All Free Economics MCQs with Answers

• A. business cycles are caused by insufficient supply
• B. a decline in aggregate supply is responsible for economic downturns
• C. an increase in aggregate supply causes output and employment to decline
• D. none of the above

Explanation: Supply-side explanations attribute economic downturns to adverse changes in aggregate supply, which reduce output and employment.

• A. Karl Marx
• B. Adam Smith
• C. John Maynard Keynes
• D. Milton Friedman

Explanation: John Maynard Keynes argued that during deficient demand and unemployment, government spending could stimulate economic activity through…

• A. earn more money
• B. increase productivity
• C. increase absenteeism
• D. decrease productivity

Explanation: Higher productivity means producing more goods and services with the same resources, which raises real output and per-capita GNP or GDP.

• A. resulted from the greed of the robber barons
• B. resulted from insufficient demand
• C. was the worst case of massive unemployment
• D. only B and C

Explanation: The Great Depression combined a severe collapse in aggregate demand with exceptionally high mass unemployment.

• A. pent-up demand
• B. aggregate demand
• C. elastic demand
• D. excess demand

Explanation: Aggregate demand is the total planned spending on final goods and services by households, firms, government and the foreign sector during…

• A. product market demand is problematic
• B. resource market demand is problematic
• C. the distribution of income becomes more inequitable
• D. all of the above

Explanation: Unstable prices make decisions in both product and resource markets more difficult and can redistribute income unfairly between borrowers…

• A. "market basket of goods
• B. the consumer price index
• C. 165 social indicators
• D. the externalities index

Explanation: The 165 social indicators were intended to describe social well-being and the desirable mix of goods and services more broadly than a…

• A. dissaving's
• B. withdrawals
• C. incremental
• D. injections

Explanation: Withdrawals, also called leakages, are income flows that leave the spending stream, such as saving, taxation and imports.

• A. incidentals
• B. withdrawals
• C. injections
• D. B and C only

Explanation: The circular flow is interrupted by withdrawals, such as saving and imports, and strengthened by injections, such as investment and…

• A. maintaining current standards of living in spite of increasing population
• B. increasing GNP per capita
• C. approximately 4% growth rate per year
• D. all of the above

Explanation: Adequate growth should preserve living standards as population rises, raise output per person, and generally achieve a sustained annual…

• A. full employment
• B. price stability
• C. adequate economic growth
• D. all of the above

Explanation: Despite differing views about the role of government, both liberals and conservatives generally recognise employment, stable prices and…

• A. Primary
• B. Secondary
• C. Tertiary
• D. Quaternary

Explanation: The primary sector obtains raw materials directly from nature through activities such as agriculture, mining, forestry and fishing.

• A. two extreme positions giving rise to a middle position
• B. polarization forcing societies to split up
• C. conflicts between rich and poor countries
• D. imperialism being destroyed by capitalism

Explanation: Dialectic reasoning develops through opposing positions, often described as thesis and antithesis, whose conflict produces a synthesis or…

• A. the means of production are controlled by the masses
• B. religion and philosophy are the foundations of society
• C. property is unimportant in the modern state
• D. they contained the seeds of their own destruction

Explanation: Marx argued that capitalism contains internal class conflicts and economic contradictions that will ultimately undermine and destroy it.

• A. the French Revolution
• B. starvation in Ireland
• C. the Industrial Revolution
• D. the Protestant Reformation

Explanation: Communism emerged as a major ideology in response to the inequality, exploitation and social disruption associated with the Industrial…

• A. distrusts reason
• B. refuses violence
• C. stresses a belief in human equality
• D. appeals to intellectuals

Explanation: Fascism generally distrusts rational debate and liberal individualism, emphasizing authority, emotion, obedience and action instead.

• A. contains secret police
• B. controls the mass media
• C. exhibits a centralized control of the economy
• D. all of the above

Explanation: Totalitarianism seeks comprehensive control over society, including political policing, mass communication and economic activity.

• A. democracy
• B. egalitarianism
• C. authoritarian or totalitarian ideologies
• D. tyranny

Explanation: In modern political analysis, traditional personal autocracy was increasingly replaced or supplemented by organized authoritarian and…

• A. there are five psycho sexual stages
• B. the personality is fixed by age five
• C. psychoanalysis including dream analysis is the only way to overcome personality problems
• D. none of the above

Explanation: Erikson proposed eight psychosocial stages, not Freud’s five psychosexual stages, and viewed development as continuing throughout life.

• A. prosperity
• B. crisis
• C. natural disasters
• D. conversations among intellectuals

Explanation: Ideologies commonly gain strength during crises because people seek explanations, order and programmes for dealing with severe uncertainty…