Test on Foundational Economic Concepts

Question 1: De-industrialisation is characterized by an increase in manufacturing activity.

A. Ano

B. Ne

Explanation: De-industrialisation is defined as a decline in the importance of manufacturing, not an increase.

Question 2: According to the study materials, which of the following accurately describe a function or characteristic of an economy?

A. It is a system that coordinates productive activities.

B. It produces and distributes goods and services.

C. It decides what resources will be used, how they will be used, who makes decisions, and who benefits from the resources.

D. Its primary role is to manage the flow of money and resources exclusively between households and the government.

Explanation: The study materials define an economy as a system that coordinates productive activities. It also states that an economy produces and distributes goods and services, and it decides what resources will be used, how they will be used, who makes decisions, and who benefits from the resources. The materials mention that money and resources flow between households, businesses, and government, not exclusively between households and the government.

Question 3: High-income households typically spend the majority of their income on necessities.

A. Ano

B. Ne

Explanation: The study materials state that high-income households 'Spend a smaller proportion on necessities,' indicating they do not spend the majority of their income on them.

Question 4: According to the study materials, what is a direct consequence of an increase in interest rates?

A. Borrowing becomes less expensive.

B. Spending increases.

C. Saving becomes more attractive.

D. Income for households decreases.

Explanation: The study materials state that when interest rates increase, 'Saving becomes more attractive.' Conversely, borrowing becomes more expensive, and spending decreases. There is no direct mention that income for households decreases due to increased interest rates.

Question 5: Under a profit sharing scheme, employees receive a portion of the company's profits.

A. Ano

B. Ne

Explanation: Profit sharing is defined as when employees receive part of the company's profits.