Economic policy - Test
  • 1. Economic policy refers to the actions that a government takes in the economic sphere. It involves decisions on how resources are allocated, how taxes are levied, how regulations are implemented, and how monetary policy is conducted. Economic policy aims to promote economic growth, stability, and prosperity for a country's citizens. It encompasses a wide range of measures, including fiscal policy, monetary policy, trade policy, and regulatory policy. Effective economic policy requires a balance between market forces and government intervention to ensure sustainable economic development and social welfare.

    What is the role of supply-side economics in economic policy?
A) Advocates for high levels of government spending
B) Aims to redistribute wealth among citizens
C) Emphasizes government interventions in market activities
D) Focuses on boosting long-term economic growth by increasing the supply of goods and services
  • 2. Which of the following is a tool of trade policy?
A) Social security payments
B) Income taxes
C) Unemployment benefits
D) Tariffs
  • 3. What is the impact of a strong currency on exports?
A) It makes exports more expensive and can reduce competitiveness
B) It leads to increased demand for exports
C) It has no effect on export levels
D) It decreases the cost of exports and boosts competitiveness
  • 4. What is the purpose of an import quota in trade policy?
A) To encourage domestic production of imports
B) To promote consumer choices
C) To limit the quantity of a specific imported good
D) To stabilize currency exchange rates
  • 5. What is the purpose of a free trade agreement?
A) To eliminate tariffs and reduce trade barriers among participant countries
B) To control the exchange rates between participating countries
C) To impose trade restrictions for national security reasons
D) To regulate the prices of imported goods
  • 6. What is the purpose of competition policy?
A) To ensure fair competition and prevent anti-competitive practices in markets
B) To increase government intervention in market activities
C) To control international trade agreements
D) To funnel government subsidies to favored industries
  • 7. What is the primary function of the World Trade Organization (WTO) in trade policy?
A) To enforce domestic tax policies
B) To oversee environmental conservation efforts
C) To regulate international trade and resolve trade disputes
D) To promote regional economic integration
  • 8. Which of the following is a tool of fiscal policy?
A) Government spending.
B) Interest rate adjustments.
C) Income tax collection.
D) Foreign exchange market interventions.
  • 9. Which of the following is a tool of competition policy?
A) Trade embargoes
B) Import tariffs
C) Antitrust laws
D) Tax incentives for corporations
  • 10. What is the purpose of a wealth tax as part of tax policy?
A) Tax deductions for charitable donations
B) Reducing income tax on high earners
C) Taxation on assets to reduce wealth inequality
D) Tax incentives for foreign investors
  • 11. What is the relationship between inflation and unemployment in the Phillips Curve?
A) An inverse relationship – lower unemployment is associated with higher inflation.
B) There is no relationship between inflation and unemployment.
C) A direct relationship – higher unemployment is associated with higher inflation.
D) Both move in the same direction – higher unemployment leads to lower inflation.
  • 12. What does the term 'quantitative easing' represent in monetary policy?
A) Raising interest rates to control inflation
B) Restricting bank lending activities
C) Central bank's purchase of financial assets to increase money supply
D) Lowering currency exchange rates
  • 13. Which of the following is a tool of monetary policy?
A) Infrastructure spending.
B) Open market operations.
C) Social security benefits.
D) Minimum wage legislation.
  • 14. What does the term 'protectionism' refer to in trade policy?
A) Promoting free trade agreements
B) The use of trade barriers to protect domestic industries from foreign competition
C) Supporting international trade organizations
D) Encouraging foreign direct investment
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