All Free Economics MCQs with Answers

• A. Interest payments on external debts
• B. repayments of external debt
• C. none of these
• D. Both of them

Explanation: Debt service covers both the interest due on a loan and repayment of its principal.

• A. Wealth tax
• B. Withholding tax
• C. Income tax
• D. None of these

Explanation: Withholding tax is deducted at the source before income is paid to the recipient, commonly including dividends sent from a foreign…

• A. Charity funds
• B. Attached funds
• C. Endowment funds
• D. Investment fund

Explanation: An endowment fund is established by a donation or invested capital whose returns provide continuing financial support to an institution…

• A. Debt retirement
• B. Debt relief
• C. Debt service
• D. PaybackCredit & Lending

Explanation: Debt service is the regular payment burden on debt, including both interest and repayment of principal.

• A. Profit tax
• B. Capital gains tax
• C. Excise duty
• D. Capital taxEconomics

Explanation: Capital gains tax is charged on the profit earned when a capital asset is sold for more than its acquisition cost.

• A. Levied on the retail price of merchandise and collected by retailer
• B. Tax deducted at source
• C. Tax on local produce
• D. Tax on gross sale

Explanation: Sales tax is imposed on the sale price of goods and is commonly collected from the buyer by the retailer, who then pays it to the…

• A. Grands
• B. Official Development Assistance (ODA)
• C. Foreign aid
• D. Friendly aid

Explanation: Official Development Assistance, or ODA, is government-provided foreign aid on concessional terms for economic development and welfare…

• A. National debt
• B. Public debt
• C. Both of them
• D. None of them

Explanation: Public debt is created when a government borrows from domestic citizens or institutions and from foreign governments or international…

• A. reduces market power
• B. Proves that there is such a thing as a free lunch
• C. improves efficiency at the expense of equity.
• D. improves equity at the expense of efficiency.

Explanation: Higher taxes and welfare transfers generally redistribute income toward greater equity, but taxation and transfers can reduce incentives…

• A. Final goods sold to households and firms
• B. Output at each stage minus intermediate inputs
• C. Intermediate goods purchased by producers
• D. All goods traded in domestic markets

Explanation: Value added equals the value of an industry's output minus the cost of intermediate inputs.

• A. Increase commercial bank reserves
• B. Reduce liquidity in the banking system
• C. Increase exports through cheaper credit
• D. Raise government tax collections

Explanation: Open-market sales transfer funds from buyers to the central bank and reduce commercial bank reserves.

• A. Public debt is large relative to national output
• B. The government has achieved a fiscal surplus
• C. Private investment exceeds public investment
• D. Exports are greater than imports

Explanation: The debt-to-GDP ratio compares the accumulated public debt with the economy's annual output.

• A. Improve because exports buy more imports
• B. Worsen because imports become cheaper
• C. Remain unchanged because quantities are fixed
• D. Disappear because trade is recorded in dollars

Explanation: Terms of trade are commonly measured as the ratio of export prices to import prices.

• A. Covered by appropriate financial inflows
• B. Matched by lower domestic production
• C. Eliminated by banning all imports
• D. Converted into a trade surplus automatically

Explanation: External deficits can be financed temporarily through borrowing, foreign investment or other financial-account inflows.

• A. A worker temporarily searching between two jobs
• B. A textile worker displaced by obsolete machinery
• C. A worker unable to find jobs during a prolonged recession
• D. A seasonal farm worker unemployed after harvest

Explanation: Frictional unemployment arises while people move between jobs or search for a suitable first job.

• A. Health, education and living standards
• B. Exports, imports and exchange rates
• C. Interest rates, taxes and public debt
• D. Wages, profits and dividend payments

Explanation: Multidimensional poverty measures several forms of deprivation, including health, education and household living conditions.

• A. A fall in labour-force pressure
• B. Higher unemployment or underemployment
• C. An automatic rise in labour productivity
• D. A permanent improvement in living standards

Explanation: When the number of potential workers expands faster than available jobs, more people may remain unemployed or accept insufficient work.

• A. Concentrating infrastructure in one major city
• B. Expanding public investment in less-developed districts
• C. Reducing access to education in rural areas
• D. Limiting transport links between provinces

Explanation: Public investment in roads, schools, health facilities and reliable utilities in less-developed areas can improve their productive…

• A. Balance of payments identity
• B. Keynesian investment multiplier
• C. Law of diminishing returns
• D. Principle of absolute advantage

Explanation: The investment multiplier reflects repeated rounds of spending generated when one person's expenditure becomes another person's income.

• A. Indirect taxes minus subsidies and depreciation
• B. Net exports minus private consumption spending
• C. Government transfers minus capital formation
• D. Imports minus exports and inventory changes

Explanation: The income approach adds factor incomes such as wages, rent, interest and profits, with related national accounting adjustments.