Types of Countries & Development (A.I.S)
What type of country is characterized by low industrialization, lower average income, and high reliance on agriculture?
Developing Country (or Least Developed Country / LDC)
According to the Law of Demand, what happens to the quantity demanded of a product when its price increases?
The quantity demanded decreases.
Roads, bridges, clean water networks, and electrical grids fall under what general economic category?
Infrastructure (Physical Infrastructure)
What does the acronym GDP stand for, and what basic metric does it measure?
Gross Domestic Product; it measures the total monetary value of all final goods and services produced within a country in a given time period.
What is the definition of inflation in an economy?
A general and sustained increase in the overall price levels of goods and services over time (or the loss of purchasing power).
What does the acronym "A.I.S." stand for in the context of economic development sectors?
Agriculture, Industry, and Services
According to the Law of Supply, how do producers usually react when the market price of a good goes up?
They produce and offer more of that good for sale (quantity supplied increases).
What is the difference between a direct tax and an indirect tax?
A direct tax is paid straight to the government by the individual or business (e.g., income tax), while an indirect tax is collected by an intermediary on goods/services (e.g., sales tax or VAT).
What is the primary structural difference between public debt and private debt?
Public debt is owed by the national or local government, while private debt is owed by individual citizens, households, or private businesses.
What is deflation, and why is it often considered dangerous for a nation's economy?
Deflation is a sustained drop in general price levels; it is dangerous because consumers delay purchases expecting lower prices, leading to reduced business revenues, wage cuts, and economic stagnation.
As a country transitions from a developing economy to a developed economy, what usually happens to the percentage of its workforce employed in the Agriculture sector?
It decreases (workers shift into the Industry and Services sectors).
What is the term for the point on a supply and demand graph where the supply curve and demand curve intersect?
Equilibrium Price
Which branch of economic policy involves government decisions regarding spending levels and taxation rates?
Fiscal Policy
What is a Non-Performing Loan (NPL) in the banking and finance sector?
A loan where the borrower has failed to make scheduled payments for a specified period (usually 90 days), putting the loan in default or close to default.
Historically, currency devaluation can force smaller sub-units of currency—such as the Thai satang or cents in other systems—out of active use. Why does inflation cause small currency units to lose practical function?
As prices rise, the purchasing power of tiny denominations becomes so negligible that the cost of minting/using them exceeds their actual market value.
What is a Newly Industrialized Country (NIC), and what is one common characteristic of its economy?
A nation transitioning from developing to developed status, characterized by rapid economic growth and a strong shift toward export-led manufacturing.
If the current market price of an item is set above the equilibrium price, will it result in a shortage or a surplus? Explain why.
A surplus, because the higher price encourages producers to supply more than consumers are willing to buy.
If a government spends more money in a fiscal year than it collects in tax revenues, what type of budget is it operating under?
A Budget Deficit (or Deficit Budget)
In government budgeting, how does discretionary spending differ from mandatory spending?
Discretionary spending is optional spending that lawmakers must approve annually through legislation, whereas mandatory spending is required by existing law (such as entitlement programs).
If an economy is experiencing high inflation due to excess demand, what is one major solution a government or central bank can implement?
Increase interest rates, raise taxes, or cut government spending to reduce the total demand for goods and services.
Why might a nation with a high Gross Domestic Product (GDP) still be classified as a developing country rather than a developed one?
Because GDP alone does not account for income inequality, high population size, poor infrastructure, low Human Development Index (HDI) scores, or lack of access to healthcare and education.
If a popular tech company releases a breakthrough product that becomes extremely popular while production costs simultaneously spike, how do the demand and supply curves shift, and what is the definite effect on equilibrium price?
The demand curve shifts to the right and the supply curve shifts to the left; the equilibrium price will definitely increase.
How does a central bank use monetary policy to cool down an overheating economy, and what tool does it typically adjust to achieve this?
It contracts the money supply by increasing interest rates (or reserve requirements) to slow down borrowing and consumer spending.
Explain the concept of "generational debt" and how persistent national debt can lead to it.
Generational debt occurs when current government borrowing to fund immediate spending passes the financial burden onto future generations, who must pay higher taxes or receive fewer public services to service the accumulated debt.
How does hyperinflation impact fixed-income earners and savers compared to debtors who borrowed money at a fixed interest rate before the inflation occurred?
Fixed-income earners and savers lose purchasing power dramatically as their money becomes worthless, while debtors benefit because they repay their fixed debts with money that is worth far less than when they borrowed it.