Chapter 1: Questions and Answers

Choose the Correct Answer:

1- Why is scarcity considered a fundamental problem in
Economics?
a) Because resources are unlimited but people’s wants
are limited
b) Because resources are limited while people’s wants
are unlimited
c) Because it only applies to poor countries
d) Because it prevents economic growth

2-What is the definition of wants?

a) Are the desire that people have e.g. things that
people would like to have, such as bigger homes,
iPhone, etc.
b) Are the basic necessities that a person must have in
order to survive e.g. food, water, warmth, shelter and
clothing.
c) Is the study of the allocation of scarce resources to
meet unlimited human wants.
d)It analyses costs and benefits of improving patters of
resource allocation.

3-Why is Economics called a social science?

a) It only studies human behavior
b) It focuses on human emotions
c) It does not involve scientific methods
d) It examines how people make choose among the
alternatives available to them.

4-Which of the following is NOT a main definition of

Economics?
a) Scarcity Definition
b) Wealth Definition
c) Welfare Definition
d) Mathematical Definition

5-Which statement is true about human needs?

a) Are the desire that people have e.g. things that
people would like to have, such as bigger homes,
iPhone, etc.
b) Are the basic necessities that a person must have in
order to survive e.g. food, water, warmth, shelter and
clothing.
c) Is the study of the allocation of scarce resources to
meet unlimited human wants.
d) It analyses costs and benefits of improving patters of
resource allocation.
6-What is the general definition of Economy:
a) Economics as a science which inquired into the
nature and cause of wealth of Nations.
b) It examines how a person gets his income and how
he invests it.
c) Economics is a social science that examines how
people choose among the alternatives available to
them.
d) Economics is a science which studies human
behavior as a relationship between ends and scarce
means which have alternative uses.

7-What is Wealth Definition?

a) Economics as a science which inquired into the
nature and cause of wealth of Nations.
b) It examines how a person gets his income and how
he invests it.
c) Economics is a social science that examines how
people choose among the alternatives available to
them.
d) Economics is a science which studies human
behavior as a relationship between ends and scarce
means which have alternative uses.

8-Which statement is true about Scarcity definition?

a) Are the desire that people have e.g. things that
people would like to have, such as bigger homes,
iPhone, etc.
b) Are the basic necessities that a person must have in
order to survive e.g. food, water, warmth, shelter and
clothing.
c) Is the study of the allocation of scarce resources to
meet unlimited human wants.
d) It analyses costs and benefits of improving patters
of resource allocation.

9. Which of the following can be part of an individual's

wealth?
A) Houses and buildings
B) Money kept in banks
C) Land and company shares
D) All of the above

10. Which of the following is an example of national

wealth?
A) A privately owned company
B) A citizen's personal savings account
C) Public roads and bridges
D) A family-owned farm
11-Which of the following statements best describes
the difference between real investment and portfolio
investment?
A) Real investment involves purchasing shares of
companies, while portfolio investment increases the
stock of capital goods.
B) Real investment refers to an increase in real capital
stock, whereas portfolio investment refers to
purchasing shares of companies.
C) Both real investment and portfolio investment refer
to the acquisition of capital goods.
D) Portfolio investment leads to the creation of new
capital goods, while real investment involves trading
stocks

12-What is the relationship between income and

saving? A) Saving is the amount left after consumption
from income
B) Income is always greater than saving
C) Saving is independent of income
D) Income and saving are the same concepts

13-If an individual's income remains the same but

consumption increases, what happens to savings?
A) Increases
B) Decreases
C) Remains unchanged
D) Doubles

14. What is the primary purpose of production?

A) To create utility and goods for selling
B) To store goods for personal use
C) To destroy surplus goods
D) To consume all produced goods

15. Which of the following best defines consumption in

economics?
A) The creation of utility and production of goods for
sale
B) The process of using goods and services to satisfy
human wants
C) The accumulation of savings after deducting
expenses
D) The allocation of resources for future investment

16. What is the best definition of a commodity?

A) Any good that is produced for personal use
B) Any product that has a high price
C) Any good produced for sale in the market
D) Any item that is consumed by people

17. What does the term "market" refer to?

A) A specific physical location where goods are bought
and sold
B) A place where only physical goods are exchanged
C) A local store where people buy products
D) Any area where buyers and sellers interact for trade

18- Which branch of economics focuses on the

behavior of individuals and firms?
a) International Economics
b) Macroeconomics
c) Microeconomics
d) Behavioral Economics

19- Macroeconomics is concerned with:

a) How a consumer allocates income
b) Individual pricing decisions
c) Changes in national output and employment
d) Behavior of individual industries

20- The aim of microeconomic analysis is to:

a) Achieve long-term economic growth
b) Achieve full utilization of resources
c) Achieve optimal allocation of resources
d) Reduce public debt

21- An example of a microeconomic topic is:

a) Inflation
b) National saving rate
c) A consumer's allocation of income to maximize
utility
d) Unemployment

22- Which of the following is a macroeconomic issue?

a) A firm's production decision
b) Price of a specific product
c) Overall employment levels
d) A single consumer's behavior
23-Which of the following is a common measure of
economic growth?
A. CPI.
B. Exchange rate.
C. Gross Domestic Product (GDP).
D. Interest rate.

24. Which of the following is not a factor that promotes

economic growth?
A. Improved technology.
B. Political instability.
C. Human capital development.
D. Investment in infrastructure.

25. Which of the following is a limitation to economic

growth in developing countries?
A. High investment in human capital.
B. Access to quality healthcare and education.
C. Poor infrastructure.
D. Technological advancement.

26. What term describes the movement of money out of

a country due to lack of investment returns?
A. Human capital flight.
B. Export-led growth.
C. Flight of capital.
D. Trade deficit.

27. What is one advantage of higher GDP for a

government?
A. Less revenue for development.
B. More tax income for spending.
C. Higher inflation.
D. Fewer employment opportunities.

28. What is the impact of political instability on economic

growth?
A. Attracts more investors
B. Has no impact
C. Encourages capital inflow
D. Scares investors and hinders growth

29. What does human capital refer to in the context of

economic growth?
A. Machines and factories
B. Natural resources
C. Skills, abilities, and training of the labor force
D. Political institutions
10. A recession is the opposite of:
 A. Employment
B. Poverty
C. Economic growth
D. Globalization

30. A skilled labor force contributes to economic

growth by:
A. Increasing wages only
B. Reducing working hours
C. Increasing productivity
D. Raising taxes

True or False
1- Economics is a social science that examines how people
choose among the alternatives available to them. (true)
2- Needs are things that people would like to have, such as
bigger homes or iPhones. (false)
3- The scarcity definition of economics focuses on how
people allocate unlimited resources to meet limited wants.
(False)
4- Labor-intensive industries rely heavily on machinery and
equipment. (False)
5- The problem of "what to produce" arises because a country
has unlimited resources. (false)
6- Alfred Marshall's welfare definition of economics focuses
on how individuals and society choose to allocate scarce
resources over time. (false)
7- Capital-intensive industries typically have lower initial
investment costs compared to labor-intensive industries. (false)
8- Microeconomics deals with the economy as a whole.
(False)
9- Both microeconomics and macroeconomics aim to
maximize the nation's material welfare. (True)
10- Macroeconomics studies how consumers allocate their
income. (False)
11- Macroeconomics is concerned with national output and
economic growth. (True)
12- Micro and macro analysis are unrelated to each other. (False)