D089 Principles of Economics - Set 4 - Part 3

Correct Answer: Inflation caused by an increase in aggregate demand

Demand-pull inflation occurs when overall demand for goods and services exceeds supply, leading to higher prices.

Correct Answer: Inflation caused by increasing production costs, such as wages or raw materials

Cost-push inflation arises when the costs of production increase, leading firms to raise prices to maintain profit margins.

Correct Answer: A tax that increases as income increases

A progressive tax system imposes higher tax rates on individuals or entities with higher incomes, with the intent of creating a more equitable distribution of wealth.

Correct Answer: To promote free trade by reducing tariffs and other trade barriers

The WTO promotes global trade by encouraging countries to reduce tariffs and trade barriers, ensuring smooth and predictable international commerce.

Correct Answer: Nominal GDP is measured using current prices, while real GDP is adjusted for inflation

Nominal GDP reflects the total value of goods and services at current prices, while real GDP adjusts for inflation, providing a more accurate measure of economic growth.

Correct Answer: A direct payment or financial support provided by the government to encourage production

Subsidies are financial incentives provided by the government to encourage the production of certain goods or services, often used in agriculture or renewable energy.

Correct Answer: The concept that self-interest in a free market leads to economic prosperity

The invisible hand, a term coined by Adam Smith, refers to the unintended social benefits of individual actions driven by self-interest in a competitive market.

Correct Answer: The goods and resources used to produce other goods and services

Capital refers to the tools, machinery, and infrastructure that are used in the production of goods and services, as opposed to labor or natural resources.

Correct Answer: A good that is non-excludable and non-rivalrous, meaning it can be used by anyone without reducing its availability to others

Public goods, such as national defense or street lighting, are available to everyone and cannot be restricted based on payment or consumption.

Correct Answer: To generate revenue for the government and protect domestic industries from foreign competition

Tariffs are taxes imposed on imported goods, used to generate revenue and protect domestic industries from foreign competition by making imported goods more expensive.