Fall SemeSter 2025 – eCS1601 eConomiCS iB |
novemBer/DeCemBer PortFolio ComPlete
anSWerS | UPDateD 2025/2026 eDition | veriFieD
UniSa StUDy GUiDe | DUe 12 DeCemBer 2025 | 100%
exam-reaDy reSoUrCe For UniverSity oF SoUth
aFriCa StUDentS
Question 1:
What is the primary purpose of a country's central bank?
A) To manage the national budget
B) To regulate the banking sector
C) C) To control inflation and stabilize the currency
D) To set tariffs on imports
Correct Option: C) To control inflation and stabilize the currency
Rationale: The central bank's main objective is to maintain price stability and control
inflation through monetary policy. It also plays a crucial role in stabilizing the currency
by managing interest rates and influencing money supply.
Question 2:
Which of the following is an example of a positive economic statement?
A) The government should increase the minimum wage.
B) B) An increase in demand leads to a rise in prices.
C) The rich should pay higher taxes.
D) The economy is not doing well.
Correct Option: B) An increase in demand leads to a rise in prices.
Rationale: Positive economic statements are objective and can be tested or validated.
This statement describes a cause-and-effect relationship that can be analyzed through
economic models.
Question 3:
What does the term 'opportunity cost' refer to?
A) The amount of money spent on a particular choice
B) B) The value of the next best alternative forgone
C) The total cost incurred in production
D) The cost of resources used in production
Correct Option: B) The value of the next best alternative forgone
Rationale: Opportunity cost represents the benefits that are missed or given up when
,choosing one alternative over another. It is a key concept in economics that emphasizes
trade-offs.
Question 4:
In which market structure do firms have some control over the price of their
products?
A) Perfect competition
B) B) Monopolistic competition
C) Oligopoly
D) Monopoly
Correct Option: B) Monopolistic competition
Rationale: In monopolistic competition, many firms sell products that are similar but
not identical, allowing them to have some price-setting power, unlike firms in perfect
competition.
Question 5:
What is GDP a measure of?
A) The total population of a country
B) B) The total value of all goods and services produced in a country
C) The distribution of income within a country
D) The amount of foreign investment in a country
Correct Option: B) The total value of all goods and services produced in a country
Rationale: Gross Domestic Product (GDP) measures the economic output of a country,
indicating the health of its economy by reflecting the total market value of all final goods
and services produced within a specific time period.
Question 6:
What is the primary function of fiscal policy?
A) To control inflation
B) B) To influence the economy through government spending and taxation
C) To manage the money supply
D) To regulate international trade
Correct Option: B) To influence the economy through government spending and
taxation
Rationale: Fiscal policy involves government decisions on spending and taxation to
influence economic activity, aiming to achieve macroeconomic objectives like stable
growth and low unemployment.
,Question 7:
Which of the following is a characteristic of a monopoly?
A) Many firms competing
B) B) Single seller in the market
C) Homogeneous products
D) Perfect information
Correct Option: B) Single seller in the market
Rationale: A monopoly exists when a single firm dominates the market, allowing it to
control prices and output without competition.
Question 8:
What does a PPF (Production Possibility Frontier) illustrate?
A) The impact of inflation on production
B) B) The maximum possible output combinations of two goods
C) The relationship between price and quantity demanded
D) The effects of government regulation
Correct Option: B) The maximum possible output combinations of two goods
Rationale: The PPF shows the trade-offs between two goods, illustrating the maximum
production efficiency and opportunity costs in an economy.
Question 9:
What is the main goal of monetary policy?
A) To increase government spending
B) B) To control inflation and stabilize the currency
C) To reduce taxes
D) To promote international trade
Correct Option: B) To control inflation and stabilize the currency
Rationale: Monetary policy aims to manage the economy's money supply and interest
rates to achieve price stability and economic growth.
Question 10:
Which of the following best describes 'elasticity' in economics?
A) The amount of goods available in the market
B) B) The responsiveness of quantity demanded or supplied to changes in price
C) The total revenue generated by sales
D) The fixed costs in production
, Correct Option: B) The responsiveness of quantity demanded or supplied to
changes in price
Rationale: Elasticity measures how much the quantity demanded or supplied changes
in response to price changes, helping to understand consumer and producer behavior.
Question 11:
What is inflation?
A) A decrease in the general price level
B) B) An increase in the general price level of goods and services
C) A rise in unemployment rates
D) A decrease in economic growth
Correct Option: B) An increase in the general price level of goods and services
Rationale: Inflation refers to the rate at which the general level of prices for goods and
services rises, eroding purchasing power.
Question 12:
What is a 'public good'?
A) A good that is sold in a competitive market
B) B) A good that is non-excludable and non-rivalrous
C) A good produced only by the government
D) A good that is consumed privately
Correct Option: B) A good that is non-excludable and non-rivalrous
Rationale: Public goods are available to all and one person's consumption does not
reduce availability for others, leading to market failure if provided solely by the private
sector.
Question 13:
What does the term 'market failure' refer to?
A) When prices fall unexpectedly
B) B) When the allocation of resources is not efficient
C) When firms earn high profits
D) When there is perfect competition
Correct Option: B) When the allocation of resources is not efficient
Rationale: Market failure occurs when free markets fail to allocate resources efficiently,
leading to overproduction or underproduction of goods and services.
Question 14:
novemBer/DeCemBer PortFolio ComPlete
anSWerS | UPDateD 2025/2026 eDition | veriFieD
UniSa StUDy GUiDe | DUe 12 DeCemBer 2025 | 100%
exam-reaDy reSoUrCe For UniverSity oF SoUth
aFriCa StUDentS
Question 1:
What is the primary purpose of a country's central bank?
A) To manage the national budget
B) To regulate the banking sector
C) C) To control inflation and stabilize the currency
D) To set tariffs on imports
Correct Option: C) To control inflation and stabilize the currency
Rationale: The central bank's main objective is to maintain price stability and control
inflation through monetary policy. It also plays a crucial role in stabilizing the currency
by managing interest rates and influencing money supply.
Question 2:
Which of the following is an example of a positive economic statement?
A) The government should increase the minimum wage.
B) B) An increase in demand leads to a rise in prices.
C) The rich should pay higher taxes.
D) The economy is not doing well.
Correct Option: B) An increase in demand leads to a rise in prices.
Rationale: Positive economic statements are objective and can be tested or validated.
This statement describes a cause-and-effect relationship that can be analyzed through
economic models.
Question 3:
What does the term 'opportunity cost' refer to?
A) The amount of money spent on a particular choice
B) B) The value of the next best alternative forgone
C) The total cost incurred in production
D) The cost of resources used in production
Correct Option: B) The value of the next best alternative forgone
Rationale: Opportunity cost represents the benefits that are missed or given up when
,choosing one alternative over another. It is a key concept in economics that emphasizes
trade-offs.
Question 4:
In which market structure do firms have some control over the price of their
products?
A) Perfect competition
B) B) Monopolistic competition
C) Oligopoly
D) Monopoly
Correct Option: B) Monopolistic competition
Rationale: In monopolistic competition, many firms sell products that are similar but
not identical, allowing them to have some price-setting power, unlike firms in perfect
competition.
Question 5:
What is GDP a measure of?
A) The total population of a country
B) B) The total value of all goods and services produced in a country
C) The distribution of income within a country
D) The amount of foreign investment in a country
Correct Option: B) The total value of all goods and services produced in a country
Rationale: Gross Domestic Product (GDP) measures the economic output of a country,
indicating the health of its economy by reflecting the total market value of all final goods
and services produced within a specific time period.
Question 6:
What is the primary function of fiscal policy?
A) To control inflation
B) B) To influence the economy through government spending and taxation
C) To manage the money supply
D) To regulate international trade
Correct Option: B) To influence the economy through government spending and
taxation
Rationale: Fiscal policy involves government decisions on spending and taxation to
influence economic activity, aiming to achieve macroeconomic objectives like stable
growth and low unemployment.
,Question 7:
Which of the following is a characteristic of a monopoly?
A) Many firms competing
B) B) Single seller in the market
C) Homogeneous products
D) Perfect information
Correct Option: B) Single seller in the market
Rationale: A monopoly exists when a single firm dominates the market, allowing it to
control prices and output without competition.
Question 8:
What does a PPF (Production Possibility Frontier) illustrate?
A) The impact of inflation on production
B) B) The maximum possible output combinations of two goods
C) The relationship between price and quantity demanded
D) The effects of government regulation
Correct Option: B) The maximum possible output combinations of two goods
Rationale: The PPF shows the trade-offs between two goods, illustrating the maximum
production efficiency and opportunity costs in an economy.
Question 9:
What is the main goal of monetary policy?
A) To increase government spending
B) B) To control inflation and stabilize the currency
C) To reduce taxes
D) To promote international trade
Correct Option: B) To control inflation and stabilize the currency
Rationale: Monetary policy aims to manage the economy's money supply and interest
rates to achieve price stability and economic growth.
Question 10:
Which of the following best describes 'elasticity' in economics?
A) The amount of goods available in the market
B) B) The responsiveness of quantity demanded or supplied to changes in price
C) The total revenue generated by sales
D) The fixed costs in production
, Correct Option: B) The responsiveness of quantity demanded or supplied to
changes in price
Rationale: Elasticity measures how much the quantity demanded or supplied changes
in response to price changes, helping to understand consumer and producer behavior.
Question 11:
What is inflation?
A) A decrease in the general price level
B) B) An increase in the general price level of goods and services
C) A rise in unemployment rates
D) A decrease in economic growth
Correct Option: B) An increase in the general price level of goods and services
Rationale: Inflation refers to the rate at which the general level of prices for goods and
services rises, eroding purchasing power.
Question 12:
What is a 'public good'?
A) A good that is sold in a competitive market
B) B) A good that is non-excludable and non-rivalrous
C) A good produced only by the government
D) A good that is consumed privately
Correct Option: B) A good that is non-excludable and non-rivalrous
Rationale: Public goods are available to all and one person's consumption does not
reduce availability for others, leading to market failure if provided solely by the private
sector.
Question 13:
What does the term 'market failure' refer to?
A) When prices fall unexpectedly
B) B) When the allocation of resources is not efficient
C) When firms earn high profits
D) When there is perfect competition
Correct Option: B) When the allocation of resources is not efficient
Rationale: Market failure occurs when free markets fail to allocate resources efficiently,
leading to overproduction or underproduction of goods and services.
Question 14:
