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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 does the term "budget surplus" mean?

When a country’s currency appreciates

When the government collects more revenue than it spends

When government expenditures exceed revenues

When inflation is at a record low

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

The amount of money a country owes to foreign creditors

The revenue generated from the sale of state-owned assets

The money borrowed by the government to cover its budget deficit

The total amount of tax collected by the government

3. 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

4. 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 savings deposited by the public in banks

The expenditure by businesses on advertising

5. What does "GDP per capita" measure?

The total wealth of an individual

The total production value of a country

The average income of citizens in a country

The amount of tax revenue collected per person

6. 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

7. What is "tax incidence"?

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

The policy used to reduce income inequality

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

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

When demand exceeds supply

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

The export of goods to foreign markets

The investment in domestic infrastructure

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

The transfer of capital from one company to another

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

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

The total value of stock market transactions

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

Increased purchasing power of consumers

Decrease in interest rates

A decrease in the cost of living

Higher prices leading to a decrease in purchasing power

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

Investments made by a country in foreign assets

Government loans to foreign companies

Investments made by foreign entities in a country’s economy

Trade between two foreign countries

13. 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

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

The price of a country's exports in foreign markets

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

The tax on international transactions

The cost of importing goods from other countries

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

Income tax

Sales tax

Customs duty

Value-added tax (VAT)

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

A measure of the total output of a country

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

17. 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 regulate trade agreements

To manage taxation

18. What does "economic diversification" involve?

Limiting foreign investment in the economy

Focusing on increasing government spending

Specializing in one type of economic activity

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

19. 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

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

Higher earners pay a higher percentage of income in taxes

Tax rates decrease as income increases

Tax rates are constant across income levels

The same tax rate applies to all taxpayers

21. What does "economic diversification" refer to?

The control of foreign trade and imports

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

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

A period of steady economic growth

A period of significant decline in economic activity across the economy

A phase where prices are continuously increasing

A phase of high levels of public spending

23. 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

24. 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

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

Stock market performance

Inflation rate

Consumer confidence index

Unemployment rate

Page 2 of 3

26. 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 control inflation through taxation

A policy to regulate foreign exchange reserves

A government policy to regulate income tax rates

27. 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

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

Interest rates

Gross Domestic Product (GDP) growth

Stock market trends

Unemployment rate

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

Gross Domestic Product (GDP)

Unemployment rate

Consumer price index (CPI)

National debt

30. What is "foreign exchange reserves"?

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

The stocks and bonds held by foreign governments

31. 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 price level required to cover production costs

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

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

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

The percentage of employed people in the workforce

33. What does inflation measure in an economy?

The total wealth of a country

The level of unemployment

The level of foreign investment

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

34. 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

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

Ensuring the stability of the financial system

Regulating income taxes

Setting trade tariffs

Monitoring agricultural output

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

To control the population growth

To regulate the money supply

To fund government expenditure

To promote international trade

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

The tax paid on a product or service

The cost of purchasing a product

The cost of production for a good

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

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

Regulations on foreign investments

Government policies related to taxation and government spending

Policies aimed at controlling international trade

Government policies related to money supply

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

The amount of tax evasion in the economy

The total amount of government revenue

The government’s ability to repay its debt

The total value of exports and imports

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

To set domestic tax rates for countries

To facilitate the negotiation of trade agreements and resolve disputes

To impose tariffs on international trade

To regulate global financial markets

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

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

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

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

The amount of foreign direct investment

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

43. 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

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

When unemployment rates increase due to economic recession

When the currency appreciates in value against foreign currencies

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

When a country has a trade deficit

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

The money supply and interest rates

The level of taxation

The amount of government spending

The total amount of imports

46. 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

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

A period of economic stagnation with high unemployment

A reduction in the number of job opportunities

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

A decrease in the general price level of goods and services

48. 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

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

The total amount of money a country owes to external creditors

The amount of money borrowed by businesses

The total value of exports and imports

The total savings held by a country’s government

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

Stock prices

National unemployment rate

Household income

Individual wages

Page 3 of 3

51. What does "Monetary Policy" involve?

The regulation of the money supply and interest rates

Policies related to taxation and government expenditure

The implementation of government savings programs

Government regulations related to trade tariffs

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

Tax revenue

Number of patents issued

Gross Domestic Product (GDP) per worker

Unemployment rate

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

To reduce the total national debt

To reduce the level of imports in the economy

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

To increase foreign debt

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

Luxury goods

Personal automobiles

National defense

Private education services

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

Government is spending more than its revenue

Government has surplus funds for investment

Government has balanced its spending and revenue

The tax rate is too high

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

Gross Domestic Product (GDP)

Land area

Tax collection rate

Population density

57. 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 unemployment rate

The inflation rate

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

Increasing government intervention in market forces

Reducing taxes and regulations to encourage production and investment

Reducing government spending to control inflation

Increasing public sector employment

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

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

The amount of taxes paid on financial assets

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

A sustained period of economic decline in GDP

A period of economic expansion with low unemployment

A temporary increase in government spending

A sharp increase in inflation rates

61. 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

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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)

Key Economic Terms Test

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Mustansar Khan

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