All Free Economics MCQs with Answers
Every Economics question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
4,037 questions · page 59 of 202
- A. china
- B. Russia
- C. Hungary
- D. Mexico
Explanation: China, Russia, and Hungary are commonly classified as transitional economies because they moved from centrally planned systems toward…
Correct answer: Mexico- A. Latin America
- B. Asia
- C. Africa
- D. Australia
Explanation: Latin America, Asia, and Africa were traditionally grouped within the developing or “Third World” regions.
Correct answer: Australia- A. depreciation of the existing capital stock
- B. productive investment
- C. dwellings
- D. inventories
Explanation: Gross investment includes both replacement investment and additions to the capital stock, whereas net investment excludes replacement for…
Correct answer: depreciation of the existing capital stock- A. exaggerate the inequality of living standards
- B. could exaggerate or understate the inequality of living standards depending on whether the transitory shocks are positive or negative
- C. understate the inequality of living standards
- D. accurately represent the true inequality of living standards
Explanation: Annual income includes temporary shocks and reflects different stages of the life cycle, while living standards are better related to…
Correct answer: exaggerate the inequality of living standards1165. Permanent income is ?
- A. Social Security income of the elderly and disabled
- B. none of these answers
- C. wages fixed by a union or other labour contract
- D. equal to the minimum wage
- E. a person's normal or average income
Explanation: Permanent income is the normal or expected average income a person can maintain over time, unlike a temporary bonus, loss, or one-period…
Correct answer: a person's normal or average income- A. Nominal wages are equal to expected wages
- B. Real wages are back at equilibrium level
- C. Nominal wages are growing faster than inflation
- D. Inflation is higher than the growth of nominal wages
Explanation: In the expectations-augmented Phillips curve, unemployment returns to its natural rate when actual wage or price expectations are…
Correct answer: Nominal wages are equal to expected wages- A. Costs of finding better rates of return
- B. Costs of altering price lists
- C. Costs of money increasing its value
- D. Costs of revaluing the currency
Explanation: Menu costs are the administrative and practical expenses firms incur when changing prices, such as reprinting catalogues, changing labels…
Correct answer: Costs of altering price lists- A. Shift aggregate demand
- B. Shift aggregate supply
- C. Reduce the natural rate of unemployment
- D. Increase the productivity of employees
Explanation: Higher production costs reduce firms’ willingness to supply at each price level, shifting aggregate supply leftward.
Correct answer: Shift aggregate supply- A. An outward shift of aggregate demand- and demand-pull inflation
- B. An outward shift of aggregate demand and cost push inflation
- C. An outward shift of aggregate supply and demand-pull inflation
- D. An outward shift of aggregate supply and cost push inflation
Explanation: Injections such as investment, government spending, and exports add spending to the circular flow, shifting aggregate demand outward.
Correct answer: An outward shift of aggregate demand- and demand-pull inflation- A. An increase in costs
- B. A reduction in interest rate
- C. A reduction in government spending
- D. An outward shift in aggregate supply
Explanation: A lower interest rate encourages borrowing and spending, increasing aggregate demand and potentially causing demand-pull inflation.
Correct answer: A reduction in interest rate- A. neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract
- B. None of these answers
- C. borrowers will gain at the expense of lenders
- D. lenders will gain at the expense of borrowers
Explanation: With the nominal rate fixed, lower-than-expected inflation makes the real interest rate higher than anticipated.
Correct answer: lenders will gain at the expense of borrowers- A. The nominal rate of interest is 15 percent and the inflation rate is 14 percent
- B. The nominal rate of interest is 20 percent and the inflation rate is 25 percent
- C. The nominal rate of interest is 12 percent and the inflation rate is 9 percent
- D. The nominal rate of interest is 5 percent and the inflation rate are 1 percent
Explanation: A lender prefers the highest real return, approximated by the nominal rate minus inflation.
Correct answer: The nominal rate of interest is 5 percent and the inflation rate are 1 percent- A. 4 percent
- B. 10 percent
- C. -4 percent
- D. 3 percent
- E. 21 percent
Explanation: Using the approximate Fisher equation, subtract inflation from the nominal rate: 7% minus 3% equals a real interest rate of 4%.
Correct answer: 4 percent- A. consumer production
- B. Products purchased by the typical consumer
- C. raw materials purchased by firms
- D. total current production
- E. none of these answers
Explanation: The CPI tracks the cost of a fixed basket representing goods and services bought by a typical consumer.
Correct answer: Products purchased by the typical consumer1175. In 1989, the CPI was 124.0 in 1990, it was 130.7 What was the rate of inflation over this period ?
- A. 5.4 percent
- B. 30.7 percent
- C. You can't tell without knowing the base year
- D. 5.1 percent
Explanation: Inflation is calculated as the change in CPI divided by the earlier CPI: (130.7 − 124.0) ÷ 124.0 × 100, which is about 5.4%.
Correct answer: 5.4 percent- A. Aggregate supply is perfectly elastic
- B. Aggregate supply is Perfectly inelastic
- C. Aggregate supply is unit elastic
- D. Aggregate supply is relatively elastic
Explanation: When aggregate supply is perfectly inelastic, output cannot expand in response to higher aggregate demand, so the entire pressure appears…
Correct answer: Aggregate supply is Perfectly inelastic- A. none of these answers
- B. Workers will gain at the expense of firms
- C. neither workers nor firms will gain because the increase in wages in fixed in the labor agreement
- D. firms will gain at the expense of workers.
Explanation: When actual inflation exceeds the rate built into the wage agreement, workers' real wages are lower than expected while firms pay the…
Correct answer: firms will gain at the expense of workers.- A. The nominal rate of interest is 12 percent and the inflation rate is 9 percent
- B. The nominal rate of interest is 20 percent and the inflation rate is 25 percent
- C. The nominal rate of interest is 5 percent and the inflation rate is 1 percent
- D. The nominal rate of interest is 15 percent and the inflation rate is 14 percent
Explanation: Borrowers benefit when inflation exceeds the nominal interest rate because the real interest rate becomes negative.
Correct answer: The nominal rate of interest is 20 percent and the inflation rate is 25 percent- A. 3/8 percent
- B. 5 percent
- C. 11 percent
- D. 24 percent
Explanation: Using the Fisher relationship, nominal interest is approximately the real interest rate plus expected inflation: 3% + 8% = 11%.
Correct answer: 11 percent- A. fallen
- B. You can't tell without knowing the base year
- C. risen
- D. stayed the same
Explanation: Income increased by about 63%, while the CPI increased by about 39%, so purchasing power and real income rose.
Correct answer: risen