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Q1. Which of the following is a tool used by central banks to control inflation?
Solution:
Central banks control inflation primarily by adjusting interest rates to influence economic activity.
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Q2. What is the purpose of a budget?
Solution:
The purpose of a budget is to track income and expenses to manage financial resources effectively.
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Q3. What is a characteristic of a monopoly?
Solution:
A monopoly is characterized by having one seller that controls the entire market for a good or service.
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Q4. In a competitive market, what happens to the price of a good when demand increases?
Solution:
When demand increases in a competitive market, the price of the good typically increases due to higher competition for the limited supply.
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Q5. What is the primary function of money in an economy?
Solution:
Money serves multiple functions including being a medium of exchange, a store of value, and a unit of account.
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Q6. Which of the following is a function of the central bank?
Solution:
The central bank performs multiple functions including issuing currency, regulating banks, and controlling inflation.
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Q7. What is the effect of a price ceiling on a market?
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.
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Q8. What does the term 'liquidity' refer to in finance?
Solution:
Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price.
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Q9. Which of the following is NOT a type of market structure?
Solution:
Bureaucracy is not a type of market structure; the other three are recognized market structures.
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Q10. Which of the following is a characteristic of a monopoly?
Solution:
A monopoly is characterized by a single seller in the market with no close substitutes for the product.
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