ECONOMIC

CONCEPTS
MCQ
MCQ 21

In the long run, firms may experience increasing returns because

they operate more efficiently. With growth comes specialization of
labor and related production efficiencies related to the law of
diminishing returns. This phenomenon is called

a. law of diminishing returns

b. law of supply and demand

c. economies of scale

d. efficiency variance
MCQ 22

Marginal cost

a. is the income or benefit foregone when the next best alternative

is chosen.

b. is the additional cost of producing one additional item

c. is the difference between relevant costs.

d. is a sunk cost.
MCQ 23

It is the total amount of expenditures for consumer goods and

investment for a period of time. It includes purchases by
consumers, businesses, government, and foreign entities.

a. Gross domestic product

b. Aggregate demand

c. Propensity to consume

d. Macro-consumption
MCQ 24

Gross domestic product (GDP ) is the

a. total amount of expenditures for consumer goods and investment

for a period of time .

b. total purchases by consumers, businesses, government, and

foreign entities

c. value of all final goods and services produced by the country by

both domestic and foreign -owned sources.

d. value of all goods and services produced by the country by

domestic firms, excluding those produced by foreign -owned
companies.
MCQ 25

In economics, personal income minus personal taxes equals

a. net income.

b. income after tax.

c. disposable income.

d. take-home pay
MCQ 26

Demand-pull inflation is caused by excess demand that bids up the

cost of labor and other resources. Which of the following is the
most effective fiscal policy program for reducing demand -pull
inflation?

a. Decrease government spending and increase taxes.

b. Increase government spending and decrease taxes.

c. Increase both government spending and taxes.

d. Decrease the money supply.

MCQ 27

Which of the following is not an instrument of monetary policy by

which the money supply is controlled?

a. Changing the discount rate

b. Open-market operations

c. Manipulation of government spending

d. Changing the reserve ratio

MCQ 28

The rate of unemployment caused by contractions of the economy

is referred to as

a. full-employment unemployment rate.

b. frictional unemployment rate.

c. cyclical unemployment rate.

d. structural unemployment rate.

MCQ 29

The rate that central bank charges for loans to commercial banks
is called

a. reserve requirement.

b. inflation rate.

c. compensating balance rate.

d. discount rate.
MCQ 30

The difference between real and nominal interest rates is called

a. inflation premium.

b. market risk.

c. credit risk.

d. default premium.
MCQ 31

In international trade, absolute advantage is defined as

a. the ability to produce a product for less than other nations.

b. the ability of one nation to produce a relatively lower

opportunity cost than another nation.

c. the difference between exports and imports.

d. the ability to sell all the units that a company can produce.
MCQ 32

Exchange rates are determined by

a. the United Nations.

b. the International Monetary Fund.

c. supply and demand in the foreign currency market.

d. the Central Bank's Monetary Board.

MCQ 33

Which of the following is the most restrictive barrier to exporting

to a country?

a. Embargoes

b. Tariffs

c. Quotas

d. Value-added tax
MCQ 34

When a country imports more than it exports

a. it has negative net exports.

b. it has negative net import.

c. the country is experiencing an income boom.

d. the country is suffering from inflation.

MCQ 35

A country’s currency foreign exchange rate is least likely affected

by that country’s

a. Tax rate

b. Interest rate

c. Inflation rate

d. Political stability