Economics MCQs

Option A: the taxes paid by the marginal worker

Option B: total income divided by total taxes paid

Option C: the extra taxes paid on an additional unit of income

Option D: total taxes paid divided by total income

Correct Answer: the extra taxes paid on an additional unit of income ✔

Option A: a proportional tax

Option B: a regressive tax

Option C: an equitable tax

Option D: a progressive tax

Correct Answer: a regressive tax ✔

Option A: an excess of government receipts over government spending.

Option B: an equality of government spending and receipts.

Option C: a surplus of government workers.

Option D: an excess of government spending over government receipts.

Correct Answer: an excess of government receipts over government spending. ✔

Option A: will have no impact on tax revenue.

Option B: will always reduce tax revenue regardless of the prior size of the tax

Option C: could increase tax revenue if the tax had been extremely high

Option D: causes a market to become less efficient

Correct Answer: could increase tax revenue if the tax had been extremely high ✔

Option A: none of these answers

Option B: Reagan curve

Option C: Keynesian curve

Option D: Laffer curve

Correct Answer: Laffer curve ✔

Option A: the unscrupulous to enter the underground economy

Option B: the elderly to retire early.

Option C: all the things described in these answers.

Option D: second earners to stay home.

Correct Answer: all the things described in these answers. ✔

Option A: supply is elastic, and demand is perfectly inelastic

Option B: demand is elastic, and demand is perfectly inelastic

Option C: both supply and demand are relatively inelastic

Option D: both supply and demand are relatively elastic

Correct Answer: both supply and demand are relatively elastic ✔

Option A: a tax on salt

Option B: a tax on cigarettes

Option C: a tax on petrol

Option D: a tax on cruise line tickets

Correct Answer: a tax on cruise line tickets ✔

Option A: B + C + E + F

Option B: E + F

Option C: B + C

Option D: A + B + C + D

Correct Answer: E + F ✔

Option A: B + C + E + F

Option B: E + F

Option C: A + B + C + D

Option D: A + B + C + D + E + F

Correct Answer: E + F ✔

Option A: B + C + E + F

Option B: B

Option C: B + C

Option D: A

Correct Answer: B ✔

Option A: D

Option B: A

Option C: A + B + E

Option D: A + B +C + D

Correct Answer: A ✔

Option A: C + D + F

Option B: A

Option C: A + B + E

Option D: D + C + B

Correct Answer: A ✔

Option A: Prices to rise and output to rise

Option B: Price to fall and output to remain unchanged

Option C: Prices to fall and output to fall

Option D: prices to rise and output to remain unchanged

Correct Answer: prices to rise and output to remain unchanged ✔

Option A: Shift aggregate demand to the left

Option B: Shift short run aggregate supply to the left

Option C: shift aggregate demand to the right

Option D: shift short-run aggregate supply to the right

Correct Answer: shift aggregate demand to the right ✔

Option A: rising prices and rising output

Option B: rising prices and falling output

Option C: falling prices and falling output

Option D: falling prices and rising output

Correct Answer: rising prices and falling output ✔

Option A: Price rise; output falls

Option B: Price fall; output rises

Option C: Price rise; output rises

Option D: Price fall; output falls

Correct Answer: Price rise; output falls ✔

Option A: Price fall; output rises

Option B: Price fall; output falls

Option C: Price rise; output fall

Option D: Price rise; output rise

Correct Answer: Price rise; output rise ✔

Option A: sticky-wage theory of the short-run aggregate supply curve

Option B: classical dichotomy theory of the short-run aggregate supply curve

Option C: misperceptions theory of the short-run aggregate supply curve

Option D: sticky-price theory of the short run aggregate supply curve

Correct Answer: sticky-wage theory of the short-run aggregate supply curve ✔

Option A: lower prices increase the value of money holding and consumers spending increase

Option B: lower prices decrease the value of money holding and consumers spending decrease

Option C: lower prices reduce money holding increase lending, interest rates fall and investment spending increase

Option D: lower prices increase money holding decrease lending, interest rates rise and investment spending falls

Correct Answer: lower prices increase the value of money holding and consumers spending increase ✔

Option A: The exchange-rate effect

Option B: The wealth effect

Option C: The classical dichotomy/monetary neutrality effect

Option D: The interest-rate effect

Correct Answer: The classical dichotomy/monetary neutrality effect ✔

Option A: lower prices increase money holdings decrease lending interest rates rise, and investment spending falls

Option B: lower prices increase the value of money holding and consumer spending increases

Option C: lower prices decrease the value of money holdings and consumers spending decreases

Option D: lower prices reduce money holdings increase lending interest rates fall, and investment spending increase

Correct Answer: lower prices reduce money holdings increase lending interest rates fall, and investment spending increase ✔

Option A: fail to respond to the adverse supply shock and allow the economy to adjust on its own.

Option B: respond to the adverse supply shock by decreasing aggregate demand which lower prices

Option C: respond to the adverse supply shock by decreasing short run aggregate supply

Option D: respond to the adverse supply shock by increasing aggregate demand, which further raises prices

Correct Answer: respond to the adverse supply shock by increasing aggregate demand, which further raises prices ✔

Option A: People will reduce their price expectations and the short run aggregate supply will shift right

Option B: People will raise their price expectations and aggregate demand will shift left

Option C: People will raise their price expectations and the short run aggregate supply will shift left

Option D: People will reduce their price expectations and aggregate demand will shift right

Correct Answer: People will reduce their price expectations and the short run aggregate supply will shift right ✔

Option A: a decrease in the money supply

Option B: a drop-in oil prices

Option C: an increase in government spending on military equipment

Option D: None of these answers

Correct Answer: a drop-in oil prices ✔

Option A: Output rises; prices are unchanged from the initial value

Option B: Output and the price level are unchanged from their initial values

Option C: Output falls; prices are unchanged from the initial value

Option D: Prices fall; output is unchanged from its initial value

Correct Answer: Output and the price level are unchanged from their initial values ✔

Option A: Output falls; prices are unchanged from the initial value

Option B: Price fall; output is unchanged from its initial value

Option C: Output and the price level are unchanged from their initial values

Option D: Prices rise; output is unchanged from its initial value

Correct Answer: Prices rise; output is unchanged from its initial value ✔

Option A: misperceptions theory of the short run aggregate supply curve

Option B: classical dichotomy theory of the short run aggregate supply curve

Option C: sticky price theory of the short run aggregate supply curve

Option D: sticky wage theory of the short run aggregate supply curve

Correct Answer: misperceptions theory of the short run aggregate supply curve ✔

Option A: When the economy is at the natural rate of unemployment

Option B: When the economy is at the natural rate of investment

Option C: When the economy is at the natural rate of aggregate demand

Option D: When there is no no unemployment

Correct Answer: When the economy is at the natural rate of unemployment ✔

Option A: Is vertical because an equal change in all prices and wages leaves output unaffected

Option B: is positively sloped because price expectations and wages tend to be fixed is the long run

Option C: shifts right when the government raises the minimum wage

Option D: shifts left when the natural rate of unemployment falls

Correct Answer: Is vertical because an equal change in all prices and wages leaves output unaffected ✔

Option A: shift the short-run aggregate supply curve to the left

Option B: shift the aggregate demand curve to the right

Option C: shift the short-run aggregate supply curve to the right

Option D: shift the aggregate demand curve to the left

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

Option A: All of these answers shift the long-run aggregate supply curve

Option B: An increase in the available capital

Option C: An increase in the available labour

Option D: An increase in price expectations

Correct Answer: An increase in price expectations ✔

Option A: None of these answers

Option B: A depression is a mild recession

Option C: A variety of spending income, and output measures can be used to measure economic fluctuation because most macroeconomic quantitties tend to fluctuate together

Option D: A recession is when output rises above the natural rate of output

Correct Answer: A variety of spending income, and output measures can be used to measure economic fluctuation because most macroeconomic quantitties tend to fluctuate together ✔

Option A: balance of payments

Option B: capital account

Option C: current account

Option D: balance of trade

Correct Answer: balance of trade ✔

Option A: credit transactions

Option B: debit transactions

Option C: unilateral transfers

Option D: statistical discrepancy

Correct Answer: statistical discrepancy ✔

Option A: exports and imports of financial assets

Option B: the current account plus capital account

Option C: the net export of goods and services

Option D: the value of merchandise exports minus imports

Correct Answer: the value of merchandise exports minus imports ✔

Option A: trade deficit and an excess of investment over domestic saving

Option B: trade surplus and an excess of investment over domestic saving

Option C: trade deficits and an excess of domestic savings over investment

Option D: trade surpluses and an excess of domestic saving over investment

Correct Answer: trade deficit and an excess of investment over domestic saving ✔

Option A: purchases more stocks and bonds from the rest of the world than it sells

Option B: purchases more goods from the rest of the world than it sells

Option C: sells more goods to the rest of the world than it purchases

Option D: sells more stocks and bonds to the rest of the world than it purchases

Correct Answer: purchases more goods from the rest of the world than it sells ✔

Option A: the country is a net lender to the rest of the world

Option B: the country is running a net capital account surplus

Option C: foreign investment in domestic securities is at very low levels

Option D: All of the above

Correct Answer: the country is a net lender to the rest of the world ✔

Option A: lending more money to other nations

Option B: experiencing a surplus in exports of goods an services

Option C: reducing its indebtedness to other nations

Option D: going further into debt with other nations

Correct Answer: going further into debt with other nations ✔

Option A: is equal to official reserve transactions

Option B: occurs because of foreign exchange fluctuations

Option C: reflects statistical discrepancies

Option D: reflects the difference between flow and stock concepts

Correct Answer: reflects the difference between flow and stock concepts ✔

Option A: unilateral transfers

Option B: capital account

Option C: merchandise account

Option D: services account

Correct Answer: services account ✔

Option A: the U.S Department of labor

Option B: the U.S Department of Agriculture

Option C: the U.S Department of commerce

Option D: the council of Economic Advisers to the President

Correct Answer: the U.S Department of commerce ✔

Option A: merchandise trade flows

Option B: services flows

Option C: current account flows

Option D: capital flows

Correct Answer: capital flows ✔

Option A: capital outflows

Option B: merchandise exports

Option C: private gifts to foreigners

Option D: foreign aid granted to other nations

Correct Answer: merchandise exports ✔

Option A: balance of international indebtedness

Option B: balance of financial transactions

Option C: balance of payments

Option D: income statements

Correct Answer: balance of payments ✔

Option A: merchandise imports equal merchandise exports

Option B: capital imports equal capital exports

Option C: services exports equal services imports

Option D: the total surplus or deficit equals zero

Correct Answer: the total surplus or deficit equals zero ✔

Option A: involves receipts from foreigners

Option B: involves payments to foreigners

Option C: increases the domestic money supply

Option D: decreases the demand for foreign exchange

Correct Answer: involves receipts from foreigners ✔

Option A: exporter

Option B: importer

Option C: debtor

Option D: creditor

Correct Answer: debtor ✔

Option A: statistical discrepancy

Option B: balance of payments

Option C: balance of trade

Option D: trade deficit

Correct Answer: statistical discrepancy ✔

Option A: The overall sum of all the entries in the balance of payments must be positive

Option B: A country runs a current account surplus if it sells more of its assets abroad than it buys abroad

Option C: A country runs a capital account deficit if it imports more than it exports

Option D: If the current account is in surplus the capital account must be in deficit

Correct Answer: If the current account is in surplus the capital account must be in deficit ✔

Option A: current account the capital account

Option B: current account the trade account

Option C: trade account the capital account

Option D: current account the reserve account

Correct Answer: current account the capital account ✔

Option A: balance of trade

Option B: capital account

Option C: current account

Option D: balance of payments

Correct Answer: balance of payments ✔

Option A: capital account transactions

Option B: current account transactions

Option C: unilateral transfer transactions

Option D: merchandise trade transactions

Correct Answer: capital account transactions ✔

Option A: is true by definition in all possible circumstances

Option B: is supported by recent U.S history

Option C: focuses only on the overall economy and is thus always true

Option D: fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending

Correct Answer: fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending ✔

Option A: merchandise trade account

Option B: services account

Option C: unilateral transfers account

Option D: capital account

Correct Answer: services account ✔

Option A: a credit item in the current account

Option B: a debit item in the capital account

Option C: a credit item in the capital account

Option D: a debit item in the current account

Correct Answer: a credit item in the capital account ✔

Option A: the sum of merchandise trade and services

Option B: the current account plus long-term capital

Option C: the value of merchandise exports minus imports

Option D: short-term capital plus the basic balance

Correct Answer: the sum of merchandise trade and services ✔

Option A: engage in more government spending

Option B: reduce government taxes

Option C: increases private investment spending

Option D: decrease domestic consumption

Correct Answer: decrease domestic consumption ✔

Option A: merchandise trade deficits

Option B: merchandise trade surpluses

Option C: capital/financial account surpluses

Option D: capital/financial account deficits

Correct Answer: capital/financial account surpluses ✔

Option A: mean a loss of foreign exchange

Option B: bring foreign exchange into the country

Option C: indicate a surplus exist

Option D: exist at the bottom line after all accounts are totaled

Correct Answer: mean a loss of foreign exchange ✔

Option A: the value of trade in merchandise

Option B: services

Option C: unilateral transfers

Option D: All of the above

Correct Answer: All of the above ✔

Option A: capital outflow would cause the nation’s currency to depreciate contributing to a trade deficit

Option B: capital inflow would cause the nation’s currency to depreciate contributing to a trade deficit

Option C: capital inflow would cause the nation’s currency to appreciate contributing to a trade deficit

Option D: capital outflow would cause the nation’s currency to appreciate contributing to a trade deficit

Correct Answer: C. capital inflow would cause the nation’s currency to appreciate contributing to a trade deficit ✔

Option A: investment inflows

Option B: merchandise exports

Option C: payments for American services to foreigners

Option D: private gives to foreign residents

Correct Answer: private gives to foreign residents ✔

Option A: insure that the sum of all debits matches the sum of all credits

Option B: insure that trade imports equals the value of trade exports

Option C: obtain an accurate account of a balance of payments deficit

Option D: obtain an accurate account of a balance of payments surplus

Correct Answer: insure that the sum of all debits matches the sum of all credits ✔

Option A: involves receipts from foreigners

Option B: involves payments to foreigners

Option C: increases the domestic money supply

Option D: decreases the demand for foreign exchange

Correct Answer: involves payments to foreigners ✔

Option A: larger savings pool available to finance domestic spending

Option B: higher interest rate which leads to lower domestic investment

Option C: loss of funds to trading partners overseas

Option D: decrease in its services exports to other countries

Correct Answer: larger savings pool available to finance domestic spending ✔

Option A: debtor

Option B: creditor

Option C: spender

Option D: exporter

Correct Answer: creditor ✔

Option A: IMF decentralization; World Bank dissolution

Option B: new loans from multilateral agencies and surplus countries; debt reduction or write-downs

Option C: structural adjustment loans for LDCs experiencing unanticipated external shocks; renewed emphases on macroeconomic stabilization programs

Option D: debt relief for at leas three-fourths of the eligible HIPCs; shorter requirements for adjustment programs

Correct Answer: new loans from multilateral agencies and surplus countries; debt reduction or write-downs ✔

Option A: The ratio of debt service to GNP is very good indicator of the debt burden

Option B: Many large LDC debtors borrowed heavily because of their excellent international credit ratings

Option C: Middle income countries account for almost four-fifths of the total outstanding debt of all LDCs

Option D: The debt-burden of sub Saharan African countries may be as heavy as for middle income countries

Correct Answer: The ratio of debt service to GNP is very good indicator of the debt burden ✔

Option A: Structural adjustment loans

Option B: sectoral adjustment loans

Option C: internal adjustment loans

Option D: external leverage loans

Correct Answer: sectoral adjustment loans ✔

Option A: I and IV only

Option B: II and III only

Option C: I, II and III only

Option D: II, III and IV only

Correct Answer: I and IV only ✔

Option A: Brazil

Option B: Argentina

Option C: Thailand

Option D: Malaysia

Correct Answer: Malaysia ✔

Option A: long-term debt divided by GDP of a country in a given year

Option B: interest and principle payments divided by exports of goods and services

Option C: ratio of debt net of portfolio investment financing and foreign direct investment

Option D: default and reschedule debt minus annual export revenues that must be devoted to paying interest

Correct Answer: interest and principle payments divided by exports of goods and services ✔

Option A: dependable positive real interest rates

Option B: higher taxes on capital gains

Option C: more efficient state enterprises

Option D: market liberalization

Correct Answer: higher taxes on capital gains ✔

Option A: External debt accumulates with international balance on goods services and income deficcits

Option B: When debts are denominated in U.S dollars their appreciation during the 1990s increased the cost of servicing such debts

Option C: In the 19901s LDCs relied increasingly on aid from DCs

Option D: International lenders required LDC governments to guarantee private debt

Correct Answer: In the 19901s LDCs relied increasingly on aid from DCs ✔

Option A: Iraq and Iran

Option B: Egypt and Poland

Option C: Pakistan and Afghanistan

Option D: Saudi Arabia and Jordan

Correct Answer: Egypt and Poland ✔

Option A: I and II only

Option B: I, II , III only

Option C: I, III and IV only

Option D: I, II , III and IV

Correct Answer: I, II , III and IV ✔

Option A: screening of debtors based on their regional location

Option B: World Bank requiring LDCs seconded by a DC to get loan reduction

Option C: loan denial to crisis-stricken highly indebted countries

Option D: None of the above

Correct Answer: None of the above ✔

Option A: excessively committed to writing down LDC debt

Option B: a managed duopoly of policy advice

Option C: a U.S monoply

Option D: the initiator of HIPCs debt forgiveness

Correct Answer: a managed duopoly of policy advice ✔

Option A: unrealistic for IMF to intervene in the financial markets of poor countries during the crisis

Option B: impractical for the IMF to loan short term as reforms can only be effective in the middle to long run

Option C: crucial that the IMF intervene in the reform of fiscal policy of the country and not the monetary policy

Option D: None of the statements above is correct

Correct Answer: impractical for the IMF to loan short term as reforms can only be effective in the middle to long run ✔

Option A: Structural adjustment loans

Option B: sectoral adjustment loans

Option C: internal adjustment loans

Option D: external leverage loans

Correct Answer: sectoral adjustment loans ✔

Option A: trade account surplus

Option B: massive reverse outflows of capital

Option C: technological transfer from DCs

Option D: Symmetric informational in financial market

Correct Answer: massive reverse outflows of capital ✔

Option A: investment loans, and grants from overseas minus international resource outflows

Option B: net international resource flows minus net international interest payments and profit remittances

Option C: international resource outflows minus international balance of payments and profit remittances

Option D: foreign direct investment inflow minus investment loans and grants from overseas

Correct Answer: net international resource flows minus net international interest payments and profit remittances ✔

Option A: Singapore (1994)

Option B: Mexico (1994)

Option C: Russia (1998)

Option D: Brazil (1998)

Correct Answer: Singapore (1994) ✔

Option A: Argentina

Option B: Venezuela

Option C: Mexico

Option D: Canada

Correct Answer: Canada ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and III only

Option D: I, II and IV only

Correct Answer: I, II and III only ✔

Option A: primary products

Option B: intermediate products

Option C: manufactured products

Option D: financial services

Correct Answer: primary products ✔

Option A: banks were unable to function

Option B: there was little corporate control

Option C: vital infrastructure was missing

Option D: All of the above

Correct Answer: All of the above ✔

Option A: an import subsidy

Option B: a quota

Option C: comparative advantage

Option D: an export subsidy

Correct Answer: an export subsidy ✔

Option A: overproduce, under consume

Option B: Overproduce, overconsume

Option C: underproduce, under consume

Option D: underproduce, overconsume

Correct Answer: overproduce, under consume ✔

Option A: comparative advantage

Option B: absolute advantage

Option C: opportunity cost

Option D: relative costs

Correct Answer: absolute advantage ✔

Option A: Comparative advantage

Option B: High exchange rates

Option C: trade barriers

Option D: trade quotas

Correct Answer: Comparative advantage ✔

Option A: Reduce interest rates

Option B: Sell its own currency

Option C: Buy its own currency with foreign reserves

Option D: Increase its own spending

Correct Answer: Buy its own currency with foreign reserves ✔

Option A: Total spending / total consumption

Option B: Total consumption / total income

Option C: Change in consumption / change in income

Option D: Change in consumption / change in savings

Correct Answer: Change in consumption / change in income ✔

Option A: The income of one country compared to another

Option B: The GDP of one country compared to another

Option C: The quantity of exports of one country compared to another

Option D: Export prices compared to import prices

Correct Answer: Export prices compared to import prices ✔

Option A: 0.4A

Option B: 2.5A

Option C: 10A

Option D: 1B

Correct Answer: 2.5A ✔

Option A: Higher interest rates

Option B: Higher income tax

Option C: Tariffs

Option D: Reduced government spending

Correct Answer: Tariffs ✔

Option A: Elimination of border controls

Option B: No import taxes on goods bought in another members country

Option C: Each country can retain its own technical standards

Option D: Common security arrangements

Correct Answer: Each country can retain its own technical standards ✔

Option A: trade diversion

Option B: trade channeling

Option C: trade creation and trade diversion

Option D: trade creation

Correct Answer: trade diversion ✔