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MATSEC IM Economics study materials
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MATSEC IM Economics practice questions

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Question 1Economics (Intermediate Level)

In economics, what does the term 'opportunity cost' refer to?

  1. The total money spent on producing a good
  2. The value of the next best alternative forgone when a choice is made Correct answer.
  3. The difference between total revenue and total cost
  4. The cost of resources that have no alternative use

Explanation

Opportunity cost is the value of the next best alternative sacrificed whenever a choice is made. It exists because resources are scarce and can be put to competing uses. It is not simply the money paid for an input.

Question 2Economics (Intermediate Level)

A production possibility frontier is drawn as a curve bowed outward from the origin. What does this shape indicate?

  1. The economy can produce unlimited quantities of both goods
  2. Technological progress is occurring continuously
  3. Resources are perfectly substitutable between the two goods
  4. Opportunity cost of producing either good rises as output of that good increases Correct answer.

Explanation

A concave (bowed-out) PPF reflects increasing opportunity cost. As more of one good is produced, resources less suited to it must be transferred, so ever more of the other good is sacrificed. A straight-line PPF would indicate constant opportunity cost.

Question 3Economics (Intermediate Level)

Which of the following is a normative economic statement?

  1. An increase in the price of a good reduces the quantity demanded
  2. The government ought to raise the minimum wage to reduce poverty Correct answer.
  3. A rise in income typically increases demand for normal goods
  4. Unemployment rose to 6% last year

Explanation

Normative statements express value judgements about what should be and cannot be tested against evidence. The word 'ought' signals a policy recommendation based on values. Positive statements describe what is and can in principle be verified or refuted.

Question 4Economics (Intermediate Level)

The demand curve for a normal good shifts to the right. Which factor could have caused this shift?

  1. An improvement in production technology
  2. An increase in consumers' disposable income Correct answer.
  3. A fall in the price of the good itself
  4. A rise in the price of a complementary good

Explanation

A rise in disposable income increases demand for a normal good, shifting the demand curve rightward. A change in the good's own price causes movement along the curve, not a shift. Technology and input prices affect supply, not demand.

Question 5Economics (Intermediate Level)

The price of a product rises from €10 to €12 and quantity demanded falls from 100 to 90 units. Using the midpoint method, the price elasticity of demand is approximately:

  1. 1.73
  2. 0.58 Correct answer.
  3. 2.00
  4. 1.00

Explanation

Midpoint percentage change in quantity is (10/95)×100 ≈ 10.5% and in price is (2/11)×100 ≈ 18.2%. Dividing gives an elasticity of about 0.58, so demand is inelastic. The midpoint method avoids different results depending on direction of change.

Question 6Economics (Intermediate Level)

A good has a price elasticity of supply of 0.3. What does this imply?

  1. Supply is unit elastic and quantity supplied changes proportionally
  2. Supply is inelastic and firms respond weakly to price changes Correct answer.
  3. Supply is elastic and firms respond strongly to price changes
  4. The good must be a necessity for consumers

Explanation

When the elasticity of supply is less than one, supply is inelastic, meaning quantity supplied responds proportionally less than the price change. Values above one indicate elastic supply. Elasticity of supply concerns producers, not whether the good is a necessity.

Question 7Economics (Intermediate Level)

A government imposes a maximum price below the equilibrium price. What is the likely outcome?

  1. No effect because the market clears at equilibrium
  2. A surplus of the good as supply exceeds demand
  3. An increase in supply as producers respond to higher prices
  4. A shortage as quantity demanded exceeds quantity supplied Correct answer.

Explanation

A binding price ceiling set below equilibrium prevents the price from rising to clear the market. At that lower price, quantity demanded exceeds quantity supplied, creating a shortage. This may lead to queues or black markets.

Question 8Economics (Intermediate Level)

Which of the following best describes a public good?

  1. A good produced by a state-owned enterprise
  2. A good whose consumption by one person reduces availability to others
  3. A good that is non-excludable and non-rival in consumption Correct answer.
  4. A good provided free of charge by the government

Explanation

Public goods are defined by two characteristics: non-excludability, meaning non-payers cannot easily be prevented from consuming them, and non-rivalry, meaning one person's use does not diminish another's. These features cause market failure through the free-rider problem.

Question 9Economics (Intermediate Level)

A factory's production creates chemical waste that pollutes a nearby river used by residents. In economic terms, this is an example of:

  1. A merit good being underprovided
  2. A negative externality of production Correct answer.
  3. A natural monopoly
  4. A positive externality of consumption

Explanation

A negative externality of production occurs when production imposes costs on third parties not reflected in market prices. Pollution is the classic example, causing marginal social cost to exceed marginal private cost. The market then overproduces relative to the social optimum.

Question 10Economics (Intermediate Level)

The marginal propensity to consume is 0.75. What is the value of the simple multiplier?

  1. 3.00
  2. 1.33
  3. 0.75
  4. 4.00 Correct answer.

Explanation

The simple multiplier equals 1 divided by (1 minus the marginal propensity to consume). With an MPC of 0.75, the multiplier is 1/0.25 = 4. This shows how an initial injection generates a larger final change in national income.

Question 11Economics (Intermediate Level)

Which of the following is counted in the calculation of a country's Gross Domestic Product?

  1. A pension payment transferred from the government to a retiree
  2. The purchase of shares on the stock exchange
  3. The market value of newly built houses produced within the country Correct answer.
  4. The value of a used car sold privately between two individuals

Explanation

GDP measures the market value of final goods and services newly produced within a country's borders in a period. Newly built houses are current production and are included as investment. Used goods, transfers and financial transactions do not create new output.

Question 12Economics (Intermediate Level)

An economy experiences a rise in its Consumer Price Index from 120 to 126 over one year. What was the inflation rate?

  1. 5.0% Correct answer.
  2. 6.25%
  3. 6.0%
  4. 4.8%

Explanation

The inflation rate is the percentage change in the index: (126 − 120) ÷ 120 × 100 = 5%. Dividing by the starting index value converts the change into a rate relative to the base period.

Question 13Economics (Intermediate Level)

Which type of unemployment is most likely to increase when an economy enters a deep recession?

  1. Cyclical unemployment Correct answer.
  2. Seasonal unemployment
  3. Structural unemployment
  4. Frictional unemployment

Explanation

Cyclical unemployment results from a fall in aggregate demand during a downturn, when firms reduce their workforce. It rises and falls with the business cycle. Frictional, structural and seasonal unemployment have different causes.

Question 14Economics (Intermediate Level)

A country's central bank raises its key interest rate. Which is the most likely short-run effect?

  1. The rate of inflation accelerates
  2. Consumption and investment spending rise
  3. Borrowing becomes more expensive and aggregate demand falls Correct answer.
  4. The exchange rate tends to depreciate

Explanation

Higher interest rates increase the cost of borrowing, discouraging consumption and investment and reducing aggregate demand. This contractionary monetary policy is used to reduce inflationary pressure. It also tends to attract capital inflows and appreciate the currency.

Question 15Economics (Intermediate Level)

Which of the following is the main function of a commercial bank in an economy?

  1. Printing notes and coins for circulation
  2. Accepting deposits and making loans to households and firms Correct answer.
  3. Collecting taxes on behalf of the government
  4. Setting the official interest rate for the country

Explanation

Commercial banks act as financial intermediaries, accepting deposits from savers and lending funds to borrowers while managing risk. They thus channel funds from surplus to deficit units. Setting interest rates and issuing currency are central bank functions.

Question 16Economics (Intermediate Level)

A country's current account records a large deficit. Which transaction would help to reduce this deficit?

  1. An increase in dividend payments to foreign investors
  2. A fall in remittances sent home by citizens working abroad
  3. An increase in imports of consumer goods
  4. A rise in earnings from services exported to other countries Correct answer.

Explanation

The current account includes trade in goods and services, plus income and transfers. Higher earnings from exported services are a credit entry that improves the balance. Rising imports or higher income outflows worsen the deficit.

Question 17Economics (Intermediate Level)

A firm's total fixed cost is €200 and its total variable cost at 10 units of output is €300. What is the average total cost at this output?

  1. €50 Correct answer.
  2. €500
  3. €30
  4. €20

Explanation

Total cost is fixed cost plus variable cost, giving €200 + €300 = €500. Average total cost is total cost divided by output, so €500 ÷ 10 = €50. Average fixed and average variable costs sum to the same figure.

Question 18Economics (Intermediate Level)

A firm operating in perfect competition is a price taker. What does this mean?

  1. The firm produces a differentiated product with brand loyalty
  2. The firm can set any price it chooses without losing sales
  3. The firm faces a downward-sloping demand curve
  4. The firm must accept the market price determined by industry supply and demand Correct answer.

Explanation

In perfect competition, many small firms sell an identical product, so no single firm can influence the market price. Each firm faces a horizontal demand curve at the market price and is therefore a price taker. Price-setting power is a feature of imperfect competition.

Question 19Economics (Intermediate Level)

Which characteristic is most closely associated with an oligopolistic market?

  1. Many firms selling a homogeneous product with no barriers to entry
  2. Perfect information and free entry and exit
  3. A single firm supplying the entire market
  4. A few large firms whose decisions are interdependent Correct answer.

Explanation

Oligopoly is characterised by a small number of large firms, each of which must consider the likely reactions of rivals when setting price or output. This strategic interdependence distinguishes it from other market structures. Barriers to entry are typically significant.

Question 20Economics (Intermediate Level)

A profit-maximising firm should continue to increase output as long as:

  1. Marginal cost is falling
  2. Total revenue is rising
  3. Average total cost is falling
  4. Marginal revenue exceeds marginal cost Correct answer.

Explanation

Profit is maximised where marginal revenue equals marginal cost. As long as each extra unit adds more to revenue than to cost, producing it increases profit. Output should therefore expand until the two are equal.

Question 21Economics (Intermediate Level)

The government increases spending on infrastructure during a recession while tax receipts are falling. This policy is best described as:

  1. Expansionary fiscal policy Correct answer.
  2. Supply-side policy
  3. Contractionary fiscal policy
  4. Tight monetary policy

Explanation

Expansionary fiscal policy involves increasing government spending or cutting taxes to boost aggregate demand during a downturn. It typically worsens the budget balance in the short run. Contractionary policy does the opposite.

Question 22Economics (Intermediate Level)

A government wishes to reduce income inequality. Which measure is most directly progressive?

  1. An increase in value added tax on all goods
  2. A flat-rate income tax applied to all earners
  3. A reduction in unemployment benefits
  4. A higher rate of income tax on higher income brackets Correct answer.

Explanation

A progressive tax takes a larger proportion of income from higher earners, which tends to reduce inequality after tax. Higher marginal rates on upper brackets are the clearest example. Flat taxes and indirect taxes are proportionally or regressively distributed.

Question 23Economics (Intermediate Level)

Country A can produce a good using fewer resources than Country B. What does this indicate?

  1. Country A has an absolute advantage in the good Correct answer.
  2. Country B has a comparative advantage in the good
  3. Country A has a comparative advantage in the good
  4. Neither country benefits from trade

Explanation

Absolute advantage means producing a good with fewer resources than another country. Comparative advantage, by contrast, concerns lower opportunity cost. A country can have an absolute advantage yet still gain from importing if its comparative advantage lies elsewhere.

Question 24Economics (Intermediate Level)

A currency depreciates against its trading partners. Which effect is most likely in the short term, other things equal?

  1. Imports become cheaper for domestic consumers
  2. The country's inflation rate falls immediately
  3. Exports become cheaper for foreign buyers and may rise Correct answer.
  4. Exports become more expensive for foreign buyers

Explanation

A depreciation lowers the foreign-currency price of exports, making them more competitive, and raises the domestic price of imports. This can improve the trade balance if demand is sufficiently elastic. It also tends to raise import prices and thus inflation.

Question 25Economics (Intermediate Level)

An economy is at the peak of a boom with rising inflation. Which combination of policies would most likely cool aggregate demand?

  1. Lowering interest rates and depreciating the currency
  2. Raising interest rates and reducing government spending Correct answer.
  3. Raising government spending and lowering taxes
  4. Cutting interest rates and increasing government spending

Explanation

To reduce inflationary pressure, contractionary policy is appropriate: higher interest rates reduce borrowing and spending, while lower government spending reduces aggregate demand directly. Combining monetary and fiscal contraction reinforces the effect. The other combinations are expansionary.

Question 26Economics (Intermediate Level)

In economics, what does the term 'opportunity cost' mean?

  1. The total cost of producing one additional unit of output
  2. The cost that does not change as output varies
  3. The value of the next best alternative forgone when a choice is made Correct answer.
  4. The money paid for a good in a market transaction

Explanation

Opportunity cost is a fundamental concept in the study of scarcity: because resources are limited, choosing one use of a resource means giving up the best alternative use. It is measured by the value of that forgone alternative, not by the money actually spent.

Question 27Economics (Intermediate Level)

Demand for a good rises sharply when consumer incomes rise. What does this show about the good?

  1. It is a Giffen good whose demand falls as its price falls
  2. It is a good with perfectly inelastic price elasticity of demand
  3. It is an inferior good with a negative income elasticity of demand
  4. It is a normal good with a positive income elasticity of demand Correct answer.

Explanation

Income elasticity of demand measures the responsiveness of demand to a change in income. A positive value, with demand rising as income rises, identifies the good as normal; if the response is strong (greater than one) it is a luxury good.

Question 28Economics (Intermediate Level)

The supply curve for a product shifts to the left. Which factor would most plausibly cause this?

  1. A fall in the market price of the product
  2. A rise in consumer incomes
  3. An increase in the wage rate paid to workers in the industry Correct answer.
  4. An effective advertising campaign by producers

Explanation

A leftward shift of supply means less is offered at every price, which happens when production costs rise. Higher wages increase costs of production, so firms supply less at each price. A change in the product's own price causes a movement along the supply curve, not a shift.

Question 29Economics (Intermediate Level)

What happens to total revenue when a firm raises price on a product whose price elasticity of demand is 0.4?

  1. Total revenue is unchanged because elasticity is below one
  2. Total revenue rises because demand is price inelastic Correct answer.
  3. Total revenue falls because demand is price elastic
  4. Total revenue falls because demand is price inelastic

Explanation

When demand is inelastic (elasticity below one in absolute value), the percentage fall in quantity demanded is smaller than the percentage rise in price, so total revenue increases. The firm gains more per unit than it loses in sales volume.

Question 30Economics (Intermediate Level)

A consumer's marginal utility from a good becomes negative. What does this imply?

  1. Total utility is rising at an increasing rate
  2. The good has zero price elasticity of demand
  3. Total utility falls as more of the good is consumed Correct answer.
  4. Total utility is at its maximum and stays constant

Explanation

Marginal utility is the change in total utility from consuming one more unit. When it turns negative, additional consumption reduces total utility, so total utility must be falling. Total utility is maximised at the point where marginal utility is zero.

Question 31Economics (Intermediate Level)

Which statement about a firm's short-run average cost curve is correct?

  1. It rises continuously because every extra unit costs more than the last
  2. It falls continuously as output rises because all costs are spread over more units
  3. It is U-shaped because average fixed cost falls while diminishing returns eventually raise average variable cost Correct answer.
  4. It is horizontal because fixed costs are constant in the short run

Explanation

In the short run, average fixed cost declines steadily as output expands, while diminishing marginal returns eventually cause average variable cost, and hence marginal cost, to rise. The combination produces the familiar U-shape of the average total cost curve.

Question 32Economics (Intermediate Level)

A market has many sellers, a homogeneous product and no barriers to entry, and firms earn only normal profit in the long run. Which market structure is described?

  1. Perfect competition Correct answer.
  2. Monopolistic competition
  3. Oligopoly
  4. Monopoly

Explanation

Perfect competition is defined by many buyers and sellers, a homogeneous product, free entry and exit and perfect information. Free entry ensures that any supernormal profit is competed away, leaving firms with normal profit in long-run equilibrium.

Question 33Economics (Intermediate Level)

In a market with a negative externality in production, what does the free-market outcome imply relative to the social optimum?

  1. Output is too low and price too high because firms underproduce
  2. Output is too high because marginal social benefit exceeds marginal social cost
  3. Output is too high and price too low because private cost excludes external cost Correct answer.
  4. Output equals the social optimum because firms maximise profit

Explanation

When production imposes external costs, marginal private cost lies below marginal social cost, so the market produces beyond the socially efficient quantity at too low a price. This overproduction creates a deadweight loss that a tax or regulation could correct.

Question 34Economics (Intermediate Level)

Which policy is best described as a Pigouvian tax?

  1. A tax set equal to the marginal external cost of a polluting activity Correct answer.
  2. A tax on profits used to fund general government spending
  3. A lump-sum tax levied equally on all firms in an industry
  4. A tariff imposed on imported goods to protect domestic producers

Explanation

A Pigouvian tax is designed to internalise an externality by making the polluter face a charge equal to the marginal external cost. This raises marginal private cost towards marginal social cost and reduces output towards the efficient level.

Question 35Economics (Intermediate Level)

What is the defining feature of a merit good that justifies government provision or subsidy?

  1. It is non-excludable and non-rival in consumption
  2. It tends to be underconsumed because consumers underestimate its private benefit Correct answer.
  3. It is produced only by natural monopolies
  4. Its consumption imposes costs on third parties

Explanation

Merit goods such as education and healthcare are often underconsumed when individuals undervalue the benefits they receive, partly because of information failure. Subsidies or public provision aim to raise consumption towards the socially optimal level.

Question 36Economics (Intermediate Level)

The value of the simple multiplier is 4. By how much will equilibrium national income rise following an increase in autonomous investment of €50 million, assuming spare capacity?

  1. €200 million Correct answer.
  2. €54 million
  3. €50 million
  4. €12.5 million

Explanation

The multiplier effect means a change in autonomous spending produces a larger change in equilibrium income: the change equals the multiplier times the initial injection. Here 4 × €50 million = €200 million.

Question 37Economics (Intermediate Level)

An economy has a marginal propensity to import of 0.2 and a marginal propensity to save of 0.1, with a marginal tax rate of 0.2. What is the value of the multiplier?

  1. 10
  2. 5
  3. 2 Correct answer.
  4. 1.25

Explanation

With withdrawals from the circular flow, the multiplier equals 1 divided by the sum of the marginal propensities to save, tax and import. Here the sum is 0.1 + 0.2 + 0.2 = 0.5, so the multiplier is 1/0.5 = 2.

Question 38Economics (Intermediate Level)

Which of the following would be classified as a withdrawal from the circular flow of income?

  1. Firms paying wages to workers
  2. A foreign firm buying exports from domestic producers
  3. The government paying pensions to retired citizens
  4. Households saving part of their disposable income in a bank Correct answer.

Explanation

Withdrawals are flows that remove spending from the domestic circular flow: saving, taxation and imports. Saving by households reduces the spending that passes on to firms, though it may return as investment via financial markets.

Question 39Economics (Intermediate Level)

An economy's nominal GDP rises by 6 per cent while its GDP deflator rises by 4 per cent. What is the approximate growth of real GDP?

  1. About 24 per cent
  2. About 1.5 per cent
  3. About 10 per cent
  4. About 2 per cent Correct answer.

Explanation

Real GDP growth is approximately nominal growth minus inflation measured by the deflator, so 6 per cent minus 4 per cent gives roughly 2 per cent. This adjustment separates genuine increases in output from price changes.

Question 40Economics (Intermediate Level)

Which situation would cause the official unemployment rate to understate the true level of labour market slack?

  1. The number of people retiring early increases sharply
  2. Discouraged workers stop actively seeking work and leave the labour force Correct answer.
  3. Part-time workers are counted as employed even though they want full-time work
  4. Firms reduce overtime hours instead of making workers redundant

Explanation

The unemployment rate counts only those actively seeking work. Discouraged workers who give up searching exit the labour force and are no longer counted as unemployed, so the measured rate understates the true slack, even though hidden underemployment from involuntary part-time work also matters.

Question 41Economics (Intermediate Level)

What is the most likely effect of a sustained rise in the general price level on savers holding money in cash?

  1. The real value of their holdings falls, acting like a tax on money balances Correct answer.
  2. Their purchasing power is unaffected because the nominal amount is fixed
  3. Their nominal wealth increases in line with inflation
  4. The real value of their holdings rises because prices are higher

Explanation

Inflation erodes the purchasing power of money held in cash or non-interest-bearing accounts. Because the nominal value is fixed while prices rise, the real value of the balances declines, redistributing wealth away from savers.

Question 42Economics (Intermediate Level)

A central bank lowers the reserve requirement ratio for commercial banks. Through which channel does this most directly affect the economy?

  1. It reduces the government's budget deficit
  2. It increases the amount of credit banks can create from a given deposit base Correct answer.
  3. It lowers the exchange rate by law
  4. It directly raises the interest rate paid on government bonds

Explanation

The reserve requirement determines the fraction of deposits banks must hold as reserves, so lowering it increases the volume of lending possible from each deposit, expanding credit and the money supply. This is a tool of monetary policy operating through bank credit creation.

Question 43Economics (Intermediate Level)

Which of the following is the best example of an automatic stabiliser?

  1. A one-off stimulus package approved by parliament
  2. A public investment programme planned over five years
  3. Progressive income tax receipts that fall when incomes fall during a slowdown Correct answer.
  4. A change in the central bank's policy interest rate

Explanation

Automatic stabilisers operate without new discretionary decisions: tax receipts and welfare spending respond to the economic cycle, cushioning fluctuations in disposable income. Progressive income tax is a classic example because receipts fall automatically as incomes decline.

Question 44Economics (Intermediate Level)

A country has a surplus on its current account. Which combination is most consistent with this outcome?

  1. The country's currency must be appreciating continuously
  2. The financial account must show a surplus of exactly the same size
  3. Exports of goods and services exceed imports, so the country is a net lender abroad Correct answer.
  4. Imports exceed exports, so the country is a net borrower abroad

Explanation

A current account surplus means receipts from exports, income and transfers exceed payments for imports and outflows, so the nation accumulates net foreign assets. In balance of payments accounting, the financial account records the corresponding net lending abroad.

Question 45Economics (Intermediate Level)

A country can produce both wine and cloth, but its opportunity cost of wine in terms of cloth is lower than its trading partner's. What does this indicate?

  1. The country should impose a tariff to protect its wine industry
  2. The country has an absolute advantage in both goods
  3. The country has no gains from trade because it can produce both goods
  4. The country has a comparative advantage in wine and should specialise in it Correct answer.

Explanation

Comparative advantage is determined by lower opportunity cost, not by producing more with fewer resources. Specialising where opportunity cost is lowest and trading allows both countries to consume beyond their domestic production possibilities.

Question 46Economics (Intermediate Level)

An increase in a country's tariff on imported steel is most likely to have which short-run effect?

  1. Government revenue falls because imports increase
  2. Domestic producers of steel lose market share
  3. Domestic steel prices fall and consumer surplus rises
  4. Domestic steel prices rise and consumer surplus falls Correct answer.

Explanation

A tariff raises the price of imports, allowing domestic producers to charge more and reducing the quantity imported. Consumers pay higher prices and buy less, so consumer surplus falls, while domestic producers and the government may gain.

Question 47Economics (Intermediate Level)

A depreciation of a country's exchange rate occurs. Under what condition is the trade balance most likely to improve?

  1. When the sum of the price elasticities of demand for exports and imports exceeds one Correct answer.
  2. When domestic inflation rises faster than in trading partners
  3. When foreign demand for its exports is completely unresponsive to price
  4. When the country's imports are dominated by price-inelastic essential goods

Explanation

The Marshall-Lerner condition states that a depreciation improves the trade balance only if the sum of the price elasticities of demand for exports and imports exceeds one in absolute value. Otherwise the volume response is too small to offset the higher cost of imports.

Question 48Economics (Intermediate Level)

Which of the following best describes the role of the World Trade Organization?

  1. It sets interest rates for its member countries
  2. It issues a single currency used by all member states
  3. It provides a framework of rules for international trade and settles disputes between members Correct answer.
  4. It lends to countries facing balance of payments crises

Explanation

The WTO administers multilateral trade agreements, promotes non-discrimination among trading partners and provides a dispute settlement mechanism. It does not manage monetary policy, balance of payments lending or a common currency.

Question 49Economics (Intermediate Level)

A government wants to reduce a structural budget deficit without harming long-run growth. Which approach is most consistent with this aim?

  1. Increasing recurrent subsidies financed by borrowing
  2. Lowering interest rates to boost demand while leaving spending unchanged
  3. Cutting all public investment to balance the budget immediately
  4. Raising the efficiency of tax collection while directing spending towards infrastructure and education Correct answer.

Explanation

A structural deficit reflects a persistent imbalance independent of the cycle, so durable correction requires improving revenue collection and prioritising growth-enhancing spending. Protecting capital spending such as infrastructure and education supports long-run productive capacity.

Question 50Economics (Intermediate Level)

Which measure of development goes beyond GDP per capita by incorporating health and education?

  1. The balance of payments on current account
  2. The consumer price index
  3. The marginal propensity to consume
  4. The Human Development Index Correct answer.

Explanation

The Human Development Index combines income per head with indicators of life expectancy and education to give a broader picture of well-being than GDP per capita alone. It was developed precisely because income measures omit important dimensions of development.