#1
Which of the following is a component of GDP?
Government spending
ExplanationContribution of government expenditure to total economic output.
#2
What does the term 'inflation' refer to?
A sustained increase in the general price level of goods and services
ExplanationPersistent rise in overall prices affecting purchasing power.
#3
What does the term 'fiscal policy' refer to?
Government policies related to taxation and spending
ExplanationActions taken by the government concerning revenue generation and expenditure.
#4
What is the primary goal of monetary policy?
Stabilizing prices and controlling inflation
ExplanationCentral bank's objective to maintain price stability and manage inflation.
#5
What is the primary tool used by central banks to control the money supply?
Open market operations
ExplanationBuying and selling government securities to influence the money supply.
#6
Which of the following is a measure of economic growth?
Gross Domestic Product (GDP)
ExplanationTotal value of goods and services produced within a country over a period.
#7
What is the Phillips curve primarily used to illustrate?
The relationship between inflation and unemployment
ExplanationInverse relationship suggesting higher inflation leads to lower unemployment and vice versa.
#8
What is the formula for calculating the unemployment rate?
Number of unemployed people / Labor force
ExplanationRatio of unemployed individuals to the total labor force, expressed as a percentage.
#9
What is the difference between nominal GDP and real GDP?
Real GDP is adjusted for inflation, while nominal GDP is not
ExplanationReal GDP accounts for changes in price levels, whereas nominal GDP does not.
#10
What is the equation of the aggregate demand curve?
AD = C + I + G + (X - M)
ExplanationSum of consumption, investment, government spending, and net exports.
#11
Which of the following is a tool of monetary policy used by central banks?
Quantitative easing
ExplanationStrategy of central banks to increase money supply by purchasing securities.
#12
What is the concept of the 'Laffer curve' often used to explain?
The effect of taxation on government revenue
ExplanationIllustrates the relationship between tax rates and tax revenue.
#13
What is the difference between monetary policy and fiscal policy?
Fiscal policy involves government spending and taxation, while monetary policy involves regulating the money supply and interest rates
ExplanationFiscal policy relates to government revenue and expenditure, while monetary policy focuses on money supply and interest rates.
#14
What does the term 'liquidity trap' refer to?
A condition where monetary policy is ineffective in stimulating the economy
ExplanationSituation where lowering interest rates fails to boost economic activity.
#15
What is the difference between monetary base and money supply?
Monetary base includes currency in circulation and commercial bank reserves, while money supply includes only currency in circulation
ExplanationMonetary base comprises cash in circulation and bank reserves, whereas money supply includes cash held by the public.