Q 01/05

In a market economy, what primarily determines the price of goods and services?

A) Government price regulation

B) Agreements among producers

C) Interaction of supply and demand

D) The labour needed to make them

Answer · why

C) Interaction of supply and demand

The interaction of supply and demand sets prices: when buyers want more than sellers offer, prices climb; when goods pile up unsold, they fall. No pla...

Q 02/05

Which of the following is a fundamental characteristic of a capitalist economic system?

A) Private ownership of production

B) Central planning of all output

C) Social welfare put before profit

D) State control of major industries

Answer · why

A) Private ownership of production

Private ownership of production is capitalism's defining feature: individuals and firms own the factories and tools and run them for profit, so what g...

Q 03/05

What does Gross Domestic Product (GDP) measure?

A) Total wealth held by a nation's citizens

B) Profits earned by a country's producers

C) Market value of final goods and services produced

D) Performance of a country's stock market

Answer · why

C) Market value of final goods and services produced

The market value of final goods and services produced in a country in a year; only final sales count, so a tyre sold to a carmaker isn't counted twice...

Q 04/05

In economics, what is the 'opportunity cost' of a decision?

A) The money spent on the chosen action

B) The time spent making the decision

C) The combined value of every alternative

D) The value of the best alternative forgone

Answer · why

D) The value of the best alternative forgone

The value of the best alternative forgone is the opportunity cost, which is why a degree costs more than its fees: the hours spent in class could have...

Q 05/05

Which economist's 1936 'General Theory' argued for government spending to end slumps?

A) Friedrich Hayek

B) Irving Fisher

C) John Maynard Keynes

D) Thorstein Veblen

Answer · why

C) John Maynard Keynes

John Maynard Keynes denied that an economy automatically returns to full employment; writing in the shadow of the Great Depression, he argued that whe...