Economy Set 1 MCQs

Economy GK

Economy Set 1 MCQs

Practice Economy GK MCQs on basic economic concepts including economy, economics, microeconomics, macroeconomics, goods and services, demand and supply, factors of production, opportunity cost, economic activities, sectors of economy and other fundamental concepts frequently asked in SSC, Railway, Banking, UPSC, JKSSB, JKPSC, Police, Defence and other competitive examinations.

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Practice Questions

Page 11 of 111
Question #201
Which of the following is NOT a function of money?
A. Medium of exchange
B. Store of value
C. Unit of account
D. Means of production
Discuss
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Correct Answer: Option D

Explanation:
The primary functions of money are medium of exchange, measure of value (unit of account), store of value and standard of deferred payments. Means of production is not a function of money.
This question belongs to: Economy GK Economy Set 1
Question #202
In the context of international trade, the theory of comparative advantage was propounded by:
A. Adam Smith
B. Paul Krugman
C. Heckscher and Ohlin
D. David Ricardo
Discuss
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Correct Answer: Option D

Explanation:
David Ricardo developed the theory of comparative advantage, which states that countries should specialise in producing goods in which they have a lower opportunity cost.
This question belongs to: Economy GK Economy Set 1
Question #203
The concept of 'Pareto Optimality' is associated with:
A. Monetary economics
B. Development economics
C. Welfare economics
D. International trade theory
Discuss
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Correct Answer: Option C

Explanation:
Pareto Optimality is a concept in welfare economics where resources are allocated in such a way that no one can be made better off without making someone else worse off.
This question belongs to: Economy GK Economy Set 1
Question #204
Which of the following is the formula for calculating fiscal deficit?
A. Capital expenditure − Capital receipts
B. Revenue expenditure − Revenue receipts
C. Total expenditure − Total receipts including borrowings
D. Total expenditure − Total receipts excluding borrowings
Discuss
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Correct Answer: Option D

Explanation:
Fiscal deficit = Total expenditure − (Revenue receipts + Non-debt capital receipts). It indicates the total borrowing requirement of the government.
This question belongs to: Economy GK Economy Set 1
Question #205
In the Keynesian model, the consumption function is given by C = a + bY, where 'b' represents:
A. Autonomous consumption
B. Marginal propensity to consume
C. Average propensity to consume
D. Marginal propensity to save
Discuss
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Correct Answer: Option B

Explanation:
In the consumption function C = a + bY, 'a' is autonomous consumption and 'b' is the marginal propensity to consume (MPC).
This question belongs to: Economy GK Economy Set 1
Question #206
Which of the following is NOT a quantitative credit control measure of RBI?
A. Open Market Operations
B. Credit Rationing
C. Bank Rate Policy
D. Variable Reserve Requirements
Discuss
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Correct Answer: Option B

Explanation:
Credit rationing is a qualitative (selective) credit control measure. Bank Rate, OMO and variable reserve ratios (CRR/SLR) are quantitative measures.
This question belongs to: Economy GK Economy Set 1
Question #207
The term 'Green Revolution' in India is associated with:
A. Increase in service sector growth
B. Increase in industrial production
C. Increase in foreign investment
D. Increase in agricultural production
Discuss
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Correct Answer: Option D

Explanation:
The Green Revolution refers to the significant increase in agricultural production in India, particularly of wheat and rice, through high-yielding varieties, fertilizers and irrigation, starting in the mid-1960s.
This question belongs to: Economy GK Economy Set 1
Question #208
Which of the following is a characteristic of a developed economy?
A. High dependence on agriculture
B. High rate of population growth
C. Low level of capital formation
D. High per capita income
Discuss
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Correct Answer: Option D

Explanation:
Developed economies are characterised by high per capita income, high level of industrialisation, low population growth and high capital formation.
This question belongs to: Economy GK Economy Set 1
Question #209
In the context of money market, Treasury Bills are issued by:
A. Private corporations
B. Reserve Bank of India on behalf of the government
C. Commercial banks
D. Stock exchanges
Discuss
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Correct Answer: Option B

Explanation:
Treasury Bills are short-term instruments issued by the RBI on behalf of the Government of India to meet short-term funding requirements.
This question belongs to: Economy GK Economy Set 1
Question #210
Which of the following is NOT a type of market structure?
A. Monopoly
B. Perfect competition
C. Monopsony of labour only
D. Oligopoly
Discuss
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Correct Answer: Option C

Explanation:
Monopsony refers to a market with a single buyer. While monopsony is a market structure, the option 'Monopsony of labour only' incorrectly restricts it. Standard market structures are perfect competition, monopoly, monopolistic competition and oligopoly.
This question belongs to: Economy GK Economy Set 1
Question #211
The concept of 'Effective Demand' was introduced by:
A. John Maynard Keynes
B. Classical economists
C. Monetarists
D. Supply-side economists
Discuss
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Correct Answer: Option A

Explanation:
Keynes introduced the concept of effective demand, which is the level of aggregate demand that is equal to aggregate supply and determines the level of employment and output.
This question belongs to: Economy GK Economy Set 1
Question #212
Which of the following is an example of a merit good?
A. Alcohol
B. Cigarettes
C. Education
D. Gambling
Discuss
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Correct Answer: Option C

Explanation:
Merit goods are those that the government feels people will under-consume and which ought to be subsidised or provided free, such as education and healthcare.
This question belongs to: Economy GK Economy Set 1
Question #213
In the context of inflation, 'Core Inflation' excludes:
A. Food and fuel prices
B. Manufactured goods prices
C. Service prices
D. Housing prices
Discuss
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Correct Answer: Option A

Explanation:
Core inflation is a measure of inflation that excludes volatile items such as food and fuel prices to give a better picture of underlying inflation trends.
This question belongs to: Economy GK Economy Set 1
Question #214
The term 'Demonetisation' refers to:
A. Introduction of new currency notes
B. Withdrawal of a currency unit from legal tender status
C. Devaluation of currency
D. Printing of more currency notes
Discuss
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Correct Answer: Option B

Explanation:
Demonetisation is the act of stripping a currency unit of its status as legal tender. In India, high denomination notes were demonetised in 2016.
This question belongs to: Economy GK Economy Set 1
Question #215
Which of the following is NOT a objective of fiscal policy?
A. Price stability
B. Full employment
C. Economic growth
D. Control of money supply
Discuss
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Correct Answer: Option D

Explanation:
Control of money supply is the objective of monetary policy. Fiscal policy aims at economic growth, price stability, full employment and equitable distribution of income.
This question belongs to: Economy GK Economy Set 1
Question #216
In the context of cost curves, the Average Fixed Cost (AFC) curve is:
A. Rectangular hyperbola
B. U-shaped
C. Upward sloping
D. Horizontal
Discuss
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Correct Answer: Option A

Explanation:
Average Fixed Cost falls continuously as output increases and the AFC curve is a rectangular hyperbola.
This question belongs to: Economy GK Economy Set 1
Question #217
Which of the following is a feature of Indian agriculture?
A. High productivity
B. Predominance of small and marginal holdings
C. Low dependence on monsoon
D. High capital intensity
Discuss
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Correct Answer: Option B

Explanation:
Indian agriculture is characterised by predominance of small and marginal land holdings, dependence on monsoon, low productivity and labour intensity.
This question belongs to: Economy GK Economy Set 1
Question #218
The term 'Special Drawing Rights' (SDRs) is associated with:
A. World Bank
B. World Trade Organisation
C. Asian Development Bank
D. International Monetary Fund
Discuss
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Correct Answer: Option D

Explanation:
Special Drawing Rights are an international reserve asset created by the International Monetary Fund to supplement member countries' official reserves.
This question belongs to: Economy GK Economy Set 1
Question #219
Which of the following is NOT a type of inflation based on speed?
A. Walking inflation
B. Demand-pull inflation
C. Creeping inflation
D. Galloping inflation
Discuss
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Correct Answer: Option B

Explanation:
Demand-pull inflation is a classification based on cause. Based on speed/intensity, inflation is classified as creeping, walking, running and galloping (or hyperinflation).
This question belongs to: Economy GK Economy Set 1
Question #220
In the context of production, the law of variable proportions is also known as:
A. Law of returns to scale
B. Law of constant returns
C. Law of diminishing returns
D. Law of increasing returns
Discuss
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Correct Answer: Option C

Explanation:
The law of variable proportions (or law of diminishing returns) states that as more units of a variable factor are applied to a fixed factor, after a point, the marginal product of the variable factor diminishes.
This question belongs to: Economy GK Economy Set 1
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