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ECONOMICS SOLVED MCQS

Basics of Economics & How Economics Works Solved MCQs 

Economics


1. What is the primary function of central banks in managing the economy?

   a) Fiscal policy  

   b) Monetary policy  

   c) Trade policy  

   d) Industrial policy  


2. In economics, what is the law of demand?

a) As prices increase, quantity demanded decreases  

b) As prices increase, quantity demanded increases  

c) Prices and quantity demanded are unrelated  

d) Quantity demanded remains constant regardless of price changes  


3. What is the full form of GDP?

   a) Gross Domestic Profit  

   b) General Domestic Product  

   c) Gross Domestic Product  

   d) General Domestic Profit  


4. Which economic system relies on the forces of supply and demand with little to no government intervention?

   a) Capitalism  

   b) Socialism  

   c) Communism  

   d) Mixed economy  


5. What does CPI stand for in the context of economics?

   a) Central Price Index  

   b) Consumer Price Index  

   c) Currency Price Indicator  

   d) Cost-Profit Inflation  


 6. What is the primary focus of macroeconomics?

   a) Individual consumer behavior

   b) Overall economy-wide trends and               phenomena

   c) Market equilibrium

   d) Supply and demand interactions


7. Which of the following is a macroeconomic indicator?

   a) Price elasticity

   b) Gross Domestic Product (GDP)

   c) Marginal utility

   d) Perfect competition


8. Microeconomics is concerned with:

   a) Large-scale economic issues

   b) Individual economic units

   c) Aggregate demand and supply

   d) Government fiscal policies


9. What does the Consumer Price Index (CPI) measure?

   a) Inflation

   b) Unemployment

   c) GDP growth

   d) Interest rates


10. Which of the following is a microeconomic concept?

   a) National income

   b) Price elasticity of demand

   c) Aggregate demand

   d) Money supply


11. What happens to the equilibrium price and quantity when there is an increase in demand?

   a. Price increases, quantity increases  

   b. Price increases, quantity decreases  

   c. Price decreases, quantity increases  

   d. Price decreases, quantity decreases  


12. If the supply of a good decreases while demand remains constant, what will happen to the equilibrium price and quantity?

   a. Price increases, quantity increases  

   b. Price increases, quantity decreases  

   c. Price decreases, quantity increases  

   d. Price decreases, quantity decreases  


13. What is the likely impact on the market if both demand and supply increase simultaneously?

   a. Price increases, quantity is ambiguous  

   b. Price decreases, quantity increases  

   c. Price increases, quantity increases  

   d. Price decreases, quantity decreases  


14. If the government imposes a price ceiling below the equilibrium price, what is the probable outcome?

   a. Surplus of the good  

   b. Shortage of the good  

   c. No impact on quantity  

   d. Equilibrium price remains unchanged  


15. What does a rightward shift of the supply curve indicate?

a. Increase in quantity supplied at every price  

b. Increase in price at every quantity  

c. Decrease in quantity supplied at every price  

d. Decrease in price at every quantity  


16. What is fiscal policy?

a) Monetary tools used by central banks

b) Government's use of taxation and spending to influence the economy

c) International trade agreements

d) Corporate financial strategies


17. Which of the following is an expansionary fiscal policy measure?

 a) Decreasing government spending

 b) Increasing taxes

 c) Decreasing taxes

 d) Selling government bonds


18. What is the primary goal of contractionary fiscal policy?

a) Stimulating economic growth

b) Reducing inflation

c) Increasing government spending

d) Lowering interest rates


19. If a government aims to decrease the budget deficit, which fiscal policy action would be appropriate?

a) Increasing government spending

b) Decreasing taxes

c) Increasing taxes or reducing government spending

 d) Selling government bonds


20. How does an automatic stabilizer work in fiscal policy?

a) Requires constant government intervention

b) Adjusts automatically in response to economic conditions

c) Stimulates inflation

 d) Impacts interest rates directly


21. What is the primary tool used by central banks to control the money supply and interest rates?

   a. Fiscal Policy  

   b. Exchange Rates  

   c. Monetary Policy  

   d. Trade Agreements  


22. When a central bank sells government securities, what is the likely impact on the money supply and interest rates?

a. Increase money supply, decrease interest rates  

b. Decrease money supply, increase interest rates  

c. Increase both money supply and interest rates  

d. Decrease both money supply and interest rates  


23. What is the discount rate in the context of monetary policy?**

a. Interest rate charged by commercial banks to each other  

b. Interest rate at which commercial banks can borrow from the central bank  

c. Interest rate set by the government for public loans  

 d. Interest rate on corporate bonds  


 24. In an expansionary monetary policy, the central bank is likely to:

   a. Sell government securities  

   b. Raise the reserve requirements  

   c. Buy government securities  

   d. Increase the discount rate  


25. What is the purpose of open market operations in monetary policy?

a. Regulating foreign exchange rates  

b. Controlling inflation  

c. Managing the money supply and interest rates  

 d. Stabilizing fiscal policy  


26. What is inflation?

   a) Increase in the general price level  

   b) Decrease in the general price level  

   c) Unchanged general price level  

   d) Increase in production levels


27. Which of the following is a cause of demand-pull inflation?

   a) Decrease in consumer spending  

   b) Increase in government spending  

   c) Decrease in money supply  

   d) Decrease in production costs


28. Deflation is characterized by:

   a) Rising prices  

   b) Falling prices  

   c) Stable prices  

   d) Fluctuating prices


29. What is one potential consequence of hyperinflation?

   a) Increased purchasing power  

   b) Stable economic conditions  

   c) Erosion of currency value  

   d) Decreased interest rates


30. Cost-push inflation can be caused by:

 a) Increase in aggregate demand  

 b) Decrease in production costs  

c) Increase in wages or raw material prices  

 d) Stable unemployment rates


31. What does the term "unemployment rate" represent in the context of labor market dynamics?

a) The percentage of the total population without a job  

b) The percentage of the labor force without a job and actively seeking employment  

c) The percentage of employed individuals in the labor force  

d) The total number of job vacancies in the economy


32. Which type of unemployment is associated with changes in the business cycle and economic downturns?

   a) Structural unemployment  

   b) Frictional unemployment  

   c) Cyclical unemployment  

   d) Seasonal unemployment


33. What characterizes "frictional unemployment"?

a) Unemployment caused by a mismatch between available jobs and workers' skills  

b) Unemployment due to changes in the business cycle  

c) Unemployment caused by seasonal factors  

d) Long-term unemployment caused by shifts in the structure of the economy


34. How is the labor force participation rate calculated?

a) Total employed individuals divided by the working-age population  

b) Total unemployed individuals divided by the labor force  

c) Labor force divided by the working-age population  

d) Total working-age population divided by the labor force


35. Which of the following is an example of structural unemployment?

a) A person who is temporarily unemployed between jobs  

b) A worker laid off during a recession due to decreased demand for a specific industry  

c) A seasonal worker without a job during the offseason  

d) A recent college graduate actively searching for their first job


36. What is Globalization in Economics?

a. The reduction of international trade  

b. The increasing interconnectedness of national economies  

c. The isolation of domestic markets  

d. The decline of multinational corporations  


37. Which of the following is a positive impact of globalization on trade?

a. Increased competition leading to lower prices  

b. Job loss and unemployment  

c. Protectionism and trade barriers  

d. Economic isolation  


38. What is a tariff in the context of international trade?

a. A tax on imported and exported goods  

b. A subsidy provided by the government  

c. A trade agreement between countries  

d. A restriction on the quantity of goods traded  


39. Which international organization promotes free trade by reducing trade barriers?

a. World Health Organization (WHO)  

b. International Monetary Fund (IMF)  

c. World Trade Organization (WTO)  

d. United Nations (UN)  


40. What is the concept of comparative advantage in international trade?

a. Each country produces all goods for self-sufficiency  

b. Countries specialize in producing goods with the lowest opportunity cost  

c. Equal distribution of resources among all trading partners  

d. A strategy to limit imports and promote domestic production  


41. What is a common measure used to assess economic growth?

   a) Gross Domestic Product (GDP)

   b) Consumer Price Index (CPI)

   c) Unemployment Rate

   d) Budget Deficit


42. Which factor is considered a key contributor to long-term economic growth?

   a) Stable Inflation

   b) Large Government Spending

   c) Increased Labor Market Regulation

   d) Technological Progress


43. In the context of economic growth, what does the term "capital accumulation" refer to?

   a) Increase in the stock market values

   b) Accumulation of financial reserves

 c) Increase in physical and human capital

   d) Growth in government bonds


44. Which of the following is a characteristic of sustainable economic growth?

a) Rapid but short-term expansion

b) High inflation rates

c) Long-term growth without depleting resources

 d) Dependence on external debt


45. What role does innovation play in fostering economic growth?

a) It hinders growth by introducing uncertainty.

b) It is unrelated to economic growth.

c) It drives productivity and efficiency improvements.

 d) It only benefits specific industries.


 Sure, here are a few multiple-choice questions (MCQs) on development economics along with their answers:


46. What is the primary focus of development economics?

   a. Economic growth

   b. Income distribution

   c. Poverty reduction

   d. All of the above


47. Which indicator is commonly used to measure a country's overall economic development?

a. Gross Domestic Product (GDP) per capita

b. Inflation rate

c. Unemployment rate

d. Consumer Price Index (CPI)


48. What is the Human Development Index (HDI) designed to assess?

   a. Economic growth only

 b. Life expectancy, education, and income

   c. Poverty rates

   d. Environmental sustainability


49. Which theory suggests that economic development is a result of a sequence of stages that countries go through?

   a. Dependency theory

   b. Modernization theory

   c. World-systems theory

   d. Neoclassical theory


50. In the context of development economics, what does the term "brain drain" refer to?

a. The movement of skilled workers from less developed to more developed countries

b. A decrease in a country's overall intelligence

c. The migration of unskilled labor

d. The loss of natural resources

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Location: Sindh, Pakistan

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