All Free Economics MCQs with Answers

• A. economic growth
• B. economic growth plus changes in (c) output distribution and economic structure
• C. improvement in the well-being of the urban population
• D. sustainable increase in Gross National Product

Explanation: Economic development is broader than economic growth: it combines rising output with changes in income distribution and the structure of…

• A. 5%
• B. 0.901%
• C. 0.090%
• D. 0.991%

Explanation: Real growth is calculated as the percentage increase in constant-price GNP: (560 − 555) ÷ 555 × 100 = 0.901%.

• A. 9700 (1978 / 2005)
• B. 300 / 360
• C. 300 000 000 / 9700
• D. 32.333

Explanation: Per-capita GNP equals total GNP divided by population: $300,000,000 ÷ 9,700 = approximately $30,928. Option c gives this calculation.

• A. reduce
• B. increase
• C. do not change
• D. None of the above

Explanation: Imports are a leakage from the domestic spending stream, so they reduce the amount of each income round that generates further spending…

• A. MPC and MPT
• B. MPT and MPZ
• C. MPC and MPZ
• D. MPC, MPT and MPZ

Explanation: In an economy with taxation and imports, the total multiplier reflects leakages through saving, taxes and imports alongside consumption…

• A. booms, booms
• B. recession, recession
• C. booms, recessions
• D. recessions, booms

Explanation: A recession raises the deficit through lower tax receipts and higher transfer payments, while a boom improves the budget balance through…

• A. leave output unchanged
• B. increase output
• C. reduce output
• D. increase the MPC

Explanation: The balanced-budget multiplier is one: an equal increase in government spending and taxes raises output by the amount of the spending…

• A. market imperfection
• B. the law of diminishing returns
• C. the paradox of thrift
• D. market failure

Explanation: The paradox of thrift occurs when everyone tries to save more, reducing consumption and equilibrium income while leaving total equilibrium…

• A. marginal propensity to invest
• B. disposable incomes
• C. marginal propensity to consume
• D. average propensity to consume

Explanation: With autonomous investment, investment does not change with income, so changes in aggregate demand arise through consumption.

• A. is less than
• B. equals
• C. is greater than
• D. fluctuates around

Explanation: In short-run equilibrium, firms produce exactly what buyers plan to purchase, so aggregate demand equals actual output.

• A. tax evasion
• B. poor statistics
• C. the lags between statistical collection and publication
• D. smuggling

Explanation: The hidden economy includes income deliberately kept out of official records, commonly to evade taxes.

• A. including non-market activities
• B. adjusted for inflation
• C. including externalities
• D. including tax evasion

Explanation: Real GNP values the goods and services produced by a country's nationals at constant prices, removing the effect of inflation.

• A. equal
• B. be less than
• C. be greater than
• D. be less or greater than

Explanation: In a circular-flow equilibrium, leakages such as saving, taxation and imports are exactly offset by injections such as investment…

• A. investment, savings, government expenditure
• B. savings, taxes net of subsidies imports
• C. consumption investment government expenditure
• D. consumption taxes imports

Explanation: Leakages remove spending from the circular flow: saving, taxes net of subsidies, and imports.

• A. 3>2>1
• B. 3=2=1
• C. 3<2<1
• D. any measure can be larger or smaller than any other

Explanation: Total value added, expenditure on final goods, and factor income are three methods of measuring national income.

• A. resources and efficiency
• B. money and efficiency
• C. money and luck
• D. resources and a good climate

Explanation: Economic growth depends chiefly on increasing available resources, such as labour and capital, and using them more efficiently through…

• A. legal transactions
• B. part of the rail network
• C. legal transactions not declared for tax and illegal activities
• D. the water distribution system

Explanation: The underground economy covers both lawful transactions hidden from tax authorities and unlawful activities.

• A. Injections = withdrawals
• B. There is a Bank Holiday
• C. Injections withdrawals
• D. None of these

Explanation: Circular-flow equilibrium requires total injections, including investment and government spending, to equal total withdrawals, including…

• A. consumption savings and taxes
• B. savings government expenditure and imports
• C. savings taxes and exports
• D. savings taxes and imports

Explanation: Withdrawals, or leakages, from the circular flow are savings, taxes, and imports.

• A. landlords
• B. peasants
• C. The army
• D. politicians

Explanation: In classical distribution theory, landlords were expected to gain from growth because expanding production and population raise the demand…