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. Theil index
B. Gini coefficient
C. Human Development Index as a pure inequality measure
D. Lorenz curve
Discuss
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Correct Answer: Option C

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. Ensure banks maintain sufficient capital relative to risk-weighted assets
B. Determine the dividend payout
C. Fix the CRR level
D. Determine the interest rate on deposits
Discuss
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Correct Answer: Option A

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. Central authority allocates resources according to a plan
B. Consumer sovereignty as the guiding principle
C. Prices determined solely by market forces
D. Decentralised decision making by private firms
Discuss
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Correct Answer: Option A

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. Only foreign direct investment
B. Trade in goods only
C. Only capital transfers
D. Trade in services, income and transfers
Discuss
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Correct Answer: Option D

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. Availability of substitutes
B. Cost of production of the commodity
C. Nature of the commodity (necessity or luxury)
D. Time period under consideration
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. A corporate tax only
B. A direct tax
C. An indirect tax with dual structure (Centre and States)
D. A wealth tax
Discuss
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Correct Answer: Option C

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. Wages of labour
B. Payment for the use of capital only
C. Payment for the use of land arising from its scarcity
D. Profit of the entrepreneur
Discuss
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Correct Answer: Option C

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. Price stability consistent with growth and financial stability
B. Only maximising fiscal deficit
C. Only promoting imports
D. Only maximising inflation
Discuss
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Correct Answer: Option A

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 prices that maximise profit
B. Combinations of income and consumption
C. Combinations of goods that give the same utility
D. Combinations of inputs that yield the same level of output
Discuss
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Correct Answer: Option D

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. Oligopoly (few sellers)
B. Duopoly (two sellers)
C. Monopsony as a seller-based classification
D. Monopoly (one seller)
Discuss
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Correct Answer: Option C

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. Increase in government expenditure without regard to revenue
B. Only printing more money
C. Policies aimed at reducing fiscal deficit and public debt
D. Only increasing tax rates
Discuss
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Correct Answer: Option C

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. Absence of short-term instruments
C. Only long-term government securities
D. Presence of a wide range of instruments and high liquidity
Discuss
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Correct Answer: Option D

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. All inferior goods
B. Necessary goods only
C. Normal goods
D. Giffen goods and Veblen goods
Discuss
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Correct Answer: Option D

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. Wholesale Price Index of India
B. Gender Inequality Index
C. Human Development Index
D. Multidimensional Poverty Index
Discuss
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Correct Answer: Option A

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 cost of producing goods
B. The cost of banking services only
C. The cost of printing money
D. The interest forgone by holding cash instead of interest-bearing assets
Discuss
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Correct Answer: Option D

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. Liberalisation, IT revolution and rising incomes
B. Only agricultural growth
C. Complete absence of industrial growth
D. Decline in demand for services
Discuss
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Correct Answer: Option A

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 is independent of economic growth
B. Only private expenditure increases with development
C. Public expenditure declines with economic development
D. Public expenditure tends to increase as the economy develops
Discuss
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Correct Answer: Option D

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. Voluntary as the only cause-based type
B. Structural
C. Frictional
D. Cyclical
Discuss
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Correct Answer: Option A

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 determined by market forces with occasional central bank intervention
D. Exchange rate is fixed in terms of gold only
Discuss
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Correct Answer: Option C

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. Unified tax on goods and services with input tax credit
B. Only central taxes without state participation
C. Multiple cascading taxes on goods
D. Complete absence of state taxes
Discuss
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Correct Answer: Option A

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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Practice Mix
Which dance of Nagaland is performed during the 'Moatsu' festival?
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?