Q. In a competitive market, what happens to the price of a good when demand increases?
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A.
Price decreases
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B.
Price remains the same
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C.
Price increases
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D.
Price fluctuates randomly
Solution
When demand increases in a competitive market, the price of the good typically increases due to higher competition for the limited supply.
Correct Answer:
C
— Price increases
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Q. What does the term 'liquidity' refer to in finance?
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A.
The ability to pay debts
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B.
The ease of converting assets to cash
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C.
The amount of cash on hand
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D.
The total value of investments
Solution
Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price.
Correct Answer:
B
— The ease of converting assets to cash
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Q. What is a characteristic of a monopoly?
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A.
Many sellers
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B.
One seller
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C.
Perfect information
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D.
Free entry and exit
Solution
A monopoly is characterized by having one seller that controls the entire market for a good or service.
Correct Answer:
B
— One seller
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Q. What is the effect of a price ceiling on a market?
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A.
It creates a surplus
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B.
It creates a shortage
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C.
It stabilizes prices
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D.
It has no effect
Solution
A price ceiling, which is a maximum price set by the government, can lead to a shortage as demand exceeds supply at that price.
Correct Answer:
B
— It creates a shortage
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Q. What is the primary function of money in an economy?
-
A.
To serve as a medium of exchange
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B.
To act as a store of value
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C.
To provide a unit of account
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D.
All of the above
Solution
Money serves multiple functions including being a medium of exchange, a store of value, and a unit of account.
Correct Answer:
D
— All of the above
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Q. What is the purpose of a budget?
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A.
To track income and expenses
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B.
To increase spending
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C.
To avoid saving
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D.
To eliminate all debts
Solution
The purpose of a budget is to track income and expenses to manage financial resources effectively.
Correct Answer:
A
— To track income and expenses
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Q. Which of the following is a characteristic of a monopoly?
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A.
Many sellers
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B.
No close substitutes
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C.
Price taker
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D.
Perfect information
Solution
A monopoly is characterized by a single seller in the market with no close substitutes for the product.
Correct Answer:
B
— No close substitutes
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Q. Which of the following is a function of the central bank?
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A.
Issuing currency
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B.
Regulating banks
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C.
Controlling inflation
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D.
All of the above
Solution
The central bank performs multiple functions including issuing currency, regulating banks, and controlling inflation.
Correct Answer:
D
— All of the above
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Q. Which of the following is a tool used by central banks to control inflation?
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A.
Increasing taxes
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B.
Adjusting interest rates
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C.
Regulating wages
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D.
Controlling prices directly
Solution
Central banks control inflation primarily by adjusting interest rates to influence economic activity.
Correct Answer:
B
— Adjusting interest rates
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Q. Which of the following is NOT a type of market structure?
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A.
Perfect competition
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B.
Monopoly
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C.
Oligopoly
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D.
Bureaucracy
Solution
Bureaucracy is not a type of market structure; the other three are recognized market structures.
Correct Answer:
D
— Bureaucracy
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