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