#1
2. Which of the following is a tool of fiscal policy?
Government spending
ExplanationGovernment spending is a key tool of fiscal policy, influencing economic activity through expenditure.
#2
5. Which economic indicator is used to measure the overall health of an economy?
Gross Domestic Product (GDP)
ExplanationGDP is a key economic indicator, measuring the total value of goods and services produced in a country.
#3
14. Which economic concept is related to the idea that individuals have unlimited wants but resources are limited?
Scarcity
ExplanationScarcity is the economic concept highlighting the imbalance between unlimited human wants and limited resources.
#4
1. What is the primary goal of monetary policy?
Stabilize prices and control inflation
ExplanationMonetary policy aims to stabilize prices and control inflation by adjusting interest rates and money supply.
#5
4. In government budgeting, what is a budget deficit?
Excess of government expenditures over revenue
ExplanationA budget deficit occurs when government spending exceeds its revenue, leading to a shortfall.
#6
7. What is the purpose of automatic stabilizers in fiscal policy?
To automatically increase government spending during a recession
ExplanationAutomatic stabilizers adjust government spending automatically in response to economic cycles, providing stability.
#7
8. Which of the following is a characteristic of expansionary fiscal policy?
Increased government spending
ExplanationExpansionary fiscal policy involves boosting economic activity through increased government spending.
#8
10. What is the purpose of the government's use of contractionary monetary policy?
To reduce inflation
ExplanationContractionary monetary policy aims to curb inflation by decreasing the money supply and increasing interest rates.
#9
12. What is the role of the central bank in monetary policy?
Controlling the money supply and interest rates
ExplanationThe central bank plays a crucial role in monetary policy, regulating the money supply and interest rates to achieve economic objectives.
#10
3. What does the term 'crowding out' refer to in economics?
Decrease in private investment due to government borrowing
ExplanationCrowding out occurs when government borrowing leads to reduced private investment in the economy.
#11
6. What is the Phillips Curve in macroeconomics used to illustrate?
The relationship between inflation and unemployment
ExplanationThe Phillips Curve depicts the inverse relationship between inflation and unemployment in an economy.
#12
9. What is the Laffer Curve in economics often used to represent?
The relationship between tax rates and government revenue
ExplanationThe Laffer Curve illustrates the potential relationship between tax rates and government revenue, highlighting the point of revenue maximization.
#13
11. In macroeconomics, what does the term 'stagflation' refer to?
High inflation combined with high unemployment
ExplanationStagflation is characterized by a simultaneous occurrence of high inflation and high unemployment in an economy.
#14
13. What is the purpose of a countercyclical fiscal policy?
To offset the effects of economic cycles
ExplanationCountercyclical fiscal policy involves measures to counteract the impact of economic cycles, stabilizing the economy.
#15
16. What is the concept of the 'Multiplier Effect' in fiscal policy?
The idea that government spending has a larger impact on aggregate demand than the initial spending amount
ExplanationThe multiplier effect in fiscal policy posits that initial government spending leads to a larger impact on overall demand.