All Free Economics MCQs with Answers

• A. Net exports
• B. Personal taxes
• C. Capital depreciation
• D. Government transfers

Explanation: Net national product measures national output after allowing for the wearing out of capital goods.

• A. Covers only imported consumer goods
• B. Includes domestically produced final goods
• C. Uses a fixed basket of consumer goods
• D. Measures only wholesale prices

Explanation: The GDP deflator covers prices of domestically produced final goods and services, while the consumer price index focuses on a consumer…

• A. State Bank of Pakistan
• B. Federal Board of Revenue
• C. Planning Commission
• D. National Finance Commission

Explanation: The Federal Board of Revenue administers major federal taxes, including income tax, sales tax and customs duties.

• A. Liquidity preference
• B. Crowding out
• C. Cost-push inflation
• D. Balance of payments adjustment

Explanation: Crowding out occurs when public borrowing places upward pressure on interest rates or absorbs available financial resources, discouraging…

• A. Current account
• B. Financial account
• C. Trade account
• D. Official reserve account only

Explanation: Foreign direct investment is a financial flow involving ownership of assets or enterprises and is recorded in the financial account.

• A. Increase their lending capacity
• B. Reduce their lending capacity
• C. Eliminate government borrowing
• D. Raise export subsidies

Explanation: A higher reserve requirement forces banks to keep a larger share of deposits as reserves, leaving fewer funds available for loans.

• A. Total migrant population
• B. Working age population
• C. Urban population
• D. Employed population only

Explanation: The dependency ratio relates children and older persons, commonly treated as dependents, to the working age population.

• A. Per unit of cultivated land
• B. From imports per year
• C. Per unit of farm machinery
• D. After deducting farm costs

Explanation: Crop yield is the quantity of agricultural output produced per unit of land, such as tonnes per hectare.

• A. More exposed to one commodity shock
• B. Less vulnerable to a single external shock
• C. Unable to earn foreign exchange
• D. Automatically free from trade deficits

Explanation: Diversification spreads export earnings across several products and destinations, reducing dependence on one commodity or market.

• A. Debt servicing
• B. Public development spending
• C. Past tax collection
• D. Existing interest payments

Explanation: When interest payments consume a larger share of revenue, fewer public funds remain for development projects and other services.

• A. Foreign production by domestic factors
• B. Domestic production by foreign factors
• C. Government transfers to households
• D. Depreciation of fixed capital

Explanation: GNP measures the income generated by a country's residents and owned factors, regardless of where production occurs.

• A. Total demand grows faster than total output
• B. Production costs rise across major industries
• C. The money supply falls below its normal level
• D. Imported goods become cheaper for consumers

Explanation: Demand-pull inflation results when aggregate demand exceeds the economy's capacity to produce goods and services.

• A. Lender of last resort
• B. Collector of federal taxes
• C. Manager of public development schemes
• D. Regulator of international trade

Explanation: A central bank acts as lender of last resort by supplying liquidity to banks that cannot obtain sufficient short-term funds elsewhere.

• A. Average real output per person
• B. The general price level
• C. The share of exports in GDP
• D. The number of people below poverty line

Explanation: Real GDP per capita divides inflation-adjusted national output by the population, so it measures average real output per person.

• A. The lowest opportunity cost
• B. The highest absolute cost
• C. The largest domestic market
• D. The greatest import dependence

Explanation: Comparative advantage is based on relative opportunity cost, not necessarily on producing a good with the fewest resources in absolute…

• A. Income or wealth
• B. Imports and exports
• C. Population across provinces
• D. Government spending across sectors

Explanation: The Gini coefficient summarizes the degree of inequality in income or wealth distribution, with higher values generally indicating greater…

• A. A mismatch between workers' skills and available jobs
• B. A brief search period between two jobs
• C. A temporary decline during a business cycle
• D. Workers choosing longer annual vacations

Explanation: Structural unemployment occurs when changes in technology, industry or demand make existing skills less suitable for available jobs.

• A. Interest payments on public debt
• B. Tax revenue collected by government
• C. Spending on public education
• D. Current transfers to households

Explanation: The primary balance compares government revenue with expenditure excluding interest payments on existing debt.

• A. Why did the national unemployment rate rise?
• B. Why did one firm's sales decline?
• C. How does one buyer choose between goods?
• D. How does one market set its price?

Explanation: Macroeconomics studies economy-wide outcomes such as national unemployment.

• A. Consumption expenditure by households
• B. Purchases of existing shares
• C. Unpaid household care work
• D. Resale of a used automobile

Explanation: The expenditure approach adds consumption, investment, government purchases, and net exports.