ECO403 Midterm MCQs 2025 by VUBuddy

Q1. Which of the following is a component of residential fixed investment?

1. Spending on housing units by consumers and landlords
2. Spending on commercial properties
3. Investment in business inventories
4. Spending on agricultural land

Correct answer: Spending on housing units by consumers and landlords

Q2. How are factor prices determined in the economy?

1. Through supply and demand in factor markets
2. Based on consumer spending
3. By government policies
4. By international trade agreements

Correct answer: Through supply and demand in factor markets

Q3. What is the government's official measure of economic output in any country?

1. Gross Domestic Product (GDP)
2. Human Development Index (HDI)
3. Consumer Price Index (CPI)
4. Net National Product (NNP)

Correct answer: Gross Domestic Product (GDP)

Q4. Why intermediate goods are NOT included in GDP calculations?

1. They do not have any value
2. They are sold at lower prices
3. They are not produced domestically
4. Including them would lead to double counting

Correct answer: Including them would lead to double counting

Q5. Which of the following is an example of a stock variable?

1. Annual savings
2. Monthly income
3. GDP
4. Government debt

Correct answer: Government debt

Q6. Who introduced the concept of invisible hand in economics?

1. John Maynard Keynes
2. David Ricardo
3. Karl Marx
4. Adam Smith

Correct answer: Adam Smith

Q7. What does the Consumer Price Index (CPI) measure?

1. Total market value of all goods and services produced in an economy
2. Unemployment rate
3. Overall level of prices for a basket of goods and services
4. Income earned by households

Correct answer: Overall level of prices for a basket of goods and services

Q8. Which of the following illustrates the trade-off between inflation and unemployment?

1. Supply and demand curve
2. Phillips curve
3. Laffer curve
4. Production possibility frontier

Correct answer: Phillips curve

Q9. What does flexible prices represent in economics?

1. Short run
2. Both short run and long run
3. Long run
4. Medium run

Correct answer: Long run

Q10. If consumption (C) decreases, what will be the effect on total demand (Y)?

1. Total demand will become double
2. Total demand will remain unchanged
3. Total demand will increase
4. Total demand will decrease

Correct answer: Total demand will decrease

Q1. Who introduced the concept of invisible hand in economics?

1. John Maynard Keynes
2. Karl Marx
3. Adam Smith
4. David Ricardo

Correct answer: Adam Smith

Q2. What does the supply curve show?

1. A negative relationship between price and quantity supplied
2. No relationship between price and quantity supplied
3. A fixed quantity supplied regardless of price
4. A positive relationship between price and quantity supplied

Correct answer: A positive relationship between price and quantity supplied

Q3. What is the formula for determining the rental rate of capital?

1. MPK = R/P
2. MPK = MPL × K
3. MPK = W/P
4. MPK = K/L

Correct answer: MPK = R/P

Q4. Which of the following best describes the concept of opportunity cost?

1. Benefits of an alternative that was chosen
2. Financial cost of attending college
3. Total cost of an item
4. Value of the next best alternative foregone

Correct answer: Value of the next best alternative foregone

Q5. Which of the following defines the concept of scarcity?

1. Conflict between limited resources and unlimited wants
2. Distribution of wealth in society
3. Ability to produce goods without limitations
4. Availability of unlimited resources

Correct answer: Ability to produce goods without limitations

Q6. How to define the concept of market failure in economics?

1. Government intervenes in the market
2. Prices remain constant in the market
3. Market allocates resources efficiently
4. Market fails to allocate resources efficiently

Correct answer: Market fails to allocate resources efficiently

Q7. What happens to the equilibrium price and quantity when income increases?

1. The equilibrium price decreases while quantity increases
2. Both the equilibrium price and quantity decrease
3. The equilibrium price increases while quantity decreases
4. Both the equilibrium price and quantity increase

Correct answer: Both the equilibrium price and quantity increase

Q8. Which of the following is a component of business fixed investment?

1. Spending on clothing
2. Spending on plant and equipment
3. Buying shares of stock
4. Household appliances

Correct answer: Spending on plant and equipment