Fundamentals of Economic Theory Quiz

Test your knowledge with questions on scarcity, GDP, utility maximization, law of demand, inflation, competitive markets, Phillips curve, tax systems, and more.

Practice Learn Test

Which of the following best defines the concept of scarcity in economics?

The unlimited wants of individuals exceed the limited resources available to fulfill those wants.

The unlimited resources available to fulfill the unlimited wants of individuals.

The limited wants of individuals match perfectly with the limited resources available.

The resources available exceed the wants of individuals.

What does GDP stand for in economics?

Gross Domestic Price

Gross Domestic Product

General Demand Projection

Global Development Protocol

Which economic theory argues that individuals make decisions based on maximizing their utility?

Keynesian Economics

Monetarist Economics

Supply-side Economics

Rational Choice Theory

What is the law of demand in economics?

As the price of a good increases, the quantity demanded decreases, and vice versa, assuming all other factors remain constant.

As the price of a good increases, the quantity demanded also increases, assuming all other factors remain constant.

As the price of a good decreases, the quantity demanded decreases, assuming all other factors remain constant.

As the price of a good decreases, the quantity demanded also increases, and vice versa, assuming all other factors remain constant.

What is the opportunity cost of a decision?

The total cost incurred in making the decision.

The next best alternative forgone when making a decision.

The total monetary value of all alternatives considered.

The cost of the resources used in implementing the decision.

In economics, what does the term 'inflation' refer to?

A decrease in the general price level of goods and services.

An increase in the purchasing power of money.

A sustained increase in the general price level of goods and services over a period of time.

A situation where there is no change in the general price level of goods and services.

What is the law of diminishing marginal utility?

As the quantity of a good consumed increases, the total utility derived from it increases at a diminishing rate.

As the quantity of a good consumed increases, the total utility derived from it increases at a constant rate.

As the quantity of a good consumed increases, the total utility derived from it decreases at a diminishing rate.

As the quantity of a good consumed increases, the total utility derived from it decreases at a constant rate.

What is the difference between microeconomics and macroeconomics?

Microeconomics focuses on individual markets and industries, while macroeconomics focuses on the overall economy.

Microeconomics focuses on the overall economy, while macroeconomics focuses on individual markets and industries.

Microeconomics focuses on the behavior of individual consumers and firms, while macroeconomics focuses on government policies.

There is no difference between microeconomics and macroeconomics.

What is the difference between nominal GDP and real GDP?

Nominal GDP is adjusted for inflation, while real GDP is not.

Real GDP is adjusted for inflation, while nominal GDP is not.

Nominal GDP accounts for changes in prices, while real GDP does not.

Real GDP accounts for changes in prices, while nominal GDP does not.

#10

According to classical economic theory, what is the primary driver of economic growth?

Government intervention

Consumer spending

Technological progress

Social welfare programs

#11

Which of the following is a characteristic of a perfectly competitive market?

Numerous buyers and sellers with no individual seller having market power.

A single seller dominating the market.

High barriers to entry and exit from the market.

Product differentiation among sellers.

#12

What is the Phillips curve in economics?

A curve showing the relationship between inflation and unemployment.

A curve showing the relationship between interest rates and investment.

A curve showing the relationship between government spending and GDP growth.

A curve showing the relationship between exchange rates and trade balance.

#13

What is the difference between a progressive tax system and a regressive tax system?

In a progressive tax system, higher-income earners pay a higher percentage of their income in taxes, while in a regressive tax system, lower-income earners pay a higher percentage.

In a progressive tax system, lower-income earners pay a higher percentage of their income in taxes, while in a regressive tax system, higher-income earners pay a higher percentage.

Both systems tax individuals at the same rate regardless of their income level.

Progressive and regressive tax systems are synonymous and can be used interchangeably.

#14

What is the equation of the aggregate expenditure line in Keynesian economics?

AE = C + I + G + NX

AE = C + I + S

AE = C + I

AE = C + I + G

#15

In economics, what does the term 'elasticity' refer to?

The responsiveness of quantity demanded to changes in price.

The total quantity of a good demanded at a given price level.

The ability of a market to adjust to changes in supply or demand.

The total revenue generated by a firm.

#16

What is the difference between monetary policy and fiscal policy?

Monetary policy refers to government decisions regarding taxation and spending, while fiscal policy refers to central bank decisions regarding interest rates and money supply.

Monetary policy refers to central bank decisions regarding interest rates and money supply, while fiscal policy refers to government decisions regarding taxation and spending.

Both monetary policy and fiscal policy refer to the same set of government decisions regarding taxation and spending.

There is no difference between monetary policy and fiscal policy.