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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?
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?
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)?
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?
Which country is likely to have the highest standard of living?
What is correct about absolute poverty?
What is correct about absolute poverty?
What is true about relative poverty?
What is true about relative poverty?
What can happen to relative poverty as absolute poverty falls?
What can happen to relative poverty as absolute poverty falls?
What is a characteristic of an advanced economy?
What is a characteristic of an advanced economy?
What is the difference between Sanjay and Raghav's income?
What is the difference between Sanjay and Raghav's income?
What is the effect of the government's decision to reduce social security spending and increase defence spending?
What is the effect of the government's decision to reduce social security spending and increase defence spending?
What is the opportunity cost of producing 20 million units of services?
What is the opportunity cost of producing 20 million units of services?
What is the main focus of macroeconomics?
What is the main focus of macroeconomics?
What is the result of the government's reallocation of resources from social security to defence?
What is the result of the government's reallocation of resources from social security to defence?
What is the maximum production possibility of goods in the given table?
What is the maximum production possibility of goods in the given table?
What is the consequence of the country's decision to produce 20 million units of services?
What is the consequence of the country's decision to produce 20 million units of services?
What is the graphical representation of the maximum production possibilities of a country?
What is the graphical representation of the maximum production possibilities of a country?
What is a likely consequence of a decrease in death rates in low-income countries?
What is a likely consequence of a decrease in death rates in low-income countries?
Which method of trade protection would allow domestic firms to compete with imported goods at a lower price?
Which method of trade protection would allow domestic firms to compete with imported goods at a lower price?
How might a multinational company directly benefit a host country's economy?
How might a multinational company directly benefit a host country's economy?
What would be the most effective way to reduce a current account deficit?
What would be the most effective way to reduce a current account deficit?
What would be a consequence of a country having a surplus on its trade in services?
What would be a consequence of a country having a surplus on its trade in services?
What would be the effect on the population growth rate if there is an improvement in education for girls?
What would be the effect on the population growth rate if there is an improvement in education for girls?
What would be a consequence of a cut in interest rates?
What would be a consequence of a cut in interest rates?
What would be a benefit of a multinational company to the host country's economy?
What would be a benefit of a multinational company to the host country's economy?
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.
