All Free Economics MCQs with Answers

• A. Inflationary pressure from excess monetary demand
• B. A guaranteed fall in the money supply
• C. An automatic increase in real wages
• D. A complete elimination of public debt

Explanation: Money-financed deficits can increase the money supply and aggregate demand, especially when the economy is near full capacity.

• A. Capital expenditure creates or improves assets, while current expenditure supports routine operations
• B. Capital expenditure is always financed by taxes, while current expenditure is always borrowed
• C. Capital expenditure is paid to households, while current expenditure is paid only to firms
• D. Capital expenditure reduces public assets, while current expenditure increases them

Explanation: Capital expenditure normally creates, acquires or improves long-term public assets, such as roads and schools.

• A. A rise in public expenditure relative to national income
• B. A permanent abolition of taxation
• C. A fall in public services as income rises
• D. A fixed public budget regardless of national income

Explanation: Wagner's law proposes that public expenditure tends to grow more than proportionately as an economy develops.

• A. Rises as taxable income increases
• B. Falls as taxable income increases
• C. Remains constant as income increases
• D. Becomes zero above a threshold

Explanation: Under proportional taxation, taxpayers pay the same percentage of income at different income levels.

• A. Internal public debt
• B. External public debt
• C. Floating public debt
• D. Funded public debt

Explanation: External public debt is borrowed from creditors outside the country and creates obligations involving foreign lenders or international…

• A. Tax rates and tax revenue
• B. Interest rates and public debt
• C. Government spending and exports
• D. Inflation and unemployment

Explanation: The Laffer curve shows that tax revenue may rise with tax rates up to a certain point, but excessively high rates can reduce the tax base…

• A. Incremental budgeting
• B. Zero-based budgeting
• C. Performance budgeting
• D. Line-item budgeting

Explanation: Zero-based budgeting starts from a zero base and requires proposed activities and expenditures to be justified afresh.

• A. Building a national highway to reduce transport costs
• B. Using taxes and transfers to reduce income inequality
• C. Maintaining currency reserves for external payments
• D. Paying interest on previously issued government bonds

Explanation: The distribution function concerns the way income and wealth are shared among members of society.

• A. Raises the same revenue from every taxpayer
• B. Causes minimal distortion in economic decisions
• C. Applies only to imported goods
• D. Is collected by the central government

Explanation: A neutral tax raises revenue while causing as little change as possible in decisions about work, saving, investment and consumption.

• A. National defence
• B. Street lighting
• C. Basic education
• D. Private jewellery

Explanation: Basic education is a merit good because society may encourage its consumption due to positive social benefits, even if individuals do not…

• A. Expect future taxes and increase saving
• B. Immediately spend all additional income
• C. Treat government debt as private money
• D. Assume interest rates remain permanently zero

Explanation: The theory holds that households may anticipate future taxes needed to repay public debt and save the temporary increase in disposable…

• A. Single-parent family
• B. Extended family
• C. Blended family
• D. Reconstituted family

Explanation: An extended family is a traditional arrangement in which several generations or relatives live together, whereas single-parent, blended…

• A. has soared in the past two years
• B. has declined in the past several years
• C. is highest among white teenagers
• D. none of the above

Explanation: In the standard demographic trend covered by this question, teenage birthrates have declined over recent years.

• A. increased in number since 1970
• B. generally a lower income than two-parent families
• C. greater emotional stress in dealing with children
• D. all of the above

Explanation: Female-headed families have grown in number since 1970 and commonly face lower incomes and greater stress in raising children without a…

• A. more suicides
• B. more instances of depression
• C. more car accidents
• D. all of the above

Explanation: Compared with married men, divorced men are statistically associated with higher risks of depression, suicide, and accident-related…

• A. the importance of religion
• B. the low status of women
• C. emphasis on group goals
• D. the stress on values of individualism and personal goals

Explanation: Industrial societies place strong emphasis on individual choice and personal goals, which can weaken the pressure to preserve a marriage…

• A. Indians (natives of India)
• B. Hasidic Jews
• C. Muslim
• D. All of the above

Explanation: Arranged marriage is found in several cultural and religious communities, including Indians, Hasidic Jews, and many Muslim communities.

• A. is an ancient principle
• B. is a modern invention
• C. prevents divorce
• D. contributes to divorce

Explanation: Treating romantic love as the primary basis for marriage is generally viewed as a modern development rather than an ancient universal…

• A. exogamy
• B. endogamy
• C. polygamy
• D. purdah

Explanation: Endogamy means marrying within one's own caste or social group. Exogamy means marrying outside the group, while polygamy concerns having…

• A. polygamy
• B. polyandry
• C. polygyny
• D. none of these

Explanation: The most common form of marriage is monogamy, meaning one spouse at a time.