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 14 of 111
Question #261
Which of the following is a feature of a planned economy?
A. Centralised planning of resource allocation
B. Private ownership of all resources
C. Decentralised decision making
D. Price determination solely by market forces
Discuss
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Correct Answer: Option A

Explanation:
In a planned (command) economy, the central authority plans and allocates resources according to predetermined objectives rather than market signals.
This question belongs to: Economy GK Economy Set 1
Question #262
The concept of 'Time Preference' is related to the theory of:
A. Wages
B. Interest
C. Rent
D. Profit
Discuss
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Correct Answer: Option B

Explanation:
The time preference theory of interest (associated with Böhm-Bawerk and others) explains interest as arising from the preference for present goods over future goods.
This question belongs to: Economy GK Economy Set 1
Question #263
Which of the following is NOT a function of the World Bank?
A. Providing long-term loans for development projects
B. Technical assistance for development
C. Poverty reduction initiatives
D. Providing short-term balance of payments support
Discuss
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Correct Answer: Option D

Explanation:
Short-term balance of payments support is primarily the function of the IMF. The World Bank focuses on long-term development finance and poverty reduction.
This question belongs to: Economy GK Economy Set 1
Question #264
In the context of elasticity, cross elasticity of demand between two complementary goods is:
A. Infinity
B. Zero
C. Positive
D. Negative
Discuss
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Correct Answer: Option D

Explanation:
For complementary goods (e.g., car and petrol), an increase in the price of one leads to a decrease in demand for the other, so cross elasticity is negative.
This question belongs to: Economy GK Economy Set 1
Question #265
Which of the following is a measure of relative poverty?
A. Income share of the bottom quintile relative to the top
B. Absolute number of poor people
C. Poverty line based on minimum calorie intake
D. Percentage of population below a fixed income threshold
Discuss
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Correct Answer: Option A

Explanation:
Relative poverty is measured in relation to the overall distribution of income in society, such as the income share of the poorest relative to the richest.
This question belongs to: Economy GK Economy Set 1
Question #266
The term 'Repo' in monetary policy stands for:
A. Rate of Preferential Operation
B. Reserve Position
C. Repurchase Agreement
D. Reverse Purchase Order
Discuss
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Correct Answer: Option C

Explanation:
Repo stands for Repurchase Agreement, under which RBI lends money to banks against government securities with an agreement to repurchase them at a later date.
This question belongs to: Economy GK Economy Set 1
Question #267
Which of the following is NOT a determinant of aggregate demand?
A. Technology level
B. Consumption expenditure
C. Investment expenditure
D. Government expenditure
Discuss
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Correct Answer: Option A

Explanation:
Technology primarily affects aggregate supply. Aggregate demand is determined by consumption, investment, government spending and net exports.
This question belongs to: Economy GK Economy Set 1
Question #268
In the context of production functions, returns to scale refer to:
A. Change in output when one input is varied
B. Change in cost when output changes
C. Change in price when supply changes
D. Change in output when all inputs are varied proportionately
Discuss
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Correct Answer: Option D

Explanation:
Returns to scale examine how output changes when all inputs are increased by the same proportion. They can be increasing, constant or decreasing.
This question belongs to: Economy GK Economy Set 1
Question #269
Which of the following is a characteristic of oligopoly?
A. Perfect information and no barriers
B. Homogeneous product with free entry
C. Large number of independent sellers
D. Interdependence among firms
Discuss
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Correct Answer: Option D

Explanation:
Oligopoly is characterised by a few firms that are interdependent in their decision-making, as the actions of one firm affect the others.
This question belongs to: Economy GK Economy Set 1
Question #270
The concept of 'Say's Law' states that:
A. Government intervention is necessary
B. Money is the most important factor
C. Supply creates its own demand
D. Demand creates its own supply
Discuss
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Correct Answer: Option C

Explanation:
Say's Law of Markets, associated with classical economics, states that 'supply creates its own demand', implying that general overproduction is impossible.
This question belongs to: Economy GK Economy Set 1
Question #271
Which of the following is NOT a component of the capital market?
A. Mutual funds
B. Stock exchanges
C. Insurance companies
D. Call money market
Discuss
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Correct Answer: Option D

Explanation:
Call money market is a part of the money market (short-term). Capital market deals with long-term funds and includes stock exchanges, mutual funds and insurance companies.
This question belongs to: Economy GK Economy Set 1
Question #272
In the context of inflation measurement in India, CPI stands for:
A. Central Price Indicator
B. Commodity Price Index
C. Consumer Price Index
D. Cost of Production Index
Discuss
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Correct Answer: Option C

Explanation:
CPI is the Consumer Price Index, which measures changes in the price level of a basket of consumer goods and services. It is the primary measure targeted by RBI for inflation.
This question belongs to: Economy GK Economy Set 1
Question #273
Which of the following is an example of a derived demand?
A. Demand for cars by households
B. Demand for labour by firms
C. Demand for entertainment
D. Demand for food by consumers
Discuss
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Correct Answer: Option B

Explanation:
Derived demand is the demand for a factor of production that arises from the demand for the final product it helps produce. Demand for labour is derived from the demand for goods and services.
This question belongs to: Economy GK Economy Set 1
Question #274
The term 'Fiscal Drag' refers to:
A. Decrease in tax rates
B. Automatic increase in tax revenue due to inflation
C. Deliberate reduction in government spending
D. Increase in fiscal deficit
Discuss
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Correct Answer: Option B

Explanation:
Fiscal drag occurs when inflation pushes taxpayers into higher tax brackets, increasing tax revenue without any change in tax rates, acting as an automatic stabiliser.
This question belongs to: Economy GK Economy Set 1
Question #275
Which of the following is NOT a type of economic system?
A. Barter economy as a complete system classification
B. Socialist economy
C. Capitalist economy
D. Mixed economy
Discuss
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Correct Answer: Option A

Explanation:
Economic systems are classified as capitalist, socialist and mixed based on ownership and resource allocation. Barter is a method of exchange, not a complete economic system classification.
This question belongs to: Economy GK Economy Set 1
Question #276
In the context of international economics, 'Dumping' refers to:
A. Exporting goods with subsidies only
B. Importing goods without tariffs
C. Selling goods abroad at a higher price
D. Selling goods abroad at a price lower than in the domestic market
Discuss
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Correct Answer: Option D

Explanation:
Dumping is the practice of selling a product in a foreign market at a price lower than the domestic price or below the cost of production, often considered an unfair trade practice.
This question belongs to: Economy GK Economy Set 1
Question #277
Which of the following is a feature of the Indian tax system?
A. Both direct and indirect taxes
B. No progressive taxation
C. Only direct taxes
D. Only indirect taxes
Discuss
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Correct Answer: Option A

Explanation:
The Indian tax system consists of both direct taxes (income tax, corporation tax) and indirect taxes (GST, customs duty), with progressive elements in direct taxes.
This question belongs to: Economy GK Economy Set 1
Question #278
The concept of 'Liquidity Preference' includes which of the following motives?
A. Only precautionary motive
B. Only speculative motive
C. Only transactions motive
D. Transactions, precautionary and speculative motives
Discuss
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Correct Answer: Option D

Explanation:
According to Keynes, the demand for money (liquidity preference) arises from three motives: transactions, precautionary and speculative.
This question belongs to: Economy GK Economy Set 1
Question #279
Which of the following is NOT a method of privatisation?
A. Nationalisation
B. Disinvestment of shares
C. Public-private partnership
D. Strategic sale
Discuss
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Correct Answer: Option A

Explanation:
Nationalisation is the opposite of privatisation; it involves taking private assets into public ownership. Privatisation methods include disinvestment, strategic sale and PPP.
This question belongs to: Economy GK Economy Set 1
Question #280
In the context of cost curves, the Marginal Cost curve intersects the Average Cost curve at:
A. Its minimum point
B. Its maximum point
C. The origin
D. Any random point
Discuss
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Correct Answer: Option A

Explanation:
The MC curve intersects both the AVC and ATC curves at their respective minimum points.
This question belongs to: Economy GK Economy Set 1
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Practice Mix
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The compound interest on Rs. 3000 at 8% per annum for 1 year compounded half-yearly is:
The Right to Education Act was enacted in:
Select the antonym of 'KNOTTY'.
A man buys a book for Rs. 150 and sells it for Rs. 180. What is the gain percent?