All Free Economics MCQs with Answers

• A. Is the same as economic growth
• B. Means improvement in lifestyle
• C. Exists when there is equal distribution of income
• D. All of the above

Explanation: Economic development is broader than economic growth because it includes improvements in living standards, health, education and quality…

• A. Investment
• B. Subsidies
• C. Taxation
• D. Consumption

Explanation: Taxation is a leakage, or withdrawal, from the circular flow because it reduces households' and firms' spending power.

• A. Household's purchases of food
• B. Households' purchase of a car
• C. Household's payment of rent for an apartment
• D. Household's purchase of stock in any XYZ corporation

Explanation: Buying shares is a purchase of a financial asset, not current consumption of goods or services.

• A. Gross investment minus household investment
• B. Gross investment minus govt. Investment
• C. Gross investment minus capital consumption allowance
• D. None of the above

Explanation: Net investment measures the addition to the capital stock after allowing for depreciation.

• A. Expenditure method
• B. Income method
• C. Product method
• D. All of the above

Explanation: National income can be calculated through the expenditure, income and product methods.

• A. Fall in prices due to less circulation of currency
• B. Fall in employment due to declining production
• C. High inflation rate combined with high unemployment and unchanged consume demand
• D. None of these

Explanation: Stagflation combines persistent inflation with weak economic activity and high unemployment.

• A. National income
• B. Per capita income
• C. Poverty ratio
• D. None of these

Explanation: Per capita income divides national income by the population, giving an average income figure that is more useful for comparing living…

• A. National income
• B. Saving
• C. Imports at lower cost
• D. Exports

Explanation: Devaluation makes a country's goods relatively cheaper for foreign buyers, increasing export competitiveness.

• A. Acting as bankers to the government
• B. Advising the government on monetary policy
• C. Dealing in foreign exchange
• D. Fixing the main interest rate

Explanation: Both types of banks may deal in foreign exchange, such as buying and selling foreign currencies.

• A. Japan
• B. South Korea
• C. Taiwan
• D. Malaysia

Explanation: Japan is generally regarded as Asia’s most industrialized country because of its advanced manufacturing base, technology and highly…

• A. commercial bank deposits
• B. government bank deposits
• C. government spending
• D. interest rates
• E. None of these

Explanation: Raising interest rates makes borrowing more expensive, which discourages consumers from taking loans and reduces consumption financed by…

• A. increasing bank lending
• B. increasing import duties
• C. reducing government expenditure
• D. None of these

Explanation: Reducing government expenditure lowers aggregate demand, helping to ease demand-pull inflation.

• A. Debtors
• B. Creditors
• C. Business class
• D. None of these

Explanation: Creditors suffer during inflation because the money they receive in repayment has lower purchasing power than the money they lent.

• A. Converting rupee into gold
• B. Lowering of the value of one currency in comparison of some foreign currency
• C. Making rupee dearer in comparison to some foreign currency
• D. None of these

Explanation: Devaluation is an official reduction in the value of a currency under a fixed or managed exchange-rate system, relative to foreign…

• A. Stagnation
• B. Take-off stage in economy
• C. Stagflation
• D. None of these

Explanation: Stagflation combines stagnant or weak economic growth with high inflation, often accompanied by unemployment.

• A. The balance of visible trade
• B. The balance of invisible trade
• C. The balance on the current account
• D. The balance of payments

Explanation: The balance of payments is an accounting statement, so total credits must equal total debits after including reserve changes and errors…

• A. Hyperinflation
• B. Reflection
• C. Stagflation
• D. Galloping

Explanation: Stagflation combines stagnation, especially high unemployment or weak growth, with inflation.

• A. National income
• B. Domestic income
• C. Protection Income
• D. Per capita Income

Explanation: Per capita income is calculated by dividing national income by the country’s population, giving average income per person for a period.

• A. Local currency
• B. Cold currency
• C. Lime currency
• D. Soft currency

Explanation: A soft currency is expected to lose value against other currencies and is often subject to weak demand or economic instability.

• A. Value of all economic activity with in a nation's border
• B. Economics output of a country
• C. Economic activities of federal government
• D. None of these

Explanation: GDP measures the monetary value of final goods and services produced within a country's borders during a specified period.