Economics-I QUIZ - Sangit Budhathoki

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What is the nature of Normal goods?

Demand decreases with increase in Income and vice versa.

Demand increases with increase in income and vice versa.

Demand has no relation with income.

Demand increases with price.

Which of the following concepts is most relevant to microeconomics?

The impact of changes in the overall price level on consumer purchasing power

The relationship between the money supply and interest rates in the economy

The determination of prices and output levels in a competitive market

The effects of government spending on the overall level of economic activity

What is the nature of Giffen goods?

Demand increases with increase in price and vice versa.

Demand decreases with increase in price and vice versa.

Demand has new relation with price.

Demand has relation with income of consumer.

Which of the following statements best describes the difference between cardinal utility analysis and ordinal utility analysis?

Cardinal utility analysis measures utility in absolute numerical terms, while ordinal utility analysis ranks preferences without assigning numerical values.

Cardinal utility analysis ranks preferences without assigning numerical values, while ordinal utility analysis measures utility in absolute numerical terms.

Both cardinal and ordinal utility analysis assign numerical values to preferences, but cardinal utility analysis focuses on ranking utility, while ordinal utility analysis quantifies utility.

Both cardinal and ordinal utility analysis rank preferences without assigning numerical values, but cardinal utility analysis focuses on the order of preferences, while ordinal utility analysis measures the intensity of preferences.

Which of the following best describes the potential consequences of deflation?

Increased purchasing power for consumers, leading to higher levels of consumption and economic growth.

Encouragement of saving and investment due to expectations of lower future prices.

Reduction in real wages and consumer spending, leading to a downward spiral of economic activity.

Stimulus for borrowing and spending as borrowers benefit from lower interest rates.

What does the Law of Returns to Scale state?

It describes the relationship between the output level and the variable inputs in the short run.

It illustrates the diminishing marginal productivity of variable inputs as more units of a variable input are added to a fixed input.

It explains how increasing all inputs by a certain proportion leads to a proportional increase in output.

It analyzes the relationship between the scale of production and the cost per unit of output in the long run.

According to Fisher's Quantity Theory of Money, what is the relationship between the quantity of money in circulation and the price level in an economy?

The quantity of money is directly proportional to the price level, meaning that an increase in the money supply leads to a proportional increase in prices.

The quantity of money is inversely proportional to the price level, implying that an increase in the money supply results in a decrease in prices.

There is no relationship between the quantity of money and the price level, as prices are determined solely by supply and demand for goods and services.

The relationship between the quantity of money and the price level depends on various factors such as velocity of money and the level of economic activity.

What does the GDP deflator measure?

The overall level of economic activity within a country.

The rate of inflation or deflation in an economy.

The average price level of all goods and services produced domestically.

The ratio of nominal GDP to real GDP, adjusted for price changes over time.

In the context of national income accounting, what factor complicates the comparison between Gross Domestic Product (GDP) and Gross National Product (GNP)?

The treatment of government expenditures.

The inclusion of net exports.

The consideration of depreciation.

The presence of factor payments to foreign residents.

10.

Which of the following statement is related to Normative Economics?

An increase in the minimum wage will lead to a decrease in unemployment.

Government should increase taxes on the wealthy to reduce income inequality.

A decrease in interest rates will stimulate economic growth

Supply and demand determine the equilibrium price in a competitive market.

11.

What is the key difference between nominal and real interest rates?

Nominal interest rates account for inflation, while real interest rates do not.

Real interest rates account for inflation, while nominal interest rates do not.

Nominal interest rates are adjusted for changes in purchasing power, while real interest rates are not.

Real interest rates are the rates quoted by financial institutions, while nominal interest rates are adjusted for economic conditions.

12.

Which of the following factors does NOT typically influence demand for a good or service?

Price of the good or service

Income of consumers

Availability of substitute goods

Cost of production for the producer

13.

If the Consumer Price Index (CPI) increases from 150 to 160 over a year, what is the inflation rate?

6.25%

10%

15%

14.

What is capital formation?

The process of converting financial assets into physical assets.

The accumulation of machinery, equipment, and infrastructure in an economy.

The creation of new financial instruments and securities in the stock market.

The increase in the total value of savings and investments in an economy over time.

15.

What does the law of substitution in economics suggest?

When the price of a good or service increases, consumers switch to inferior substitutes.

When the price of a good or service increases, consumers reduce their overall consumption of that good or service.

When the price of a good or service increases, consumers substitute it with other goods or services that provide similar utility.

When the price of a good or service decreases, consumers substitute it with more expensive alternatives.

16.

Who propounded Wealth Definition of Economics?

Alfred Marshall

Adam Smith

John Keynes

Lionel Robbins

17.

Which of the following is NOT considered a factor of production?

Land

Labour

Money

Capital

18.

Which statement accurately reflects a characteristic of an open economy compared to a closed economy?

In an open economy, there is greater vulnerability to external shocks and economic fluctuations, while closed economies are more insulated from global market forces.

Open economies typically experience higher levels of government intervention and regulation compared to closed economies, which operate with minimal government involvement.

Closed economies often exhibit higher levels of economic integration and participation in international trade agreements, whereas open economies tend to prioritize self-sufficiency and domestic production.

An open economy allows for the unrestricted flow of capital, goods, and services across international borders, while a closed economy imposes strict restrictions on such movements to protect domestic industries.

19.

What does the law of variable proportion state?

As more units of a variable input are added to a fixed input, the marginal product of the variable input eventually diminishes.

As more units of a variable input are added to a fixed input, the total product of the variable input increases at a decreasing rate.

As more units of a variable input are added to a fixed input, the average product of the variable input eventually decreases.

As more units of a variable input are added to a fixed input, the total product of the variable input increases at an increasing rate.

20.

What defines cyclical unemployment?

Cyclical unemployment results from fluctuations in consumer demand and overall economic activity.

Cyclical unemployment occurs when workers voluntarily leave their jobs to pursue other opportunities.

Cyclical unemployment is caused by structural changes in the economy, such as advancements in technology.

Cyclical unemployment arises from mismatched skills between available jobs and the workforce.

21.

Which of the following characteristics best describes a public good?

Excludability and rivalry in consumption

Non-excludability but rivalry in consumption

Excludability but non-rivalry in consumption

Non-excludability and non-rivalry in consumption

22.

What is a potential misconception about per capita income?

Per capita income provides an accurate measure of individual purchasing power within a country.

Higher per capita income necessarily indicates a higher standard of living for all individuals in a country.

Per capita income fails to account for income inequality and disparities in wealth distribution.

Countries with similar per capita incomes will have identical levels of economic development.

23.

In economics, what distinguishes the short run from the long run in production analysis?

Short run refers to a period of time in which all inputs are variable, while long run refers to a period of time in which at least one input is fixed.

Short run refers to a period of time in which at least one input is fixed, while long run refers to a period of time in which all inputs are variable.

Short run refers to a period of time in which both labor and capital are fixed, while long run refers to a period of time in which only labor is variable.

Short run refers to a period of time in which production cannot be increased, while long run refers to a period of time in which production can be expanded without limit.

24.

Which of the following scenarios best illustrates structural unemployment, where individuals are unemployed due to long-term changes in the economy?

Mary, a skilled textile worker, loses her job when the factory where she worked for many years relocates to another country with lower production costs.

Jack, an accountant, is laid off during a recession as many businesses reduce their workforce to cut costs, leading to a temporary increase in unemployment.

Emily, a recent college graduate with a degree in computer science, is unable to find employment because her skills are outdated and not aligned with the current demands of the job market.

David, a construction worker, experiences unemployment every winter when construction activity slows down due to adverse weather conditions.

25.

Which of the following is NOT typically considered a determinant of supply?

Input prices (cost of production)

Technology

Number of buyers in the market

Government regulations and taxes

26.

Which of the following best represents a demand function?

Qd = 10 – 2P

Qd = 5P + 3

Qd = 3P – 5

Qd = 2P – 10

27.

Which economic concept explains the phenomenon where individuals experience a decrease in the additional satisfaction gained from consuming additional units of a good or service?

The law of diminishing opportunity cost

The principle of demand elasticity

The law of diminishing marginal utility

The concept of consumer surplus

28.

Which of the following scenarios best exemplifies frictional unemployment?

Sarah, a recent college graduate, is unemployed because she is searching for a job that aligns with her field of study and career aspirations after completing her degree.

Tom, a factory worker, lost his job due to the closure of the plant where he worked for many years, leading to a prolonged period of unemployment in the region.

Lisa, a retail worker, experiences unemployment every year during the offseason when tourist activity decreases in her coastal town.

John, an accountant, is laid off from his job due to a recession and struggles to find employment as many firms are downsizing and not hiring.

29.

Which of the following factors of production receives non-fixed payment?

Enterprise

Labour

Capital

Land

30.

What do isoquant curves represent in microeconomics?

The relationship between the quantities of two inputs required to produce a given level of output.

The relationship between the quantities of a single input required to produce different levels of output.

The relationship between total output and the quantities of inputs used in production.

The relationship between marginal product and the quantities of inputs used in production.

31.

In the context of microeconomics, which of the following best defines producer's surplus?

The total revenue earned by producers from selling a good or service in a given market.

The difference between the price producers are willing to accept for a good or service and the actual price they receive in the market.

The additional profit earned by producers when they sell a good or service above their marginal cost.

The total profit generated by producers when they maximize their output level.

32.

Which of the following scenarios best illustrates the law of demand?

As the price of smartphones increases, the demand for smartphones also increases due to their perceived prestige.

Despite a rise in the price of gasoline, consumers continue to purchase the same amount of gasoline because they believe it is a necessity.

When the price of movie tickets decreases, more people attend the movies, leading to higher ticket sales.

In response to an increase in the price of coffee, consumers buy more coffee because they believe it indicates higher quality.

33.

Which of the following topics is primarily studied in macroeconomics?

The pricing decisions of individual firms

The effects of government policies on aggregate unemployment rates

The determination of an individual consumer’s demand for a specific good

The analysis of the production decisions of a single industry

34.

What is the primary cause of demand-pull inflation?

Decrease in the money supply

Increase in aggregate demand

Decrease in consumer confidence

Increase in production costs

35.

Which of the following pairs of goods are likely to be substitutes?

Milk and eggs

Cars and bicycles

Coffee and tea

Peanut butter and jelly

36.

What is the key distinction between absolute poverty and relative poverty in socioeconomic analysis?

Absolute poverty refers to a lack of basic necessities such as food, shelter, and clothing, whereas relative poverty is defined in relation to the average standard of living within a specific society.

Absolute poverty measures income levels below a fixed threshold necessary for meeting basic needs, while relative poverty compares income distribution within a society relative to the overall income distribution in that society.

Absolute poverty considers poverty as a universal condition, irrespective of geographic location or economic context, while relative poverty focuses on disparities in income and wealth within specific populations.

Absolute poverty emphasizes material deprivation and lacks a comparative element, while relative poverty emphasizes social exclusion and disparities in opportunities and resources compared to others in society.

37.

Why does the demand curve slope downward from left to right?

Because as quantity demanded increases, price increases to maintain equilibrium.

Because as quantity demanded decreases, price decreases to maintain equilibrium.

Because as price increases, quantity demanded decreases due to the law of diminishing marginal utility.

Because as price decreases, quantity demanded increases due to the law of diminishing marginal utility.

38.

In a barter economy, what does the term "double coincidence of wants" refer to?

It describes the situation where two parties have different wants and needs, making trade difficult to arrange.

It refers to the necessity for both parties in a transaction to have exactly the same preferences and desires.

It signifies the requirement that both parties in a trade must desire what the other party has to offer.

It highlights the need for a centralized authority to regulate barter transactions and ensure fairness.

39.

Which of the following pairs of goods are likely to be complementary?

Peanut butter and jelly

Laptops and tablets

Shoes and socks

Umbrellas and sunglasses

40.

Which of the following accurately describes the Balance of Payments (BoP) in economics?

It solely monitors a country’s trade balance, comparing exports to imports.

It encompasses all financial transactions between a country and foreign entities, excluding goods and services trade.

It provides a comprehensive record of all economic transactions between a country and the rest of the world, including goods, services, financial transactions, and transfers.

It measures the difference between a country’s total government spending and total government revenue.

41.

If the price elasticity of supply for a product is close to zero, what does it suggest about the responsiveness of quantity supplied to changes in price?

Quantity supplied is highly responsive to changes in price.

Quantity supplied is not responsive to changes in price.

Quantity supplied is perfectly responsive to changes in price.

Quantity supplied varies randomly with changes in price.

42.

What does it indicate if the price elasticity of demand for a product is greater than 1?

Demand for the product is elastic.

Demand for the product is inelastic.

Demand for the product is unit elastic.

Demand for the product is perfectly elastic.

43.

What would cause a rightward shift in the demand curve for smartphones?

An increase in the price of smartphones.

A decrease in consumer income.

Technological advancements that improve smartphone features.

A decrease in the price of complementary goods, such as phone cases.

44.

What term does not refer to a form of unemployment?

Technological unemployment, which occurs when workers are displaced by automation or technological advancements.

Cyclical unemployment, which arises due to fluctuations in the business cycle, with unemployment increasing during economic downturns and decreasing during expansions.

Underemployment, which describes a situation where individuals are working part-time or in jobs that are below their skill level or desired employment status.

Overemployment, which occurs when the number of available jobs exceeds the number of qualified workers, leading to an excess of employment opportunities.

45.

Which factor could contribute to a strengthening of a country's currency in the foreign exchange market?

Increased interest rates relative to other countries.

Higher inflation rates compared to other nations.

A trade deficit resulting in increased demand for foreign currency.

Political instability and uncertainty in the country.

46.

What does consumer surplus mean?

The total amount of money consumers save when buying goods on sale.

The difference between what consumers are willing to pay for a good or service and what they actually pay.

The additional satisfaction consumers derive from purchasing goods at higher prices.

The total amount of money consumers spend on goods and services in a given market.

47.

Which of the following best describes cost-push inflation?

It occurs when an increase in the money supply leads to higher prices.

It results from a decrease in aggregate demand in the economy.

It arises when businesses raise prices to cover higher production costs.

It is caused by excessive consumer spending relative to available goods and services.

48.

What is the term for the situation when inflation causes nominal wages to increase at a slower rate than prices, leading to a decrease in real wages?

Stagflation

Hyperinflation

Deflation

Cost-push inflation

49.

What is the fundamental difference between full-bodied coins and token coins in a monetary system, considering historical and economic contexts?

Full-bodied coins are minted with a higher level of craftsmanship and detail compared to token coins, reflecting their greater value and historical significance.

Full-bodied coins are backed by a reserve of precious metals such as gold or silver, ensuring that their face value is equal to or close to their intrinsic value, while token coins are not backed by any tangible asset.

Full-bodied coins have a legal tender status recognized internationally, facilitating trade across borders, whereas token coins are primarily used for local transactions within specific regions.

Full-bodied coins have a longer lifespan and are less susceptible to wear and tear compared to token coins, allowing them to retain their value and historical authenticity over time.

50.

In economics, what does the term "marginal utility" specifically refer to?

The cumulative satisfaction gained from consuming a good or service over time.

The satisfaction derived from consuming the last unit of a good or service.

The change in total utility resulting from consuming one more unit of a good or service.

The satisfaction obtained from consuming a good or service relative to the average consumer.

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