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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.
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Page 1 of 3

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

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

To reduce the total national debt

To reduce the level of imports in the economy

To increase foreign debt

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

To facilitate the negotiation of trade agreements and resolve disputes

To regulate global financial markets

To impose tariffs on international trade

To set domestic tax rates for countries

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

The same tax rate applies to all taxpayers

Tax rates are constant across income levels

Tax rates decrease as income increases

Higher earners pay a higher percentage of income in taxes

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

A policy to control inflation through taxation

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

A government policy to regulate income tax rates

A policy to regulate foreign exchange reserves

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

The total value of stock market transactions

The amount of money in a country’s central bank

The government’s yearly tax collection

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

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

Regulating income taxes

Monitoring agricultural output

Setting trade tariffs

Ensuring the stability of the financial system

7. What does "trade liberalization" involve?

The removal of trade barriers and tariffs to promote free trade

The reduction of government spending on international trade

The introduction of quotas on imports

The imposition of trade restrictions

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

To control the stock market

To set monetary policy and regulate the money supply

To manage taxation

To regulate trade agreements

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

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

The savings deposited by the public in banks

The expenditure by businesses on advertising

The amount of taxes collected from businesses

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

The amount of government spending

The total amount of imports

The level of taxation

The money supply and interest rates

11. What does "economic diversification" involve?

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

Limiting foreign investment in the economy

Focusing on increasing government spending

Specializing in one type of economic activity

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

Increasing public sector employment

Reducing government spending to control inflation

Reducing taxes and regulations to encourage production and investment

Increasing government intervention in market forces

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

The conversion of currency into foreign bonds

A policy of increasing tariffs on foreign goods

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

An increase in the value of a country’s currency

14. What does "economic diversification" refer to?

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

The control of foreign trade and imports

The concentration of economic activities in one sector

The reduction of government involvement in business activities

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

To control the population growth

To promote international trade

To regulate the money supply

To fund government expenditure

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

Household income

Stock prices

National unemployment rate

Individual wages

17. What does "GDP per capita" measure?

The amount of tax revenue collected per person

The total wealth of an individual

The total production value of a country

The average income of citizens in a country

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

Government policies related to money supply

Regulations on foreign investments

Policies aimed at controlling international trade

Government policies related to taxation and government spending

19. What does inflation measure in an economy?

The level of unemployment

The level of foreign investment

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

The total wealth of a country

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

A sustained period of economic decline in GDP

A sharp increase in inflation rates

A period of economic expansion with low unemployment

A temporary increase in government spending

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

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

When the currency appreciates in value against foreign currencies

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

Rules to limit the amount of foreign investment

Central bank decisions regarding interest rates

A government program to reduce unemployment benefits

Changes in government spending and taxation to influence economic activity

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

The number of workers in a specific sector

The percentage of employed people in the workforce

The percentage of people who are actively looking for work

The total number of jobs available in the economy

24. 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

25. What is "tax incidence"?

The policy used to reduce income inequality

The amount of tax a government collects from individuals

The impact of tax evasion on government revenue

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

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26. What is "supply-side economics"?

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

A policy that focuses on increasing aggregate demand in an economy

A policy focused on boosting government spending

A policy focused on controlling inflation through price controls

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

The unemployment rate

Government debt

The inflation rate

Gross Domestic Product (GDP) per capita

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

A period of significant decline in economic activity across the economy

A phase of high levels of public spending

A phase where prices are continuously increasing

A period of steady economic growth

29. What does "Monetary Policy" involve?

The implementation of government savings programs

Policies related to taxation and government expenditure

The regulation of the money supply and interest rates

Government regulations related to trade tariffs

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

Luxury goods

National defense

Private education services

Personal automobiles

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

The transfer of capital from one company to another

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

The export of goods to foreign markets

The investment in domestic infrastructure

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

The ease with which an asset can be converted into cash

The process of issuing bonds to raise capital

The long-term profitability of a business

The amount of taxes paid on financial assets

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

The difference between income and expenditure of a government

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

The financial reserves held by the central bank

The total revenue collected by the government

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

When the government collects more revenue than it spends

When a country’s currency appreciates

When government expenditures exceed revenues

When inflation is at a record low

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

Fiscal deficit refers to a country's overall debt

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

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

Fiscal deficit and budget deficit mean the same thing

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

The amount of money borrowed by businesses

The total savings held by a country’s government

The total amount of money a country owes to external creditors

The total value of exports and imports

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

Higher prices leading to a decrease in purchasing power

A decrease in the cost of living

Decrease in interest rates

Increased purchasing power of consumers

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

Inflation rate

Gross Domestic Product (GDP) per capita

Tax revenue

Government spending

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

Value-added tax (VAT)

Sales tax

Customs duty

Income tax

40. 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

41. What is "foreign exchange reserves"?

The money held by foreign investors in domestic banks

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

The total wealth of a country in the form of assets

The stocks and bonds held by foreign governments

42. 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

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

Goods purchased by businesses for resale

Tools used for manufacturing

Machinery used to produce goods

Goods purchased by individuals for personal use

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

Tax revenue

Number of patents issued

Unemployment rate

Gross Domestic Product (GDP) per worker

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

Tax collection rate

Gross Domestic Product (GDP)

Population density

Land area

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

The government’s ability to repay its debt

The total value of exports and imports

The total amount of government revenue

The amount of tax evasion in the economy

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

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

The cost of living in a country

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

The average income of a country’s citizens

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

The tax paid on a product or service

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

The cost of purchasing a product

The cost of production for a good

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

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

The revenue generated from the sale of state-owned assets

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

A measure of the level of exports in the economy

A measure of the total taxes collected by the government

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

A measure of the total output of a country

Page 3 of 3

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

Stock market trends

Interest rates

Unemployment rate

Gross Domestic Product (GDP) growth

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

Consumer confidence index

Unemployment rate

Stock market performance

Inflation rate

53. 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 there is a shortage of goods in the market

When the government controls the market prices

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

Unemployment rate

National debt

Consumer price index (CPI)

Gross Domestic Product (GDP)

55. 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

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

Government has surplus funds for investment

The tax rate is too high

Government has balanced its spending and revenue

Government is spending more than its revenue

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

The difference between the value of exports and imports

The total value of imports and exports

The total market value of a country's goods

The amount of foreign direct investment

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

To reduce inflation

To encourage savings

To provide income redistribution

To fund government activities

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

Investments made by a country in foreign assets

Investments made by foreign entities in a country’s economy

Government loans to foreign companies

Trade between two foreign countries

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

It is the reduction in the unemployment rate

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

61. 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

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Mustansar KhanLast Updated: July 8, 2025

Key Economic Terms Test Online (Basic Economic Indicators)

Key Economic Terms Test Online (Basic Economic Indicators)

Key Economic Terms Test

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