Economics basics Quiz
The concepts behind the budget fights and the news. 10 multiple-choice questions with explanations.
Questions
If demand for a product rises while supply stays the same, its price usually…
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Rises. More buyers competing for the same supply pushes prices up.
What is inflation?
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A general rise in prices over time. Inflation reduces what a dollar can buy.
Which institution sets U.S. monetary policy, including key interest rates?
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The Federal Reserve. The Fed's Federal Open Market Committee sets its interest-rate target.
What is a tariff?
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A tax on imported goods. Importers pay tariffs, and some of the cost is usually passed on to buyers.
A recession is commonly described as…
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A significant decline in economic activity, often two straight quarters of shrinking GDP. In the U.S., a committee of the National Bureau of Economic Research officially dates recessions.
What is a budget deficit?
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The amount by which spending exceeds revenue in a year. The national debt is the sum of past deficits (minus surpluses).
A progressive income tax is one where…
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Tax rates rise as income rises. The U.S. federal income tax has rising brackets.
What is opportunity cost?
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The value of the next-best option you give up. Every choice has an opportunity cost.
What is a monopoly?
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A market dominated by a single seller. Antitrust laws aim to prevent abuses of monopoly power.
Adam Smith's 1776 book on markets and the "invisible hand" is called…
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The Wealth of Nations. Its full title is An Inquiry into the Nature and Causes of the Wealth of Nations.