EST2 HIGH SCHOOL ECONOMICS
🔥 HARD MODE – 20 Challenging Questions
Directions: Choose the best answer for each question (A – E). Answers are provided below each question.
1. If the cross-price elasticity of demand between two goods is -2.5, the goods are classified as:
A) Substitutes
B) Complements
C) Inferior goods
D) Luxury goods
E) Independent goods
Answer: B
2. In the long run, a monopolistically competitive firm will produce at an output level where:
A) P = MC
B) P = ATC and P > MC
C) MR = MC and P = ATC
D) P = MR
E) ATC is minimized
Answer: C
3. Which of the following would cause the demand curve for money to shift to the right?
A) A decrease in the price level
B) A decrease in real GDP
C) An increase in the interest rate
D) An increase in real GDP
E) A decrease in the money supply
Answer: D
4. The Laffer Curve suggests that:
A) Tax cuts always increase revenue
B) Tax increases always increase revenue
C) There is an optimal tax rate that maximizes revenue
D) Lower taxes always lead to lower revenue
E) Tax revenue is unaffected by tax rates
Answer: C
5. A country has a current account deficit. This implies that:
A) It is a net lender to the rest of the world
B) Its imports exceed its exports
C) Its exports exceed its imports
D) It has a surplus in the financial account
E) Its government budget is balanced
Answer: B
6. In the Keynesian model, if the marginal propensity to consume is 0.75, the multiplier effect of a $100 million government spending increase is:
A) $100 million
B) $133 million
C) $175 million
D) $400 million
E) $75 million
Answer: D
7. Which market structure has the highest barriers to entry in the long run?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
E) Contestable market
Answer: D
8. If the nominal GDP grows by 6% and the real GDP grows by 2%, the inflation rate is approximately:
A) 2%
B) 3%
C) 4%
D) 6%
E) 8%
Answer: C
9. Which of the following is NOT a component of M2 money supply?
A) Currency in circulation
B) Demand deposits
C) Savings deposits
D) Large time deposits over $100,000
E) Money market mutual funds
Answer: D
10. A firm in perfect competition is producing where P = AVC and P < ATC. In the short run, it should:
A) Shut down immediately
B) Continue producing because it covers variable costs
C) Increase output
D) Decrease output
E) Exit the industry
Answer: B
11. The Phillips Curve suggests a trade-off between:
A) Inflation and interest rates
B) Unemployment and GDP growth
C) Inflation and unemployment
D) Exports and imports
E) Taxes and government spending
Answer: C
12. Which policy would a central bank use to combat stagflation?
A) Increase money supply
B) Decrease taxes
C) Increase government spending
D) Supply-side policies like deregulation
E) Decrease interest rates
Answer: D
13. The Gini coefficient measures:
A) Inflation rate
B) Economic growth
C) Income inequality
D) Unemployment rate
E) Tax burden
Answer: C
14. In game theory, a Nash equilibrium occurs when:
A) One player dominates the other
B) Both players cooperate fully
C) Each player chooses the best strategy given the other's strategy
D) The outcome is Pareto optimal
E) There is no dominant strategy
Answer: C
15. If the Fed sells government bonds in the open market, what happens to the money supply and interest rates?
A) Money supply increases, interest rates decrease
B) Money supply decreases, interest rates increase
C) Money supply increases, interest rates increase
D) Money supply decreases, interest rates decrease
E) No change in either
Answer: B
16. Which cost is considered irrelevant in short-run production decisions?
A) Marginal cost
B) Variable cost
C) Fixed cost (sunk cost)
D) Average variable cost
E) Total cost
Answer: C
17. A country with a comparative advantage in producing a good should:
A) Produce all goods domestically
B) Specialize and trade
C) Impose tariffs on imports
D) Subsidize domestic production
E) Avoid international trade
Answer: B
18. The crowding-out effect occurs when:
A) Higher taxes reduce consumer spending
B) Increased government borrowing raises interest rates and reduces private investment
C) Exports exceed imports
D) The central bank prints too much money
E) Wages rise faster than productivity
Answer: B
19. A monopsonist in the labor market will hire workers up to the point where:
A) MRP = MC
B) MRP = Wage
C) Wage = MC
D) MRP = AVC
E) Wage = ATC
Answer: A
20. The natural rate of unemployment includes all EXCEPT:
A) Frictional unemployment
B) Structural unemployment
C) Seasonal unemployment
D) Cyclical unemployment
E) All of the above are included
Answer: D
✅ Good luck on your EST2 Economics Exam! You've got this!
Posted for practice purposes only.
No comments:
Post a Comment