#1
Which of the following is a component of government expenditure?
Investment in infrastructure
ExplanationGovernment spends on building infrastructure.
#2
What does GDP stand for?
Gross Domestic Product
ExplanationGDP measures the total value of goods and services produced in a country.
#3
What is the purpose of an expansionary monetary policy?
To stimulate economic growth
ExplanationExpansionary monetary policy boosts economic activity.
#4
What is the main objective of supply-side economics?
To promote economic growth by reducing barriers to production
ExplanationSupply-side economics aims to boost growth by easing production constraints.
#5
Which of the following best describes fiscal policy?
Government decisions on taxation and spending to influence economic conditions
ExplanationFiscal policy involves government actions on taxes and spending to shape economy.
#6
Which of the following is NOT a tool of fiscal policy?
Interest rates
ExplanationInterest rates are managed by monetary policy.
#7
What does the term 'budget deficit' refer to?
When government spending exceeds its revenue in a fiscal year
ExplanationBudget deficit occurs when government spends more than it earns.
#8
What is the primary goal of monetary policy?
Promoting economic growth and stability
ExplanationMonetary policy aims to stabilize economy and foster growth.
#9
Which of the following is NOT a function of central banks?
Managing government finances
ExplanationCentral banks don't directly manage government finances.
#10
What is the main purpose of a trade deficit?
To increase domestic employment
ExplanationTrade deficit aims to create jobs domestically.
#11
Which of the following is a characteristic of expansionary fiscal policy?
Lower taxes
ExplanationTo boost economy, government reduces taxes.
#12
What is the main purpose of a contractionary monetary policy?
To decrease inflation and cool down an overheated economy
ExplanationContractionary monetary policy aims to curb inflation and economic overheating.
#13
In the context of fiscal policy, what is 'crowding out'?
When private investment decreases due to increased government borrowing
ExplanationGovernment borrowing displaces private investment.
#14
What is the purpose of automatic stabilizers in fiscal policy?
To automatically adjust taxes and transfer payments in response to economic conditions
ExplanationAutomatic stabilizers help stabilize economy by adjusting fiscal policies automatically.
#15
Which of the following is NOT a tool of monetary policy?
Government spending
ExplanationMonetary policy doesn't involve direct government spending.