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

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

The cost of purchasing a product

The tax paid on a product or service

The cost of production for a good

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

Sales tax

Customs duty

Value-added tax (VAT)

Income tax

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

Government policies related to taxation and government spending

Policies aimed at controlling international trade

Regulations on foreign investments

Government policies related to money supply

4. 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 investment in domestic infrastructure

The export of goods to foreign markets

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

To impose tariffs on international trade

To regulate global financial markets

To set domestic tax rates for countries

To facilitate the negotiation of trade agreements and resolve disputes

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

When government expenditures exceed revenues

When inflation is at a record low

When a country’s currency appreciates

When the government collects more revenue than it spends

7. 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

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

To manage taxation

To control the stock market

To regulate trade agreements

To set monetary policy and regulate the money supply

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

Luxury goods

National defense

Personal automobiles

Private education services

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

The financial reserves held by the central bank

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

11. 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 controlling inflation through price controls

A policy focused on boosting government spending

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

The amount of money in a country’s central bank

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

The total value of stock market transactions

The government’s yearly tax collection

13. What does "Monetary Policy" involve?

Policies related to taxation and government expenditure

The implementation of government savings programs

The regulation of the money supply and interest rates

Government regulations related to trade tariffs

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

Goods purchased by individuals for personal use

Goods purchased by businesses for resale

Machinery used to produce goods

Tools used for manufacturing

15. What is "foreign exchange reserves"?

The stocks and bonds held by foreign governments

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

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

Inflation rate

Consumer confidence index

Unemployment rate

Stock market performance

17. 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

18. 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 refers to the level of inflation in an economy

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

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

The amount of taxes collected from businesses

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

The expenditure by businesses on advertising

The savings deposited by the public in banks

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

The process of issuing bonds to raise capital

The amount of taxes paid on financial assets

The long-term profitability of a business

The ease with which an asset can be converted into cash

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

Policies aimed at increasing demand for goods and services

Tax policies targeted at consumer spending

Economic policies focused on increasing production and reducing taxes for businesses

Policies aimed at increasing government spending

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

Tax revenue

Number of patents issued

Gross Domestic Product (GDP) per worker

Unemployment rate

23. 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

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

The price level required to cover production costs

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 amount of demand for a product based on income

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

Government is spending more than its revenue

The tax rate is too high

Government has balanced its spending and revenue

Government has surplus funds for investment

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

The total value of imports and exports

The total market value of a country's goods

The difference between the value of exports and imports

The amount of foreign direct investment

27. 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 refers to a country's overall debt

Fiscal deficit and budget deficit mean the same thing

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

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

When the government controls the market prices

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 demand exceeds supply

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

Monitoring agricultural output

Setting trade tariffs

Regulating income taxes

Ensuring the stability of the financial system

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

The total amount of tax collected by the government

The money borrowed by the government to cover its budget deficit

The amount of money a country owes to foreign creditors

The revenue generated from the sale of state-owned assets

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

To encourage savings

To provide income redistribution

To reduce inflation

To fund government activities

32. 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 policy to control inflation through taxation

A government policy to regulate income tax rates

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

Land area

Gross Domestic Product (GDP)

Population density

Tax collection rate

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

Increasing government intervention in market forces

Increasing public sector employment

Reducing taxes and regulations to encourage production and investment

Reducing government spending to control inflation

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

Investments made by a country in foreign assets

Trade between two foreign countries

Government loans to foreign companies

Investments made by foreign entities in a country’s economy

36. What is "tax incidence"?

The policy used to reduce income inequality

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

The impact of tax evasion on government revenue

The amount of tax a government collects from individuals

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

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

When a country has a trade deficit

When unemployment rates increase due to economic recession

When the currency appreciates in value against foreign currencies

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

Central bank decisions regarding interest rates

Changes in government spending and taxation to influence economic activity

A government program to reduce unemployment benefits

Rules to limit the amount of foreign investment

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

The amount of tax evasion in the economy

The government’s ability to repay its debt

The total value of exports and imports

The total amount of government revenue

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

The conversion of currency into foreign bonds

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

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

Household income

Stock prices

Individual wages

National unemployment rate

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

Higher earners pay a higher percentage of income in taxes

The same tax rate applies to all taxpayers

Tax rates are constant across income levels

Tax rates decrease as income increases

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

National debt

Gross Domestic Product (GDP)

Consumer price index (CPI)

Unemployment rate

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

Interest rates

Stock market trends

Unemployment rate

Gross Domestic Product (GDP) growth

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

To reduce the level of imports in the economy

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

To reduce the total national debt

To increase foreign debt

46. What does "economic diversification" refer to?

The reduction of government involvement in business activities

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

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

To regulate the money supply

To fund government expenditure

To control the population growth

To promote international trade

48. 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 cost of living in a country

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

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

A reduction in the number of job opportunities

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

A period of economic stagnation with high unemployment

A decrease in the general price level of goods and services

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

Government debt

The unemployment rate

The inflation rate

Gross Domestic Product (GDP) per capita

Page 3 of 3

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

The percentage of employed people in the workforce

The total number of jobs available in the economy

The number of workers in a specific sector

The percentage of people who are actively looking for work

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

A sharp increase in inflation rates

A temporary increase in government spending

A sustained period of economic decline in GDP

A period of economic expansion with low unemployment

53. What does "GDP per capita" measure?

The average income of citizens in a country

The total wealth of an individual

The amount of tax revenue collected per person

The total production value of a country

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

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

A measure of the level of exports in the economy

55. 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

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

The total value of exports and imports

The total amount of money a country owes to external creditors

The amount of money borrowed by businesses

The total savings held by a country’s government

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

The cost of importing goods from other countries

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

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

Government spending

Inflation rate

Gross Domestic Product (GDP) per capita

Tax revenue

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

The amount of government spending

The level of taxation

The money supply and interest rates

The total amount of imports

60. What does "economic diversification" involve?

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

Focusing on increasing government spending

Limiting foreign investment in the economy

Specializing in one type of economic activity

61. 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 imposition of trade restrictions

The introduction of quotas on imports

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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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