Economics Quiz

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Questions and Answers

What is the relationship between the rate of inflation and the change in personal incomes in year 1?

Indirect and proportional

Direct and regressive

Direct and proportional (correct)

Indirect and regressive

What happened to prices and real incomes in year 1?

Both prices and real incomes fell

Prices fell but real incomes rose

Prices rose but real incomes fell (correct)

Both prices and real incomes rose

What is included in the construction of the Consumer Prices Index (CPI)?

Incomes

Quantity supplied

Price elasticity of demand

A base year (correct)

Which country is likely to have the highest standard of living?

C Signup and view all the answers

What is correct about absolute poverty?

It occurs when income falls below what is needed for survival Signup and view all the answers

What is true about relative poverty?

It is a relative measure of poverty Signup and view all the answers

What can happen to relative poverty as absolute poverty falls?

It can rise Signup and view all the answers

What is a characteristic of an advanced economy?

A low level of absolute poverty Signup and view all the answers

What is the difference between Sanjay and Raghav's income?

Sanjay receives interest and wages, while Raghav receives profits and rent Signup and view all the answers

What is the effect of the government's decision to reduce social security spending and increase defence spending?

It is an example of contractionary fiscal policy Signup and view all the answers

What is the opportunity cost of producing 20 million units of services?

20 million units of goods Signup and view all the answers

What is the main focus of macroeconomics?

The economy as a whole, including issues such as inflation and unemployment Signup and view all the answers

What is the result of the government's reallocation of resources from social security to defence?

A shift in the allocation of resources within the government budget Signup and view all the answers

What is the maximum production possibility of goods in the given table?

100 million units Signup and view all the answers

What is the consequence of the country's decision to produce 20 million units of services?

The production of goods decreases by 20 million units Signup and view all the answers

What is the graphical representation of the maximum production possibilities of a country?

Production possibility frontier Signup and view all the answers

What is a likely consequence of a decrease in death rates in low-income countries?

An increase in the population growth rate Signup and view all the answers

Which method of trade protection would allow domestic firms to compete with imported goods at a lower price?

A subsidy Signup and view all the answers

How might a multinational company directly benefit a host country's economy?

By creating local employment opportunities Signup and view all the answers

What would be the most effective way to reduce a current account deficit?

A depreciation of the exchange rate Signup and view all the answers

What would be a consequence of a country having a surplus on its trade in services?

A surplus on the current account Signup and view all the answers

What would be the effect on the population growth rate if there is an improvement in education for girls?

A small decline in population growth Signup and view all the answers

What would be a consequence of a cut in interest rates?

An increase in the value of the exchange rate Signup and view all the answers

What would be a benefit of a multinational company to the host country's economy?

It would create local employment opportunities Signup and view all the answers

Study Notes

Microeconomics

Sanjay Raghav's concept: A (interest and profit - wages only), B (interest and wages - profits and rent), C (profits and wages - rent and wages), D (profits only - interest and wages)

Fiscal Policy

If a government reduces social security spending by $10 bn and increases defence spending by $10 bn, it is an example of reallocation of resources (D)

Production Possibilities

If a country originally produced only goods but now produces 20 million units of services, the opportunity cost is 20 million units of goods (A)

Macroeconomics

Macroeconomics includes indirect and regressive taxes (D)

Inflation and Income

If the rate of inflation is 3.5% and the change in personal incomes is 2.5%, then prices rose but real incomes fell (D)

Consumer Prices Index (CPI)

The construction of CPI includes a base year (A)

Standard of Living

The country with the highest standard of living is likely to have the lowest infant mortality rate, birth rate, and death rate, and the highest life expectancy (C)

Poverty

Absolute poverty occurs when income falls below what is needed for survival (A)
Relative poverty is not measured by the same goods and services in all countries (D)

Population Growth

The United Nations predicts that the population in low-income countries will increase due to modern medicine and sanitation leading to a rapid decline in death rates (D)

Trade Protection

A subsidy enables domestic firms to lower their prices and undercut the price of imported goods (A)

Multinational Companies (MNCs)

An MNC can directly benefit a host country by creating local employment (A)

Balance of Payments

A depreciation of the exchange rate is most likely to reduce a current account deficit (C)
If a country has a surplus on its trade in services, it can have a deficit on its trade in goods, primary income, and secondary income, and still have a surplus on the current account (B)

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Description

Test your knowledge of economics concepts including interest, profit, wages, rent, and fiscal policy.