All Free Economics MCQs with Answers

• A. oligarchy
• B. economic institution
• C. public institution
• D. total institution

Explanation: A total institution is an extreme coercive organization in which people live under comprehensive control and are separated from wider…

• A. produce useful things
• B. serve the practical purposes of their owners
• C. provide useful services to the community
• D. provide material benefits in exchange for work

Explanation: Utilitarian organizations are joined for concrete material rewards, such as wages, salaries, or other benefits exchanged for work.

• A. leadership structure
• B. full-time employees
• C. bylaws and body of officers
• D. appearance to its general public

Explanation: An organization's formal structure is recorded in its official rules and offices, including its bylaws and body of officers.

• A. underlies both competition and coercion
• B. is diametrically opposed to competition
• C. is a hostile form of struggle?
• D. all of the above

Explanation: Conflict is a hostile form of struggle, unlike competition, which can occur without direct hostility, and coercion, which is a method of…

• A. the family
• B. the military
• C. ones in-group
• D. society

Explanation: Society is the broadest and most self-sufficient social group because it contains the institutions and groups needed to meet the full…

• A. they cannot exist in secondary groups
• B. they are always harmonious
• C. the family is the only source of primary relation
• D. all of the above

Explanation: Primary relations can occur outside the family and are not always harmonious; close friendships and work relationships may also qualify.

• A. 30%
• B. 10%
• C. 70%
• D. 40%

Explanation: The marginal tax rate applies to the next rupee earned, not to the person’s entire income.

• A. During the 1980s OECD countries contributed four fifths of the world's bilateral official development assistance to LDCs
• B. In the early 1990s the OECD contributed 98 percent of all aid
• C. The OECD aid increased from $6.9 billion in 1970 to $8.9 billion in 2001
• D. In 2001, only Denmark Norway, Sweden, the Netherlands, and Luxembourg exceeded the aid target for LDCs

Explanation: The figure in option c is incorrect, since OECD development assistance rose far more substantially than from $6.9 billion to $8.9 billion…

• A. price distortions
• B. consumer surplus
• C. shadow prices
• D. exchange rates

Explanation: Shadow prices adjust market prices when private prices do not reflect the full social costs or benefits of a resource.

• A. scholarship for technical education
• B. R&D in robotics
• C. a new drug to cure AIDS
• D. environmental pollution

Explanation: Environmental pollution imposes costs on people who are not directly involved in the polluting activity, making it a negative externality…

• A. economies of scale
• B. external economies
• C. negative externality
• D. net present value

Explanation: Vaccination protects both the individual and other members of society by reducing disease transmission, creating a positive externality.

• A. Investigating development potential through scientific and market research and natural resources surveys
• B. Providing adequate infrastructure for public and private agencies
• C. Creating markets, including commodity markets, security exchanges, banks credit facilities and insurance companies
• D. Increasing market monopolies and oligopolies to help producers

Explanation: Public policy can support private enterprise through research, infrastructure, and financial or commodity markets.

• A. The amount of tax paid increase with income
• B. The marginal rate of tax decrease with more income
• C. The average rate of tax falls as income increase
• D. The average rate of tax is constant as income increases

Explanation: A regressive tax takes a smaller percentage of income as income rises, so its average tax rate falls with income.

• A. sells less government bonds than are required to finance the PSBR
• B. sells more government bonds than are required to finance the PSBR
• C. sells government securities on the open market
• D. buys government securities on the open market

Explanation: The PSBR is the government's borrowing requirement. Over-funding occurs when the State Bank sells more government bonds than are needed to…

• A. A measure of the country's trade position
• B. A measure of the country's budget position
• C. A measure of the country's total debt
• D. A measure of the government's monetary stance

Explanation: The Public Sector Net Cash Requirement measures the public sector's need to borrow or obtain cash, making it an indicator of the…

• A. The total tax paid / total income
• B. Total income / total tax paid
• C. Change in the tax paid / change in income
• D. Change in income / change in tax paid

Explanation: The marginal tax rate measures the tax on the next unit of income, so it is the change in tax paid divided by the change in income.

• A. Tax bands do not increase with inflation
• B. Tax rates move inversely with inflation
• C. Government spending falls to reduce aggregate demand
• D. Tax banks increase with inflation

Explanation: Fiscal drag occurs when tax thresholds or bands are not adjusted with inflation, pushing taxpayers into higher brackets or increasing…

• A. increase: increase
• B. decrease; decrease
• C. increase; decrease
• D. decrease; increase

Explanation: During a recession, benefits such as unemployment assistance automatically raise government expenditure, while lower incomes reduce tax…

• A. The government regulation of financial intermediaries
• B. The spending and taxing policies used by the government to influence the economy
• C. The actions of the central bank in controlling the money supply
• D. The government's attitude to taxation

Explanation: Fiscal policy consists of government decisions about taxation and spending used to influence output, employment, inflation and economic…

• A. specific
• B. Direct
• C. Ad valorem
• D. Excise duty

Explanation: VAT is charged as a percentage of the value of goods and services, making it an ad valorem tax.