Economics MCQs

Option A: Zero

Option B: Negative

Option C: Where the marginal social benefit = the marginal social cost

Option D: Total social costs are minimised

Correct Answer: Where the marginal social benefit = the marginal social cost ✔

Option A: the growth of the fastest economy in the world

Option B: The fastest growth an economy has ever achieved

Option C: The present rate of growth of an economy

Option D: The rate of growth that could be achieved if resources were fully employed

Correct Answer: the growth of the fastest economy in the world ✔

Option A: 40 units

Option B: 195 units

Option C: 1000 units

Option D: 200 units

Correct Answer: 40 units ✔

Option A: Unemployment is likely to fall

Option B: Prices are likely to fall

Option C: Demand is likely to fall

Option D: Imports are likely to grow

Correct Answer: Unemployment is likely to fall ✔

Option A: Investment

Option B: Savings

Option C: Taxation

Option D: Imports spending

Correct Answer: Taxation ✔

Option A: increasing injections

Option B: Reducing taxation rates

Option C: Reducing interest rates

Option D: Reducing government spending

Correct Answer: Reducing interest rates ✔

Option A: Assumed to be exogenous

Option B: Assumed to be a function of national income

Option C: Decrease aggregate demand

Option D: Decrease the investment into an economy

Correct Answer: Decrease the investment into an economy ✔

Option A: Reduce injections into the economy

Option B: Reduce national income

Option C: Move the economy away from full employment

Option D: Boost aggregate demand

Correct Answer: Move the economy away from full employment ✔

Option A: Decrease aggregate demand

Option B: Always equal savings

Option C: Always equal national income

Option D: include investment and export spending

Correct Answer: Always equal national income ✔

Option A: Financial audit

Option B: Balance sheet

Option C: Profit and loss account

Option D: Social audit

Correct Answer: Financial audit ✔

Option A: Selling another unit will increase total revenue

Option B: Selling another unit will increase profits

Option C: Selling another unit will increase costs

Option D: Selling another unit will increase average revenue

Correct Answer: Selling another unit will increase average revenue ✔

Option A: Marginal costs are maximized

Option B: Marginal costs are Minimized

Option C: Average costs are minimized

Option D: Average costs are maximized

Correct Answer: Marginal costs are maximized ✔

Option A: Total revenue equals total cost

Option B: There is the biggest positive difference between total revenue and total cost

Option C: There is the biggest negative difference between total revenue and total cost

Option D: Profits are Zero

Correct Answer: There is the biggest negative difference between total revenue and total cost ✔

Option A: Average revenue equals marginal cost

Option B: Average revenue equals average cost

Option C: Marginal revenue equals marginal cost

Option D: Average cost equals marginal cost

Correct Answer: Marginal revenue equals marginal cost ✔

Option A: Demand is upward sloping

Option B: Demand is price elastic

Option C: A price fall would increase revenue

Option D: Demand is price inelastic

Correct Answer: Demand is upward sloping ✔

Option A: Average revenue is greater than average variable cost

Option B: Average revenue is greater than average cost

Option C: Average revenue is greater than marginal revenue

Option D: Average revenue is greater than average fixed cost

Correct Answer: Average revenue is greater than marginal revenue ✔

Option A: Some products are produced that would not otherwise be produced

Option B: Producer surplus increases

Option C: Consumer surplus decreases

Option D: Firm’s profits increase

Correct Answer: Consumer surplus decreases ✔

Option A: The higher price in market A

Option B: The higher price in market B

Option C: The same Price in both markets

Option D: Cannot tell which price will be higher

Correct Answer: The same Price in both markets ✔

Option A: Charging different prices for different products

Option B: Charging the same prices for different products

Option C: Charging the same prices for same products

Option D: Charging different prices for the same products

Correct Answer: Charging the same prices for different products ✔

Option A: Total revenue – quantity

Option B: Total revenue / quantity sold

Option C: Total quantity sold quantity sold

Option D: Total revenue / total cost

Correct Answer: Total revenue / quantity sold ✔

Option A: Price plus quantity

Option B: Price multiplier by quantity sold

Option C: Price divided by the quantity sold

Option D: Price minus quantity sold

Correct Answer: Price divided by the quantity sold ✔

Option A: Profit

Option B: Profitability

Option C: Feasibility

Option D: Realism

Correct Answer: Realism ✔

Option A: Fixed costs

Option B: Variable costs

Option C: Total costs

Option D: Revenue

Correct Answer: Total costs ✔

Option A: The firm is making a loss and will shutdown in the short term

Option B: The firm is making a profile

Option C: The firm is making a loss but will continue to produce in the short term

Option D: The firm is making a loss and is making a negative contribution to fixed costs

Correct Answer: The firm is making a loss but will continue to produce in the short term ✔

Option A: The total product will fall

Option B: The average product will fall

Option C: Average variable cost will fall

Option D: Total revenue will fall

Correct Answer: The average product will fall ✔

Option A: Marginal cost is Rs20

Option B: Average cost falls

Option C: Variable cost rises by Rs100

Option D: Average fixed cost is Rs10

Correct Answer: Variable cost rises by Rs100 ✔

Option A: is derived from the average fixed costs

Option B: Converges with the average cost as output increases

Option C: Equals the total costs divided by the output

Option D: Equals revenue minus profits

Correct Answer: Converges with the average cost as output increases ✔

Option A: Total costs fall

Option B: Marginal costs increase

Option C: Average costs fall

Option D: Revenue falls

Correct Answer: Average costs fall ✔

Option A: The marginal product fall as more units of a variable factor are added to a fixed factor

Option B: Marginal utility falls as more unity of a product are consumed

Option C: The total product falls as more units of a variable factor are added to a fixed factor

Option D: The marginal product increases as more units of a variable factor are added to a fixed factor

Correct Answer: The marginal product fall as more units of a variable factor are added to a fixed factor ✔

Option A: If the marginal cost is greater than the average cost the average cost falls

Option B: If the marginal cost is greater than the average cost the average cost increase

Option C: If the marginal cost is positive total costs are miximised

Option D: If the marginal cost is negative total costs increase at a decreasing rate if output increases

Correct Answer: If the marginal cost is greater than the average cost the average cost increase ✔

Option A: Allocatively inefficient

Option B: X inefficient

Option C: Consumer inefficient

Option D: Productively inefficient

Correct Answer: Productively inefficient ✔

Option A: Demand

Option B: Land

Option C: Labour

Option D: Capital

Correct Answer: Demand ✔

Option A: 7As

Option B: 10As

Option C: 3As

Option D: 1A

Correct Answer: 3As ✔

Option A: An inward shift of the production possibility frontier

Option B: A movement along the production possibility frontier

Option C: An outward shift of the production possibility frontier

Option D: The pivoting of the production possibility frontier

Correct Answer: A movement along the production possibility frontier ✔

Option A: Everyone is wealthy

Option B: Resources are unemployed

Option C: More of one product can only be produced if less of another product is produced

Option D: The distribution of income is eqal

Correct Answer: More of one product can only be produced if less of another product is produced ✔

Option A: Money supply is more difficult to control in a currency union.

Option B: The inflation-unemployment trade-off is more unstable in a currency union

Option C: All of these answers describe problems for monetary policy in a currency union

Option D: The interest rate may be higher than is appropriate for economic conditions in some countries while it’s lower than is appropriate in some others monetary policy must be one size fits all

Correct Answer: D. The interest rate may be higher than is appropriate for economic conditions in some countries while it’s lower than is appropriate in some others monetary policy must be one size fits all ✔

Option A: The central bank controls interest rates on long-term bonds issued by the governments of the member countries of the currency union

Option B: Government of the member countries of the currency union may run large budget deficit and so crowd out private investment

Option C: government of the member countries of the currency union may run large budget deficits and so impose costs on other countries by pushing up interest rates on the bonds these countries governments issue

Option D: It is difficult to raise enough tax revenue to pay for the operation of the currency union

Correct Answer: government of the member countries of the currency union may run large budget deficits and so impose costs on other countries by pushing up interest rates on the bonds these countries governments issue ✔

Option A: A fiscal system for a group of countries in which fiscal policy is set in a treaty signed by all the countries

Option B: A fiscal system for a group of countries in which government budget deficits are strictly limited

Option C: A fiscal system for a group of countries involving a common fiscal budget and a system of taxes and fiscal transfers across countries

Option D: A fiscal system in which fiscal policy is jointly determined by local and national politicians

Correct Answer: A fiscal system for a group of countries involving a common fiscal budget and a system of taxes and fiscal transfers across countries ✔

Option A: A high degree of labour mobility among the countries of the common currency area

Option B: A high degree of capital mobility among the countries of the common currency area

Option C: None of the characteristics described in these answers They are all characteristics that reduce the cost of a single currency

Option D: A high degree of trade integration among the countries of the common currency area

Correct Answer: A high degree of trade integration among the countries of the common currency area ✔

Option A: None of these answers All of them are asymmetric macroeconomic shocks

Option B: A sudden and substantial fall in the worldwide demand for French wine

Option C: An epidemic of an animal disease in a country that significantly reduces the country’s agricultural output

Option D: A sudden and substantial rise in prices on the world oil market

Correct Answer: A sudden and substantial rise in prices on the world oil market ✔

Option A: None of these arguments they are all arguments in support of the UK joining the UMU

Option B: The characteristics of the UK housing market make UK consumers expenditure very sensitive to changes in interest rates

Option C: The UK risks exclusion from the Euroland capital market with damaging consequences with damaging

Option D: The UK needs to be a member of the EMU in order to continue to attract such large share of foreign direct investment in EU countries

Correct Answer: The characteristics of the UK housing market make UK consumers expenditure very sensitive to changes in interest rates ✔

Option A: the stability and growth pack

Option B: the European solidarity packs

Option C: the exchange rate mechanism pact

Option D: the responsibility and growth pack

Correct Answer: the stability and growth pack ✔

Option A: The eurozone has a higher degree of labour mobility than the USA and labour law is much less restrictive in the erozone than in the USA On these measures the eurozone is more likely to be an OCA than is the USA

Option B: The eurozone has a lower degree of labour mobility than the USA and labour law is much more restrictive in the erozone than in the USA On these measures the eurozone is less likely to be an OCA than is the USA

Option C: The eurozone has a higher degree of labour mobility than the USA but labour law is much more restrictive in the erozone than in the USA On these measures it is hard to judge whether the eurozone is more or less likely to be an OCA than is the USA

Option D: The eurozone has a lower degree of labour mobility than the USA and labour law is much less restrictive in the erozone than in the USA On these measures it is hard to judge whether the eurozone is more or less likely to be an OCA than is the USA

Correct Answer: The eurozone has a lower degree of labour mobility than the USA and labour law is much more restrictive in the erozone than in the USA On these measures the eurozone is less likely to be an OCA than is the USA ✔

Option A: All of the reasons given in these answers are correct

Option B: real wages fall rapidly in a recession and the economy moves quickly back to long run equilibrium so limiting the duration of the recession even when exchange rate adjustment is not possible

Option C: workers will move from a country in which aggregate demand falls to other countries of the currency union, and so unemployment remains lower than it otherwise would

Option D: real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency

Correct Answer: real wages fall rapidly in a recession and the economy moves quickly back to long run equilibrium so limiting the duration of the recession even when exchange rate adjustment is not possible ✔

Option A: A high degree of labour mobility between the tow countries

Option B: An increase in government spending in country (A)

Option C: A depreciation in the foreign exchange value of the common currency

Option D: A low degree of capital mobility between the two countries

Correct Answer: A high degree of labour mobility between the tow countries ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and III only

Option D: I, II , III and IV

Correct Answer: I and II only ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and IV only

Option D: I, II and III only

Correct Answer: I, II and IV only ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and III only

Option D: I, II , III and IV

Correct Answer: I, II , III and IV ✔

Option A: adverse selection

Option B: moral hazard

Option C: social goods

Option D: hyperinflation

Correct Answer: adverse selection ✔

Option A: Taxes on international trade are the major source of tax revenue for low-income countries with poor administrative capacity

Option B: import duties can restrict luxury goods consumption

Option C: several LDCs have used value-added taxes to raise a substantial fraction of revenues

Option D: Cascade tax a form of progressive tax, is dominant in DCs

Correct Answer: Cascade tax a form of progressive tax, is dominant in DCs ✔

Option A: indirect taxes

Option B: direct taxes

Option C: inelastic

Option D: value-added tax

Correct Answer: direct taxes ✔

Option A: incomes policy

Option B: Moral hazard

Option C: Wagner’s law

Option D: Fiscal policy

Correct Answer: C. Wagner’s law ✔

Option A: demand pull inflation tax elasticity

Option B: interest rates, financial liberalization

Option C: interest rates, tax rates

Option D: tax rates, government spending

Correct Answer: tax rates, government spending ✔

Option A: demand for government spending on public goods goes due to lack of financial backup through tax collection

Option B: consumer business and government demand for goods and services in excess of an economy’s capacity to produce

Option C: a shortage of demand for goods and services in excess of supply during depression

Option D: demand for public goods is greater than demand for consumer goods

Correct Answer: B. consumer business and government demand for goods and services in excess of an economy’s capacity to produce ✔

Option A: ratchet inflation

Option B: inflationary expectations

Option C: import substitution

Option D: demand pull inflation

Correct Answer: ratchet inflation ✔

Option A: I and II only

Option B: III and IV only

Option C: I ,II and III only

Option D: I , II , III, and IV

Correct Answer: I , II , III, and IV ✔

Option A: I and II only

Option B: I and III only

Option C: III and IV only

Option D: I, II and III

Correct Answer: I and II only ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and III only

Option D: I, II, III, and IV

Correct Answer: I, II, III, and IV ✔

Option A: progressive

Option B: regressive

Option C: value added taxes (VAT)

Option D: excise taxes

Correct Answer: progressive ✔

Option A: are central banks

Option B: are branches of commercial banks

Option C: use fiscal policy to influence GDP

Option D: loan money to most of LDC commercial banks

Correct Answer: are central banks ✔

Option A: reserve, unemployment

Option B: money supply, interest rate

Option C: taxes, exchange rate

Option D: stock price, minimum wage

Correct Answer: money supply, interest rate ✔

Option A: reduction, increase

Option B: reduction, reduction

Option C: increase, reduction

Option D: increase , increase

Correct Answer: increase, reduction ✔

Option A: demand for money, interest rate

Option B: interest rate equilibrium money supply

Option C: demand for money equilibrium money supply

Option D: interest rate, demand for money

Correct Answer: interest rate equilibrium money supply ✔

Option A: lender of less resort

Option B: financial intermediation

Option C: Open Market operations

Option D: Financial regulation

Correct Answer: Open Market operations ✔

Option A: narrow, banks, building societies

Option B: wide, banks insurance companies

Option C: Narrow, banks insurance companies

Option D: Wide, banks building societies

Correct Answer: Wide, banks building societies ✔

Option A: fall

Option B: increase

Option C: not change

Option D: None of these

Correct Answer: fall ✔

Option A: asset demand for money

Option B: transactions demand for money

Option C: token demand for money

Option D: precautionary demand for money

Correct Answer: precautionary demand for money ✔

Option A: Unchanged

Option B: Larger

Option C: Smaller

Option D: Unstable

Correct Answer: Larger ✔

Option A: printing it

Option B: issuing debit cards

Option C: accepting cheques

Option D: lending out part of their deposits

Correct Answer: lending out part of their deposits ✔

Option A: IOU , inflation hedge store of value

Option B: Medium of exchange inflation hedge store of value

Option C: Medium of exchange unit of account IOU

Option D: Medium of exchange unit of account store of value

Correct Answer: Medium of exchange unit of account store of value ✔

Option A: money market for the given level of the money supply

Option B: money market for different combinations of interest rates and output

Option C: goods market for the given level of government spending

Option D: goods market for the given interest rate

Correct Answer: money market for different combinations of interest rates and output ✔

Option A: money supply curve

Option B: LM curve

Option C: money demand curve

Option D: IS curve

Correct Answer: LM curve ✔

Option A: goods market for the given interest rate

Option B: goods market for the given level of government spending

Option C: money market for the given level of the money supply

Option D: money market for the given value of aggregate output

Correct Answer: goods market for the given interest rate ✔

Option A: incomes

Option B: overseas investment

Option C: imports

Option D: interest rates

Correct Answer: interest rates ✔

Option A: fiscal drag

Option B: investment blight

Option C: crowding-out

Option D: the Thatcher effects

Correct Answer: crowding-out ✔

Option A: a hyperinflation

Option B: a depression

Option C: stagflation

Option D: a recession

Correct Answer: a hyperinflation ✔

Option A: both monetary and fiscal policy are ineffective

Option B: monetary policy is effective but fiscal policy is ineffective

Option C: monetary policy is ineffective but fiscal policy is effective

Option D: both monetary and fiscal policy are effective

Correct Answer: monetary policy is ineffective but fiscal policy is effective ✔

Option A: a reduction in the taxes banks pay on their profits.

Option B: an increase in the required reserve ratio

Option C: an increase in the discount rate

Option D: the Central bank buying government securities in the open market

Correct Answer: the Central bank buying government securities in the open market ✔

Option A: the money and labor markets

Option B: the goods and labor markets

Option C: the goods market

Option D: the money markets

Correct Answer: the money markets ✔

Option A: the goods and labor markets.

Option B: the goods market

Option C: the money markets

Option D: the money and labor market

Correct Answer: the goods market ✔

Option A: a positive relationship between the interest rate and the quantity of money demanded

Option B: a negative relationship between the price level and the quantity of money demanded

Option C: a negative relationship between the level of aggregate output and the quantity of money demanded

Option D: a negative relationship between the interest rate and the quantity of money demanded

Correct Answer: a negative relationship between the interest rate and the quantity of money demanded ✔

Option A: Transactions motive

Option B: precautionary motive

Option C: profit motive

Option D: speculation motive

Correct Answer: speculation motive ✔

Option A: A sale of government securities by the central bank

Option B: An increase in the level of aggregate output

Option C: An increase in the discount rate

Option D: A decrease in the price level

Correct Answer: A decrease in the price level ✔

Option A: How much cash do you wish you could have?

Option B: How much wealth would you like?

Option C: How much income would you like to earn?

Option D: What proportion of your financial assets do you want to hold in non-interest-bearing forms

Correct Answer: What proportion of your financial assets do you want to hold in non-interest-bearing forms ✔

Option A: increase the money supply because it is now cheaper for banks to borrow from the central bank

Option B: decrease the money supply because it will now be more expensive for business firms and consumers to borrow money

Option C: Not change the money supply because banks already have excess reserves they cannot lend

Option D: Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities

Correct Answer: Not change the money supply because banks already have excess reserves they cannot lend ✔

Option A: decreases

Option B: remain the same, as long as banks hold no excess reserves

Option C: could either increase or decrease

Option D: increases

Correct Answer: increases ✔

Option A: Assisting Banks that are in a difficult financial position

Option B: Auditing the various agencies and department of the government

Option C: Loaning money to other countries that are friendly to the UK.

Option D: Issuing new bonds to finance the PSBR.

Correct Answer: Assisting Banks that are in a difficult financial position ✔

Option A: savings accounts

Option B: Travelers checks

Option C: Currency held outside banks

Option D: Automatic-transfer savings accounts

Correct Answer: savings accounts ✔

Option A: precious metals

Option B: commodity money

Option C: fiat money

Option D: barter items

Correct Answer: fiat money ✔

Option A: bills of exchanges

Option B: government bonds

Option C: Treasury bills

Option D: Capital bills

Correct Answer: government bonds ✔

Option A: The banks will increase their lending

Option B: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks

Option C: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result

Option D: the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response

Correct Answer: E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks. ✔

Option A: fiat, commodity and deposit money

Option B: Open-market operations reserve requirements and the refinancing rate

Option C: The money supply, government purchases and taxation

Option D: Government expenditures taxation and reserve requirements

Correct Answer: Open-market operations reserve requirements and the refinancing rate ✔

Option A: Rs 4,000

Option B: Rs 5,000

Option C: Rs 1,000

Option D: Rs 0

Correct Answer: Rs 5,000 ✔

Option A: Increasing the refinancing rate

Option B: All of these will increase the money supply

Option C: Buying government bonds in open market operations

Option D: Increasing reserve requirements

Correct Answer: Buying government bonds in open market operations ✔

Option A: Rs 10,00

Option B: Rs 1,000

Option C: Rs 9,000

Option D: Rs 0

Correct Answer: Rs 0 ✔

Option A: Money supply will increase because Banca Solida will increase its loans

Option B: The effect on money supply cannot be determined from the information given

Option C: Money supply will decrease because the loans will have to be repaid

Option D: Money supply will be unchanged because the central bank has made no policy changes

Correct Answer: Money supply will increase because Banca Solida will increase its loans ✔

Option A: has no intrinsic value

Option B: has intrinsic value

Option C: is used exclusively in the economies of western Europe and north America

Option D: is used as reserves to back fiat money

Correct Answer: has intrinsic value ✔

Option A: hedge against inflation

Option B: Medium of exchange

Option C: unit of account

Option D: Store of value

Correct Answer: hedge against inflation ✔

Option A: higher interest rates

Option B: lower expected future profits

Option C: more expensive capital goods

Option D: All of the above

Correct Answer: All of the above ✔

Option A: rise; increase, increase

Option B: rise, falls, increase

Option C: rise, increase, falls

Option D: rise, falls, falls

Correct Answer: rise, falls, falls ✔