Economics Quiz

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)