EBE Revision

Which of the following is NOT a responsibility of different sectors in the economy?

• Producing and distributing goods and services

• Consuming goods and services

• Performing activities to allow production and consumption to occur

• Only saving money

Answer explanation

The correct choice, 'Only saving money', is not a responsibility of different sectors in the economy. Sectors are primarily involved in producing, distributing, and consuming goods and services, not just saving.

Investment (I) is considered a leakage from the circular flow of income.

• True

• False

Answer explanation

Investment (I) is not a leakage; it is an injection into the circular flow of income, stimulating economic activity. Therefore, the statement is false.

What are the two key roles of the government sector in the circular flow of income?

• Taxation (Leakage) and Government Expenditure (Injection)

• Production and Consumption

• Imports and Exports

• Saving and Investment

Answer explanation

The government sector plays a crucial role in the circular flow of income through taxation (leakage) and government expenditure (injection), balancing the economy by redistributing income and stimulating demand.

Exports (X) are considered an injection into the economy.

• True

• False

Answer explanation

True. Exports (X) are considered an injection into the economy because they represent spending by foreign buyers on domestic goods and services, thus increasing overall economic activity.

Imports (M) are a ______ from the economy.

• leakage

• injection

• subsidy

• output

Answer explanation

Imports (M) represent money leaving the economy to purchase foreign goods, which is why they are classified as a leakage. This reduces the overall economic activity, unlike injections that add to it.

The business cycle refers to:

• The movement of goods between businesses

• The cyclical fluctuations in the level of economic activity

• The process of saving and investing

• The role of government in the economy

Answer explanation

The business cycle refers to the cyclical fluctuations in the level of economic activity, including periods of expansion and contraction, making this the correct choice.

What happens during an economic contraction?

• Production increases, unemployment decreases, wages increase, consumer spending increases, prices increase

• Production decreases, unemployment increases, wages decrease, consumer spending decreases, prices decrease

• Production stays the same, unemployment stays the same, wages stay the same, consumer spending stays the same, prices stay the same

• Production increases, unemployment increases, wages increase, consumer spending increases, prices decrease

Answer explanation

During an economic contraction, production decreases, leading to higher unemployment and lower wages. Consumer spending also declines as people have less income, which can result in lower prices.

Fill in the blank: A period of low economic activity, with decreases in production, profits, wages, employment, and inflation, is known as a ________.

• bust

• boom

• expansion

• recovery

Answer explanation

A period of low economic activity characterized by declines in production, profits, wages, employment, and inflation is referred to as a 'bust'. This contrasts with a 'boom', which indicates economic growth.

When the economy expands, what happens to unemployment?

• Unemployment increases

• Unemployment decreases

• Unemployment stays the same

• Unemployment disappears completely

Answer explanation

When the economy expands, businesses grow and require more workers, leading to job creation. This results in a decrease in unemployment as more people find jobs.

During a boom, there is a period of high economic growth and an increase in consumer spending.

• True

• False

Answer explanation

True. A boom is characterized by high economic growth and increased consumer spending, indicating a thriving economy.