#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 a characteristic of a boom phase in the business cycle?
Rising stock prices
ExplanationBooms are characterized by increasing stock prices.
#8
What is the term for the situation where there is a sustained increase in the general price level of goods and services in an economy?
Inflation
ExplanationInflation signifies a continuous rise in the overall price level.
#9
What is the term used to describe the situation where the government spends more money than it collects in revenue?
Budget deficit
ExplanationBudget deficit occurs when government spending exceeds revenue.
#10
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.
#11
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.
#12
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.
#13
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.
#14
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.
#15
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.
#16
What is the term for a period of declining economic activity across the economy lasting longer than a few months?
Depression
ExplanationDepression denotes prolonged economic decline.
#17
What is the name of the situation where an economy's total output is less than its potential output?
Deflationary gap
ExplanationDeflationary gap occurs when actual output is below potential.
#18
Which of the following best describes the concept of the business cycle?
The short-term fluctuations in economic activity around its long-term growth trend
ExplanationThe business cycle encompasses short-term economic fluctuations around a long-term growth trend.
#19
What is the name of the phenomenon where rising wages lead to increased production costs and eventually to higher prices?
Cost-push inflation
ExplanationCost-push inflation arises from increased production costs due to rising wages, leading to higher prices.
#20
What is the term used to describe a situation where an economy's total output exceeds its potential output?
Inflationary gap
ExplanationInflationary gap indicates actual output surpassing potential output.
#21
What is the term for the situation where the rate of economic growth exceeds the rate of population growth?
Demographic dividend
ExplanationDemographic dividend occurs when economic growth outpaces population growth.
#22
What is the primary goal of monetary policy?
Maintain price stability and promote full employment
ExplanationMonetary policy aims to stabilize prices and achieve full employment.
#23
Which of the following is a lagging indicator of economic activity?
Unemployment rate
ExplanationThe unemployment rate is a lagging indicator, reflecting past economic performance.
#24
Which of the following factors can lead to a shift in the long-run aggregate supply curve?
Changes in technology
ExplanationTechnological advancements can shift the long-run aggregate supply curve.
#25
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.