Economics for Sixth Form College Year 12: Master the Fundamentals

Question 1

Which of the following factors **does not** affect the demand for a product?

Accepted Answer

Number of suppliers in the market

Answer

Consumer tastes and preferences

Answer

Consumer income levels

Answer

Government policies and regulations

Question 2

Which of the following statements correctly describes the difference between fiscal and monetary policy?

Accepted Answer

Fiscal policy involves government spending and taxation, while monetary policy involves interest rates and money supply.

Answer

Fiscal policy is used to control inflation, while monetary policy is used to control unemployment.

Answer

Monetary policy is more effective than fiscal policy in managing economic growth.

Answer

Fiscal and monetary policy are only used in times of economic recession.

Question 3

How does fiscal policy impact the economy? Describe its goals, instruments, and potential effects on economic growth, unemployment, and inflation.

Accepted Answer

Fiscal policy involves government actions to manage spending and taxation, influencing the **macroeconomy**.

Answer

Fiscal policy targets the **microeconomy**, focusing on specific markets and businesses.

Answer

Fiscal policy has no direct impact on **economic growth**, unemployment, or inflation.

Answer

Monetary policy is the most effective government policy for managing economic growth.

Question 4

Describe the Phillips curve and explain its significance for economic policymakers.

Accepted Answer

The Phillips curve illustrates an inverse relationship between inflation and unemployment, with high inflation typically corresponding to low unemployment and vice versa.

Answer

The Phillips curve shows a direct relationship between inflation and unemployment, with both increasing simultaneously.

Answer

The Phillips curve indicates no relationship between inflation and unemployment.

Answer

The Phillips curve demonstrates a perfect correlation between inflation and unemployment.

Question 5

When making economic decisions, what ethical factors should be considered?

Accepted Answer

Ethical considerations should be balanced with economic efficiency, social fairness, and environmental sustainability.

Answer

Ethical considerations should only apply to personal decisions, as businesses are solely profit-driven.

Answer

Ethical considerations should prioritize profit maximization, as that's the primary goal of economic activity.

Question 6

Define externalities and explain how they can affect the efficiency of markets.

Accepted Answer

Externalities are costs or benefits that affect a third party due to a transaction between two other parties.

Answer

Externalities only arise when the government interferes in the market.

Answer

Positive externalities always result in market inefficiency, while negative externalities always enhance market efficiency.

Answer

Externalities are not taken into account when determining market equilibrium.

Question 7

Economic development involves improving a country or region's economic well-being. Which indicators are used to measure economic development?

Accepted Answer

(A) GDP, HDI, and Literacy rates

Answer

(B) Unemployment rate, Inflation rate, and Exchange rate

Answer

(C) Birth rate, Death rate, and Population growth

Answer

(D) Energy consumption, CO2 emissions, and Air quality

Question 8

How does behavioral economics differ from traditional economic models?

Accepted Answer

Traditional models assume perfect rationality, while behavioral economics considers cognitive biases and psychological factors.

Answer

Behavioral economics focuses on microeconomics, while traditional models focus on macroeconomics.

Answer

Behavioral economics uses more complex mathematical models than traditional economic models.

Answer

Behavioral economics is a recent development, while traditional economic models have been around for centuries.

Question 9

What is the likely outcome when demand rises and supply remains unchanged?

Accepted Answer

Equilibrium price increases.

Answer

Equilibrium price decreases.

Answer

Equilibrium price remains stable.

Answer

Additional information is needed to determine the outcome.

Question 10

Which government policy is primarily aimed at controlling inflation?

Accepted Answer

Monetary policy

Answer

Fiscal policy

Answer

Incomes policy

Answer

Exchange rate policy

Question 11

What is the fundamental objective of Keynesian economics?

Accepted Answer

Reducing unemployment

Answer

Controlling inflation

Answer

Promoting economic growth

Answer

Reducing government expenditure

Question 12

Identify the primary functions of the Bank of England.

Accepted Answer

Combination of the above

Answer

Issuing banknotes

Answer

Managing monetary policy

Answer

Regulating the banking industry

Question 13

Which of the following is NOT a common role of government in a mixed economy?

Accepted Answer

Generating profits

Answer

Providing public goods and services

Answer

Regulating markets to protect consumers

Answer

Redistributing income

Question 14

What is the key difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics examines individual markets and firms, while macroeconomics focuses on the overall economy.

Answer

Microeconomics emphasizes short-term economic behavior, while macroeconomics focuses on long-term economic trends.

Answer

Microeconomics utilizes supply and demand analysis, while macroeconomics employs macroeconomic models.

Answer

There is no distinction between microeconomics and macroeconomics.

Question 15

Regarding the relationship between economic growth and unemployment, which of the following is generally accurate?

Accepted Answer

The relationship depends on various factors.

Answer

Economic growth always leads to a decrease in unemployment.

Answer

Economic growth always leads to an increase in unemployment.

Answer

There is no clear relationship between economic growth and unemployment.

Question 16

Which of the following potential impacts of international trade on an economy is NOT universally positive?

Accepted Answer

Increased income inequality

Answer

Increased economic growth

Answer

Reduced consumer prices

Answer

Job creation

Question 17

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

Accepted Answer

Promote economic growth and maintain price stability

Answer

Reduce income inequality and increase social welfare

Answer

Control the money supply and manage exchange rates

Answer

Maximize government revenue and minimize public spending

Question 18

In a perfectly competitive market, firms:

Accepted Answer

Are price takers and have no influence on market price

Answer

Are price makers and can set their own prices

Answer

Operate in a market with a small number of large sellers

Answer

Have complete control over the quantity of goods supplied

Question 19

Elasticity measures the:

Accepted Answer

Responsiveness of one economic variable to changes in another

Answer

Total change in quantity demanded when price changes

Answer

Relationship between the price of a good and its supply

Answer

Sensitivity of consumer demand to changes in income

Question 20

A potential benefit of government subsidies is:

Accepted Answer

Increased production of goods and services

Answer

Lower prices for consumers

Answer

Reduced government expenditure

Answer

Increased tax revenue

Question 21

A decrease in aggregate demand is likely to result in:

Accepted Answer

Lower prices and lower output

Answer

Higher prices and higher output

Answer

Lower prices and higher output

Answer

Higher prices and lower output

Question 22

A characteristic of a mixed economic system is:

Accepted Answer

Private ownership of resources and government regulation

Answer

Government control of all economic activity

Answer

Complete reliance on market forces without government intervention

Answer

Equal distribution of income and wealth

Question 23

The marginal cost of production refers to the:

Accepted Answer

Change in total cost resulting from producing one additional unit

Answer

Fixed cost of production divided by the number of units produced

Answer

Total cost of producing all units divided by the quantity produced

Answer

Average cost of production minus the variable cost

Question 24

A negative externality of a market transaction is:

Accepted Answer

An external cost or benefit that is not reflected in the market price

Answer

A government regulation that restricts economic activity

Answer

A technological innovation that benefits society

Answer

A positive externality that increases social welfare

Question 25

According to Keynesian theory, an increase in government spending will lead to:

Accepted Answer

A greater than proportional increase in aggregate demand

Answer

A less than proportional decrease in aggregate demand

Answer

No change in aggregate demand

Answer

An equal decrease in private investment

Question 26

Which of the following is a defining feature of a free market economy?

Accepted Answer

Absence of government intervention in resource allocation

Answer

Existence of a centralized planning body controlling prices and output

Answer

Heavy reliance on government subsidies and bailouts

Answer

Dominance of public ownership of industries

Question 27

According to the law of demand, as the price of a good increases, consumer demand for that good:

Accepted Answer

Typically decreases

Answer

Typically increases

Answer

Remains unchanged

Answer

Becomes unpredictable

Question 28

Which of the following is NOT a primary role of the government in a mixed economy like the United Kingdom?

Accepted Answer

Controlling the entire banking system

Answer

Providing essential public services

Answer

Enacting and enforcing laws

Answer

Regulating industries to protect consumers and businesses

Question 29

Gross Domestic Product (GDP) is a measure of:

Accepted Answer

The total value of goods and services produced within a country's borders in a specific period

Answer

The total amount of money in circulation within a country

Answer

The average price level of goods and services in a country

Answer

The number of people employed in a country

Question 30

Which of the following is an example of a fiscal policy tool used by the government to influence the economy?

Accepted Answer

Adjusting tax rates

Answer

Changing interest rates

Answer

Increasing the money supply

Answer

Imposing import quotas

Question 31

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Interest rates and inflation

Answer

Economic growth and inflation

Answer

Unemployment and economic growth

Question 32

The Laffer curve demonstrates the relationship between:

Accepted Answer

Tax rates and tax revenue

Answer

Inflation and economic growth

Answer

Interest rates and unemployment

Answer

Government spending and inflation

Question 33

In economics, the term 'elasticity' refers to:

Accepted Answer

The degree to which a variable responds to changes in another variable

Answer

An economy's ability to bounce back after price fluctuations

Answer

The slope of the supply curve

Answer

The relationship between income and spending

Question 34

In a free market system, the equilibrium price is determined by:

Accepted Answer

The point of intersection between the supply and demand curves

Answer

Government intervention

Answer

Monetary policy

Answer

Fiscal policy

Question 35

The principle of 'comparative advantage' in international trade implies that:

Accepted Answer

A country should focus on producing goods it can produce efficiently relative to other nations

Answer

A country should only trade with neighboring countries

Answer

Trade equally benefits all participating countries

Answer

Trade solely benefits the importing nation

Question 36

'GDP per capita' is defined as:

Accepted Answer

The total value of goods and services produced in a country divided by its population

Answer

The income earned by each individual in a country

Answer

The government's budget shortfall

Answer

The rate of inflation

Question 37

Which of the following is a recognized advantage of globalization?

Accepted Answer

Increased economic efficiency

Answer

Reduced cultural diversity

Answer

Environmental degradation

Answer

Social unrest

Question 38

The term 'marginal utility' refers to:

Accepted Answer

The additional satisfaction gained from consuming one additional unit of a good or service

Answer

The total satisfaction gained from consuming a good or service

Answer

The price of a good or service

Answer

The elasticity of demand for a good or service

Question 39

Which of the following is NOT a determinant of demand in a market economy?

Accepted Answer

Number of firms in the industry

Answer

Consumer tastes and preferences

Answer

Income levels

Answer

Price of a substitute good

Question 40

Demand is best defined as:

Accepted Answer

The amount of a good or service that consumers are willing and able to purchase at a given price.

Answer

The amount of a good or service that producers are willing and able to sell at a given price.

Answer

The difference between the quantity demanded and the quantity supplied.

Answer

The highest price that consumers are willing to pay for a good or service.

Question 41

Which of the following is NOT a determinant of supply?

Accepted Answer

Weather conditions

Answer

Price of the good or service

Answer

Cost of production

Answer

Technology

Question 42

Market equilibrium occurs at the point where:

Accepted Answer

Quantity demanded equals quantity supplied

Answer

Price is at its maximum

Answer

Price is at its minimum

Answer

There is a surplus of the good or service

Question 43

Fiscal policy is primarily used by governments to:

Accepted Answer

Influence the economy through taxation and spending

Answer

Control the money supply

Answer

Set interest rates

Answer

Control inflation

Question 44

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Inflation and economic growth

Answer

Unemployment and economic growth

Answer

Interest rates and inflation

Question 45

Economic growth is commonly measured by:

Accepted Answer

The rate of increase in GDP

Answer

The rate of increase in inflation

Answer

The rate of decrease in unemployment

Answer

The rate of increase in interest rates

Question 46

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Differentiated products

Answer

Many buyers and sellers

Answer

Free entry and exit

Answer

Price takers

Question 47

Define externalities in economics.

Accepted Answer

Costs or benefits to third parties not reflected in market prices.

Answer

Actions that only affect the individual or business taking them.

Answer

Situations where there are no costs or benefits to anyone from the actions of others.

Question 48

How does behavioral economics contribute to our understanding of consumer behavior and market outcomes?

Accepted Answer

Behavioral economics helps explain market failures and anomalies that traditional economic models struggle to account for.

Answer

Behavioral economics provides a comprehensive framework that replaces traditional economic models.

Answer

Behavioral economics focuses solely on irrational consumer behavior.

Answer

Behavioral economics principles apply exclusively to consumer behavior and are irrelevant to firms' decision-making.

Question 49

How does consumer demand impact technological innovation?

Accepted Answer

Consumer demand drives businesses to invest in new products to meet those demands.

Answer

Businesses innovate mainly to increase profits.

Answer

Government regulations require businesses to innovate.

Answer

Technological innovation happens randomly.

Question 50

When using economic models to guide policymaking, what ethical concerns should be considered?

Accepted Answer

Economic models may simplify complex issues, potentially ignoring ethical implications like social fairness.

Answer

Economic models offer objective guidance for policy decisions, free from personal biases.

Answer

Ethical considerations should be left to elected officials, who are responsible for making value judgments.

Answer

Economic models are irrelevant to ethical decision-making, which should be based solely on moral principles.

Question 51

How do ethical considerations surrounding intellectual property rights impact innovation and creativity?

Accepted Answer

They need careful balance to protect creators and encourage innovation.

Answer

They restrict innovation by limiting access to ideas.

Answer

They stifle creativity by giving creators absolute control.

Question 52

Which theory of income distribution emphasizes the role of human capital in determining individual earnings?

Accepted Answer

Neoclassical theory

Answer

Marxist theory

Answer

Institutionalist theory

Answer

Radical theory

Question 53

The elasticity of demand quantifies the responsiveness of quantity demanded to changes in:

Accepted Answer

Price

Answer

Consumer tastes and preferences

Answer

Consumer income

Answer

Advertising expenditure

Question 54

The concept of 'externalities' refers to:

Accepted Answer

Costs or benefits that are not reflected in market prices

Answer

Government regulations

Answer

Hidden costs

Question 55

The GDP deflator is a measure of:

Accepted Answer

Inflation

Answer

Economic growth

Answer

Income inequality

Answer

Unemployment

Question 56

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

Accepted Answer

Individuals with higher incomes pay a higher proportion of their income in taxes

Answer

Taxes are levied at a uniform rate for all income levels

Answer

Lower earners pay a higher percentage of their income in taxes

Question 57

The Lorenz curve is a graphical representation of:

Accepted Answer

Income inequality

Answer

Unemployment

Answer

Economic growth

Answer

Inflation

Question 58

Which of the following is a distinctive feature of a mixed economy?

Accepted Answer

Coexistence of both public and private ownership of industries

Answer

Unrestricted free market system

Answer

Government control of all industries

Answer

Central planning of all economic activities

Question 59

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Price discrimination

Answer

Price transparency

Answer

Homogeneous products

Answer

Many buyers and sellers

Question 60

What is the term used to describe the graphical representation of the relationship between the price of a good and the quantity demanded?

Accepted Answer

Demand curve

Answer

Elasticity of demand

Answer

Supply curve

Question 61

What is the name of the independent central bank responsible for setting interest rates and managing the money supply in the United Kingdom?

Accepted Answer

Bank of England

Answer

Financial Conduct Authority

Answer

International Monetary Fund

Answer

Treasury

Question 62

Which of the following is a potential benefit of government intervention in a competitive market economy?

Accepted Answer

Correcting market failures

Answer

Increasing income inequality

Answer

Suppressing innovation

Answer

Reducing consumer choice

Question 63

What is the term used to describe the total monetary value of all final goods and services produced within the borders of a country in a given period of time?

Accepted Answer

Gross domestic product (GDP)

Answer

Disposable income

Answer

National income

Answer

Gross national income (GNI)

Question 64

Which of the following is a type of unemployment caused by advancements in technology that replace human labor?

Accepted Answer

Technological unemployment

Answer

Frictional unemployment

Answer

Structural unemployment

Answer

Cyclical unemployment