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 19 of 111
Question #361
Which of the following is NOT a type of elasticity of demand?
A. Cross elasticity
B. Income elasticity
C. Supply elasticity of demand
D. Price elasticity
Discuss
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Correct Answer: Option C

Explanation:
Elasticity of demand includes price elasticity, income elasticity and cross elasticity. Elasticity of supply is a separate concept relating to supply response.
This question belongs to: Economy GK Economy Set 1
Question #362
In the context of economic reforms, 'Disinvestment' refers to:
A. Nationalisation of private companies
B. Complete closure of all PSUs
C. Increase in government investment in PSUs
D. Sale of government equity in public sector enterprises
Discuss
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Correct Answer: Option D

Explanation:
Disinvestment involves the sale of government-held shares in public sector enterprises to private entities or the public, reducing government ownership.
This question belongs to: Economy GK Economy Set 1
Question #363
Which of the following is a major source of revenue for the Central Government of India?
A. Corporation tax, income tax and GST (central share)
B. Only professional tax
C. Only property tax
D. Only state GST
Discuss
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Correct Answer: Option A

Explanation:
Major sources of central government revenue include corporation tax, personal income tax, and the central share of GST, along with customs and other duties.
This question belongs to: Economy GK Economy Set 1
Question #364
The concept of 'Intergenerational Equity' is particularly relevant in the context of:
A. Only short-term monetary policy
B. Only trade policy
C. Only private investment decisions
D. Public debt and fiscal sustainability
Discuss
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Correct Answer: Option D

Explanation:
Intergenerational equity concerns the fairness of distributing the burden of public debt and resource use between present and future generations, important for fiscal sustainability.
This question belongs to: Economy GK Economy Set 1
Question #365
Which of the following is NOT a characteristic of money?
A. Perishability as a desirable feature
B. Portability
C. Divisibility
D. Durability
Discuss
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Correct Answer: Option A

Explanation:
Desirable characteristics of money include durability, portability, divisibility, uniformity and limited supply. Perishability is undesirable as money should retain value over time.
This question belongs to: Economy GK Economy Set 1
Question #366
In the context of the Indian economy, the 'Demographic Dividend' refers to:
A. Increase in the old-age population only
B. Economic growth potential from a large working-age population
C. Decline in the total population
D. Increase in the proportion of dependent population
Discuss
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Correct Answer: Option B

Explanation:
Demographic dividend arises when a large share of the population is of working age, providing an opportunity for higher economic growth if this workforce is productively employed.
This question belongs to: Economy GK Economy Set 1
Question #367
Which of the following is a feature of the long-run average cost curve under increasing returns to scale?
A. It is U-shaped only due to fixed factors
B. It is downward sloping
C. It is upward sloping
D. It is horizontal
Discuss
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Correct Answer: Option B

Explanation:
Under increasing returns to scale, long-run average cost falls as output expands, resulting in a downward-sloping LAC curve over the relevant range.
This question belongs to: Economy GK Economy Set 1
Question #368
The term 'Base Year' in the context of national income statistics is important because:
A. It determines the fiscal deficit
B. It determines the tax rates
C. It is used to calculate real GDP by providing constant prices
D. It fixes the exchange rate
Discuss
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Correct Answer: Option C

Explanation:
The base year provides the constant price structure used to calculate real (inflation-adjusted) GDP and other national income aggregates, enabling comparison over time.
This question belongs to: Economy GK Economy Set 1
Question #369
Which of the following is NOT a type of foreign investment?
A. Domestic bank deposits by residents
B. Foreign Direct Investment
C. Foreign Portfolio Investment
D. External Commercial Borrowings
Discuss
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Correct Answer: Option A

Explanation:
Domestic bank deposits by residents are not foreign investment. FDI, FPI and ECBs represent different forms of foreign capital inflows.
This question belongs to: Economy GK Economy Set 1
Question #370
In the context of public goods, the free-rider problem arises because:
A. Public goods are rivalrous
B. Public goods are excludable
C. Markets always provide public goods efficiently
D. Individuals can benefit without paying
Discuss
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Correct Answer: Option D

Explanation:
Because public goods are non-excludable, individuals have an incentive to free-ride — enjoy the benefits without contributing to the cost — leading to under-provision by the market.
This question belongs to: Economy GK Economy Set 1
Question #371
Which of the following is a major challenge for the Indian economy?
A. Complete self-sufficiency in all goods
B. High level of human development across all states equally
C. Regional disparities and unemployment
D. Absence of informal sector
Discuss
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Correct Answer: Option C

Explanation:
Regional disparities in development and persistent unemployment (especially youth and disguised unemployment) remain significant challenges for the Indian economy.
This question belongs to: Economy GK Economy Set 1
Question #372
The concept of 'Purchasing Power Parity' is used to:
A. Measure unemployment
B. Compare the relative value of currencies based on a basket of goods
C. Determine the interest rate only
D. Calculate the fiscal deficit
Discuss
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Correct Answer: Option B

Explanation:
Purchasing Power Parity (PPP) is a theory and method that compares currencies by determining the amount needed to purchase the same basket of goods and services in different countries.
This question belongs to: Economy GK Economy Set 1
Question #373
Which of the following is NOT a function of SEBI?
A. Issuing currency notes
B. Regulating the securities market
C. Protecting the interests of investors
D. Promoting the development of the securities market
Discuss
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Correct Answer: Option A

Explanation:
Issuing currency notes is the function of RBI. SEBI regulates the securities market, protects investors and promotes the orderly development of the capital market.
This question belongs to: Economy GK Economy Set 1
Question #374
In the context of cost-benefit analysis, a project is considered viable if:
A. Only private benefits are considered
B. Present value of benefits exceeds present value of costs
C. Only financial costs are considered without social costs
D. Present value of costs exceeds present value of benefits
Discuss
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Correct Answer: Option B

Explanation:
In cost-benefit analysis, a project is economically viable if the present value of its benefits exceeds the present value of its costs (Net Present Value > 0).
This question belongs to: Economy GK Economy Set 1
Question #375
Which of the following is a characteristic of the informal sector in developing economies?
A. High degree of regulation
B. Easy entry, small scale and labour intensity
C. High capital intensity and formal contracts
D. Complete absence of employment
Discuss
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Correct Answer: Option B

Explanation:
The informal sector is characterised by easy entry, small-scale operations, labour-intensive technology, lack of formal contracts and limited regulation.
This question belongs to: Economy GK Economy Set 1
Question #376
The term 'Quantitative Easing' refers to:
A. Reduction in government expenditure
B. Increase in CRR
C. Large-scale purchase of assets by the central bank to inject liquidity
D. Increase in policy interest rates
Discuss
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Correct Answer: Option C

Explanation:
Quantitative easing is an unconventional monetary policy tool whereby a central bank purchases large quantities of financial assets to inject liquidity into the economy when interest rates are already near zero.
This question belongs to: Economy GK Economy Set 1
Question #377
Which of the following is NOT a type of tax based on the impact on income distribution?
A. Regressive tax
B. Proportional tax
C. Ad valorem tax as a distribution classification
D. Progressive tax
Discuss
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Correct Answer: Option C

Explanation:
Ad valorem is a classification based on the method of assessment (percentage of value). Based on impact on distribution, taxes are progressive, proportional or regressive.
This question belongs to: Economy GK Economy Set 1
Question #378
In the context of the Indian economy, the term 'Twin Deficit' refers to:
A. Capital account deficit and fiscal surplus
B. Budget deficit and trade surplus
C. Fiscal deficit and current account deficit
D. Revenue deficit and primary deficit only
Discuss
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Correct Answer: Option C

Explanation:
Twin deficit refers to the simultaneous existence of a fiscal deficit (government budget) and a current account deficit (external sector) in an economy.
This question belongs to: Economy GK Economy Set 1
Question #379
Which of the following is a major advantage of a flexible exchange rate system?
A. Elimination of all speculation
B. Complete insulation from external shocks
C. No need for foreign exchange reserves
D. Automatic adjustment of balance of payments
Discuss
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Correct Answer: Option D

Explanation:
Under a flexible exchange rate system, the exchange rate adjusts automatically to equilibrate the demand and supply of foreign exchange, helping to correct balance of payments imbalances.
This question belongs to: Economy GK Economy Set 1
Question #380
The concept of 'Sunk Cost' is important because:
A. It is a cost that has already been incurred and should be ignored in future decisions
B. It increases with output in the long run
C. It should always be considered in future decision making
D. It is the only cost relevant for pricing
Discuss
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Correct Answer: Option A

Explanation:
Sunk costs are costs that have already been incurred and cannot be recovered. Rational decision-making requires ignoring sunk costs and focusing on future (incremental) costs and benefits.
This question belongs to: Economy GK Economy Set 1
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