Question 1

Two sector economy consists of:

Accepted Answer

A two-sector economy simplifies the economic model to include just households and firms, where households provide labor to firms, and firms provide goods and services to households.

Question 2

Real flow is also known as:

Accepted Answer

Real flow refers to the flow of physical goods and services across different sectors of the economy, contrasting with money flow, which involves the flow of money.

Question 3

Which of the following is the consumption sector?

Accepted Answer

Households are considered the consumption sector as they are the primary consumers of goods and services in an economy.

Question 4

Real flow refers to the flow of factor services from ------ to -----

Accepted Answer

Real flow refers to the flow of factor services from households to firms. Households provide labor, capital, and land to firms in exchange for wages, rent, and interest.

Question 5

Which of the following constitute the reason for difference between Market prices and factor cost?

Accepted Answer

The difference between market prices and factor cost is primarily due to indirect taxes, which increase the market price, and subsidies, which decrease it. Therefore, both indirect taxes and subsidies are responsible for the difference.

Question 6

Final goods refer to those goods which are used either for ............. or for ..........

Accepted Answer

Final goods are those goods which are used either for consumption or for investment, meaning they have reached their end use in the consumption chain and are not intended for resale or further processing.

Question 7

Net Factor Income from Abroad is:

Accepted Answer

The answer of Net Factor Income from Abroad is:
...

Question 8

Depreciation means:

Accepted Answer

Depreciation refers to the accounting process of allocating the cost of tangible assets over their useful lives, reflecting the loss of value due to wear and tear, age, or obsolescence.

Question 9

Non-exclusion principle is related to:

Accepted Answer

The non-exclusion principle is related to public goods. It states that it is not possible to exclude individuals from enjoying the good's benefits, even if they do not pay for it. This characteristic is typical for public goods like national defense or public parks, where the use by one individual does not reduce availability to others.

Question 10

Education is an example of:

Accepted Answer

Merit goods are those that are deemed socially desirable by the government or society, and education is often classified as such because it provides significant benefits not only to the individual receiving the education but also to society at large.

Question 11

Public Goods are:

Accepted Answer

Public goods are characterized by their non-excludability, meaning they are available to all members of society regardless of who pays for them.

Question 12

Who is the father of Public Finance:

Accepted Answer

The answer of Who is the father of Public Finance:
...

Question 13

Incidence of tax means:

Accepted Answer

The answer of Incidence of tax means:
...

Question 14

Which is the tax shifting

Accepted Answer

Tax shifting occurs when the entity that is legally responsible for paying a tax passes the cost onto another party, such as consumers or employees, rather than bearing the full burden themselves.

Question 15

The equity principle of taxation was propounded by:

Accepted Answer

Adam Smith propounded the equity principle of taxation, emphasizing that taxes should be proportional to individuals' ability to pay, as outlined in his seminal work, "The Wealth of Nations."

Question 16

BOP includes

Accepted Answer

The Balance of Payments (BOP) includes the current account, capital account, and official reserve account, as it is a comprehensive record of all economic transactions between the residents of a country and the rest of the world.

Question 17

International trade refers to trade between

Accepted Answer

International trade specifically refers to the exchange of goods, services, and capital between two or more countries.

Question 18

Under a fixed exchange rate system, ____________________are official changes in the value of a country's currency relative to other currencies.

Accepted Answer

The answer of Under a fixed exchange rate system, ____________________are...

Question 19

__________ is the deliberate downward adjustment in the official exchange rate, reduces the currency's value.

Accepted Answer

Devaluation is the deliberate downward adjustment of a country's currency value by its government or central bank, making its currency less expensive relative to other currencies.

Question 20

A _______________is an upward adjustment in the official exchange rate, which increases the value of the currency.

Accepted Answer

A revaluation is an upward adjustment in the official exchange rate established by a government or central bank, which increases the value of the country's currency relative to other currencies.

Quiz 2: Economic Policies and Public Finance