Economics MCQs

This comprehensive set of Economics MCQs is designed to cover all essential topics required for success in understanding the principles and applications of economics. Focused on key subjects such as Microeconomics, Macroeconomics, Economic Theories, and Market Structures, these MCQs are crafted to help students build a strong foundation in economic concepts and analytical skills.

Who should practice Economics MCQs?

Students pursuing degrees in economics, business, finance, or related fields who wish to enhance their understanding of economic theories and principles.
Individuals preparing for competitive exams and certifications that include economic reasoning and analysis.
University students targeting high-yield topics like supply and demand, market equilibrium, and fiscal policy.
Anyone aiming to strengthen their foundational understanding of economic concepts and their applications in real-world scenarios.
Candidates focused on developing critical thinking and problem-solving skills specific to economic analysis and decision-making.
Suitable for all students preparing for assessments related to economics, including those seeking to improve their analytical skills and build exam confidence

1. What is the primary concern of microeconomics?

A) National income
B) Individual economic agents and their interactions
C) Inflation rates
D) Global trade patterns

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2. Which of the following describes the law of demand?

A) As price increases, quantity demanded decreases
B) As price decreases, quantity demanded decreases
C) Demand is independent of price
D) Demand only changes with consumer income

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3. What is the main function of money in an economy?

A) To serve as a store of value
B) To serve as a unit of account
C) To serve as a medium of exchange
D) All of the above

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4. What does GDP stand for?

A) Gross Domestic Product
B) General Domestic Profit
C) Gross Development Price
D) General Development Product

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5. Which of the following is considered a factor of production?

A) Land
B) Labor
C) Capital
D) All of the above

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6. What is the main purpose of fiscal policy?

A) To control inflation
B) To manage government spending and taxation
C) To regulate the money supply
D) To influence international trade

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7. Which term describes a market structure characterized by a few large firms?

A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly

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8. What is inflation?

A) A decrease in the general price level
B) An increase in the general price level
C) A decrease in money supply
D) An increase in unemployment

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9. Who is known as the father of economics?

A) John Maynard Keynes
B) Adam Smith
C) Karl Marx
D) David Ricardo

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10. What does the term “opportunity cost” refer to?

A) The cost of producing one more unit of a good
B) The value of the next best alternative forgone
C) The total cost of production
D) The cost associated with lost time

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11. Which of the following is an example of a public good?

A) A sandwich
B) National defense
C) A smartphone
D) A car

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12. What does “monetary policy” typically involve?

A) Government spending
B) Taxation
C) Regulation of the money supply
D) Trade agreements

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13. What is the primary goal of a firm in a capitalist economy?

A) To provide jobs
B) To maximize profit
C) To support the community
D) To improve the environment

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14. Which of the following is a leading indicator of economic performance?

A) Unemployment rate
B) Gross Domestic Product (GDP)
C) Stock market performance
D) Inflation rate

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15. What is a tariff?

A) A tax on exports
B) A tax on imports
C) A subsidy for local businesses
D) A regulation on foreign investments

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16. Which economic theory emphasizes the importance of government intervention in the economy?

A) Classical economics
B) Neoclassical economics
C) Keynesian economics
D) Supply-side economics

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17. What is the main purpose of an economic system?

A) To ensure political stability
B) To allocate resources effectively
C) To increase consumer choice
D) To control prices

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18. What is the “invisible hand” concept?

A) Government intervention in the economy
B) Self-regulating nature of the marketplace
C) Control of prices by suppliers
D) The influence of monopolies

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19. What does the term “substitute goods” refer to?

A) Goods that are used together
B) Goods that can replace each other
C) Goods that are produced in a similar way
D) Goods that are considered luxuries

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20. Which of the following is a characteristic of perfect competition?

A) Few sellers
B) Homogeneous products
C) High barriers to entry
D) Price setting by firms

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21. What does the term “elasticity” measure in economics?

A) The ability of producers to supply goods
B) The responsiveness of demand or supply to changes in price
C) The total revenue generated from sales
D) The level of consumer satisfaction

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22. Which of the following is a consequence of a price ceiling?

A) Surplus of goods
B) Shortage of goods
C) Increased competition
D) Higher quality products

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23. What is the primary function of the Federal Reserve?

A) To collect taxes
B) To regulate international trade
C) To manage the country’s monetary policy
D) To control fiscal policy

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24. What is the concept of “diminishing marginal utility”?

A) The total satisfaction from consuming a good increases
B) Each additional unit of a good consumed provides less satisfaction
C) The overall utility from consumption is constant
D) Marginal costs decrease with increased production

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25. Which type of unemployment occurs due to economic downturns?

A) Structural unemployment
B) Frictional unemployment
C) Cyclical unemployment
D) Seasonal unemployment

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26. What does “comparative advantage” refer to?

A) The ability to produce more of a good than another producer
B) The ability to produce a good at a lower opportunity cost than another producer
C) The advantage of having better technology
D) The advantage of higher labor productivity

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27. What is the purpose of antitrust laws?

A) To promote international trade
B) To prevent monopolies and promote competition
C) To regulate labor unions
D) To manage consumer prices
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28. Which of the following is considered a direct tax?

A) Sales tax
B) Value-added tax (VAT)
C) Income tax
D) Tariff
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29. What is a market failure?

A) When the market operates efficiently
B) When there is an excess of supply
C) When the allocation of goods and services is not efficient
D) When prices are too high

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30. What is the primary goal of international trade?

A) To restrict access to markets
B) To increase domestic prices
C) To maximize the benefits of comparative advantage
D) To eliminate competition

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31. What does “aggregate demand” refer to?

A) The total demand for goods and services in an economy
B) The demand for a specific good
C) The demand from individual consumers
D) The demand from foreign markets

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32. Which of the following best describes a “monopoly”?

A) A market structure with many firms
B) A market with a single seller and no close substitutes
C) A market with differentiated products
D) A market that allows free entry and exit

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33. What is the primary measure of economic performance?

A) Gross National Product (GNP)
B) Gross Domestic Product (GDP)
C) Consumer Price Index (CPI)
D) Unemployment rate

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34. Which of the following is an example of a negative externality?

A) Education
B) Pollution
C) Vaccination
D) Public parks

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35. What is a “supply shock”?

A) A sudden increase in demand
B) A sudden decrease in supply
C) A sudden increase in prices
D) A sudden change in consumer preferences

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36. What does “price elasticity of demand” measure?

A) The effect of income changes on demand
B) The responsiveness of quantity demanded to a change in price
C) The relationship between price and supply
D) The overall demand in an economy

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37. What is the term for a prolonged period of economic recession?

A) Economic boom
B) Economic depression
C) Economic stagnation
D) Economic expansion

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38. What is the relationship between interest rates and investment?

A) Higher interest rates typically increase investment
B) Lower interest rates typically decrease investment
C) Higher interest rates typically decrease investment
D) Interest rates have no effect on investment

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39. What does the term “liquidity” refer to in finance?

A) The profitability of an asset
B) The ability to quickly convert an asset into cash
C) The risk associated with an investment
D) The amount of debt a firm holds

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

A) Setting interest rates
B) Changing tax rates
C) Controlling money supply
D) Regulating exchange rates

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41. What does “cost-push inflation” result from?

A) Increased consumer demand
B) Rising production costs
C) Expansionary monetary policy
D) Decreasing supply

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42. What is “full employment”?

A) Zero unemployment
B) The level of employment where all who are willing and able to work can find employment
C) Employment at maximum productivity
D) A situation where all workers have jobs in their desired field

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43. What does the term “Gini coefficient” measure?

A) The level of economic growth
B) The distribution of income inequality within a population
C) The rate of inflation
D) The total economic output

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44. Which of the following is a characteristic of oligopoly?

A) Many sellers and buyers
B) Homogeneous products
C) Interdependence among firms
D) Easy market entry

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45. What does “crowding out” refer to in economics?

A) Increased private investment due to government spending
B) Decreased private investment due to government borrowing
C) The elimination of a specific industry
D) Reduced government spending on public services

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46. What is the “Phillips Curve” used to illustrate?

A) The relationship between inflation and unemployment
B) The relationship between economic growth and consumer spending
C) The relationship between interest rates and investment
D) The relationship between GDP and national income

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47. What does “capital” refer to in economics?

A) Money used for investment
B) Natural resources used for production
C) Physical goods used in the production process
D) Intellectual property rights

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48. Which of the following describes a “trade deficit”?

A) A situation where exports exceed imports
B) A situation where imports exceed exports
C) A balanced trade scenario
D) A surplus of goods in the domestic market

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49. What is “aggregate supply”?

A) The total quantity of goods and services produced in an economy at a given price level
B) The quantity of goods and services demanded by consumers
C) The total income earned in an economy
D) The total money supply available for investment

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50. What does “stagflation” refer to?

A) Economic growth with low inflation
B) High inflation with high unemployment
C) Low inflation with high employment
D) High growth with low unemployment

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51. What is a “budget surplus”?

A) When government revenues exceed expenditures
B) When government expenditures exceed revenues
C) A balanced budget scenario
D) A situation of high public debt

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52. Which of the following is considered a variable cost?

A) Rent
B) Salaries
C) Raw materials
D) Insurance

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53. What does “import quota” refer to?

A) A tax on imported goods
B) A limit on the quantity of a good that can be imported
C) A subsidy for local producers
D) A tariff exemption for certain goods

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54. What is the term for the situation when a good’s quantity demanded increases as its price decreases?

A) Inelastic demand
B) Elastic demand
C) Negative demand
D) Law of supply

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55. Which economic system is characterized by collective or governmental ownership of resources?

A) Capitalism
B) Socialism
C) Mixed economy
D) Free market

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56. What does the “business cycle” refer to?

A) The systematic fluctuation of economic activity
B) The natural rate of unemployment
C) The period of economic growth
D) The total output of an economy

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57. What does “supply-side economics” advocate?

A) Increased taxes to boost government revenue
B) Reducing barriers to production and investment
C) Higher government spending to stimulate demand
D) Increased regulation of industries

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58. Which of the following is a characteristic of a command economy?

A) Market-driven pricing
B) Government control over resources and production
C) High levels of competition
D) Low levels of government intervention

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59. What is “market equilibrium”?

A) A situation where supply equals demand
B) A situation where demand exceeds supply
C) A situation where supply exceeds demand
D) A scenario with fluctuating prices

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60. Which of the following indicates a contraction in the economy?

A) Decreasing GDP
B) Increasing employment
C) Rising consumer confidence
D) Decreasing inflation

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61. What does “net exports” refer to?

A) The total value of exports
B) The total value of imports
C) Exports minus imports
D) Imports minus exports

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62. What is a characteristic of monopolistic competition?

A) A single seller dominates the market
B) Many firms sell similar but differentiated products
C) There are high barriers to entry
D) Firms have no price-setting power

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63. What does “real GDP” account for?

A) Changes in population
B) Changes in prices over time
C) The value of exports only
D) Government spending

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64. What is the “law of supply”?

A) As price increases, quantity supplied decreases
B) As price increases, quantity supplied increases
C) Supply is independent of price
D) Supply only changes with consumer demand

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65. What is “deflation”?

A) An increase in the general price level
B) A decrease in the general price level
C) Stable prices over time
D) Hyperinflation

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66. What is “human capital”?

A) Physical assets owned by a company
B) The skills and knowledge possessed by individuals
C) Financial resources available for investment
D) Natural resources used in production

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67. What is a “price floor”?

A) A maximum allowable price
B) A minimum allowable price set by the government
C) A price set by the market
D) A price determined by consumer demand

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68. What does “quantitative easing” involve?

A) Reducing interest rates to encourage borrowing
B) Increasing the money supply to stimulate the economy
C) Tightening monetary policy to control inflation
D) Reducing government spending

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69. What is “long-term economic growth”?

A) Short-term fluctuations in economic activity
B) Sustained upward trend in an economy’s output over time
C) The impact of seasonal employment
D) The rate of inflation

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70. What is the “labor force participation rate”?

A) The percentage of people employed in the economy
B) The percentage of working-age people who are actively seeking employment
C) The total number of unemployed individuals
D) The ratio of skilled workers to unskilled workers

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71. Which of the following is a component of the consumer price index (CPI)?

A) Interest rates
B) Unemployment rate
C) Prices of goods and services
D) Tax rates

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72. What does “economic efficiency” refer to?

A) The ability to produce more goods with less input
B) The optimal allocation of resources
C) The maximum profit for firms
D) The equal distribution of wealth

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73. What is a “black market”?

A) A legal market for goods and services
B) An illegal market for goods and services
C) A regulated market for essential goods
D) A market with no buyers

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74. What does “currency devaluation” refer to?

A) An increase in the value of a currency
B) A decrease in the value of a currency relative to others
C) The stabilization of currency exchange rates
D) A sudden increase in money supply

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75. What is the “law of diminishing returns”?

A) The total output increases indefinitely
B) Adding more of one factor of production results in smaller increases in output
C) All inputs have the same effect on production
D) The cost of production decreases with more output

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76. What does “supply shock” result in?

A) A sudden increase in demand
B) A sudden decrease in supply
C) A sudden increase in prices
D) A sudden change in consumer preferences

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77. Which of the following is an example of a “transfer payment”?

A) Salary paid to government employees
B) Social security benefits
C) Taxes collected by the government
D) Payments for goods and services

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78. What is the “natural rate of unemployment”?

A) The lowest level of unemployment achievable
B) The unemployment rate that exists when the economy is at full employment
C) The total unemployment in a recession
D) The unemployment rate during economic growth

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79. What is a “nudge” in behavioral economics?

A) A direct incentive to change behavior
B) A small adjustment in choice architecture that influences behavior
C) A large-scale economic intervention
D) A monetary policy tool

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80. What is the “consumer surplus”?

A) The difference between what consumers are willing to pay and what they actually pay
B) The total cost of production
C) The surplus of goods available for sale
D) The excess supply in the market

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81. What is the “producer surplus”?

A) The difference between what producers are willing to accept for a good and the actual price they receive
B) The total cost of production
C) The total revenue generated from sales
D) The surplus of labor in the market

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82. What is the primary goal of antitrust laws?

A) To promote international trade
B) To prevent monopolies and promote competition
C) To regulate labor unions
D) To manage consumer prices

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83. Which of the following is an example of a negative externality?

A) Education
B) Vaccination
C) Pollution
D) Public parks

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84. What does “economic growth” refer to?

A) A decrease in unemployment
B) An increase in the production of goods and services over time
C) A reduction in inflation
D) An increase in consumer confidence

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85. Which of the following is an example of a public good?

A) A sandwich
B) National defense
C) A smartphone
D) A car

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86. What does the term “inelastic demand” refer to?

A) Demand that is highly responsive to price changes
B) Demand that is not very responsive to price changes
C) Demand that is perfectly elastic
D) Demand that increases with price

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87. What is “aggregate supply”?

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88. Which of the following best describes a “monopoly”?

A) A market structure with many firms
B) A market with a single seller and no close substitutes
C) A market with differentiated products
D) A market that allows free entry and exit

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89. What does the term “comparative advantage” refer to?

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90. What does “economic efficiency” refer to?

A) The ability to produce more goods with less input
B) The optimal allocation of resources
C) The maximum profit for firms
D) The equal distribution of wealth

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91. What does “inflation” refer to?

A) A decrease in the general price level
B) An increase in the general price level
C) A decrease in money supply
D) An increase in unemployment

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92. What is “fiscal policy”?

A) Government policies related to taxation and spending
B) Policies governing the money supply
C) Policies affecting international trade
D) Policies influencing consumer behavior

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93. Which of the following describes a “trade surplus”?

A) When imports exceed exports
B) When exports exceed imports
C) A balanced trade scenario
D) A scenario of high public debt

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94. What is the term for a prolonged period of economic recession?

A) Economic boom
B) Economic depression
C) Economic stagnation
D) Economic expansion

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95. What does “liquidity” refer to in finance?

A) The profitability of an asset
B) The ability to quickly convert an asset into cash
C) The risk associated with an investment
D) The amount of debt a firm holds

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96. What is “stagflation”?

A) Economic growth with low inflation
B) High inflation with high unemployment
C) Low inflation with high employment
D) High growth with low unemployment

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97. What does “quantitative easing” involve?

A) Reducing interest rates to encourage borrowing
B) Increasing the money supply to stimulate the economy
C) Tightening monetary policy to control inflation
D) Reducing government spending

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98. What is the primary measure of economic performance?

A) Gross National Product (GNP)
B) Gross Domestic Product (GDP)
C) Consumer Price Index (CPI)
D) Unemployment rate

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99. What does the “business cycle” refer to?

A) The systematic fluctuation of economic activity
B) The natural rate of unemployment
C) The period of economic growth
D) The total output of an economy

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100. What is the primary goal of a firm in a capitalist economy?

A) To provide jobs
B) To maximize profit
C) To support the community
D) To improve the environment

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