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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 term "liquidity" in financial markets?

The long-term profitability of a business

The amount of taxes paid on financial assets

The process of issuing bonds to raise capital

The ease with which an asset can be converted into cash

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

Number of patents issued

Gross Domestic Product (GDP) per worker

Tax revenue

Unemployment rate

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

The total value of imports and exports

The difference between the value of exports and imports

The total market value of a country's goods

The amount of foreign direct investment

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

When the government controls the market prices

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

5. What does "economic diversification" involve?

Specializing in one type of economic activity

Focusing on increasing government spending

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

Limiting foreign investment in the economy

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

Tax revenue

Government spending

Inflation rate

Gross Domestic Product (GDP) per capita

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

To provide income redistribution

To fund government activities

To reduce inflation

To encourage savings

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

National unemployment rate

Household income

Individual wages

Stock prices

9. 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

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

Gross Domestic Product (GDP) per capita

The unemployment rate

The inflation rate

Government debt

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

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

The price of a country's exports in foreign markets

The tax on international transactions

The cost of importing goods from other countries

12. What does "economic diversification" refer to?

The control of foreign trade and imports

The reduction of government involvement in business activities

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

The concentration of economic activities in one sector

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

Rules to limit the amount of foreign investment

A government program to reduce unemployment benefits

Central bank decisions regarding interest rates

Changes in government spending and taxation to influence economic activity

14. What does "Monetary Policy" involve?

Government regulations related to trade tariffs

The implementation of government savings programs

The regulation of the money supply and interest rates

Policies related to taxation and government expenditure

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

Unemployment rate

National debt

Consumer price index (CPI)

Gross Domestic Product (GDP)

16. 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

17. 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

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

Fiscal deficit refers to a country's overall debt

Fiscal deficit and budget deficit mean the same thing

19. What is "foreign exchange reserves"?

The stocks and bonds held by foreign governments

The money held by foreign investors in domestic banks

The total wealth of a country in the form of assets

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

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

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

The price level required to cover production costs

The sensitivity of consumers to price changes for a good

The amount of demand for a product based on income

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

Unemployment rate

Interest rates

Gross Domestic Product (GDP) growth

Stock market trends

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

The money borrowed by the government to cover its budget deficit

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

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

Goods purchased by individuals for personal use

Tools used for manufacturing

Machinery used to produce goods

Goods purchased by businesses for resale

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

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

The transfer of capital from one company to another

The export of goods to foreign markets

The investment in domestic infrastructure

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

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

The average income of a country’s citizens

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

The cost of living in a country

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

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

A decrease in the general price level of goods and services

A reduction in the number of job opportunities

A period of economic stagnation with high unemployment

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

Trade between two foreign countries

Investments made by foreign entities in a country’s economy

Government loans to foreign companies

Investments made by a country in foreign assets

28. 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

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

Government policies related to income tax and public spending

Central bank actions to manage the money supply and interest rates

Policies that affect the balance of payments

Policies aimed at regulating the stock market

30. What does inflation measure in an economy?

The level of foreign investment

The total wealth of a country

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

The level of unemployment

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

To facilitate the negotiation of trade agreements and resolve disputes

To impose tariffs on international trade

To regulate global financial markets

To set domestic tax rates for countries

32. 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 taxes collected by the government

A measure of the total output of a country

33. What does "GDP per capita" measure?

The average income of citizens in a country

The total production value of a country

The amount of tax revenue collected per person

The total wealth of an individual

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

Consumer confidence index

Stock market performance

Inflation rate

Unemployment rate

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

Economic policies focused on increasing production and reducing taxes for businesses

Policies aimed at increasing government spending

Policies aimed at increasing demand for goods and services

Tax policies targeted at consumer spending

36. What is "tax incidence"?

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

The amount of tax a government collects from individuals

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

National defense

Luxury goods

Personal automobiles

Private education services

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

The expenditure by businesses on advertising

The amount of taxes collected from businesses

The savings deposited by the public in banks

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

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

Tax rates decrease as income increases

The same tax rate applies to all taxpayers

Higher earners pay a higher percentage of income in taxes

Tax rates are constant across income levels

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

Increasing public sector employment

Reducing taxes and regulations to encourage production and investment

Reducing government spending to control inflation

Increasing government intervention in market forces

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

To promote international trade

To fund government expenditure

To control the population growth

To regulate the money supply

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

To control the stock market

To manage taxation

To set monetary policy and regulate the money supply

To regulate trade agreements

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

The total value of exports and imports

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

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

Ensuring the stability of the financial system

Monitoring agricultural output

Setting trade tariffs

Regulating income taxes

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

Government policies related to taxation and government spending

Government policies related to money supply

Policies aimed at controlling international trade

Regulations on foreign investments

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

A temporary increase in government spending

A sustained period of economic decline in GDP

A sharp increase in inflation rates

A period of economic expansion with low unemployment

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

It is the reduction in the unemployment rate

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 refers to an increase in a country's national debt

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

Government is spending more than its revenue

Government has balanced its spending and revenue

The tax rate is too high

Government has surplus funds for investment

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

The total amount of government revenue

The government’s ability to repay its debt

The amount of tax evasion in the economy

The total value of exports and imports

50. What does "trade liberalization" involve?

The introduction of quotas on imports

The removal of trade barriers and tariffs to promote free trade

The imposition of trade restrictions

The reduction of government spending on international trade

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

Sales tax

Value-added tax (VAT)

Income tax

Customs duty

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

When inflation is at a record low

When government expenditures exceed revenues

When the government collects more revenue than it spends

When a country’s currency appreciates

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

The difference between income and expenditure of a government

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

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

When a country has a trade deficit

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

When the currency appreciates in value against foreign currencies

When unemployment rates increase due to economic recession

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

A government policy to regulate income tax rates

A policy to control inflation through taxation

A policy to regulate foreign exchange reserves

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

56. What is "supply-side economics"?

A policy that focuses on increasing aggregate demand in an economy

A policy focused on controlling inflation through price controls

A policy focused on boosting government spending

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

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

A phase where prices are continuously increasing

A phase of high levels of public spending

A period of steady economic growth

A period of significant decline in economic activity across the economy

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

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

The conversion of currency into foreign bonds

59. 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 increase foreign debt

To reduce the level of imports in the economy

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

Gross Domestic Product (GDP)

Tax collection rate

Land area

Population density

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

The cost of purchasing a product

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

The tax paid on a product or service

The cost of production for a good

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Mustansar KhanLast Updated: July 8, 2025

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Key Economic Terms Test Online (Basic Economic Indicators)

Key Economic Terms Test Online (Basic Economic Indicators)

Key Economic Terms Test

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