#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 'trade deficit' refer to?
Imports exceeding exports
ExplanationWhen a country imports more goods and services than it exports.
#3
What is the main goal of a central bank's monetary policy?
To stabilize prices
ExplanationMaintaining stable inflation rates and currency values through interest rate manipulation.
#4
What does the term 'exchange rate' refer to?
The price of one currency in terms of another
ExplanationRate at which one currency can be exchanged for another.
#5
What does the term 'balance of trade' refer to?
The difference between exports and imports of goods and services
ExplanationNet difference between the value of a country's exports and imports of goods and services.
#6
What is the main purpose of a trade barrier?
To restrict imports
ExplanationMeasures imposed by governments to control the flow of goods and services across borders.
#7
Which of the following is an example of a protective trade policy?
Tariffs
ExplanationTax imposed on imported goods to make them more expensive and protect domestic industries.
#8
What does the term 'comparative advantage' mean in the context of international trade?
When a country produces a good at a lower opportunity cost than another country
ExplanationAbility of a country to produce a good or service at a lower opportunity cost than another country.
#9
What is the Phillips curve used to depict?
The relationship between inflation and unemployment
ExplanationInverse relationship between unemployment rate and inflation rate.
#10
Which of the following is NOT a characteristic of a developed economy?
Low literacy rate
ExplanationDeveloped economies typically have high literacy rates.
#11
What is the main function of the World Trade Organization (WTO)?
To facilitate negotiations for free trade agreements
ExplanationPromoting global trade liberalization and resolving trade disputes between member countries.
#12
Which of the following is an example of a capital account transaction?
Foreign direct investment
ExplanationInvestment made by a company or individual in one country in business interests in another country.
#13
What is the main function of the International Monetary Fund (IMF)?
To provide financial assistance to countries facing economic difficulties
ExplanationOffering financial support and advice to countries experiencing economic crises.
#14
What is the current account balance in the balance of payments?
All of the above
ExplanationNet balance of trade in goods and services, net income from abroad, and net current transfers.
#15
Which economic theory advocates for government intervention in the economy during recessions?
Keynesian economics
ExplanationEmphasizes the role of government spending and monetary policy in stimulating demand during economic downturns.