BSocSc Bachelor of Social Science Bachelor of Social Science Economics 4

Question 1

Which concept explains why nations benefit from trade even when one country is more efficient at producing everything?

Accepted Answer

Comparative advantage

Answer

Comparative advantage shows that a country gains from specializing in goods it produces at lower opportunity cost, even if another country is absolutely more efficient at all goods.

Question 2

When calculating GDP using the expenditure approach, which component is subtracted?

Accepted Answer

Imports

Answer

Imports are subtracted in the expenditure formula (GDP = C + I + G + NX) because they represent spending on foreign-produced goods, not domestic output.

Question 3

The concept of 'moral hazard' in economics refers to:

Accepted Answer

Risky behavior encouraged by being insulated from consequences

Answer

Moral hazard arises when individuals or firms take on greater risk because they do not bear the full cost of that risk, such as when insured parties are less careful.

Question 4

Stagflation, which challenged Keynesian economics in the 1970s, refers to the simultaneous occurrence of:

Accepted Answer

High inflation and high unemployment

Answer

Stagflation — stagnant growth plus inflation — contradicted the traditional Phillips Curve trade-off and prompted reconsideration of demand-management policies.

Question 5

In behavioral economics, 'loss aversion' means people:

Accepted Answer

Feel losses more strongly than equivalent gains

Answer

Kahneman and Tversky found that the pain of losing a given amount is roughly twice as powerful as the pleasure of gaining the same amount.

BSocSc Bachelor of Social Science Practice Test

BSocSc Bachelor of Social Science Practice Test

BSocSc Bachelor of Social Science Bachelor of Social Science Economics 4