Key Economic Terms Test Online (Basic Economic Indicators)

Mustansar KhanLast Updated: July 8, 2025

Key Economic Terms Test Online (Basic Economic Indicators)

Key Economic Terms Test

Total Questions:	61
Time Allowed:	30 Minutes
Total Marks:	61
How to Attempt Test:	Please choose the right Option in MCQ-type question.
Test Helpful For:	FBR Sub Inspector Test Customs Inspector Test FBR Interviews FBR Sepoy Test Preparation for Customs and Tax Related Questions

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Page 1 of 3

1. Which of the following is an example of a "lagging indicator" in economics?

Unemployment rate

Stock market trends

Interest rates

Gross Domestic Product (GDP) growth

2. What is "tax incidence"?

The amount of tax a government collects from individuals

The impact of tax evasion on government revenue

The policy used to reduce income inequality

The distribution of the burden of a tax between buyers and sellers

3. Which of the following is true about "economic growth"?

It refers to an increase in a country's national debt

It is measured by the total production of goods and services in a country

It refers to the level of inflation in an economy

It is the reduction in the unemployment rate

4. What is the concept of "opportunity cost" in economics?

The cost of purchasing a product

The tax paid on a product or service

The value of the next best alternative foregone when making a decision

The cost of production for a good

5. What is the difference between fiscal deficit and budget deficit?

Budget deficit is a narrower concept that refers to the annual gap in government revenue and expenditure

Fiscal deficit and budget deficit mean the same thing

Fiscal deficit is about government borrowing, while budget deficit refers to a trade imbalance

Fiscal deficit refers to a country's overall debt

6. Which of the following is typically used to measure the standard of living in a country?

Inflation rate

Tax revenue

Government spending

Gross Domestic Product (GDP) per capita

7. What is meant by "public spending" in economics?

The expenditure by businesses on advertising

The savings deposited by the public in banks

The government’s expenditure on goods and services to benefit society

The amount of taxes collected from businesses

8. What is the primary objective of a tax system in an economy?

To fund government activities

To encourage savings

To reduce inflation

To provide income redistribution

9. What does the "federal reserve" control in the United States economy?

The total amount of imports

The money supply and interest rates

The level of taxation

The amount of government spending

10. What does "GDP per capita" measure?

The average income of citizens in a country

The amount of tax revenue collected per person

The total production value of a country

The total wealth of an individual

11. What is meant by "Fiscal Policy" in economic terms?

Policies aimed at controlling international trade

Regulations on foreign investments

Government policies related to money supply

Government policies related to taxation and government spending

12. What does "exchange rate" refer to in economics?

The average income of a country’s citizens

The value of a country’s currency in terms of gold

The rate at which one country’s currency can be exchanged for another’s

The cost of living in a country

13. What does "exchange rate" determine in international trade?

The cost of importing goods from other countries

The price of a country's exports in foreign markets

The tax on international transactions

The rate at which one currency can be exchanged for another currency

14. What does inflation measure in an economy?

The total wealth of a country

The level of unemployment

The rate at which the general level of prices for goods and services is rising

The level of foreign investment

15. Which of the following is an example of "inflationary gap"?

When the currency appreciates in value against foreign currencies

When the demand for goods exceeds the supply, causing prices to rise

When unemployment rates increase due to economic recession

When a country has a trade deficit

16. What does "trade liberalization" involve?

The reduction of government spending on international trade

The imposition of trade restrictions

The introduction of quotas on imports

The removal of trade barriers and tariffs to promote free trade

17. What does "Monetary Policy" involve?

Policies related to taxation and government expenditure

The regulation of the money supply and interest rates

The implementation of government savings programs

Government regulations related to trade tariffs

18. What does "Deflation" mean in economic terms?

A period of economic stagnation with high unemployment

A sudden increase in the general price level of goods and services

A reduction in the number of job opportunities

A decrease in the general price level of goods and services

19. What is the role of the Central Bank in an economy?

To regulate trade agreements

To set monetary policy and regulate the money supply

To control the stock market

To manage taxation

20. What does the term "economic recession" refer to?

A period of economic expansion with low unemployment

A sharp increase in inflation rates

A temporary increase in government spending

A sustained period of economic decline in GDP

21. What is "foreign exchange reserves"?

The stocks and bonds held by foreign governments

The total wealth of a country in the form of assets

The amount of a country’s currency held in foreign accounts

The money held by foreign investors in domestic banks

22. Which of the following is a characteristic of a progressive tax system?

Tax rates are constant across income levels

Higher earners pay a higher percentage of income in taxes

Tax rates decrease as income increases

The same tax rate applies to all taxpayers

23. Which of the following is an example of an economic indicator that reflects the standard of living in a country?

The inflation rate

Gross Domestic Product (GDP) per capita

Government debt

The unemployment rate

24. What is the role of the World Trade Organization (WTO) in global trade?

To regulate global financial markets

To set domestic tax rates for countries

To impose tariffs on international trade

To facilitate the negotiation of trade agreements and resolve disputes

25. What is "supply-side economics"?

A policy focused on boosting government spending

A policy that aims to increase production by lowering taxes and reducing regulations on businesses

A policy focused on controlling inflation through price controls

A policy that focuses on increasing aggregate demand in an economy

Page 2 of 3

26. Which of the following best describes "monetary policy"?

Government policies related to income tax and public spending

Policies aimed at regulating the stock market

Central bank actions to manage the money supply and interest rates

Policies that affect the balance of payments

27. What does "debt-to-GDP ratio" measure?

The total amount of government revenue

The total value of exports and imports

The government’s ability to repay its debt

The amount of tax evasion in the economy

28. What does the term "supply-side economics" focus on?

Increasing public sector employment

Increasing government intervention in market forces

Reducing government spending to control inflation

Reducing taxes and regulations to encourage production and investment

29. What does the "budget deficit" indicate in an economy?

Government has balanced its spending and revenue

Government has surplus funds for investment

The tax rate is too high

Government is spending more than its revenue

30. Which of the following describes "unemployment rate"?

The number of workers in a specific sector

The percentage of people who are actively looking for work

The percentage of employed people in the workforce

The total number of jobs available in the economy

31. Which of the following is the best example of a "consumer good"?

Goods purchased by businesses for resale

Goods purchased by individuals for personal use

Tools used for manufacturing

Machinery used to produce goods

32. What does the term "supply-side economics" refer to?

Policies aimed at increasing demand for goods and services

Policies aimed at increasing government spending

Economic policies focused on increasing production and reducing taxes for businesses

Tax policies targeted at consumer spending

33. Which of the following best defines "Monetary Policy"?

A policy used by the central bank to control money supply and interest rates

A policy to regulate foreign exchange reserves

A government policy to regulate income tax rates

A policy to control inflation through taxation

34. What does "market equilibrium" mean in economic terms?

When demand exceeds supply

When the quantity of goods demanded equals the quantity supplied at a particular price

When the government controls the market prices

When there is a shortage of goods in the market

35. Which of the following is a consequence of "high inflation"?

Higher prices leading to a decrease in purchasing power

Decrease in interest rates

A decrease in the cost of living

Increased purchasing power of consumers

36. Which of the following describes "balance of payments"?

The financial reserves held by the central bank

The total revenue collected by the government

The comparison between the value of a country’s imports and exports

The difference between income and expenditure of a government

37. Which of the following is an example of a "leading economic indicator"?

Inflation rate

Consumer confidence index

Stock market performance

Unemployment rate

38. What is meant by the term "devaluation" of currency?

A decrease in the value of a country’s currency relative to others

An increase in the value of a country’s currency

The conversion of currency into foreign bonds

A policy of increasing tariffs on foreign goods

39. What does "National Debt" refer to in economic terms?

The amount of money borrowed by businesses

The total value of exports and imports

The total amount of money a country owes to external creditors

The total savings held by a country’s government

40. Which of the following is an example of a direct tax?

Customs duty

Value-added tax (VAT)

Income tax

Sales tax

41. Which of the following best defines "public debt"?

The revenue generated from the sale of state-owned assets

The total amount of tax collected by the government

The amount of money a country owes to foreign creditors

The money borrowed by the government to cover its budget deficit

42. What does "price elasticity of demand" measure?

The amount of demand for a product based on income

The sensitivity of consumers to price changes for a good

The extent to which the price of a good affects the supply of that good

The price level required to cover production costs

43. What is "consumer price index" (CPI)?

A measure of the level of exports in the economy

A measure of the average change in prices paid by consumers for goods and services

A measure of the total output of a country

A measure of the total taxes collected by the government

44. Which of the following is an indicator of "economic productivity"?

Gross Domestic Product (GDP) per worker

Unemployment rate

Tax revenue

Number of patents issued

45. What is "Trade Balance" in economic terms?

The total market value of a country's goods

The total value of imports and exports

The amount of foreign direct investment

The difference between the value of exports and imports

46. What does "economic diversification" involve?

Limiting foreign investment in the economy

Focusing on increasing government spending

Expanding the economy into different sectors to reduce dependence on one sector

Specializing in one type of economic activity

47. Which of the following is considered a key economic indicator used to assess a country’s economic health?

Gross Domestic Product (GDP)

Land area

Population density

Tax collection rate

48. What is the main purpose of taxation in an economy?

To control the population growth

To fund government expenditure

To regulate the money supply

To promote international trade

49. What does the term "budget surplus" mean?

When government expenditures exceed revenues

When the government collects more revenue than it spends

When a country’s currency appreciates

When inflation is at a record low

50. Which of the following is an example of "fiscal policy"?

Central bank decisions regarding interest rates

A government program to reduce unemployment benefits

Rules to limit the amount of foreign investment

Changes in government spending and taxation to influence economic activity

Page 3 of 3

51. What does the term "Recession" indicate in economic terms?

A phase of high levels of public spending

A phase where prices are continuously increasing

A period of significant decline in economic activity across the economy

A period of steady economic growth

52. Which of the following is considered a key function of central banks?

Regulating income taxes

Setting trade tariffs

Monitoring agricultural output

Ensuring the stability of the financial system

53. Which of the following is an example of "public goods"?

Private education services

Luxury goods

National defense

Personal automobiles

54. What is "Foreign Direct Investment" (FDI)?

Trade between two foreign countries

Investments made by a country in foreign assets

Investments made by foreign entities in a country’s economy

Government loans to foreign companies

55. Which of the following is an example of a macroeconomic indicator?

National unemployment rate

Household income

Individual wages

Stock prices

56. What is "capital flight" in economic terms?

The investment in domestic infrastructure

The export of goods to foreign markets

The transfer of capital from one company to another

The movement of financial assets out of a country to avoid taxes or instability

57. What is the "current account balance" in a country’s economy?

The total value of stock market transactions

The total value of the country’s imports and exports of goods and services

The government’s yearly tax collection

The amount of money in a country’s central bank

58. What is the purpose of a "trade surplus"?

To have more exports than imports, improving a country's economy

To increase foreign debt

To reduce the total national debt

To reduce the level of imports in the economy

59. What does "economic diversification" refer to?

The concentration of economic activities in one sector

The expansion of a country’s economy into new and varied sectors

The reduction of government involvement in business activities

The control of foreign trade and imports

60. Which of the following is a common indicator of economic growth?

Gross Domestic Product (GDP)

National debt

Consumer price index (CPI)

Unemployment rate

61. What is the term "liquidity" in financial markets?

The long-term profitability of a business

The process of issuing bonds to raise capital

The amount of taxes paid on financial assets

The ease with which an asset can be converted into cash

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