Economics MCQs

Option A: deficit

Option B: surplus

Option C: revaluation

Option D: devaluation

Correct Answer: surplus ✔

Option A: selling, increase

Option B: buying reduce

Option C: selling, reduce

Option D: buying increase

Correct Answer: F. C and D ✔

Option A: depreciates, appreciates

Option B: revalues, devalues

Option C: appreciates, depreciates

Option D: becomes more expensive becomes cheaper

Correct Answer: appreciates, depreciates ✔

Option A: falls; falls; falls; surplus

Option B: falls; rises; falls; surplus

Option C: is static; low; rises; deficit

Option D: rises; falls; rises; deficit

Correct Answer: falls; falls; falls; surplus ✔

Option A: rise; falls; rise; deficit

Option B: falls; rises; falls; surplus

Option C: falls; falls; falls; surplus

Option D: is static; low; rises; deficit

Correct Answer: is static; low; rises; deficit ✔

Option A: fluctuate more than it would do otherwise

Option B: appreciate

Option C: depreciate

Option D: not be affected

Correct Answer: depreciate ✔

Option A: fluctuate more than it would do otherwise

Option B: appreciate

Option C: depreciate

Option D: not be affected

Correct Answer: depreciate ✔

Option A: depreciate

Option B: not be affected

Option C: fluctuate more than if it were at peace

Option D: appreciate

Correct Answer: depreciate ✔

Option A: will remain the same

Option B: will decrease

Option C: will increase

Option D: could either increase of decrease

Correct Answer: will increase ✔

Option A: a recession

Option B: a trade surplus

Option C: a trade deficit

Option D: an expansion.

Correct Answer: a trade deficit ✔

Option A: financial account on the balance of payments.

Option B: balance of payments

Option C: balance of payments on current account

Option D: capital account of the balance of payments

Correct Answer: financial account on the balance of payments. ✔

Option A: visible trade balance

Option B: balance of trade

Option C: balance of payments on current account

Option D: balance of payments.

Correct Answer: balance of trade ✔

Option A: free-trade

Option B: autarkic

Option C: open

Option D: mixed

Correct Answer: open ✔

Option A: rise, fall

Option B: rise; rise

Option C: fall; fall

Option D: fall; rise

Correct Answer: rise, fall ✔

Option A: fiscal policies

Option B: incomes policies

Option C: supply-side policies

Option D: monetary policies

Correct Answer: fiscal policies ✔

Option A: real balance effect

Option B: menu costs of inflation

Option C: money illusion.

Option D: cost-push inflation.

Correct Answer: menu costs of inflation ✔

Option A: ratio of the frictional unemployment rate to the cyclical unemployment rate.

Option B: Sum of structural unemployment and cyclical unemployment.

Option C: Sum of frictional unemployment and cyclical unemployment

Option D: sum of frictional unemployment and structural unemployment.

Correct Answer: sum of frictional unemployment and structural unemployment. ✔

Option A: regional

Option B: technological

Option C: structural

Option D: demand-deficient

Correct Answer: structural ✔

Option A: natural

Option B: frictional

Option C: disequilibrium

Option D: structural

Correct Answer: disequilibrium ✔

Option A: the household and government sectors

Option B: the household sector.

Option C: all sectors of except the rest of the world

Option D: all sectors of the economy including the rest of the world.

Correct Answer: all sectors of the economy including the rest of the world. ✔

Option A: not change the unemployment rate

Option B: decrease the unemployment rate

Option C: increase the unemployment rate

Option D: have an indeterminate impact on the unemployment rate

Correct Answer: increase the unemployment rate ✔

Option A: a labour force survey.

Option B: the number out of work and claiming benefit

Option C: the percentage of the labour force not in work

Option D: the ILO/OECD standardised unemployment measurement

Correct Answer: the ILO/OECD standardised unemployment measurement ✔

Option A: Unemployment population ratio.

Option B: Unemployment rate

Option C: employment rate

Option D: Labour force rate.

Correct Answer: Unemployment rate ✔

Option A: Increasing employment

Option B: Increasing economic growth

Option C: Increasing government spending

Option D: Increasing the level of exports

Correct Answer: Increasing employment ✔

Option A: lower interest rates

Option B: A better balance of trade position

Option C: Faster economic growth

Option D: Lower unemployment

Correct Answer: Lower unemployment ✔

Option A: Unemployment

Option B: Inflation

Option C: The wages paid to footballers

Option D: Economic growth

Correct Answer: Economic growth ✔

Option A: Income tax

Option B: National insurance

Option C: VAT

Option D: Interest insurance

Correct Answer: Income tax ✔

Option A: The price of houses in karachi

Option B: The wage rate for plumbers in Islamabad

Option C: Your decision to work or stay at home

Option D: The level of unemployment is pakistan

Correct Answer: Your decision to work or stay at home ✔

Option A: Spending on public schools

Option B: Military spending

Option C: All of these answers are automatic stabilizers

Option D: spending on the space shuttle

Correct Answer: Unemployment benefits ✔

Option A: The aggregate supply curve shifts to the right by more than Rs 16 billion

Option B: The aggregate demand curve shifts to the left by more than Rs 16 billion

Option C: The aggregate demand curve shifts to the right by more than Rs 16 billion

Option D: the aggregate supply curve shifts to the left by more than Rs 16 billion

Correct Answer: The aggregate demand curve shifts to the right by more than Rs 16 billion ✔

Option A: supply-side economics

Option B: None of these answers

Option C: The crowding-out effect

Option D: The multiplier effects

Correct Answer: The crowding-out effect ✔

Option A: raises the value of the multiplier

Option B: has no impact on the value of the multiplier?

Option C: rarely occurs because the MPC is set by congressional legislation

Option D: lowers the value of the multiplier

Correct Answer: raises the value of the multiplier ✔

Option A: aggregate demand to the right

Option B: aggregate demand to the left

Option C: aggregate supply to the right

Option D: aggregate supply to the left

Correct Answer: aggregate demand to the right ✔

Option A: increase the interest rate

Option B: increase the price level

Option C: decrease the price level

Option D: decrease the interest rate

Correct Answer: increase the price level ✔

Option A: The wealth effect

Option B: None of these answers

Option C: The exchange-rate effect

Option D: The fiscal effect

Correct Answer: The interest-rate effect ✔

Option A: None of these answers

Option B: decrease the quantity demanded of money

Option C: increase the quantity demanded of money

Option D: decreases the demand for money

Correct Answer: decrease the quantity demanded of money ✔

Option A: The money supply shifts right prices fall spending increases and the aggregate demand curve shifts right

Option B: The money supply shifts right the interest rate rises investment decreases and the aggregate demand curve shifts left

Option C: The money supply shifts right the interest rate falls, investment increases, and the aggregate demand curve shifts right

Option D: The money supply shifts right, prices rise, demand curve shifts left

Correct Answer: The money supply shifts right the interest rate falls, investment increases, and the aggregate demand curve shifts right ✔

Option A: Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy

Option B: None of these answers are true

Option C: Long lags enhance the ability of policy makers to fine tune the economy

Option D: When policy makers implement activist stabilization policies there is a significant risk that their policies may actually have a destabilizing effect

Correct Answer: Long lags enhance the ability of policy makers to fine tune the economy ✔

Option A: The multiplier effects

Option B: supply side economics

Option C: None of these answers

Option D: The crowding out effect

Correct Answer: The multiplier effects ✔

Option A: Most economists believe that in the short run the greatest impact of a change in taxes is on aggregate supply, not aggregate demand

Option B: An increase in taxes shifts the aggregate demand curve to the right

Option C: A decrease in taxes shifts the aggregate supply curve to the left

Option D: A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.

Correct Answer: A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes. ✔

Option A: decrease government spending Which the shifts the aggregate demand curve to the left

Option B: decrease taxes, which shifts the aggregate demand curve to the right

Option C: decrease taxes, which shifts the aggregate demand curve to the left

Option D: decrease government spending which shifts the aggregate demand curve to the right

Correct Answer: decrease government spending Which the shifts the aggregate demand curve to the left ✔

Option A: 4

Option B: 7.5

Option C: 5

Option D: 0.75

Correct Answer: 4 ✔

Option A: Increase government spending and decrease taxes

Option B: decrease the money supply

Option C: decrease government spending and increase taxes

Option D: decrease interest rates

Correct Answer: decrease interest rates ✔

Option A: shift the aggregate supply curve to the right

Option B: shift the aggregate supply curve to the left

Option C: shift the aggregate demand curve to the left

Option D: shift the aggregate demand curve to the right

Correct Answer: shift the aggregate demand curve to the right ✔

Option A: shifts money demand to the right and increases the interest rate

Option B: None of these answers

Option C: shifts money demand to the right and decreases the interest rate

Option D: shifts money demand to the left and increases the interest rate

Correct Answer: shifts money demand to the right and increases the interest rate ✔

Option A: aggregate supply and aggregate demand

Option B: the supply and demand for loanable funds

Option C: the supply and demand for money

Option D: the supply and demand for labor

Correct Answer: the supply and demand for money ✔

Option A: externality

Option B: market imperfection

Option C: deadweight burden

Option D: free rider

Correct Answer: free rider ✔

Option A: public transport

Option B: the national health service

Option C: national defence

Option D: rail transport

Correct Answer: national defence ✔

Option A: imperfect competition

Option B: taxation

Option C: externalities

Option D: missing markets

Correct Answer: all of the above ✔

Option A: a production externality

Option B: a second-best solution

Option C: transaction costs

Option D: a consumption externality

Correct Answer: a consumption externality ✔

Option A: Producers are price takers

Option B: consumers and producers face the same prices

Option C: marginal costs and benefits are equal

Option D: prices equal marginal cost and benefit

Correct Answer: All of the above ✔

Option A: moral hazard

Option B: risk aversion

Option C: adverse selection

Option D: a poor gamble

Correct Answer: adverse selection ✔

Option A: Assuming other players move first

Option B: dominated by the other players

Option C: given the strategies of other players

Option D: that is a credible threat

Correct Answer: given the strategies of other players ✔

Option A: behave like competitive firms

Option B: agree to act together

Option C: differentiate their products

Option D: practice price discrimination

Correct Answer: behave like competitive firms ✔

Option A: monopolistic competition

Option B: oligopoly

Option C: monopoly

Option D: unfair competition

Correct Answer: unfair competition ✔

Option A: is the way in which a tax is structured

Option B: is the ultimate distribution of a tax’s burden

Option C: occurs when taxes cause prices to increase but wages to fall

Option D: occurs when house hold can alter their behaviour and do something to avoid paying a tax.

Correct Answer: occurs when house hold can alter their behaviour and do something to avoid paying a tax. ✔

Option A: Negative externalies

Option B: Positive externalities

Option C: Monopolies

Option D: Oligopolies

Correct Answer: Positive externalities ✔

Option A: This tax will not raise much revenue either in the short term or the long term since demand is price inelastic

Option B: The tax on cigarettes may not raise as much revenue as anticipated in the years to com because the demand for cigarettes is likely to become more elastic over time.

Option C: This a very good way to raise revenue both in the short term and in the long term, because there are no substitutes for cigarettes.

Option D: No tax revenue can be raised in this way because sellers of cigarette will just lower their price by the amount of the tax and therefore, the price of cigarettes to consumers will not change

Correct Answer: The tax on cigarettes may not raise as much revenue as anticipated in the years to com because the demand for cigarettes is likely to become more elastic over time. ✔

Option A: VAT

Option B: inheritance tax

Option C: income tax

Option D: a tax on profits

Correct Answer: VAT ✔

Option A: wages in general would fall as employers tried to hold down costs

Option B: fewer young workers would be employed

Option C: the costs and prices of firms employing cheap labour would increase

Option D: there would be more unemployment

Correct Answer: the costs and prices of firms employing cheap labour would increase ✔

Option A: price

Option B: quantity

Option C: demand

Option D: supply

Correct Answer: supply ✔

Option A: inflation occurs

Option B: there are externalities

Option C: merit goods are produced

Option D: there is excess demand

Correct Answer: there is excess demand ✔

Option A: A price fall

Option B: A price increase

Option C: Excess supply

Option D: Excess demand

Correct Answer: Excess supply ✔

Option A: Is provided by the government

Option B: Is free

Option C: Has the properties of being non-excludable and non-diminishable

Option D: Gas external costs

Correct Answer: Has the properties of being non-excludable and non-diminishable ✔

Option A: Supply is price elastic

Option B: Demand is price elastic

Option C: Supply is stable

Option D: Demand and supply are price inelastic

Correct Answer: Demand and supply are price inelastic ✔

Option A: There is excess equilibrium

Option B: There is excess supply

Option C: There is excess demand

Option D: There is equilibrium

Correct Answer: There is excess supply ✔

Option A: The social marginal costs are higher than the private marginals costs

Option B: A product is not provided in the free market

Option C: The social marginal cost equal the social marginal benefit

Option D: The social marginal benefits are higher than the private marginal benefits

Correct Answer: The social marginal costs are higher than the private marginals costs ✔

Option A: Judicial economic statement

Option B: Positive economic statement

Option C: Formative economic statement

Option D: Normative economic statement

Correct Answer: Normative economic statement ✔

Option A: increase equilibrium price and quantity

Option B: Decrease equilibrium price and quantity

Option C: Increase equilibrium price and decrease quantity

Option D: Decrease equilibrium price and increase quantity

Correct Answer: Decrease equilibrium price and quantity ✔

Option A: The price elasticity of supply is + 3

Option B: The price elasticity of supply is + 0.2

Option C: The price elasticity of supply is + 2

Option D: The price elasticity of supply is infinity

Correct Answer: The price elasticity of supply is + 2 ✔

Option A: Signal

Option B: Incentive

Option C: Rationing device

Option D: Indicator of income

Correct Answer: Indicator of income ✔

Option A: Act as a signal

Option B: Act as a incentive

Option C: Act as a rationing device

Option D: shift the demand curve

Correct Answer: shift the demand curve ✔

Option A: Shifts the supply curve

Option B: shifts the demand curve

Option C: Leads to a contractions in supply

Option D: Leads to an extension of supply

Correct Answer: Shifts the supply curve ✔

Option A: Excess supply

Option B: Excess demand

Option C: Equilibrium

Option D: Downward pressure on prices

Correct Answer: Excess demand ✔

Option A: income elastic

Option B: income inelastic

Option C: Price elastic

Option D: Price inelastic

Correct Answer: Price inelastic ✔

Option A: Lead to a movement along the demand curve

Option B: Shift the supply curve

Option C: Shift the demand curve

Option D: Lead to an extension of demand

Correct Answer: Shift the demand curve ✔

Option A: decrease in supply

Option B: increase in demand

Option C: increase in supply

Option D: decrease in demand

Correct Answer: decrease in demand ✔

Option A: There is an increase in the quantity demanded of apples and in the supply for apples

Option B: There is an increase in the demand and supply of apples.

Option C: There is an increase in the demand for apples and a decrease in the supply of apples

Option D: There is a decrease in the quantity demanded of apples and an increase in the supply for apples

Correct Answer: There is an increase in the demand for apples and an increase in the quantity supplied of apples. ✔

Option A: Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall

Option B: The supply of lettuce will decrease

Option C: The demand for lettuce will decrease

Option D: The equilibrium price and quantity of salad dressing will fall

Correct Answer: The equilibrium price and quantity of salad dressing will fall ✔

Option A: the equilibrium quantity to rise and the equilibrium price to rise

Option B: the equilibrium quantity to rise and the equilibrium price to fall

Option C: the equilibrium quantity to rise and the equilibrium price to remain constant

Option D: the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise

Correct Answer: the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. ✔

Option A: an increase in the equilibrium price and quantity

Option B: none of these answers

Option C: an increase in the equilibrium price and a decrease in the equilibrium quantity

Option D: a decrease in the equilibrium quantity.

Correct Answer: a decrease in the equilibrium price and quantity. ✔

Option A: there is a shortage and the price will rise

Option B: the quantity demanded is equal to the quantity supplied and the price remains unchanged

Option C: there is a shortage and the price will fall

Option D: there is a surplus and the price will rise

Correct Answer: there is a shortage and the price will rise ✔

Option A: an advance in the technology used to manufacture watches

Option B: an increase in the price of watches

Option C: All of these answers cause an increase in the supply of watches

Option D: a decrease in the wage of workers employed to manufacture watches

Correct Answer: an increase in the price of watches ✔

Option A: many buyers and sellers

Option B: none of these answers

Option C: firms that are price takers

Option D: only one seller

Correct Answer: only one seller ✔

Option A: none of these answers

Option B: increases the quantity supplied of that good

Option C: increase the supply of that good

Option D: decrease the demand for the good

Correct Answer: increases the quantity supplied of that good ✔

Option A: Complements

Option B: inferior goods

Option C: normal goods

Option D: none of these answers

Correct Answer: Substitutes ✔

Option A: increasing average cost curve, marginal cost lies above average cost

Option B: increasing average cost curve, marginal cost lies below average cost

Option C: decreasing average cost curve marginal cost lies above average cost

Option D: decreasing average cost curve, marginal cost lies below average cost

Correct Answer: decreasing average cost curve, marginal cost lies below average cost ✔

Option A: vertical merger

Option B: horizontal merger

Option C: conglomerate merger

Option D: hostile takeover

Correct Answer: horizontal merger ✔

Option A: marginal cost is set equal to marginal revenue

Option B: price is less than marginal cost

Option C: marginal consumer benefit is less than marginal revenue

Option D: there is too little output at too high a cost

Correct Answer: there is too little output at too high a cost ✔

Option A: reduce , reduce

Option B: increase, increase

Option C: increase, reduce

Option D: reduce, increase

Correct Answer: increase, reduce ✔

Option A: marginal costs, marginal benefits

Option B: demand, supply

Option C: marginal cost, marginal revenue

Option D: marginal cost, average cost

Correct Answer: marginal costs, marginal benefits ✔

Option A: imperfect competition popular

Option B: externalities , distortionary

Option C: inequality , a first best option

Option D: poor health, unnecessary

Correct Answer: externalities , distortionary ✔

Option A: Private good

Option B: merit good

Option C: public good

Option D: abundant good

Correct Answer: public good ✔

Option A: externalities

Option B: the free-rider problem

Option C: a and b

Option D: a and c

Correct Answer: a and b ✔

Option A: private costs, private benefits

Option B: private costs, social costs or benefits

Option C: social costs, social benefit

Option D: insiders, outsiders

Correct Answer: private costs, social costs or benefits ✔

Option A: the marginal cost of production does not equal society’s marginal benefit

Option B: the distribution is inequitable

Option C: economic growth is low

Option D: unemployment is high

Correct Answer: A. the marginal cost of production does not equal society’s marginal benefit ✔

Option A: some people can’t count

Option B: some people may not be permanent resident

Option C: not all economic activity is legal

Option D: We can’t make value judgments to compare different people’s welfare

Correct Answer: D. We can’t make value judgments to compare different people’s welfare ✔

Option A: worse off; worse off

Option B: better off; better off

Option C: better off; worse off

Option D: equal, unequal

Correct Answer: better off; worse off ✔

Option A: reduces the likelihood

Option B: increases the likelihood

Option C: guarantees

Option D: none of the above

Correct Answer: increases the likelihood ✔

Option A: a wining strategy

Option B: a losing strategy

Option C: a players best strategy when moving first

Option D: a player’s best strategy whatever the strategies adopted by rivals

Correct Answer: D. a player’s best strategy whatever the strategies adopted by rivals ✔