#1
Which of the following is NOT a component of Gross Domestic Product (GDP)?
Savings
ExplanationSavings are not included in GDP calculation.
#2
What does inflation measure?
The increase in the general price level
ExplanationInflation measures the rate at which the general price level of goods and services is rising.
#3
What is the primary objective of fiscal policy?
Promote economic growth
ExplanationFiscal policy aims to stabilize the economy and promote economic growth through government spending and taxation.
#4
What is the term used to describe the situation where the value of a currency is fixed to another currency or a basket of currencies?
Pegging
ExplanationPegging refers to fixing the value of a currency to another currency or a basket of currencies.
#5
Which of the following best describes the concept of 'opportunity cost'?
The value of the next best alternative that is foregone when a decision is made
ExplanationOpportunity cost represents the potential benefits an individual or business misses out on when choosing one alternative over another.
#6
Which of the following monetary policies involves increasing the money supply to stimulate economic growth?
Expansionary monetary policy
ExplanationExpansionary monetary policy involves increasing the money supply to boost economic activity.
#7
What is the primary function of a central bank?
All of the above
ExplanationThe primary functions of a central bank include regulating money supply, overseeing monetary policy, and maintaining financial stability.
#8
What is the Phillips Curve relationship?
A negative correlation between inflation and unemployment
ExplanationThe Phillips Curve shows the tradeoff between inflation and unemployment; as one decreases, the other increases.
#9
Which of the following is a leading economic indicator?
New housing starts
ExplanationNew housing starts are considered a leading indicator as they can predict economic trends.
#10
Which of the following is NOT a function of financial markets?
Regulating monetary policy
ExplanationRegulating monetary policy is the responsibility of central banks, not financial markets.
#11
What does the term 'liquidity trap' refer to?
A situation where monetary policy is ineffective
ExplanationA liquidity trap occurs when injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth.