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 18 of 111
Question #341
Which of the following is NOT a source of agricultural finance in India?
A. Cooperative societies
B. Commercial banks
C. NABARD
D. Stock exchanges for small farmers
Discuss
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Correct Answer: Option D

Explanation:
Stock exchanges primarily serve corporate entities. Agricultural finance is provided by commercial banks, cooperatives, RRBs and refinanced by NABARD.
This question belongs to: Economy GK Economy Set 1
Question #342
In the context of market failure, 'Asymmetric Information' leads to:
A. Zero transaction costs
B. Perfect competition
C. Adverse selection and moral hazard
D. Efficient market outcomes
Discuss
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Correct Answer: Option C

Explanation:
Asymmetric information, where one party has more information than the other, can lead to adverse selection (before the contract) and moral hazard (after the contract).
This question belongs to: Economy GK Economy Set 1
Question #343
Which of the following is a feature of the Indian monetary system?
A. Gold standard
B. Managed floating exchange rate with inflation targeting
C. Fixed exchange rate without any intervention
D. Complete free floating without RBI role
Discuss
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Correct Answer: Option B

Explanation:
India follows a managed floating exchange rate regime and has adopted a flexible inflation targeting framework for monetary policy.
This question belongs to: Economy GK Economy Set 1
Question #344
The term 'Gross Fixed Capital Formation' includes:
A. Only construction of buildings
B. Investment in fixed assets such as machinery, buildings and infrastructure
C. Only inventory investment
D. Only financial investments
Discuss
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Correct Answer: Option B

Explanation:
Gross Fixed Capital Formation refers to the net addition to the stock of fixed assets such as plant, machinery, buildings and infrastructure during a period.
This question belongs to: Economy GK Economy Set 1
Question #345
Which of the following is NOT a type of market based on the degree of competition?
A. Perfect competition
B. Monopoly
C. Oligopoly
D. Barter market as a competition classification
Discuss
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Correct Answer: Option D

Explanation:
Barter refers to exchange without money. Market structures based on competition are perfect competition, monopolistic competition, oligopoly and monopoly.
This question belongs to: Economy GK Economy Set 1
Question #346
In the context of economic planning, indicative planning is characterised by:
A. Absence of any targets
B. Only private sector planning
C. Complete government control over all sectors
D. Setting targets and providing incentives without compulsion
Discuss
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Correct Answer: Option D

Explanation:
Indicative planning involves setting broad targets and providing incentives and information to guide private sector decisions rather than imposing compulsory directives.
This question belongs to: Economy GK Economy Set 1
Question #347
Which of the following is a major component of India's foreign exchange reserves?
A. Foreign currency assets, gold, SDRs and reserve position in IMF
B. Only equity shares of foreign companies
C. Only gold
D. Only domestic currency
Discuss
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Correct Answer: Option A

Explanation:
India's foreign exchange reserves consist of foreign currency assets, gold, Special Drawing Rights and the reserve tranche position in the IMF.
This question belongs to: Economy GK Economy Set 1
Question #348
The concept of 'Break-even Point' in economics refers to:
A. The level of output where marginal cost is minimum
B. The level of output where total revenue equals total cost
C. The level of output where profit is maximum
D. The level of output where average cost is maximum
Discuss
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Correct Answer: Option B

Explanation:
The break-even point is the level of output at which total revenue equals total cost, so that economic profit is zero.
This question belongs to: Economy GK Economy Set 1
Question #349
Which of the following is NOT a feature of globalisation?
A. Greater integration of markets
B. Increased cross-border trade and investment
C. Spread of technology and information
D. Complete isolation of national economies
Discuss
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Correct Answer: Option D

Explanation:
Globalisation involves increasing integration of national economies through trade, investment, technology and information flows, not isolation.
This question belongs to: Economy GK Economy Set 1
Question #350
In the context of public finance, 'Tax Incidence' refers to:
A. The legal liability to pay the tax
B. The final burden of the tax after shifting
C. The total tax revenue collected
D. The administrative cost of tax collection
Discuss
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Correct Answer: Option B

Explanation:
Tax incidence refers to the final resting place of the tax burden — who ultimately bears the economic burden of the tax after possible shifting.
This question belongs to: Economy GK Economy Set 1
Question #351
Which of the following is a characteristic of a dualistic economy?
A. Coexistence of modern and traditional sectors
B. Only agricultural activities
C. Absence of informal sector
D. Uniform technology across sectors
Discuss
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Correct Answer: Option A

Explanation:
Dualism refers to the coexistence of a modern, capital-intensive sector alongside a traditional, labour-intensive sector within the same economy.
This question belongs to: Economy GK Economy Set 1
Question #352
The term 'Open Market Operations' refer to:
A. Lending by commercial banks to the public
B. Buying and selling of goods in the open market by the government
C. Issuing new shares by companies
D. Buying and selling of government securities by the central bank
Discuss
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Correct Answer: Option D

Explanation:
Open Market Operations involve the purchase and sale of government securities by the central bank to regulate liquidity and money supply in the economy.
This question belongs to: Economy GK Economy Set 1
Question #353
Which of the following is NOT a type of cost in the short run?
A. Fixed cost
B. Total cost
C. Sunk cost as the only long-run cost
D. Variable cost
Discuss
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Correct Answer: Option C

Explanation:
In the short run, costs are classified as fixed, variable and total. Sunk costs are costs that have already been incurred and cannot be recovered, relevant in both short and long run decisions.
This question belongs to: Economy GK Economy Set 1
Question #354
In the context of economic growth models, the Solow model emphasises the role of:
A. Technological progress as the key driver of long-run growth
B. Only population growth
C. Only savings rate
D. Only capital accumulation without technology
Discuss
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Correct Answer: Option A

Explanation:
The Solow-Swan neoclassical growth model shows that long-run growth in per capita income is driven primarily by exogenous technological progress.
This question belongs to: Economy GK Economy Set 1
Question #355
Which of the following is a major objective of the Reserve Bank of India Act?
A. To regulate the issue of bank notes and maintain monetary stability
B. To collect direct taxes
C. To formulate five-year plans
D. To maximise government revenue
Discuss
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Correct Answer: Option A

Explanation:
The RBI Act, 1934 primarily aims at regulating the issue of bank notes, maintaining reserves to secure monetary stability and operating the currency and credit system of the country.
This question belongs to: Economy GK Economy Set 1
Question #356
The concept of 'Consumer Sovereignty' implies that:
A. Only exporters decide production
B. Government decides all production
C. Producers decide what to produce
D. Consumers ultimately determine what is produced through their demand
Discuss
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Correct Answer: Option D

Explanation:
Consumer sovereignty means that in a market economy, consumers, through their spending decisions, ultimately determine what goods and services are produced.
This question belongs to: Economy GK Economy Set 1
Question #357
Which of the following is NOT a component of the current account of India's balance of payments?
A. Software exports
B. Invisibles (services, income, transfers)
C. Merchandise trade
D. Foreign direct investment
Discuss
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Correct Answer: Option D

Explanation:
Foreign direct investment is recorded in the capital account. Merchandise trade, services (including software), income and transfers form the current account.
This question belongs to: Economy GK Economy Set 1
Question #358
In the context of inflation, 'Headline Inflation' typically refers to:
A. Overall inflation including all items in the basket
B. Only fuel inflation
C. Only food inflation
D. Inflation excluding food and fuel
Discuss
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Correct Answer: Option A

Explanation:
Headline inflation measures the total inflation in an economy, including all items such as food, fuel and others. Core inflation excludes volatile items like food and fuel.
This question belongs to: Economy GK Economy Set 1
Question #359
Which of the following is a feature of a capitalist economy?
A. Private ownership of means of production and profit motive
B. Absence of market mechanism
C. Central planning of all economic activities
D. Collective ownership of resources
Discuss
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Correct Answer: Option A

Explanation:
A capitalist (market) economy is characterised by private ownership of the means of production, profit motive, and resource allocation through the market mechanism.
This question belongs to: Economy GK Economy Set 1
Question #360
The term 'Primary Market' in the capital market refers to:
A. Market for short-term funds only
B. Market for issue of new securities
C. Market for trading existing securities
D. Market for agricultural commodities
Discuss
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Correct Answer: Option B

Explanation:
The primary market is the market where new securities are issued by companies or governments for the first time to raise capital. The secondary market deals with existing securities.
This question belongs to: Economy GK Economy Set 1
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