MCQOPTIONS

Explore topic-wise MCQs in Economics.

This section includes 72 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.

1.	With fixed exchange rates and no private currency flows, when the central bank buys domestic currency the domestic money supply is ?
A.	increased
B.	unaffected
C.	reduced
D.	None of these
Answer» D. None of these

2.	Within the circular flow of income, an increase in domestic income will tend to increase ?
A.	exports
B.	taxes
C.	inventories
D.	imports
Answer» C. inventories

3.	Which of the following is not likely to be government objective ?
A.	Increasing employment
B.	Increasing economic growth
C.	Increasing government spending
D.	Increasing the level of exports
Answer» B. Increasing economic growth

4.	Which of the following is not involved with fiscal policy ?
A.	Income tax
B.	National insurance
C.	VAT
D.	Interest insurance
Answer» B. National insurance

5.	Which of the following is not a macroeconomic issue ?
A.	Unemployment
B.	Inflation
C.	The wages paid to footballers
D.	Economic growth
Answer» E.

6.	Which of the following is macroeconomic issue ?
A.	The price of houses in karachi
B.	The wage rate for plumbers in Islamabad
C.	Your decision to work or stay at home
D.	The level of unemployment is pakistan
Answer» D. The level of unemployment is pakistan

7.	Which of the following is a possible government objective as opposed to a policy ?
A.	Lower interest rates
B.	Lower taxation rates
C.	Lower government spending
D.	Lower inflation
Answer» B. Lower taxation rates

8.	Which of the following is a policy instrument as opposed to a government objective ?
A.	lower interest rates
B.	A better balance of trade position
C.	Faster economic growth
D.	Lower unemployment
Answer» E.

9.	Which of the following can the government not use directly to control the economy ?
A.	Pay rates within the private sector
B.	pay rates in the public sector
C.	investment in education
D.	Benefits available for the unemployed and sick
Answer» B. pay rates in the public sector

10.	Which fixed exchange rates and no private capital flows, to correct a balance of payments deficit, the central bank will _______ and ________ ?
A.	buy foreign exchange, sell domestic currency
B.	sell foreign exchange buy domestic currency
C.	buy foreign exchange buy domestic currency
D.	sell foreign exchange sell domestic currency
Answer» C. buy foreign exchange buy domestic currency

11.	Which does the government not control directly ?
A.	Spending on health
B.	Spending on defence
C.	Firms investment decisions
D.	Spending on education
Answer» D. Spending on education

12.	When the $/£ exchange rate rises the pound _____ and when the $/£ rates falls the pound ________?
A.	depreciates, appreciates
B.	revalues, devalues
C.	appreciates, depreciates
D.	becomes more expensive becomes cheaper
Answer» D. becomes more expensive becomes cheaper

13.	When capital mobility is perfect interest rate differentials will tend to be offset by ?
A.	Price difference
B.	balance of payments difference
C.	current account differences
D.	expected exchange rate changes
Answer» E.

14.	What is meant by an objective ?
A.	A policy
B.	A way of reaching a target
C.	A target
D.	A strategy
Answer» E.

15.	Unemployment resulting from real wages being above their equilibrium level is called _________ unemployment?
A.	natural
B.	frictional
C.	disequilibrium
D.	structural
Answer» D. structural

16.	Unemployment resulting from changes in the pattern of demand or supply in the economy is called _______ unemployment?
A.	regional
B.	technological
C.	structural
D.	demand-deficient
Answer» D. demand-deficient

17.	Unemployment resulting from imperfect information in the labour market is called ____ unemployment?
A.	Frictional
B.	natural
C.	real-wage
D.	disequilibrium
Answer» B. natural

18.	Under floating exchange rates, expectations of higher interest rates are likely to cause an ____ of the exchange rate?
A.	depreciation
B.	appreciation
C.	fall
D.	devaluation
Answer» C. fall

19.	The situation when a country imports more than it exports is ?
A.	a recession
B.	a trade surplus
C.	a trade deficit
D.	an expansion.
Answer» D. an expansion.

20.	The single European Act committed ________ governments to a ________ in 1992?
A.	European union, single market
B.	Western European, single currency area
C.	European Union, single currency area
D.	Western European, single market
Answer» B. Western European, single currency area

21.	The record of a county’s transfers of shareholding property and bank deposits to and from abroad is called its ?
A.	financial account on the balance of payments.
B.	balance of payments
C.	balance of payments on current account
D.	capital account of the balance of payments
Answer» B. balance of payments

22.	The record of country’s transfers of land inter-government payments and money sent by migrants to and from abroad is called its ?
A.	balance of payments
B.	capital account of the balance of payments
C.	financial account of the balance of payments
D.	balance of payments on current account
Answer» C. financial account of the balance of payments

23.	The record of country’s imports and exports of goods is called its ?
A.	balance of trade:
B.	balance of payments
C.	balance of payments on current account
D.	visible trade balance
Answer» E.

24.	The record of country’s imports and exports of goods and services is called its ?
A.	visible trade balance
B.	balance of trade
C.	balance of payments on current account
D.	balance of payments.
Answer» C. balance of payments on current account

25.	The record of a country’s imports and exports of of goods and services plus net investment incomes and current transfers of money to and from abroad, is called its ?
A.	balance of payments on current account
B.	visible trade balance
C.	balance of trade
D.	balance of payments
Answer» B. visible trade balance

26.	The percentage of the labour force that is unemployed is the ?
A.	Unemployment population ratio.
B.	Unemployment rate
C.	employment rate
D.	Labour force rate.
Answer» C. employment rate

27.	The natural rate of unemployment is generally thought of as the ?
A.	ratio of the frictional unemployment rate to the cyclical unemployment rate.
B.	Sum of structural unemployment and cyclical unemployment.
C.	Sum of frictional unemployment and cyclical unemployment
D.	sum of frictional unemployment and structural unemployment.
Answer» E.

28.	The main features of the European Monetary system are ?
A.	The ECU
B.	currency swap agreement between member
C.	the exchange rate mechanism
D.	all of the above
Answer» E.

29.	The Maastricht criteria for entry to the EMU are that applicants should have ?
A.	low inflation
B.	low interest rates
C.	stable nominal exchange rates
D.	budget deficits and government debt under control
E.	all of the above
Answer» F.

30.	The labour force can be defined as ?
A.	Those who could claim benefit if they were to become unemployed.
B.	The population between school leaving age and retirement age.
C.	anyone who is working or actively seeking work
D.	Those of working age who are seeking work and are available to for work at current wage rates.
Answer» E.

31.	The demand for ice-cream is lower outside of summer causing lower demand for ice-cream salesman if they cannot find other work, this is called _______ unemployment?
A.	Regional
B.	structural
C.	seasonal
D.	demand-deficient
Answer» D. demand-deficient

32.	The competitive advantage from a devaluation is likely to be offset by _______ and ________?
A.	higher import prices, higher wages increases
B.	lower export prices, lower imports volumes
C.	higher import prices, lower export prices
D.	higher wage increases lower import volumes
Answer» B. lower export prices, lower imports volumes

33.	Reducing inflation is a more important objective than economic growth is an example of ?
A.	Normative economics
B.	Positive economics
C.	Objective economics
D.	Reality economics
Answer» D. Reality economics

34.	perfect international capital mobility suggests that international funds will be responsive to ________ differentials?
A.	current account
B.	interest rate
C.	tax
D.	price
Answer» C. tax

35.	In the short run the level of floating exchange rates is determined mainly by ?
A.	interest rates
B.	competitiveness
C.	trade
D.	speculation
Answer» E.

36.	In the ERM, each country fixed participant Collectively the group ________ against the rest of the world?
A.	a nominal exchange rate, floated
B.	a real exchange rate, pegged
C.	a purchasing power parity, pegged
D.	a real exchange rate, floated
Answer» B. a real exchange rate, pegged

37.	In the EMU a country’s competitiveness can change because of ?
A.	interest rate adjustment
B.	central bank intervention in the Forex
C.	domestic wage and price adjustment
D.	devaluation
Answer» D. devaluation

38.	In the absence of international capital controls, central banks set ________ to provide the correct incentive for speculators?
A.	money supply targets
B.	income policy
C.	interest rates
D.	inflation targets
Answer» D. inflation targets

39.	In a fixed exchange rate regime, the central the exchange rate ?
A.	selling, increase
B.	buying reduce
C.	selling, reduce
D.	buying increase
E.	C and D
Answer» F.

40.	If VAT rates rise, then costs are likely to ___ and demand is likely to ____?
A.	rise; rise
B.	rise; fall
C.	fall; fall
D.	fall; rise
Answer» C. fall; fall

41.	If the US economy is forecast to come out of recession because military expenditure has increase then the exchange value of the UK pound will tend to ?
A.	depreciate
B.	not be affected
C.	fluctuate more than it would do therwise
D.	appreciate
Answer» E.

42.	If the Pakistan takes part in a war in the Middle East, then the exchange value of its currency will tend to ?
A.	depreciate
B.	not be affected
C.	fluctuate more than if it were at peace
D.	appreciate
Answer» B. not be affected

43.	If the Pakistan receives larger than expected revenues from exports then the exchange value of its currency will tend to ?
A.	not be affected
B.	fluctuate more than if exports were lower
C.	depreciate
D.	appreciate
Answer» E.

44.	If the exchange rate between the UK and Japan changes from £1 = 100 yen to £1 = 150 yen then ceteris paribus, the price of UK goods in Japan ?
A.	will remain the same
B.	will decrease
C.	will increase
D.	could either increase of decrease
Answer» D. could either increase of decrease

45.	If the economy is in the though phase of the business cycle, aggregate demand ____ unemployment ______ inflation ______ and the current account of the balance of payments is likely to move towards ________?
A.	falls; falls; falls; surplus
B.	falls; rises; falls; surplus
C.	is static; low; rises; deficit
D.	rises; falls; rises; deficit
Answer» B. falls; rises; falls; surplus

46.	If the economy is in the recessionary phase of the business cycle, aggregate demand ___ unemployment ____ inflation ___ and the current account of the balance of payments is likely to move towards ____?
A.	falls; falls; falls; surplus
B.	is static; low; rises; deficit
C.	falls; rises; falls; surplus
D.	rises; falls; rises; deficit
Answer» D. rises; falls; rises; deficit

47.	If the economy is in the expansionary phase of the business cycle, aggregate demand ____ unemployment ____ inflation ____ payments is likely to move towards ____?
A.	falls; rise; falls; surplus
B.	is static; low; rise; deficit;
C.	falls; falls; falls; surplus
D.	rise; falls; rises; deficit
Answer» E.

48.	If the economy is at the peak of the business cycle, aggregate demand ____ unemployment _______ inflation _______ and the current account of the balance of payments is likely to move towards _______?
A.	rise; falls; rise; deficit
B.	falls; rises; falls; surplus
C.	falls; falls; falls; surplus
D.	is static; low; rises; deficit
Answer» E.

49.	If Pakistan’s incomes rise faster than those in most other countries the the exchange value will tend to ?
A.	fluctuate more than it would do otherwise
B.	appreciate
C.	depreciate
D.	not be affected
Answer» D. not be affected

50.	If one country, with floating exchange rates, has higher inflation than its competitors we would expect its exchange rate to ?
A.	appreciate
B.	depreciate
C.	revalue
D.	be in short supply
Answer» C. revalue