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 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

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

To provide income redistribution

To encourage savings

To fund government activities

To reduce inflation

3. What does "Monetary Policy" involve?

The implementation of government savings programs

Government regulations related to trade tariffs

The regulation of the money supply and interest rates

Policies related to taxation and government expenditure

4. What does "GDP per capita" measure?

The amount of tax revenue collected per person

The total production value of a country

The average income of citizens in a country

The total wealth of an individual

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

Setting trade tariffs

Regulating income taxes

Ensuring the stability of the financial system

Monitoring agricultural output

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

National defense

Personal automobiles

Luxury goods

Private education services

7. 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

8. 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 government’s yearly tax collection

The total value of stock market transactions

9. 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 period of economic stagnation with high unemployment

A reduction in the number of job opportunities

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

The export of goods to foreign markets

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

11. 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

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

A period of significant decline in economic activity across the economy

A phase where prices are continuously increasing

A period of steady economic growth

A phase of high levels of public spending

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

Individual wages

Household income

Stock prices

National unemployment rate

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

A sharp increase in inflation rates

A sustained period of economic decline in GDP

A temporary increase in government spending

A period of economic expansion with low unemployment

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

To impose tariffs on international trade

To facilitate the negotiation of trade agreements and resolve disputes

To set domestic tax rates for countries

To regulate global financial markets

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

Consumer price index (CPI)

Unemployment rate

National debt

Gross Domestic Product (GDP)

17. 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

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

Tools used for manufacturing

Goods purchased by individuals for personal use

Goods purchased by businesses for resale

Machinery used to produce goods

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

Tax policies targeted at consumer spending

Economic policies focused on increasing production and reducing taxes for businesses

Policies aimed at increasing demand for goods and services

Policies aimed at increasing government spending

20. 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

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

To promote international trade

To fund government expenditure

To regulate the money supply

To control the population growth

22. 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 amount of government revenue

The total value of exports and imports

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

A policy to control inflation through taxation

A government policy to regulate income tax rates

A policy to regulate foreign exchange reserves

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

24. 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

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

Unemployment rate

Number of patents issued

Tax revenue

Gross Domestic Product (GDP) per worker

Page 2 of 3

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

Regulations on foreign investments

Policies aimed at controlling international trade

Government policies related to money supply

Government policies related to taxation and government spending

27. 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

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

Government has balanced its spending and revenue

The tax rate is too high

Government has surplus funds for investment

Government is spending more than its revenue

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

The revenue generated from the sale of state-owned assets

The money borrowed by the government to cover its budget deficit

The amount of money a country owes to foreign creditors

The total amount of tax collected by the government

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

Tax rates are constant across income levels

The same tax rate applies to all taxpayers

Tax rates decrease as income increases

Higher earners pay a higher percentage of income in taxes

31. 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

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

Reducing government spending to control inflation

Increasing government intervention in market forces

Increasing public sector employment

Reducing taxes and regulations to encourage production and investment

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

Inflation rate

Unemployment rate

Stock market performance

Consumer confidence index

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

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 is the reduction in the unemployment rate

It refers to the level of inflation in an economy

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

Government policies related to income tax and public spending

Policies that affect the balance of payments

Central bank actions to manage the money supply and interest rates

Policies aimed at regulating the stock market

36. 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

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

A policy of increasing tariffs on foreign goods

The conversion of currency into foreign bonds

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

An increase in the value of a country’s currency

38. 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

39. 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

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

Changes in government spending and taxation to influence economic activity

Central bank decisions regarding interest rates

A government program to reduce unemployment benefits

Rules to limit the amount of foreign investment

41. What does "economic diversification" involve?

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

Focusing on increasing government spending

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

The total value of imports and exports

The amount of foreign direct investment

The total market value of a country's goods

The difference between the value of exports and imports

43. 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 amount of taxes collected from businesses

The expenditure by businesses on advertising

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

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

The amount of demand for a product based on income

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

To manage taxation

To set monetary policy and regulate the money supply

To regulate trade agreements

To control the stock market

46. 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 inflation rate

Government debt

The unemployment rate

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

To increase foreign debt

To reduce the total national debt

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

To reduce the level of imports in the economy

48. 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

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

The price of a country's exports in foreign markets

The tax on international transactions

The cost of importing goods from other countries

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

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

Increased purchasing power of consumers

A decrease in the cost of living

Decrease in interest rates

Higher prices leading to a decrease in purchasing power

Page 3 of 3

51. 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 cost of production for a good

The tax paid on a product or service

52. 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 total output of a country

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

53. What is "tax incidence"?

The amount of tax a government collects from individuals

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

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

When demand exceeds supply

When there is a shortage of goods in the market

When the government controls the market prices

When the quantity of goods demanded equals the quantity supplied at a particular price

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

The total amount of imports

The amount of government spending

The money supply and interest rates

The level of taxation

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

When a country has a trade deficit

When unemployment rates increase due to economic recession

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

When the currency appreciates in value against foreign currencies

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

Unemployment rate

Gross Domestic Product (GDP) growth

Stock market trends

Interest rates

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

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

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

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

The total savings held by a country’s government

The amount of money borrowed by businesses

The total value of exports and imports

The total amount of money a country owes to external creditors

60. 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

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

Sales tax

Income tax

Value-added tax (VAT)

Customs duty

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