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.

2220
Total Questions

Practice Questions

Page 23 of 111
Question #441
Which of the following is used to measure multidimensional poverty?
A. Lorenz curve
B. Headcount ratio based only on income
C. Gini coefficient
D. Multidimensional Poverty Index (MPI)
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
The Multidimensional Poverty Index, developed by UNDP and OPHI, captures deprivations in health, education and living standards beyond income poverty.
This question belongs to: Economy GK Economy Set 1
Question #442
In the context of elasticity, a perfectly inelastic demand curve is:
A. Upward sloping
B. Downward sloping with unit elasticity
C. Vertical
D. Horizontal
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
A perfectly inelastic demand curve is a vertical straight line, indicating that quantity demanded does not change at all with changes in price.
This question belongs to: Economy GK Economy Set 1
Question #443
Which of the following is a qualitative tool of monetary policy?
A. Repo rate
B. Open market operations
C. Selective credit control
D. Cash Reserve Ratio
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
Selective credit controls (such as margin requirements and credit ceilings for specific sectors) are qualitative measures aimed at directing credit flow rather than controlling its overall volume.
This question belongs to: Economy GK Economy Set 1
Question #444
The term 'Base Money' or 'Reserve Money' consists of:
A. Only currency with the public
B. Only time deposits of banks
C. Only demand deposits
D. Currency in circulation plus bankers' deposits with RBI and other deposits
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
Reserve money (monetary base) includes currency in circulation, bankers' deposits with the RBI and other deposits with the RBI.
This question belongs to: Economy GK Economy Set 1
Question #445
Which of the following is an assumption of the perfect competition model?
A. Selling costs are significant
B. Product differentiation
C. Free entry and exit of firms
D. Firms face a downward-sloping demand curve
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
Perfect competition assumes free entry and exit, homogeneous product, large number of buyers and sellers, and perfect information, resulting in firms being price takers.
This question belongs to: Economy GK Economy Set 1
Question #446
In the context of Indian public finance, 'Effective Revenue Deficit' is defined as:
A. Revenue deficit minus grants for creation of capital assets
B. Fiscal deficit minus interest payments
C. Revenue deficit plus capital expenditure
D. Primary deficit plus interest payments
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
Effective Revenue Deficit is Revenue Deficit minus grants given by the Centre to states and union territories for the creation of capital assets.
This question belongs to: Economy GK Economy Set 1
Question #447
The concept of 'Terms of Trade' deterioration for developing countries was emphasised by:
A. Raul Prebisch and Hans Singer
B. Adam Smith
C. David Ricardo
D. Heckscher and Ohlin
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
The Prebisch-Singer hypothesis argues that the terms of trade of primary commodity exporters (mostly developing countries) tend to deteriorate over time relative to manufactured goods.
This question belongs to: Economy GK Economy Set 1
Question #448
Which of the following is a feature of the Indian monetary policy framework since 2016?
A. Flexible inflation targeting with CPI as the nominal anchor
B. Exchange rate targeting
C. Multiple indicator approach without a nominal anchor
D. Monetary targeting with M3 as the sole intermediate target
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
India adopted a Flexible Inflation Targeting framework in 2016, with CPI inflation as the nominal anchor and a target of 4% with a tolerance band of ±2%.
This question belongs to: Economy GK Economy Set 1
Question #449
In the theory of consumer behaviour, the income effect of a price change for a normal good is:
A. Positive
B. Negative
C. Zero
D. Indeterminate
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
For a normal good, a fall in price increases real income, leading to an increase in quantity demanded (positive income effect), reinforcing the substitution effect.
This question belongs to: Economy GK Economy Set 1
Question #450
The term 'Disguised Unemployment' implies that:
A. Unemployment is due to seasonal factors only
B. More people are engaged in a task than required, with marginal productivity close to zero
C. Workers are employed in high-productivity jobs
D. Workers are unemployed and actively seeking jobs
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option B

Explanation:
Disguised unemployment exists when the removal of some workers does not reduce total output, typically found in agriculture in developing countries.
This question belongs to: Economy GK Economy Set 1
Question #451
Which of the following is an automatic stabiliser in the fiscal system?
A. Change in repo rate by the central bank
B. Discretionary increase in infrastructure spending
C. One-time stimulus package
D. Progressive income tax structure
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
Progressive income taxes automatically increase the tax burden during expansions and reduce it during contractions, stabilising disposable income without new legislation.
This question belongs to: Economy GK Economy Set 1
Question #452
In the context of international trade, 'Voluntary Export Restraint' is an example of:
A. Free trade agreement
B. Tariff barrier
C. Export promotion measure
D. Non-tariff barrier
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
A Voluntary Export Restraint (VER) is a non-tariff barrier under which an exporting country agrees to limit the quantity of exports to a particular country.
This question belongs to: Economy GK Economy Set 1
Question #453
Which of the following is a characteristic of the long-run equilibrium under monopolistic competition?
A. Firms earn supernormal profits
B. Firms produce at the lowest point of the LAC curve
C. Price equals minimum average cost
D. Firms earn only normal profits and operate with excess capacity
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
In the long run, free entry eliminates supernormal profits under monopolistic competition. Firms operate on the falling portion of their LAC curve, implying excess capacity.
This question belongs to: Economy GK Economy Set 1
Question #454
The concept of 'Liquidity Preference' theory explains the determination of:
A. Real wages
B. Rent on land
C. Rate of interest
D. Profit rate
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
According to Keynes, the rate of interest is determined by the demand for money (liquidity preference) and the supply of money.
This question belongs to: Economy GK Economy Set 1
Question #455
Which of the following is a measure of absolute poverty commonly used in India?
A. Poverty line based on calorie norms and consumption expenditure
B. Gini coefficient
C. Lorenz curve
D. Relative income share of the bottom 10%
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
India has traditionally used a poverty line based on minimum calorie requirements and corresponding consumption expenditure to measure absolute poverty.
This question belongs to: Economy GK Economy Set 1
Question #456
In the context of banking, the Statutory Liquidity Ratio (SLR) is maintained in the form of:
A. Only cash
B. Cash, gold and approved securities
C. Only equity shares
D. Only foreign exchange
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option B

Explanation:
Banks are required to maintain SLR in the form of cash, gold or unencumbered approved securities as a percentage of their Net Demand and Time Liabilities.
This question belongs to: Economy GK Economy Set 1
Question #457
The term 'Primary Deficit' indicates:
A. Fiscal deficit including interest payments
B. Fiscal deficit excluding interest payments
C. Revenue deficit excluding interest payments
D. Budgetary deficit only
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option B

Explanation:
Primary deficit = Fiscal deficit − Interest payments. It shows the borrowing requirement of the government excluding the interest burden of past debt.
This question belongs to: Economy GK Economy Set 1
Question #458
Which of the following is an example of a positive externality in production?
A. Bee-keeping near an apple orchard
B. Pollution from a factory
C. Noise from an airport
D. Congestion on public roads
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
Bee-keeping provides pollination benefits to nearby apple orchards without compensation, representing a positive production externality.
This question belongs to: Economy GK Economy Set 1
Question #459
In the context of national income accounting, which of the following is excluded from GDP?
A. Government final consumption expenditure
B. Value of final goods produced domestically
C. Imputed rent of owner-occupied houses
D. Value of intermediate goods
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
Intermediate goods are excluded from GDP to avoid double counting. Only the value of final goods and services is included.
This question belongs to: Economy GK Economy Set 1
Question #460
The concept of 'Accelerator Principle' states that:
A. Investment depends on the rate of change of income or output
B. Investment depends on the level of income
C. Saving depends only on income
D. Consumption depends on the rate of interest
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
The accelerator principle posits that net investment is a function of the change in output or income; a rise in demand induces a multiple increase in investment.
This question belongs to: Economy GK Economy Set 1
Today's Top Topics
Economy Set 1 2220
Explore Subjects
Geography GK 6121 Reasoning 2064 Current Affairs 575 Maths 5575 Economy GK 2220
Practice Mix
When is the International Day of Democracy observed?
He is _______ good that he saves many lives.
Which is a key metric for laptop CPUs?
She keeps ___ smiling.
Which Indian athlete won the silver medal in the men's triple jump at the 2022 Commonwealth Games?