#1
Which of the following is not a component of GDP?
Exports
ExplanationExports are not considered in GDP calculation.
#2
What does the term 'stagflation' refer to?
High inflation and high unemployment
ExplanationStagflation indicates simultaneous high inflation and unemployment.
#3
Which of the following is NOT a tool of monetary policy?
Government spending
ExplanationGovernment spending is not a tool of monetary policy.
#4
Which of the following is a characteristic of a recession?
Declining consumer spending
ExplanationRecession is marked by a decrease in consumer spending.
#5
Which of the following is a tool of fiscal policy?
Government spending
ExplanationGovernment spending is a key tool of fiscal policy.
#6
Which of the following is not a phase of the business cycle?
Stagnation
ExplanationStagnation is not a recognized phase in the business cycle.
#7
Which of the following is true about fiscal policy?
It involves changes in government spending and taxation
ExplanationFiscal policy entails altering government spending and taxation.
#8
What is the primary tool used by central banks to control the money supply?
Open market operations
ExplanationCentral banks primarily use open market operations to regulate the money supply.
#9
What is the Phillips Curve?
A graphical representation of the relationship between inflation and unemployment
ExplanationThe Phillips Curve illustrates the inverse relationship between inflation and unemployment.
#10
What does the term 'crowding out' refer to in economics?
A situation where government borrowing leads to higher interest rates and reduces private investment
ExplanationCrowding out describes reduced private investment due to increased government borrowing and higher interest rates.
#11
What is the difference between fiscal policy and monetary policy?
Fiscal policy involves changes in government spending and taxation, while monetary policy involves changes in the money supply and interest rates
ExplanationFiscal policy alters government spending and taxation, while monetary policy adjusts money supply and interest rates.
#12
What is the relationship between inflation and the purchasing power of money?
As inflation increases, the purchasing power of money decreases
ExplanationInflation erodes the purchasing power of money, causing it to decrease.
#13
According to classical economic theory, what should happen in the long run when an economy experiences an increase in aggregate demand?
Inflation will occur
ExplanationClassical theory suggests that increased demand leads to inflation in the long run.