National Income and Economic Growth: Online Learning Quizzes

Question 1

How does government borrowing affect economic growth? Consider both the immediate impact on spending and the potential long-term effects on the government's ability to pay its debts.

Accepted Answer

Government borrowing can boost economic growth in the short term, but it may make it harder for the government to pay its debts in the long term.

Answer

Government borrowing always leads to economic growth in the short term and has no long-term consequences.

Answer

Government borrowing has no significant impact on economic growth or the government's ability to pay its debts.

Question 2

How does international trade contribute to economic growth?

Accepted Answer

International trade can stimulate economic growth by fostering specialization, competition, and access to new markets and resources.

Answer

International trade always boosts economic growth, regardless of the goods and services traded.

Answer

Exports benefit economic growth, while imports hinder it.

Answer

Free trade policies always lead to greater economic growth than protectionist policies.

Question 3

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Depreciation of capital equipment

Answer

Consumption spending by households

Answer

Government spending on public services

Answer

Net exports (exports minus imports)

Question 4

The primary objective of monetary policy in the United Kingdom is to:

Accepted Answer

Control inflation

Answer

Promote economic growth

Answer

Reduce unemployment

Answer

Increase the value of the British pound

Question 5

The term 'potential GDP' refers to:

Accepted Answer

The maximum output an economy can produce when all resources are fully employed

Answer

The actual output of an economy in a given year

Answer

The level of GDP that can be achieved with zero inflation

Answer

The GDP of a country compared to other countries

Question 6

The multiplier effect refers to the:

Accepted Answer

Increase in economic activity resulting from an initial change in spending

Answer

Decrease in economic activity resulting from an initial change in spending

Answer

Government's use of fiscal policy to influence the economy

Answer

Central bank's use of monetary policy to influence the economy

Question 7

Which of the following is NOT a potential constraint on economic growth in the United Kingdom?

Accepted Answer

Abundant natural resources

Answer

Lack of skilled labour

Answer

Poor infrastructure

Answer

Political instability

Question 8

The unemployment rate is calculated as the number of unemployed people:

Accepted Answer

Relative to the labour force

Answer

Relative to the total population

Answer

Relative to the number of employed people

Answer

Relative to the number of people receiving benefits

Question 9

Which of the following is a demand-side factor that can influence economic growth?

Accepted Answer

Government spending

Answer

Interest rates

Answer

Technological innovation

Answer

Changes in the weather

Question 10

The multiplier effect refers to the:

Accepted Answer

Increase in GDP caused by an initial increase in spending

Answer

Decrease in GDP caused by a decrease in taxes

Answer

Increase in inflation caused by an increase in interest rates

Answer

Decrease in unemployment caused by a decrease in government spending

Question 11

The Phillips curve shows the trade-off between:

Accepted Answer

Inflation and unemployment

Answer

Economic growth and inflation

Answer

Interest rates and exchange rates

Answer

Government spending and taxation

Question 12

The balance of payments is:

Accepted Answer

A record of a country's transactions with the rest of the world

Answer

A measure of a country's GDP

Answer

A measure of a country's inflation rate

Answer

A measure of a country's unemployment rate

Question 13

The term 'crowding out' refers to:

Accepted Answer

The displacement of private investment by government borrowing

Answer

The increase in private investment caused by government borrowing

Answer

The decrease in government borrowing caused by private investment

Answer

The increase in government spending caused by private borrowing

Question 14

Which of the following measures the total value of all goods and services produced domestically in an economy?

Accepted Answer

Gross Domestic Product (GDP)

Answer

Gross National Product (GNP)

Answer

National Income

Answer

Disposable Income

Question 15

What is the primary focus of fiscal policy?

Accepted Answer

Controlling government spending and taxation

Answer

Adjusting interest rates

Answer

Stabilizing exchange rates

Answer

Regulating the supply of money

Question 16

What is the difference between a recession and a depression?

Accepted Answer

A recession is a temporary decline in economic activity, while a depression is a more severe and prolonged decline.

Answer

A depression is a temporary decline in economic activity, while a recession is a more severe and prolonged decline.

Answer

There is no difference between a recession and a depression.

Answer

A recession is characterized by high unemployment, while a depression is not.

Question 17

What is the significance of the Phillips Curve?

Accepted Answer

It illustrates the trade-off between unemployment and inflation.

Answer

It shows the relationship between economic growth and interest rates.

Answer

It predicts the future direction of the stock market.

Answer

It explains why inflation is always higher than economic growth.

Question 18

Gross Domestic Product (GDP) measures the:

Accepted Answer

Total value of goods and services produced within a country's borders in a given period

Answer

Total income earned by individuals within a country in a given period

Answer

Total amount of money spent by consumers within a country in a given period

Answer

Total amount of wealth accumulated by a country over time

Question 19

A common tool used in fiscal policy is:

Accepted Answer

Government spending

Answer

Interest rate adjustments

Answer

Open market operations

Answer

Quantitative easing

Question 20

For economic growth to be sustainable, it should:

Accepted Answer

Meet all of the above criteria

Answer

Protect the environment

Answer

Reduce income inequality

Answer

Control inflation

Question 21

The Phillips Curve illustrates the relationship between:

Accepted Answer

Unemployment and inflation

Answer

Inflation and economic growth

Answer

Economic growth and unemployment

Answer

Inflation and government spending

Question 22

The multiplier effect describes:

Accepted Answer

How an increase in investment leads to further income gains

Answer

How a decrease in government spending leads to further income losses

Answer

How an increase in interest rates reduces inflation

Answer

How a decrease in inflation stimulates economic growth

Question 23

According to the Laffer Curve, there is an:

Accepted Answer

Optimal tax rate that maximises government revenue

Answer

Assumption that tax rates should be kept as low as possible

Answer

Need to increase tax rates to reduce inequality

Answer

Requirement for reduced government spending to stimulate growth

Question 24

Okun's Law suggests that:

Accepted Answer

A 1% increase in unemployment leads to a 2% decline in output

Answer

Unemployment and inflation have a negative relationship

Answer

Economic growth automatically reduces unemployment

Answer

Government spending can stimulate growth without causing inflation

Question 25

The Phillips curve illustrates the relationship between:

Accepted Answer

Unemployment and inflation

Answer

Inflation and interest rates

Answer

GDP growth and inflation

Answer

Government debt and inflation

Question 26

The multiplier effect describes the:

Accepted Answer

Increase in GDP resulting from an initial injection of spending

Answer

Decrease in GDP resulting from an initial reduction in spending

Answer

Impact of government spending on inflation

Answer

Effect of monetary policy on economic growth

Question 27

A characteristic of long-run economic growth is that it is:

Accepted Answer

Driven primarily by technological progress

Answer

Concentrated in specific sectors of the economy

Answer

Accompanied by a constant increase in unemployment

Answer

Chiefly caused by government spending

Question 28

According to the Solow model of economic growth:

Accepted Answer

Only technological progress can drive long-run economic growth

Answer

Government spending can boost short-run, but not long-run economic growth

Answer

Economic growth is a 'zero-sum game' where some countries benefit at the expense of others

Answer

The natural rate of unemployment is determined by structural factors

Question 29

The formula for calculating real GDP is:

Accepted Answer

Nominal GDP divided by the GDP deflator

Answer

Nominal GDP multiplied by the GDP deflator

Answer

Nominal GDP minus the GDP deflator

Answer

Real GDP minus Nominal GDP

Question 30

Fiscal policy primarily aims to influence economic activity through:

Accepted Answer

Changes in government spending and taxation

Answer

Adjustments to interest rates

Answer

Manipulating exchange rates

Answer

Expanding or contracting the money supply

Question 31

Which monetary policy tool is used to reduce economic activity?

Accepted Answer

Raising interest rates

Answer

Quantitative easing

Answer

Conducting open market operations

Answer

Increasing reserve requirements

Question 32

The multiplier effect refers to:

Accepted Answer

The amplified impact of an initial change in spending on overall economic activity

Answer

The reduction in aggregate demand caused by government intervention

Answer

The increase in inflation resulting from rapid economic growth

Answer

The decline in economic growth due to high interest rates

Question 33

The Phillips curve depicts the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Inflation and economic growth

Answer

Unemployment and economic growth

Answer

Inflation and interest rates

Question 34

Which of the following is considered a structural cause of unemployment?

Accepted Answer

Technological advancements

Answer

Economic recession

Answer

Seasonal factors

Answer

Government policies

Question 35

The upward slope of the aggregate supply curve is because:

Accepted Answer

Firms are encouraged to increase production in response to higher prices.

Answer

Higher prices lead to a greater availability of resources.

Answer

Increased prices reduce labour costs.

Answer

Higher prices discourage consumption.

Question 36

Which of the following is not a factor that influences economic growth?

Accepted Answer

Government regulations

Answer

Advancements in technology

Answer

Skilled workforce

Answer

Abundance of natural resources

Question 37

What is the primary purpose of fiscal policy?

Accepted Answer

To steer economic activity by adjusting government expenditure and taxes

Answer

To regulate the money supply and interest rates

Answer

To oversee the banking system

Answer

To provide social welfare programs

Question 38

Which curve depicts the relationship between inflation and unemployment?

Accepted Answer

Phillips Curve

Answer

IS-LM Curve

Answer

AD-AS Curve

Answer

Laffer Curve

Question 39

Explain the concept of the multiplier.

Accepted Answer

The idea that a change in government spending leads to a larger change in GDP

Answer

The idea that a change in interest rates leads to a larger change in inflation

Answer

The idea that a change in the money supply leads to a larger change in economic growth

Answer

The idea that a change in unemployment leads to a larger change in real GDP

Question 40

The government can increase aggregate demand through:

Accepted Answer

Reducing taxes, which increases disposable income and spending

Answer

Increasing interest rates, which encourages saving and reduces borrowing

Answer

Selling government bonds, which absorbs money from the economy

Answer

Raising the minimum wage, which increases consumer spending

Question 41

Which of the following is NOT a role of the Bank of England?

Accepted Answer

Providing financial advice to the government

Answer

Setting interest rates to influence the cost of borrowing and spending

Answer

Controlling inflation to maintain price stability

Answer

Issuing currency notes and coins

Question 42

The concept of 'economic multiplier' refers to:

Accepted Answer

The number of times an initial increase in spending multiplies throughout the economy, increasing GDP

Answer

The amount of GDP lost during a recession

Answer

The ratio of government spending to GDP

Answer

The level of inflation

Question 43

The concept of 'potential GDP' refers to:

Accepted Answer

The maximum sustainable level of output an economy can produce in the long run, given its resources and technology

Answer

The output an economy produces in the short run

Answer

The output an economy produces at full employment

Answer

The output an economy produces when there is no inflation

Question 44

Which of the following is not a component of the expenditure approach to calculating national income?

Accepted Answer

Gross exports

Answer

Consumption expenditure

Answer

Investment expenditure

Answer

Government expenditure

Question 45

The difference between an economy's actual output and its potential output is known as the:

Accepted Answer

Output gap

Answer

Natural rate of unemployment

Answer

Okun's law

Answer

Productivity gap

Question 46

Which of the following is not a factor that can contribute to economic growth?

Accepted Answer

Increased unemployment

Answer

Technological improvements

Answer

Increased capital stock

Answer

Higher population growth

Question 47

Expansionary fiscal policy entails:

Accepted Answer

Increasing government spending or cutting taxes

Answer

Reducing government spending or raising taxes

Answer

Raising interest rates

Answer

Reducing the money supply

Question 48

The primary function of the central bank in monetary policy is to:

Accepted Answer

Control the money supply and interest rates

Answer

Establish the exchange rate

Answer

Manage the government's finances

Answer

Regulate the banking industry

Question 49

The Phillips curve illustrates the relationship between:

Accepted Answer

Unemployment and inflation

Answer

GDP growth and inflation

Answer

Interest rates and inflation

Answer

Exchange rates and inflation

Question 50

In fiscal policy, what is meant by 'crowding out'?

Accepted Answer

Government borrowing can reduce private investment

Answer

Government spending influences the interest rate

Answer

Fiscal and monetary policy are closely linked

Answer

Government subsidies boost economic growth

Question 51

Which of these is NOT included in Gross Domestic Product (GDP)?

Accepted Answer

Imports

Answer

Consumer spending

Answer

Government expenditure

Answer

Net factor income from abroad

Question 52

What formula is used to calculate real GDP?

Accepted Answer

Nominal GDP divided by GDP deflator

Answer

Nominal GDP plus GDP deflator

Answer

GDP deflator divided by Nominal GDP

Answer

Nominal GDP minus GDP deflator

Question 53

Differentiate between short-run and long-run economic growth.

Accepted Answer

Short-run growth is influenced by demand, while long-run growth is determined by supply factors

Answer

Short-run growth exceeds long-run growth

Answer

Long-run growth is influenced by demand, while short-run growth is determined by supply factors

Answer

There is no distinction between short-run and long-run economic growth

Question 54

Describe the relationship between inflation and economic growth.

Accepted Answer

Inflation can stimulate growth in the short term but hinder it in the long term

Answer

Inflation always harms economic growth

Answer

Inflation always stimulates economic growth

Answer

There is no connection between inflation and economic growth

Question 55

The multiplier effect illustrates the process by which:

Accepted Answer

Increased government spending leads to a disproportionately larger rise in national income

Answer

Export increases result in import decreases

Answer

Tax reductions lead to increased household savings

Question 56

Which of these is a fiscal policy tool employed by governments?

Accepted Answer

Adjustments to government spending and taxes

Answer

Open market operations

Answer

Quantitative easing

Question 57

Economic growth is defined as:

Accepted Answer

A sustained increase in real GDP over time

Answer

A decline in unemployment

Answer

A rise in the general price level

Question 58

Expansionary monetary policy is generally used to:

Accepted Answer

Stimulate economic growth

Answer

Curb inflation

Answer

Stabilize exchange rates

Question 59

The Phillips Curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Economic growth and inflation

Answer

Interest rates and investment

Question 60

The idea of potential GDP refers to:

Accepted Answer

The maximum output an economy can sustainably produce in the long term

Answer

The current output level in an economy

Answer

The maximum output an economy can produce in the immediate term

Question 61

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Output and unemployment

Answer

Inflation and interest rates

Answer

Output and investment

Question 62

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

Accepted Answer

Altering government spending

Answer

Raising interest rates

Answer

Devaluing the currency

Answer

Increasing the minimum wage

Question 63

The multiplier effect describes the:

Accepted Answer

Increase in national income resulting from an initial increase in spending

Answer

Decrease in national income resulting from a decrease in government spending

Answer

Increase in inflation resulting from an increase in interest rates

Answer

Decrease in unemployment resulting from an expansionary fiscal policy

Question 64

The Solow model is a theoretical framework used to explain:

Accepted Answer

Long-term economic growth

Answer

Short-term fluctuations in output

Answer

The distribution of income

Answer

The impact of government policies