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gce2025economics
Q1. The law of demand states that
Athe higher the price, the higher the quantity demanded.
Bthe lower the price, the higher the quantity demanded.
Cprice and quantity demanded are directly proportional.
Ddemand is constant regardless of price changes.
Correct Answer: B
The law of demand states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity demanded, meaning lower prices lead to higher quantities demanded.
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gce2025economics
Q2. If the quantity demanded of a good increases as its price falls, the demand is
Aelastic.
Binelastic.
Cunitary elastic.
Dperfectly inelastic.
Correct Answer: A
Elastic demand means that the percentage change in quantity demanded is greater than the percentage change in price, so quantity demanded increases significantly when price falls.
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gce2025economics
Q3. A shift in the demand curve to the right indicates
Aa decrease in demand.
Ban increase in demand.
Ca movement along the curve.
Da decrease in supply.
Correct Answer: B
A rightward shift of the demand curve represents an increase in demand at every price level, often due to factors like income rise or preferences change.
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gce2025economics
Q4. The concept of opportunity cost refers to
Athe money cost of production.
Bthe best alternative forgone.
Cthe total cost of inputs.
Dthe fixed cost of production.
Correct Answer: B
Opportunity cost is the value of the next best alternative that is sacrificed when a choice is made, reflecting the true cost of decisions.
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gce2025economics
Q5. In a perfectly competitive market, the firm's demand curve is
Adownward sloping.
Bupward sloping.
Cperfectly elastic.
Dperfectly inelastic.
Correct Answer: C
In perfect competition, firms are price takers, facing a horizontal (perfectly elastic) demand curve at the market price, as they can sell any quantity at that price.
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gce2025economics
Q6. Marginal cost is the
Atotal cost divided by output.
Bchange in total cost due to a unit change in output.
Caverage cost multiplied by output.
Dfixed cost per unit.
Correct Answer: B
Marginal cost measures the additional cost of producing one more unit of output, calculated as the change in total cost divided by the change in quantity.
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gce2025economics
Q7. Economies of scale occur when
Aaverage cost increases with output.
Baverage cost decreases with output.
Cmarginal cost equals average cost.
Dtotal cost remains constant.
Correct Answer: B
Economies of scale refer to the cost advantages from increasing production scale, leading to lower average costs per unit due to spreading fixed costs.
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gce2025economics
Q8. A monopoly exists when there is
Amany sellers and identical products.
Bone seller and no close substitutes.
Cfew sellers and differentiated products.
Dmany sellers and differentiated products.
Correct Answer: B
A monopoly features a single seller with no close substitutes, allowing control over price and output.
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gce2025economics
Q9. The central bank controls money supply through
Afiscal policy only.
Bopen market operations.
Ctaxation measures.
Dgovernment spending.
Correct Answer: B
Open market operations involve buying or selling government securities to adjust the money supply, a key monetary policy tool of central banks.
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gce2025economics
Q10. Inflation is a sustained
Aincrease in the general price level.
Bdecrease in the general price level.
Crise in money supply only.
Dfall in unemployment rate.
Correct Answer: A
Inflation is defined as a persistent rise in the general price level of goods and services over time, reducing purchasing power.
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gce2025economics
Q11. Unemployment caused by a change in the structure of the economy is
Africtional.
Bcyclical.
Cstructural.
Dseasonal.
Correct Answer: C
Structural unemployment arises from mismatches between workers' skills and job requirements due to economic shifts like technological changes.
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gce2025economics
Q12. National income is measured using the
Aexpenditure method only.
Bincome method only.
Coutput method only.
Dany of the above methods.
Correct Answer: D
National income can be calculated via the expenditure approach (total spending), income approach (total earnings), or output approach (value added), all yielding the same result in theory.
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gce2025economics
Q13. Fiscal policy involves the use of
Ataxation and government spending.
Binterest rates and money supply.
Cexchange rates only.
Dimport quotas.
Correct Answer: A
Fiscal policy uses government revenue (taxation) and expenditure (spending) to influence economic activity, unlike monetary policy which uses money supply tools.
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gce2025economics
Q14. A regressive tax is one where the
Atax rate increases as income increases.
Btax rate decreases as income increases.
Ctax burden is equal for all.
Dtax is based on expenditure.
Correct Answer: B
Regressive taxes take a larger percentage of income from low earners (e.g., sales tax), so effective rate decreases as income rises.
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gce2025economics
Q15. The multiplier effect refers to the
Aincrease in income due to an initial increase in investment.
Bdecrease in consumption due to inflation.
Crise in exports due to devaluation.
Dfall in imports due to tariffs.
Correct Answer: A
The multiplier amplifies initial spending changes (e.g., investment) through successive rounds of consumption, leading to a larger increase in national income.
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gce2025economics
Q16. Comparative advantage is the ability to produce a good
Aat a lower opportunity cost than others.
Bwith absolute efficiency.
Cusing more resources.
Dat higher cost but better quality.
Correct Answer: A
Comparative advantage allows a country to produce a good at a lower opportunity cost, enabling specialization and mutually beneficial trade.
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gce2025economics
Q17. Tariffs are used to
Apromote free trade.
Brestrict imports.
Cencourage capital flight.
Dreduce domestic production.
Correct Answer: B
Tariffs are taxes on imports that raise their price, discouraging imports to protect domestic industries.
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gce2025economics
Q18. The foreign exchange market is an example of a
Aspot market only.
Bfutures market only.
Cboth spot and forward markets.
Dcommodity market.
Correct Answer: C
The forex market includes spot transactions (immediate exchange) and forward contracts (future exchange at agreed rates).
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gce2025economics
Q19. Economic development differs from economic growth in that it includes
Aincrease in GDP only.
Bimprovement in living standards.
Crise in population.
Dexpansion of industries.
Correct Answer: B
Economic development encompasses growth (GDP increase) plus qualitative improvements like better health, education, and equity in living standards.
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gce2025economics
Q20. Human capital refers to
Aphysical machinery.
Bskilled workforce.
Cnatural resources.
Dfinancial assets.
Correct Answer: B
Human capital is the stock of knowledge, skills, and health in the workforce that enhances productivity and economic output.
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gce2025economics
Q21. The main objective of the World Trade Organization (WTO) is to
Apromote international trade barriers.
Bliberalize international trade.
Ccontrol global inflation.
Dmanage foreign aid.
Correct Answer: B
The WTO aims to reduce trade barriers and promote free trade through negotiated agreements, dispute settlement, and rule enforcement.
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gce2025economics
Q22. In a command economy, resources are allocated by
Amarket forces.
Bgovernment planning.
Cconsumer preferences.
Dprice mechanism.
Correct Answer: B
In a command (planned) economy, the government centrally plans production, distribution, and pricing to meet societal goals.
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gce2025economics
Q23. The Lorenz curve is used to measure
Aincome distribution.
Bpopulation growth.
Cexport volumes.
Dinflation rates.
Correct Answer: A
The Lorenz curve graphically shows income inequality; the greater the curve's deviation from the line of equality, the more unequal the distribution.
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gce2025economics
Q24. Public goods are characterized by
Arivalry and excludability.
Bnon-rivalry and non-excludability.
Crivalry but non-excludability.
Dexcludability but non-rivalry.
Correct Answer: B
Public goods like national defense are non-rivalrous (one's use doesn't reduce availability) and non-excludable (can't prevent non-payers from benefiting).
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gce2025economics
Q25. The Phillips curve shows the relationship between
Ainflation and unemployment.
Bgrowth and inflation.
Cexports and imports.
Dsavings and investment.
Correct Answer: A
The Phillips curve illustrates an inverse short-run relationship between inflation rates and unemployment rates.
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gce2025economics
Q26. A budget deficit occurs when
Agovernment revenue exceeds expenditure.
Bgovernment expenditure exceeds revenue.
Ctaxes equal spending.
Dborrowing equals savings.
Correct Answer: B
A budget deficit arises when government spending surpasses revenue, requiring borrowing to finance the shortfall.
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gce2025economics
Q27. The main function of commercial banks is to
Aprint money.
Baccept deposits and grant loans.
Ccontrol fiscal policy.
Dregulate international trade.
Correct Answer: B
Commercial banks intermediate by accepting deposits from savers and providing loans to borrowers, facilitating economic transactions.
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gce2025economics
Q28. Elasticity of supply measures
Aresponsiveness of quantity supplied to price changes.
Bresponsiveness of quantity demanded to income changes.
Cchange in demand due to price.
Dshift in supply curve.
Correct Answer: A
Price elasticity of supply (Es) quantifies how much quantity supplied responds to a change in price.
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gce2025economics
Q29. Infant industries are protected by
Afree trade policies.
Btariffs and subsidies.
Cderegulation.
Dprivatization.
Correct Answer: B
Tariffs and subsidies shield new industries from foreign competition, allowing them to grow until competitive.
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gce2025economics
Q30. The Harrod-Domar model emphasizes the role of
Apopulation growth.
Bsavings and investment in growth.
Ctrade balance.
Dinflation control.
Correct Answer: B
The model posits that economic growth depends on the savings rate and capital-output ratio, highlighting investment's role in increasing productive capacity.
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gce2025economics
Q31. A commodity has a perfectly elastic demand when
Aboth the buyers and sellers burden the tax.
Bthe price of the commodity is $4.
Ca change from point x to z.
Da unit change in price causes an infinite change in quantity demanded.
Correct Answer: D
Perfectly elastic demand (Es = ∞) means quantity demanded drops to zero with any price increase, as seen in perfect competition.
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gce2025economics
Q32. One advantage a country has over another country’s production is
Athe government leads to a greater economic growth.
Bthe country enjoys a large financial stability.
Ccapacity to attract immigrants.
Dcapacity to attract emigrants.
Correct Answer: C
The ability to attract immigrants indicates skilled labor inflow, enhancing production advantages through human capital.
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gce2025economics
Q33. The presence of many sellers and buyers in the market
Asupply and demand operators for short term loans.
Bsupply and demand operators for long term loans.
Cgovernment prints currency.
Dgovernment prints money.
Correct Answer: A
In a competitive market with many buyers and sellers, it resembles the money market for short-term loans, balancing supply and demand.
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gce2025economics
Q34. Balance of payments is defined as the
Adifference between the values of visible imports and visible exports.
Brecord of financial transactions between a country and the rest of the world.
Crelationship between prices of exports and prices of imports.
Ddifference between a country’s expected revenue and proposed expenditure.
Correct Answer: B
Balance of payments records all economic transactions (current and capital accounts) between residents and non-residents over a period.
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gce2025economics
Q35. Devaluation of currency will help to correct balance of payments deficit if a country’s
Aexports have perfectly inelastic demand.
Bimports have inelastic demand.
Cexports have elastic demand.
Dproductivity is low.
Correct Answer: C
Devaluation makes exports cheaper and imports costlier; elastic export demand leads to greater export volume increase, improving the trade balance.
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gce2025economics
Q36. Terms of trade is favourable when the
Avalue of visible imports is greater than that of visible exports.
Bprice of imports is greater than that of exports.
Cpayments on imports is greater than receipts from exports.
Dprice of exports is rising faster than that of imports.
Correct Answer: D
Favorable terms of trade occur when export prices rise relative to import prices, allowing more imports per unit of exports.
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gce2025economics
Q37. Short-term deficits in the current account of the balance of payments can be financed by balancing with the
AInvisible account.
Bcapital account.
Cvisible account.
Dnational income account.
Correct Answer: B
Current account deficits (trade in goods/services) are offset by capital account surpluses (investments, loans) in the balance of payments.
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gce2025economics
Q38. Harmonised monetary and fiscal policies is a feature of
Aa free trade area.
Ban economic union.
Ca customs union.
Da common market.
Correct Answer: B
An economic union involves coordinated monetary and fiscal policies, including a common currency, to achieve deeper integration.
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gce2025economics
Q39. One major achievement of the Economic Commission for Africa (ECA) is the
Asetting up of the African Development Bank (AfDB).
Bprovision of long term loans to non-members.
Creduction of balance of payments problems in Africa.
Dremoving the gap between African countries and the rich nations.
Correct Answer: A
The ECA played a key role in establishing the AfDB in 1964 to promote economic development and integration in Africa.
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gce2025economics
Q40. Exploitation of solid minerals in developing countries can stabilize their revenue base mainly because it helps in
Apromoting a mono-economy.
Bthe transfer of technology.
Cthe diversification of the economy.
Dthe provision of energy.
Correct Answer: C
Solid mineral exploitation diversifies revenue sources beyond agriculture or oil, reducing dependence on volatile commodities and stabilizing fiscal income.