Multiple Choice Questions
Economics: Global Trade and Economic Systems
Topic: Global Trade and Economic Systems
Grade: 10
Question 1:
Which of the following is an example of a trade barrier?
a) Import quotas
b) Comparative advantage
c) Free trade agreements
d) Exchange rates
Answer: a) Import quotas
Explanation: Import quotas are a form of trade barrier that restricts the quantity of a particular good that can be imported into a country. This is done to protect domestic industries from foreign competition. For example, if a country imposes an import quota on automobiles, it limits the number of foreign cars that can be brought into the country, thus giving domestic car manufacturers an advantage.
Question 2:
Which economic system is characterized by private ownership and competition?
a) Traditional economy
b) Command economy
c) Market economy
d) Mixed economy
Answer: c) Market economy
Explanation: In a market economy, individuals and businesses own the means of production and make decisions based on supply and demand. Competition among firms drives efficiency and innovation. For example, in a market economy, consumers have the freedom to choose between different brands and prices when purchasing a product, which encourages businesses to offer better quality and lower prices to attract customers.
Question 3:
Which of the following is a disadvantage of a centrally planned economy?
a) Lack of economic stability
b) Inequality of income
c) Limited consumer choice
d) Excessive government intervention
Answer: c) Limited consumer choice
Explanation: In a centrally planned economy, the government controls the allocation of resources and production decisions, which often leads to limited consumer choice. For example, in a command economy, the government determines what goods and services will be produced and at what prices, which can result in a lack of variety and options for consumers.
Question 4:
Which organization promotes global economic cooperation and trade liberalization?
a) United Nations
b) International Monetary Fund (IMF)
c) World Trade Organization (WTO)
d) Organization of Petroleum Exporting Countries (OPEC)
Answer: c) World Trade Organization (WTO)
Explanation: The World Trade Organization is an international organization that aims to promote global economic cooperation and reduce barriers to trade. It sets rules for international trade and resolves trade disputes between member countries. For example, the WTO oversees negotiations on trade agreements, such as the General Agreement on Tariffs and Trade (GATT), which aims to reduce tariffs and other trade barriers.
Question 5:
Which of the following is an example of a protectionist trade policy?
a) Subsidies for domestic industries
b) Free trade agreements
c) Floating exchange rates
d) Removal of import quotas
Answer: a) Subsidies for domestic industries
Explanation: Protectionist trade policies are measures taken by governments to protect domestic industries from foreign competition. Subsidies, which are financial assistance given to domestic industries, are one example of a protectionist trade policy. For example, a government may provide subsidies to its farmers to make their products more competitive in the global market, thereby protecting them from cheaper imports.
Question 6:
Which economic theory argues that a nation should specialize in producing goods for which it has a comparative advantage?
a) Mercantilism
b) Absolute advantage
c) Comparative advantage
d) Protectionism
Answer: c) Comparative advantage
Explanation: Comparative advantage is the economic theory that suggests a nation should specialize in producing goods for which it has a lower opportunity cost compared to other nations. This leads to increased efficiency and benefits from trade. For example, if Country A can produce 10 cars or 20 computers with the same resources, while Country B can produce 5 cars or 15 computers, Country A has a comparative advantage in producing computers and should focus on that.
Question 7:
Which of the following is a feature of a mixed economy?
a) Central planning by the government
b) Private ownership of resources
c) Profit maximization as the main goal
d) Redistribution of income and wealth
Answer: d) Redistribution of income and wealth
Explanation: In a mixed economy, there is a combination of government intervention and private enterprise. One of the features of a mixed economy is the redistribution of income and wealth, which aims to reduce inequality. For example, through progressive taxation and social welfare programs, a mixed economy seeks to provide a safety net for those in need and ensure a more equitable distribution of resources.
Question 8:
Which economic concept refers to the total value of goods and services produced within a country in a given period of time?
a) Gross Domestic Product (GDP)
b) Inflation rate
c) Unemployment rate
d) Consumer price index
Answer: a) Gross Domestic Product (GDP)
Explanation: Gross Domestic Product is a measure of the total value of all goods and services produced within a country\’s borders in a specific time period. It is often used as an indicator of a country\’s economic performance. For example, if a country\’s GDP increases from $1 trillion to $1.2 trillion in a year, it indicates that the overall economic output has grown by 20%.
Question 9:
Which of the following is an example of a trade surplus?
a) Imports exceed exports
b) Exports exceed imports
c) Balance of trade is zero
d) Current account deficit
Answer: b) Exports exceed imports
Explanation: A trade surplus occurs when the value of a country\’s exports exceeds the value of its imports. This means that the country is exporting more goods and services than it is importing, resulting in a positive balance of trade. For example, if Country A exports $100 billion worth of goods and services and imports $80 billion, it has a trade surplus of $20 billion.
Question 10:
Which international organization is responsible for providing financial assistance and promoting global monetary cooperation?
a) United Nations
b) International Monetary Fund (IMF)
c) World Bank
d) Organization for Economic Cooperation and Development (OECD)
Answer: b) International Monetary Fund (IMF)
Explanation: The International Monetary Fund is an international organization that aims to promote global monetary cooperation, secure financial stability, and provide financial assistance to member countries facing economic crises. For example, during the global financial crisis of 2008, the IMF provided loans and technical assistance to countries in need to help stabilize their economies.
Question 11:
Which of the following is an example of a non-tariff barrier to trade?
a) Import quotas
b) Embargo
c) Tariffs
d) Exchange rate fluctuations
Answer: b) Embargo
Explanation: An embargo is a government-imposed restriction on trade with a specific country or group of countries. It is a non-tariff barrier to trade because it does not involve the imposition of tariffs or quotas. For example, if Country A imposes an embargo on Country B, it prohibits all trade between the two countries, including the import and export of goods and services.
Question 12:
Which economic theory suggests that a government should intervene to stabilize the economy during times of recession or inflation?
a) Keynesian economics
b) Monetarism
c) Laissez-faire economics
d) Supply-side economics
Answer: a) Keynesian economics
Explanation: Keynesian economics is an economic theory that advocates for government intervention in the economy to promote stability and address fluctuations in aggregate demand. It suggests that during times of recession, the government should increase spending and lower taxes to stimulate economic activity, while during times of inflation, the government should decrease spending and raise taxes to reduce demand. For example, during the Great Depression, the U.S. government implemented Keynesian policies, such as increased public spending on infrastructure projects, to stimulate the economy.
Question 13:
Which economic indicator measures the average change in prices of goods and services over time?
a) Consumer price index
b) Gross Domestic Product (GDP)
c) Unemployment rate
d) Inflation rate
Answer: a) Consumer price index
Explanation: The consumer price index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used to estimate inflation and price changes in an economy. For example, if the CPI increases by 2% in a year, it indicates that the overall price level has risen by that amount.
Question 14:
Which of the following is an example of a multinational corporation (MNC)?
a) Small family-owned business
b) Local grocery store
c) Coca-Cola Company
d) Sole proprietorship
Answer: c) Coca-Cola Company
Explanation: A multinational corporation (MNC) is a company that operates in multiple countries and has a global presence. Coca-Cola Company is an example of an MNC as it has operations and sells its products in numerous countries around the world. For example, Coca-Cola has bottling plants and distribution networks in various countries, making it a multinational corporation.
Question 15:
Which economic principle states that as more units of a good are consumed, the satisfaction or utility derived from each additional unit decreases?
a) Law of supply
b) Law of demand
c) Law of diminishing marginal utility
d) Law of comparative advantage
Answer: c) Law of diminishing marginal utility
Explanation: The law of diminishing marginal utility states that as individuals consume more units of a good, the additional satisfaction or utility derived from each additional unit decreases. This is because individuals tend to satisfy their most urgent needs first and as they consume more, the marginal utility decreases. For example, if a person is hungry and eats their first slice of pizza, they will experience high satisfaction. However, as they consume more slices, the satisfaction or utility derived from each additional slice will decrease.