CSS Economics MCQs

This comprehensive collection of MCQs on Economics for the Central Superior Services (CSS) examination is designed to provide candidates with a thorough understanding of economic principles, theories, and applications. Covering a wide range of topics, including microeconomics, macroeconomics, international trade, and development economics, these questions aim to enhance candidates’ analytical skills and practical knowledge essential for success in the CSS exams.

Who Should Practice Economics MCQs?

CSS aspirants: Ideal for candidates preparing for the CSS examination who seek to improve their performance in the Economics section.
Students of economics and related fields: Beneficial for individuals pursuing academic paths in economics, finance, and business studies, providing a solid foundation in key concepts.
Job seekers in public service: Perfect for those aiming for government positions where economic literacy is crucial for effective policy-making and analysis.
Professionals seeking to enhance their knowledge: Suitable for anyone interested in broadening their understanding of economic issues and their implications on society.

1. What does the law of demand state?

A) As price increases, quantity demanded increases
B) As price decreases, quantity demanded decreases
C) As price decreases, quantity demanded increases
D) Quantity demanded is independent of price

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2. Which of the following is an example of a public good?

A) A sandwich
B) National defense
C) A concert ticket
D) A smartphone

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3. What is the main focus of microeconomics?

A) National income
B) Individual consumer behavior
C) Global trade
D) Fiscal policy

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4. In the context of elasticity, what does a price elasticity of demand greater than 1 indicate?

A) Inelastic demand
B) Unit elastic demand
C) Elastic demand
D) Perfectly elastic demand

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5. What is producer equilibrium?

A) When total revenue equals total cost
B) When marginal cost equals marginal revenue
C) When total output is maximized
D) When fixed costs are minimized

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6. The concept of diminishing marginal utility explains:

A) Why people always buy more of a product
B) How utility increases with quantity consumed
C) Why consumers value the first unit of a good more than subsequent units
D) The relationship between income and consumption

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7. What does the production possibility frontier illustrate?

A) The maximum output possibilities for two goods
B) The relationship between price and quantity demanded
C) The efficiency of resource allocation
D) All of the above

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8. Which of the following is a characteristic of perfect competition?

A) Many buyers and sellers
B) Homogeneous products
C) Free entry and exit from the market
D) All of the above

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9. What is the primary goal of macroeconomics?

A) To understand individual consumer choices
B) To analyze aggregate economic behavior
C) To study firm production decisions
D) To evaluate market structures

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10. What does GDP stand for?

A) Gross Domestic Product
B) General Domestic Profit
C) Gross Development Potential
D) Generalized Demand Price

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11. Which of the following factors is NOT included in the calculation of GDP?

A) Government spending
B) Consumer spending
C) Underground economy transactions
D) Business investments

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12. The consumption function describes the relationship between:

A) Income and savings
B) Income and consumption
C) Savings and investment
D) Investment and output

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13. What is the multiplier effect?

A) A decrease in consumption following an increase in taxes
B) The increase in final income arising from any new injection of spending
C) A method to measure inflation
D) The relationship between savings and investment

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14. What is the primary cause of inflation?

A) Increase in aggregate supply
B) Decrease in consumer demand
C) Increase in aggregate demand
D) Technological advancements

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15. Which school of thought emphasizes the role of total spending in the economy?

A) Classical
B) Keynesian
C) Monetarist
D) Supply-side

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16. The Fisher equation relates:

A) Nominal interest rates, real interest rates, and inflation
B) GDP, GNP, and NNP
C) Employment rates and inflation
D) Consumption and savings

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17. What is the main function of money?

A) Store of value
B) Unit of account
C) Medium of exchange
D) All of the above

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18. Which of the following describes a central bank’s function?

A) Issuing currency
B) Regulating banks
C) Conducting monetary policy
D) All of the above

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19. What does the term “credit creation” refer to?

A) The generation of new currencies
B) The process by which banks create money through lending
C) The issuance of government bonds
D) The accumulation of savings by individuals

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20. What is the primary goal of fiscal policy?

A) Control inflation
B) Stabilize the economy
C) Manage public debt
D) All of the above

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21. What is the impact of a progressive tax system?

A) It reduces income inequality
B) It increases tax burden on the poor
C) It encourages savings
D) It eliminates tax evasion

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22. What does public debt refer to?

A) Debt owed by individuals
B) Government borrowing
C) Corporate debt
D) Personal loans

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23. The Balance of Payments accounts for:

A) All international transactions
B) Only exports and imports
C) Domestic financial transactions
D) Government expenditures

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24. Which economic theory emphasizes the importance of comparative advantage?

A) Keynesian economics
B) Classical economics
C) Supply-side economics
D) Marxist economics

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25. What does the term “liquidity preference” mean?

A) Preference for cash over investments
B) Demand for money based on interest rates
C) Preference for short-term investments
D) Demand for liquid assets over illiquid assets

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26. What is the main focus of welfare economics?

A) Production efficiency
B) Economic growth
C) The allocation of resources for social welfare
D) International trade

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27. What are the components of aggregate demand?

A) Consumption, Investment, Government Spending, Net Exports
B) Consumption, Savings, Exports, Imports
C) Production, Consumption, Investment, Government Spending
D) None of the above

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28. Which of the following is NOT a type of unemployment?

A) Frictional
B) Cyclical
C) Structural
D) Economic

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29. The term “structural unemployment” refers to:

A) Temporary unemployment due to transitions
B) Unemployment due to changes in the economy
C) Seasonal unemployment in agriculture
D) Unemployment due to economic downturns

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30. What is the objective of privatization?

A) To increase government control
B) To enhance efficiency and competitiveness
C) To reduce private sector involvement
D) To eliminate market competition

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31. Which of the following is a method of deficit financing?

A) Increasing taxes
B) Borrowing from international agencies
C) Selling government assets
D) Reducing government spending

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32. The term “absolute poverty” refers to:

A) A lack of basic necessities for survival
B) A relative lack of income compared to others
C) Poverty that is temporary
D) Poverty that affects a small portion of the population

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33. What is the concept of sustainable development?

A) Maximizing short-term profits
B) Meeting present needs without compromising future generations
C) Increasing industrial production
D) Reducing government regulations

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34. What does “foreign exchange” refer to?

A) The exchange of currencies
B) International trade agreements
C) Cross-border investments
D) Global financial markets

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35. Which of the following best describes the “terms of trade”?

A) The exchange rate between two currencies
B) The ratio of export prices to import prices
C) The trade balance of a country
D) The total value of trade

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36. The balance of payments is divided into which major accounts?

A) Current account, Capital account, Financial account
B) Trade account, Investment account
C) Public account, Private account
D) Monetary account, Fiscal account

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37. What does the term “economic integration” refer to?

A) Merging of different economic systems
B) Uniting financial markets
C) The process of reducing trade barriers between countries
D) Consolidation of government policies

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38. What is the primary focus of development economics?

A) Economic growth
B) Resource allocation
C) Structural changes in developing countries
D) Market equilibrium

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39. Which of the following is a characteristic of underdevelopment?

A) High literacy rates
B) Limited access to technology
C) Diversified economy
D) High standard of living

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40. What is the major goal of fiscal policy?

A) Control inflation
B) Manage public debt
C) Stabilize economic fluctuations
D) Increase consumer spending

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41. What is the main objective of land reforms?

A) Increase agricultural production
B) Promote urbanization
C) Redistribute land to reduce inequality
D) Increase government revenue

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42. What does “income distribution” refer to?

A) The total amount of income in an economy
B) How income is shared among individuals or groups
C) The income earned by the government
D) The savings rate of households

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43. What is the primary function of the World Bank?

A) To manage international trade
B) To provide financial and technical assistance for development
C) To regulate global currencies
D) To control inflation worldwide

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44. The term “human development” focuses on:

A) Economic growth alone
B) Social and economic well-being
C) Industrial production
D) Global trade policies

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45. Which of the following is a primary cause of environmental degradation?

A) Sustainable farming practices
B) Industrialization without regulation
C) Effective waste management
D) Conservation efforts

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46. What does “deficit financing” involve?

A) Reducing government spending
B) Borrowing to cover a budget deficit
C) Increasing taxes
D) Selling government assets

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47. What is “public financing”?

A) Funding provided by private investors
B) Government spending and revenue generation
C) The management of private sector finances
D) Budgeting by non-governmental organizations

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48. What is a primary challenge in achieving economic development?

A) High levels of education
B) Political stability
C) Income inequality
D) Access to technology

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49. The “accelerator” effect in economics refers to:

A) Increased savings leading to higher investment
B) The relationship between income and consumption
C) Changes in investment due to changes in income
D) The effect of government spending on GDP

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50. Which of the following best defines “capital structure”?

A) The total amount of capital required for a business
B) The mix of debt and equity financing
C) The distribution of assets in a company
D) The overall market valuation of a firm

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51. The IS-LM model is used to analyze:

A) Market structures
B) The interaction between the goods market and the money market
C) Consumer behavior
D) International trade relations

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52. What is the role of a central bank in an economy?

A) To provide loans to individuals
B) To regulate the money supply and interest rates
C) To control fiscal policy
D) To manage international trade

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53. What does “interest rate” refer to?

A) The cost of borrowing money
B) The profit earned on investments
C) The rate of return on savings
D) All of the above

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54. What is a major characteristic of a developing economy?

A) High industrial output
B) Low per capita income
C) High levels of technology
D) Abundant natural resources

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55. The term “economic growth” refers to:

A) An increase in a country’s production of goods and services
B) A rise in employment rates
C) A reduction in income inequality
D) An improvement in the standard of living

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56. Which of the following is an effect of inflation?

A) Increased purchasing power
B) Decreased cost of living
C) Reduced savings
D) All of the above

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57. What does “monetary policy” aim to influence?

A) Government spending
B) The money supply and interest rates
C) Taxation levels
D) International trade balances

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58. What is the main purpose of tariffs?

A) To promote free trade
B) To protect domestic industries by increasing import costs
C) To increase government revenue
D) Both B and C

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59. Which of the following factors contributes to economic underdevelopment?

A) High literacy rates
B) Political instability
C) Advanced infrastructure
D) Strong legal systems

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60. What is the significance of the Gini coefficient?

A) It measures economic growth
B) It measures income inequality within a population
C) It assesses trade balances
D) It evaluates government debt

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61. What does “capital restructuring” involve?

A) Selling off assets
B) Changing the debt-equity ratio
C) Increasing production capacity
D) Diversifying product lines

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62. The term “export-led growth” refers to:

A) Growth driven by domestic consumption
B) Growth stimulated by increasing exports
C) Growth through foreign aid
D) Growth resulting from government spending

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63. What is a key challenge for the agricultural sector in Pakistan?

A) High levels of mechanization
B) Access to international markets
C) Water scarcity
D) Abundant labor supply

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64. What does the term “human capital” refer to?

A) Physical assets of a company
B) The skills and knowledge of the workforce
C) Financial investments in education
D) Natural resources available in a country

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65. The concept of “comparative advantage” suggests that:

A) A country should produce everything it needs
B) Countries should specialize in goods they can produce more efficiently
C) Trade leads to economic decline
D) Protectionism is beneficial for all nations

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66. What is the purpose of land reforms in Pakistan?

A) To increase agricultural productivity
B) To redistribute land to the landless
C) To eliminate feudalism
D) All of the above

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67. Which of the following is a source of government revenue?

A) Taxes
B) Fines
C) Sale of public assets
D) All of the above

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68. What is the role of the Pakistan Industrial Credit and Investment Corporation (PICIC)?

A) To regulate foreign trade
B) To provide financial assistance for industrial development
C) To manage agricultural policies
D) To oversee banking regulations

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69. What does “energy policy” refer to in Pakistan?

A) The management of energy resources
B) Regulation of energy prices
C) Strategies to improve energy efficiency
D) All of the above

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70. Which of the following is a challenge to economic development in Pakistan?

A) Strong governance
B) High levels of corruption
C) Increasing foreign investments
D) Stable political environment

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71. What is the aim of economic planning in Pakistan?

A) To increase government control over the economy
B) To set economic goals and allocate resources
C) To reduce foreign investment
D) To eliminate poverty

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72. What is the concept of “de-nationalization”?

A) Reversing the process of privatization
B) Increasing government ownership of industries
C) The process of transferring state-owned enterprises to private ownership
D) None of the above

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73. What is the effect of remittances on the Pakistani economy?

A) They decrease domestic consumption
B) They increase foreign direct investment
C) They provide a source of income for families
D) They have no significant impact

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74. What is the main concern of fiscal policy?

A) Managing the money supply
B) Government spending and taxation
C) Regulating interest rates
D) Controlling inflation

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75. What does the term “human development index” measure?

A) Economic growth only
B) Standard of living based on income, education, and life expectancy
C) Environmental sustainability
D) None of the above

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76. What is the primary objective of public debt?

A) To finance government deficits
B) To reduce taxes
C) To increase economic growth
D) To fund private projects

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77. What is meant by “income inequality”?

A) The distribution of income among individuals
B) Equal income for all citizens
C) The wealth gap between nations
D) None of the above

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78. What is a key feature of an “open economy”?

A) Limited international trade
B) High tariffs on imports
C) Engagement in international trade and investment
D) Complete government control over trade

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79. What is the main purpose of energy policy in Pakistan?

A) To maximize coal production
B) To diversify energy sources and ensure sustainability
C) To increase reliance on foreign energy imports
D) To eliminate renewable energy sources

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80. Which of the following is NOT a source of non-tax revenue for the government?

A) Profit from state-owned enterprises
B) Grants and aid
C) Corporate taxes
D) Fines and penalties

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81. What is the main goal of “social sector development” in Pakistan?

A) To increase industrial output
B) To improve healthcare, education, and social welfare
C) To boost foreign investment
D) To expand infrastructure projects

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82. What is a significant issue faced by the agricultural sector in Pakistan?

A) Overproduction of crops
B) Lack of irrigation facilities
C) High levels of mechanization
D) Abundant labor supply

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83. The concept of “income distribution” addresses:

A) The overall income levels in an economy
B) The allocation of income among individuals and groups
C) Government tax policies
D) The savings behavior of households

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84. What is the relationship between inflation and unemployment known as?

A) The Phillips Curve
B) The Laffer Curve
C) The Keynesian Model
D) The Demand Curve

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85. What does the term “foreign direct investment” refer to?

A) Investments made by residents in foreign countries
B) Investments made by foreign entities in the domestic market
C) Loans provided to foreign governments
D) None of the above

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86. What is the significance of remittances in Pakistan’s economy?

A) They are a primary source of government revenue
B) They contribute to household income and foreign reserves
C) They increase reliance on foreign aid
D) They reduce domestic consumption

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87. What is “privatization” aimed at achieving?

A) Increasing government control over industries
B) Enhancing efficiency through private sector involvement
C) Limiting competition
D) Reducing foreign investments

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88. What is the goal of agricultural policies in Pakistan?

A) To reduce crop diversity
B) To increase productivity and sustainability
C) To limit export of agricultural products
D) To eliminate smallholder farms

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89. The term “economic planning” refers to:

A) Government policies to direct economic activity
B) Private sector investment strategies
C) The natural market adjustment process
D) None of the above

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90. Which of the following is a common method for measuring poverty?

A) Gini coefficient
B) Human Development Index
C) Poverty Line
D) GDP per capita

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91. What is the purpose of land reforms?

A) To increase land prices
B) To redistribute land to improve equity
C) To promote urbanization
D) To eliminate agricultural practices

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92. What does “economic liberalization” typically involve?

A) Increased government control
B) Reduction of trade barriers and deregulation
C) Higher taxes on businesses
D) Nationalization of key industries

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93. What is a key goal of fiscal policy?

A) To control the money supply
B) To influence overall economic activity through government spending and taxation
C) To set interest rates
D) To manage exchange rates

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94. What does “subsidy” refer to in economic terms?

A) A tax levied on goods
B) A financial aid provided by the government to encourage production
C) A payment made for services rendered
D) A penalty for poor performance

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95. What is the primary concern of labor economics?

A) The cost of goods and services
B) The functioning of labor markets and employment
C) Investment strategies
D) International trade policies

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96. What does “inflation targeting” involve?

A) Focusing on controlling interest rates
B) A monetary policy strategy to keep inflation within a specified range
C) Reducing public spending
D) Increasing government revenue

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97. The term “public goods” refers to:

A) Goods that are exclusively for government use
B) Goods that are non-excludable and non-rivalrous
C) Goods produced by private firms
D) Goods that have high market prices

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98. Which of the following is an example of “crowding out”?

A) Increased government spending leading to higher private investment
B) Government borrowing leading to reduced private sector investment
C) Decreased taxes leading to increased consumer spending
D) All of the above

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99. What does “trade balance” indicate?

A) The difference between exports and imports
B) The total value of trade agreements
C) The amount of foreign investments
D) The level of currency reserves

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100. The concept of “economic sanctions” typically involves:

A) Promoting international trade
B) Restricting trade to influence a country’s policies
C) Encouraging foreign investments
D) None of the above

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