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 20 of 111
Question #381
Which of the following is NOT a measure of economic inequality?
A. Gini coefficient
B. Human Development Index as a pure inequality measure
C. Theil index
D. Lorenz curve
Discuss
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Correct Answer: Option B

Explanation:
HDI is a composite measure of development (health, education, income). Gini coefficient, Lorenz curve and Theil index are specific measures of inequality.
This question belongs to: Economy GK Economy Set 1
Question #382
In the context of banking regulation, the Capital Adequacy Ratio is prescribed to:
A. Fix the CRR level
B. Determine the interest rate on deposits
C. Ensure banks maintain sufficient capital relative to risk-weighted assets
D. Determine the dividend payout
Discuss
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Correct Answer: Option C

Explanation:
Capital Adequacy Ratio (CAR) requires banks to hold a minimum amount of capital in proportion to their risk-weighted assets to absorb potential losses and protect depositors.
This question belongs to: Economy GK Economy Set 1
Question #383
Which of the following is a characteristic of a command economy?
A. Prices determined solely by market forces
B. Consumer sovereignty as the guiding principle
C. Decentralised decision making by private firms
D. Central authority allocates resources according to a plan
Discuss
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Correct Answer: Option D

Explanation:
In a command (planned) economy, a central planning authority makes major decisions regarding production, allocation of resources and distribution of goods.
This question belongs to: Economy GK Economy Set 1
Question #384
The term 'Invisible Trade' in the balance of payments refers to:
A. Trade in goods only
B. Trade in services, income and transfers
C. Only foreign direct investment
D. Only capital transfers
Discuss
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Correct Answer: Option B

Explanation:
Invisible trade (or invisibles) includes trade in services (such as tourism, software, transportation), income (interest, dividends) and unilateral transfers.
This question belongs to: Economy GK Economy Set 1
Question #385
Which of the following is NOT a factor affecting the elasticity of demand?
A. Nature of the commodity (necessity or luxury)
B. Cost of production of the commodity
C. Time period under consideration
D. Availability of substitutes
Discuss
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Correct Answer: Option B

Explanation:
Cost of production affects supply, not the elasticity of demand. Elasticity of demand depends on substitutes, nature of the good, income proportion, time, and habits.
This question belongs to: Economy GK Economy Set 1
Question #386
In the context of the Indian economy, the 'GST' is an example of:
A. An indirect tax with dual structure (Centre and States)
B. A direct tax
C. A corporate tax only
D. A wealth tax
Discuss
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Correct Answer: Option A

Explanation:
Goods and Services Tax is a comprehensive indirect tax levied on the supply of goods and services, with a dual structure involving both the Centre and the States.
This question belongs to: Economy GK Economy Set 1
Question #387
The concept of 'Economic Rent' in classical economics refers to:
A. Payment for the use of land arising from its scarcity
B. Payment for the use of capital only
C. Wages of labour
D. Profit of the entrepreneur
Discuss
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Correct Answer: Option A

Explanation:
In classical economics, economic rent is the payment made for the use of land (or other resources in fixed supply) that arises due to its scarcity and differential fertility.
This question belongs to: Economy GK Economy Set 1
Question #388
Which of the following is a major objective of monetary policy in a developing country like India?
A. Only promoting imports
B. Only maximising fiscal deficit
C. Price stability consistent with growth and financial stability
D. Only maximising inflation
Discuss
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Correct Answer: Option C

Explanation:
The primary objective of monetary policy in India is to maintain price stability while keeping in mind the objective of growth, along with ensuring financial stability.
This question belongs to: Economy GK Economy Set 1
Question #389
In the context of production theory, the isoquant represents:
A. Combinations of inputs that yield the same level of output
B. Combinations of prices that maximise profit
C. Combinations of goods that give the same utility
D. Combinations of income and consumption
Discuss
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Correct Answer: Option A

Explanation:
An isoquant is a curve that shows all possible combinations of two inputs that produce the same level of output, analogous to an indifference curve in consumer theory.
This question belongs to: Economy GK Economy Set 1
Question #390
Which of the following is NOT a type of market structure based on the number of sellers?
A. Monopsony as a seller-based classification
B. Duopoly (two sellers)
C. Oligopoly (few sellers)
D. Monopoly (one seller)
Discuss
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Correct Answer: Option A

Explanation:
Monopsony refers to a market with a single buyer. Market structures based on the number of sellers are monopoly, duopoly, oligopoly and perfect competition (many sellers).
This question belongs to: Economy GK Economy Set 1
Question #391
The term 'Fiscal Consolidation' refers to:
A. Policies aimed at reducing fiscal deficit and public debt
B. Only increasing tax rates
C. Increase in government expenditure without regard to revenue
D. Only printing more money
Discuss
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Correct Answer: Option A

Explanation:
Fiscal consolidation refers to policies and measures undertaken to reduce the fiscal deficit and put public finances on a sustainable path.
This question belongs to: Economy GK Economy Set 1
Question #392
Which of the following is a characteristic of a developed money market?
A. High transaction costs and low participation
B. Only long-term government securities
C. Presence of a wide range of instruments and high liquidity
D. Absence of short-term instruments
Discuss
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Correct Answer: Option C

Explanation:
A developed money market features a variety of short-term instruments, high liquidity, low transaction costs and active participation by financial institutions.
This question belongs to: Economy GK Economy Set 1
Question #393
In the context of economic theory, the 'Law of Demand' may not hold in the case of:
A. Giffen goods and Veblen goods
B. All inferior goods
C. Normal goods
D. Necessary goods only
Discuss
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Correct Answer: Option A

Explanation:
The law of demand does not hold for Giffen goods (where income effect outweighs substitution effect) and Veblen goods (where higher price increases demand due to prestige value).
This question belongs to: Economy GK Economy Set 1
Question #394
Which of the following is NOT a component of the Human Development Report published by UNDP?
A. Multidimensional Poverty Index
B. Human Development Index
C. Gender Inequality Index
D. Wholesale Price Index of India
Discuss
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Correct Answer: Option D

Explanation:
The Wholesale Price Index is an Indian domestic price index. The Human Development Report includes HDI, GII, MPI and other development-related indices.
This question belongs to: Economy GK Economy Set 1
Question #395
The concept of 'Opportunity Cost of Holding Money' is related to:
A. The interest forgone by holding cash instead of interest-bearing assets
B. The cost of producing goods
C. The cost of printing money
D. The cost of banking services only
Discuss
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Correct Answer: Option A

Explanation:
The opportunity cost of holding money is the interest income that could have been earned by holding interest-bearing assets instead of cash.
This question belongs to: Economy GK Economy Set 1
Question #396
Which of the following is a major reason for the growth of the service sector in India?
A. Only agricultural growth
B. Decline in demand for services
C. Complete absence of industrial growth
D. Liberalisation, IT revolution and rising incomes
Discuss
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Correct Answer: Option D

Explanation:
The service sector in India has grown rapidly due to economic liberalisation, the information technology revolution, rising incomes and global demand for services such as software and BPO.
This question belongs to: Economy GK Economy Set 1
Question #397
In the context of public expenditure, Wagner's Law suggests that:
A. Public expenditure declines with economic development
B. Public expenditure is independent of economic growth
C. Public expenditure tends to increase as the economy develops
D. Only private expenditure increases with development
Discuss
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Correct Answer: Option C

Explanation:
Wagner's Law posits that as an economy develops, the share of public expenditure in national income tends to rise due to increased demand for public goods and social services.
This question belongs to: Economy GK Economy Set 1
Question #398
Which of the following is NOT a type of unemployment based on cause?
A. Structural
B. Cyclical
C. Voluntary as the only cause-based type
D. Frictional
Discuss
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Correct Answer: Option C

Explanation:
While unemployment can be voluntary or involuntary, the standard cause-based classification includes frictional, structural, cyclical and seasonal unemployment.
This question belongs to: Economy GK Economy Set 1
Question #399
The term 'Managed Floating' exchange rate system means:
A. Exchange rate is completely fixed by the government
B. There is no role for the central bank
C. Exchange rate is fixed in terms of gold only
D. Exchange rate is determined by market forces with occasional central bank intervention
Discuss
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Correct Answer: Option D

Explanation:
Under a managed floating system, the exchange rate is primarily determined by market forces, but the central bank intervenes occasionally to prevent excessive volatility.
This question belongs to: Economy GK Economy Set 1
Question #400
Which of the following is a feature of the Indian tax structure after the introduction of GST?
A. Complete absence of state taxes
B. Multiple cascading taxes on goods
C. Unified tax on goods and services with input tax credit
D. Only central taxes without state participation
Discuss
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Correct Answer: Option C

Explanation:
GST replaced multiple cascading taxes with a unified tax on the supply of goods and services, allowing input tax credit and involving both the Centre and the States.
This question belongs to: Economy GK Economy Set 1
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