All Free Economics MCQs with Answers

• A. 20%
• B. 2%
• C. 12%
• D. 16%

Explanation: The increase is Rs2,000, found by subtracting Rs10,000 from Rs12,000; dividing Rs2,000 by the original Rs10,000 gives 0.20, or 20%.

• A. construct price lists
• B. compare shop prices
• C. measure changes in the cost of living
• D. None of the above

Explanation: The retail price index tracks the average change in prices of goods and services bought by households, so it is used to measure changes in…

• A. the business cycle has been eliminated
• B. an increase in inflation temporarily increases unemployment.
• C. inflation and unemployment are unrelated in the short run.
• D. a decrease in inflation temporarily increases unemployment.
• E. none of these

Explanation: The short-run Phillips curve describes an inverse relationship between inflation and unemployment: reducing inflation can temporarily…

• A. the countries of Western Europe have set high minimum wage rates.
• B. Unions in Western Europe keep the wage high
• C. none of these answers.
• D. The countries of Western Europe have protected their industries from foreign corporation
• E. Workers in the united states are highly productive

Explanation: None of the listed explanations correctly identifies the main reason for Western Europe’s high living standards, which is generally high…

• A. increase the scarcity of resources.
• B. makes a country more equitable.
• C. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything to home.
• D. None of these

Explanation: Foreign trade enables countries to specialize according to comparative advantage and obtain goods more cheaply than if each tried to…

• A. a period of declining prices.
• B. a period of declining unemployment
• C. a period during which aggregate output declines.
• D. a period of very rapidly declining prices.

Explanation: A recession is a significant decline in overall economic activity, commonly reflected in falling real aggregate output.

• A. gross national product.
• B. national demand.
• C. economy-wide demand
• D. aggregate demand

Explanation: Aggregate demand is the total planned demand for final goods and services in an economy at different price levels.

• A. descriptive economics
• B. normative economics
• C. macroeconomics.
• D. microeconomics

Explanation: Inflation is a sustained rise in the general price level, so its causes and effects are studied as economy-wide macroeconomic issues.

• A. the behavior of the electronics industry
• B. the behavior of firms
• C. economics aggregates
• D. the activities of individual units

Explanation: Macroeconomics studies aggregates such as national income, total output, employment and the general price level.

• A. More spending by the government reduces poverty
• B. Higher taxes lead to less desire to work
• C. The Pakistan's economy is growing fast relative to other SAARC members
• D. The government should concentrate on reducing unemploymentSend Money Overseas

Explanation: A normative statement expresses a value judgment or recommendation, signaled here by “should.” The other statements are positive claims…

• A. Okun's Law
• B. classical theory
• C. Consumer price index
• D. none of the above

Explanation: Okun's law describes the inverse relationship between unemployment and real output: a rise in unemployment is associated with slower real…

• A. Only if both comparative and absolute advantage are present in both countries.
• B. If opportunity costs are the same in the countries involved.
• C. Only if there are economies of scale available.
• D. If countries specialize in the production of goods in which they are relatively more efficient.Download Interactive Maps

Explanation: Comparative advantage depends on relative opportunity costs, so countries gain by specializing in goods they produce at lower opportunity…

• A. Alfred Marshall
• B. Adam Smith
• C. Lionel Robbins
• D. None of these

Explanation: Adam Smith presented the theory of absolute advantage in The Wealth of Nations.

• A. Total utility of the good for consumption of the last unit
• B. Extra utility associated with consuming another unit of the good
• C. Utility associated with consuming an alternative good
• D. Consumer surplus associated with the consumption of an alternative good

Explanation: Marginal utility is the additional satisfaction gained from consuming one more unit of a good.

• A. Consumptive efficiency
• B. Production efficiency
• C. Allocative efficiency
• D. EquityCompare Credit Cards

Explanation: Pareto efficiency concerns efficient allocation, production, and consumption, but it does not judge whether the resulting distribution is…

• A. Unitary price elastic
• B. Relatively price inelastic
• C. Perfectly price elastic
• D. Perfectly price inelastic

Explanation: A nonsmoker has no intention of purchasing cigarettes, so the quantity demanded remains zero regardless of price.

• A. Horizontal
• B. Vertical
• C. Downward Sloping
• D. Upward Sloping

Explanation: A normal demand curve slopes downward because consumers generally buy more when price falls and less when price rises, holding other…

• A. Business by rich people
• B. Monopoly shared by few large sellers
• C. Just one supplier of an item
• D. None of the above

Explanation: An oligopoly is a market in which a small number of large firms supply most of the product, so each firm’s decisions affect the others.

• A. Adam Smith
• B. David Ricardo
• C. Malthus
• D. J. M. Keynes

Explanation: Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776.

• A. Equal to 1
• B. Greater than 1
• C. Less than 1
• D. Equal to 0

Explanation: A horizontal price-consumption curve implies that the quantity response to price changes keeps total expenditure on the good proportional…