#1
Which of the following best describes the concept of 'fiscal policy'?
The management of government spending and taxation to influence the economy
ExplanationGovernment's economic management through spending and taxation.
#2
What does 'GDP' stand for in the context of economics?
Gross Domestic Product
ExplanationTotal value of goods and services produced in a country.
#3
What is the term used to describe the situation when the government's total expenditures exceed its total revenues within a fiscal year?
Budget deficit
ExplanationWhen government spends more than it earns in a year.
#4
In economics, what does the term 'opportunity cost' refer to?
The value of the next best alternative forgone when a decision is made
ExplanationCost of choosing one option over another.
#5
What is the primary objective of 'monetary policy'?
To regulate the money supply and interest rates
ExplanationManagement of money supply and interest rates.
#6
Which economic concept measures the responsiveness of demand for a good to a change in its price?
Price elasticity of demand
ExplanationHow demand changes with price variations.
#7
In public finance, what does the term 'progressive tax' refer to?
A tax that imposes a higher percentage rate of taxation on higher incomes
ExplanationTax rates increase as income rises.
#8
What is the primary function of 'seigniorage' in economics?
The income derived from a government's ability to create money
ExplanationGovernment profit from issuing currency.
#9
Which of the following is an example of an 'automatic stabilizer' in fiscal policy?
Unemployment insurance
ExplanationPrograms stabilizing economy without legislative changes.
#10
What is the purpose of 'crowding out' in the context of fiscal policy?
To decrease private sector investment due to increased government borrowing
ExplanationReduced private investment from government borrowing.
#11
What is the 'Tragedy of the Commons' in the context of public finance?
A situation where individuals exploit shared resources to the detriment of society as a whole
ExplanationOveruse of shared resources leads to depletion.
#12
What is the 'Laffer Curve' often used to illustrate in the context of taxation?
The relationship between tax rates and government revenue
ExplanationOptimal tax rates for maximum revenue.
#13
Which economic theory suggests that government intervention in markets is often unnecessary and can lead to inefficiency?
Classical economics
ExplanationMinimal government intervention for efficient markets.