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 13 of 111
Question #241
Which of the following is NOT a characteristic of developing countries?
A. High rate of capital formation
B. High population growth rate
C. Low per capita income
D. Dependence on primary sector
Discuss
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Correct Answer: Option A

Explanation:
Developing countries typically have low rates of capital formation. High capital formation is a feature of developed economies.
This question belongs to: Economy GK Economy Set 1
Question #242
The term 'Balance of Trade' refers to:
A. Capital account balance
B. Difference between exports and imports of goods and services
C. Overall surplus or deficit in balance of payments
D. Difference between exports and imports of goods only
Discuss
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Correct Answer: Option D

Explanation:
Balance of Trade is the difference between the value of exports and imports of merchandise (goods) only. Balance of payments is a broader concept including services and capital flows.
This question belongs to: Economy GK Economy Set 1
Question #243
Which of the following is an example of a positive externality?
A. Noise from a construction site
B. Pollution from a factory
C. Congestion on roads
D. Vaccination by an individual
Discuss
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Correct Answer: Option D

Explanation:
A positive externality confers benefits on third parties. Vaccination protects not only the individual but also reduces the spread of disease to others.
This question belongs to: Economy GK Economy Set 1
Question #244
In the context of cost, Marginal Cost is defined as:
A. Variable cost divided by output
B. Fixed cost divided by output
C. Total cost divided by output
D. Change in total cost due to production of one additional unit
Discuss
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Correct Answer: Option D

Explanation:
Marginal Cost (MC) is the addition to total cost when one more unit of output is produced. MC = ΔTC/ΔQ.
This question belongs to: Economy GK Economy Set 1
Question #245
Which of the following is NOT a source of non-tax revenue for the government of India?
A. Corporation tax
B. Dividends from PSUs
C. Fees and fines
D. Interest receipts
Discuss
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Correct Answer: Option A

Explanation:
Corporation tax is a tax revenue. Interest receipts, dividends from public sector undertakings, and fees and fines are non-tax revenues.
This question belongs to: Economy GK Economy Set 1
Question #246
The concept of 'Multiplier-Accelerator Interaction' is associated with:
A. International trade theories
B. Public finance theories
C. Business cycle theories
D. Monetary theories
Discuss
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Correct Answer: Option C

Explanation:
The interaction between the multiplier and accelerator is used in theories of business cycles (e.g., by Samuelson and Hicks) to explain fluctuations in economic activity.
This question belongs to: Economy GK Economy Set 1
Question #247
Which of the following is a qualitative credit control measure?
A. Cash Reserve Ratio
B. Bank Rate
C. Statutory Liquidity Ratio
D. Margin requirements
Discuss
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Correct Answer: Option D

Explanation:
Margin requirements (prescribing the difference between loan amount and value of security) is a selective/qualitative credit control measure used by RBI.
This question belongs to: Economy GK Economy Set 1
Question #248
In the context of national income accounting, which of the following is a transfer payment and not included in national income?
A. Wages and salaries
B. Rent
C. Interest on public debt
D. Profits
Discuss
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Correct Answer: Option C

Explanation:
Interest on public debt is a transfer payment and is not included in national income as it does not correspond to any current production of goods or services.
This question belongs to: Economy GK Economy Set 1
Question #249
Which of the following is the correct sequence of stages in the business cycle?
A. Expansion, Peak, Contraction, Trough
B. Peak, Expansion, Trough, Contraction
C. Trough, Peak, Expansion, Contraction
D. Contraction, Expansion, Peak, Trough
Discuss
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Correct Answer: Option A

Explanation:
The typical stages of a business cycle are expansion (recovery), peak (boom), contraction (recession) and trough (depression), and then the cycle repeats.
This question belongs to: Economy GK Economy Set 1
Question #250
The term 'Capital Formation' refers to:
A. Increase in money supply
B. Increase in consumption
C. Increase in the stock of capital goods
D. Increase in population
Discuss
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Correct Answer: Option C

Explanation:
Capital formation refers to the net addition to the existing stock of capital goods such as machinery, buildings and equipment in an economy.
This question belongs to: Economy GK Economy Set 1
Question #251
Which of the following is NOT a feature of imperfect competition?
A. Selling costs
B. Few or many sellers with some control over price
C. Product differentiation
D. Perfect knowledge
Discuss
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Correct Answer: Option D

Explanation:
Perfect knowledge is a feature of perfect competition. Imperfect competition is characterised by product differentiation, selling costs and some degree of price control by sellers.
This question belongs to: Economy GK Economy Set 1
Question #252
In the context of Indian economy, which of the following is a major source of agricultural credit?
A. Commercial banks and cooperative banks
B. Mutual funds
C. Foreign institutional investors
D. Stock markets
Discuss
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Correct Answer: Option A

Explanation:
Agricultural credit in India is primarily provided by commercial banks, regional rural banks and cooperative banks, along with NABARD refinancing.
This question belongs to: Economy GK Economy Set 1
Question #253
Which of the following is a characteristic of a public good?
A. Non-excludable but rivalrous
B. Non-excludable and non-rivalrous
C. Excludable but non-rivalrous
D. Excludable and rivalrous
Discuss
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Correct Answer: Option B

Explanation:
Public goods are non-excludable (difficult to prevent non-payers from consuming) and non-rivalrous (one person's consumption does not reduce availability for others).
This question belongs to: Economy GK Economy Set 1
Question #254
The concept of 'Opportunity Cost' is central to which branch of economics?
A. Only microeconomics
B. Only macroeconomics
C. Only international economics
D. Both micro and macroeconomics
Discuss
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Correct Answer: Option D

Explanation:
Opportunity cost is a fundamental concept used in both microeconomics (individual choice) and macroeconomics (resource allocation at national level).
This question belongs to: Economy GK Economy Set 1
Question #255
Which of the following is NOT a type of budget deficit?
A. Revenue deficit
B. Fiscal deficit
C. Trade deficit
D. Primary deficit
Discuss
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Correct Answer: Option C

Explanation:
Trade deficit is a component of the balance of payments (external sector). Revenue, fiscal and primary deficits are concepts related to the government budget.
This question belongs to: Economy GK Economy Set 1
Question #256
In the context of demand, a Giffen good is one for which:
A. Demand is independent of price
B. Demand is perfectly elastic
C. Demand decreases as price increases
D. Demand increases as price increases
Discuss
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Correct Answer: Option D

Explanation:
A Giffen good is an inferior good for which the income effect outweighs the substitution effect, leading to an upward-sloping demand curve (demand rises when price rises).
This question belongs to: Economy GK Economy Set 1
Question #257
Which of the following is a tool of quantitative monetary policy?
A. Direct action
B. Moral suasion
C. Credit rationing
D. Open Market Operations
Discuss
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Correct Answer: Option D

Explanation:
Open Market Operations (buying and selling of government securities by RBI) is a quantitative tool that affects the overall volume of credit and money supply.
This question belongs to: Economy GK Economy Set 1
Question #258
The term 'Structural Unemployment' arises due to:
A. Seasonal variations in demand
B. Temporary mismatch between jobs and workers
C. Changes in the structure of the economy
D. Cyclical fluctuations in economic activity
Discuss
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Correct Answer: Option C

Explanation:
Structural unemployment occurs due to changes in the structure of the economy, such as technological changes or decline of certain industries, creating a mismatch between skills of workers and available jobs.
This question belongs to: Economy GK Economy Set 1
Question #259
Which of the following is NOT included in the calculation of GDP at market prices?
A. Net exports
B. Private consumption expenditure
C. Intermediate goods
D. Gross investment
Discuss
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Correct Answer: Option C

Explanation:
GDP includes only final goods and services to avoid double counting. Intermediate goods are not included in GDP calculation.
This question belongs to: Economy GK Economy Set 1
Question #260
In the context of public finance, 'Deadweight Loss' refers to:
A. Loss of economic efficiency due to market distortion
B. Loss due to natural disasters
C. Loss due to inflation
D. Loss of foreign exchange
Discuss
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Correct Answer: Option A

Explanation:
Deadweight loss is the loss of economic efficiency that occurs when the equilibrium quantity is not produced due to taxes, subsidies, monopolies or other market distortions.
This question belongs to: Economy GK Economy Set 1
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