Grade 12 Economics Paper 1 Diagnostic Test

What are the four sectors in the circular flow of income?

• Households, Firms, Government, Non-Profit Sector

• Households, Firms, Banks, Foreign Sector

• Households, Firms, Government, Foreign Sector

• Households, Firms, Government, Local Sector

What is the equilibrium condition in the circular flow model?

• Injections = Leakages

• Savings = Investment

• Government Spending = Tax Revenue

• Exports = Imports

Which of the following is considered a leakage in the circular flow?

• Exports

• Taxes

• Investment

• Government Spending

What does the multiplier effect refer to?

• The decrease in savings when income rises

• The increase in taxes due to higher income

• The ratio of change in income to initial spending change

• The reduction in government spending during a recession

What phase of the business cycle is characterized by high unemployment?

• Recovery

• Expansion

• Recession

• Boom

Which of the following is a leading indicator of the business cycle?

• GDP

• Unemployment Rate

• Building Plans

• CPI

What is an automatic stabilizer in fiscal policy?

• A fixed government spending program

• A policy that only activates during recessions

• A tax that changes with income levels

• A government program that requires new legislation

What is the primary role of the public sector?

• Maximizing profits

• Competing with private firms

• Providing public goods

• Reducing taxes

Which of the following is a public good?

• National Defense

• Healthcare

• Public Transport

• Private Education

What does the term 'dumping' refer to in trade policy?

• Selling goods at a loss to gain market share

• Imposing tariffs on imports

• Subsidizing local industries

• Restricting the quantity of imports