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CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics

Which of the following is one of the central economic problems that every economy, whether rich or poor, must solve because of scarcity?

Deciding what to produce and in what quantities is a central economic problem. Because resources are scarce, every economy must choose which goods to make, how to make them and for whom. Political, taxation or currency matters are policy decisions, not the basic allocation problems.

  1. ADeciding how much foreign currency the central bank should print
  2. BDeciding what to produce and in what quantitiesCorrect
  3. CDeciding which political party should govern
  4. DDeciding the rate of income tax to be levied on firms

Explanation

The basic problems are what to produce, how to produce and for whom to produce. Deciding which goods and how much of each to produce is the first of these. The other options are policy or political matters, not the core allocation problems.

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