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

To fund government activities

To provide income redistribution

To encourage savings

To reduce inflation

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

Stock market performance

Consumer confidence index

Unemployment rate

Inflation rate

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

Government has balanced its spending and revenue

Government has surplus funds for investment

Government is spending more than its revenue

The tax rate is too high

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

Population density

Gross Domestic Product (GDP)

Tax collection rate

Land area

5. What does "Monetary Policy" involve?

The implementation of government savings programs

The regulation of the money supply and interest rates

Government regulations related to trade tariffs

Policies related to taxation and government expenditure

6. What does "trade liberalization" involve?

The imposition of trade restrictions

The introduction of quotas on imports

The reduction of government spending on international trade

The removal of trade barriers and tariffs to promote free trade

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

Customs duty

Value-added tax (VAT)

Income tax

Sales tax

8. What is "supply-side economics"?

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

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

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

Individual wages

National unemployment rate

Household income

Stock prices

10. What does "economic diversification" involve?

Focusing on increasing government spending

Limiting foreign investment in the economy

Specializing in one type of economic activity

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

11. 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 and budget deficit mean the same thing

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

12. 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 investment in domestic infrastructure

The export of goods to foreign markets

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

Regulating income taxes

Monitoring agricultural output

Ensuring the stability of the financial system

Setting trade tariffs

14. 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

15. 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

Machinery used to produce goods

Tools used for manufacturing

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

The cost of production for a good

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

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

Reducing taxes and regulations to encourage production and investment

Increasing public sector employment

Increasing government intervention in market forces

Reducing government spending to control inflation

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

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 average income of a country’s citizens

The cost of living in a country

19. 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

20. What is "tax incidence"?

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

The amount of tax a government collects from individuals

The impact of tax evasion on government revenue

The policy used to reduce income inequality

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

The same tax rate applies to all taxpayers

Tax rates decrease as income increases

Tax rates are constant across income levels

Higher earners pay a higher percentage of income in taxes

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

A period of significant decline in economic activity across the economy

A period of steady economic growth

A phase of high levels of public spending

A phase where prices are continuously increasing

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

The amount of taxes collected from businesses

The expenditure by businesses on advertising

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

The savings deposited by the public in banks

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

Government spending

Gross Domestic Product (GDP) per capita

Tax revenue

Inflation rate

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

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

A measure of the level of exports in the economy

Page 2 of 3

26. 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

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

Government loans to foreign companies

Investments made by foreign entities in a country’s economy

Trade between two foreign countries

Investments made by a country in foreign assets

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

A decrease in the general price level of goods and services

A sudden increase 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

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

Unemployment rate

Stock market trends

Gross Domestic Product (GDP) growth

Interest rates

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

The total amount of imports

The money supply and interest rates

The amount of government spending

The level of taxation

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

Higher prices leading to a decrease in purchasing power

Increased purchasing power of consumers

A decrease in the cost of living

Decrease in interest rates

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

The total market value of a country's goods

The difference between the value of exports and imports

The total value of imports and exports

The amount of foreign direct investment

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

To manage taxation

To regulate trade agreements

To control the stock market

To set monetary policy and regulate the money supply

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

The total revenue collected by the government

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

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

To set domestic tax rates for countries

To impose tariffs on international trade

To regulate global financial markets

To facilitate the negotiation of trade agreements and resolve disputes

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

The total value of exports and imports

The total amount of government revenue

The government’s ability to repay its debt

The amount of tax evasion in the economy

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

Policies aimed at controlling international trade

Regulations on foreign investments

Government policies related to taxation and government spending

Government policies related to money supply

38. 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

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

Gross Domestic Product (GDP)

National debt

Consumer price index (CPI)

Unemployment rate

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

The government’s yearly tax collection

The total value of stock market transactions

The amount of money in a country’s central bank

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

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

The percentage of employed people in the workforce

The number of workers in a specific sector

The percentage of people who are actively looking for work

The total number of jobs available in the economy

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

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

A policy of increasing tariffs on foreign goods

An increase in the value of a country’s currency

The conversion of currency into foreign bonds

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

To reduce the total national debt

To reduce the level of imports in the economy

To increase foreign debt

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

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

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

The long-term profitability of a business

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

To promote international trade

To regulate the money supply

To control the population growth

To fund government expenditure

46. 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

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

Changes in government spending and taxation to influence economic activity

A government program to reduce unemployment benefits

Central bank decisions regarding interest rates

Rules to limit the amount of foreign investment

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

When a country’s currency appreciates

When inflation is at a record low

When government expenditures exceed revenues

When the government collects more revenue than it spends

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

Luxury goods

National defense

Private education services

Personal automobiles

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

It is the reduction in the unemployment rate

It refers to the level of inflation in an economy

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

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

Page 3 of 3

51. 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

Government debt

The inflation rate

The unemployment rate

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

The revenue generated from the sale of state-owned assets

The amount of money a country owes to foreign creditors

The total amount of tax collected by the government

The money borrowed by the government to cover its budget deficit

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

Number of patents issued

Unemployment rate

Gross Domestic Product (GDP) per worker

Tax revenue

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

A policy to regulate foreign exchange reserves

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

A policy to control inflation through taxation

A government policy to regulate income tax rates

55. 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

56. What does "GDP per capita" measure?

The average income of citizens in a country

The total production value of a country

The total wealth of an individual

The amount of tax revenue collected per person

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

A period of economic expansion with low unemployment

A sustained period of economic decline in GDP

A temporary increase in government spending

A sharp increase in inflation rates

58. What does inflation measure in an economy?

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

The level of unemployment

The level of foreign investment

The total wealth of a country

59. What is "foreign exchange reserves"?

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

The money held by foreign investors in domestic banks

The total wealth of a country in the form of assets

The stocks and bonds held by foreign governments

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

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

The sensitivity of consumers to price changes for a good

The price level required to cover production costs

The amount of demand for a product based on income

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

Policies aimed at regulating the stock market

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

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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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Key Economic Terms Test Online (Basic Economic Indicators)

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