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#1
By TheQuizWire
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Easy
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Fact Checked
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26 Jan 2026
What is the fundamental economic problem that necessitates the study of resource allocation?
💡 Explanation:Scarcity is the basic economic problem: the conflict between unlimited wants and limited resources. Because resources are scarce, choices must be made about how to allocate them, which forms the basis of economic study.
#2
By TheQuizWire
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Medium
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Fact Checked
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18 Jan 2026
If the Marginal Propensity to Consume (MPC) is 0.8, what is the maximum potential change in equilibrium GDP from a $10 billion increase in government spending?
💡 Explanation:The formula for the spending multiplier (k) is $k = 1 / (1 - text{MPC})$. Given an MPC of 0.8, the multiplier is $k = 1 / (1 - 0.8) = 1 / 0.2 = 5$. The maximum potential change in GDP is calculated as $text{Change in GDP} = k times text{Change in Spending}$. Therefore, $text{Change in GDP} = 5 times $10 text{ billion} = $50 text{ billion}$. This represents the total effect of the initial injection plus the subsequent rounds of induced consumption.
#3
By TheQuizWire
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Medium
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Fact Checked
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15 Jan 2026
What is the immediate effect of a central bank selling government bonds on money supply and interest rates?
💡 Explanation:Selling government bonds on the open market is a contractionary monetary policy action (Open Market Sales). When the central bank sells bonds, commercial banks use their reserves to purchase them, which effectively removes money from the banking system, thus reducing the money supply. A decrease in the money supply (or reserves) increases the cost of borrowing for banks, leading to a rise in market interest rates.
#4
By TheQuizWire
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Medium
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Fact Checked
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15 Jan 2026
What does the short-run Phillips Curve primarily illustrate in macroeconomics?
💡 Explanation:The short-run Phillips Curve illustrates the inverse relationship, or trade-off, between the rate of inflation and the rate of unemployment in an economy. In the short run, policymakers can often reduce unemployment by stimulating aggregate demand, but this action tends to lead to higher inflation, and vice versa. This relationship breaks down in the long run as expectations adjust, but the short-run curve captures this immediate policy dilemma.
#5
By TheQuizWire
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Hard
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Fact Checked
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10 Jan 2026
Which concept encompasses GDP increase, poverty reduction, improved living standards, and human capital enhancement?
💡 Explanation:Economic Development is a comprehensive concept that includes economic growth (a quantitative rise in output/GDP) along with qualitative improvements in socio-economic factors such as reduction in poverty, increase in life expectancy, literacy rates, and enhancement of human capital and living standards. Economic Growth (A) is the quantitative aspect, while Sustainable Development (B) explicitly includes environmental protection, and GNP (D) is a measure of output/income.
#6
By TheQuizWire
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Hard
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Fact Checked
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29 Dec 2025
What is a critical assumption for the strict application of the Ricardian Equivalence theorem?
💡 Explanation:The Ricardian Equivalence theorem, which posits that debt-financed tax cuts do not affect aggregate demand, relies on several strong assumptions. The most technically demanding and frequently debated is the assumption that current generations are linked to future generations (who will pay the debt) by 'operative' bequests, ensuring they fully account for the future tax burden in their present saving decisions.
#7
By TheQuizWire
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Medium
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Fact Checked
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08 Dec 2025
Which characteristics primarily define a pure public good in economics?
💡 Explanation:A pure public good, such as national defense or uncrowded street lighting, is fundamentally defined by two characteristics: Non-rivalry (one person's consumption does not reduce the availability for others) and Non-excludability (it is impossible or too costly to prevent people from consuming the good once it is provided).
#8
By TheQuizWire
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Medium
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Fact Checked
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04 Dec 2025
Stagflation challenges the Phillips Curve trade-off. What is its usual primary cause?
💡 Explanation:Stagflation is the simultaneous occurrence of high inflation, high unemployment, and stagnant economic growth. The traditional short-run Phillips Curve suggests an inverse relationship (trade-off) between inflation and unemployment. Stagflation breaks this relationship, typically caused by an adverse aggregate supply shock (or negative supply shock), such as a sudden, sharp rise in the price of key commodities (e.g., oil). This shock increases production costs (cost-push inflation), shifting the Short-Run Aggregate Supply (SRAS) curve leftward. This simultaneously raises the price level (inflation) and lowers output/employment (stagnation and unemployment).
#9
By TheQuizWire
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Medium
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16 Nov 2025
What is the primary function of a Central Bank?
💡 Explanation:Central banks (like the Federal Reserve) manage money supply and interest rates to ensure economic stability.
#10
By TheQuizWire
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Medium
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14 Nov 2025
What does Gross Domestic Product (GDP) measure?
💡 Explanation:GDP measures the total monetary value of all finished goods and services produced within a country's borders.
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