MCQOPTIONS
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MCQOPTIONS
This section includes 50 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Which of the following taxes can be supported by the benefits principle of taxation ? |
| A. | All these answers can be supported by the benefits principle of taxation |
| B. | Progressive income taxes used to pay for national defense |
| C. | Petrol taxes used to pay for roads |
| D. | property taxes used to pay for policies and the court system |
| Answer» B. Progressive income taxes used to pay for national defense | |
| 2. |
Which of the following would likely cause the greatest deadweight loss ? |
| A. | a tax on salt |
| B. | a tax on cigarettes |
| C. | a tax on petrol |
| D. | a tax on cruise line tickets |
| Answer» E. | |
| 3. |
Which of the following would shift the long-run Phillips curve to the right ? |
| A. | An increase in the minimum wage |
| B. | An increase in the expected inflation |
| C. | An increase in the price of foreign oil |
| D. | An increase in the aggregate demand |
| Answer» B. An increase in the expected inflation | |
| 4. |
Which of the following is true with regard to a tax on labor income? Taxes on labor income tend to encourage ? |
| A. | the unscrupulous to enter the underground economy |
| B. | the elderly to retire early. |
| C. | all the things described in these answers. |
| D. | second earners to stay home. |
| E. | workers to work fewer hours |
| Answer» D. second earners to stay home. | |
| 5. |
When actual inflation exceeds expected inflation ? |
| A. | Unemployment is equal to the natural rate of unemployment |
| B. | People will reduce their expectations of inflation in the future |
| C. | Unemployment is greater than the natural rate of unemployment |
| D. | Unemployment is less than the natural rate of unemployment |
| Answer» E. | |
| 6. |
When a tax on a good start small and is gradually increased tax revenue ? |
| A. | will fall |
| B. | will rise |
| C. | will first rise and then fall |
| D. | will first fall and then rise |
| Answer» D. will first fall and then rise | |
| 7. |
When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold than otherwise the tax has ? |
| A. | caused a deadweight loss |
| B. | decreased equity |
| C. | generated no tax revenue |
| D. | increased efficiency |
| Answer» B. decreased equity | |
| 8. |
The reduction of tax ? |
| A. | will have no impact on tax revenue. |
| B. | will always reduce tax revenue regardless of the prior size of the tax |
| C. | could increase tax revenue if the tax had been extremely high |
| D. | causes a market to become less efficient |
| Answer» D. causes a market to become less efficient | |
| 9. |
The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increase price and ? |
| A. | decreases unemployment |
| B. | decrease growth |
| C. | increases unemployment |
| D. | decreases inflation |
| Answer» B. decrease growth | |
| 10. |
The original Phillips curve illustrates ? |
| A. | the trade-off between inflation and unemployment |
| B. | The trade-off between output and unemployment |
| C. | The positive relationship between output and unemployment |
| D. | The positive relationship between inflation and unemployment |
| Answer» B. The trade-off between output and unemployment | |
| 11. |
The natural rate hypothesis argues that ? |
| A. | in the long run the unemployment rate returns to the natural rate, regardless of inflation |
| B. | Unemployment is always below the natural rate |
| C. | Unemployment is always above the natural rate |
| D. | Unemployment is always equal to the natural rate |
| Answer» B. Unemployment is always below the natural rate | |
| 12. |
The misery index Which some commentators suggest measures the health of the economy, is ? |
| A. | The sum of the growth rate of output and the inflation rate |
| B. | The sum of the natural rate of unemployment and the actual rate of unemployment |
| C. | The sum of the inflation rate and the central bank’s refinancing rate |
| D. | The sum of the unemployment rate and the inflation rate |
| Answer» E. | |
| 13. |
The marginal tax rate is ? |
| A. | the taxes paid by the marginal worker |
| B. | total income divided by total taxes paid |
| C. | the extra taxes paid on an additional unit of income |
| D. | total taxes paid divided by total income |
| Answer» D. total taxes paid divided by total income | |
| 14. |
The graph that shows the relationship between the size of a tax and the tax revenue collected by the government is known as a ? |
| A. | none of these answers |
| B. | Reagan curve |
| C. | Keynesian curve |
| D. | Laffer curve |
| E. | Henry George curve. |
| Answer» E. Henry George curve. | |
| 15. |
The average tax rate is ? |
| A. | total taxes paid divided by total income |
| B. | the extra taxes paid on an additional dollar or income. |
| C. | the taxes paid by the marginal worker |
| D. | total income divided by total taxes paid |
| Answer» B. the extra taxes paid on an additional dollar or income. | |
| 16. |
The appropriate tax rate to consider judging the vertical equity of a tax system is the ? |
| A. | marginal tax rate |
| B. | average tax rate |
| C. | horizontal tax rate |
| D. | proportional tax rate |
| Answer» C. horizontal tax rate | |
| 17. |
The appropriate tax rate to consider gauging how much the tax system distorts incentives and decision making is the ? |
| A. | Proportional tax rate |
| B. | average tax rate |
| C. | marginal tax rate |
| D. | vertical tax rate |
| E. | horizontal tax rate |
| Answer» D. vertical tax rate | |
| 18. |
Sana values a pair of blue jeans at Rs400. If the price is Rs350 Sana buys the jeans and generates consumer surplus of Rs50 Suppose a tax is placed on blue jeans that causes the price of blue jeans to rise to Rs450 Now sana chooses not to buy a pair of? |
| A. | the deadweight has demonstrated |
| B. | the ability-to-pay principle |
| C. | the benefits principle |
| D. | horizontal equity |
| E. | The administrative burden of a tax. |
| Answer» B. the ability-to-pay principle | |
| 19. |
Refer to Exhibit 6.Suppose the economy is in long-run equilibrium at point E. A sudden increase in government spending should move the economy in the direction of point ? |
| A. | d |
| B. | G |
| C. | E |
| D. | b |
| Answer» B. G | |
| 20. |
Refer to Exhibit 6. Suppose the economy is Operating in long-run equilibrium at point E. In the long run a monetary contraction will move the economy in the direction of point ? |
| A. | F |
| B. | a |
| C. | H |
| D. | I |
| Answer» D. I | |
| 21. |
Refer to Exhibit 6. Suppose the economy is Operating in long-run equilibrium at point E. An unexpected monetary contraction will move the economy in the direction of point ? |
| A. | H |
| B. | F |
| C. | E |
| D. | c |
| Answer» C. E | |
| 22. |
Refer to Exhibit 6.If People in the economy expect inflation to be 6 percent but inflation turn out to be 3 percent the economy is operating at point ? |
| A. | H |
| B. | c |
| C. | d |
| D. | F |
| Answer» E. | |
| 23. |
Refer to Exhibit 6.If People in the economy expect inflation to be 3 percent and inflation is 3 percent the economy is operating at point ? |
| A. | b |
| B. | I |
| C. | a |
| D. | H |
| Answer» E. | |
| 24. |
Refer to Exhibit 6. Suppose the economy is operating at point (D) As people revise their price expectations ? |
| A. | The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 3 percent inflation |
| B. | The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 9 per cent inflation |
| C. | The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 6 percent inflation |
| D. | The long-run Phillips curve will shift to the left |
| Answer» E. | |
| 25. |
Refer to Exhibit 4. Which of the following is true with regard to the burden of the tax in Exhibit 4 ? |
| A. | The buyers pay a larger portion of the tax because demand is more inelastic than supply |
| B. | The sellers pay a larger portion of the tax because supply is more elastic than demand |
| C. | The buyers pay a larger portion of the tax because demand is more elastic then supply |
| D. | The sellers pay a larger portion of the tax because supply is more inelastic than demand |
| Answer» E. | |
| 26. |
Refer to Exhibit 4. If there is no tax placed on the product in this market total surplus is the area ? |
| A. | B + C + E + F |
| B. | E + F |
| C. | A + B + C + D |
| D. | A + B + C + D + E + F |
| Answer» E. | |
| 27. |
Refer to Exhibit 4. If a tax is placed on the product in this market consumer surplus is the area ? |
| A. | D |
| B. | A |
| C. | A + B + E |
| D. | A + B +C + D |
| Answer» C. A + B + E | |
| 28. |
Refer to Exhibit 4. If there is no tax placed on the product in this market, producer surplus is the area ? |
| A. | A + B + E |
| B. | D |
| C. | C + F |
| D. | C + D + F |
| Answer» E. | |
| 29. |
Refer to Exhibit 4. If a tax is placed on the product in this market tax revenue paid by the buyers is the area ? |
| A. | B + C + E + F |
| B. | B |
| C. | B + C |
| D. | A |
| Answer» C. B + C | |
| 30. |
Refer to Exhibit 4. If a tax is placed on the product in this market tax revenue paid by the sellers is the area ? |
| A. | C + F |
| B. | A |
| C. | B |
| D. | C |
| Answer» E. | |
| 31. |
Refer to Exhibit 4. If there is no tax placed on the produced in this market consumer surplus is the area ? |
| A. | C + D + F |
| B. | A |
| C. | A + B + E |
| D. | D + C + B |
| Answer» D. D + C + B | |
| 32. |
Refer to Exhibit 4. If a tax is placed on the product in this market total surplus is the area ? |
| A. | A + B + C + D+ E +F |
| B. | A + B + C + D |
| C. | A + D |
| D. | B + C + E + F |
| Answer» C. A + D | |
| 33. |
Refer to Exhibit 4. If a tax is placed on the product in this market, producer surplus is the area? |
| A. | A + B + E |
| B. | A + B + C + D |
| C. | A |
| D. | D |
| Answer» E. | |
| 34. |
Refer to Exhibit 4. If a tax is placed on the product in this market. deadweight loss is the area ? |
| A. | B + C + E + F |
| B. | E + F |
| C. | B + C |
| D. | A + B + C + D |
| Answer» C. B + C | |
| 35. |
If the sacrifice ratio is five, a reduction in inflation from 7 percent to 3 percent would require ? |
| A. | a reduction in output of 20 percent |
| B. | a reduction in output of 5percent |
| C. | a reduction in output of 15 percent |
| D. | a reduction in output of 35 percent |
| Answer» B. a reduction in output of 5percent | |
| 36. |
If the Pakistani government runs a budget surplus there is ? |
| A. | an excess of government receipts over government spending. |
| B. | an equality of government spending and receipts. |
| C. | a surplus of government workers. |
| D. | an excess of government spending over government receipts. |
| Answer» B. an equality of government spending and receipts. | |
| 37. |
If people have rational expectations a monetary policy contraction that is announced and is credible could ? |
| A. | reduce inflation with little or no increase in unemployment |
| B. | Increase inflation but would decrease unemployment by an unusually large amount |
| C. | increase inflation with little or no decrease in unemployment |
| D. | reduce inflation but it would increase unemployment by an unusually large amount |
| Answer» B. Increase inflation but would decrease unemployment by an unusually large amount | |
| 38. |
If, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price level then the long-run Phillips curve ? |
| A. | is vertical |
| B. | is negatively sloped |
| C. | has a slope that is determined by how fast people adjust their price expectations |
| D. | is positively sloped |
| Answer» B. is negatively sloped | |
| 39. |
If a tax on a good is doubled the deadweight loss from the tax ? |
| A. | doubles |
| B. | stays the same |
| C. | increase by a factor of four. |
| D. | could rise or fall |
| Answer» D. could rise or fall | |
| 40. |
If a country’s policy makers were to continuously use expansionary monetary policy in an attempt to hold unemployment below the natural rate the long-run result would be ? |
| A. | an increase in the level of output |
| B. | a decrease in the unemployment rate |
| C. | an increase in the rate of inflation |
| D. | All of these answers |
| Answer» D. All of these answers | |
| 41. |
Deadweight loss is greatest when ? |
| A. | supply is elastic, and demand is perfectly inelastic |
| B. | demand is elastic, and demand is perfectly inelastic |
| C. | both supply and demand are relatively inelastic |
| D. | both supply and demand are relatively elastic |
| Answer» E. | |
| 42. |
An increase in expected inflation ? |
| A. | shifts the short run Phillips curve downward and the unemployment inflation trade-off is less favorable. |
| B. | shifts the short-run Phillips curve upward and the unemployment inflation trade-off is more favorable |
| C. | Shift the short-run Phillips curve downward and the unemployment inflation trade-off is more favorable |
| D. | Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable |
| Answer» E. | |
| 43. |
An efficient tax ? |
| A. | minimizes the administrative burden form the tax |
| B. | does all the things describe in these answers |
| C. | raises revenue at the smallest possible cost to taxpayers. |
| D. | minimize the deadweight loss from the tax. |
| Answer» C. raises revenue at the smallest possible cost to taxpayers. | |
| 44. |
Along a short-run Phillips curve, ? |
| A. | a higher rate of inflation is associated with a lower unemployment rate |
| B. | a higher rate of growth in output is associated with a lower unemployment rate |
| C. | a higher rate of inflation is associated with a higher unemployment rate |
| D. | a higher rate of growth in output is associated with a higher unemployment rate. |
| Answer» B. a higher rate of growth in output is associated with a lower unemployment rate | |
| 45. |
According to the Phillips curve, in the short run, if policy makers choose an expansionary policy to lower the rate of unemployment ? |
| A. | The economy will experience an increase in inflation |
| B. | The economy will experience a decrease in inflation |
| C. | Inflation will be unaffected if price expectations are unchanging |
| D. | None of these answers |
| Answer» B. The economy will experience a decrease in inflation | |
| 46. |
A tax system is regarded as horizontally equitable if ? |
| A. | all taxpayers pay the same amount of tax |
| B. | taxes on all goods are levied at the same rate |
| C. | taxes are as low as possible |
| D. | the system comprises only lump sum taxes |
| E. | taxpayers with similar abilities to pay taxes pay the same amount |
| Answer» F. | |
| 47. |
A tax for which high income taxpayers pay a smaller fraction of their income than do low income taxpayers is known as ? |
| A. | a proportional tax |
| B. | a regressive tax |
| C. | an equitable tax |
| D. | a progressive tax |
| Answer» C. an equitable tax | |
| 48. |
A tax on petrol is likely to ? |
| A. | generate a deadweight loss that is unaffected by the time period over which it is measured |
| B. | cause a greater deadweight loss in the long run when compared to the short run |
| C. | None of these answers |
| D. | cause a greater deadweight loss in the short run when compared to the long run. |
| Answer» C. None of these answers | |
| 49. |
A progressive tax system is one where ? |
| A. | marginal tax rates are high. |
| B. | higher income taxpayers pay more taxes than do lower income taxpayers. |
| C. | marginal tax rates are low. |
| D. | higher income taxpayers pay a greater percentage of their income in taxes than do lower income taxpayers. |
| Answer» E. | |
| 50. |
A decrease the Price of foreign oil ? |
| A. | Shifts the short-run Phillips curve downward and make the unemployment inflation trade-off less favorable |
| B. | Shifts the short run Phillips curve upward and makes the unemployment inflation trade-off more favorable |
| C. | Shifts the short run Phillips curve upward and makes the Unemployment inflation trade off more favorable |
| D. | Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favorable |
| Answer» E. | |