#1
Which of the following is a component of GDP?
All of the above
ExplanationGDP encompasses consumption, investment, government spending, and net exports.
#2
What does the unemployment rate measure?
The percentage of people in the labor force who are unemployed
ExplanationUnemployment rate indicates the portion of the labor force actively seeking employment but unable to find jobs.
#3
Which of the following is a measure of economic growth?
Real GDP per capita
ExplanationReal GDP per capita gauges the economic output per person, accounting for inflation.
#4
What is the primary tool used by central banks to influence monetary policy?
Open market operations
ExplanationCentral banks conduct open market operations to buy or sell government securities, affecting money supply and interest rates.
#5
What is the primary goal of monetary policy?
Stabilizing prices
ExplanationThe primary objective of monetary policy is to maintain stable prices, usually targeting low inflation.
#6
Which of the following is NOT a component of aggregate demand (AD)?
Imports (M)
ExplanationAggregate demand includes consumption (C), investment (I), government spending (G), and net exports (exports minus imports).
#7
In the IS-LM model, what does the LM curve represent?
Equilibrium in the money market
ExplanationThe LM curve shows combinations of interest rates and income where money supply equals money demand.
#8
What is the relationship between inflation and unemployment known as?
The Phillips Curve
ExplanationThe Phillips Curve depicts an inverse relationship between inflation and unemployment.
#9
Which of the following best describes the concept of 'crowding out'?
Increase in government spending leads to a decrease in private investment
ExplanationCrowding out occurs when government spending absorbs resources, reducing private sector investment.
#10
What does the term 'stagflation' refer to?
High inflation and high unemployment occurring simultaneously
ExplanationStagflation describes a scenario of stagnant economic growth accompanied by high inflation and unemployment.
#11
What does the term 'liquidity trap' refer to in macroeconomics?
A situation where monetary policy is ineffective
ExplanationA liquidity trap arises when nominal interest rates are near zero, rendering conventional monetary policy ineffective.
#12
What does the term 'deflation' refer to?
A sustained decrease in the general price level
ExplanationDeflation signifies a persistent decline in the overall price level of goods and services.
#13
What is the formula for calculating the velocity of money?
V = PY/M
ExplanationVelocity of money (V) equals nominal GDP (PY) divided by money supply (M).
#14
What is the name of the index that measures the average prices received by producers?
Producer Price Index (PPI)
ExplanationThe Producer Price Index tracks changes in prices received by producers for their output.
#15
Which of the following best describes the concept of 'comparative advantage'?
A country's ability to produce a good at a lower opportunity cost than another country
ExplanationComparative advantage refers to a nation's capacity to produce a good or service at a lower opportunity cost than its trading partners.