Economics Multiple Choice Questions Economy
1. Effective demand depends on
A. capital-output ratio
B. output-capital ratio
C. total expenditure
D. supply price
Answer: D.supply price
Explanation: Effective Demand is “the demand in which the consumer are able and willing to purchase at conceivable price” simply saying if the product price is low more will buy; but if the rates go high then the quantity of the demand goes down. Keynes used Iwo terms: Aggregate Demand Function or Price and Aggregate Supply Function or Price to explain the determination of effective demand.
2. The basic problem studied in Macro – Economics is
A. production of income
B. usage of income
C. flow of income
D. distribution of income
Answer: A.production of income
Explanation: Macroeconomics involves the sum total of economic activity, dealing with the issues such as production of national income, growth, inflation, and unemployment. It is all about is about maximizing national income and growth.
3. Prof Miltion Fridman was leader of –
A. Ohio school
B. Chicago school
C. Cambridge school
D. London school
Answer: B.Chicago school
Explanation: Milton Friedman was a leader of the Chicago school of economics. He profoundly influenced the research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. He was a recipient of the 1976 Nobel Prize in Economic Sciences.
4. Who is called the ‘Father of Economics’?
A. Max Muller
B. Karl Marx
C. Adam Smith
D. Alfred Marshall
Answer: C.Adam Smith
Explanation: Adam Smith who laid the foundations of classical free market economic theory is known as the Father of Modern Economics. His magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations (1776),’ is considered the first modern work of economics.
5. The bank cheques are processed by using
A. OCR
B. MICR
C. OMR
D. PMR
Answer: B.MICR
Explanation: Magnetic Ink Character Recognition, or MICR, is a character recognition technology used primarily by the banking industry to facilitate the processing of cheques and makes up the routing number and account number at the bottom of a cheque. The technology allows computers to read information (such as account numbers) off printed documents. Unlike barcodes or similar technologies, however, MICR codes can be easily read by humans. MICR characters are printed in special typefaces with a magnetic ink or toner, usually containing iron oxide.
6. When was the Minimum Wages Act enacted in India?
A. 1936
B. 1948
C. 1951
D. 1956
Answer: B.1948
Explanation: The Minimum Wages Act, 1948 was enacted to safeguard the interests of workers, mostly in the unorganized sector by providing for the fixation of minimum wages in certain specified employments. It binds the employers to pay their workers the minimum wages fixed under the Act from time to time.
7. Identify the one which is not related to the Agricultural Price Policy.
A. Buffer stock
B. Imports
C. Support price
D. Licensing
Answer: D.Licensing
Explanation: Licensing is a marketing and brand extension tool that is widely used by everyone from major corporations to the smallest of small business. A license may be issued by authorities, to allow an activity that would otherwise be forbidden.
8. Steel sheets used in the production of furnitures is an example of
A. an intermediate good
B. a final good
C. an investment good
D. a consumption good
Answer: A.an intermediate good
Explanation: Intermediate goods are semi- finished products are goods that are used as inputs in the production of oilier goods including final goods. It comprises material or item that is a final-product of a process, but is also used as an input in the production process of some other good. In the production process, intermediate goods either become part of the final product, or are changed beyond recognition.
9. The main source of long-term credit for a business unit is –
A. sale of stocks and bonds to the public
B. borrowing from banks
C. loans from the Government
D. deposits from the public and financial institutions
Answer: A.sale of stocks and bonds to the public
Explanation: Companies issue securities called stocks and bonds to raise necessary capital which funds the company’s daily operations
10. Devaluation of money means :
A. decrease in the internal value of money
B. decrease in the external value of money
C. decrease in both internal and external value of money
D. the government takes back currency notes of any denominations
Answer: A.decrease in the internal value of money
Explanation: Devaluation refers to a decline in the value of a currency in relation to another, usually brought about by the actions of a central bank or monetary authority. Devaluation is sometimes used more generally to describe any significant drop in a currency’s international exchange rate, although usually a decline caused by market forces with no government intervention is termed a depreciation. Devaluations are most often associated with developing countries that don’t allow their currency prices to float freely on the open market.
11. Under flexible exchange rate system, the exchange rate is determined by
A. the Central Bank of the country
B. the forces of demand and supply in the foreign exchange market
C. the price of gold
D. the purchasing power of currencies
Answer: B.the forces of demand and supply in the foreign exchange market
Explanation: A floating exchange rate is a type of exchange rate regime wherein a currency’s value is allowed to fluctuate according to the foreign exchange market. It refers to a country’s exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies.
12. Bank rate is the rate of interest –
A. at which public borrows money from Commercial Bank
B. at which public borrows money from RBI
C. at which Commercial Banks borrow money from RBI
D. at which Commercial Banks borrow money from public
Answer: C.at which Commercial Banks borrow money from RBI
Explanation: Bank Rate is the interest rate at which a nation’s central bank lends money to domestic banks. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity.
13. Open Market Operations refer to
A. Borrowings by Scheduled banks from RBI
B. Lending by Commercial banks to industry
C. Purchase and sale of Government securities by RBI
D. Deposit mobilization
Answer: C.Purchase and sale of Government securities by RBI
Explanation: Open Market Operation (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. A central bank uses OMO as the primary means of implementing monetary policy.
14. Which of the following is the classification of Industries on the basis of raw-materials?
A. Small Scale — Large scale
B. Primary and Secondary
C. Basic and Consumer
D. Agro-based and Mineral based
Answer: D.Agro-based and Mineral based
Explanation: Industries are classified on the bases of source of raw material. There are two types of industries agro based and mineral based industries. Agro based industries are the one that produce jute, cotton, silk, tea. coffee, rubber etc. Mineral based industries are iron and steel, cement, aluminum, machine tools, and petrochemicals producing industries
15. Which one of the following items is not included in the current account of India’s Balance of Payments?
A. Short-term commercial borrowings
B. Non-monetary gold movements
C. Investment income
D. Transfer payments
Answer: B.Non-monetary gold movements
Explanation: Balance of payments (BoP) accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country’s exports and imports of goods, services, financial capital, and financial transfers. The two principal parts of the BOP accounts are the current account and the capital account. The current account shows the net amount a country is earning if it is in surplus or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
16. The New Economic Policy was introduced by:
A. Lenin
B. Stalin
C. Kerensky
D. Khrushchev
Answer: A.Lenin
Explanation: The New Economics Policy was introduced by Vladimir Ilyich Lenin (1870- 1924). He was founder of modern communist Russia. He was the leader of Soviet Revolution of October 1917. He liberated the country from the Czars and became Head of its first Communist Government (1917-1924). He dedicated himself to the cause of workers’ revolution.
17. “Functional Finance” is associated with :
A. Adolph Wogner
B. Adam Smith
C. Adams
D. Abba ‘V Lerner
Answer: D.Abba ‘V Lerner
Explanation: Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principle and cartelism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.
18. Multiplier process in economic theory is conventionally taken to mean:
A. the manner in which prices increase
B. the manner in which banks create credit
C. income of an economy grows on account of an initial investment
D. the manner in which government expenditure increases
Answer: C.income of an economy grows on account of an initial investment
Explanation: In economics, a multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable. For example, suppose a one-unit change in some variable x causes another variable y to change by M units. Then the multiplier is M. In monetary macroeconomics and banking, the money multiplier measures how much the money supply increases in response to a change in the monetary base. The multiplier may vary across countries, and will also vary depending on what measures of money are considered. For example, consider M2 as a measure of the U.S. money supply, and MO as a measure of the U.S. monetary base.
19. Personal disposable income is :
A. always equal to personal income.
B. always more than personal income.
C. equal to personal income minus direct taxes paid by household.
D. equal to personal income minus indirect taxes.
Answer: C.equal to personal income minus direct taxes paid by household.
Explanation: Disposable income is total personal income minus personal current taxes. In national accounts definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major category of personal(or, private) consumption expenditure) yields personal (or, private) savings
20. Which one of the following is not a method of measurement of National Income?
A. Value Added Method
B. Income Method
C. Investment Method
D. Expenditure Method
Answer: C.Investment Method
Explanation: Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method. Product method is given by Dr. Alfred Marshall, income method by A.C. Pigou and expenditure method by Dr. Irving Fisher. The ‘Investment Method’ is used for trading properties where evidence of rates is slight, such as hotels, cinema, car park and etc.
21. Which one of the following would not constitute an economic activity?
A. A teacher teaching students in his class
B. A teacher teaching students under Sarva Shiksha Abhiyan
C. A teacher teaching his own daughter at home
D. A teacher providing consultancy services from his residence
Answer: C.A teacher teaching his own daughter at home
Explanation: Economic activities are related to production, distribution, exchange and consumption of goods and services. The primary aim of the economic activity is the production of goods and services with a view to make them available to consumer “Human activities which are performed in exchange for money or money’s worth are called economic activities.” In other words, economic activities are those efforts which are undertaken by man to earn Income. Money, and Wealth for his life and to secure maximum satisfaction of wants with limited and scarce means. A teacher teaching his own daughter at home is a non-economic activity. “Human activities which are not performed for money or money’s worth arc called non- economic activities.” Here, there is no monetary consideration in exchange for such activities.
22. Transfer payments include :
A. Gifts received from a friend
B. rent free accommodation by the employer
C. net factor income from abroad
D. Employee’s contribution to social security
Answer: D.Employee’s contribution to social security
Explanation: A transfer payment is a oneway payment of money for which no money, good, or service is received in exchange. Governments use such payments as means of income redistribution by giving out money under social welfare programs such as social security, old age or disability pensions, student grants, unemployment compensation, etc. Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses
23. Capacity utilization –
A. is usually near 100 percent.
B. represents the percent of the labour force that is employed.
C. is a measure of the proportional of the existing capital stock used for current production.
D. rises as the economy moves into a recession, since firms must replace unemployed workers with some other resources to maintain production.
Answer: C.is a measure of the proportional of the existing capital stock used for current production.
Explanation: Capacity utilisation refers to the extent or level to which the productive capacity of a plant, firm, or country is used in generation of goods and services. Expressed usually as a percentage, it is computed by dividing the total capacity with the portion being utilized.
24. Apart from the availability of raw material location of an industry is also dependent on the availability of:
A. enviornmental protection and vegetation
B. man power and energy source
C. transport and bio energy
D. water and inputs
Answer: B.man power and energy source
Explanation: Some of the factors which affect the industrial location are as follows: availability of raw materials, avail-ability of labour, availability of capital, availability of power, availability of market and infrastructure. good supply of labor is one of the traditional factors that is indispensable for industry. Besides, availability of power/electricity is also a deciding factor.
25. What happens when there is a demand deficiency in an economy?
A. Poverty
B. Stagnation
C. Recession
D. Inflation
Answer: B.Stagnation
Explanation: Deficient demand refers to the situation when aggregate demand for goods and services falls short of aggregate supply of output which is produced by fully employing the given resources of the economy. This deficient demand leads to the decrease in output, employment and prices in the economy. According to Malthus, deficiency of demand could lead to stagnation in which both capital and labor are redundant relative to the opportunities for employing them profitably.
26. Which one of the following is not a feature of monopoly?
A. Single seller of the product
B. Heavy selling costs
C. Barriers to entry of new firms
D. Price discriminations
Answer: B.Heavy selling costs
Explanation: Heavy selling cost is one of the defining features of an oligopoly. Firms resort to heavy selling cost to attract customers. Under this market form, the firms have to compete to promote their sale by largely homogenous products, differentiated mainly by heavy advertising and promotional expenditure that ultimately adds to the total selling cost.
27. The supply of labour in the market depends on –
A. the proportion of the population in the labour force
B. the number of person hours put in by each person
C. the size of population
D. All the above
Answer: D.All the above
Explanation: Supply of labour in an economy depends upon both economic as well as non- economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.
28. Engel’s Law states the relationship between –
A. quantity demanded and price of a commodity
B. quantity demanded and price of substitutes
C. quantity demanded and tastes of the consumers
D. quantity demanded and income of the consumers
Answer: D.quantity demanded and income of the consumers
Explanation: Engel’s law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. Engel’s Law doesn’t imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income.
29. The demand curve for a Giffen good is
A. upward rising
B. downward falling
C. parallel to the quantity axis
D. parallel to the price axis
Answer: A.upward rising
Explanation: A Giffen good is a good whose consumption in-creases as its price increases. (For a normal good, as the price increases, consumption decreases.) Thus, the demand curve will be upward instead of down-ward sloping. A Giffen good has an upward sloping demand curve because it is exceptionally inferior. It has a strong negative income elasticity of demand such that when a price changes the income effect outweighs the substitution effect and this leads to perverse demand curve.
30. If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for
A. Coke will decrease
B. 7-Up will decrease
C. Coke and 7-Up will increase
D. Coke and 7-Up will decrease
Answer: D.Coke and 7-Up will decrease
Explanation: Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when price rises. So, here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.
31. The demand curve shows that price and quantity demanded are –
A. directly related only
B. directly proportional and also directly related
C. inversely proportional and aslo inversely related
D. inversely related only
Answer: C.inversely proportional and aslo inversely related
Explanation: Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
32. If the main objective of the government is to raise revenue, it should tax commodities with
A. high elasticity of demand
B. low elasticity of supply
C. low elasticity of demand
D. high income elasticity of demand
Answer: C.low elasticity of demand
Explanation: The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low- income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
33. Monopoly means –
A. single buyer
B. many sellers
C. single seller
D. many buyers
Answer: C.single seller
Explanation: A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity’s control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods
34. Kinked demand curve is a feature of –
A. Monopoly
B. Oligopoly
C. Monopsony
D. Duopoly
Answer: B.Oligopoly
Explanation: The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
35. Demand for complementary goods is known as –
A. Joint demand
B. Derived demand
C. Direct demand
D. Cross demand
Answer: A.Joint demand
Explanation: Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
36. Quasi rent is a phenomenon.
A. medium term
B. long term
C. short term
D. no time
Answer: C.short term
Explanation: Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
37. Which of the following economists is called the Father of Economics?
A. Malthus
B. Robinson
C. Ricardo
D. Adam Smith
Answer: D.Adam Smith
Explanation: Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the “father of modern economics.” He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
38. Perfectly inelastic demand is equal to :
A. One
B. Infinite
C. Zero
D. Greater than one
Answer: C.Zero
Explanation: Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity ofdemand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
39. A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to –
A. Zero
B. One
C. Less than one
D. Infinity
Answer: D.Infinity
Explanation: Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
40. ‘Capital gains’ refers to goods which –
A. serve as a source of raising further capital
B. help in the further production of goods
C. directly go into the satisfaction of human wants
D. find multiple uses
Answer: B.help in the further production of goods
Explanation: Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
41. From the national point of view, which of the following indicates micro approach?
A. Study of sales of mobile phones by BSNL
B. Unemployement among Women
C. Per capita income in India
D. Inflation in India
Answer: A.Study of sales of mobile phones by BSNL
Explanation: Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
42. Returns to scale is a –
A. timeless phenomenon
B. directionless phenomenon
C. short-run phenomenon
D. long-run phenomenon
Answer: D.long-run phenomenon
Explanation: Returns to Scale refers to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms–increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
43. Rent is a factor payment paid to –
A. land
B. restaurant
C. building
D. factory
Answer: A.land
Explanation: Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
44. Plant arid machinery are –
A. Producers’ goods
B. Consumers’ goods
C. Distributors’ goods
D. Free goods
Answer: A.Producers’ goods
Explanation: Plant and machinery are Producers’ goods. Together with stocks and work in progress, these goods are collectively termed ‘Capital’.
45. Which activity is not included in production?
A. Production of wheat by a farmer
B. Production of medicines by a company
C. Services given by a nurse in hospital
D. Services done by a house-wife in her own house
Answer: D.Services done by a house-wife in her own house
Explanation: Services done by a house-wife in her own house are not included in production.
46. Marginal cost is the –
A. cost of producing a unit of output
B. cost of producing an extra unit of output
C. cost of producing the total output
D. cost of producing a given level of output
Answer: B.cost of producing an extra unit of output
Explanation: Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
47. Under hill cost pricing, price is determined –
A. by adding a margin to the average cost
B. by comparing marginal cost and marginal revem
C. by adding normal profit to the marginal cost
D. by the total al cost of production
Answer: A.by adding a margin to the average cost
Explanation: Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what averagetotal cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a ‘satisfactory’ profit margin. This is known as ‘full-cost’ pricing. The price is equal to ‘full’ cost, including an acceptable profit.
48. As output increases, average fixed cost
A. increases
B. falls
C. remains consl ant
D. first increases, then falls
Answer: B.falls
Explanation: Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
49. Fixed cost is known as –
A. Special cost
B. Direct cost
C. Prime cost
D. Overhead cost
Answer: D.Overhead cost
Explanation: Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
50. All of the goods which are scarce and limited in supply are called –
A. Luxury goods
B. Expensive goods
C. Capital goods
D. Economic goods
Answer: D.Economic goods
Explanation: In economics, a good is something that is intended to satisfy some wantsor needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
51. The terms “Micro Economics” and “Macro Economics” were coined by –
A. Alfred Marshall
B. Ragner Nurkse
C. Ragner Frisch
D. J.M. Keynes
Answer: C.Ragner Frisch
Explanation: The terms microeconomics and macroeconomics were coined by Professor Ragnar Frisch of Oslo University for the first time in 1933 and since then they gained popularity and were widely used by other economists. Now they have become an integral part of economic terminology. Ragnar Anton Kittil Frisch was a Norwegian economist and the co-winner with Jan Tinbergen of the first Nobel Memorial Prize in Economic Sciences in 1969. Frisch was one of the founders of economics as a modern science. He made a number of significant advances in the field of economics and coined a number of new words.
52. ‘Hire and Fire’ is the policy of –
A. Capitalism
B. Socialism
C. Mixed Economy
D. Traditional Economy
Answer: C.Mixed Economy
Explanation: In capitalism, people may sell or lend their properly, and other people may buy or borrow them. In many countries with mixed economies (part capitalism and part socialism) there are laws about what we can buy or sell, or what prices we can charge, or whom we can hire or fire.
53. Consumption function expresses the relationship between consumption and –
A. savings
B. income
C. investment
D. price
Answer: B.income
Explanation: The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes. The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy.
54. The relationship between the rate of interest and level of consumption was first visualized by –
A. Amartya K. Sen
B. Milton Friedman
C. Irving Fisher
D. James Duesenberry
Answer: C.Irving Fisher
Explanation: Irving Fisher, in His Theory of Interest (1930), found the relationship between interest rates (nominal interest rate and real interest rate) and the consumption level. Though his theory is about interest rate and inflation, it discusses the effect of real interest rate on savings and gives an inverse relationship between nominal interest rates and consumer expenditures
55. The Liquidity Preference Theory of Interest was propounded by :
A. J.M. Keynes
B. David Ricardo
C. Alfred Marshall
D. Adam Smith
Answer: A.J.M. Keynes
Explanation: In macroeconomic theory, liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John May-nard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money.
56. Which of the following is not an economic activity?
A. A labourer working in a factory.
B. A CRPF jawan guarding country’s borders.
C. A teacher teaching his own son.
D. A farmer tilling his own land.
Answer: C.A teacher teaching his own son.
Explanation: An activity which is done with the aim of monetary return is called an economic activity, while an activity which is not done with the aim of monetary return is called a non- economic activity. The most quoted example to understand this is that of a teacher. When a teacher teaches students in a school, he is doing economic activity. When the same teacher teaches his son, he is doing non-economic activity.
57. Cosequent upon the recommendations of the Working Group on Rural Banks, 5 Rural Regional Banks were initially set up in the year –
A. 1973
B. 1974
C. 1975
D. 1976
Answer: C.1975
Explanation: The Government of India set up Regional Rural Banks (RRBs) on October 2, 1975. Initially, five RRBs were set up on October 2, 1975 which were sponsored by Syndicate Bank, State Bank of India, PunjabNational Bank, United Commercial Bank and United Bank of India: Capital share being 50% by the central government. 15% by the state government and 35% by the scheduled bank.
58. Poverty in less developed countries is largely due to –
A. voluntary idleness
B. income inequality
C. lack of cultural activities
D. lack of intelligence of the people
Answer: B.income inequality
Explanation: Despite the developing countries’ impressive aggregate growth of the past 25 years, its benefits have only reached the poor to a very limited degree. Not only have the poorest countries grown relatively slowly, but growth processes are such that within most developing countries, the incomes of the poor increase much less than the average. Much of the poverty is due to severe inequality which in turn is due to lop- sided development. Income inequality is the major determinant of poverty both in developed and non-developed countries. Rising unemployment is a major source of spreading poverty.
59. Which unit of valuation is known as “Paper gold”?
A. Eurodollar
B. Petrodollar
C. SDR
D. GDR
Answer: C.SDR
Explanation: Paper Gold is a measure of a country’s reserve assets in I he international monetary system. It is also called Special Drawing Rights (SDR) which is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. SDRs may actually represent a potential claim on IMF member countries’ non-gold foreign exchange reserve assets, which are usually held in those currencies.
60. A closed economy is one which –
A. Does not trade with other countries
B. Does not possess any means of international transport
C. Does not have a coatastal line
D. (4) Is not a member of the U.N.O.
Answer: A.Does not trade with other countries
Explanation: A closed economy is one that has no exports or imports. An open economy is one that has exports and imports. In a closed economy, domestic quantity and domestic price entirely determine producer surplus and consumer surplus. In a closed economy, equilibrium price and equilibrium quantity determine consumer surplus and producer surplus.
61. Who are the creditors of a Corporation?
A. Bond holders
B. Stock holders
C. Both Bond and Stock holders
D. Holders of preferred stock
Answer: C.Both Bond and Stock holders
Explanation: A creditor is a party (e.g. person, organization, company, or government) that has a claim to the services of a second party. It is a person or institution to whom money is owed. The second party is frequently called a debtor or borrower. An incorporated entity is a separate legal entity that has been incorporated through a legislative or registration process established through legislation. Both bond holders and stock holders are creditors of a corporation.
62. The ratio of a bank’s cash holdings to its total deposit liabilities is called the –
A. Variable Reserve Ratio
B. Cash Reserve Ratio
C. Statutory Liquidity Ratio
D. Minimum Reserve Ratio
Answer: B.Cash Reserve Ratio
Explanation: Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the avail-able amount with the bankscomes down. The RBI uses the CRR to drain out excessive money from the system.
63. The smaller the Cash Reserve Ratio, the scope for lending by banks is :
A. greater
B. smaller
C. weaker
D. lesser
Answer: A.greater
Explanation: Cash Reserve Ratio is a regulation set by Central bank (RBI in India) which dictates the minimum amount (reserves) (hata commercial bank must be held to customer notes and deposits. A decrease in CRR will make it mandatory for the banks to hold a lesser proportion of (heir deposits in the form of deposits with the RBI.
64. For hannelizing the unaccounted money for productive purposes the Government Introduced the scheme of :
A. Special Bearer Bonds
B. Resurgent. India Bonds
C. Provident Funds
D. Market Loans
Answer: A.Special Bearer Bonds
Explanation: The Special Bearer Bonds (Immunities And Exemptions) Act, 1981 laid down the purpose of such bonds as necessary to canalize for productive purposes black money which has become a serious threat to the national economy. With a view to such canalization, the Central Government decided to issue at par certain bearer bonds to be known as the Special Bearer Bonds, 1991.
65. Saving is that portion of money income that is –
A. spent for development of Industries
B. not spent on consumption
C. spent on health and education
D. spent for consumer durables
Answer: B.not spent on consumption
Explanation: Saving is income not spent, or deferred consumption. In economics, it refers to any income not used for immediate consumption- consuming less out of a givenamount of resources in the present in order to consume more in the future. Saving, therefore, is the decision to defer consumption and to store this deferred consumption in some form of asset.
66. What is the role of “Ombudsman” in a bank?
A. To provide quality and speedy redressal of grievances of customers.
B. To provide suggestions for innovative schemes in the banks.
C. To inspect the internal working of the branches.
D. To monitor the poverty alleviation programmes under-taken by or implemented by the bank.
Answer: A.To provide quality and speedy redressal of grievances of customers.
Explanation: The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.
67. Which of the following taxes is not collected by the Central Government?
A. Income tax
B. Customs duty
C. Professional tax
D. Excise duty
Answer: C.Professional tax
Explanation: A professional tax, also known as an occupation tax or a professional privilege lax, is a tax that a professional must pay to receive the right to practice a professional service. Many state and local governments collect professional tax, and a professional who has clients in more than one state may owe professional taxes in several states.
68. The permission given to a bank customer to draw cheques in excess of his current account balance is called –
A. a personal loan
B. an ordinary loan
C. discounting a bill of exchange
D. an overdraft
Answer: D.an overdraft
Explanation: Overdrafts is an extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it. Basically the bank allows people to borrow a set amount of money. An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be “overdrawn.”
69. Forced Savings refer to –
A. Reduction of consumption consequent to a rise in prices
B. Taxes on individual income and wealth
C. Compulsory deposits imposed on income tax payers
D. Provident fund contribution of private sector employees
Answer: A.Reduction of consumption consequent to a rise in prices
Explanation: Forced saving is an economic situation in which consumers spend less than their disposable income, not because they want to save but because the goods they seek are not available or because goods are too expensive. In a free economy, this situation would normally result in increase in prices and inflow of more goods.
70. Which of the following is an indirect tax?
A. Capital Gains Tax
B. Excise Duty
C. Wealth Tax
D. Estate Duty
Answer: B.Excise Duty
Explanation: Some examples of indirect taxes include value added tax, excise duty, sales tax, stamp duty and custom duty levied on imports. These are taxes levied by the slate on expenditure and consumption, but not on property or income.
71. Say’s Law of Market holds that –
A. supply is not equal to demand
B. supply creates its own demand
C. demand creates its own supply
D. supply is greater than demand
Answer: B.supply creates its own demand
Explanation: Say’s law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767-1832), who stated that “supply creates its own demand”. “Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes. The rejection of this doctrine is a central component of The General Theory of Employment, Interest and Money (1936) and a central tenet of Keynesian economics.
72. ‘Marginal efficiency of capital’ is –
A. expected rate of return on new investment
B. expected rate of return of existing investment
C. difference between rate of profit and rate of interest
D. value of output per unit of capital invested
Answer: A.expected rate of return on new investment
Explanation: The volume of investment depend upon the following two factors: (1) rate of interest: and (2) marginal efficiency of capital. Before investing the money a businessman compares interest with the rale of marginal efficiency capital. If they expect that rate of profit will be greater than the rate of interest, then they invest the money otherwise not. The expected rate of return on capital is called the marginal efficiency of capital. In other words, marginal efficiency of capital is a return on investment which is based partly on expectations of future yields and partly on the actual price of the capital good concerned.
73. National Income is the –
A. Net National Product at market price
B. Net National Product at factor cost
C. Net Domestic Product at market price
D. Net domestic Product at factor cost
Answer: B.Net National Product at factor cost
Explanation: Net National Product. at factor cost is also called as national income. Net National Product at factor cost is equal to sum total of value added at factor cost or net domestic product at factor cost and net factor income fromabroad. NNP al factor cost = NNP at Market Price -Net. Indirect Tax. National income measures the money value of the flow of output of goods and services produced within an economy over a period of Lime.
74. What is meant by ‘Capital Gain’?
A. Part of profits added to the capital
B. Appreciation in the money value of assets
C. Additions to the capital invested in a business
D. None of these
Answer: B.Appreciation in the money value of assets
Explanation: A capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realized on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Capital gains may refer to “investment income” that arises in relation to real assets. In other words, a capital gain represents an appreciation in value accruing over a prescribed period of time on the asset.
75. Backward bending supply curve belongs to which market?
A. Capital
B. Labour
C. Money
D. Inventories
Answer: B.Labour
Explanation: In economics, backward bending supply curve is related to labour. Also known as backward-bending supply curve of labour, This curve models a situation where workers choose to substitute leisure time for work time, i.e. wages, thus reducing the pool of labour available. It shows how the change in real wage rates affects the number of hours worked by employees.
76. Interms of economics, if it is possible to make someone better off without making someone worse off, then the situation is –
A. Inefficient
B. Efficient
C. Optimal
D. Paretosuperior
Answer: A.Inefficient
Explanation: Pareto efficiency is said to occur when it is impossible to make one party better off without making some-one worse off. An inefficient situation is one where it possible to make some people better off without making anyone else worse off.
77. The theory of distribution relates to which of the following?
A. The distribution of assets
B. The distribution of income
C. The distribution of factor payments
D. Equality in the distribution of the income and wealth
Answer: D.Equality in the distribution of the income and wealth
Explanation: In economics, distribution theory is the systematic attempt to account for the sharing of the national income among the owners of the factors of production—land, labour, and capital. Traditionally, economists have studied how the costs of these factors and the size of their return—rent, wages, and profits—are fixed. The theory of distribution involves three distinguishable sets of questions. First, how is the national income distributed among persons? Second, what determines the prices of the factors of production? Third, how is the national income distributed proportionally among the factors of production?
78. Knowledge, technical skill, education etc. in economics, are regarded as –
A. social-overhead capital
B. human capital
C. tangible physical capital
D. working capital
Answer: B.human capital
Explanation: Human capital is the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions.
79. Purchasing Power Parity theory is related with –
A. Interest rate
B. Bank rate
C. Wage rate
D. Exchange rate
Answer: D.Exchange rate
Explanation: Purchasing power parity (PPP) is an economic theory and a technique used to determine the relative value of currencies, estimating the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to (or on par with) each currency’s purchasing power. It asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount of money thus has the same purchasing power in different countries.
80. The demand for which of the following commodity will not rise in spite of a fall in its price?
A. Television
B. Refrigerator
C. Salt
D. Meat
Answer: C.Salt
Explanation: For certain goods called necessities, demand is not related to income. Demand for salt does not increase with the increase in income & does not decrease with the decrease in income. It means that it is irrespective of income. The demand curve slopes downward for goods like salt, but it is inelastic.
81. In the long-run equilibrium, a competitive firm earns –
A. Super-normal profit
B. Profits equal to other firms
C. Normal profit
D. No profit
Answer: C.Normal profit
Explanation: Making the assumption that the market demand curve remains unchanged, higher market supply will reduce the equilibrium market price until the price = long run average cost. At this point each firm is making normal profits only. There is no further incentive for movement of firms in and out of the industry and a long-run equilibrium has been established.
82. What is selling cost?
A. Cost incurred on transportation of commodities to market
B. Cost incurred on promoting the sale of the product
C. Cost incurred on commission and salaries personnel
D. Cost incurred on advertisement
Answer: B.Cost incurred on promoting the sale of the product
Explanation: Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods.
83. Who said, “Economics is the Science of Wealth”?
A. Robbins
B. J.S. Mill
C. Adam Smith
D. Keynes
Answer: C.Adam Smith
Explanation: It was Adam Smith who conceptualized Economics as a science of wealth. Elaborating upon the scope and fundamental conceptualizations of the new science, he then called political economy as “an inquiry into the nature and causes of the wealth of nations.”
84. The addition to total cost by producing an additional unit of out-put by a firm is called –
A. Variable cost
B. Average cost
C. Marginal cost
D. Opportunity cost
Answer: C.Marginal cost
Explanation: The addition to total cost by producing an additional unit of output by a firm is called Marginal cost. Average cost is the total cost of producing a given output divided by that output.
85. In a perfectly competitive market, a firm’s –
A. Average Revenue is always equal to Marginal Revenue
B. Marginal Revenue is more than Average Revenue
C. Average Revenue is more than Marginal Revenue
D. Marginal Revenue and Average Revenue are never equal
Answer: A.Average Revenue is always equal to Marginal Revenue
Explanation: Average revenue is the amount money received by a firm per unit of output sold. Marginal revenue is the change in total revenue resulting from a small change in the quantity sold. In a perfectly competitive market, a firm’s Average Revenue is always equal to Marginal Revenue.
86. An increase in the quantity supplied suggests –
A. a leftward shift of the supply curve
B. a movement up along the supply curve
C. a movement down along the supply curve
D. a rightward shift of the supply curve
Answer: B.a movement up along the supply curve
Explanation: Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at an higher price increases revenue.
87. Price and output are determinates in market structure other than –
A. monopoly
B. perfect competition
C. oligopoly
D. monopsony
Answer: B.perfect competition
Explanation: Perfect competition is a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price and output. Each firm’s output is a perfect substitute for the output of the other firms. so the demand for each firm’s output isperfectly elastic. Product differentiation holds the key in this type of market structure.
88. Bilateral monopoly situation is
A. when there are only two sellers of a product
B. when there are only two buyers of a product
C. when there is only one buyer and one seller of a product
D. when there are two buyers and two sellers of a product
Answer: C.when there is only one buyer and one seller of a product
Explanation: Bilateral monopoly is a market consisting of a single seller (monopolist) and a single buyer (monopsonist).For example, if a single firm produced all the copper in a country and if only one firm used this metal, the copper market would be a bilateral monopoly market. The equilibrium in such a market cannot be determined by the traditional tools of demand and supply.
89. A ‘Market Economy’ is one which –
A. is controlled by the Government
B. is free from the Government control
C. in influenced by international market forces
D. All of these
Answer: B.is free from the Government control
Explanation: A market economy is an economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country’s individual citizens and businesses. There is little government intervention or central planning. The United States is the world’s premier market economy
90. The law of demand states that –
A. if the price of a good increases, the demand for that good decreases.
B. if the price of a good increases, the demand for that good increases.
C. if the price of a good increases, the quantity demanded of that good decreases
D. if the price of a good increases, the quantity demanded of that good increases.
Answer: C.if the price of a good increases, the quantity demanded of that good decreases
Explanation: The law of demand states that, other things remaining the same, the quantity demanded of a commodity is inversely related to its price. Thus, according to the law of demand, there is an inverse relationship between price and quantity demanded, other things remaining the same.
91. The demand curve facing a perfectly competitive firm is –
A. downward sloping
B. perfectly inelastic
C. a concave curve
D. perfectly elastic
Answer: D.perfectly elastic
Explanation: A perfectly competitive industry is comprised of a. large number of relatively small firms that sell identical products. Each perfectly competitive firm is so small relative to the size of the market that it has no market control, it has no ability to control the price. In other words, it can sell any quantity of output it wants at the going market price. This translates into a horizontal or perfectly elastic demand curve.
92. If average cost falls, marginal cost –
A. increases at a higher rate
B. falls at the same rate
C. increases at a lower rate
D. falls at a higher rate
Answer: B.falls at the same rate
Explanation: Average cost is the per unit cost incurred in the production of a good or service. It is specified as the total cost divided by the quantity of output. The marginal cost (the additional, cost of producing one more unit of output) and average cost are related. So when average total cost rises, marginal cost also rises; when average cost curve falls with the increase in output, the marginal cost also rises.
93. Consumer gets maximum satisfaction at the point where –
A. Marginal Utility = Price
B. Marginal Utility > Price
C. Marginal Utility < Price
D. Marginal Cost = Price
Answer: A.Marginal Utility = Price
Explanation: As per the law of diminishing marginal utility, the utility of each successive unit goes on diminishing as more and more units of a commodity are consumed. A rational consumer will consume the commodity up to a point where the marginal utility of the final unit of the commodity is equal to the marginal utility of money (in terms of price) paid for it. In this way, the consumer will get the maximum satisfaction and will be in equilibrium.
94. Micro-economics is also called :
A. Income theory
B. Investment theory
C. Price theory
D. Expenditure theory
Answer: C.Price theory
Explanation: Microeconomics is the branch of economics concerned with isolated parts of the economy, for example, individual people, firms or industries. It involves such topics as the theory of prices and of the firm.
95. Demand in Economics means :
A. Aggregate demand
B. Market demand
C. Individual demand
D. Demand backed by purchasing power
Answer: D.Demand backed by purchasing power
Explanation: Demand ‘ in Economics refers to the quantity of a good or service consumers ate able and willing to buy at a given price in a given market during a specified time period , other things beings equal.
96. A fall in demand or rise in supply of a commodity—
A. Increases the price of that commodity
B. decreases the price of that commodity
C. neutralizes the changes in the price
D. determines” the price elasticity
Answer: B.decreases the price of that commodity
Explanation: The four basic laws of supply and demand are: (1) If demand increases and supplyremains unchanged, a shortage occurs, leading to a higher price: (2) If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower price; (3) If demand remains unchanged and supply increases, a surplus occurs, leading to a lower price; and (4) If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher price.
97. The relationship between the value of money and the price level in an economy is –
A. Direct
B. Inverse
C. Proportional
D. Stable
Answer: B.Inverse
Explanation: The basic causal relationship between the price level and the value of money is that as the price level goes up, the value of money goes down. The “value of money” refers to what a unit of money can buy whereas the “price level” refers to the average of all of the prices of goods and services in a given economy.
98. Production function relates –
A. Cost to output
B. Cost to input
C. Wages to profit
D. Inputs to output
Answer: D.Inputs to output
Explanation: Production function specifies the output of a firm, an industry, or an entire economy for all combinations of inputs. The relationship of output to inputs is non-monetary; that is, a production function relates physical inputs to physical outputs, and prices and costs are not reflected in the function.
99. If total utility is maximum at a point, then marginal utility is –
A. positive
B. zero
C. negative
D. positive but decreasing
Answer: B.zero
Explanation: Marginal utility of a good or service is the gain (or loss) from an increase (or decrease) in the consumption of that good orservice. As the rate of commodity acquisition increases, marginal utility decreases. If commodity consumption continues to rise, marginal utility at some point falls to zero, reaching maximum total utility. Further increase in consumption of units of commodities causes marginal utility to become negative; this signifies dissatisfaction.
100. Economies of Scale means reduction in
A. unit cost of production
B. unit cost of distribution
C. total cost of production
D. total cost of distribution
Answer: A.unit cost of production
Explanation: In microeconomics, economies of scale are the cost advantages that an enterprise obtains due to expansion. “Economies of scale” is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.
101. Who is authorized to issue coins in India?
A. Reserve Bank of India
B. Ministry of Finance
C. State Bank of India
D. Indian Overseas Bank
Answer: B.Ministry of Finance
Explanation: Coins may be coined at the Mint for issue under the authority of the Central Government, (of such denominations not higher than one hundred rupees), such dimensions and designs, and of such metals or of mixed metals of such composition as the Central Government may. by notification in the official Gazette, determine.) Paper Currency in India consists of notes of various denominations which are issued by the RBI and the Government of India. The one rupee note is issued by the Ministry of Finance and bears the signature of the secretary. All currency notes are legal tender.
102. Reserve Bank of India was nationalized in –
A. 1948
B. 1947
C. 1949
D. 1950
Answer: C.1949
Explanation: The Reserve Bank of India was nationalised with effect from 1st January, 1949 on the basis of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. All shares in the capital of the Bank were deemed transferred to the Central Government on payment of a suitable compensation. The Reserve Bank of India (RBI) is India’s central banking institution.
103. Scheduled Banks have to be registered with –
A. SEBI
B. RBI
C. Finance Ministry
D. SBI
Answer: B.RBI
Explanation: The scheduled primary (urban) cooperative banks are required to maintain with the Reserve Bank of India an average daily balance, the amount of which should not be lessthan 5 per cent of their net demand and time liabilities in India in terms of Section 42 of the Reserve Bank of India Act, 1934. Nonscheduled (urban) cooperative banks, under the provision of Section 18 of Banking Regulation. Act, 1949 (As Applicable to Cooperative Societies) should maintain a sum equivalent to at least 3 per cent of their total demand and time liabilities in India on clay-to-day basis.
104. The difference between visible exports and visible imports is defined as –
A. Balance of trade
B. Balance of payment
C. Balanced terms of trade
D. Gains from trade
Answer: A.Balance of trade
Explanation: The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation’s imports and exports.
105. A commercial bank law creates credit only if it has –
A. Cash in the vault
B. Excess reserves
C. Permission of Reserve Bank of India
D. (4) Cooperation of other banks
Answer: A.Cash in the vault
Explanation: A commercial bank is a profit- seeking business, dealing in money and credit. It is a financial institution dealing in money in the sense that it accepts deposits of money from the public to keep them in its custody for safety. So also, it deals in credit, i.e., it creates credit by making advances out of the funds received as the deposits to needy people. So it creates credit from the cash deposits with it.
106. “Dear Money” means –
A. low rate of interest
B. high rate of interest
C. depression
D. inflation
Answer: B.high rate of interest
Explanation: Dear Money, also known as tight money, is money which has to be borrowed at ahigh interest rate, and so restricts expenditure by companies. This situation can be a result of a restricted money supply, causing interest rates to be pushed up due to the forces of supply and demand. Businesses may have a tough time raising capital during a period of dear money.
107. Commercial banks create credit –
A. on the basis of their securities
B. on the basis of their assets
C. on the basis of their reserve fund
D. on the basis of their deposits
Answer: D.on the basis of their deposits
Explanation: Commercial banks create credit on the basis of their deposits. Credit creation is the multiple expansions of banks demand deposits. Whenever, customer deposits sum of money, a part of that money is kept by the commercial banks with the credit bank of the country which is obligatory by the law. The amount of credit that can be created by the bank will depend on the primary deposits and also on the amounts of minimum legal resource requirement.
108. Bank money refers to –
A. currency notes
B. coins
C. gold bullions
D. cheques
Answer: D.cheques
Explanation: There are two types of money in a fractional-reserve banking system, currency originally issued by the central bank, and hank deposits at commercial banks: (1) central bank money (all money created by the central bank regardless of its form, e.g. banknotes, coins, electronic money): and (2) commercial bank money (money created in the banking system through borrowing and lending) – sometimes referred to as chequebook money.
109. A financial instrument is called a ‘primary security’ if ii represents the liability of :
A. some ultimate borrower
B. the Government of India
C. a primary cooperative bank
D. a commercial bank
Answer: A.some ultimate borrower
Explanation: Instruments (certificates) issued by the ultimate borrower are called primary securities. Instruments issued by intermediaries on behalf of the ultimate borrower are called indirect securities. The market for instruments (also called securities) issued for the first time, is called the primary market. Primary security is the asset created out of the credit facility extended to the borrower and / or which are directly associated with the business / project of the borrower for which the credit facility has been extended.
110. founded in the year 1886 by a pharmacist named John Pemberton, this product is the second most widely understood term in the world after “OK”. What is its name?
A. Aspirin
B. ENO
C. CocaCola
D. Pepsi
Answer: C.CocaCola
Explanation: Coca-Cola is the second most widely understood term in the world after “Ok”. It was originally intended as a patent medicine when it was invented in the late 19th century by John Pemberton. Coca Cola is the world’s largest soft drinks company. It is rated as the most recognized trade mark and third most valuable brand in the world.
111. Which of the following is done at a Stock Exchange?
A. Commodities are bought and sold at wholesale price
B. Commodities are bought and sold at retail price
C. Securities are bought and sold
D. None of these
Answer: C.Securities are bought and sold
Explanation: A stock exchange or bourse is an exchange where stock brokers and traders can buy and/or sell stocks (also called shares), bonds, and other securities. Stock exchanges may also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends.
112. Indirect tax means :
A. there is not direct relationship between the tax payer and the government.
B. direct relationship between tax payer and the government.
C. tax base is income
D. the incidence and impact are on the same person on whom tax is imposed.
Answer: A.there is not direct relationship between the tax payer and the government.
Explanation: The term indirect tax has more than one meaning. In the colloquial sense, an indirect tax (such as sales tax, a specific tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed.
113. A short-term government security paper is called –
A. Share
B. Debenture
C. Mutual fund
D. Treasury bill
Answer: D.Treasury bill
Explanation: Treasury bills are instrument of short-term borrowing by the Government of India, issued as promissory notes under discount. The interest received on them is the discount which is the difference between the price at which they are issued and their redemption value. They have assured yield and negligible risk of default.
114. The existence of a parallel economy or Black Money –
A. makes the economy more competitive
B. makes the monetary policies less effective
C. ensures a better distribution of income and wealth
D. ensures increasing productive investment
Answer: B.makes the monetary policies less effective
Explanation: The existence of black money is injurious not just for tax revenues. It distorts the systematic resource allocation process and upsets the accuracy of economic forecasts. Inflation is both a cause as well as a consequence of the black money in our economy. Black money results in the social injustice and fallacy in the economy. The rich gets richer and the poor gets poorer. So the existence of black money erodes the very rationale of growth behind monetary policies.
115. he non-expenditure costs which arise when the producing firm itself owns and supplies certain factors of production are –
A. Explicit costs
B. Original costs
C. Implicit costs
D. Replacement costs
Answer: C.Implicit costs
Explanation: In economics, an implicit is the opportunity cost equal to what a firm must give up in order to use factors which it neither purchases nor hires. It is the opposite of an explicit cost, which is borne directly. In other words, an implicit cost is any cost that results from using an asset instead of renting, selling or lending it. These are costs a business incurs without actually spending money.
116. Which of the following subjects does not figure in the Concurrent List of our Constitution?
A. Stock Exchanges and futures markets
B. Protection of wild animals and birds
C. Forests
D. Trade unions
Answer: A.Stock Exchanges and futures markets
Explanation: The Concurrent List or List-Ill is a list of 47 items given in Part XI of the Constitution of India, concerned with relations between the Union and States. Stock exchanges and futures markets come under the Union List.
117. The method of calculating the national income by the product method is otherwise known as :
A. Income method
B. Value added method
C. Expenditure method
D. Net output method
Answer: D.Net output method
Explanation: Primarily there are three methods of measuring national income. Which method is to be employed depends on the availability of data and purpose. The methods are product method, income method and expenditure method. According to product method, the total value of final goods and services produced in a country during a year is calculated at market prices. According to this method only the final goods and services are included and the intermediary goods and services are not taken into account. In this method, National Output = National Expenditure (Aggregate Demand) = National Income.
118. The best measure to assess a country’s economic growth is –
A. per capita income at constant prices
B. per capita income at current prices ,
C. gross domestic product at current prices
D. gross national product at current prices
Answer: A.per capita income at constant prices
Explanation: Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.
119. Rate of interest is determined by –
A. The rate of return on the capital invested
B. Central Government
C. Liquidity preference
D. Commercial Banks
Answer: D.Commercial Banks
Explanation: Bank Rate is determined by the Reserve Bank of India. The rate of interest is determined by the commercial banks in India. As per RBI notification, banks are free todetermine rates of interest subject to BPLR and spread guidelines.
120. The total value of goods and services produced in a country during a given period is –
A. Disposable income
B. National income
C. Per capita income
D. Net national income
Answer: B.National income
Explanation: National income is the total value a country’s final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macroeconomics.
121. Income and consumption are :
A. inversely related
B. directly related
C. partially related
D. unrelated.
Answer: B.directly related
Explanation: Consumption and income arc directly or positively related. An increase in income is associated with an increase in income; a decrease in consumption accompanies a decrease in income.
122. Which of the following is deducted from GNP to arrive at NNP?
A. Depreciation
B. Interest
C. Tax
D. Subsidy
Answer: A.Depreciation
Explanation: If we subtract the depreciation charges from the gross national product, we get net national product at market price. Net national product at market price=Gross national product at market priceDepreciation.
123. Regarding money supply situation in India it can be said that the :
A. Currency with the public is inconvertible only.
B. Currency with the public is less than the deposits with the banks.
C. Currency with the public is more than the deposits with the banks.
D. Currency with the public is almost equal to the deposits with banks.
Answer: B.Currency with the public is less than the deposits with the banks.
Explanation: Money supply in India includes the following:
(i) Currency with the public:
(ii) Demand deposits and time deposits with banks:
(iii) Deposits with reserve Bank of India: and
(iv) Deposits in Post Office. The currency with public is less than the total currency issued by RBI. This is because of cash reserves with banks, i.e., a part of currency issued remains with banks. As far as deposits are concerned, during the last four decades, the proportion of demand deposits, time deposits and other with banks in relation to total supply of money has been increasing with reciprocal diminution in currency held by the public.
124. The equilibrium price of a commodity will definitely rise if there is a/an:
A. increase in supply combined with a decrease in demand.
B. increase in both demand and supply.
C. decrease in both demand and supply.
D. increase in demand accompanied by a decrease in supply.
Answer: D.increase in demand accompanied by a decrease in supply.
Explanation: Price of a commodity is always determined by the forces of demand and supply in the market. The price at which the amount demanded and amount supplied are equal is known as ‘equilibrium price.’ The equilibrium price definitely increases when there is an in- crease in demand combined with the decrease in supply.
125. Short term contractions and expansions in economic activity are called
A. Expansions
B. Recession
C. Deficits
D. The business cycle
Answer: D.The business cycle
Explanation: The business cycle is the fluctuation in economic activity that an economy experiences over a period of time. It is basicallydefined in terms of periods of expansion or recession. During expansions, the economy grows in real terms (i.e. excluding inflation), as evidenced by increases in indicators like employment, industrial production, sales and personal incomes. During recessions, the economy contracts, as measured by decreases in the above indicators.
126. The concept of joint sector implies cooperation between –
A. Public sector and private sector industries
B. State Government and Central Government
C. Domestic and. Foreign Companies
D. None of these
Answer: A.Public sector and private sector industries
Explanation: Joint sector industries are owned jointly by the government and private individuals who have contributed to the capital. In joint sector, both public sector and private sector join hands to establish new enterprise. The joint sector is an extension of the concept of mixed economy.
127. When there is a change in demand leading to a shift of the Demand Curve to the right, at the same price as before, the quantity demanded will –
A. decrease
B. increase
C. remain the same
D. contract
Answer: B.increase
Explanation: In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. The shift of a demand curve takes place when there is a change in any non-price determinant of demand, resulting in a new demand curve. There is movement along a demand curve when a change in price causes the quantity demanded to change.
128. The income elasticity of demand being greater than one, the commodity must be –
A. a necessity
B. a luxury
C. an inferior good
D. None of these
Answer: B.a luxury
Explanation: In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good, ceteris paribus. It is calculated as the ratio of the percentage change in demand to the percentage change in income. For example, if, in response to a 10% increase in income, the demand for a good increased by 20%. the income elasticity of demand would be 20%/10% = 2. A positive income elasticity of demand is associated with normal goods: an increase in income will lead to a rise in demand. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.
129. The main determinant of real wage is –
A. extra earning
B. nature of work
C. promotion prospect
D. purchasing power money
Answer: D.purchasing power money
Explanation: The term real wages refers to wages that have been adjusted for inflation. This term is used in contrast to nominal wages or unadjusted wages. Real wages provide a clearer representation of an individual’s wages. The real purchasing power of income or money is the key determinant of real wage. It an indication of an individual’s actual purchasing power. Real wages arc a useful economic measure, as opposed to nominal wages, which simply show the monetary value of wages in that year.
130. A refrigerator operating in a chemist’s shop is an example of –
A. free good
B. final good
C. producers good
D. consumer’s good
Answer: B.final good
Explanation: Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the carmanufacturer are not; they are intermediate goods used to make the final good.
131. The situation in which total revenue is equal to total cost, is known as –
A. monopolistic competition
B. equilibrium level of output
C. break-even point
D. perfect competition
Answer: C.break-even point
Explanation: In economics and cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even”. A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk- adjusted, expected return.
132. The relationship between price of a commodity and the demand for it –
A. is a positive relationship
B. is an inverse relationship
C. They are independent of each other
D. They do not have any relationship
Answer: B.is an inverse relationship
Explanation: According to the Law of demand, consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant.
133. Consumer’s sovereignty means:
A. consumers are free to spend their income as they like.
B. consumers have the power to manage the economy.
C. consumer’s expenditures influence the allocation of resources.
D. consumer goods are free from government control,
Answer: A.consumers are free to spend their income as they like.
Explanation: Consumer sovereignty means that buyers ultimately determine which goods and services remain in production. In unrestricted markets, those with income orwealth are able to use their purchasing power to motivate producers. So ultimately it means how the consumers want to spend their incomes.
134. The situation in which total Revenues equals total cost, is known as :
A. Monopolistic competition
B. Equilibrium level of output.
C. Break even point
D. Perfect competition
Answer: C.Break even point
Explanation: In economics and cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even.”
135. A market in which there are a few number of large firms is called as
A. Duopoly
B. Competition
C. Oligopoly
D. Monopoly
Answer: C.Oligopoly
Explanation: Duopoly means a market in which two producers of the same good are predominantly powerful. In some theries, the term is used specifically to denote the existence of only two suppliers of a good.
136. Number of sellers in the monopoly market structure is –
A. few
B. large
C. one
D. two
Answer: C.one
Explanation: Monopoly refers to a market in which there is only one supplier and no other firms are able to enter.
137. When percentage change in demand for a commodity is less than percentage change in its price, then demand is said to be –
A. Highly elastic
B. Inelastic
C. Relatively elastic
D. Perfectly inelastic
Answer: B.Inelastic
Explanation: When the percentage change in quantity demanded is less than the percentage change in price, then the demand for the commodity is said to be inelastic. Price elasticity of demand refers to the degree of responsiveness of quantity demanded to change in price.
138. Production function is the relationship between –
A. Production and Profit
B. Production and Prices
C. Production and Production factors
D. Production and Income
Answer: C.Production and Production factors
Explanation: In economics, a production function relates physical output of a production process to physical inputs or factors of production. The primary purpose of the production function is to address allocative efficiency in the use of factor inputs in production and the resulting distribution of income to those factors.
139. Any factor of production can earn economic-rent, when its supply will be –
A. Perfectly elastic
B. Perfectly inelastic
C. Elastic in nature
D. All of the above
Answer: B.Perfectly inelastic
Explanation: Economic rent is the revenue that can be earned from the land or other natural resource for which there is a fixed supply — as economists like to say, the supply is perfectly inelastic. Because the supply is perfectly inelastic, the amount of its supply does not depend on any income that the resource can produce.
140. The father of Economics is –
A. Marshall
B. Adam Smith
C. J.M. Keynes
D. Karl Marx
Answer: B.Adam Smith
Explanation: Adam Smith is known as ‘Father of Modern Economics,’ He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
141. The sale of branded articles is common in a situation of –
A. excess capacity
B. monopolistic competition
C. monopoly
D. pure competition
Answer: B.monopolistic competition
Explanation: Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities.
142. Who propounded Dynamic Theory of profit?
A. Clark
B. Schumpeter
C. Knight
D. Hawly
Answer: A.Clark
Explanation: Dynamic Theory of Profit is associated with the name of an American Economist J. B. Clark. In the world of reality, according to J. B. Clark profit arises only in a dynamic economy.
143. Demand curve of a firm under perfect competition is :
A. horizontal to ox-axis
B. negatively sloped
C. positively sloped
D. U – shaped
Answer: A.horizontal to ox-axis
Explanation: Under Perfect Competition, the firm faces a horizontal demand curve. It can sell any quantity desired at the market price, but cannot sell anything above the market price.
144. The marginal revenue of a monopolist is:
A. more than price
B. equal to price
C. less than price
D. less than marginal cost
Answer: C.less than price
Explanation: A monopolist’s marginal revenue is always less than or equal to the price of the good. Marginal revenue is the amount of revenue the firm receives for each additional unit of output. It is the difference between total revenue – price times quantity – at the new level of output and total revenue at the previous output (one unit less).
145. Payment of water charges by the farmers to the government represents –
A. intermediate consumption
B. final consumption
C. fixed investment
D. inventory investment
Answer: A.intermediate consumption
Explanation: Intermediate consumption is an accounting concept which measures the value of the goods and services consumed as inputs by a process of production. It excludes fixed assets whose consumption is recorded as consumption of fixed capital. The goods and services may be either transformed or used up by the production process. Intermediate goods or services used in production can be either changed in form (e.g. bulk sugar) or completely used up (e.g. electric power, water, etc).
146. The problem of Economics arises from
A. Plenty
B. Scarcity of goods
C. More wants and less goods
D. All of the above
Answer: C.More wants and less goods
Explanation: The theory of Economic problem states that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production(such as capital and labor) are to be allocated. In short, the economic problem is the choice one must make, arising out of limited means and unlimited wants.
147. When average cost production (AC) falls, marginal cost of production must be –
A. rising
B. Falling
C. Greater than the average cost
D. Less than the average cost
Answer: D.Less than the average cost
Explanation: Average cost is the total cost per unit of output. Marginal cost, on the other hand, is the addition to the total cost by producing one more units of output. Economies of scale are said to exist if an additional unit of output can he produced for less than the average of all previous units—that is, if long-run marginal cost is below long-run average cost, so the latter is falling. Conversely, there may be levels of production where marginal cost is higher than average cost, and average cost is an increasing function of output.
148. Production function expresses –
A. technological relationship between physical inputs and output
B. financial relationship between physical inputs and output
C. relationship between finance and technology
D. relationship between factors of production
Answer: A.technological relationship between physical inputs and output
Explanation: Production involves transformation of inputs into outputs. The output is a function of input. The functional relationship between physical inputs and physical output of a firm is called production function. The word ‘function’ in mathematics means the precise relationship that exists between one dependent variable and a number (or one) of independent variables. The production function states the maximum quantity of output that can be produced from any given quantities of various inputs during a given period of time.
149. When there is one buyer and many sellers then that situation is called –
A. Monopoly
B. Single buyer right
C. Down right
D. Double buyers right
Answer: B.Single buyer right
Explanation: In economics, a monopsony (mono: single) is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers. As the only purchaser of a good or service, the monopsonist may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers. It is also known as Single buyer Right. A single-payer universal health care system, in which the government is the only “buyer” of health care services, is an example of a monopsony. Another possible monopsony could develop in the exchange between the food industry and farmers.
150. The measure of a worker’s real wage is
A. The change in his productivity over a given time
B. His earnings after deduction at source
C. His daily earnings
D. The purchasing power of his earnings
Answer: D.The purchasing power of his earnings
Explanation: A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. While differences in earnings or incomes may be misleading indicators of worker welfare, real wage rates are comparable across time and location. Nominal wages are not sufficient to tell us if workers gain since, even if wages rise, the price of one of the goods also rises when moving to free trade. The real wage represents the purchasing power of wages—that is, the quantity of goods the wages will purchase.
151. Bull and bear are related to which commercial activity?
A. Banking
B. Ecommerce
C. International trade
D. Stock market
Answer: D.Stock market
Explanation: Both the terms are related to stock market. Investors who take a bull approach purchase securities under the assumption that they can be sold later at a higher price. A “bear” is considered to be the opposite of a bull. Bear investors believe that the value of a specific security or an industry is likely to decline in the future
152. The share broker who sells shares in the apprehension of falling prices of shares is called
A. Bull
B. Dog
C. Bear
D. Stag
Answer: C.Bear
Explanation: A bear market is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Bear investors believe that the value of a specific security or an industry is likely to decline in the future. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market.
153. “Bad money will drive out good money from circulation.” This is known as :
A. Engle’s Law
B. Gresham’s Law
C. Say’ Law
D. Wagner’s Law
Answer: B.Gresham’s Law
Explanation: Gresham’s law is an economic principle that states: “When a government compulsorily overvalues one type of money and undervalues another, the under-valued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.” It is commonly stated as: “Bad money drives out good.”
154. If he Central Bank wants to encourage an increase in the supply of money and decrease in the cost of borrowing money, it should –
A. lower cash reserve ratio
B. raise discount rates
C. sell government securities
D. All of the above
Answer: A.lower cash reserve ratio
Explanation: When the Central Bank of a country intends to increase money supply, it should lower the Cash Reserve Ratio. A decrease in CRR helps the commercial banks to hold a lesser proportion of their deposits in the form of deposits with the RBI. This increases the amount of Bank deposits and they will lend more as they have more amount as their reserve.
155. On the administered price of which of the following articles no subsidy is given?
A. DAP
B. ATF
C. LPG
D. Kerosene oil
Answer: B.ATF
Explanation: In India, no subsidy is given to Aviation Turbine Fuel (ATF). Indian Oil Aviation Service is a leading aviation fuel solution provider in India and the most-preferred supplier of jet fuel to major international and domestic airlines. Jet fuel is a colorless, combustible, straight-run petroleum distillate liquid. The highly punitive fiscal regime in India is the primary problem for the aviation sector. The cost of Aviation Turbine Fuel in India is almost 60% higher than international benchmarks. Combined with a high base price, fuel now represents 45-55% of a carrier’s operating costs.
156. Which among the following has the least possibility of globalization?
A. selection of labour force
B. location of capital works
C. to manage resources for investment
D. increase in infrastructure
Answer: B.location of capital works
Explanation: Globalization can affect the labor market by increasing capacity of developing countries to create new opportunities for work and production following the alleviation of price distortions with respect to both labor and capital. Globalization on business management is interconnection of international markets and managing businesses in a global industry. This includes management of resources for foreign investments whereby a company expands its business and invests in foreign countries. Globalization means inter-linkage among the countries of the globe. This can only happen when infrastructure is in proper shape. A well- developed infrastructure is an indispensable condition for faster globalization.
157. What was the objective of Command Area Development Programme?
A. To ensure that land is given to the tillers
B. To ensure better utilization of irrigation potential
C. To develop I he areas under the command of Army
D. Poverty alleviation in selected areas
Answer: B.To ensure better utilization of irrigation potential
Explanation: The Command Area Development Programme was launched in the year 1974-75 under Centrally Sponsored Scheme, with the objective of fast utilization of created irrigation potential and optimum agriculture product ion from irrigable land. It aimed at: reclamation of water logged areas; construction of field irrigation channels; construction of field drains; all round development of areas pertaining to agriculture, etc.
158. Distribution of food rains operates under a two her system with the introduction of –
A. Targetted Public Distribution System
B. The Consumers Cooperatives
C. The Cooperative Marketing Societies
D. The Service Cooperatives
Answer: A.Targetted Public Distribution System
Explanation: The Targeted Public Distribution System (TPDS) replaced the erstwhile PDS from June 1997. Under the new system a two tier subsidized pricing system was introduced to benefit the poor.
159. A favorable Balance of Trade of a country implies that –
A. Imports are greater than Exports
B. Exports are greater than Imports
C. Both Imports and Exports are equal
D. Rising Imports and Falling Exports
Answer: B.Exports are greater than Imports
Explanation: Favorable balance of trade is an imbalance in a nation’s balance of trade in which the payments for merchandise exports received by the country exceed payments for merchandise imports paid by the country. This is also termed a balance of trade surplus. It’s considered favorable because more goods are exported out of the country than are imported in, meaning that foreign production is replaced with domestic production, which then increases domestic employment and income. A balance of tradesurplus is often the source of a balance of payments surplus.
160. ‘Quota’ is –
A. tax levied on imports
B. imports of capital goods
C. limit on the quantity of imports
D. limit on the quantity of exports
Answer: C.limit on the quantity of imports
Explanation: An import quota is a limit on the quantity of a good that can be produced abroad and sold domestically. It is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can he imported into a country in a given period of time. The primary goal of import quotas is to reduce imports and increase domestic production of a good, service, or activity, thus “protect” domestic production by restricting foreign competition.
161. A tax is characterized by horizontal equity if its liability is –
A. proportional to the income of tax payers
B. similar for tax payers in similar circumstances
C. proportional to the expenditure of tax payers
D. the same for every tax payer
Answer: A.proportional to the income of tax payers
Explanation: The principle of equity includes both horizontal and vertical. Equity is determined by first assessing an individual’s ability-to-pay. The idea of the ability-to-pay principle considers whether or not it is fair to tax someone higher just because that person has the ability and resources to pay. If it is decided that they should be required to pay more, the question of how much more arises. These questions can be analyzed through horizontal and vertical equity which are subsets of the ability-to-pay principle. Horizontal equity suggests it is fair for people of equal ability to pay the same amount in taxes.
162. What does a Leasing Company provide?
A. Machinery and capital equipment on hire
B. Legal guidance in establishing an enterprise
C. Office accommodation on hire
D. Technical consultancy and experts for a fee
Answer: A.Machinery and capital equipment on hire
Explanation: Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. Equipment leasing is a financing alternative for businesses to acquire needed machinery while saving precious operating capital. Leasing provides opportunities to use available money to operate assets that can make more money over time.
163. The government set up a committee headed by the Chairman, Central Board of Direct Taxes some time back to go into –
A. codification of tax laws
B. the entire structure of tax laws including the question of imposition of bank tax
C. the concerns of the foreign investors in India with regard to taxation matters
D. aspects of generation of black money, its transfer abroad and bringing back such money into India’s legitimate financial system
Answer: D.aspects of generation of black money, its transfer abroad and bringing back such money into India’s legitimate financial system
Explanation: The Central Board of Direct Taxes (CBDT) panel on black money recently suggested enactment of new laws, strengthening of existing legislation and introduction of deterrent penalties for tax offences to deal with the menace. In its 66-page report on measures to tackle black money in India and abroad, the CBDT committee also recommended steps to prevent generation of illicit funds through transactions in property, bullion and equity market.
164. What is dual pricing?
A. Wholesale price and Retail pricing
B. Pricing by agents and Pricing by retailers
C. Price fixed by Government and Price in open market
D. Daily prices and Weekly prices
Answer: C.Price fixed by Government and Price in open market
Explanation: Dual pricing is the practice of setting prices at different levels depending on the currency used to make the purchase. It may be used to accomplish a variety of goals, such as to gain entry into a foreign market by offering unusually low prices to buyers – using the foreign currency, or as a method of price discrimination. In the context of commerce, however, dual pricing refers to the sale of the same product at different prices, depending on the market. This is also known as two-tier pricing and is common in many developing nations
165. A tax is said to be regressive when its burden falls –
A. less heavily on the poor than on the rich
B. more heavily on the poor than on the rich
C. equally on the poor as on the rich
D. None of these
Answer: B.more heavily on the poor than on the rich
Explanation: In terms of individual income and wealth, a regressive tax imposes a greater burden on the poor than on the rich. There is an inverse relationship between the tax rate and the taxpayer’s ability to pay, as measured by assets, consumption, or income. These taxes tend to reduce the tax burden of the well-todo, as they shift the burden disproportionately to the needy.
166. Mixed Economy means :
A. Promoting both agriculture and industries in the economy
B. Co-existence of public and private sectors
C. Co-existence of rich and poor
D. Co-existence of small and large industries
Answer: B.Co-existence of public and private sectors
Explanation: A mixed economy is variously defined as an economic system consisting of a mixture of either markets and economic planning, public ownership and private ownership, or free markets and economic interventionism. All modern economies are mixed where the means of production are shared between the private and public sectors.
167. When aggregate supply exceeds aggregate demand –
A. unemployment falls
B. prices rise
C. inventories accumulate
D. unemployment develops
Answer: C.inventories accumulate
Explanation: Deflation sets in when aggregate supply exceeds aggregate demand. Recession sets in. This will lead to a buildup in stocks (inventories) and this sends a signal to producers either to cut prices (to stimulate an increase in demand) or to reduce output so as to reduce the buildup of excess stocks. Either way -there is a tendency for output to move closer to the current level of demand.
168. Investment is equal to –
A. gross total of all types of physical capital assets
B. gross total of all capital assets minus wear and tear
C. stock of plants, machines and equipments
D. None of these
Answer: B.gross total of all capital assets minus wear and tear
Explanation: Investment” is a broader concept that includes investment in all kinds of capital assets, whether physical property or financial assets. In economic statistics and accounts, capital formation can be valued gross, i.e., before deduction of consumption of fixed capital (or “depreciation”), or net, i.e. after deduction of “depreciation” write-offs. The net valuation method views “depreciation” as the compensation for the cost of replacing fixed equipment used up or worn out, which must be deducted from the total investment volume to obtain a measure of the “real” value of investments: the depreciation write-off compensates and cancels out the loss in capital value of assets used due to wear & tear, obsolescence, etc.
169. Which one of the following items is included in the national income account?
A. Services of housewives
B. Income of smugglers
C. Services of Sadhus
D. Services of night-watchmen
Answer: D.Services of night-watchmen
Explanation: National income is the total value a country’s final output of all new goods and services produced in one year. Services provided by housewives, income of smugglers and services of sadhus can be categorized as non- economic services and thus cannot be accounted.
170. An Increase in national income because of an increase in price is called-
A. an increase in national income in real terms
B. an increase in national income at constant prices
C. an increase in money national income
D. an increase in national income at base year prices
Answer: D.an increase in national income at base year prices
Explanation: To find the real value of changes in output under inflationary conditions, the effects of any general price increase (price inflation) must be taken into account. This is done by holding prices constant from a starting measure, called the base year. It holds prices constant in terms of the prices existing in the base year.
171. A-Transfer Income’ is an –
A. Income which is not produced by any production process
B. Income taken away from one person and given over to another
C. Unearned income
D. Earned income
Answer: A.Income which is not produced by any production process
Explanation: Income which is not produced by any production process is called Transfer Income.
172. National Income is also called as :
A. GNP at Factor Cost
B. GNP at Market Price
C. (3) NNP at Factor Cost
D. (4) NNP at Market Price
Answer: A.GNP at Factor Cost
Explanation: National Income is the total value of all goods and services produced in the economy during a particular period of time.
173. One of the following is ‘Labour’ in Economics.
A. A Musician performing for a benefit fund
B. A Painter working for his own pleasure
C. Reading a book as a hobby
D. A Mother teaching her own son
Answer: A.A Musician performing for a benefit fund
Explanation: Labour includes both physical and mental work undertaken for some monetary reward. In this way, workers working in factories, services of doctors, advocates, ministers, officers and teachers are all included in labour. Any physical or mental work which is not undertaken for getting income, but simply to attain pleasure or happiness, is not labour.
174. Excise duty is levied on –
A. sale of goods
B. production of goods
C. import of goods
D. export of goods
Answer: B.production of goods
Explanation: Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty.
175. Average Revenue means –
A. the revenue per unit of commodity sold
B. the revenue from all commodities sold
C. the profit realised from the marginal unit sold
D. the profit realised by sale of all commodities
Answer: A.the revenue per unit of commodity sold
Explanation: Average revenue is the revenue per unit of the commodity sold. It can be obtained by dividing the TR by the number of units sold. Then, AR = TR/Q AR. In other words, it means price. Since the demand curve shows the relationship between price and the quantity demanded, it also represents the aver- age revenue or price at which the various amounts of a commodity are sold, because the price offered by the buyer is the revenue from seller’s point of view. Therefore, averagerevenue curve of the firm is the same as demand curve of the consumer.
176. Economic rent refers to –
A. Payment made for the use of labour
B. Payment made for the use of capital
C. Payment made for the use of organisation
D. Payment made for the use of land
Answer: D.Payment made for the use of land
Explanation: Rent refers to that part of payment by a tenant which is made only for the use of land, i.e., free gift of nature. The payment made by an agriculturist tenant to the landlord is not necessarily equals to the economic rent. A part of this payment may consist of interest on capital invested in the land by the land-lord in the form of buildings, fences, tube wells, etc. The term ‘economic rent’ refers to that part of payment which is made for the use of land only, and the total payment made by a tenant to the landlord is called ‘contract rent’. Economic rent is also called surplus because it emerges without any effort on the part of a landlord.
177. “Interest is a reward for parting with liquidity” is according to –
A. Keynes
B. Marshall
C. Haberler
D. Ohlin
Answer: A.Keynes
Explanation: In macroeconomic theory, liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money. The demand for money as an asset was theorized to depend on the interest foregone by not holding bonds. Interest rates, he argues, cannot be a reward for saving as such because, if a person hoards his savings in cash, keeping it under his mattress say, he will receive no interest, although he has nevertheless refrained from consuming all his current income. Instead of a reward for saving, interest in theKeynesian analysis is a reward for parting with liquidity.
178. Extension or contraction of quantity demanded of a commodity is a result of a change in the –
A. unit price of the commodity
B. income of the consutner
C. tastes of the consumer
D. climate of the region
Answer: A.unit price of the commodity
Explanation: Demand for a commodity refers to the quantity of the commodity that people are willing to purchase at a specific price per unit of time, other factors (such as price of related goods, income, tastes and preferences, advertising, etc) being constant. Demand includes the desire to buy the commodity accompanied by the willingness to buy it and sufficient purchasing power to purchase it. So changes in the unit price of a commodity leads to either extension or contraction in demand. The law of demand states that there is an inverse relationship between quantity demanded of a commodity and its price, other factors being constant. In other words, higher the price, lower the demand and vice versa, other things remaining constant.
179. Why is rent earned by land even in the long run?
A. Land has original and indestructible power
B. Land is a man made factor
C. Its supply is inelastic in the short run
D. Its supply is inelastic in the long run
Answer: D.Its supply is inelastic in the long run
Explanation: Rent accrues to land which is fixed in supply even in the longer run. It is permanent. In contrast to it is a quasi rent, introduced by Marshall, which is inelastic in the short run, but elastic in the longer run.
180. Who is called the Father of Economics?
A. J.M. Keynes
B. Malthus
C. Ricardo
D. Adam Smith
Answer: D.Adam Smith
Explanation: Adam Smith is best known for two classic works: The Theory of Moral Sentiments (1759), and An Ingully into the Nature and Causes of the Wealth of Nations (1776). The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. Smith is cited as the father of modern economics and is still among the most influential thinkers in the field of economics today.
181. A horizontal demand curve is –
A. relatively elastic
B. perfectly inelastic
C. perfectly elastic
D. of unitary elasticity
Answer: C.perfectly elastic
Explanation: The demand curve facing a perfectly competitive firm is flat or horizontal. This is because all firms in perfect competition are by definition selling an identical (homogeneous) product. A horizontal demand curve is a flat curve with a slope of zero. It is a perfectly elastic demand curve. Because the slope of the curve is zero, it is impossible for the price to change in the market.
182. The theory of monopolistic competition has been formulated in the United States of America by –
A. Joan Robinson
B. Edward Chamberlin
C. John Bates Clark
D. Joseph Schumpeter
Answer: B.Edward Chamberlin
Explanation: In treatments of monopolistic competition, Edward Chamberlin and Joan Robinson are usually credited with simultaneously and independently developing the theory of monopolistic or imperfect competition. Chamberlin published his book ‘The Theory of Monopolistic Competition’ in 1933, the same year that Joan Robinson published her book on the same topic: The Economics of Imperfect Competition,’ so these two economists can be regarded as the parents of the modern study of imperfect competition.
183. The remuneration of the entrepreneur in production is –
A. Pure profit
B. Gross profit
C. Net profit
D. Super-normal profit
Answer: C.Net profit
Explanation: Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship. An entrepreneur is a person who combines the other factors of production – land, labor, and capital – to earn a profit. His profit is in the form of Net Profit which is achieved by deducting other elements (such as planning the production, producing the commodities on the basis of demand, looking after efficient distribution) from the gross profit.
184. Elasticity (e) expressed by the formula 1 > e > 0 is –
A. Perfectly elastic
B. Relatively elastic
C. Perfectly inelastic
D. Relatively inelastic
Answer: D.Relatively inelastic
Explanation: Elasticity (e) expressed by the formula 1 > e > 0 is relatively inelastic. Elasticity is responsiveness of one variable to a change in
185. In the case of an inferior good, the income elasticity of demand is :
A. Zero
B. Negative
C. Infinite
D. Positive
Answer: B.Negative
Explanation: A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes. A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand.
186. Production Function relates to:
A. costs to outputs
B. costs to inputs
C. inputs to outputs
D. wage level to profits
Answer: C.inputs to outputs
Explanation: In microeconomics and macroeconomics, a production function is a function that specifies the out-put of a firm, an industry, or an entire economy for all combinations of inputs. The primary purpose of the production function is to address allocative efficiency in the use of factor inputs in production and the resulting distribution of income to those factors.
187. The term “market” in Economics means –
A. A central place
B. Presence of competition
C. Place where goods are stored
D. Shops and super bazars
Answer: A.A central place
Explanation: The most important defining characteristic of a market in economics is that it allows buyers and sellers to exchange any type of goods, services and information. According to Walter Christaller’s ‘Central Place Theory,’ a central place is a market center for the exchange of goods and services by people attracted from the surrounding area. The central place is so called because it is centrally located to maximize accessibility from the surrounding region.
188. Division of labour is limited by –
A. the number of workers
B. hours of work
C. extent of the market
D. working space
Answer: C.extent of the market
Explanation: Division of labour is a process whereby the production process is broken clown into a sequence of stages and workers are assigned to particular stages. As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division mils (always be limited by the extent of that power, or, other words, by the extent of the market.
189. Cross elasticity of demand between petrol and car is –
A. infinite
B. positive
C. zero
D. negative
Answer: D.negative
Explanation: In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of anal her good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good. For example, if, in response to a 10% increase in the price of fuel, the demand of new cars that are (110 inefficient decreased by 20%, the cross elasticity of demand would be -2. A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products
190. The Law of Demand expresses –
A. effect of change in price of a commodity on its demand
B. effect of change in demand of a commodity on its price
C. effect of change in demand of a commodity over the supply of its substitute
D. (4) None of the above
Answer: A.effect of change in price of a commodity on its demand
Explanation: The law of demand states the inverse relation that comes to exist of between price in one hand and quantity demanded on the other. The law of demand portrays that demand is the function of price. Price is the key determinant of demand. Fluctuations in price leads to changes in the quantity demanded. In other words, the higher the price of a product, the lower the quantity demanded.
191. The Marginal Utility Curve slopes downward from left to right indicating –
A. A direct relationship between marginal utility and the stock of commodity
B. A constant relationship between marginal utility and the stock of commodity
C. A proportionate relation-ship between marginal utility and the stock of commodity
D. An inverse relationship between marginal utility and the stock of commodity
Answer: D.An inverse relationship between marginal utility and the stock of commodity
Explanation: The Marginal Utility Curve is a curve illustrating the relation between the marginal utility obtained from consuming an additional unit of good and the quantity of the good consumed. The negative slope of the marginal utility curve reflects the law of diminishing marginal utility. The marginal utility curve also can be used to derive the demand curve. Marginal Utility is the utility derived from the last unit of a commodity purchased. One of the earliest explanations of the inverse relationship between price and quantity demanded is the law of diminishing marginal utility. This law suggests that as more of a product is consumed the marginal (additional) benefit to the consumer falls; hence consumers are prepared to pay less.
192. The term ‘Macro Economics’ was used by .
A. J.M. Keynes
B. Ragner Frisch
C. Ragner Nurkse
D. Prof. Knight
Answer: B.Ragner Frisch
Explanation: Ragnar Frisch coined the widely- used term pair macroeconomics/ microeconomics in 1933. He was a Norwegian economist and the co-recipient of the first Nobel Memorial Prize in Economic Sciences in 1969. Fie is known for having founded the discipline of econometrics.
193. Tax on inheritance is called –
A. Excise duty
B. Estate duty
C. Gift tax
D. Sales tax
Answer: B.Estate duty
Explanation: Estate duty is a tax on the total market value of a person’s assets at the date of his or her death. The deceased person’s assets, as a whole, are called an estate. Inheritance tax is levied on assets that legal heirs inherit, while estate duty is applicable on the assets of those who are dead.
194. Which nationalized bank of India has a shining star as its emblem?
A. Syndicate Bank
B. Indian Bank
C. Bank of India
D. Bank of Baroda
Answer: C.Bank of India
Explanation: The new logo of the Bank of Baroda is a unique representation of a universal symbol. It comprises dual ‘B’ letterforms that hold the rays of the rising sun. It is known as the ‘Baroda Sun’ which is the single most powerful source of light and energy – its far reaching rays dispel darkness to illuminate everything they touch. With this logo, Bank of Baroda seeks to be the source that will help all its stakeholders realize their goals. To customers, the hank seeks to be a one-stop. reliable partner who will help them address different financial needs. To employees, the bank offers rewarding careers and to our investors and business partners, maximum return on their investment.
195. ISI mark is not given to which of the following products?
A. Electrical goods
B. Hosiery goods
C. Biscuits
D. Cloth
Answer: C.Biscuits
Explanation: ISI mark is a certification mark for industrial products in India, which is mandatory for certain products to be sold in India, like most of the electrical appliances viz; switches, electric motors, wiring cables, heaters, kitchen appliances etc., and other products like portland cement, LPG valves, LPG cylinders, automotive tyres.
196. The duties levied on alcoholic liquors, narcotic drugs and opium come under—
A. Central Excise Duty
B. Land Revenue
C. State Excise Duty
D. General Sales Tax
Answer: C.State Excise Duty
Explanation: An excise or excise tax (sometimes called an excise duty) is a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country). It is charged on many goods like cars. writing paper, printing paper and packing paper, drugs and pharmaceuticals, alcoholic liquor, water filtration and purification devices, pan masala, etc.
197. Theoretically trade between two countries lakes place on account of –
A. differences In costs
B. scarcity of goods
C. comparative differences in costs
D. need for exports
Answer: C.comparative differences in costs
Explanation: Trade exists for man clue to specialization and division of labor, most people concentrate on a small aspect of production, trading for other products. Trade exists between regions because different regions have a comparative advantage in the production of some tradable commodity, or because different regions’ size allows for the benefits of mass production thus providing cost advantage of producing the same commodity.
198. Short term loans to correct Balance of Payments problems is given by
A. I.M.F.
B. I.B.R.D
C. I.D.A
D. A.D.B
Answer: A.I.M.F.
Explanation: Upon Initial IMF formation, its two primary functions were: to oversee the fixed exchange rate arrangements between countries, thus helping national governments manage their exchange rates and allowing these governments to prioritize economic growth, and to provide short-term capital to aid balance-of-payments.
199. The outcome of ‘devaluation of currency’ is –
A. increased export and improvement in balance of payment
B. increased export and foreign reserve deficiency
C. increased import and improvement in balance of payment
D. increased export and import
Answer: A.increased export and improvement in balance of payment
Explanation: Devaluation is a reduction in the exchange value of a country’s monetary unit in terms of gold, silver, or foreign currency. By decreasing the price of the home country’s exports abroad and increasing the price of imports in the home country, devaluationencourages the home country’s export sales and discourages expenditures on imports, thus improving its balance of payments.
200. ‘Gresham’s Law’ in Economics relates to
A. supply and demand
B. circulation of currency
C. consumption of supply
D. distribution of goods and services
Answer: B.circulation of currency
Explanation: Gresham’s law is an economic principle that states: “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear, from circulation into hoards, while the over-valued money will flood into circulation.” It is commonly stated as: “Bad money drives out good.”
201. Which one of the following is an example of optional money?
A. Currency note
B. Coins
C. Cheque
D. Bond
Answer: C.Cheque
Explanation: On the basis of acceptability, money has been classified into legal tender and optional money. Legal tender money is enforced by law. Optional money is that money which may or may not be accepted as a means of payment; it has no legal sanction. Different credit instruments, like, cheques, bank drafts, etc., are the examples of optional money.
202. ‘Money’ is an example of –
A. Sunk capital
B. Floating capital
C. Concrete capital
D. Social capital
Answer: B.Floating capital
Explanation: Money is something which is widely accepted in payment for goods and services and in setting debts. Money is an example of Floating Capital.
203. The existence of a Parallel Economy or Black Money –
A. makes the economy more competitive
B. makes the monetary policies less effective
C. ensures a better distribution of income and wealth
D. ensures increasing productive investment
Answer: B.makes the monetary policies less effective
Explanation: In India, Black money refers to funds earned on the black market, on which income and other taxes has not been paid. Black money leads to black liquidity which is immune to any monetary-fiscal policy. It can move around in the economy creating excess demand in several vulnerable sectors of the economy. Of particular relevance in this context is a policy dominated by sector-wise credit rationing in order to maintain inter-sectoral balances. The cost of credit is one one part of such a policy. So, in nutshell, the existence of parallel economy erodes the effectiveness of monetary policies.
204. An economy is in equilibrium when –
A. planned consumption exceeds planned saving
B. planned consumption exceeds planned investment
C. intended saving equals intended investment
D. intended investment exceeds intended savings
Answer: C.intended saving equals intended investment
Explanation: In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. The condition of equilibrium of income is the equality of intended saving and intended investment. An economy is in equilibrium when total savings equal total investment.
205. The ‘Canons of Taxation’ were propounded by –
A. Edwin Canon
B. Adam Smith
C. J.M. Keynes
D. Dalton
Answer: B.Adam Smith
Explanation: Canons of Taxation were first originally laid down by economist Adam Smith in his famous book ‘The Wealth of Nations”. In this book, Adam smith only gave four canons of taxation: (i) canon of equity: (ii) canon of certainty: (iii) canon of convenience; and (iv) canon of economy.
206. Beyond a certain point deficit financing will certainly lead to –
A. inflation
B. deflation
C. recession
D. economic stagnation
Answer: A.inflation
Explanation: Deficit financing is a practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds. Some economists are of the view that it leads to inflation as governments pay off debts by printing fiat money, increasing the money supply and the purchasing power of the people which increases the aggregate demand.
207. VAT is imposed:
A. Directly on Consumer
B. On first stage of production
C. On final stage of production
D. On all stages between production and sale
Answer: D.On all stages between production and sale
Explanation: Value Added Tax (VAT) is imposed on the value added to each commodity by a firm during all stages of production and distribution. In simple terms, it is a fee assessed against businesses at each step of the production and distribution process, usually whenever a product is resold or value is added to it. Valueadded taxation in India was introduced as an indirect value added tax (VAT) into the Indian taxation system from 1 April 2005.
208. The aim of Differentiated Interest Scheme was to provide concessional loans to –
A. weaker section of the society
B. Public Sector Industries
C. Public Limited Companies
D. big exports
Answer: A.weaker section of the society
Explanation: The Differential Rate of Interest Scheme, formulated in March 1972, offers financial assistance at concessional rate of interest. 0 4% to those who intend taking up any productive activity and has been tailored for persons whose income is very low.
209. Investment and savings are kept equal through a change in the level of –
A. Consumption
B. Investment
C. Government expenditure
D. Income
Answer: A.Consumption
Explanation: Desired savings are kept equal to desired investment by responses to interest rate changes. Savings identity or the savings investment identity is a concept in National Income Accounting stating that the amount saved (S) in an economy will be amount invested (I). This identity only holds true because investment here is defined as including inventories. Thus, should consumers decide to save more, and spend less, the fall in demand would lead to an increase in business inventories. The change in inventories brings savings and investment into balance without any intention by business to increase investment.
210. Which of the following is not required while computing Gross National Product (GNP)?
A. Net foreign investment
B. Private investment
C. Per capita income of citizens
D. Purchase of goods by government
Answer: C.Per capita income of citizens
Explanation: Gross National Product (GNP) is the market value of all products and services produced in one year by labour and property supplied by the residents of a country. Basically, GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. GNP measures the value of goods andservices that the country’s citizens produced regardless of their location.
211. In a highly developed country the relative contribution of agriculture to GDP is
A. relatively high
B. relatively low
C. the same as that of other sectors
D. zero
Answer: B.relatively low
Explanation: In developed countries, the labor productivity of any commercial agriculture is high, so only a very small percentage of the population is involved with agriculture even when agriculture is a major industry and export. These countries focus more on manufacturing and service industry. Agriculture or the primary sectors of the economy have sizeable contributions in the GDP of developing nations.
212. The demand for money, according to Keynes, is for –
A. speculative motive
B. transaction motive
C. precautionary motive
D. All the above motives
Answer: C.precautionary motive
Explanation: According to Keynes, money is demanded because of three motives -transaction, precautionary and speculative. The first two motives provide yield of convenience and certainty. The third motive provides money yield. Keynes has termed demand for money as liquidity preference.
213. Economic progress of a country is determined by –
A. Increase in per capita income of people of country
B. Increase in the price of produced capital goods during the year
C. Increased numbers of Trade Unions
D. Fall in the general price level of a country
Answer: A.Increase in per capita income of people of country
Explanation: Economic progress of a country is determined by increase in per capita income of people f that country.
214. What is “book-building”?
A. Preparing the income and expenditure ledgers of a company (book-keeping)
B. Manipulating the profit and loss statements of a company
C. A process of inviting subscriptions to a public offer of securities, essentially through a tendering process
D. Publishers’ activity
Answer: C.A process of inviting subscriptions to a public offer of securities, essentially through a tendering process
Explanation: Book building refers to the process of generating, capturing, and recording investor demand for shares during an IPO (or other securities during their issuance process) in order to support efficient price discovery. Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner. The “book” is the off-market collation of investor demand by the bookrunner and is confidential to the bookrunner, issuer, and underwriter. Book-building is a process of price discovery used in public offers. The issuer sets a base price and a band within which the investor is allowed to bid for shares.
215. A hammer in the hands of a house-wife is a good.
A. consumer
B. capital
C. free
D. intermediary
Answer: D.intermediary
Explanation: Good is any tangible item, whether produced or found naturally and which is available for exchange. Free good is a good that is so abundant is supply that it has no opportunity cost, for example, air. Intermediary good is a firm’s product that is used as an input into the production process of either the same firm or another.
216. Surplus budget is recommended during
A. Boom
B. Depression
C. Famines
D. War
Answer: B.Depression
Explanation: Surplus budget is a budget in which government receipts arc greater than government expenditures. Such a budget is desired when the economy is battling inflation due to excess aggregate demand (AD). Surplus budget plugs the inflationary gap by lowering the level of aggregate demand. AD is lowered on account of (i) rise in revenue collection by the government and (ii) fall in government expenditure.
217. Economic profit or normal profit is the same as –
A. optimum profit
B. accounting profile
C. maximum profit
D. net profit
Answer: D.net profit
Explanation: Normal profit or economic profit is an economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero. Simply put, normal profit is the minimum level of profit needed for a company to remain competitive in the market. In a sense, normal profit is the same as net profit which is calculated by subtracting a company’s total expenses from total revenue, thus showing what the company has earned (or lost) in a given period of time. Accounting profit occurs when revenues are greater than costs, and not equal, as in the case of normal profit.
218. Which of the following is not a feat tare of a capitalist economy?
A. Right to private property
B. Existence of competition
C. Service motive
D. Freedom of choice to consumers
Answer: C.Service motive
Explanation: Capitalism is an economic system in which each individual in his capacity as a consumer, producer, and resource owner is engaged in economic activity with a large measure of economic freedom. The inspiring force in this system is self-interest and maximization of profit. The decisions of businessmen, farmers, producers, including that of wage-earners are based on the profit motive.
219. When the demand for a good increases with an increase in income, such a good is called –
A. Superior good
B. Giffin good
C. Inferior good
D. Normal good
Answer: A.Superior good
Explanation: A superior good is a product that people demand more of as they their incomes grow. These are products that are generally more expensive and rarer like diamonds and classic cars. Such a good must possess two economic characteristics: it must be scarce, and, along with that, it must have a high price.
220. In equilibrium, a perfectly competitive firm will equate –
A. marginal social cost with marginal social benefit
B. market supply with market demand
C. marginal profit with marginal cost
D. marginal revenue with marginal cost
Answer: D.marginal revenue with marginal cost
Explanation: A perfectly competitive firm’s supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. In that price equals marginal revenue for a perfectly competitive firm, price is also equal to marginal cost. In other words, the firm produces by moving up and down along its marginal cost curve. The marginal cost curve is thus the perfectly competitive firm’s supply curve.
221. Equilibrium is a condition that can –
A. never change
B. change only if some outside factor changes
C. change only if some internal factor changes
D. change only if government policies change
Answer: C.change only if some internal factor changes
Explanation: In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absenceof external influences the (equilibrium) values of economic variables will not change. For example, in the standard text-book model of perfect competition, equilibrium occurs at the point, at which quantity demanded and quantity supplied is equal. Equilibrium can change if there is a change in demand or supply conditions which arc internal factor changes.
222. Enterpreneurial ability is a special kind of labour that –
A. is hired out to firms at high wages
B. organizes the process of production
C. produces new capital goods to earn interest
D. manages to avoid losses by continual innovation
Answer: B.organizes the process of production
Explanation: In economics, factors of production are the inputs to the production process. Factors of production’ may also refer specifically to the ‘primary factors’, which are stocks including land, labor (the ability to work), and capital goods applied to production. Many economists today consider “human capital” (skills and education) as the fourth factor of production, with entrepreneurship as a form of human capital. In markets, entrepreneurs combine the other factors of production, land, labor, and capital, in order to make a profit.
223. An exceptional demand curve is one that moves –
A. upward to the right
B. downward to the right
C. horizontally
D. vertically
Answer: B.downward to the right
Explanation: A demand curve that violates the law of demand is termed an exceptional demand curve. If a household expects the price of a commodity to increase, it may start purchasing a greater amount of the commodity even at the presently increased price. Similarly, if the household expects the price of the commodity to decrease, it may postpone its purchases. Thus, law of demand is violated in such cases. In this case, the demand curve does not slope down from left to right; instead it presents a backward slope from the top right to down left. This curve is known as an exceptional demand curve.
224. Production function explains the relationship between –
A. initial inputs and ultimate output
B. inputs and ultimate consumption
C. output and consumption
D. output and exports
Answer: A.initial inputs and ultimate output
Explanation: Production function explains the relationship between factor input and output under given technology. It explains as to for increasing the output, in which proportion various inputs or factors may be employed under given technological conditions. In short, production function may be defined as a technological relationship that tells the maximum output producible from various combinations of inputs. Production function explains the physical relationship between input and output under given technology.
225. The four factors of production are –
A. land, labour, capital, organisation,
B. land, electricity, water, labour
C. labour, capital, land, rainfall,
D. labour, climate, land, tools,
Answer: A.land, labour, capital, organisation,
Explanation: Factors of Production is an economic term to describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. Resources required for generation of goods or services, generally classified into four major groups: (i) Land (including all natural resources), (ii) Labor (including all human resources), (iii) Capital (including all man-made resources), and (iv) Enterprise (which brings all the previous resources together for production).
226. The term utility means –
A. usefulness of a commodity
B. the satisfaction which a commodity yields
C. the service which a commodity is capable of rendering
D. None of these
Answer: B.the satisfaction which a commodity yields
Explanation: In economics, ‘Utility,’ refers to the total satisfaction received from consuming a good or service. It is usually applied by economists in such constructs as the indifference curve, which plots the combination of commodities that an individual or a society would accept to maintain a given level of satisfaction.
227. The degree of monopoly power is to be measured in terms of the firm’s-
A. normal profit
B. supernormal profit
C. both normal and supernormal profit
D. selling price
Answer: B.supernormal profit
Explanation: Monopoly power implies the amount of discretion which a monopolist possesses to fix up the prices of his products and degree of control over his output decisions. According to J.S. Bains, the degree of monopoly power can be measured by the monopoly firm’s super-normal profit.
228. Who propounded the Innovation theory of profits?
A. J.A. Schumpeter
B. P.A. Samuelson
C. Alfred Marshall
D. David Ricardo.
Answer: A.J.A. Schumpeter
Explanation: Schumpeter’s (1934) original theory of innovative profits emphasized the role of entrepreneurship (his term was entrepreneurial profits) and the seeking out of opportunities for novel value-generating activities which would expand (and transform) the circular flow of income. It did so with reference to a distinction between invention or discovery on the one hand and innovation, commercialization and entrepreneurship on the other. This separation of invention and innovation marked out the typical nineteenth century institutional model of innovation, in which independent inventors typically fed discoveries as potential inputs to entrepreneurial firms.
229. The principle of maximum social advantage is the basic principle of –
A. Micro Economics
B. Macro Economics
C. Fiscal Economics
D. Environmental Economics
Answer: C.Fiscal Economics
Explanation: The ‘Principle of Maximum Social Advantage’, introduced by British economist Hugh Dalton, is the fundamental principle of Public Finance which implies that all the financial operations of the state should aim at maximization of net social benefit. It takes into consideration both the aspects of public finance that is the government revenue or taxation as well as government expenditure. Since it studies problems related to government taxation and spending, it comes under the domain of fiscal economics.
230. Diamonds are priced higher than water because :
A. they are sold by selected firms with monopolistic powers.
B. their marginal utility to buyers is higher than that of water.
C. their total utility to buyers is higher than that of water.
D. consumers do not buy them at lower prices.
Answer: B.their marginal utility to buyers is higher than that of water.
Explanation: The water diamond paradox or puzzle was a mystery of Adam Smith who observed that the price of diamonds was much higher than that of water even though water seemed to offer for more utility than diamonds. The resolution of this puzzle or paradox is based on the distinction between marginal utility and total utility. The marginal utility of diamonds is very high and so consumers are willing to pay higher prices for diamond, than for water.
231. Buyers and Sellers will have perfect knowledge of market conditions under –
A. Duopoly
B. Perfect competition
C. Monopolistic competition
D. Oligopoly
Answer: A.Duopoly
Explanation: Complete market information is one of the main features of Perfect Competition. This condition implies close contact betweenbuyers and sellers. Both of them possess complete knowledge about the prices at which goods are being bought and sold, and the prices at which others are prepared to buy or sell.
232. In short run, if a competitive firm incurs losses, it will –
A. stop production.
B. continue to produce as long as it can cover its variable costs.
C. raise price of its product.
D. go far advertising campaign.
Answer: A.stop production.
Explanation: In the short run, a firm that is operating at a loss (where the revenue is less that the total cost or the price is less than the unit cost) must decide to operate or temporarily shutdown. It will shutdown if the sale of the goods or services produced cannot even cover the variable costs of production.
233. If the average revenue is a horizontal straight line, marginal revenue will be –
A. U shaped
B. Kinked
C. Identical with average revenue
D. L shaped
Answer: C.Identical with average revenue
Explanation: The price of a good is also known as the Average Revenue of the firm. Average Revenue (AR) or Price and Marginal Revenue (MR) are identical. When the former is constant, the latter is also constant. More-over, the Average Revenue curve of a firm is the same as the individual demand curve. Hence, the competitive demand curve is a horizontal straight line parallel to the OX axis.
234. The demand of a factor of production is
A. direct
B. derived
C. neutral
D. discretion of the producer
Answer: B.derived
Explanation: There are 4 factors of production; land, labor, capital and entrepreneurship. The demand for the factors of production is a derived demand. That means these factors of productionare demanded because there is a demand for the end product they produce.
235. Bilateral monopoly refers to the market situation of –
A. two sellers, two buyers
B. one seller and two buyers
C. two sellers and one buyer
D. one seller and one buyer
Answer: D.one seller and one buyer
Explanation: In a bilateral monopoly there is both a monopoly (a single seller) and monopsony (a single buyer) in the same market. The one supplier tends to act as a mo-nopoly power, and looks to charge high prices to the one buyer. The lone buyer looks towards paying a price that is as low as possible. Since both parties have conflicting goals,
236. Production function refers to the functional relationship between input and
A. product
B. produce
C. output
D. service
Answer: C.output
Explanation: The Production function expresses a functional relationship amidst quantities of raw materials and goods. It is the name given to the relationship between rates of input of productive services and the rate of output of product.
237. Under perfect competition, the industry does not have any excess capacity because each firm produces at the minimum point on its –
A. long-run marginal cost curve
B. long-run average cost curve
C. long-run average variable cost curve
D. long-run average revenue curve
Answer: B.long-run average cost curve
Explanation: Under perfect competition, the firms operate at the minimum point of long-run average cost curve. In this way, the actual long- run output of the firm under monopolistic competition falls short of what is produced underperfect competition which can be considered the socially ideal output. This gives the mea-sure of excess capacity which lies unutilized under imperfect competition.
238. Exploitation of labour is said to exist when –
A. Wage = Marginal Revenue Product
B. Wage < Marginal Revenue Product C. Wage > Marginal Revenue Product
D. Marginal Revenue Product =0
Answer: B.Wage < Marginal Revenue Product
Explanation: The term “exploitation” is used to denote the payment to labor of a wage less than its marginal revenue product. Under monopolistic competition, all factors are exploited in this sense. All firms hire labour until the marginal revenue product equals the marginal factor cost.
239. The size of the market for a product refers to –
A. the number of people in the given area
B. the geographical area served by the proudcers
C. the volume of potential sales of the product
D. the number of potential buyers of the product
Answer: D.the number of potential buyers of the product
Explanation: The size of market for a product refers to number of buyers and sellers in a particular market. This is especially important for companies that wish to launch a new product or service, since small markets are less likely to be able to support a high volume of goods. The market size is defined through the market volume and the market potential (defines the up- per limit of the total demand and takes potential clients into consideration).
240. Economic problem arises mainly due to
A. overpopulation
B. unemployment
C. scarcity of resources
D. lack of industries
Answer: C.scarcity of resources
Explanation: The theory of Economic problem states that there is scarcity, or that the finiteresources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated.
241. In Economics the ‘Utility’ and ‘Usefulness’ have –
A. same meaning
B. different meaning
C. opposite meaning
D. None of the above
Answer: B.different meaning
Explanation: In economics, utility is a representation of preferences over some set of goods and services. Preferences have a utility representation so long as they are transitive, complete, and continuous. Usefulness refers to which extent something is useful and the utility is the quality of that piece in practical use. Both are inter-related terms. Utility is a factor of usefulness term. Usefulness means having practical utility of a piece which is beneficial, pertinent and functional.
242. If two commodities are complements, then their crossprice elasticity is-
A. zero
B. positive
C. negative
D. imaginary number
Answer: D.imaginary number
Explanation: In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good. A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.
243. Transfer earning or alternative cost is otherwise known as –
A. Variable cost
B. Implicit cost
C. Explicit cost.
D. Opportunity cost
Answer: D.Opportunity cost
Explanation: 0
244. Economic development depends on :
A. Natural resources
B. Capital formation
C. Size of the market
D. All of the above
Answer: D.All of the above
Explanation: Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives.
245. Human Development Index was developed by :
A. Amartya Sen
B. Mahbub-ul-Haq
C. Friedman
D. Montek Singh
Answer: B.Mahbub-ul-Haq
Explanation: The origins of the Human Development Index (HDI) are found in the annual Human Development Reports of the United Nations Development Programme (UNDP). These were devised and launched by Pakistani economist Mahbub ul Haq in 1990. To produce the Human Development Reports, Mahbub ul Haq brought together a group of well-known development economists including: Paul Streeten, Frances Stewart.
246. While determining income the expenditure on which of the following items is not considered as investment?
A. Construction of factory
B. Computer
C. Increase in the stock of unsold articles
D. Stock and share in joint stock company
Answer: C.Increase in the stock of unsold articles
Explanation: The gross national product is the sum total of all final goods and services produced by the people of one country in one year. The GNP is a flow concept. It can be calculated with either the expenditure approach or the income approach. The expenditure approach sums all that is purchased: in a sense, it is equivalent to the income approach because purchases are only possible if income is present. GDP can be calculated as the sum of all expenditures: personal consumption expenditure (C), gross private domestic investment (Ig), government purchases (G), and net exports (Xn). Increase in the stock of unsold articles do not come under any of these heads.
247. Rate of interest is determined by –
A. The rate of return on the capital invested
B. Central Government
C. Liquidity preference
D. Commercial Banks
Answer: C.Liquidity preference
Explanation: According to the classical view, rate of interest is determined by the interaction of supply of and demand for capital. Thus this theory is popularly called as the demand and supply of theory of rate of interest. The supply of money together with the liquidity-preference curve in theory interact to determine the interest rate at which the quantity of money demanded equals the quantity of money supplied. According to Keynes, interest is the price paid for surrendering their liquid assets. Greater the liquidity preference higher shall be the rate of interest. The liquidity preference constitutes the demand for money.
248. Speculative demand for cash is determined by –
A. The rate of interest
B. the level of income
C. the general price level
D. the market conditions
Answer: A.The rate of interest
Explanation: Speculative demand is the demand for financial assets, such as securities, money or foreign currency that is not dictated by real transactions such as trade, or financing. The assets demand for money is inversely related to the market interest rate. This is because at lower interest rate, more people will expect a rise in interest rate (or a fall in bond prices).
249. Gross National Product is the money measure of –
A. all tangible goods produced in a country
B. final goods and services produced in the economy
C. services generated annually in the economy
D. all tangible goods available in the economy
Answer: B.final goods and services produced in the economy
Explanation: Gross national product (GNP) is the market value of all products and services produced in one year by labour and property supplied by the residents of a country. It is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.
250. The difference between GNP and NNP equals –
A. corporate profits
B. personal taxes
C. transfer payments
D. depreciation
Answer: D.depreciation
Explanation: Gross National Product [GNP) is the gross value of all the final products without deducting the depreciation of fixed capital. Net National Product (NNP) is the value of net output in an economy during a period of one year. The difference between the GNP and NNP is equal to Capital depreciation.
251. Investment multiplier shows the effect of investment on –
A. Employment
B. Savings
C. Income
D. Consumption
Answer: C.Income
Explanation: Investment multiplier is simply the multiplier effect of an injection of investment into an economy. The multiplier effect refers to the idea that an initial spending rise can lead to even greater increase in national income
252. Barter transactions means –
A. Goods are exchanged with gold.
B. Coins are exchanged for goods.
C. Money acts as a medium of exchange.
D. Goods are exchanged with goods.
Answer: D.Goods are exchanged with goods.
Explanation: Barter is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. Barter, as a replacement for money as the method of exchange, is used in times of monetary crisis, such as when the currency may be either un- stable or simply unavailable for conducting commerce,
253. The supply-side measure to control inflation is –
A. Reducing public expenditure
B. Price control through Public Distribution System
C. Higher taxation to mop up liquidity
D. Credit control
Answer: B.Price control through Public Distribution System
Explanation: The issue of inflation is addressed from both demand and supply sides. demand management is achieved by measures such as postponing public expenditure, mopping up excess liquidity either through taxes or savings schemes, etc. On the supply side, the mechanism of Public Distribution System (PDS) ensures availability of essential commodities for the vulnerable sections of society, This helps to maintain price levels. Coupled with this is the open market sale of rice and wheat resorted to by FCI from its buffer stock in times of price rise.
254. HDI is an aggregate measure of progress in which of the three dimensions?
A. Health, Education, Income
B. Food Security, Employment, Income
C. Agriculture, Industry, Services
D. Height, Weight, Colour
Answer: A.Health, Education, Income
Explanation: The Human Development Index (HDI) is an aggregate measure of progress in three dimensions—health, education and income which are used to rank countries into four tiers of human development. The FIDI was developed by the Pakistani economist Mahboob ul Haq working alongside Indian economist Amartya Sen.
255. What is an octroi?
A. Tax
B. Tax collection centre
C. Tax processing centre
D. Tax information centre
Answer: A.Tax
Explanation: Octroi is a local tax which is collected by the state government on those goods that have been bought into the city/state for the purpose of personal use and sale. The charges on the items are generally levied after on the weight, value and total number of goods. It is levied on certain articles, such as foodstuffs, on their entry into a city.
256. Demand of commodity mainly depends upon –
A. Purchasing will
B. Purchasing power
C. Tax policy
D. Advertisement
Answer: B.Purchasing power
Explanation: The demand of commodity mainly stems from the consumption capacity of the buyer. Demand is equal to desire plus ability to pay plus will to spend. Demand for a commodity depends upon number of factors called Determinants.
257. NIFTY is associated with –
A. Cloth Market Price Index
B. Consumer Price Index
C. BSE Index
D. NSE Index
Answer: D.NSE Index
Explanation: The NSE’s key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. Nifty Fifty was an informal term used to refer to 50 popular large cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks. NIFTY means National Index for Fifty.
258. The data collection for national income estimation is conducted in India by—
A. The Finance Ministry of the Government of India
B. The RBI
C. The NSSO (National Sample Survey Organization
D. None of these
Answer: C.The NSSO (National Sample Survey Organization
Explanation: The National Sample Survey Office (NSSO) in India is a unique setup to carry out surveys on socioeconomic, demographic, agricultural and industrial subjects for collecting data from households and from enterprises located in villages and in the towns. It is a focal agency of the Government of India for collection of statistical data in the areas which are vital for developmental planning.
259. What is AGMARK?
A. It is a marketing seal issued on the graded agricultural commodity
B. It stands for agricultural marketing
C. It represents agricultural management and regulation
D. None of these
Answer: B.It stands for agricultural marketing
Explanation: AGIVIARK is a certification mark employed on agricultural products in India, assuring that they conform to a set of standards approved by the Directorate of Marketing and
260. The Imperial Bank of India, after its nationalization came to be known as :
A. Reserve Bank of India
B. State Bank of India
C. United Bank of India
D. Indian Overseas bank
Answer: B.State Bank of India
Explanation: The State Bank of India, the largest banking and financial services company in India by revenue, assets and market capitalization: traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which in turn became the State Bank of India. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India
261. Floating Exchange Rate is also referred to as –
A. Flexible Exchange Rate
B. Fixed Exchange Rate
C. Real Exchange Rate
D. Controlled Exchange Rate
Answer: A.Flexible Exchange Rate
Explanation: A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency’s value is allowed to fluctuate according to the foreign exchange market. In this sense, it is quite flexible and not something fixed or constant. Such rates automatically adjust, enabling a country to dampen the impact of shocks and foreign business cycles, and to preempt the possibility of having a balance of payments crisis.
262. Countries that depend mainly on the export of primary products for their income, are prone to –
A. inflation
B. economic instability
C. increasing unemployment
D. stable economic growth
Answer: C.increasing unemployment
Explanation: Most of the world’s poorest countries depend for increasing export earnings on agricultural products that are vulnerable to fluctuating or declining terms of trade. Disadvantageous terms of technology transfer, protectionism, and decline in financial flows compound the already existing poverty and lack of work. Being labour-intensive, such sectors are prone to various types of unemployment. Developing countries that rely on the export of primary products were hit particularly hard by falling commodity prices between 1980 and 1984.
263. Bank deposits that can be withdrawn without notice are called –
A. account payee deposits
B. fixed deposits
C. variable deposits
D. demand deposits
Answer: D.demand deposits
Explanation: Demand deposits are funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be “demanded” by an account holder at any time. Many checking and savings accounts today are demand deposits and are accessible by the account holder through a variety of banking options, including teller, ATM and online banking. In contrast, a term deposit is a type of account which cannot be accessed for a predetermined period (typically the loan’s term).
264. What does ECS in banking transactions stand for?
A. Excess Credit Supervisor
B. Extra Cash Status
C. Exchange Clearing Standard
D. Electronic Clearing Service
Answer: D.Electronic Clearing Service
Explanation: Electronic Clearing Service is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons.
265. Which one is not a function of money?
A. Transfer of value
B. Store of value
C. Price stabilization
D. Value measurement
Answer: C.Price stabilization
Explanation: Generally, economists have defined four types of functions of money which are as follows: (i) Medium of exchange (transfer of value) (ii) Measurement of value, (iii) Standard of deferred payments, and (iv) Store of value. Price stabilization is a function of monetary policy.
266. Inflation is caused by –
A. increase in money supply and decrease in production
B. increase in money supply
C. increase in production
D. decrease in production
Answer: A.increase in money supply and decrease in production
Explanation: Economists generally agree that in the long run, inflation is caused by increases in the money supply. According to the theory of Demand-Pull Inflation, if demand grows faster than supply, prices will increase. There is too much money chasing too few goods. The increase in money supply is not matched by the equivalent production of goods.
267. State which of the following is correct? The Consumer Price Index reflects –
A. the standard of living
B. the extent of inflation in the prices of consumer goods
C. the increasing per capita income
D. the growth of the economy
Answer: B.the extent of inflation in the prices of consumer goods
Explanation: A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values.
268. What are the main components of basic social infrastructure of an economy?
A. Education, Industry and Agriculture
B. Education, Health and Civil amenities
C. Transport, Health and Banks
D. Industry, Trade and Transport
Answer: B.Education, Health and Civil amenities
Explanation: Social infrastructure refers to the facilities and mechanisms that ensure education, health care, community development, income distribution, employment and social welfare. It Includes health care system, including hospitals, the financing of health care, including health insurance, the systems for regulation and testing of medications and medical procedures; the educational and research system, including elementary and secondary schools, universities, specialized colleges, research institutions; Social welfare systems; Sports and recreational infrastructure, such as parks, sports facilities, the system of sports leagues and associations: Cultural infrastructure; and business travel and tourism infrastructure, including both man-made and natural attractions, etc.
269. The tax levied on gross sales revenue from business transactions is called –
A. Turnover Tax
B. Sales Tax
C. Capital Gains Tax
D. Corporation Tax
Answer: A.Turnover Tax
Explanation: A turnover tax is similar to a sales
270. Ad Valorem tax is levied –
A. according to value added by the Government.
B. according to value addition to a commodity
C. according to value given by producers
D. according to value added by the finance ministry
Answer: C.according to value given by producers
Explanation: An ad valorem tax (Latin for “according to value”) is a tax based on the value of real estate or personal property. It is more common than a specific tax, a tax based on the quantity of an item, such as cents per kilogram, regardless of price. It is levied on the basis of value given by producers. So sometimes, the primary difficulty with such taxation, especially in the case of tariffs, is in establishing a satisfactory value figure.
271. Equilibrium price means –
A. Price determined by demand and supply
B. Price determined by Cost and Profit
C. Price determined by Cost of production
D. Price determined to maximize profit
Answer: A.Price determined by demand and supply
Explanation: Equilibrium price is a state in economy where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively equal and that the market is in a stale of equilibrium. In short, it is the market price at which the supply of an item equals the quantity demanded.
272. Opportunity cost of production of a commodity is –
A. the cost that the firm could have Incurred when a different technique was adopted
B. the cost that the firm could have incurred under a different method of production
C. the actual cost incurred
D. the next best alternative output
Answer: D.the next best alternative output
Explanation: The concept of opportunity cost is based on scar-city and choice. The opportunity cost of a commodity is the next best alternative commodity sacrificed. In other words opportunity cost of a commodity is forgoing the opportunity to produce alternative goods and services. If one commodity is produced another commodity is sacrificed.
273. Surplus earned by a factor other than land in the short period of referred to as-
A. economic rent
B. net rent
C. quasi-rent
D. super-normal rent
Answer: C.quasi-rent
Explanation: Quasi-rent is the surplus which is received in the short period because of demand exceeding the supply by the man made factors besides land. It is an analytical term in economics, for the income earned, in excess of post-investment opportunity cost, by a sunk cost investment. In general, an economic rent is the difference between the income from a factor of production in a particular use, and either the cost of bringing the factor into economic use (Classical factor rent), or the opportunity cost of using the factor, where opportunity cost is defined as the current income minus the income available in the next best use.
274. If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is –
A. perfectly inelastic
B. elastic
C. perfectly elastic
D. inelastic
Answer: C.perfectly elastic
Explanation: If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would beundefined but it approaches negative infinity as demand becomes more elastic.
275. Which of the following are not fixed costs?
A. Rent on land
B. Municipal taxes
C. Wages paid to workers
D. Insurance charges
Answer: C.Wages paid to workers
Explanation: In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost.
276. Cost of production of the producer is given by:
A. sum of wages paid to labourers.
B. sum of wages and interest paid on capital.
C. sum of wages, interest, rent and supernormal profit.
D. sum of wages, interest, rent and normal profit.
Answer: D.sum of wages, interest, rent and normal profit.
Explanation: The following elements are included in the cost of production: (1) Purchase of raw machinery, (2) Installation of plant and machinery, (3) Wages of labor, (4) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges,
277. The market price is related to :
A. very short period
B. short period
C. long period
D. very long period
Answer: A.very short period
Explanation: Marshall was the first economist who analyzed the importance of time in price determination. Market period is a very short period in which supply being fixed, price is determined by demand. The time period is of few clays or weeks in which the supply of a product can be amplified out of given stock to match the demand. This is possible for durable goods.
278. The demand for necessities is –
A. elastic
B. perfectly inelastic
C. inelastic
D. perfectly elastic
Answer: B.perfectly inelastic
Explanation: Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
279. If a good has negative income elasticity and positive price elasticity of demand, it is a
A. giffen good
B. normal good
C. superior good
D. an inferior good
Answer: A.giffen good
Explanation: A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
280. A unit price elastic demand curve will touch –
A. both price and quantity axis
B. neither price axis, nor quantity axis
C. only price axis
D. only quantity axis
Answer: B.neither price axis, nor quantity axis
Explanation: Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
281. If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be –
A. less than unity
B. infinitely large
C. greater than unity
D. equal to unity
Answer: D.equal to unity
Explanation: Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
282. According to Modern Theory of Rent, rent accrues to –
A. capital only
B. any factor
C. labour only
D. land only
Answer: B.any factor
Explanation: Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
283. As the number of investments made by a firm increases, its internal rate of return –
A. declines due to diminishing marginal productivity.
B. declines because the market rate of interest will fall, ceteris paribus.
C. increases to compensate the firm for the current consumption foregone.
D. increases because the level of savings will fall.
Answer: C.increases to compensate the firm for the current consumption foregone.
Explanation: Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project’s internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
284. The opportunity cost of a factor of production is –
A. what it is earning in its present use.
B. what it can earn in the long period.
C. what has to be paid to retain it in its present use.
D. what it can earn in some other use.
Answer: D.what it can earn in some other use.
Explanation: The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
285. The demand for labour is called –
A. Market demand
B. Direct demand
C. Derived demand
D. Factory demand
Answer: C.Derived demand
Explanation: The demand for labour is “derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is “derived” from the market demand for the product.
286. Equilibrium price is the price when :
A. supply is greater than demand
B. supply is less than demand
C. demand is very high
D. supply is equal to demand
Answer: D.supply is equal to demand
Explanation: The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the ‘Invisible Hand’, or market forces of the economy.
287. Elasticity of demand measures the responsiveness of the quantity demanded of a goods to a
A. change in the price of the goods
B. change in the price of substitutes
C. change in the price of the complements
D. change in the price of joint products
Answer: A.change in the price of the goods
Explanation: Price elasticity of demand is a measure of responsiveness of the quantity of a good or service demanded to changes in its price. This measure of elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.e., the elasticity of demand with respect to the good’s own price, in order to distinguish it from the elasticity of demand for that good with respect to the change in the price of some other good, a complementary or substitute good.
288. Product differentiation is the most important feature of –
A. Pure competition
B. monopolistic competition
C. monopoly
D. oligopoly
Answer: B.monopolistic competition
Explanation: There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation; (2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (e) market power; and (0 Buyers and Sellers do not. have perfect information.
289. Division of labour is the result of –
A. Complicated work
B. excessive pressure
C. excess supply of labour
D. specialization
Answer: D.specialization
Explanation: Division of Labor is the “specialization” of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
290. Which from the following is not true when the interest rate in the economy goes up?
A. Saving increases
B. Lending decreases
C. Cost of production increases
D. Return on capital increases
Answer: D.Return on capital increases
Explanation: The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
291. Labour Intensive Technique would get chosen in a –
A. Labour Surplus Economy
B. Capital Surplus Economy
C. Developed Economy
D. Developing Economy
Answer: A.Labour Surplus Economy
Explanation: Labour’ refers to the people required to carry out a process in a business. Labour-intensive processes are those that require a relatively high level of labour compared to capital investment. These processes are more likely to be used to produce individual or personalized products, or to produce on a smallscale. The costs of labour are: wages and other benefits, recruitment, training and so on. Labour intensive processes are more likely to be seen in Job production and in smaller-scale enterprises.
292. When marginal utility is zero, the total utility is –
A. Minimum
B. Increasing
C. Maximum
D. Decreasing
Answer: C.Maximum
Explanation: Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
293. Operating Surplus arises in the –
A. Government Sector
B. Production for self consumption
C. Subsistence farming
D. Enterprise Sector
Answer: A.Government Sector
294. The definition of ‘small-scale industry’ in India is based on –
A. sales by the unit
B. Investment In machines and equipments
C. market coverage
D. export capacity
Answer: B.Investment In machines and equipments
Explanation: Generally, small-scale sector is defined in terms of investment ceilings on the original value of the installed plant and machinery. As per the Ministry of Micro, Small & Medium Enterprises of India, a small scale industry is an industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs 10 million. Fixed capital investment in a unit has been adopted as criteria to make a distinction between small-scale and large-scale industries. This limit is being continuously raised up wards by government.
295. What type of products, does CACP recommend minimum support price for?
A. Industrial products
B. Agricultural products
C. Pharmaceutical products
D. None of the above
Answer: B.Agricultural products
Explanation: The Agricultural Prices Commission was set up in January. 1965 to advise the Government on price policy of major agricultural commodities. Since March 1985, the Commission has been known as Commission for Agricultural Costs and Prices (CACP). The minimum support prices (MSP) for major agricultural products are fixed by the government. each year, after taking into account the recommendations of CACP.
296. Special Economic Zone (SEZ) concept was first introduced in –
A. China
B. Japan
C. India
D. Pakistan
Answer: A.China
Explanation: Worldwide, the first known instance of an SEZ seems to have been an industrial park set up in Puerto Rico in 1947 to attract investment from the US mainland. In the 1960s, Ireland and Taiwan followed suit, but in the 1980s China made the SEZs gain global currency with its largest SEZ being the metropolis of Shenzhen.
297. Externality theory is the basic theory of the following branch of Economics:
A. Environomics
B. Fiscal Economics
C. International Economics
D. Macro Economics
Answer: A.Environomics
Explanation: In economics, an externality is a cost or benefit which results from an activity or transaction and which affects an otherwise uninvolved party who did not choose to incur that cost or benefit. Environmental pollution is a classic case of an externality. Externality theory forms the basic theory of environmental economics.
298. The balance of payments of a country is in equilibrium when the –
A. demand as well as supply of the domestic currency are the highest
B. demand for the domestic currency is equal to its supply
C. demand for the domestic currency is the highest
D. demand for the domestic currency is the lowest
Answer: B.demand for the domestic currency is equal to its supply
Explanation: When the balance of payments (BOP) of a country is in equilibrium, the surplus or deficit is eliminated from the BOP. When the BOP of a country is in equilibrium, the demand for domestic currency is equal to its supply. The demand and supply situation is thus neither favourable nor unfavourable.
299. Cheap money means –
A. Low rates of interest
B. Low level of saving
C. Low level of income
D. Low level of standard of livtrig
Answer: A.Low rates of interest
Explanation: Cheap money is a loan or credit with a low interest rate, or the setting of low interest rates by a central bank like the Federal Reserve. Cheap money is good for borrowers, but had for investors, who will see the same low interest rates on investments like savings accounts, money market funds, CDs and bonds. Cheap money can have detrimental economicconsequences as borrowers take on excessive leverage.
300. When too much money is chasing too few goods, the situation is –
A. Deflation
B. Inflation
C. Recession
D. Stagflation
Answer: B.Inflation
Explanation: Inflation occurs when too much money is chasing too few goods. The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. In general, mainstream economists divide into two camps: those who believe that monetary effects dominate all others in setting the rate of inflation, or broadly speaking, monetarists, and those who believe that the interaction of money, interest and out-put dominate over of her effects, or broadly speaking Keynesians. Other theories, such as those of the Austrian school of economies, believe that inflation of the general price level and of specific prices is a result from an increase in the supply of money by central banking authorities.
301. Who benefits the most during the inflationary period?
A. corporate servants
B. creditors
C. entrepreneurs
D. government servants
Answer: C.entrepreneurs
Explanation: Inflation has the effect of redistributing income because prices of all factors do not decline in the same proportion. Entrepreneurs stand to gain more than wage earners or fixed income groups. Speculators, hoarders, black marketers and smugglers gain on account of windfall profits.
302. Pegging up of a currency means, fixing the value of a currency –
A. at a constant level
B. at a lower level
C. at a higher level
D. leaving it to market forces
Answer: A.at a constant level
Explanation: Currency pegging is the idea of fixing the exchange rate of a currency by matching its value to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold or silver. A fixed exchange rate is usually used to stabilize the value of a currency, with respect to the.currency or the other valuable it is pegged to.
303. Deficit financing is an instrument of –
A. monetary policy
B. credit policy
C. fiscal policy
D. tax policy
Answer: C.fiscal policy
Explanation: In economics, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure. Deficit financing is defined as financing the budgetary deficit through public loans and creation of new money. Deficit financing in India means the expenditure which in excess of current revenue and public borrowing.
304. Interest on public, debt is part of –
A. Transfer payments by the enterprises
B. Transfer payments by the government.
C. National income
D. Interest payments by households
Answer: B.Transfer payments by the government.
Explanation: In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output. Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses (firms). Government debt is the debt owed by a central government. In the budget, it is listed among the transfer payments by the government.
305. The incidence of Tax refers to –
A. Who pays the Tax?
B. Who bears the burden of Tax?
C. How Taxes can be shifted?
D. Who transfers the Tax burden?
Answer: B.Who bears the burden of Tax?
Explanation: In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to “fall’ upon the group that ultimately bears the burden of, or ultimately has to pay, the tax.
306. Core Industries are –
A. Basic industries
B. Consumer goods industries
C. Capital goods industries
D. Government industries
Answer: A.Basic industries
Explanation: Core Industries are those necessary industries in an economy that are necessary for industrialization of a country. Such industries include Machine tools, chemicals, power, steel, etc. The Planning Commission of India has defined them as industries “involving significant investments or foreign exchange.” The Commission indicated that the core sector should include all t he basic strategic and critical industries, and no single criterion such as that of foreign exchange requirements should govern the definition of the core sector.
307. An economic theory is a/an –
A. Axion
B. Proposition
C. Hypothesis
D. Tested hypothesis
Answer: B.Proposition
Explanation: A theory is an established explanation that accounts for known facts or phenomenon. Specifically, economic theories ate statements or propositions about patterns of economic behavior under certain circumstances. These theories help us sort out and understand the complexities of economic behavior (Exploring Economics by Robert L. Sexton, p 9).
308. The hypothesis that rapid growth of per capita income will be associated with a reduction in poverty is called –
A. trickle down Hypothesis
B. trickle up hypothesis
C. U shaped hypothesis
D. poverty estimation hypothesis
Answer: A.trickle down Hypothesis
Explanation: According to the trickle down hypothesis the rapid growth of per capita income will be associated with a reduction in poverty. In India, this hypothesis has been interpreted to suggest that with growth in agriculture output without radical institution reform will reduce the incidence of poverty in the context of agricultural development in India.
309. Who propounded the ‘market law?
A. Adam Smith
B. J.B. Say
C. T.R. Malthus
D. David Recardo
Answer: B.J.B. Say
Explanation: Say’s law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767-1832), who stated that “products are paid for with products” and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another.
310. “he national income consists of a collection of goods and services reduced to common basis by being measured in terms of money,”— Who says this?
A. Samuelson
B. Kuznets
C. Hicks
D. Pigou
Answer: C.Hicks
Explanation: British economist John Hicks said that National income is a collection of goods and services reduced to a common basis by being measured in terms of money. Hicks was one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model (1937), which summarized a Keynesian view of macroeconomics. His bookValue and Capital (1939) significantly extended general-equilibrium and value theory.
311. Gross National Product means –
A. gross value of finished goods
B. money values of the total national production for any given period
C. gross value of raw materials and semi- finished products
D. money value of inputs and outputs
Answer: B.money values of the total national production for any given period
Explanation: Gross national product (GNP) is the market/monetary value of all products and services produced in one year by labour and property supplied by the residents of a country.
312. The self-employed in a developing country who are engaged in small scale labour intensive work belong to the –
A. Informal sector
B. Primary sector
C. Secondary sector
D. Tertiary sector
Answer: B.Primary sector
Explanation: Such a scenario is seen in the case of primary economic activities such as agriculture in the developing countries like India. Most of the primary activities are labour intensive where the volume of man-power substitutes the lack of technology. Besides, farmers are ‘self-employed.’
313. The incomes of Indians working abroad are a part of –
A. domestic income of India
B. income earned from Abroad
C. net domestic product of India
D. gross domestic product of India
Answer: C.net domestic product of India
Explanation: Domestic Product is the ross money value of all final goods and services produced in the domestic territory of a country during a year. National Product is the gross money value of all final goods and services produced by the normal residents of a country during a year. It includes net factor income from abroad.
314. Production of a commodity mostly through the natural process is an activity of –
A. Primary Sector
B. Secondary Sector
C. Tertiary Sector
D. Technology Sector
Answer: A.Primary Sector
Explanation: The primary sector of the economy is the sector of an economy making direct use of natural resources. This includes agriculture, forestry, fishing, mining, and extraction of oil and gas.
315. Average Fixed Cost Curve is –
A. Upward sloping
B. `U’ shaped
C. ‘V’ shaped
D. Downward sloping
Answer: D.Downward sloping
Explanation: The Average Fixed Cost Curve graphically represents the relation between average fixed cost incurred by a firm in the short-run product of a good or service and the quantity produced. It is relatively high at small quantities of output.
316. In which of the following market forms, a firm does not exercise control over price?
A. Monopoly
B. Perfect competition
C. Oligopoly
D. Monopolistic competition
Answer: B.Perfect competition
Explanation: In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product. The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry. As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.
317. Lorenz curve shows –
A. Inflation
B. Unemployment
C. Income distribution
D. Poverty
Answer: C.Income distribution
Explanation: In economics, the Lorenz curve is a graphical representation of the distribution of income or of wealth. It was developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution. On the graph, a straight diagonal line represents perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of wealth distribution.
318. Which of the following is a tertiary activity?
A. Farming
B. Manufacturing
C. Dairying
D. Trading
Answer: D.Trading
Explanation: The tertiary sector or service sector is the third of the three economic sectors of the three-sector theory. The others are the secondary sector (manufacturing), and the primary sector (agriculture). Tertiary activities are service based and give non-tangible value to customers such as provision of services, trading, etc.
319. Sellers market denotes a situation where :
A. commodities are available at competitive rates
B. demand exceeds supply
C. supply exceeds demand
D. supply and demand are evenly balanced
Answer: B.demand exceeds supply
Explanation: Seller’s market is a market which has more buyers than sellers. High prices result from this excess of demand over supply. The opposite of the seller’s market is the buyer’s market, where supply greatly exceeds demand.
320. The fixed cost on such factors of production which are neither hired nor bought by the firm is called –
A. social cost
B. opportunity cost
C. economic cost
D. surcharged cost
Answer: A.social cost
Explanation: Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by entire society, city or even country. This is not a one-time cost like private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs. The cost may result from an event, action, or policy changes. Social costs are not calculated whenever a seller sells any product or item to buyer. This cost is added up from the use of that product.
321. Under which market condition do firms have excess capacity?
A. Perfect compettion
B. Monopolistic competition
C. Duopoly
D. Oligopoly
Answer: B.Monopolistic competition
Explanation: Unlike a perfectly competitive firm, a monopolistically competitive firm ends up choosing a level of output that is below its minimum efficient scale. When the firm produces below its minimum efficient scale, it is under-utilizing its available resources. In this situation, the firm is said to have excess capacity because it can easily accommodate an increase in product ion. This excess capacity is the major social cost of a mo-nopolistically competitive market structure.
322. Price theory is also known as –
A. Macro Economics
B. Development Economics
C. Public Economics
D. Micro Economics
Answer: D.Micro Economics
Explanation: Price theory is also known as micro economics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as “it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts ofthe flow. It is concerned too with the now of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses.”
323. Different firms constituting the industry, produce homogeneous goods under
A. monopoly
B. monopolistic competition
C. oligopoly
D. perfect competition
Answer: D.perfect competition
Explanation: The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
324. Gross Profit means –
A. Total investment over total saving
B. Changes in methods of production
C. Changes in the form of business organisation
D. Total receipts over total expenditure
Answer: D.Total receipts over total expenditure
Explanation: In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting over-head, payroll, taxation, and interest payments. Gross profit = Net sales (total receipts) – Cost of goods sold (total expenditure).
325. Which of the following is not a fixed cost?
A. Salaries of administrative staff
B. Rent of factory building
C. Property taxes
D. Electricity charges
Answer: A.Salaries of administrative staff
Explanation: Fixed costs arc business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents beingpaid per month, and are often referred to as overhead costs. The salaries of administrative staff are variable costs.
326. Inwhich market structure is the demand curve of the market represented by the demand curve of the firm?
A. Monopoly
B. Oligopoly
C. Duopoly
D. Perfect Competition
Answer: A.Monopoly
Explanation: Because the monopolist is the market’s only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
327. If a firm is operating at loss in the short- period in perfect combination, it should :
A. decrease the production and the price.
B. increase the production and the price
C. continue to operate as long as it covers even the variable costs.
D. shut-down and leave the industry
Answer: C.continue to operate as long as it covers even the variable costs.
Explanation: The demand for labour is “derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is “derived” from the market demand for the product.
328. At “Break-even point”,
A. the industry is in equilibrium in the long run.
B. the producers suffers the minimum losses
C. the seller earns maximum profit
D. the firm is at zero-profit point
Answer: D.the firm is at zero-profit point
Explanation: The break-even point (BEP) is the point at which cost or expenses and revenue areequal: there is no net loss or gain, and one has “broken even.” For businesses, reaching the break-even point is the first major step towards profitability.
329. The internal rate of return –
A. must be less than the interest rate if the firm is to in-vest.
B. makes the present value of profits equal to the present value of costs.
C. falls as the annual yield of an investment rises.
D. is equal to the market interest rate for all the firm’s in-vestment.
Answer: C.falls as the annual yield of an investment rises.
Explanation: The internal rate of return on an investment or project is the “annualized effective compounded re-turn rate” or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
330. Which of the following occurs when labour productivity rises?
A. The equilibrium nominal wage falls.
B. The equilibrium quantity of labour falls.
C. Competitive firms will be induced to use more capital
D. The labour demand curve shifts to the right
Answer: D.The labour demand curve shifts to the right
Explanation: As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
331. Which of the following are consumer semi-durable goods?
A. Cars and television sets
B. Milk and Milk products
C. Foodgrains and other food products
D. Electrical appliance like fans and electric irons.
Answer: C.Foodgrains and other food products
Explanation: Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
332. Which of the following statements is correct?
A. Most workers will work for less than their reservation wage.
B. The reservation wage is the maximum amount any firm will pay for a worker.
C. Economic rent is the difference between the market wage and the reservation wage.
D. Economic rent is the amount one must pay to enter a desirable labour market.
Answer: C.Economic rent is the difference between the market wage and the reservation wage.
Explanation: The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person’s reservation wage com-pared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
333. The basic object of all production is to
A. satisfy human wants
B. provide employment
C. make profits
D. increase physical output
Answer: A.satisfy human wants
Explanation: According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes,by which human labor creates goods and services, bring them to the ultimate consumer.
334. The equilibrium of a firm under perfect competition will be determined when –
A. Marginal Revenue > Average Cost
B. Marginal Revenue > Average Revenue
C. Marginal Revenue = Marginal Cost
D. Marginal Cost > Average Cost
Answer: C.Marginal Revenue = Marginal Cost
Explanation: 173. (3) When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
335. Which of the following is an inverted `U’ shaped curve?
A. Average cost
B. Marginal cost
C. Total cost
D. Fixed cost
Answer: A.Average cost
Explanation: In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
336. Which one of the following is having elastic demand?
A. Electricity
B. Medicines
C. Rice
D. Match boxes
Answer: A.Electricity
Explanation: In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can beused for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
337. Same price prevails throughout the market under –
A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer: A.perfect competition
Explanation: Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
338. Selling cost means:
A. Cost of selling a product
B. Cost incurred in transportation
C. Cost Incurred in advertisement
D. Cost Incurred on fact ors of production
Answer: C.Cost Incurred in advertisement
Explanation: Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
339. A want becomes a demand only when it is backed by the –
A. Ability to purchase
B. Necessity to buy
C. Desire to buy
D. Utility of the product
Answer: A.Ability to purchase
Explanation: Need,” “Want,” and “Demand” are the three key concepts of marketing. Needs are the basic human requirements. These needsbecome wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one’s society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
340. “Economics is what it ought to be” – This statement refers to –
A. Normative economics
B. Positive economics
C. Monetary economics
D. Fiscal economics
Answer: A.Normative economics
Explanation: Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of “what ought to be” rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, “We should cut taxes in half to increase disposable income levels”.
341. The ‘breali-even point’ is where –
A. marginal revenue equals marginal cost
B. average revenue equals average cost
C. total revenue equals total cost
D. None of these
Answer: B.average revenue equals average cost
Explanation: The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even”. A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk- adjusted, expected return.
342. One of the essential conditions of Monopolistic competition is –
A. Many buyers but one seller
B. Price discrimination
C. Product differentiation
D. Homogeneous product
Answer: C.Product differentiation
Explanation: Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
343. The General Equilibrium Analysis” was developed by –
A. Marshall
B. Ricardo
C. Walras
D. Adam Smith
Answer: C.Walras
Explanation: French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work ‘Elements of Pure Economics’. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.the place of manufacturer. Formerly called the Central Excise duty, this tax is now known as the Central Value Added Tax (CENVAT).
344. Capital market deals with –
A. Short term fund
B. Long term fund
C. Cash
D. Both long and short term funds
Answer: B.Long term fund
Explanation: Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.
345. Debenture holders of a company are its –
A. Shareholders
B. Creditors
C. Debtors
D. Directors
Answer: B.Creditors
Explanation: Companies issue debentures instead of shares to extend their business. These debentures are issue to borrow loan from general public; interest is paid on the borrowed money to the debenture holders. So a debenture holder is essentially a creditor who simply gives loan to the company.
346. Excise duty on a commodity is payable with reference to its –
A. production
B. production and sale
C. production and transportations
D. production, transportation and sale
Answer: A.production
Explanation: Excise duty is a type of tax charged on goods produced within the country. In India, an excise tax is levied on the manufacturer of goods when those goods leave
347. Compared to the rich the poor save –
A. A larger part of their income
B. An equal part of their income
C. A smaller part of their income
D. All of their incomes
Answer: C.A smaller part of their income
Explanation: A “subsistence” or necessary level of consumption produces differences in consumption growth rates across income levels. This implies that poor households have lower saving rates because they cannot “afford to save” after buying the necessities. Institutional and behavioral mechanism also leads to low levels of saving among the poor.
348. One of the main factors that led to rapid expansion of Indian exports is –
A. Imposition of import duties
B. Liberalization of the economy
C. Recession in other countries
D. Diversification of exports
Answer: D.Diversification of exports
Explanation: India has rapidly diversified its exports markets from the traditional export partners towards emerging and developing economies. This has played a crucial role in cushioning India’s exports growth during the recent years, which has remained fairly steady despite global economic slowdown. The rapid diversification of India’s export destinations is encouraging. The widely spreading export markets can be noted from the narrowing dependence on selected economies for exports.
349. The Minimum Wages Act was first passed in India in the year:
A. 1947
B. 1948
C. 1950
D. 1951
Answer: B.1948
Explanation: The Minimum Wages Act, 1948 was enacted to safeguard the interests of workers, mostly in the unorganized sector by providing for the fixation of minimum wages in certain specified employments. It binds the employers to pay their workers the minimum wages fixed under the Act from time to time.
350. AGMARK is a guarantee of standard:
A. quality
B. quantity
C. weight
D. size
Answer: A.quality
Explanation: The present AGMARK standards cover quality guidelines for 205 different agricultural commodities spanning a variety of Pulses, Cereals, Essential Oils, Vegetable Oils, Fruits & Vegetables, and semiprocessed products.
351. In the balance of payments account, unrequited receipts and payments are also regarded as –
A. bilateral transfers
B. unilateral transfers
C. capital account transfers
D. invisible transfers
Answer: B.unilateral transfers
Explanation: Unrequited receipts and payments are also regarded as unilateral transfers as the flow is only in one direction with no automatic reverse flow in the other direction. There is no repayment obligation attached to these transfers because they are neither borrowings nor lending, but gifts and grants exchanged between governments and people in the world.
352. “Wall Street” is the name of the :
A. Stock Exchange of New York
B. Indian Township in Washington
C. Super market in Munthai
D. Stock Exchange of kolkata
Answer: A.Stock Exchange of New York
Explanation: Wall Street, a 1.1 km street in the Financial District of lower Manhattan, New York City, is home to the world’s two largest stock exchanges by total market capitalization,the New York Stock Exchange and NASDAQ. Over time, the term has become a metonym for the financial markets of the United States as a whole, the American financial sector.
353. Which one of the following is a developmental expenditure?
A. Irrigation expenditure
B. Civil administration
C. Debt services
D. Grant-in-aid
Answer: A.Irrigation expenditure
Explanation: Public expenditure whether plans or non-plan or capital or revenue is classified into developmental and non-developmental expenditure. The expenditure which is incurred on activities directly related to economic development is called developmental expenditure. Hence, expenditure incurred on education, health care, scientific research: infrastructure and so on is developmental expenditure. Expenditure incurred on general essential services required for normal running of the government is termed as non-developmental expenditure. Therefore, expenditure incurred on services relating to general administration, police, defense, judiciary etc. is non- developmental expenditure.
354. Green banking means –
A. development of forestry by banks
B. financing of environmental friendly projects by banks
C. financing of irrigation projects by banks
D. None of the above
Answer: B.financing of environmental friendly projects by banks
Explanation: Green banking is like a normal bank, which considers all the social and environmental/ecological factors with an aim to protect the environment and conserve natural resources. It is also called as an ethical bank or a sustainable bank. They are controlled by the same authorities but with an additional agenda toward taking care of the Earth’s environment/ habitats/resources.
355. The best Index of Economic Development is provided by:
A. Growth in Percapita Real Income from year to year.
B. Growth in National Income at Current Prices.
C. Growth in savings ratio.
D. Improvement in the Balance of Payments Position.
Answer: A.Growth in Percapita Real Income from year to year.
Explanation: Per capita Gross National Product (GNP) is the best index of development. It can be derived by dividing the GNP of a country with its population. Higher the level of per capita income, higher is the economic development. The World Bank, in its world development report 1998, classified the countries in the world on the bases of per capita GNP.
356. Which one of the following is not a ‘canon of taxation’ according to Adam Smith?
A. Canon of certainty
B. Canon of simplicity
C. Canon of convenience
D. Canon of economy
Answer: B.Canon of simplicity
Explanation: In this book, titled The Wealth of Nations, ‘Adam smith only gave four canons of taxation: (i) canon of equity; (ii) canon of certainty; (iii) canon of convenience; and (iv) canon of economy.
357. The business in Stock Markets and other securities markets is regulated –
A. Securities and Exchange Board of India
B. Sole Trade and Exchange Bank of India
C. State and Exchange Bank of India
D. Stock and Exchange Bank of India
Answer: A.Securities and Exchange Board of India
Explanation: As per the Securities and Exchange Board Of India (SEBI) Act, 1992, SEBI is responsible for protecting the interests of investors in securities and to promote the development of, and to regulate the securities market. It is the duty of SEBI to regulate the business in stock exchanges and any other securities markets.
358. Liberalism stands for –
A. religious orthodoxy
B. a (movement and an attitude
C. self-emancipation
D. freedom in social, political and economic aspects
Answer: D.freedom in social, political and economic aspects
Explanation: Liberalism includes a broad spectrum of political philosophies that consider individual liberty to be the most important political goal, and emphasize individual rights and equality of opportunity. It supports market economy and a transparent and democratic system of government. The same applies to social and religious aspects as well.
359. Which of the following is a better measurement of Economic Development?
A. GDP
B. Disposable income
C. NNP
D. Per capita income
Answer: D.Per capita income
Explanation: Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population, Measurement of personal income is the best measure of economic well- being of individuals and nation. Besides, it helps to show the level of inequality in a society or country.
360. Imputed gross rent of owner-occupied buildings is a part of –
A. capital formation
B. final consumption
C. intermediate consumption
D. consumer durable
Answer: B.final consumption
Explanation: The figure of final private consumption expenditure includes the imputed gross rent of owner-occupied dwellings, consumption of own-account production and payment by households of wages and salaries in kind valued at cost, e.g., provision for food, shelter and clothing to the employees, wherever they exist. Production for self consumption is apart of production and hence an income and is also a part of final consumption expenditure.
361. An increase in per capital income is not an indication of an increase in the economic welfare of the people –
A. When such increase is the result of an increased production action of comforts
B. When such increase is the result of an increase in agricultural production
C. When it is the result of an increase in the production of industrial goods
D. When such increase is the result of increased production of intoxicants
Answer: D.When such increase is the result of increased production of intoxicants
Explanation: An increase in per capita income due to increased production of intoxicants cannot be taken as economic welfare as it defeats the very notion of welfare. Economic welfare refers to the level of prosperity and living standards of either an individual or a group of persons. Factors used to measure the economic welfare of a population, include: GDP, literacy, access to health care, and assessments of environmental quality.
362. The functional relationship between income and consumption expenditure is explained by –
A. Consumer’ Surplus
B. Law of Demand
C. Law of Supply
D. Keynes’s psychological law of consumption
Answer: D.Keynes’s psychological law of consumption
Explanation: Keynes defined Psychological Law of Consumption in terms of, “The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average, to increase their consumption as their income in- creases but not by as much as the increase in the income.”
363. Preparation of butter, ghee by a household for their own use is a part of :
A. own-account production
B. household capital formation
C. industrial production
D. consumption
Answer: D.consumption
Explanation: The processing of agricultural products; the production of grain by threshing: the production of flour by milling; the curing of skins and the production of leather; the production and preservation of meat and fish products; the preservation of fruit by drying, bottling, etc.; the production of daily products such as butter or cheese; the production of beer, wine or spirits; the production of baskets and mats; etc, come under processing of primary commodities for own consumption.
364. Average propensity to consume is defined as –
A. Aggregate consumption +Total population
B. Aggregate income ÷ Aggregate consumption
C. Change in consumption ÷ Change in income
D. Aggregate consumption +Aggregate income
Answer: D.Aggregate consumption +Aggregate income
Explanation: In economics, the average propensity to consume (APC) is defined as the ratio of aggregate or total consumption to aggregate income in a given period of time. Thus, the value of average propensity to consume, for any income level, may be found by dividing consumption by income.
365. Market segmentation is:
A. Group of Sales Persons
B. Dividing target groups as per their needs
C. Market Division
D. Market Space
Answer: B.Dividing target groups as per their needs
Explanation: Market segmentation is a marketing strategy which refers to the aggregating of prospective buyers into groups, or segments, having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
366. What will be the effect on inferior commodities when income of the consumer rises?
A. Negative effect
B. Positive effect
C. No effect
D. First increase then decrease
Answer: A.Negative effect
Explanation: In economics, an inferior good is a good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases), unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers’ demand increases when their income increases. Cheaper cars are examples of the inferior goods.
367. An indiference curve measures level of satisfaction derived from different combinations of commodity X and Y.
A. same
B. higher
C. lower
D. minimum
Answer: A.same
Explanation: An indifference curve may be defined as the locus of points, each representing a different combination of two substitute goods, which yield the same utility or level of satisfaction to the consumer. Therefore, he is indifferent between any two combinations of goods when it comes to making a choice between them.
368. motion that seeks to reduce the amount of demand presented by government to Re. 1/is known as –
A. Disapproval of policy Cut
B. Token cut
C. Economy cut
D. Vote on account
Answer: A.Disapproval of policy Cut
Explanation: Disapproval of Policy Cut seeks to reduce the amount of the demand be reduced to Re.1/-‘ representing disapproval of the policy underlying the demand. A member giving notice of such a motion shall indicate in precise terms the particulars of the policy which he proposesto discuss. The discussion shall be confined to the specific point or points mentioned in the notice and it shall be open to members to advocate an alternative policy.
369. In the law of demand, the statement “Other things remain constant” means –
A. income of consumer should not change
B. price of other goods should not change
C. taste of consumer should not change
D. All of the above
Answer: D.All of the above
Explanation: In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher (ceteris paribus). The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
370. A firm is in equilibrium when its
A. marginal cost equals the marginal revenue
B. total cost is minimum
C. total revenue is maximum
D. average revenue and marginal revenue are equal
Answer: A.marginal cost equals the marginal revenue
Explanation: A consumer is in a state of equilibrium when he achieves maximum aggregate satisfaction on the expenditure that he makes depending on the set of conditions relating to his tastes and preferences, income, price and supply of the commodity etc. Producers’ equilibrium occurs when he maximizes his net profit subject to a given set of economic situations. A firm’s equilibrium point is when it has no inclination in changing its production. In short run Marginal revenue = Marginal Cost is the condition of equilibrium.
371. The excess of price a person is to pay rather than forego the consumption of the commodity is called –
A. Price
B. Profit
C. Producers’ surplus
D. Consumer’s surplus
Answer: C.Producers’ surplus
Explanation: Producer Surplus’ is an economic measure of the difference between the amount that a producer of a good receives and the minimum amount that he or she would be willing to accept for the good. The difference, or surplus amount, is the benefit that the producer receives for selling the good in the market.
372. When the price of a commodity falls, we can expect –
A. the supply of it to increase
B. the demand for it to fall
C. the demand for it to stay constant
D. the demand for it to increase
Answer: D.the demand for it to increase
Explanation: In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher. The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good
373. A situation of large number of firms producing similar goods is termed as :
A. Perfect competition
B. Monopolistic competition
C. Pure competition
D. Oligopoly
Answer: A.Perfect competition
Explanation: The fundamental condition of perfect competition • is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical.
374. The difference between the price the consumer is prepared to pay for a commodity and the price which he actually pays is called
A. Consumer’s Surplus
B. Producer’s Surplus
C. Landlord’s Surplus
D. Worker’s Surplus
Answer: A.Consumer’s Surplus
Explanation: Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they do pay. If a consumer would be willing to pay more than the current asking price, then they are getting more benefit from the purchased product than they spent to buy it.
375. For an inferior good, demand falls when –
A. price rises
B. income rise
C. price falls
D. income falls
Answer: B.income rise
Explanation: In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good. An Inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers’ demand increases when their income increases.
376. Wage fund theory was propounded by
A. J.B. Say
B. J.S. Mill
C. J.R. Hicks
D. J.M. Keynes
Answer: B.J.S. Mill
Explanation: J.S. Mill developed the wages- fund theory. This theory of wage was an attempt to show that in certain circumstances wages could rise above subsistence level. According to this theory a fund of capital has to he accumulated in advance before wage could be paid. This fund of capital is called wages-fund out of which wages are paid to labourers.
377. Cross demand expresses the functional relationship between –
A. demand and prices of related commodities
B. demand and income
C. demand and prices
D. demand and supply
Answer: A.demand and prices of related commodities
Explanation: Other things being constant, cross demand expresses the relation between demand for good ‘A’ due to change in the price of its related good ‘B’. It shows that at different prices of good ‘B’ what different quantities of good A’ will be demanded.
378. Third stage of Law of Variable Proportion is called –
A. negative returns
B. positive returns
C. constant returns
D. increasing returns
Answer: A.negative returns
Explanation: The stages of Law of Variable Proportion are: Stage 1: Increasing return: Stage 2: Diminishing return; and Stage 3: Negative Return. In the third stage Marginal Product of variable factor is zero. In this stage the Total Product starts diminishing.
379. Other things being equal, a decrease in quantity demanded of a commodity can be caused by –
A. a rise in the price of the commodity
B. a rise in the income of the consumer
C. a fall in the price of a commodity
D. a fall in the income of the consumer
Answer: A.a rise in the price of the commodity
Explanation: In economics, the law states that, all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases.
380. Which of the following is not an economic problem?
A. Deciding between paid work leisure
B. Deciding between expenditure on one good and the other
C. Deciding between alternative methods of personal savings
D. Deciding between different ways of spending leisure time
Answer: C.Deciding between alternative methods of personal savings
Explanation: The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desire of all human beings. The fundamental economic problem is how to allocate scarce resources to the provision of various goods and services within the economy.
381. The Psychological law of consumption states that –
A. proportionate increase in consumption is less than proportionate increase in income
B. increase in income is equal to increase in consumption
C. increase in consumption is greater than increase in income
D. consumption does not change with a change in income
Answer: A.proportionate increase in consumption is less than proportionate increase in income
Explanation: According to Keynes’ psychological law of consumption, increased aggregate consumption due to increased aggregate income — aggregate consumption increases with increase in aggregate income but the increase in consumption is less than the increase in the income. This is because when the basic necessities or demand of the people are already fulfilled, they start saving the extra additional income.
382. Subsidies are payment by government to –
A. Consuming units
B. Producing units
C. Banking units
D. Retired persons
Answer: B.Producing units
Explanation: A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs of production and encourages them to increase output.
383. Tha Law of Demand is based on –
A. Manufacturer’s preference
B. Seller’s preference
C. Supplier’s preference
D. Consumer’s preference
Answer: D.Consumer’s preference
Explanation: The Law of Demand states that, all else being equal, as the price of a product increases, quantily demanded lowers; likewise, as the price of a product decreases, quantity demanded increases. Demand is derived from consumers’ tastes and preferences, and it is bound by income. In other words, given a limited income, the consumer must decide what goods and services to purchase. Each consumer will purchase different things because individual preferences and incomes differ.
384. The expenses on advertising is called –
A. Implicit cost
B. Surplus cost
C. Fixed cost
D. Selling cost
Answer: D.Selling cost
Explanation: Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost
385. The most distinguishing feature of oligopaly is –
A. number of firms
B. interdependence
C. negligible influence on price
D. price leadership
Answer: B.interdependence
Explanation: An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oilgopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Some of its characteristics are: Profit maximization conditions; Number of firms; Product differentiation; Interdependence; Non-Price Competition, etc. The distinctive feature of an oligopoly is interdependence. Oligopolies are typically composed of a few large firms.
386. ‘Law of demand’ implies that when there is excess demand for a commodity, then
A. price of the commodity falls
B. price of the commodity remains same
C. price of the commodity rises
D. quantity demanded of the commodity falls
Answer: C.price of the commodity rises
Explanation: The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good. When there is excess demand of the commodity the price starts rising and it continues to rise till equilibrium price is reached.
387. Given the money wages, if the price level in an economy increases, then the real wages will –
A. increase
B. decrease
C. remain constant
D. become flexible
Answer: B.decrease
Explanation: If workers receive a higher nominal wage and the price level does not change, then the real purchasing power of their wages is higher and they are inclined to increase the quantity of labor supplied.
388. In Economics, production means –
A. manufacturing
B. making
C. creating utility
D. farming
Answer: C.creating utility
Explanation: All factors of production like land, labour, capital and entrepreneur are required in combination at a time to produce a commodity. Production means creation or an addition of utility. Factors of production (or productive ‘inputs’ or ‘resources’) are any commodities or services used to produce goods and services.
389. What is included in the Tetiary sector?
A. Banking
B. Manufacturing
C. Forestry
D. Mining
Answer: A.Banking
Explanation: The led ‘my industry is the segment of the economy that provides services to its consumers. It includes a wide range or activities that service based and give non- tangible value to customers such as provision of trading, insurance, banking, etc. The other sectors are the secondary sector (manufacturing), and the primary sector (agriculture and allied activities).
390. Minimum payment to factor of production is called –
A. Quasi Rent
B. Rent
C. Wages
D. Transfer Payment
Answer: D.Transfer Payment
Explanation: In economics, factors of production are the inputs to the production process. There are three basic factors of production: land, labour, capital. The payment for use and the received income of a land owner is rent. The payment for someone else’s laborand all income received from one’s own labor is wages. The modern theory of rent is that it is the difference between the actual earning of a factor unit over its transfer earnings. So the Transfer earnings are the mini-mum payment required to keep a factor of production in its present use. It is also known as opportunity cost.
391. Consumer’s surplus is the highest in the case of:
A. durable goods
B. luxuries
C. comforts
D. necessities
Answer: D.necessities
Explanation: Consumer surplus is the difference between the price consumers would be prepared to pay and the actual market price.
392. Which of the following cost curve is never `U’ shaped ?
A. Marginal cost curve
B. Average variable cost curve
C. Average fixed cost curve
D. Average cost curve
Answer: C.Average fixed cost curve
Explanation: Average fixed cost curve is never ‘U’ shaped. Since total fixed costs are unchanged as output rises, the average fixed cost curve falls continuously as output is increased.
393. Perfect competition means –
A. large number of buyers and less sellers
B. large number of buyers and sellers
C. large number of sellers and less buyers
D. None of these
Answer: B.large number of buyers and sellers
Explanation: The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market.
394. Bread and butter, car and petrol are examples of goods which have –
A. composite demand
B. joint demand
C. derived demand
D. autonomous demand
Answer: C.derived demand
Explanation: Derived demand is a term in economics, where demand for one good or service occurs as a result of the demand for another intermediate/final good or service. This may occur as the former-is a good of production of the second. For example, demand for coal leads to derived demand for mining, as coal must be mined for coal to be consumed. As the demand for coal increases, so does its price.
395. In a Capitalistic Economy, the prices are determined by :
A. Demand and Supply
B. Government Authorities
C. Buyers in the Market
D. Sellers in the Market
Answer: A.Demand and Supply
Explanation: Capitalism generally refers to economic system in which the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation. In general, investments, distribution, income, and pricing is determined by markets. In capitalism, prices are decided by the demand-supply scale. For example, higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices.
396. Tooth paste is a product sold under :
A. Monopolistic Competition
B. Perfect Competition
C. Monopoly
D. Duopoly
Answer: A.Monopolistic Competition
Explanation: Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. There are six characteristics of monopolistic competition (MC): (1) Product differentiation; (2) many firms; (3) Free entryand exit in the long run: (4) Independent decision making; (e) market power; and (f) Buyers and Sellers do not have perfect information.
397. Prime cost is equal to –
A. Variable cost plus administrative cost
B. Variable cost plus fixed costs
C. Variable cost only
D. Fixed cost only
Answer: A.Variable cost plus administrative cost
Explanation: Prime Cost refers to a business’s expenses for the materials and labor it uses in production. Prime cost is a way of measuring the total cost of the production inputs needed to create a given output. By analyzing its prime costs, a company can determine how much it must charge for its finished product in order to make a profit. Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced.
398. An expenditure that has been made and cannot be recovered is called –
A. Variable cost
B. Opportunity cost
C. Sunk cost
D. Operational cost
Answer: C.Sunk cost
Explanation: In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. The sunk cost is distinct from economic loss. Sunk costs may cause cost overrun.
399. Elasticity of demand is the degree of responsiveness of demand of a commodity to a –
A. change in consumers’ wealth
B. change in the price of substitutes
C. change in consumers’ tastes
D. change in its price
Answer: D.change in its price
Explanation: The elasticity of demand, also known as price elasticity of demand, is the degree of responsiveness of demand to change in price. Its measure depends upon comparing the percentage change in the price with the resultant percentage change in the quantity demanded. Thus, elasticity of demand is the ratio of percentage change in amount demanded to a percent-age change in price.
400. The price of a commodity is the same as
A. Average revenue
B. Total cost
C. Average cost
D. Total revenue
Answer: A.Average revenue
Explanation: Average Revenue refers to revenue received per unit of output sold. It is the same as Price of the commodity. Average revenue can be obtained by dividing the total revenue by the number of units sold.
401. Equilibrium output is deter-mined by:
A. the equality between total Variable cost and Marginal revenue.
B. the equality between Marginal cost and Marginal revenue.
C. the equality between Average cost and Average revenue.
D. the equality between total cost and total revenue.
Answer: B.the equality between Marginal cost and Marginal revenue.
Explanation: Equilibrium Output refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy. It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year. According to MR-MC approach, equilibrium refers to stage of that output level at which Marginal Cost (MC) = Marginal Revenue (MR). As long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more only when MC becomes equal to MR.
402. An employer goes on employing more and more of a factor units until :
A. the Average Revenue Productivity becomes equal to Marginal Revenue Productivity.
B. the Marginal Revenue Productivity becomes zero.
C. the Diminishing Marginal Returns sets into operation.
D. the Marginal Revenue Productivity of a factor becomes equal to its reward.
Answer: D.the Marginal Revenue Productivity of a factor becomes equal to its reward.
Explanation: ‘According to the Marginal Productivity Theory, the reward or the price of a factor unit depends upon its productivity or its contribution to the total product. While employing a factor, an employer compares the marginal revenue productivity (MRP) of the lost unit and the marginal cost of the factor. He will employ a factor up to the point where the reward (marginal cost of the factor) paid to the factor equals its MRP. If MRP is more than the marginal cost, the employer increases its profits by employing more units of the factor; on the other hand, if marginal cost of the factor is greater than MRP, it will reduce employment to reduce its loss.
403. The main emphasis of Keynesian economics is on –
A. Expenditure
B. Exchange
C. Foreign trade
D. Taxation
Answer: A.Expenditure
Explanation: Keynesian Economics is an economic theory of total spending in the economy and its effects on output and inflation. It emphasizes that government expenditures (or tax cuts) leads to increase in GDP which is a multiple of the original expenditure.
404. The book which is at the centrepiece of the study of Macro – Economics was written by –
A. Prof. Samuelson
B. Prof. J.M. Keynes
C. Prof. Benham
D. Prof. Baumol
Answer: B.Prof. J.M. Keynes
Explanation: J.M. Keynes’s magnum opus, The General Theory of Employment, Interest andMoney’ is often viewed as the foundation of modern macroeconomics. Macroeconomics deals with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.
405. Which of the following items is a major item of Indian export?
A. Computer chips
B. Potato chips
C. Textile garments
D. Car engines
Answer: D.Car engines
Explanation: India exports were worth 23698 Million USD in September of 2012. Historically, from 1994 until 2012, India Exports averaged 8603.18 Million USD reaching an all time high of 30418.00 Million USD in March of 2011 and a record low of 1805.00 Million USD in May of 1994. Exports amount to 22% of India’s GDP. Gems and jewelry constitute the single largest export item, accounting for 16 percent of exports. India is also leading exporter of textile goods, engineering goods, chemicals, leather manufactures and services. India’s main export partners are European Union, United States, United Arab Emirates and China.
406. Indian agriculture is typically characterised as –
A. land surplus, labour scarce economy
B. land surplus, labour surplus economy
C. land scarce, labour surplus economy
D. land scarce, labour scarce economy
Answer: C.land scarce, labour surplus economy
Explanation: The labor surplus economy model has as its basic premise the inability of unskilled agricultural labor markets to clear in countries with high man/land ratios. In such situations, the marginal product of labor is likely to fall below a bargaining wage, related to the average rather than the marginal product. Most of the East Asian economies such as Japan, South Korea, and Taiwan are similar to India in being land scarce and labor surplus.
407. The most accessible medium in India is
A. Television
B. Radio
C. Cinema
D. Newspapers
Answer: D.Newspapers
Explanation: The newspaper’s importance in India may be due to the fact t hat it is relatively free from competition despite the rise of the Internet. Though there are a large number of households who own television sets, there are still many more without. Newspapers are highly affordable and arc the more accessible alternative, even for rural areas. Moreover, it is not dependent on other factors such as infrastructure or available of electricity, which are both areas that are lacking in India.
408. Capital Market Regulator is:
A. NSE
B. RBI
C. SEBI
D. IRDA
Answer: C.SEBI
Explanation: Capital Market Regulator is the Securities and Exchange Board of India (SEBI).
409. The term ‘Dumping’ refers to –
A. The sale of a substandard commodity
B. Sale in a foreign market of a commodity at a price below marginal cost
C. Sale in a foreign market of a commodity just at marginal cost with too much of profit
D. Smuggling of goods without paying any customs duty
Answer: B.Sale in a foreign market of a commodity at a price below marginal cost
Explanation: Dumping is an international price discrimination in which an exporter firm sells a portion of its out-put in a foreign market at a very low price and the remaining output at a high price in the home market. This is done to turn out foreign competitors from the domestic market. If the foreign market is perfectly competitive, the firm may lower the price in comparison with other competitors so that the demand for it may increase. In such a situation, the firm may sell the commodity even below marginal cost of production, incurring loss in the foreign market (International Economics by M. Maria. John Kennedy, p.122).
410. “Globalisation of Indian Economy” denotes :
A. Increase of external borrowings
B. having minimum intervention in economic relations with other countries
C. starting of new business units abroad
D. relaxing the programmes of import substitution
Answer: B.having minimum intervention in economic relations with other countries
Explanation: Globalization means integrating the economy of a country with the economies of other countries or world economy under conditions of free flow of trade, capital and movement of persons across borders. In the Indian content, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India; removing constraints and obstacles to the entry of MNCs in India allowing Indian companies to enter into foreign collaborations in India and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programmes by switching over from quantitative restrictions to tariffs in the first place and then bringing down the level of import duties considerably; and instead of a plethora of export incentives opting for exchange rate adjustments for promoting exports.
411. Full convertibility of a rupeee means –
A. purchase of foreign exchange for rupees freely
B. payment for imports in terms of ruppes
C. repayment of loans in terms of rupees
D. determination of rate of exchange between rupee and foreign currencies freely by the market forces of demand and supply
Answer: D.determination of rate of exchange between rupee and foreign currencies freely by the market forces of demand and supply
Explanation: The full convertibility of the Indian currency means that the rupee would be made freely exchangeable into other currencies and vice versa. The rupee was made partially convertible in 1994. Currently, it can be changed freely into foreign currency for business and trade expenses but not freely for activities like acquiring overseas assets. Full converted of the currency means the local currency can be exchanged to foreign currency without any governmental control. Presently, the issue ofcapital account convertibility is in the discussion stage.
412. The term stagflation refers to a situation where –
A. growth has no relation with the change in prices
B. rate of growth and prices both are decreasing
C. rate of growth in faster than the rate of price increase
D. rate of growth is slower than the rate of price increase
Answer: D.rate of growth is slower than the rate of price increase
Explanation: In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Stagflation occurs when the economy isn’t growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stag-nation increased the inflationary effects.
413. What does the letter `e’ denotes in the term `e – banking’?
A. Essential Banking
B. Economic Banking
C. Electronic Banking
D. Expansion Banking
Answer: C.Electronic Banking
Explanation: ‘e-banking’ stands for electronic banking which involves the use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. It is also known as online or interne banking.
414. The Cash Reserve Ratio is a tool of :
A. Monetary policy
B. Tax policy
C. Agricultural policy
D. Fiscal policy
Answer: A.Monetary policy
Explanation: Cash Reserve Ratio (CRR) is a specified minimum fraction of the total depositsof customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is a crucial monetary policy tool and is used for controlling money supply in an economy.
415. The ‘Interest Rate Policy’ is a component of –
A. Fiscal Policy
B. Monetary Policy
C. Trade Policy
D. Direct Control
Answer: B.Monetary Policy
Explanation: Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment. The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates. Monetary authorities in different nations have differing levels of control of economy-wide interest rates.
416. A mixed economy works primarily through the –
A. market mechanism
B. central allocative machinery
C. market mechanism regulated by Government policy
D. market mechanism guided by Government participation and planning
Answer: D.market mechanism guided by Government participation and planning
Explanation: Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. The basic idea of the mixed economy is that (he means of production are mainly under private ownership; that markets remain the dominant form of economic coordination: and that profit- seeking enterprises and the accumulation of capital remain the fundamental driving force behind economic activity.
417. Which one of the following is the most appropriate reason for Inequalities in Income?
A. Racial factors
B. Lack of opportunities
C. Inheritance from family Environment
D. Differences in Ability
Answer: B.Lack of opportunities
Explanation: Joseph E. Stiglitz, a Nobel laureate in economics, has pointed how lack of opportunity leads to widening of inequality. It leads to concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.
418. Which one of the following is not included in current revenue of the Union Government?
A. Tax revenue
B. Non-tax revenue
C. Loans
D. interest payments
Answer: C.Loans
Explanation: Loans are not included in the current revenue of the Union Government.
419. Which is the parameter for the economic development?
A. Per capita monetary income
B. National income
C. Per capita rural income
D. Population
Answer: A.Per capita monetary income
Explanation: A majority of economists such as Simon Kuznets, Meter and Baldwin, Hicks D. Samuelson, Pigeon and others consider national income as the most suitable index of economic development. However, the UNO experts in their report on ‘Measures of Economic Development of Under-Developed Countries’ have Per Capita Real Income as the best measurement of economic development. They contend that economic growth is meaningless if it does not improve the standard of living of the common masses.
420. The supply-side economics lays greater emphasis on –
A. Producer
B. Global economy
C. Consumer
D. Middle Man
Answer: A.Producer
Explanation: Supply-side economics emphasizes economic growth achieved by tax and fiscal policy that creates incentives to produce goods and service. It lays great emphasis on entrepreneurs, investors and producers who are treated the prime movers on which the economy depends.
421. Which of the following is not included in the National Income?
A. Imputed rent of owner-occupied houses
B. Government expenditure on making new bridges
C. Winning a lottery
D. Commission paid to an agent for sale of house
Answer: C.Winning a lottery
Explanation: National income is the total value a country’s final output of all new goods and services produced in one year. Transfer payments are not a part of the national income so they are cut from national income to get n.n.p in order to arrive national income such payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc. Private- sector transfers include charitable donations and prizes to lottery winners.
422. Personal disposable income is –
A. always equal to personal income
B. always more than personal income
C. equal to personal income minus indirect taxes
D. equal to personal income minus direct taxes
Answer: D.equal to personal income minus direct taxes
Explanation: Disposable income is total personal income minus personal current taxes. In national accounts definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.
423. Depreciation is equal to —
A. Gross national product —Net national product
B. Net national product —Gross national product
C. Gross national product —Personal income
D. Personal income — Personal taxes
Answer: A.Gross national product —Net national product
Explanation: Net national product at market price is the market value of the output of final goods and services produced at current price in one year of a country. If we subtract the depreciation charges from the gross national product, we get net national product at market price. So depreciation = Gross National Product- Net National Product,
424. National Income Estimates in India are prepared by:
A. National Development Council
B. National Productivity Council
C. National Income Committee
D. Central Statistical Organization
Answer: D.Central Statistical Organization
Explanation: Since 1955 the national income estimates are being prepared by Central Statistical Organization. The CSO uses different methods like the Product Method, Income Method and Expenditure method for various sectors in the process of estimating the National Income.
425. Over short period, when income rises, average propensity to consume usually –
A. rises
B. falls
C. remains constant
D. fluctuates
Answer: B.falls
Explanation: Keynes postulated that aggregate consumption is a function of aggregate current disposable income. The Keynesian consumption function is written as: C = a + eY a > 0, 0 < c < 1; where a is the intercept, a constant which measures consumption at a zero level of disposal income; c is the marginal propensity to consume (MPC); and Y is the disposal in-come. So asincome increases, average propensity to consume (APC = C/Y) falls.
426. According to Keynes, business cycles are due to variation in the rate of investment caused by fluctuations, in the –
A. Marginal efficiency of capital
B. Marginal propensity to save
C. Marginal propensity to consumption
D. Marginal efficiency to investment
Answer: A.Marginal efficiency of capital
Explanation: According to Keynes’ General Theory of Employment, Interest, and Money,’ business cycles are caused by variations in the rate of investment which are caused by fluctuations in the marginal efficiency of capital. Marginal efficiency of capital means the expected profits from new investments.
427. When average product of an input is at its maximum then :……..
note:(AP= Average product) (MP= Marginal product.)
A. AP > MP
B. AP < MP
C. AP = 0
D. AP = MP
Answer: D.AP = MP
Explanation: There is a close relationship between marginal product and average product because both are derived from total product. When marginal product is equal to average product, the average product is at its maxi-mum. In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the “cross-over point,” when MP = AP, AP is at its maximum.
428. If total product is at its maximum then:…….
note:(AP= Average product) (MP= Marginal product.)
A. AF = 0
B. AP < 0
C. MP = 0
D. AP = MP = 0
Answer: C.MP = 0
Explanation: Total product (TP) is the total output a production unit can produce, using different combination of factors of production. When marginal product =0 (at point D in the figure), the total product is at its maximum (as seen at point C in the figure given below). Then en as the marginal product becomes negative, the total product starts going down.
429. The innovation theory of profit was proposed by –
A. Marshall
B. Clark
C. Schumpeter
D. Joan Robbinson
Answer: C.Schumpeter
Explanation: The Innovation Theory of Profit was proposed by Joseph. A. Schumpeter, who believed that an entrepreneur can earn economic profits by introducing successful innovations. In other words, innovation theory of profit posits that the main function of an entrepreneur is to introduce innovations and the profit in the form of reward is given for his performance.
430. Aneconomy in which there are no flows of labour, goods or money to and from other nations is a/an –
A. slow economy
B. mixed economy
C. closed economy
D. open economy
Answer: C.closed economy
Explanation: An economy that does not interact with the economy of any other country is known as closed economy. A closed economy is self- sufficient, meaning no imports are brought in and no exports are sent out. It is the opposite of an open economy, in which a country conducts trade with outside regions.
431. Seawater, fresh air, etc., are regarded in Economics as –
A. Giffen goods
B. inferior goods
C. free goods
D. normal goods
Answer: C.free goods
Explanation: Free goods are what is needed by the society and is available without limits, The free good is a term used in economics to describe a good that is not scarce. A free good is available in as great a quantity as desired with zero opportunity cost to society.
432. Which of the following does not determine supply of labour?
A. Size and age-structure of population
B. Nature of work
C. Marginal productivity of labour
D. Work-leisure ratio
Answer: C.Marginal productivity of labour
Explanation: The term ‘supply of labour’ refers to the number of hours of a given type of labour which will be offered for hire at different wage rates. Usually, it is found that higher the wage rates larger is the supply indicating a direct relationship that exists between the wage rate i.e. the price of labour and labour hours supplied.
433. The ‘break-even’ point is where
A. marginal revenue equals marginal cost
B. average revenue equals average cost,
C. total revenue equals total cost
D. None of the above
Answer: C.total revenue equals total cost
Explanation: Break-even is the point of balance between making either a profit or a loss. In economics & business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even”. A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk- adjusted, expected return.
434. The value of a commodity expressed in terms of money is known as –
A. Price
B. Utility
C. Value
D. Wealth
Answer: A.Price
Explanation: The exchange value of every commodity can be expressed in terms of money. This possibility has enabled money to become a medium for expressing values when the growing elaboration of the scale of values which resulted from the development of exchange necessitated a revision of the technique of valuation. When value is expressed in terms of money, it is called price. Thus, price can be defined as exchange value of a commodity expressed in terms of money.
435. Total fixed cost curve is –
A. Vertical
B. Horizontal
C. Positively Sloping
D. Negatively sloping
Answer: B.Horizontal
Explanation: The Total Fixed Cost Curve is a curve that graphically represents the relation between total fixed cost incurred by a firm in the short-run product of a good or service and the quantity produced. This curve is constructed to capture the relation between total fixed cost and the level of output, holding other variables, like technology and resource prices, constant. Because total fixed cost are, in fact, fixed, the total fixed cost curve is, in fact, a horizontal line.
436. Economic rent does not arise when the supply of a factor unit is –
A. Perfectly inelastic
B. Perfectly elastic
C. Relatively elastic
D. Relatively inelastic
Answer: B.Perfectly elastic
Explanation: Economic rent in the sense of surplus over transfer earnings arise when the supply of the factor units is less than perfectly elastic or not perfectly elastic. When the supply of factor units is perfectly elastic, there is no surplus or economic rent and the actual earnings and transfer earnings are equal. In such a scenario, at a given price or remuneration, the entrepreneur can engage any number of factor units.
437. The supply of labour in the economy depends on –
A. Population
B. National income
C. Per capita income
D. Natural resources
Answer: A.Population
Explanation: The supply curve for labor depends on variables such as population, wage rates, etc. in developing countries, the vast population base explains the relatively lower wage rates and easy accessibility to labour supply. This is just the opposite in the case of developed countries.
438. Which one of the following pairs of goods is an example for Joint Supply?
A. Coffee and Tea
B. Ink and Pen
C. Tooth brush and Paste
D. Wool and Mutton
Answer: D.Wool and Mutton
Explanation: The production of two or more goods simultaneously from the same imputs is called Joint Supply. Wool and Mutton are an example for joint supply.
439. Goods which are meant either for consumption or for investment are called –
A. Final goods
B. Giffen goods
C. Inferior goods
D. Intermediate goods
Answer: A.Final goods
Explanation: All goods which are meant either (i) for consumption by consumers or (ii) for investment by firms are called final goods. They are finished goods, meant for final use. These are neither resold nor do they enter into further stages of production. Cars, television sets, cloth, food, machinery, equipments etc. are final goods.
440. Which is the most essential function of an entrepreneur?
A. Supervision
B. Management
C. Marketing
D. Risk bearing
Answer: D.Risk bearing
Explanation: An entrepreneur performs a series of functions necessary right from the genesis of an idea up to the establishment and effective operation of an enterprise. The functions of an entrepreneur as risk bearer are specific in nature. The entrepreneur assumes all possible risks of business which emerges due to the possibility of changes in the tastes of consumers, modem techniques of production and new inventions. Such risks are not insurable and incalculable. In simple terms such risks are known as uncertainty concerning a loss.
441. Which of the following most closely approximates our definition of oligopoly?
A. The cigarette industry
B. The barber shops
C. The gasoline stations
D. Wheat farmers
Answer: A.The cigarette industry
Explanation: An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oilgopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by the decisions of other firms. Businesses that are part of an oligopoly share some common characteristics: they are less concentrated than in a monopoly, but more concentrated than in a competitive system. This creates a high amount of interdependence which encourages competition in non price-related areas, like advertising and packaging.
442. One of the essential conditions of perfect competition is :
A. product differentiation
B. multiplicity of prices for identical products at any one time.
C. many sellers and a few buyers.
D. Only one price for identical goods at any one time.
Answer: D.Only one price for identical goods at any one time.
Explanation: The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another. There are no trademarks, patents etc. to distinguish the product of one seller from that of another. Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities.
443. Pump priming should be resorted to at a time of?
A. Inflation
B. Deflation
C. Stagflation
D. Reflation
Answer: B.Deflation
Explanation: Pump priming is the action taken to stimulate an economy, usually during a recessionary/deflationary period, through government spending, and interest rate and tax reductions. Growth is accomplished through the increase in purchasing power experienced by those affected by the injection of funds, with the goal of prompting higher demand for goods and services.
444. When will demand become a grant?
A. When a demand is proposed
B. After the discussion on demand is over
C. After the demand is granted
D. When the budget session is closed.
Answer: C.After the demand is granted
Explanation: The estimates of expenditure included in the Budget and required to be voted by Lok Sabha are in the form of Demands for Grants. These Demands are arranged Ministry- wise and a separate Demand for each of themajor services is presented. Each Demand contains first a statement of the total grant and then a statement of the detailed estimate divided into items. A demand becomes a grant after it has been voted. The voting of demands for grants is the exclusive privilege of the Lok Sabha and not of Rajya Sabha.
445. The value of investment multiplier relates to –
A. change in income due to change in autonomous investment.
B. change in autonomous investment due to change in income.
C. change in income due to change in consumption.
D. change in the income due to change in induced investment.
Answer: B.change in autonomous investment due to change in income.
Explanation: The term investment multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy. The investment multiplier tries to determine the financial impact for a public or private project.
446. Savings rate is relatively low in developed economies because of –
A. Low per capita income
B. Welfare programmes
C. Liquidity/ Borrowing constraint
D. High interest rate
Answer: B.Welfare programmes
Explanation: As a general rule, saving is considered as a derivative of consumption. Developed economies have lower saving rates than developing countries because at the same income level, the level of consumption is higher in their cases. Besides, as seen in the recent case of the United States, welfare programmes have been found to be responsible for falling saving rate. Redistributing from young and future generations to older generations raises national consumption and lowers national saving (The Concise Encyclopedia of Economics).
447. A rising Per Capita Income will indicate a better welfare if it is accompanied by –
A. unchanged Income distribution overall.
B. changed Income distribution in favour of rich.
C. changed Income distribution in favour of poor.
D. changed Income disribution in favour of Industrial Labour.
Answer: C.changed Income distribution in favour of poor.
Explanation: Per capita income has lately been viewed as a better determinant of economic development and welfare. However, high inequality can still diminish economic growth. So equal or more rationale distribution of income in the favour of the poor is the best way to ensure that the welfare is holistic and leaves no quarters deprived as after all, economic welfare is a part and parcel of social welfare.
448. National Income is generated from:
A. any money making activity
B. any laborious activity
C. any profit-making activity
D. any productive activity
Answer: B.any laborious activity
Explanation: National Income is the monetary value of all goods and services produced by nationals of a country. Only productive activities are included in the computation of national income. All incomes earned through productive activities are included in national income. Income earned through unproductive activities is not Included.
449. Net National Product of a country is –
A. GDP minus depreciation allowances
B. GDP plus net income from abroad
C. GNP minus net income from abroad
D. GNP minus depreciation allowances
Answer: D.GNP minus depreciation allowances
Explanation: Net national product (NNP) is the total market value of all final goods and services produced by residents in a country or other polity during a given time period (gross national product or GNP) minus depreciation. The net domestic product (NDP) is the equivalentapplication of NNP within macroeconomics, and NDP is equal to gross domestic product (GDP) minus depreciation: NDP = GDP – depreciation.
450. Which one of the following is not a method of estimating National Income?
A. Expenditure method
B. Product method
C. Matrix method
D. Income method
Answer: C.Matrix method
Explanation: The matrix method is a structural analysis method used as a fundamental principle in many applications in civil engineering. The method is carried out, using either a stiffness matrix or a flexibility matrix. Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method.
451. Who said ‘Supply creates its own demand’?
A. Adam Smith
B. J.B.Saw
C. Marshall
D. Ricardo
Answer: B.J.B.Saw
Explanation: “Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes. The rejection of this doctrine is a central component of The General Theory of Employment, interest and Money (1936) and a central tenet of Keynesian economics. Say’s law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767-1832), who stated that “products are paid for with products” and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another
452. Investment is equal to :
A. gross total of all types of physical capital assets
B. gross total of all capital assets minus wear and tear
C. stock of plants, machines and equipments
D. None of the above
Answer: B.gross total of all capital assets minus wear and tear
Explanation: Capital formation is frequently thought of as a measure of total “investment”, in the sense of that portion of capital actually used for investment purposes and not held as savings or consumed. But in fact, in national accounts, the concept of gross capital formation refers only to the accounting value of the “additions of non- financial produced assets to the capital stock less the disposals of these assets”. “Investment” is a broader concept that includes investment in all kinds of capital assets, whether physical property or financial assets.
453. ‘Gold’ is mainly related to –
A. Local market
B. National market
C. International market
D. Regional market
Answer: C.International market
Explanation: Gold is mainly related to the international market as of all the precious metals, it is the most popular as an investment. Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economic regions or countries, until recent times. Gold price has shown a long term correlation with the price of crude oil.
454. Value-added means value of –
A. output at factor cost
B. output at market prices
C. goods and services less depreciation
D. goods and services less cost of intermediate goods and services
Answer: D.goods and services less cost of intermediate goods and services
Explanation: Value added is an economic term to express the difference between the value of goods and the cost of materials or supplies that are used in producing them. It is a measure of economic activity which eliminates the duplication inherent in the sales value figure which results from the use of products of some establishments as materials or services by others. So it is of goods and services less cost of intermediate goods and services.
455. In India, disguised unemployment is generally observed in –
A. the Agricultural sector
B. the Factory sector
C. the Service sector
D. All these sectors
Answer: A.the Agricultural sector
Explanation: As the word suggests, disguised unemployment refers to a situation when a person is apparently employed, but in effect unemployed. It is a phenomenon of concealed unemployment, not visible to the open eyes. Here it is not possible to identify as to who are unemployed, as all “appear to be working.” Disguised unemployment is especially seen in the field of agriculture. Most of the people are observed to be engaged in agriculture; however, in reality a sufficient number of them are unemployed. Their contribution regarding production is negligible.
456. Excise duty on a commodity is payable with reference to its –
A. production
B. production and sale
C. production and transportation
D. production, transportation and sale
Answer: A.production
Explanation: An excise or excise tax (sometimes called a duty of excise special tax) is an inland tax on the sale, or production for sale, of specific goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are distinguished from customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties arc border taxes.
457. “Smart Money” term is used for –
A. Credit Card
B. Internet Banking
C. eBanking
D. Cash with Public
Answer: A.Credit Card
Explanation: Credit cards are sometimes considered as smart money since they enable transactions without the need for physical cash and that, too, in a convenient manner. It is plastic money that is used to pay for products andservices at over 20 million locations around the world. In pure economic terms, Smart Money refers to investments made by people experienced in matters of finance.
458. Which of the following brings out the ‘Consumer Price Index Number’ for Industrial workers?
A. RBI
B. The Labour Bureau
C. Commerce Department
D. NITI Aayog
Answer: B.The Labour Bureau
Explanation: The Consumer Price Index Numbers for Industrial Workers CPI (IW) are being compiled, maintained and disseminated by the Labour Bureau since its inception in October, 1946. These index numbers are being utilized for fixation and revision of wages and de-termination of variable Dearness Allowances payable to workers in organized sectors of the economy. These index numbers are compiled by the Bureau on month to month basis.
459. ‘Green Banking’ means :
A. Banks financing agriculture
B. Banks financing irrigation projects
C. Banks financing farmers
D. Banks financing pro environmental projects
Answer: D.Banks financing pro environmental projects
Explanation: Green Banking refers to practices and guidelines that make banks sustainable in economic, environment, and social dimensions. Green banking is also known as environment- friendly banking, ethical banking or sustainable banking. A conventional bank becomes a green bank by directing its core operations towards the betterment of the environment.
460. A currency having a falling exchange rate due to continuing balance of payments deficit is called a-
A. Soft currency
B. Hard currency
C. Scarce currency
D. Surplus currency
Answer: A.Soft currency
Explanation: Soft currency is a currency with a value that fluctuates as a result of the country’s political or economic uncertainty which may be due to balance of payments problem. Currencies from most developing countries are considered to be soft currencies. Often, governments from these developing countries will set unrealistically high exchange rates, pegging their currencies to a currency such as the U.S. dollar
461. A speculator who enters into a purchase transaction with a view to sell in the near future when the price would have risen is called a –
A. Bear
B. Bull
C. Bison
D. Boar
Answer: B.Bull
Explanation: Investors who take a bull approach purchase securities under the assumption that they can be sold later at a higher price. A “bear” is considered to be the opposite of a bull.
462. Bank rate is that rate on which –
A. Any bank lends money to an individual
B. State Bank of India gives loan to the rural banks
C. Central Bank of Country lends money to the commercial banks
D. Rural bank gives loan to cooperative societies
Answer: C.Central Bank of Country lends money to the commercial banks
Explanation: Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances to a commercial bank. Repo (Repurchase) rate is the rate at which the central bank lends short- term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. The reverse repo rate is the rate at which the banks park surplus funds with reserve bank, while the repo rate is the rate at which the banks borrow from the central bank.
463. Devaluation usually causes the internal prices to :
A. fall
B. rise
C. remain unchanged
D. None of the above
Answer: C.remain unchanged
Explanation: Devaluation reduces the export price in term of foreign currencies in the world market. As a result the exports are increased so as to increase the revenue of the country. When the exports are increased all efforts are made to increase the production of the country. However, devaluation of currency is in relation to external currencies and external trade. It has effects on a country’s international trade by alluring traders. But, internal prices remain unaffected.
464. Which among the following is not a non-customs duty obstacle in the world trade?
A. Quantity restriction
B. Establishment of Standard of labour in manufacturing
C. Determination of import duty uniformly
D. Restrictions on goods quality
Answer: C.Determination of import duty uniformly
Explanation: Non-tariff barriers to trade include import quotas, special licenses, unreasonable standards for the quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and phyto- sanitary measures, rules of origin, etc. Determination of import duty uniformly is comes under the sovereign duty of a nation. It is internal development.
465. seller or buyer protects his business or holdings from changing prices and takes action against it. It is known as –
A. defence
B. betting
C. inter-trading
D. mortgage
Answer: A.defence
Explanation: It is known as defence, It is a type of resistance against danger, attack, or harm to business or holding. A seller or buyer resorts to defence as a means of protection.
466. Which one of the following does not deal with export promotion?
A. Trade Development Authority
B. Minerals and Metals Trading Corporation
C. Cooperative Marketing Societies
D. Slate Trading Corporation of India
Answer: C.Cooperative Marketing Societies
Explanation: According to the Reserve Bank of India, co-operative marketing is a co-operatove association of cultivators formed primarily for the purpose of helping the members to market their produce more profitably than is possible through private trade. Under the system of co- operative marketing whole responsibility of marketing is taken up by the farmers themselves, organized on co-operative basis. The area of operation of marketing society is usually fixed with reference to local conditions – area based or commodity based. The commodity-based societies related to grapes, oranges, banana, pomegranate, etc.
467. Which of the following sets belongs to Central tax?
A. Excise duty, Sales tax and Custom duty
B. Excise duty, Custom duly and Income tax
C. Income tax, Custom duty and House, Lax
D. Custom duty, Entertainment tax and Income tax
Answer: B.Excise duty, Custom duly and Income tax
Explanation: The Central Indian Government that is officially named as the “Union Government” is responsible for the imposition of both direct taxes as well indirect taxes. Listed below are some of the taxes that are levied by the India Government: Banking Cash Transaction Tax; Capital Gains Tax; Corporate Income Tax: Fringe Benefit Tax; Personal Income Tax; and Securities Transaction Tax. The indirect taxes are: Customs Duty; Excise Duty and Service Tax.
468. ho defined ‘Rent’ as that portion or produce of the earth which is paid to the landlord for the use of original and indestructible power of the soil?
A. Ricardo
B. Marshall
C. Keynes
D. Plgou
Answer: A.Ricardo
Explanation: In his The Principles of Political Economy and Taxation (1821), David Ricardo stated: “Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often, however, confounded with the interest and profit of capital, and, in popular language, the term is applied to whatever is annually paid by a farmer to his landlord.
469. Economies of a firm are :
A. An increase in its profits
B. A reduction in its selling expenses
C. Its dominance of the market
D. Saving in it’s production costs
Answer: D.Saving in it’s production costs
Explanation: Economics of a firm includes how it combines labour and capital so as to lower the average cost of output, either from increasing, decreasing, or constant returns to scale for one product line or from economies of scope for more than one product line. It includes producing more units of a good or a service on a larger scale, yet with (on average) less input costs.
470. Nature of unemployment in agriculture in India is –
A. only seasonal
B. only disguised
C. Both (1) and (2)
D. None of the above
Answer: C.Both (1) and (2)
Explanation: Seasonal employment refers to a situation where a number of persons are not able to find jobs during some months of the year. Example: Agriculture is a seasonal activity. There is an increased demand for labour at the time of sowing, harvesting, weeding and threshing. In between there is little or no demand for labour. Besides, disguised unemployment is also seen in agriculture in India.
471. The monetary policy is India is formulated by –
A. Central Government
B. Industrial Financial Corporation of India
C. Reserve Bank of India
D. Industrial Development Bank of India
Answer: C.Reserve Bank of India
Explanation: Monetary policy is the process by which monetary authority of a country, generally a central bank controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI). is so designed as to maintain the price stability in the economy.
472. The system of “Memorandum of Understanding” (MoU) was introduced in –
A. 1989 – 90
B. 1990 – 91
C. 1987 – 88
D. 1988 – 89
Answer: C.1987 – 88
Explanation: The System of Memorandum of Understanding was introduced in the Public Sector Enterprises during the year 1987-88 in India. It was based on the report of the Arjuna Sengupta Committee (1984).
473. The upper limit of investment in plant and machinery for small-scale industries has been fixed currently at –
A. Rs. 35 lakhs
B. Rs. 45 lakhs
C. Rs. 60 lakhs
D. Rs. 1 crore
Answer: D.Rs. 1 crore
Explanation: The upper limit of investment in plant and machinery for small-scale industries has been fixed at Rs. one crore.
474. What is USP in marketing field?
A. Uninterrupted power supply
B. Universal standards of production
C. Us Programme based
D. Exclusive marketing features
Answer: D.Exclusive marketing features
Explanation: The Unique Selling Proposition (a.k.a. Unique Selling Point, or USP) Is a marketing concept that was first proposed as a theory to understand a pattern among successful advertising campaigns of the early 1940s. It states that such campaigns made unique propositions to the customer and that this convinced them to switch brands. The term was invented by Rosser Reeves of Ted Bates & Company.
475. When too much money is chasing too few goods, the situation is –
A. deflation
B. inflation
C. recession
D. stagflation
Answer: B.inflation
Explanation: Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as “too much money chasing too few goods”. More accurately, it should be described as involving “too much money spent chasing too few goods”, since only money that is spent on goods and services can cause inflation.
476. When there is an official change in the exchange rate of domestic currency, then it is called
A. Appreciation
B. Depreciation
C. Revaluation
D. Deflation
Answer: B.Depreciation
Explanation: Revaluation is a calculated adjustment to a country’s official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government (i.e. central bank) can alter the official value of the currency. It is opposite of devaluation.
477. Inflation redistributes income and wealth in favour of :
A. Pensioners
B. Poor
C. Middle class
D. Rich
Answer: D.Rich
Explanation: A group of economists including Keynes is of the opinion that ‘inflation, in one form or the other, is a factor which helps economic growth. Usually, it is argued that inflation tends to redistribute income and wealth. The redistributive effect of inflation is always in favour of profit-earning class, that is to say, It redistributes income always from the wage- recipient class towards the profit-recipient class in the community. As a result, the saving ratio will increase because the marginal propensity to save of the profit earners is generally high as against the high margin-al propensity to consume of the wage- earners because of their near-subsistence level of income.
478. Money market is a market for –
A. Short term fund
B. Long term fund
C. Negotiable instruments
D. Sale of shares
Answer: A.Short term fund
Explanation: The money market is where financial instruments with high liquidity and very short maturities are traded. It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year. Some of the common money market instruments are: commercial paper, municipal notes, interest rate swaps, etc.
479. MUDRA Bank has been launched to help –
A. Small business
B. Marginal farmers
C. Poor women
D. Rural sector
Answer: A.Small business
Explanation: Micro Units Development and Refinance Agency Bank (or MUDRA Bank)is a new institution setup by the Government of India to provide the funding to the non-corporate small business sector. It will provide its services tosmall entrepreneurs outside the service area of regular banks, by using last mile agents.
480. Industrial exit policy means –
A. forcing foreign companies to leave India
B. forcing business units to move out of congested localities
C. allowing manufacturers to shift their line of products
D. allowing business units to close down
Answer: D.allowing business units to close down
Explanation: The term ‘exit’ is the obverse of the term ‘entry’ into industry. It refers to the right or ability of an industrial unit to withdraw from or leave an industry or in other words to close down. The proposal to introduce an exit policy was first mooted in 1991 when it was felt that without labor market flexibility, efficient industrialization would be difficult to achieve.
481. Capital formation in an economy depends on –
A. Total Income
B. Tot al demand
C. Total savings
D. Total production
Answer: C.Total savings
Explanation: Capital formation refers to capital accumulation, referring to the total “stock of capital” that has been formed, or to the growth of this total capital stock. It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period.
482. If the tax rate increases with the higher level of income, it shall be called –
A. Proportional tax
B. Progressive tax
C. Lump sum tax
D. Regressive tax
Answer: B.Progressive tax
Explanation: A progressive tax is a tax by which the tax rate increases as the taxable base amount increases.” Progressive” describes a distribution effect on income or expenditure,referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence increasingly to those with a higher ability-to-pay.
483. New capital issue is placed in –
A. Secondary market
B. Grey market
C. Primary market
D. Black market
Answer: C.Primary market
Explanation: The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).
484. If a country devalues its currency, its -(1)
A. Exports become cheaper and imports become costlier
B. (2) Exports become costlier and imports become cheaper.
C. Exports value is equivalent to imports value
D. No effect on exports and imports
Answer: A.Exports become cheaper and imports become costlier
Explanation: Devaluation means official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. Devaluation causes a country’s exports to become less expensive, making them more competitive in the global market. This, in turn, means that imports are more expensive, making domestic consumers less likely to purchase them.
485. ‘Residex’ is associated with –
A. Share prices
B. Price inflation
C. Mutual fund prices
D. Land prices
Answer: D.Land prices
Explanation: The RESIDEX was first launched in 2007 by the National Housing Bank (NHB) to provide an index of residential prices in India across cities and over time. It is the first housing price index in India. It was launched in order to fill price information gap and to streamline the process of development of property in various cities across the country.
486. Which one of the following is not a function of the central bank in an economy?
A. Dealing with foreign exchange
B. Controlling monetary policy
C. Controlling government spending
D. Acting as a banker’s bank
Answer: C.Controlling government spending
Explanation: A central bank, reserve bank, or monetary authority is a public institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries.
487. In a period of inflation and price rises the supply of money remains –
A. the same
B. increases
C. decreases
D. increases or decreases pro-portionately.
Answer: B.increases
Explanation: Money supply is the total amount of monetary assets available in an economy at a specific time. The relation between money and prices is historically associated with the quantity theory of money. There is strong empirical evidence of a direct relation between long-term price inflation and money-supply growth, at least for rapid increases in the amount of money in the economy.
488. Which of the following groups suffer the most from inflation?
A. Debtros
B. Creditors
C. Business class
D. Holders of real assets
Answer: B.Creditors
Explanation: Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal). Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power. Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed.
489. What is “narrow money”?
A. The sum of currency in circulation and the demand deposits in banks
B. The sum of MI money and the time deposits
C. The sum of currency in circulation with the public and the cash reserves held by banks
D. The market value of the stocks held by all the holders excluding the promoters
Answer: A.The sum of currency in circulation and the demand deposits in banks
490. Legal Tender Money is –
A. accepted only by Government
B. accepted by people and Government as per the law
C. not accepted for business purposes by law
D. not accepted by Government
Answer: B.accepted by people and Government as per the law
Explanation: Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. So it is accepted by people and government on a legal basis. Paper currency and coins are common forms of legal tender in many countries.
491. Bank rate is the rate of interest:
A. At which public borrows money from Commercial Banks
B. At which public borrows money from R.B.I.
C. At which Commercial Banks borrow money from R.B.I.
D. At which Commercial Banks borrow money from the public
Answer: C.At which Commercial Banks borrow money from R.B.I.
Explanation: Bank Rate is the interest rate at which a nation’s central bank lends money to domestic banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Regulation of the economy through management of the money supply is referred to as monetary policy.
492. Which of the following can be used for checking inflation temporarily?
A. Increase in wages
B. Decrease in money supply
C. Decrease in taxes
D. None of these
Answer: B.Decrease in money supply
Explanation: An open market operation (also known as OMO) is an activity by a central bank to buy or sell government bonds on the open market. India’s Open Market Operation is much influenced by the fact that it is a developing country and that the capital flows are much different than those in the other developed countries. Economists claim that an increase in money supply alone constitutes inflation.
493. he annual record for all the monetary transactions of a country with other countries of the world is known as –
A. Balance of trade
B. Balance of monetary-receipts
C. Balance of payments
D. Balance Sheet
Answer: C.Balance of payments
Explanation: Balance of payments (BoP) accounts arc an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country’s exports and imports of goods, services, financial capital, and financial transfers. The BoP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned.
494. A country’s balance of trade is unfavorable when —
A. exports exceed imports
B. imports exceed exports
C. terms of trade become unfavorable
D. None of these
Answer: B.imports exceed exports
Explanation: The balance of trade, or net exports is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation’s imports and exports. A positive balance is known as a trade surplus if it consists of exporting more than is imported: a negative balance is referred to as a trade deficit or, informally, a trade gap.
495. Which one of the following categories of workers is termed as cultivators?
A. Those who own land and cultivate
B. Those who lease in land and cultivate
C. Those who cultivate the land of others
D. Those who own land and lease in from others or institutions and cultivate
Answer: C.Those who cultivate the land of others
Explanation: Agricultural laborers are those who cultivate the land of others but own no (or very little) land of their own. Owner cultivators are those who own and cultivate their own land. Landowners are those who own land but do not cultivate it themselves. So basically, a cultivator is an agricultural labourer who tills the land of others.
496. The reserves held by Commercial Banks over and above the statutory minimum, with the RBI are called –
A. Cash reserves
B. Deposit reserves
C. Excess reserves
D. Momentary reserves
Answer: C.Excess reserves
Explanation: In banking, excess reserves are bank reserves in excess of the reserve requirement set by a central bank. They are reserves of cash more than the required amounts. Holding excess reserves has an opportunity cost if higher risk-adjusted interest can be earned by putting the funds elsewhere; the advantage of holding some funds in excess reserves is that doing so may provide enhanced liquidity and therefore more smooth operation of payment system.
497. J. B. Say’s Law of Market was not accepted by –
A. Adam Smith
B. Marshall
C. Malthus
D. David Ricardo
Answer: B.Marshall
Explanation: Malthus opposed what has come to be described as Say’s Law: that supply creates its own demand. He rejected the proposition that the demand for commodities will automatically provide a motive for sufficient investment and production to satisfy such demand, or that investment and production would alone and automatically lead to an adequate demand to absorb supply. He argued that production and consumption were impelled by very different motives. Demand adjusted slowly, according to ‘habit and tastes’ and hence if productivity increased significantly, demand would not
498. The time element in price analysis was introduced by :
A. J.M. Keynes
B. Alfred Marshall
C. J.S. Mill
D. J.R. Hicks
Answer: B.Alfred Marshall
Explanation: Marshall, who propounded the theory that price is determined by both demand and supply, also gave a great importance to the time element in the determination of price. He introduced time period analysis into pricing process to bring out the varying influence of each of two forces over price of the product in different time periods. He said, “as a general rate”, “the shorter the period which one considers the greater must be the share of our attention which is given to the influence of demand on value, and the longer the period more important will be the influence of cost of production on value.”
499. Selling cost have to be incurred in case of –
A. Perfect Competition
B. Monopoly
C. Monopolistic Competition
D. None of the given options
Answer: C.Monopolistic Competition
Explanation: Selling costs are the expenses on advertisement, salesmanship, free sampling, free service, door-todoor canvassing, and so on. There is no selling problem under perfect competition where the product is homogeneous. Under monopolistic competition where the product is differentiated, selling costs are essential to push up the sales. They are incurred to persuade a buyer to purchase one product in preference to another.
500. Inflation is a situation characterized by
A. Too much money chasing too few goods
B. Too few money chasing too much goods
C. Too many people chasing too few goods
D. Too many people chasing too little money
Answer: A.Too much money chasing too few goods
Explanation: Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as “too much money chasing too few goods.”
501. If a change in all inputs leads to a proportionate change in output, it is case of –
A. Constant returns to scale
B. Diminishing returns to scale
C. Increasing returns to scale
D. Variable returns to scale
Answer: A.Constant returns to scale
Explanation: If output increases by that same proportional change as all inputs change then there are constant returns to scale (CRS). If output increases by less than that proportional change in inputs, there are decreasing returns to scale (DRS). If output increases by more than that proportional change in inputs, there are increasing returns to scale (IRS).
502. Which of the following is a consequence of inflationary price rise?
A. Obstacle in development
B. Increase in economic inequalities
C. All of these
D. Adverse effect on the balance of payment
Answer: C.All of these
Explanation: Inflationary price rise is harmful to a country’s economic performance and to the welfare of its citizens. It can create a random redistribution of income given that inflation does not have an equal impact on individuals and groups. The balance of payments may deteriorate because domestic inflation stimulates import spending, given that imports appear relatively cheaper, and dampens export sales. A continuous price rise can be an obstacle to development as it has an adverse effect on saving and investment and causes a fall in growth.
503. Price mechanism is a feature of –
A. Capitalist economy
B. Barter economy
C. Mixed economy
D. Socialist economy
Answer: A.Capitalist economy
Explanation: Price mechanism is an economic term that refers to the manner in which the prices of commodities affect the demand and supply of goods and services. It is essentially a feature of market-driven or capitalist economic systems. It is based on the principle that only by allowing prices to move freely will the supply of any given commodity match demand.
504. The main feature of a capitalist economy is –
A. Administered prices
B. Public ownership
C. Economic planning
D. Private ownership
Answer: D.Private ownership
Explanation: Capitalism is an economic system that is based on private ownership of the means of production and the production of goods or services for profit. Other elements central to capitalism include capital accumulation and often competitive markets.
505. Personal Income’ equals –
A. The household sector’s in-come
B. Private income minus savings of the corporate sector minus corporation tax
C. Personal disposable income plus miscellaneous receipts of the Goverment
D. All of the above
Answer: C.Personal disposable income plus miscellaneous receipts of the Goverment
Explanation: Disposable income is total personal income minus personal current taxes (or plus receipts of the government). In national accounts definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings
506. According to the classical system, saving is a function of –
A. Income
B. The interest rate
C. The real wage
D. The Price level
Answer: A.Income
Explanation: Saving function is a mathematical relation between saving and income by the household sector. This function captures the saving-income relation, the flip side of the consumption-income relation that forms one of the key building blocks for Keynesian economics.
507. Which of the following concepts are most closely associated with J.M. Keynes?
A. Control of money supply
B. Marginal utility theory
C. Indifference curve analysis
D. Marginal efficiency of captial
Answer: D.Marginal efficiency of captial
Explanation: The marginal efficiency of capital (MEC) is that rate of discount which would equate the price of a fixed capital asset with its present discounted value of expected income. The term “marginal efficiency of capital” was introduced by John Maynard Keynes in his General Theory, and defined as “the rate of discount which would make the present value of the series of annuities given by the returns expected from the capital asset during its life Just equal its supply price
508. When the total product rises at an increasing rate, the –
A. marginal product is zero
B. marginal product is rising
C. marginal product is falling
D. marginal product remains constant
Answer: B.marginal product is rising
Explanation: Marginal product of an input (factor of production) is the extra output that can be produced by using one more unit of the input (for instance, the difference in output when a firm’s labor usage is increased from five to six units), assuming that the quantities of no other inputs to production change. Marginal product, which occasionally goes by the alias marginal physical product (MPP), is one of two measuresderived from total product. The other is average product. Marginal product is directly proportional to total product.
509. If an industry is characterized by economies of scale then –
A. barriers to entry are not very large
B. long run unit costs of production decreases as the quantity the firm produces increases
C. capital requirement are small due to the efficiency of the large scale operation
D. the costs of entry into the market are likely to be substantial
Answer: B.long run unit costs of production decreases as the quantity the firm produces increases
Explanation: In microeconomics, economies of scale are the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. “Economies of scale” is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.
510. Movement along the same demand curve is know as –
A. Extension and Contraction of Demand
B. Increase and Decrease of Demand
C. Contraction of supply
D. Increase of supply
Answer: B.Increase and Decrease of Demand
Explanation: A shift in the demand curve is caused by a factor affecting demand other than a change in price. If any of these factors change then the amount consumers wish to purchase changes whatever the price. The shift in the demand curve is referred to as an increase or decrease in demand. A movement along the demand curve occurs when there is a change in price, This may occur because of a change in supply conditions. The factors affecting demand are assumed to be held const ant.
511. What are gilt-edged securities?
A. Securities issued by the multinational companies.
B. Securities issued by the Government
C. Securities issued by the private sector
D. Securities issued by the joint venture companies
Answer: B.Securities issued by the Government
Explanation: Gilt-edged securities are bonds issued by governments. They are government securities, i.e., instruments issued by the government to borrow money from the market. Gilt-edged securities are a high-grade investment with very low risk.
512. Which curve shows the inverse relationship between unemployment and inflation rates?
A. Supply curve
B. Indifference curve
C. IS curve
D. Phillips curve
Answer: D.Phillips curve
Explanation: The Phillips curve shows the inverse relationship between inflation and unemployment: as unemployment decreases, inflation increases. The relationship, however, is not linear. Graphically, the short-run Phillips curve traces an L-shape when the unemployment rate is on the x-axis and the inflation rate is on the y-axis.
513. Collective consumption means –
A. household consumption
B. individual consumption
C. self-consumption
D. consumption by the citizens of the country
Answer: D.consumption by the citizens of the country
Explanation: Collective consumption is a concept that refers to the many goods and services that are produced and consumed on a collective level, such as in cities or countries. These include schools, libraries, roads, bridges, public transportation, health care, welfare, fire and police protection, etc.
514. The market equilibrium for a commodity is determined by :
A. The market supply of the commodity.
B. The balancing of the forces of demand and supply for the commodity
C. (3) The intervention of the Government.(4)
D. The market demand of the commodity.
Answer: B.The balancing of the forces of demand and supply for the commodity
Explanation: Market Equilibrium is determined when the quantity demanded of a commodity becomes equal to the quantity supplied. The price determined corresponding to market equilibrium is known as equilibrium price and the corresponding quantity is known as equilibrium quantity.
515. Which of the following would not constitute an economic activity in Economics?
A. A teacher teaching students in his college
B. A teacher teaching students in a coaching institute
C. A teacher teaching his own daughter at home
D. A teacher teaching students under Sarva Shiksha Abbiyan Scheme
Answer: C.A teacher teaching his own daughter at home
Explanation: Economic activity, is quite simply, the activity of the economy. It includes the growth and shrinkage of the economy and all factors that affect this (for example Aggregate Expenditure). It is commonly measured by the GDP (Gross Domestic Product) which is probably one of the most reliable economic indicators. A teacher teaching his daughter at home is the example of a non-economic activity.
516. Which one of the following is not included while estimating national income through income method?
A. Rent
B. Mixed incomes
C. Pension
D. Undistributed profits
Answer: C.Pension
Explanation: The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation. Transfer incomes are excluded from national income. Therefore, wages of labourers will be included, pensions of retired workers will be excluded from national income.
517. Who defined investment as “the construction of a new capital asset like machinery or factory building”?
A. Hansen
B. J.M. Keynes
C. Harrod
D. J.R. Hicks
Answer: B.J.M. Keynes
Explanation: Investment expenditure refers to the creation of new assets i.e. an addition to the stock of existing capital assets. According to Keynes investment demand depends upon two factors: (1) Expected rate of profit which he calls as Marginal Efficiency of Capital (MEC). Investment demand increases with the increase in the expected rate of profit; (2) the rate of interest (IR). Investment demand decreases with the increase in the rate of interest.
518. An individual’s actual standard of living can be assessed by –
A. Gross National Income
B. Net National Income
C. Per Capita Income
D. Disposable Personal Income
Answer: C.Per Capita Income
Explanation: The standard of living is a measure of the material welfare of the inhabitants of a country. The baseline measure of the standard of living is real national output per head of population or real GDP per capita. This is the value of national output divided by the resident population. Other things being equal, a sustained increase in real GDP increases a nation’s standard of living providing that output rises faster than the total population.
519. The standard of living in a country is represented by its:
A. poverty ratio
B. per capita income
C. national income
D. unemployment rate
Answer: B.per capita income
Explanation: Per capita income or average income or income per person is the mean income within an economic aggregate, such as a county or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDPor Gross National Income) and dividing it by the total population. It does not attempt to reflect the distribution of income or wealth. Per capita income is often used to measure a country’s standard of living. However, it is not a good standard of measuring standard of living as it is income of one person of the country.
520. Capital output ratio of a commodity measures –
A. its per unit cost of production
B. the amount of capital invested per unit of output
C. the ratio of capital depreciation to quantity of output
D. the ratio of working capital employed to quantity of output
Answer: B.the amount of capital invested per unit of output
Explanation: Capital Output Ratio is the ratio of capital used to produce an output over a period of time. This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output: hence the resulting capital output ratio is low. The capital output ratio tends to increase if the capital available in a country is cheaper than the other inputs. Therefore, the countries that are rich in natural resources have a low capital output ratio. This is because they can easily substitute the capital with natural resources in order to increase the output. When countries use their natural resources instead of capital then COR reduces.
521. Taxes on professions can be levied by :
A. State government only
B. both by state and union government
C. by panchayats only
D. Union government only
Answer: A.State government only
Explanation: In India, the professional tax is imposed at the state level. However, not all the states impose this tax. Business owners, working individuals, merchants and people carrying out various occupations comes under the purview of this tax. Professional tax is levied by particular Municipal Corporations.
522. A part of National Debt known as External Debt is the amount –
A. borrowed by its citizens from abroad
B. lent by its citizens to foreign governments
C. borrowed by its government from abroad
D. lent by its government to foreign government
Answer: C.borrowed by its government from abroad
Explanation: External debt (or foreign debt) is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank.
523. Which of the following is not considered as National Debt?
A. National Savings Certificates
B. Long-term Government Bonds
C. Insurance Policies
D. Provident Fund
Answer: C.Insurance Policies
Explanation: Government debt is the debt owed by a central government. Governments usually borrow by issuing securities, government bonds and bills. Government Bonds are often issued via auctions at Stock. Exchanges. There are two main depository types: Book-Entry and Certificate. Insurance policies do not come under government debt. In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.
524. Disinvestments is –
A. offloading of shares of privates companies to government
B. offloading of government shares to private companies
C. increase in investment
D. closing down of business concerns
Answer: B.offloading of government shares to private companies
Explanation: Disinvestment is a process where Government sells its equity holding to private sectors. In other ways it is a privatization process where private parties are given shareholding in Government undertakings either wholly or partially.
525. Acording to Keynesian theory of income determination, at full employment, a fall in aggregate demand causes –
A. a fall in prices of output and resources
B. a fall in real gross National product and employment
C. a rise in real gross National product and investment
D. a rise in prices of output and resources
Answer: A.a fall in prices of output and resources
Explanation: In 1936, John Maynard Keynes published the book “The General Theory of Employment, Interest and Money to explain the prolonged and massive unemployment in the Great Depression. The book criticises the classical model. Keynes turns Say’s Law on its head, arguing that aggregate demand determines national output and employment in the economy. In this sense, demand creates its own supply. Unlike the Classical economists, Keynes believes that prices and wages are rigid, especially in the downward direction and hence the economy is not a self-correcting mechanism. In other words, Keynes believes that as prices and wages are rigid, the economy can stay at a below-full-employment equilibrium. Suppose that the economy is at the full-employment equilibrium.
526. The theory of “Maximum Social Advantage” in Public Finance Was given by
A. Robbins
B. Musgrave
C. Findley
D. Dalten
Answer: D.Dalten
Explanation: The ‘Principle of Maximum Social Advantage’ was introduced by British economist Hugh Dalton. According to Dalton, “The best system of public finance is that which secures the maximum social advantage from the operations which it conducts.”
527. Taxes are as certain as the death, because –
A. They constitute the major source of government revenue.
B. Government have no other source of revenue.
C. Most PSUs are run inefficiently.
D. Government has its own budget constraints.
Answer: A.They constitute the major source of government revenue.
Explanation: Benjamin Franklin’s utterance, “In this world nothing can be said to be certain, except death and taxes,” when applied in economics means that the largest amount of revenue raised by governments comes from taxation. The proverb draws on the actual inevitability of death to highlight the difficulty in avoiding the burden of taxes.
528. In the context of the stock market, IPO stands for –
A. Immediate Payment Order
B. Internal Policy Obligation
C. Initial Public Offer
D. International Payment Obligation
Answer: C.Initial Public Offer
Explanation: An initial public offering (IPO) or stock market launch is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time. Through this process, a private company transforms into a public company. Initial public offerings are used by – companies to raise expansion capital, to possibly monetize the investments of early private investors, and to become publicly traded enterprises. A company selling shares is never required to repay the capital to its public investors.
529. Disinvestment in Public Sector is called
A. Liberalisation
B. Globalisation
C. Industrialisation
D. Privatisation
Answer: D.Privatisation
Explanation: Privatization is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the privatesector, either to a business that operates for a profit or to a non-profit organization. The term can also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.
530. Which one of the following is NOT an example of indirect tax?
A. Sales tax
B. Excise duty
C. Customs duty
D. Expenditure tax
Answer: D.Expenditure tax
Explanation: Expenditure tax is a taxation plan that replaces the income tax (a direct tax). Instead of applying a tax based on the income earned, tax is allocated based on the rate of spending. This is different from a sales tax, which is applied at the time the goods or services are provided and is considered a consumption tax. The major benefit for this type of tax scheme is the removal of double taxation.
531. Interest on public debt is a part of :
A. transfer payments by the enterprises
B. transfer payments by the Govt.
C. national income
D. interest payments by households
Answer: B.transfer payments by the Govt.
Explanation: In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output. In other words, the transfer is made without any exchange of goods or services. Examples of certain transfer payments include welfare (financial aid), interest on public debt, social security, and government making subsidies for certain businesses (firms).
532. A speculator who sells stocks, in order to buy back when price falls, for gain is a –
A. Bull
B. Bear
C. Boar
D. Bison
Answer: B.Bear
Explanation: A bear is a speculator who is wary of fall in prices and hence sells securities so that he may buy them at cheap price in future. He does not have securities at present but sells them at higher prices in anticipation that he will supply them business purchasing at lower prices in the future. If the prices move down as per the expectations of the bear he will earn profits out of these transactions.
533. Inflation can be checked by –
A. increasing exports
B. increasing money supply
C. increasing Government expenditure
D. decreasing money supply
Answer: D.decreasing money supply
Explanation: The technical and most often used way to control inflation is by tightening the money supply. The logic goes that when people do not have excess money, they will buy lesser quantity of goods and services and postpone luxurious expenses. This will reduce the demand for the products and thus lead to reduction in prices. Most central banks use high interest rates as the traditional way to fight or prevent inflation.
534. “Legal Tender Money” refers to :
A. Cheques
B. Drafts
C. Bill of exchange
D. Currency notes
Answer: D.Currency notes
Explanation: Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency and coins are common forms of legal tender in many countries. Legal tender money is a type of payment that is protected by law.
535. Gresham’s Law means –
A. Good money replaces bad money in circulation
B. Bad money replaces good money in circulation
C. Good money promotes bad money in the system
D. Bad money promotes good money in the system
Answer: B.Bad money replaces good money in circulation
Explanation: Gresham’s law is an economic principle that states: “When a government compulsorily overvalues one type of money and undervalues another, the under-valued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”
536. Free Trade refers to –
A. free movement of goods from one country to another
B. movement of goods free of cost
C. unrestricted exchange of goods and service
D. trade free of duty
Answer: A.free movement of goods from one country to another
Explanation: Free trade is a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports) or quotas. According to the law of comparative advantage, the policy permits trading partners mutual gains from trade of goods and services. Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. ‘Free’ trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ-from those that would emerge under deregulation.
537. Insider trading is related to –
A. Trade sector
B. Share market
C. Credit market
D. Horse racing
Answer: B.Share market
Explanation: Insider trading is the trading of a public company’s stock or other securities by individuals with access to non-public information about the company. It is related to share markets. Insider trading is an unfair practice, wherein the other stock holders are at a great disadvantage due to lack of important insider non-public information.
538. Situation Analysis is useful for:
A. Analysis of Capital Market
B. SWOT Analysis
C. Capital Market.
D. Analysis of Capital Market and Capital Market.
Answer: B.SWOT Analysis
Explanation: Three of the four options in the question are identical. Situation analysis refers to a collection of methods that managers use to analyze an organization’s internal and external environment to understand the organization’s capabilities, customers, and business environment. It is useful for Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis in which internal strengths and weaknesses of an organization, and external opportunities and threats faced by it are closely examined to chart a strategy.
539. Which terns is used in economics for the market value of all goods and services in one year by labour and properly supplied by the residents of the country?
A. GDP
B. GPN
C. OMP
D. GNP
Answer: D.GNP
Explanation: Gross National Product (GNP) is defined as “the market value of all goods andservices produced in one year by labour and property supplied by the residents of a country. It is contrasted to Gross domestic product (GDP), defined as “the value of all final goods and services produced in a country in I year.”
540. Which one of the following is not a method for computing GNP?
A. Income Approach
B. Expenditure Approach
C. Savings Approach
D. Value Added Approach
Answer: A.Income Approach
Explanation: Gross National Product (GNP) can be defined as an economic statistic which includes Gross Domestic Product, plus any income earned by the residents from investments made overseas. Net factor income from abroad = income earned in foreign countries by the residents of a country – income earned by nonresidents in that country.
541. An economy which does not have any relation with the rest of the world is known as
A. Socialist economy
B. Closed economy
C. Open economy
D. Mixed economy
Answer: B.Closed economy
Explanation: A Closed economy is an economy in which no activity is conducted with outside economies. A closed economy is self-sufficient, meaning that no imports are brought in and no exports are sent out. The goal is to provide consumers with everything that they need from within the economy’s borders.
542. While estimating national income which of the following is not taken into account?
A. Services of a teacher
B. Services of a doctor
C. Services of a housewife
D. Services of a maid servant
Answer: C.Services of a housewife
Explanation: Services provided by housewives can be categorized as non-economic services and thus cannot be accounted in national income which is the sum total of all the goods andservices produced in a country, in a particular period of time.
543. Consumptions function refers to –
A. relationship between income and employment
B. relationship between savings and investment
C. relationship between input and output
D. relationship between income and consumption
Answer: D.relationship between income and consumption
Explanation: The Consumption function is a single mathematical function used to express consumer spending. It was developed by John Maynard Keynes and detailed most famously in his book The General Theory of Employment, Interest, and Money. It is made up of autonomous consumption that is not influenced by current income and induced consumption that is influenced by the economy’s income level.
544. Capital : Output Ratio of a measures –
A. its per unit cost of production
B. the amount of capital invested per unit of output
C. the ratio of capital depreciation to quantity of output
D. the ratio of working capital employed to quantity of output
Answer: B.the amount of capital invested per unit of output
Explanation: Capital output ratio is the ratio of capital used to produce an output over a period of time. This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output; hence the resulting capital output ratio is low.
545. “Supply creates its own demand” – Who said this?
A. J. B. Say
B. J. S. Mill
C. J. M. Keynes
D. Senior
Answer: A.J. B. Say
Explanation: “Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes. The rejection of this doctrine is a central component of The General Theory of Employment, Interest and Money (1936) and a central tenet of Keynesian economics. Say’s Law (or Say’s Law of Markets), is often summarized as: “Aggregate supply creates its own aggregate demand”, “Supply creates its own demand”, “If you build it, they will come”, and Inherent in supply is the wherewithal for its own consumption”.
546. ‘Take-off stage’ in an economy means –
A. Steady growth begins.
B. Economy is stagnant.
C. Economy is about to collapse.
D. All controls are removed.
Answer: A.Steady growth begins.
Explanation: Rostow’s ‘Stages of Economic Growth’ (1960) presented five stages through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity, and 5) age of high mass consumption. Take-off is the short period of intensive growth, in which industrialization begins to occur, and workers and institutions become concentrated around a new industry.
547. Gross National Product – Depreciation Allowance =?
A. Per Capita Income
B. Gross Domestic Product
C. Personal Income
D. Net National Product
Answer: D.Net National Product
Explanation: Net National product (NNP) is Gross National Product minus a depreciation allowance for the wearing out of machines and buildings during the period. In other words, NNP= Gross National Product – Depreciation Allowance. Since NNP counts only the net additions to the nation’s stock, it is less than GNP.
548. Interest paid by the government on the loans raised is called –
A. Debt Servicing
B. Deficit Financing
C. Discounted Budgeting
D. Bridge-loan
Answer: A.Debt Servicing
Explanation: Debt service is the amount of money required to make payments on the principal and interest on outstanding loans, the interest on bonds. or the principal of maturing bonds. An individual or company unable to make such payments is said to be “unable to service one’s debt.”
549. In an economy, the sectors are classified into public and private on the basis of –
A. employment conditions
B. nature of economic activities
C. ownership of enterprises
D. use of raw materials
Answer: C.ownership of enterprises
Explanation: The classical breakdown of all economic sectors is: primary, secondary and tertiary. However, on the basis of ownership, the sectors are: business sector, private sector (privately run businesses), public sector (state sector) and voluntary sector.
550. Which of the following taxes is such which does not cause rise in price?
A. Import duty
B. Income tax
C. Octoroi
D. Sales tax
Answer: B.Income tax
Explanation: The government of India imposes an income tax on taxable income of individuals, Hindu Undivided Families (H UFs), companies, firms, co-operative societies and trusts (identified as body of individuals and association of persons) and any other artificial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. It does not lead to increase in price as it is dependent of income of individuals.
551. Who among the following has suggested tax on expenditure?
A. Dalton
B. Kaldor
C. Musgrave
D. Gautam Mathur
Answer: B.Kaldor
Explanation: Nicholas Kaldor’s seminal’ work, titled ‘An Expenditure Tax,’ was brought out in 1955. Kaldor asked to levy a tax on a person’s expenditure (consumption), instead of on his income. When expenditure is made the basis of taxation, the problems created by the non- comparability of various types of accruals of wealth resolve themselves. This was his major argument in favour of an expenditure tax.
552. Which of the following is not helpful in controlling money supply?
A. Free market policy
B. CRR
C. Bank Rate
D. Change in margin requirement
Answer: A.Free market policy
Explanation: The Central Bank of a country regulates money supply with the help of open market operations, changing the reserve requirements (CRR) and changing discount rate (bank rate). Besides, banks are required to maintain liquid assets in the form of gold, cash and approved securities (margin requirements); also known as Statutory Liquidity ratio. In India, the Reserve Bank of India has recently been resorting more to open market operations.
553. Which term is not related to banking?
A. C.R.R.
B. N .E.E .R.
C. S.L.R.
D. Fixed Deposits
Answer: B.N .E.E .R.
Explanation: NEER stands for Nominal Effective Exchange Rate which represents the relative value of a home country’s currency compared to the other major currencies being traded (U.S. dollar, Japanese yen, euro, etc.). It also represents the approximate relative price a consumer will pay for an imported good.
554. The process of curing inflation by reducing money supply is called –
A. Cost-push inflation
B. Demand-pull inflation
C. Disinflation
D. Reflation
Answer: C.Disinflation
Explanation: Disinflation is a decrease in the rate of inflation -a slowdown in the rate of increase of the general price level of goods and services in a nation’s gross domestic product over Lime. It is the opposite of reflation. Disinflation occurs when the increase in the “consumer price level” slows down from the previous period when the prices were rising. Disinflation is the reduction in the general price level in the economy but for a very short period of time. Disinflation takes place only when an economy is suffering from recession.
555. Longterm funds in the capital, market can be raised either by borrowing from certain institutions or through –
A. issue of note
B. taking loan from Government
C. issue of securities
D. taking loan from foreign institutions
Answer: C.issue of securities
Explanation: Capital markets provide for the buying and selling of long term debt or equity backed securities. When they work well, the capital markets channel the wealth of savers to those who can put it to long term productive use, such as companies or governments making long term investments. Capital Markets allow businesses to raise long-term funds by providing a market for securities, both through debt and equity.
556. “Closed Economy” means :
A. no provision for public sector
B. no provision for private sector
C. economy policy not well defined
D. a country having no imports and exports
Answer: D.a country having no imports and exports
Explanation: Closed economy is an economy in which no activity is conducted with outside economies. A closed economy is self-sufficient, meaning that no imports are brought in and no exports are sent out. The goal is to provide consumers with everything that they need from within the economy’s borders.
557. Dumping is a form of price discrimination at –
A. within industry
B. national level
C. international level
D. local level
Answer: C.international level
Explanation: Dumping is, in general, is a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. It is regarded as an “unfair” trade practice as it may cause or threat en to cause material injury to the importing markets.
558. Money supply is governed by the –
A. Planning Commission
B. Finance Commission
C. Reserve Bank of India
D. Commercial Banks
Answer: C.Reserve Bank of India
Explanation: In economics, the money supply or money stock, is the total amount of monetary assets available in an economy at a specific time. It is governed and regulated by the central bank of a country. The Reserve Bank of India regulates money supply in India through its several policy rates and reserve ratios.
559. The food stocks that are built up during the years of bumper harvest are called :
A. Capital stock
B. Buffer stock
C. Production stock
D. Grain stock
Answer: B.Buffer stock
Explanation: Commercial grain stock is the current amount of harvested grain crops stored domestically, including both on-farni and off- farm storage sites. Buffer stocks are created during periods of normal or bumper harvest to ensure food security during the periods when production is short of normal demand during bad agricultural years.
560. ‘NABARD’ is associated with the development of –
A. agricultural sector and rural areas
B. heavy Industries
C. banking sector
D. real estates
Answer: A.agricultural sector and rural areas
Explanation: National Bank for Agriculture and Rural Development (NABARD) has been accredited with “matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India”. It serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas.
561. Government takes ‘ways and means advances’ from –
A. RBI
B. IDBI
C. SBI
D. ICICI
Answer: A.RBI
Explanation: Ways and means advances (WMA) is a mechanism used by Reserve Bank of India (RBI) under its credit policy by which provides to the States banking with it to help them to tide over temporary mismatches in the cash flow of their receipts and payments. These are temporary advances (overdrafts) extended by RBI to the government. Section 17(5) of RBI Act allows RBI to make WMA both to the Central and State governments. It aims to bridge the interval between expenditure and receipts.
562. Kisan Credit Card scheme was introduced in –
A. 1991
B. 1996
C. 1998
D. 2000
Answer: C.1998
Explanation: Kisan Credit Card Scheme (KCC) aims at providing adequate and timely support from the banking system to t he farmers for their short-term credit needs for cultivation of crops. This mainly helps farmer for purchase of inputs etc., during the cropping season. Credit card scheme proposed to introduce flexibility to thesystem and improve cost efficiency. It was introduced in August 1998.
563. According to Malthusian theory of population –
A. Population increases in geometric ratio, food supply increases in arithmetic ratio
B. Population increases in arithmetic ratio, food supply increases in geometric ratio
C. Population increases in a harmonic mean, food supply increases in geometric ratio
D. Population increases in a harmonic ratio, food supply increases in a arithmetic ratio
Answer: A.Population increases in geometric ratio, food supply increases in arithmetic ratio
Explanation: In his 1798 work, An Essay on the Principle of Population, Malthus ermined the relationship between population growth and resources and developed the Malthusian theory of population growth. He proposed that human populations grow exponentially (i.e., doubling with each cycle) while food production grows at an arithmetic rate (i.e. by the repeated addition of a uniform increment in each uniform interval of time).
564. Whch of the following curve describes the variation of household expenditure on a particular good with respect to household income?
A. Demand curve
B. Engel curve
C. Great Cats by curve
D. Cost curve
Answer: B.Engel curve
Explanation: In microeconomics, an Engel curve describes how household expenditure on a particular good or service varies with household income. The curve is named after the German statistician Ernst Engel (1821-1896). who was the first to investigate this relationship between goods expenditure and income systematically in 1857.
565. Malthusian theory is associated with which of the following?
A. Poverty
B. Employment
C. Diseases
D. Population
Answer: D.Population
Explanation: The most well-known theory of population is the Malthusian theory. lt explains the relationship between the growth in food supply and in population. It states that population increases faster than food supply and if unchecked leads to vice or misery. Thomas Robert Malthus enunciated his views about population in his famous book, Essay on the Principle of Population as it affects the Future Improvement of Society, published in 1798.
566. Which of the following relations always holds true?
A. Income = Consumption + Investment
B. Income = Consumption + Saving
C. Saving = Investment
D. Income = Consumption + Saving + Investment
Answer: B.Income = Consumption + Saving
Explanation: Consumers do one of two things with their disposable income: They save it or they spend it. So Income = Consumption + Saving.
567. The Keynesian consumption function shows a relation between –
A. aggregate consumption and total population.
B. aggregate consumption and general price level.
C. aggregate consumption and aggregate income
D. aggregate consumption and interest rate
Answer: C.aggregate consumption and aggregate income
Explanation: According to Keynesian Theory of consumption, the current real disposable income is the most important determinant of consumption in the short run. It bases consumption on current income.
568. Full employment is a situation where –
A. there is no involuntary unemployment
B. there is involuntary unemployment
C. there is no voluntary unemployment
D. there is voluntary unemployment
Answer: B.there is involuntary unemployment
Explanation: Full employment refers to a situation in which every able bodied person who is willing to work at the prevailing rate of wages is, in fact, employed. It implies absence of involuntary unemployment which occurs when those who are willing to work at the going wage rate do not get work.
569. What is needed for creating demand?
A. Production
B. Price
C. Income
D. Import
Answer: A.Production
Explanation: Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. So for demand to originate, a product is required first.
570. Which of the statements is correct about India’s national income?
A. Percentage share of agriculture is higher than services
B. Percentage share of industry is higher than agriculture
C. Percentage share of services is higher than industry
D. Percentage share of services is higher than agriculture and industry put together
Answer: D.Percentage share of services is higher than agriculture and industry put together
Explanation: The services sector has the largest share in the GDP, accounting for 55% in 2007, up from 15% in 1950. Industry accounts for 28% of the GDP and employ 14% of the total workforce. Agriculture and allied sectors like forestry, logging and fishing ac-counted for 15.7% of the GDP in 2009-10.
571. Who among the following is not a classical economist?
A. David Ricardo
B. John Stuart Mill
C. Thomas Malthus
D. John Maynard Keynes
Answer: D.John Maynard Keynes
Explanation: Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill. John Maynard Keynes was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics and formed the economic policies of governments.
572. The difference in the value of visible exports and visible imports is called :
A. Balance Sheet of items
B. Balance of Payments
C. Balance of Trade
D. Balance of Account
Answer: C.Balance of Trade
Explanation: Balance of Trade refers to the difference between the value of a country’s visible imports and visible exports. Also known as the visible balance, it forms part of the balance of payments current account. When the value of visible imports totals more than the value of visible exports, it is known as an adverse balance of trade.
573. Which of the following best indicates economic growth of a Nation?
A. Agriculture income
B. Per capita income
C. Gross industrial production
D. Inflation
Answer: B.Per capita income
Explanation: Some economists believe that economic growth is meaningless if it is not distributed across different segments of population. So per capita income is considered by some as a better indicator of economic growth since it measures the average income earned per person in country in a specified year. It serves as an indicator of a country’s living standards and how wealth or income isdistributed across the population. However, to a vast majority Gross Domestic Product (GDP) is the most comprehensive measure of over-all economic performance.
574. Indirect taxes by nature are –
A. degressive
B. regressive
C. progressive
D. proportional
Answer: B.regressive
Explanation: An indirect tax is one in which the burden can be shifted to others. The tax payer is not the tax bearer. The impact and incidence of indirect taxes are on different persons. Since, most of the indirect taxes are not progressive in nature, individuals may not mind to pay them, In other words, indirect taxes are generally regressive in nature. Therefore, individuals would not be de-motivated to work and to save, which may increase investment.
575. Taxation is a tool of –
A. Monetary-policy
B. Fiscal policy
C. Price policy
D. Wage policy
Answer: B.Fiscal policy
Explanation: In economics, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure.
576. Which of the following is not viewed as national debt?
A. Life Insurance Policies
B. Long-term Government Bonds
C. National Savings Certificates
D. Provident Fund
Answer: A.Life Insurance Policies
Explanation: Government debt (also known as public debt, national debt) is the debt owed by a central government. Government debt is one method of financing government operations, but it is not the only method. Governments can also create money to monetize their debts, thereby removing the need to pay interest. But this practice simply reduces government interestcosts rather than truly canceling government debt. Governments usually borrow by issuing securities, government bonds and bills. Less creditworthy countries sometimes borrow directly from a supranational organization (e.g. the World Bank) or international financial institutions.
577. What is Value Added Tax (VAT)?
A. A simple, transparent, easy to pay tax imposed on consumers
B. A new initiative taken by the Government to increase the tax-burden of high income groups
C. A single tax that replaces State taxes like, surcharge, turnover tax, etc.
D. A new tax to be imposed on the producers of capital goods
Answer: C.A single tax that replaces State taxes like, surcharge, turnover tax, etc.
Explanation: A value added tax (VAT) is a form of consumption tax. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. VAT comes under the single tax system based primarily or exclusively on one tax, typically chosen for its special properties.
578. What is referred to as ‘Depository Services’?
A. A new scheme of fixed deposits
B. A method for regulating stock exchanges
C. An agency for safe-keeping of securities
D. An advisory service to investors
Answer: C.An agency for safe-keeping of securities
Explanation: It is a service offered by a securities depository under which the depository maintains book accounts recording the ownership of securities held on behalf of the depository’s participants, for eligible securities.
579. The terms ‘Bull’ and ‘Bear’ are associated with –
A. Banking
B. Foreign Trade
C. Stock Market
D. Internet Trade
Answer: C.Stock Market
Explanation: The terms ‘bull’ and ‘bear’ describe upward and downward trends respectively of the stock market. A bear market refers to a decline in prices, usually for .a period of a few months, in a single security or asset, group of securities or the securities market as a whole. A bull market is when prices are rising.
580. A currency whose exchange rate is influenced by the government is a/an –
A. Unmanaged Currency
B. Managed Currency
C. Scarce Currency
D. Surplus Currency
Answer: B.Managed Currency
Explanation: Managed currency refers to currency whose ex-change rate is not determined by the free-market forces of demand and supply but instead by the government’s intervention through the country’s central bank.
581. Which one of the following statements is correct?
A. Good money drives bad money out of circulation
B. Bad money drives good money out of circulation
C. Good and bad money cannot circulate together
D. Cannot say
Answer: B.Bad money drives good money out of circulation
Explanation: One of the most famous axioms in economics is “bad money drives out good.” This rule has generally been attributed to Sir Thomas Gresham (1519-1579), an English financier who advised King Edward VI and Queen Elizabeth I with regard to financial matters, and it is popularly known as Gresham’s Law. The key prerequisite is that there must be two forms of money or currency (with the same face value) in circulation simultaneously.
582. Devaluation of currency leads to –
A. expansion of export trade
B. contraction of import trade
C. expansion of import substitution
D. All of the above
Answer: D.All of the above
Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. There are two implications for currency devaluation. First, de-valuation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country’s trade deficit. Import substitution means promotion of export to replace imports. It is also fallout of devaluation.
583. As a result of higher rate of inflation in India, the U.S. dollar will –
A. Depreciate
B. Constant
C. Negligible
D. Appreciate
Answer: D.Appreciate
Explanation: A relatively higher rate of inflation causing rise in prices of the goods in India as compared to those in the USA will make US goods relatively cheaper and the Indian goods expensive. This will lead to rise in imports of US goods into India and the reduction in Indian exports to the USA that will, in turn, cause the foreign exchange rate of dollar in terms of rupees to rise and the price of Indian rupee in terms of dollar will fall. Thus, as a result of higher rate of inflation in India, the US dollar -will appreciate and the Indian rupee will depreciate.
584. Which type of foreign investment is considered as unsafe?
A. Foreign Direct Investment (FDI)
B. Portfolio Investment
C. NRI deposits
D. External commercial borrowing
Answer: B.Portfolio Investment
Explanation: Portfolio Investments are considered unsafe. These are investments in the form of a group (portfolio) of assets, including transactions in equity securities, such as common stock, and debt securities, such asbanknotes, bonds, and debentures. Portfolio investments are passive investments, as they do not entail active management or control of the issuing company. Rather, the purpose of the investment is solely financial gain, in contrast to foreign direct investment (FDI), which allows an investor to exercise a certain degree of managerial control over a company.
585. ‘Mixed economy’ refers to –
A. the co-existence of heavy, small scale and cottage industries
B. the promotion of agriculture as well as cottage industries
C. the co-existence of rich as well as poor
D. the co-existence of public as well as private sector
Answer: D.the co-existence of public as well as private sector
Explanation: Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies.
586. Golden Handshake Scheme is associated with –
A. Inviting foreign companies
B. Private investment in public enterprises
C. Establishing joint enterprises
D. Voluntary retirement
Answer: D.Voluntary retirement
Explanation: A golden handshake is a clause in an executive employment contract that provides the executive with a significant severance package in the case that the executive loses his or her job through firing, restructuring, or even scheduled retirement. This can be in the form of cash, equity, and other benefits, and is often accompanied by an accelerated vesting of stock options.
587. Stagflation is a situation of –
A. stagnation and deflation
B. stagnation and recession
C. stagnation and inflation
D. stagnation and recovery
Answer: C.stagnation and inflation
Explanation: Stagflation is a situation of stagnation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Stagflation occurs when the economy isn’t growing but prices are, which is not a good situation for a country to be in
588. Devaluation makes import –
A. Competitive
B. Inelastic
C. Cheaper
D. Dearer
Answer: D.Dearer
Explanation: Devaluation makes import expensive and discourages it, while the export of a country that devalues becomes cheaper and thereby induces trade partners to import more goods from her. Nations that produce industrial goods on a large scale stand to benefit from devaluation.
589. Gresham’s law is related to –
A. Consumption and demand
B. Supply and demand
C. Circulation of money
D. Deficit financing
Answer: C.Circulation of money
Explanation: Gresham’s law is an observation in economics that “bad money drives out good.” More exactly, if coins containing metal of different value have the same value as legal tender, the coins composed of the cheaper metal will be used for payment, while those made of more expensive metal will be hoarded or exported and thus tend to disappear from circulation. Sir Thomas Gresham, financial agent of Queen Elizabeth I, was not the first to recognize this monetary principle, but his elucidation of it in 1558 prompted the economist H.D. Macleod to suggest the term Gresham’s law in the 19th century.
590. ‘PROTECTION’ means –
A. Restrictions imposed on import trade
B. Protection to home industries
C. No free exchange of goods and services between two countries
D. All of the above
Answer: D.All of the above
Explanation: Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow (according to proponents) “fair competition” between imports and goods and services produced domestically. It refers to policies or doctrines which protect businesses and workers within a country by restricting or regulating trade with foreign nations.
591. Which one of the following does not deal with export promotion?
A. Trade Development Authority
B. Mineral and Metal Trading Corporation
C. Cooperative Marketing Societies
D. State Trading Corporation of India
Answer: C.Cooperative Marketing Societies
Explanation: Cooperative marketing is just an extension and application of the philosophy of cooperation in the area of agricultural marketing. It is a process of marketing through a cooperative society, formed for the producers, by the producers. It seeks to eliminate the middlemen between the producer and the consumer, thus getting the maximum price for their produce.
592. Commercialization of agriculture implies –
A. cultivation of Limbers
B. plantation
C. production of crops for sale
D. production of crops like wheat or rice
Answer: C.production of crops for sale
Explanation: Commercial agriculture is large- scale production of crops for sale, intended for widespread distribution to wholesalers or retail outlets. In commercial farming crops such as wheat, maize, tea, coffee, sugarcane, cashew, rubber, banana, and cotton are harvested and sold into world markets.
593. Agricultural income tax is a source of revenue to –
A. Central Government
B. State Government
C. Local Administration
D. Centre and State Governments
Answer: B.State Government
Explanation: The Constitution of India allocates the taxation of agricultural income to states. Land revenue is a major source of revenue for states in India
594. Agricultural Technology is hard to spread because :
A. it has to be adopted to local conditions.
B. rural people are not receptive
C. farmers are afraid to experiment on land for fear of failure.
D. all of the above
Answer: D.all of the above
Explanation: There are many benefits of using technology in agriculture system, but there are also negative aspects. Technology transfer ismost difficult in agriculture because of the differences in natural conditions, such as weather, geographical features, plant ecology, and irrigation, which overlap social and institutional restrictions. When an agricultural technology is stable as a result of the limitations imposed by the existing national conditions and social system, the limits of production are empirically foreseeable.
595. Structural unemployment arises due to :
A. deflationary conditions
B. heavy industry bias
C. shortage of raw materials
D. inadequate productive capacity
Answer: D.inadequate productive capacity
Explanation: Structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Structural unemployment is a result of the dynamics of the labor market, such as agricultural workers being displaced by mechanized agriculture. unskilled laborers displaced by both mechanization and automation, or industries with declining employment. Many of these displaced workers are “left behind” due to costs of training and moving (e.g., the cost of selling one’s house in a depressed local economy), inefficiencies in the labor markets, such as discrimination or monopoly power, or because they are unsuited for work in growing sectors such as health care or high technology.
596. The demand of a commodity is a direct demand but the demand of a factor of production is called a –
A. Crossed demand
B. Joint demand
C. Derived demand
D. Independent demand
Answer: C.Derived demand
Explanation: In the words of McConnell, the demand for factors of production is a derived demand that is derived from the finished goods and services which resources help to produce. While the demand for good is direct demand, demand for factors is derived demand. It is based on the productivity of the factors.
597. Depreciation is loss in value of .
A. Final goods
B. Machinery
C. Capital stock
D. Stock of inventory
Answer: B.Machinery
Explanation: The term depreciation represents loss or diminution in the value of an asset consequent upon wear and tear, obsolescence, effluxion of time or permanent fall in market value. Physical deterioration of an asset is caused from movement, strain, friction, erosion etc. For instance, building, machineries, furniture, vehicles, plant etc. The wear and tear is general but primary cause of depreciation.
598. When income increase, consumption also increases :
A. in a lower proportion
B. in a higher proportion
C. in the same proportion
D. None of the options
Answer: A.in a lower proportion
Explanation: According to the Keynesian Consumption theory, “men are disposed, as a rule and on average, to increase their consumption as their income increases, but not by as much as the increase in their income.” Another feature of consumer behavior is that when income increases, people do not spend their entire incremental income on consumption. They save a part of it for their financial security during the period of =employment, illness, etc. In simple words, the marginal propensity to consume decreases, i.e., house-holds spend a decreasing proportion of marginal income on consumption.
599. The total utility from 9 units of commodity x is 20 and from 10 units is 15. Calculate the marginal utility from 10th unit.
A. 0.5
B. 5
C. -0.5
D. -5
Answer: D.-5
Explanation: Marginal Utility = Change in Total Utility / Change in number of Units consumed. The first component of the formula is to calculate the change in total utility. The second component of the marginal utility formula is the change in the number of units that have been consumed.
600. A camera in the hands of a professional photographer is a good.
A. Free
B. Intermediary
C. Consumer
D. Capital
Answer: B.Intermediary
Explanation: Good is any tangible item, whether produced or found naturally and which is available for exchange. Free good is a good that is so abundant is supply that it has no opportunity cost, for example, air. Intermediary good is a firm’s product that is used as an input into the production process of either the same firm or another,
601. The economist who believed that unemployment is impossible and that market mechanism has a built in regulatory system to meet any ups and downs –
A. J.M.Keynes
B. Ohlin
C. J. B. Say
D. Galbraith
Answer: C.J. B. Say
Explanation: The classical economists’ belief in full employment as a normal condition of a free market economy is based on Say’s Law of Markets. It was on the basis of this law that the classical economists thought that general over- production and hence general unemployment were impossible. The law simply states “supply creates its own demand.”
602. Liquidity Preference means –
A. holding assets in the form of bonds and shares
B. holding assets in the form of cash
C. creation of immovable property
D. assets in the form of jewellery
Answer: B.holding assets in the form of cash
Explanation: Liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936). It is the desire to hold money rather than other assets, in Keynesian theory based on motives of transactions, precaution, and speculation.
603. Aggregate net value of the output in one year is the –
A. National income at factor cost
B. Gross Domestic Product at market prices
C. Net. National Product at market prices
D. Gross National Product at market prices
Answer: C.Net. National Product at market prices
Explanation: Net national product at market price is the market value of the output of final goods and services produced at current price in one year of a country. If we subtract the depreciation charges from the gross national product, we get net national product at market price, Net national product at market price=Gross national product at market price- Depreciation.
604. The sum total of incomes received for the services of labour, land or capital in a country is called
A. Gross domestic product
B. National income
C. Gross domestic income
D. Gross national income
Answer: C.Gross domestic income
Explanation: The Gross Domestic Income (GDI) is the total in-come received by all sectors of an economy within a nation. It includes the sum of all wages, profits, and taxes, minus subsidies. Since all income is derived from production (including the production of services), the gross domestic income of a count should exactly equal its gross domestic product (GDP).
605. Which of the following results by dividing national income by size of population?
A. Per capita income
B. Subsistence level
C. Subsistence expenditure-
D. Per capita production
Answer: A.Per capita income
Explanation: Per capita income or average income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.
606. The first computer made available for commercial use was –
A. MANIAC
B. ENIAC
C. UNIVAC
D. EDSAC
Answer: C.UNIVAC
Explanation: The UNIVAC computer was the first commercially available computer invented by John Presper Eckert and John Mauchly. As well as being the first American commercial computer, the UNIVAC I was the first American computer designed at the outset for business and administrative use (i.e., for the fast execution of large numbers of relatively simple arithmetic and data transport operations, as opposed to the complex numerical calculations required by scientific computers). As such the UNIVAC competed directly against punch-card machines (mainly made by IBM).
607. Malthusian theory of population explored the relationship between –
A. food supply and technology
B. food supply and population growth
C. population growth and development
D. optimum growth and resources
Answer: B.food supply and population growth
Explanation: According to Malthusian theory of population, population increases in a geometrical ratio, whereas food supply increases in an arithmetic ratio. This disharmony would lead to widespread poverty and starvation, which would only be checked by natural occurrences such as disease, high infant mortality, famine, war or moral restraint.
608. In public budgets, zero-base budgeting was first introduced in –
A. USA
B. UK
C. France
D. Sweden
Answer: A.USA
Explanation: Zero-based budgeting is an approach to planning and decision-making which reverses the working process of traditional budgeting. This technique of budgeting was developed by Peter Phyrr in the United States and was first implemented at Texas Instruments in the 1960s. In 1973. President Jimmy Carter contracted with Phyrr to implement a ZBB system for the State of Georgia executive budget process.
609. The sale proceeds of Government Bonds come under the budget head of –
A. Revenue Receipts
B. Current Expenditure
C. Capital Outlay
D. Capital Receipts
Answer: D.Capital Receipts
Explanation: Capital receipts are the funds received into the businesses that are not part of the operating activities of the establishment. Capital receipts primarily include external assistance, market loans, small savings, principal investment in bonds, and Government provident funds. A capital receipt is a receipt which is derived from sale or purchase of capital assets like plant and machinery, furniture, investment (long term) etc., which shall not be occurring all the time.
610. The incidence of sales tax falls on –
A. Consumers
B. Wholesale dealers
C. Retail dealers
D. Producers
Answer: A.Consumers
Explanation: In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to “fall” upon the group that ultimately bears the burden of, or ultimately has to pay the tax. The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply.
611. Government securities are considered liquid because they are –
A. backed by the Government treasury
B. convertible into other types of saving deposits
C. quickly and easily marketable
D. stable in value
Answer: C.quickly and easily marketable
Explanation: Liquid Asset is an asset that can be converted into cash quickly and with minimal impact to the price received. In a liquid market, assets can be easily converted without considerable price fluctuation, and with a minimal decline in worth. A liquid market is a type of market that possesses a high level of stability, and low spreads between asking and selling prices. Securities issued by the Government are considered risk-free, and as such, their yields are often used as the benchmarks for fixed- income securities with the same maturities. The government securities market constitutes a key segment of the financial market, heavily traded offering virtually credit risk-free highly liquid financial instruments, which market participants are more willing to transact and take positions.
612. Deflation is a situation in which –
A. The value of money is falling.
B. The price of goods is increasing.
C. The value of money is increasing.
D. The price level is stagnant.
Answer: C.The value of money is increasing.
Explanation: Deflation is a situation where the prices of goods and commodities in a country go down. i.e., there is negative inflation. This is caused due to reduced supply of money/credit. Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy.
613. Stagflation refers to a situation which is characterized by –
A. stagnant employment and deflation
B. deflation and rising unemployment
C. inflation and rising employment.
D. inflation and rising unemployment
Answer: D.inflation and rising unemployment
Explanation: Stagflation describes a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment, and vice versa.
614. How will a reduction in ‘Bank Rate’ affect the availability of credit?
A. Credit will increase
B. Credit will not increase
C. Credit will decrease
D. None of these
Answer: A.Credit will increase
Explanation: Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances to a commercial bank. Whenever the banks have any shortage of funds they can borrow it from the central bank. Repo (Repurchase) rate is the rate at which the central bank lends short-term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from the central bank becomes more expensive. It is more applicable when there is a liquidity crunch in the market.
615. Inflation occurs when aggregate supply is –
A. more than aggregate demand
B. less than aggregate demand
C. equal to aggregate demand
D. None of these
Answer: B.less than aggregate demand
Explanation: If the supply is less than the demand, the price will increase. Inflation, the persistent increase in the average price level, can be caused by an increase in aggregate demand or a decrease in aggregate supply. This suggests two basics sources, causes, or types of inflation—demand-pull inflation and costpush inflation. In general, prices increase as a result of market shortages, which occur when quantity demanded exceeds quantity supplied. Market shortages can be created by either increases in demand or decreases in supply. Translating thisto the macro-economy suggests that inflation occurs when aggregate demand exceeds aggregate supply.
616. Multinational Corporation is also called –
A. Trading Corporation
B. International Corporation
C. Finance Corporation
D. Trans-national Corporation
Answer: D.Trans-national Corporation
Explanation: A Multinational corporation, also known as Trans-national Corporation or International corporation, is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries. They play an important role in globalization.
617. Freeing the economy from all unnecessary controls and regulations is referred to as –
A. Freedom
B. Privatisation
C. Liberalisation
D. Globalisation
Answer: C.Liberalisation
Explanation: Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities; the doctrine is associated with classical liberalism. The arguments for economic liberalization include greater efficiency and effectiveness that would translate to a “bigger pie” for everybody. Thus, liberalization in short refers to “the removal of controls”, to encourage economic development.
618. A high Statutory Liquidity Ratio (SLR)
A. restricts lending
B. increases supply of cash
C. provides funds to the state
D. increases the strength of the banks
Answer: A.restricts lending
Explanation: Statutory Liquidity Ratio refers to the amount that the commercial banks require tomaintain in the form gold or government approved securities before providing credit to the customers. An increase in SLR practically restricts lending, thus controlling credit in the country. In India, the RBI can increase the Statutory Liquidity Ratio to contain inflation, suck liquidity in the market, to tighten the measure to safeguard the customers’ money.
619. Corporation tax is a tax imposed on –
A. the net incomes of the companies
B. the corporate properties
C. the utilities provided by the corporation
D. tax imposed by the corporation on individual properties
Answer: A.the net incomes of the companies
Explanation: Corporate Tax is a levy placed on the profit of a firm, with different rates used for different levels of profits. Corporate taxes are taxes against profits earned by businesses during a given taxable period. Most countries tax all corporations doing business in the country on income from that country.
620. Which one of the following taxes is collected and utilized by the State Governments?
A. Personal income tax
B. Corporation tax
C. Land revenue
D. Custom duties
Answer: C.Land revenue
Explanation: The Constitution allocates the taxation of agricultural income to states. Lan revenue is a major source of revenue for states in India. For purpose of revenue management, a State is divided into various districts, each in the charge of a Deputy Commissioner, also known as Collector indicating his responsibility for the realization of all Government revenues.
621. Which amidst the following is not a credit rating agency?
A. CRISIL
B. CARE
C. ICRA
D. IFCI
Answer: D.IFCI
Explanation: A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In some cases, the servicers of the underlying debt are also given ratings. CRISIL is the most influential and largest credit rating agency among all the credit rating agencies in India. ICRA Limited (ICRA) is one of lndia’s premier financial information services company. It offers credit rating information and professional financial consulting services across India, as well as in the Asia-Pacific region through its subsidiaries.
622. The basis of determining dearness allowance to employees in India is –
A. National Income
B. Consumer Price Index
C. Standard of Living
D. Inflation Rate
Answer: B.Consumer Price Index
Explanation: The Consumer Price Index Numbers for Industrial Workers CPI (1W) is utilized for fixation and revision of wages and determination of variable Dearness Allowances payable to workers in organized sectors of the economy. Despite the coverage being limited to Industrial Workers, presently, the CPI (IW) is also utilized as an indicator for measuring inflationary trend in the country and for policy formulations.
623. An indifference curve measures the same level of –
A. Output from two factors
B. Satisfaction from two commodities
C. Satisfaction from Income and Capital
D. Satisfaction from expenditure and savings
Answer: B.Satisfaction from two commodities
Explanation: An indifference curve is a locus of combinations of goods which derive the same level of satisfaction. so that the consumer is indifferent to any of the combination he consumes. If a consumer equally prefers two product bundles, then the consumer is indifferent between the two bundles. The consumer gets the same level of satisfaction (utility) from either bundle. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer
624. The Ability Principle of Taxation is given by –
A. Adam Smith
B. Edgeworth
C. Joan Robinson
D. J.S.Mill
Answer: A.Adam Smith
Explanation: The ‘Ability-to-Pay’ principle of Taxation is one of the canons of taxation proposed by Adam Smith in his ‘Wealth of Nations.’ It is a progressive taxation principle that maintains that taxes should be levied according a taxpayer’s ability to pay. It is concerned with the equitable distribution of taxes according to the stated taxable capacity or ability to pay of an individual or group. The emphasis in this approach is put on redistribution of income.
625. ‘Galloping Inflation’ is also known as –
A. Walking Inflation
B. Running Inflation
C. Hyper Inflation
D. Creeping Inflation
Answer: C.Hyper Inflation
Explanation: When prices rise between 20% to 100% per annum or even more, it is called galloping or hyperinflation. Such a situation brings a total collapse of the monetary system because of the continuous fall in the purchasing power of money. Galloping inflation has adverse effect on middle and low income groups in the society.
626. Which of the following is not an investment expenditure in goods and services?
A. Expansion of the main plant of a company
B. Purchase of a house
C. Purchase of machinery
D. An increase in business in ventories
Answer: B.Purchase of a house
Explanation: Investment expenditure refers to the expenditure incurred either by an Individual or a firm or the government for the creation of new capital assets like machinery, building etc. Business inventories are goods that firms produce in one time period with the intent to sell later and they are counted as part of businessinvestment. The purchase of house cannot be considered as investment expenditure as it may be for personal use.
627. Which one of following represents the Savings of the Private Corporate Sector?
A. Dividends paid to shareholders
B. Total profits of a company
C. Undistributed profits
D. Excess of income over expenditure
Answer: C.Undistributed profits
Explanation: For private corporate sector, retained profits adjusted for non operating surplus/deficit is considered as its Net Saving. Retained profits are those which are ploughed back into business after making commitments to depreciation provision for various fixed assets, debts, government and to shareholders.
628. Net National Product in National Income Accounting refers to –
A. Gross Domestic Product—Depreciation
B. Gross Domestic Product + Subsidies
C. Gross National Product—Depreciation
D. Gross National Product + Subsidies
Answer: C.Gross National Product—Depreciation
Explanation: Net national product at market price is the market value of the output of final goods and services produced at current price in one year of a country. If we subtract the depreciation charges from the gross national product, we get net national product at market price.
629. A very high rise in National Income at current market prices and a low rise at constant prices reveals –
A. the high rate of growth in the economy at the current period
B. the increased production in the current period
C. the improper growth of the economy
D. the high rate of inflation prevailing in the economy
Answer: C.the improper growth of the economy
Explanation: When national output is multiplied by present ruling price, we obtain national income at current prices. On the otherhand if the national output is multiplied by the base price if called national income at constant price. But what is seen is that prices of commodities go on changing. When the current outputs are multiplied by the current prices it will give rise to monetary national income. So a very rise in National Income at current or constant prices does not indicate increase in product or output, but is rather due to the rise in price level.
630. In calculating National Income which of the following is included?
A. Services of housewives
B. Pensions
C. Income of smugglers
D. Income of watchmen
Answer: D.Income of watchmen
Explanation: National Income is defined as the sum total of all the goods and services produced in a country, in a particular period of time. Normally this period consists of one year duration, as a year is neither too short nor long a period. National product is usually used synonymous with National income.
631. The term ‘Green GNP’ emphasises –
A. rapid growth of GNP
B. increase in per capita income
C. economic development
D. sustainable development
Answer: D.sustainable development
Explanation: The gross national product (GNP) measures the welfare of a nation’s economy through the aggregate of products and services produced in that nation, Although GNP is a proficient measurement of the magnitude of the economy, many economists, environmentalists and citizens have been arguing the validity of the GNP in respect to measuring welfare. They are calling for a green national product that would indicate if activities benefit or harm the economy and well-being.
632. The Great Depression occurred during
A. 1914-18
B. 1929-34
C. 1939-45
D. 1922-26
Answer: B.1929-34
Explanation: Depression is referred to a period of time during which economic activity is so low for such a long period of time that large numbers of people are permanently unemployed. The great Depression originated in the United States, after the fall in stock prices that began around September 4, 1929 and became world-wide news with the stock market crash of October 29, 1929 (known as Black Tuesday).
633. The worldwide Great Depression took place in –
A. 1936
B. 1929
C. 1928
D. 1930
Answer: B.1929
Explanation: Depression is referred to a period of time during which economic activity is so low for such a long period of time that large numbers of people are permanently unemployed. The great Depression originated in the United States, after the fall in stock prices that began around September 4, 1929 and became world-wide news with the stock market crash of October 29, 1929 (known as Black Tuesday).
634. Paraellel economy emerges due to –
A. Tax Avoidance
B. Tax Evasion
C. Tax Compliance
D. Tax Estimation
Answer: B.Tax Evasion
Explanation: Parallel economy (black economy) indicates the functioning of an unsanctioned sector in the economy whose objectives run parallel with the social objectives. Major contributory factor to such an economy is black money which is any money that a person or an organization acquires as by a means that involves tax evasion. It is that income from illegal activities that is not reported to the government for tax purposes.
635. Under-writting refers to –
A. under estimation
B. under selling
C. winding up the business
D. an act of insuring risk
Answer: D.an act of insuring risk
Explanation: The word “underwriter” is said to have come from the practice of having each risk- taker write his or her name under the total amount of risk that he or she was willing to accept at a specified premium. In a way, this is still true today, as new issues are usually brought to market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific allotment.
636. Basic infrastructure facilities in Economics are known as :
A. Human capital
B. Physical capital
C. Social overheads capital
D. Working capital
Answer: C.Social overheads capital
Explanation: Social overheads capital is the capital spent on social infrastructure, such as schools, universities, hospitals, libraries. They are capital goods of types which are available to anybody, hence social; and are not tightly linked to any particular part of production, hence overhead. Because of their broad availability they often have to be provided by the government. Examples of social overhead capital include roads, schools, hospitals, and public parks.
637. Which one of the following is a direct tax?
A. Sales Tax
B. Excise Tax
C. Wealth Tax
D. Entertainment Tax
Answer: C.Wealth Tax
Explanation: Direct tax is a tax levied directly on the person or company that has to pay it. These taxes are paid directly to the tax authority.
638. Custom duty is an instrument of –
A. Monetary Policy
B. Foreign Trade Policy
C. Industrial Policy
D. Fiscal Policy
Answer: B.Foreign Trade Policy
Explanation: Custom duty is a tax on imports imposed on an ad valorem basis, i.e, fixed in the form of a percentage on the value of the commodity imported.
639. Whe a large number of investors in a country transfer investments elsewhere because of disturbed economic conditions, it is called –
A. Transfer of Capital
B. Escape of Capital
C. Outflow of Capital
D. Flight of Capital
Answer: D.Flight of Capital
Explanation: Flight of capital refers to the movement of money from one investment to another in search of greater stability or increased returns. Sometimes, it specifically refers to the movement of money from investments in one country to another in order to avoid country- specific risk (such as high inflation or political turmoil) or in search of higher returns. Capital flight is seen most commonly in massive foreign capital outflows from a specific country, often at times of currency instability.
640. ‘Golden Handshake Scheme’ is associated with –
A. inviting foreign companies
B. private investment in public enterprises
C. establishing joint enterprises
D. voluntary retirement
Answer: D.voluntary retirement
Explanation: The voluntary retirement scheme (VRS) is the most humane technique to provide overall reduction in the existing strength of the employees. It is a technique used by companiesfor trimming the workforce employed in the industrial unit. It is also known as ‘Golden Handshake’ as it is the golden route to retrenchment.
641. The major objective of monetary policy is to –
A. increase government’s tax revenue
B. revamp the Public Distribution System
C. Promote economic growth with price stability
D. weed out corruption in the economy
Answer: C.Promote economic growth with price stability
Explanation: The main objective of monetary policy is to control the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general economic growth. Further goals of a monetary policy are usually to contribute to lower unemployment, and to maintain predictable exchange rates with other currencies.
642. The rate of tax increase as the amount of the Lax base Increases is called-
A. Proportional tax
B. Progressive tax
C. Regressive tax
D. Degressive tax
Answer: B.Progressive tax
Explanation: A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term “progressive” refers to the way the tax rate progresses from low to high, with the result that a taxpayer’s average tax rate is less than the person’s marginal tax rate
643. During periods of inflation, tax rates should –
A. increase
B. decrease
C. remain constant
D. fluctuate
Answer: A.increase
Explanation: In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In other words, inflation means continuously decrease in the value of money due to excess supply ofmoney in the market. There are two types of inflation demand pull and cost push inflation. Causes behind inflation are reduced taxes, rate de-crease in saving, increase in supply of goods, increase in the number of producers in the market. To control inflation there should be an increase in the tax rate and increase in the interest rate.
644. Cheap Money means –
A. Low Rate of Interest
B. Low level of Savings
C. Low level Income
D. Excess of Black Money
Answer: A.Low Rate of Interest
Explanation: Cheap Money’ is a loan or credit with a low interest rate, or the setting of low interest rates by a central bank like the Federal Reserve. Cheap money is good for borrowers, but bad for investors, who will see the same low interest rates on investments like savings accounts, money market funds, CDs and bonds.
645. Which among (he following is not the outcome of decrease in prime lending rate?
A. to raise the bank loan
B. decline in saving rate
C. decline in productivity
D. increased demand of consumer products
Answer: C.decline in productivity
Explanation: Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility. When these rates are high, demand decreases and output falls to meet the new lower demand. Less output requires fewer worker, driving unemployment higher.
646. The major aim of devaluation is to –
A. encourage imports
B. encourage exports
C. encourage both exports and imports
D. discourage both exports and imports
Answer: B.encourage exports
Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or othermonetary units with which that currency can be exchanged. ‘Devaluation’ means official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. There are two implications for a currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country’s trade deficit.
647. Buffer stock operations are conducted by –
A. Warehousing Corporation of India
B. State Trading Corporation of India
C. Food Corporation of India
D. Ministry of Agriculture
Answer: C.Food Corporation of India
Explanation: 0
648. Coal mines were Nationalized in the year :
A. 1970
B. 1971
C. 1972
D. 1976
Answer: C.1972
Explanation: The Coal Conservation and Development Act, 1974 provides for imposition of excise duty on coal despatches for meeting activities like conservation of coal, development of coal mines execution of stowing and other operations for the safety in coal mines and research work connected with conservation and utilisation of coal, and assistance in mining operation. The Coking Coal (Nationalisation) Act was enacted in 1972.
649. Open market operations of RBI refer to buying and selling of –
A. Commercial bills
B. Foreign exchange
C. Gold
D. Government bonds
Answer: D.Government bonds
Explanation: OMOs are the market operations conducted by the Reserve Bank of India by wayof sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the RBI feels there is excess liquidity in the market. it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market.
650. A siuation where we have people whose level of income is not sufficient to meet the minimum consumption expenditure is considered as –
A. Absolute Poverty
B. Relative Poverty
C. Urban Poverty
D. Rural Poverty
Answer: A.Absolute Poverty
Explanation: Absolute poverty is defined as a situation in which the individual’s basic needs are not covered, in other words, there is a lack of basic goods and services (normally related to food, housing and clothes). This concept of poverty is strongly linked to destitution which is an inability to meet the minimum consumption expenditure. It is a level of poverty as defined in terms of the minimal requirements necessary to afford minimal standards of food, clothing, health care and shelter. According to a UN declaration that resulted from the World Summit on Social Development in Copenhagen in 1995, absolute poverty is “a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.”
651. Of the following land uses, which is restricted to Special Economic Zones ?
A. Educational Institutions
B. Free trade Centres
C. Marketing Centres
D. Information Technology Companies
Answer: B.Free trade Centres
Explanation: The category Special economic zone includes free trade zones (FTZ), export processing Zones (EPZ), free Zones (FZ), industrial parks or industrial estates (IE), free ports, free economic zones, and urban enterprisezones. The goal of a SEZ structure is to increase foreign direct investment by foreign investors.
652. As er the TRIPS Agreement-1994, a good originating from a region with specific character/ quality/reputation is covered/to be protected under the IPR as –
A. Patent
B. Trademark
C. Trade secret
D. GI (Geographical Indicator)
Answer: D.GI (Geographical Indicator)
Explanation: Geographical Indication (GI) means the name of a region or a locality, a specific place or, in exceptional cases, a country, used to describe a product originating in that region, locality, specific place or country, which possesses a specific quality, reputation or other characteristics attributable to that geographical origin, and the production and/or processing and/or preparation of which take place in the defined geographical area.
653. At present, India is following –
A. Fixed exchange rate
B. Floating exchange rate
C. Pegged up exchange rate
D. Pegged down exchange rate
Answer: B.Floating exchange rate
Explanation: Exchange rate can be defined as the value of one currency in terms of another. India follows floating exchange rate system for the determination of the exchange rate. Floating exchange rate system can be defined as a system where the exchange rate between currencies are not fixed but they keep fluctuating, as they are determined by the demand and supply for the domestic currency in the international market. India has been operating on a managed floating exchange rate regime from March 1993, marking the start of an era of a market determined exchange rate regime of the rupee with provision for timely intervention by the central bank
654. Which of the following taxes are levied and collected by the centre but their net proceeds are wholly transferred to states?
A. Expenditure Tax and Gift Tax
B. Additional Duties of Excise in lieu of Sales Tax
C. Stamps and Registration
D. Taxes on Advertisement
Answer: D.Taxes on Advertisement
Explanation: Apart from taxes levied and collected by the States, the Constitution has provided for the revenues for certain taxes on the Union List to be allotted, partly or wholly to the States. There are taxes which are levied and collected by the Union, but the entire proceeds of which are assigned to the states, in proportion determined by the Parliament. These taxes include: Succession and Estate duty; Terminal Taxes on goods and passengers; Taxes on railway freight and fares; Taxes on transactions in stock exchanges and future markets; and Taxes on sale and purchase of newspapers and advertisements therein.
655. With which form of economy is the term ‘Laissez-faire’ associated?
A. Capitalist economy
B. Socialist economy
C. Mixed economy
D. Command economy
Answer: A.Capitalist economy
Explanation: In economics, laissez-faire means allowing industry to be free of state intervention, especially restrictions in the form of tariffs and government monopolies. The growth of industry in England in the early 19th century and American industrial growth in the late 19th century both occurred in a laissezfaire capitalist environment.
656. National Social Assistance Programme is aimed at providing –
A. financial support to Scheduled Castes and Scheduled Tribes
B. old age pension to very poor
C. insurance for the poor
D. All of the above
Answer: B.old age pension to very poor
Explanation: The National Social Assistance Scheme (NSAS) or National Social Assistance Programme (NSAP) is a flagship welfare programme of the Government of India initiatedon 15 August. 1995. It provides a pension for the elderly who live below the poverty line. Article 41 of the Indian Constitution directs the State to provide public assistance to its citizens in case of unemployment, old age, sickness and disablement and in other cases of undeserved want within the limit of its economic capacity and development.
657. Which of the following is a part of tertiary sector?
A. Power and transportation
B. Animal Husbandry
C. Cotton manufacturing
D. Cultivation of crops
Answer: A.Power and transportation
Explanation: The service sector, also called the tertiary sector. is one of the three parts of the economy in the Threesector hypothesis. It involves the provision of services to business as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to consumers as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment.
658. If the average total cost is Rs.54, total fixed cost is Rs.45000 and quantity produced is 2500 units, find the average variable costs (in Rs.) of the firm –
A. 24
B. 18
C. 36
D. 60
Answer: C.36
Explanation: The standard method of calculating average variable cost is to divide total variable cost by the quantity, illustrated by this equation :
Average Variable Cost = Total Variable Cost/ Quantity of Output
An alternative specification for average variable cost is found by subtracting average fixed cost from average total cost
Average Variable Cost = Average Total Cost – Average Fixed CostAccording to question,
Average Total Cost = 45000/2500 = 18 So Average Variable Cost = 54 – 18= 36
659. If the fixed costs of a factory producing candles is Rs 20,000, selling price is Rs 30 per dozen candles and variable cost is Rs 1.5 per candle, what is the break-even quantity?
A. 20000
B. 10000
C. 15000
D. 12000
Answer: A.20000
Explanation: Breakeven quantity is the number of incremental units that the firm needs to sell to cover the cost of a marketing program or other type of investment. It is given by the formula: BEQ = FC / (P-VC)
Where BEQ = Break-even quantity FC = Total fixed costs
P = Average price per unit, and VC = Variable costs per unit,
According to the question, Price per unit = 30/12 = Rs. 2.5
So 20000/ (2.5-1.5) = 20000/1= Rs. 20,000
660. Equilibrium price in the market is determined by the –
A. equality between marginal cost and average cost.
B. equality between total cost and total revenue.
C. equality between average cost and average revenue.
D. equality between marginal cost and marginal revenue.
Answer: D.equality between marginal cost and marginal revenue.
Explanation: The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect. Both under perfect competition and monopolisticcompetition, the firm is in equilibrium at the point of equality of marginal cost and marginal revenue. (MC = MR).
661. Internal economies –
A. arise when there is expansion in an industry.
B. arise in an economy as it makes progress.
C. accrue to a firm when it expands its output.
D. arise when there is expansion in internal trade.
Answer: A.arise when there is expansion in an industry.
Explanation: Internal economies are those economies in production—those reductions in production costs—which accrue to the firm itself when it expands its output or enlarges its scale of production. The internal economies arise within a firm as a result of its own expansion independent of the size and expansion of the industry as a whole.
662. One of the features of a free market economy is –
A. active state intervention
B. public ownership of factors of production
C. rationing and price control
D. consumer’s sovereignty
Answer: D.consumer’s sovereignty
Explanation: Consumer Sovereignty is one of the features of a free market economy. It refers to the assertion consumer preferences determine the production of goods and services. In a free market system, market performance is in fact responsive to the specific wants of the consumers within the system.
663. Which of the following costs is related to marginal cost?
A. Variable Cost
B. Implicit Cost
C. Prime Cost
D. Fixed Cost
Answer: A.Variable Cost
Explanation: In economics, marginal cost is the change in the total cost that arises when the quantity produced is Incremented by one unit. That is, it is the cost of producing one more unit of a good. Marginal cost is independent of the fixed cost and depends on the changes in thevariable factors. Since fixed costs do not change with output, there are no marginal fixed costs when output is increased in the short run. It is only the variable costs that vary with output in the short run.
664. Which one of the following is not a dimension of human development, index?
A. Life expectancy
B. Knowledge
C. Social status
D. Standard of living
Answer: C.Social status
Explanation: Social Status is not a dimension of Human Development Index
665. Transfer payments mean –
A. Old age pensions
B. Unemployment compensations
C. Social security payments
D. All the above
Answer: D.All the above
Explanation: Transfer payment refers to a payment made by a public authority other than one made in exchange for goods or service produced. Transfer payments are not part of the national income. Examples include Old age pensions, unemployment compensations, social security payments and child benefit.
666. In accounting terms, what constitutes the ‘closing stock’?
A. Net Investment
B. Gross Investment-Capital Losses
C. Opening Stock-Capital Losses
D. Opening Stock + Net Investment – Capital Losses
Answer: D.Opening Stock + Net Investment – Capital Losses
Explanation: Closing stock refers to the goods remaining un-sold during the year. It includes finished products, raw materials, or work in progress and is deducted from the period’s costs in the balance sheets. The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation: Opening stock + Purchases – Closing stock = Cost of goods sold.
667. National income accounting is the study of the income and expenditure of the entire –
A. family
B. state
C. economy
D. organisation
Answer: C.economy
Explanation: National Income Accounting is a set of principles and methods used to measure the income and production of a country. There are basically two ways of measuring national economic activity: as the money value of the total production of goods and services during a given period (usually a year) or as the total of incomes derived from economic activity after allowance has been made for capital consumption.
668. In a business, raw materials, components, work in progress and finished goods are jointly regarded as –
A. capital stock
B. inventory
C. investment
D. net worth
Answer: B.inventory
Explanation: Inventory refers to raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders/owners.
669. The gradation and standardization of agricultural products are conducted through
A. Food Corporation of India
B. Directorate of Marketing and Inspection
C. Indian Standards Institution
D. Central Statistical Organization
Answer: B.Directorate of Marketing and Inspection
Explanation: The Directorate of Marketing and Inspection (DMI) is an attached Office of the Ministry of Agriculture. It was set up in the year1935 to implement the agricultural marketing policies and programmes of the Central Government. It aims at bringing integrated development of marketing of agricultural and allied produce in the country. It is entrusted with promotion of standardization and grading of agricultural and allied produce.
670. According to the Employment Outlook 2007 reports of the Organisation for Economic Cooeration and Development (OECD), the number of new jobs created in India every year from 2000 to 2005 is –
A. 5 million
B. 8 million
C. 11 million
D. 13 million
Answer: C.11 million
Explanation: Over the period 2000-05, India generated 11.3 million net new jobs per year, on average. The figure was 7 million in China, 2.7 million in Brazil and 0.7 million jobs hi the Russian Federation, compared with an average of 3.7 million net new jobs generated in the OECD area as a whole each year over the same period.
671. “Marginal Cost” equals –
A. total cost minus total benefit for the last unit produced
B. total cost divided by total benefit for the last unit produced
C. total cost divided by quantity
D. the change in total cost divided by the change in quantity
Answer: D.the change in total cost divided by the change in quantity
Explanation: Marginal cost is the change in the total cost that arises when the quantity produced has an increment by unity. That is, it is the cost of producing one more unit of a good. To illustrate marginal cost let’s assume that the total cost of producing 10,000 units is Rs.50,000. If we produce a total of 10,001 units the total cost is Rs.50,002. That would mean the marginal cost—the cost of producing the next unit— was Rs.2.
672. A low interest policy is also known as –
A. cheap money policy
B. income generating
C. dear money policy
D. investment policy
Answer: A.cheap money policy
Explanation: Cheap money policy involves loan or credit with a low interest rate, or the setting of low interest rates by the central bank of the country. Cheap money is good for borrowers, but bad for investors. Cheap money policy was one of the primary catalysts of the 2008 recession.
673. Economics classifies the manmade instrument of production as:
A. Organization
B. Capital
C. equipment
D. labour
Answer: B.Capital
Explanation: Some economists have classified factors into two categories, land and labour (or nature and man) on the ground that they are the only original or primary factors. It is said that capital has no independent origin and is merely the outcome of combined efforts of land and labour. However, other economists include all man-made instruments for production in the category of Capital.
674. A demand curve will not shift:
A. When only income changes
B. When only prices of substitute products change
C. When there is a change in advertisement expenditure
D. When only price of the commodity changes
Answer: D.When only price of the commodity changes
Explanation: In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. A change in price of the commodity leads to a movement along the demand curve without shifting it. In simple words, the increase of decrease in price of a commodity only causes contraction or extension of demand (increase causes contraction while decrease cause extension). Increase or decrease in demand only occurs only when there is achange in other determinants of demand, other than price of the commodity.
675. Which law states that with constant taste and preferences, the proportion of income spend on food stuff diminishes as income increases?
A. Say’s Law
B. Griffin’s Law
C. Gresham’s Law
D. Engel’s Law
Answer: D.Engel’s Law
Explanation: According to Engel’s Law, as disposable income of a consumer increases, the percentage of income spent for food decreases if all other factors remain constant. This happens even when the actual expenditure on food rises. The income elasticity of demand of food is less than 1. A lower Engel coefficient indicates a higher standard of living.
676. Extreme forms of markets are –
A. Perfect competition; Oligopoly
B. Oligopoly; Monopoly
C. Perfect competition; Monopoly
D. Perfect competition; Monopolistic competition
Answer: C.Perfect competition; Monopoly
Explanation: There are two extreme forms of market structure: monopoly and, its opposite, perfect competition. Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. A monopoly is a market structure in which there is only one producer/ seller for a product.
677. National Income include :
A. Financial help to earthquake victims
B. Pocket money of a child
C. Winning of a lottery prize
D. Construction of a new house
Answer: D.Construction of a new house
Explanation: National income is the total value a country’s final output of all new goods and services produced in one year. So construction of a new house is certainly output of goods.Transfer payments are not a part of the national income. So private sector transfers including charitable donations and prizes to lottery winners are excluded from it.
678. Value of out put and value added can be distinguished if we know:
A. the value of intermediate consumption
B. the value of net indirect taxes
C. the value of the sales
D. the value of consumption of fixed capital
Answer: A.the value of intermediate consumption
Explanation: Intermediate consumption is an accounting flow which consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises. including raw materials, services and various other operating expenses. Inter-mediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net out-put by sector of activity. Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.
679. Who prepared the first estimate of National Income for the country?
A. Central Statistical Organisation
B. National Income Committee
C. Dadabhai Naoroji
D. National Sample Survey Organisation
Answer: C.Dadabhai Naoroji
Explanation: Dadabhai Naoroji prepared the first estimates of National income in 1876. He estimated the national income by first estimating the value of agricultural production and then adding a certain percentage as nonagricultural production. However, such method can only been called as a non-scientific method.
680. ‘Supply creates its own demand’. This statement is related to –
A. Prof. J.B. Say
B. John Robinson
C. Adam Smith
D. J.S. Mill
Answer: A.Prof. J.B. Say
Explanation: Jean Baptiste Say was a French economist. I le is well known for Say’s Law (or Say’s Law of Markets), often summarized as: “Aggregate supply creates its own aggregate demand”; “Supply creates its own demand”, or “Supply constitutes its own demand”. He argued that production and sale of goods in an economy automatically produces an income for the producers of the same value, which would then be reinjected into the economy and create enough demand to buy the goods. Thus production is determined by the supply of goods rather than demand.
681. Sectoral distribution of GDP index measures .
A. Agriculture development of a country
B. Economic development of a country
C. Social development of a country
D. Socio-Economic development of a Country
Answer: B.Economic development of a country
Explanation: The sectoral distribution of GDP index measures the development of a country across several economic activities. It the market value of all final goods and services produced in a period (quarterly or yearly).
682. Which among the following statements is not true when there is an increase in interest rate in an economy?
A. increase in saving
B. decrease in loan
C. increase in production cost
D. increase in capital return
Answer: D.increase in capital return
Explanation: Interest rate increase the cost of borrowing, which results in lesser investment activity and the purchase of consumer durables. In a low interest-rate environment, shares become a more attractive buy, raising households’ financial assets. This may also contribute to higher consumer spending, and makes companies’ investment projects more attractive. Lower interest rates also tend to cause currencies to depreciate: Demand for domestic goods rises when imported goods become more expensive. All of these factors raise output and employment as well as investment and consumer spending.
683. The difference between the GNP and the NNP is equal to the –
A. consumer expenditure on durable goods
B. direct tax revenue
C. indirect tax revenue
D. capital depreciation
Answer: D.capital depreciation
Explanation: Depreciation refers to two very different but related concepts: the decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with (he matching principle). The difference between the GNP and NNP is equal to capital depreciation. It is the wearing out, breaking down, or technological obsolescence.
684. By whom was the autonomous investment separated from induced investment?
A. Schumpeter
B. Malthus
C. Joan Robinson
D. Adam Smith
Answer: A.Schumpeter
Explanation: Under his concept of creative destruction, Schunipeter distinguished between two types of investment that he called induced and autonomous. Induced investment arose from the discrepancy between supply and demand and autonomous investment from resources and technology created by the entrepreneurs. He also introduced a concept of “saving up” which is different from saving in the neoclassical growth models. Saving up constituted the part of out-put that is withheld from investment and consumption.
685. When price of a substitute of commodity falls, the demand for –
A. falls
B. remains unchanged
C. increases at increasing rate
D. rises
Answer: A.falls
Explanation: Cross Price Effect refers to effect on the demand for a given commodity due to a change in the price of a substitute commodity. A change (increase or decrease) in the price ofsubstitutes directly affects the demand for a given commodity. When price of substitute goods (say, coffee) rises, demand for the given commodity (say, tea) also rises at its same price. It leads to a rightward shift in the demand curve of the given commodity. With decrease in price of substitute goods (coffee), demand for the given commodity (tea) also decreases. It shifts the demand curve of the given commodity towards left.
686. A mixed economy refers to an economic system where –
A. The economy functions with foreign collaboration
B. Only t he private sector operates under government control
C. Both the government and the private sectors operate sectors operate simultaneously
D. No foreign investment is allowed
Answer: C.Both the government and the private sectors operate sectors operate simultaneously
Explanation: Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. The basic idea of the mixed economy is that the means of production are mainly under private ownership: that markets remain the dominant form of economic coordination: and that the government wields indirect influence over the economy through fiscal arid monetary policies.
687. A Black Market is a situation where in
A. Goods are loaded by the producers
B. Goods are sold secretly
C. Goods are sold at prices higher than what is fixed by the Government
D. Goods are made available
Answer: B.Goods are sold secretly
Explanation: Black market is the market in which illegal goods are traded. Goods acquired illegally take one of two price levels: (i) they may be cheaper than legal market prices as the supplier does not have to pay for production costs or taxes; or (ii) they may be more expensive than legal market prices as the product is difficult to acquire or produce. dangerous to handle or not easily available legally. Black- market transactions typically occur as a way for participants to avoid government price controlsor taxes, conducting transactions ‘under the table.’ So the most defining feature of black markets is that they have to be carried out secretly as they are illegal.
688. Buoyancy of a tax is defined as –
A. percentage increase in tax revenue/ percentage increase in tax base
B. increase in tax revenue/ percentage increase in tax coverage
C. increase in tax revenue/increase in tax base
D. percentage increase in tax revenue/ increase in tax coverage
Answer: C.increase in tax revenue/increase in tax base
Explanation: Buoyancy means the growth/increase in tax collections. This is in line with the GDP growth within the economy, the industry profile and the tax structure administered by the government. Tax buoyancy measures the total response of tax revenues to changes in national income. Total response takes into account both increases in income and discretionary changes (i.e., tax rates and bases) made by tax authorities in the system. The responsiveness of tax revenues to discretionary changes in the tax rate and in the tax base in relation to the GDP is termed the buoyancy of the tax system.
689. What is referred to as “Depository Services”?
A. A new scheme of fixed deposits
B. A method of regulating stock exchanges
C. An agency for safe-keeping of securities
D. An advisory service to investors
Answer: C.An agency for safe-keeping of securities
Explanation: A Central Securities Depository (CSD) is an organization holding securities either in certificated or uncertificated (dematerialized) form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of securities. The physical securities may be immobilized by the depository, or securities may be dematerialized (so that they exist only as electronic records). The following are depository services: Demat accounts; dematerialization; rematerialization; transfer of securities; and pledge services.
690. Regulated markets aim at the development of the marketing structure to –
A. widen the price spread between the producer and the consumer
B. narrow down the price spread between the producer and the consumer
C. increase the non-functional margins of the traders
D. maximize the non-functional margins of the commission agents
Answer: B.narrow down the price spread between the producer and the consumer
Explanation: Regulated markets aim at the development of marketing structures to ensure remunerative prices to the producers and to narrow down the price spread between the producer and the consumer. It also aims at reducing the non-functional margins of the commission agents.
691. Evaluating all the options to find out most suitable solution to business problems is interdisplinary activities. It is called –
A. Professional research
B. Management research
C. Operational research
D. Commercial research
Answer: C.Operational research
Explanation: Operational research is a discipline that deals with the application of advanced analytical methods to help make better decisions. Employing techniques from other mathematical sciences, such as mathematical modeling, statistical analysis, and mathematical optimization, operations research arrives at optimal or near-optimal solutions to complex decision-making problems. In a nutshell, operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions.
692. Variation in Cash Reserve Ratio and Open Market Operations are instruments of
A. Budgetary policy
B. Trade policy
C. Fiscal policy
D. Monetary policy
Answer: D.Monetary policy
Explanation: Bank Rate Policy, open market operations and variation of Cash Reserve Ratios, etc. are instruments of monetary policy. With the help of these instruments, the Reserve Bank of India controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.
693. The purpose of devaluation is to :
A. be little foreign currencies
B. encourage exports
C. discourage exports
D. encourage import
Answer: B.encourage exports
Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. It makes exports more competitive and imports more expensive.
694. Foreign currency which has a tendency of quick migration is called –
A. Scarce currency
B. Soft currency
C. Gold currency
D. Hot currency
Answer: D.Hot currency
Explanation: Hot money or currency is a term that is most commonly used in financial markets to refer to the now of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called “hot money” because they can move very quickly in and out of markets, potentially leading to market instability.
695. Bank Rate refers to the interest rate at which –
A. Commercial banks receive deposits from the public
B. Central bank gives loans to Commercial banks
C. Government loans are floated
D. Commercial banks grant loans to their customers
Answer: B.Central bank gives loans to Commercial banks
Explanation: Bank rate is the interest rate at which a nation’s central bank lends money to domestic banks. Often these loans are very short in duration.
696. A Trade Policy consists of –
A. Export-Import Policy
B. Licencing Policy
C. Foreign Exchange Policy
D. Balance of Payment Policy
Answer: A.Export-Import Policy
Explanation: Trade policy, also called Export- Import policy, is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. Things like import and export taxes, tariffs, inspection regulations, and quotas can all be part of a nation’s trade policy.
697. Globalisation means –
A. Integration of economy
B. Integration of financial market
C. Integration of the domestic economy with the world economy
D. Integration of the various sectors of economy
Answer: C.Integration of the domestic economy with the world economy
Explanation: Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalization refers to processes that promote world-wide exchanges of national and cultural resources.
698. The ‘sunrise industries’ imply –
A. petrochemicals and electronics industry
B. sunflower oil industry
C. computer industry
D. chemical industry
Answer: A.petrochemicals and electronics industry
Explanation: Sunrise Industry is a colloquial term for a sector or business that is in its infancy,but is growing at a rapid pace. A sunrise industry is typically characterized by high growth rates, numerous startups and an abundance of venture capital funding. A sunrise industry is often characterized by a high degree of innovation.
699. Regional Rural Banks arc sponsored by
A. Nationalized Commercial Bank
B. Reserve Bank of India
C. State Bank of India
D. Government of India
Answer: A.Nationalized Commercial Bank
Explanation: The Narasimham committee conceptualized the foundation of regional rural banks in India. Five regional rural banks were set up on October 2. 1975. There were five commercial banks, viz. Punjab National Bank, State Bank of India, Syndicate Bank. United Bank of India and United Commercial Bank, which sponsored the regional rural banks.
700. Scheduled Banks have to be registered with –
A. SEBI
B. RBI
C. Finance Ministry
D. SBI
Answer: B.RBI
Explanation: The scheduled primary (urban) cooperative banks are required to maintain with the Reserve Bank of India an average daily balance, the amount of which should not be less than 5 per cent of their net demand and time liabilities in India in terms of Section 42 of the Reserve Bank of India Act, 1934. Nonscheduled (urban) cooperative banks, under the provision of Section 18 of Banking Regulation Act, 1949 (As Applicable to Cooperative Societies) should maintain a sum equivalent to at least 3 per cent of their total demand and time liabilities in India on clay-to-day basis.
701. Which organization collects data for the unorganized sector?
A. NSSO
B. CSO
C. ASI
D. RBI
Answer: A.NSSO
Explanation: The National Sample Survey Office (NSSO) in India is a unique setup to carry out surveys on socioeconomic, demographic, agricultural and industrial subjects for collecting data from households and from enterprises located in villages and in the towns. The unregistered manufacturing sub-sector, a complement set to the registered manufacturing sub-sector, covers all the residual units which are not covered under the registered manufacturing sector.