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 27 of 111
Question #521
The concept of 'Inter-temporal Choice' in economics deals with:
A. Choice between present and future consumption
B. Choice between different goods at the same time
C. Choice between imports and exports
D. Choice between leisure and work only
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
Inter-temporal choice refers to decisions involving trade-offs among costs and benefits occurring at different points in time, such as saving versus present consumption.
This question belongs to: Economy GK Economy Set 1
Question #522
Which of the following is a feature of the Indian fiscal federalism?
A. Division of tax powers between Centre and States with Finance Commission recommendations
B. Complete centralisation of all taxes
C. Only states collect all major taxes
D. Absence of any sharing of taxes
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
Indian fiscal federalism involves constitutional division of tax bases between the Centre and States, with the Finance Commission recommending the sharing of divisible taxes and grants.
This question belongs to: Economy GK Economy Set 1
Question #523
In the context of market failure, externalities lead to:
A. Efficient market outcomes
B. Zero role for government intervention
C. Divergence between private and social costs or benefits
D. Perfect competition
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
Externalities cause a divergence between private and social costs (or benefits), leading to over- or under-production relative to the socially optimal level.
This question belongs to: Economy GK Economy Set 1
Question #524
Which of the following is a characteristic of the Indian service sector?
A. Largest contributor to GDP and significant employment generation in recent decades
B. Absence of IT and ITES services
C. Complete dependence on agriculture
D. Low contribution to GDP
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
The services sector is the largest contributor to India's GDP and has been a major driver of growth, particularly through IT, financial services, trade and tourism.
This question belongs to: Economy GK Economy Set 1
Question #525
The term 'Quantitative Restrictions' on imports refer to:
A. Limits on the quantity or value of goods that can be imported
B. Tariffs only
C. Export subsidies
D. Exchange rate controls only
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
Quantitative restrictions (QRs) are non-tariff barriers that limit the volume or value of imports, such as quotas and licensing requirements.
This question belongs to: Economy GK Economy Set 1
Question #526
Which of the following is a feature of the production possibility frontier?
A. It is always a straight line
B. It shifts inward with technological progress
C. It is concave to the origin under increasing opportunity costs
D. Points inside the frontier are unattainable
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
The PPF is typically concave to the origin, reflecting increasing opportunity costs as more of one good is produced by reallocating resources from the other good.
This question belongs to: Economy GK Economy Set 1
Question #527
In the context of banking regulation, Basel norms primarily deal with:
A. Exchange rate management
B. Fiscal deficit targets
C. Capital adequacy, risk management and supervision of banks
D. Interest rate determination
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
Basel norms (Basel I, II, III) are international banking regulations that set standards for capital adequacy, stress testing and market liquidity risk.
This question belongs to: Economy GK Economy Set 1
Question #528
Which of the following is a major objective of the Goods and Services Tax in India?
A. To increase the number of indirect taxes
B. To eliminate all central taxes
C. To increase cascading of taxes
D. To create a unified national market and reduce cascading effect
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
GST aims to create a common national market, eliminate the cascading effect of taxes through input tax credit, and simplify the indirect tax structure.
This question belongs to: Economy GK Economy Set 1
Question #529
The concept of 'Liquidity Trap' implies that monetary policy becomes ineffective because:
A. Interest rates are very high
B. Money demand is interest-inelastic
C. People prefer to hold cash at very low interest rates
D. Investment is highly interest-elastic
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
In a liquidity trap, interest rates are near zero and the demand for money becomes perfectly elastic; additional money supply is absorbed as idle balances without reducing interest rates further.
This question belongs to: Economy GK Economy Set 1
Question #530
Which of the following is a feature of the Indian external sector since the 1990s?
A. Complete isolation from global capital flows
B. Fixed exchange rate without intervention
C. Gradual liberalisation of trade and capital account with managed float
D. Ban on foreign direct investment
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
Since the 1991 reforms, India has progressively liberalised trade and capital flows while adopting a managed floating exchange rate regime.
This question belongs to: Economy GK Economy Set 1
Question #531
In the context of cost analysis, fixed costs in the short run:
A. Vary with the level of output
B. Are zero at zero output
C. Remain constant irrespective of the level of output
D. Are always greater than variable costs
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
Fixed costs do not change with the level of output in the short run; they must be incurred even if output is zero.
This question belongs to: Economy GK Economy Set 1
Question #532
Which of the following is a characteristic of a dual economy?
A. Absence of informal activities
B. Only service sector dominance
C. Uniform productivity across sectors
D. Coexistence of a modern industrial sector and a traditional agricultural sector
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
Dualism refers to the simultaneous existence of a modern, high-productivity sector and a traditional, low-productivity sector within the same economy.
This question belongs to: Economy GK Economy Set 1
Question #533
The term 'Most Favoured Nation' treatment under WTO implies:
A. Non-discriminatory treatment among all member countries
B. Higher tariffs for all members
C. Preferential treatment to one country at the expense of others
D. Complete free trade without any rules
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
The MFN principle requires that any trade advantage granted to one WTO member must be extended to all other members, ensuring non-discrimination.
This question belongs to: Economy GK Economy Set 1
Question #534
Which of the following is a major source of non-tax revenue for the Government of India?
A. Customs duty
B. Corporation tax
C. Personal income tax
D. Interest receipts and dividends from PSUs
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
Interest receipts on loans given by the government and dividends/profits from public sector enterprises are important components of non-tax revenue.
This question belongs to: Economy GK Economy Set 1
Question #535
In the context of economic theory, the 'Invisible Hand' suggests that:
A. Individuals pursuing self-interest can promote social welfare through market mechanism
B. Markets always fail
C. Government planning is necessary for efficiency
D. Collective ownership is optimal
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
Adam Smith's concept of the invisible hand argues that individuals seeking their own gain in competitive markets unintentionally promote the overall social good.
This question belongs to: Economy GK Economy Set 1
Question #536
Which of the following is a feature of the Indian labour market?
A. Complete absence of unemployment
B. Dominance of formal sector employment only
C. Large share of informal employment and dualism
D. Uniform wages across sectors
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
The Indian labour market is characterised by a large informal sector, dualism between formal and informal employment, and significant underemployment.
This question belongs to: Economy GK Economy Set 1
Question #537
The concept of 'Purchasing Power Parity' is used primarily for:
A. Comparing the real value of currencies and living standards across countries
B. Determining domestic interest rates only
C. Calculating fiscal deficit
D. Measuring unemployment rates
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option A

Explanation:
PPP exchange rates equalise the purchasing power of different currencies by eliminating differences in price levels, allowing better comparison of real income and living standards.
This question belongs to: Economy GK Economy Set 1
Question #538
Which of the following is a characteristic of the long-run equilibrium in perfect competition?
A. Firms earn supernormal profits
B. Price equals minimum average cost and firms earn normal profits
C. Price is greater than marginal cost
D. Firms operate with excess capacity
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option B

Explanation:
In long-run equilibrium under perfect competition, free entry and exit ensure that price equals minimum long-run average cost and firms earn only normal profits.
This question belongs to: Economy GK Economy Set 1
Question #539
In the context of Indian economy, the term 'Twin Balance Sheet Problem' referred to:
A. Problems of government and household balance sheets
B. Only fiscal and current account deficits
C. Stressed balance sheets of banks and corporates
D. Only external and internal debt
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
The twin balance sheet problem referred to the simultaneous stress on the balance sheets of banks (rising NPAs) and over-leveraged corporates in India during a particular period.
This question belongs to: Economy GK Economy Set 1
Question #540
Which of the following is a feature of the Classical theory of interest?
A. Interest is determined by demand and supply of money
B. Interest is a monetary phenomenon only
C. Liquidity preference determines interest
D. Interest is determined by demand and supply of real savings and investment
Discuss
Get Complete Subject PDF for Economy GK

Correct Answer: Option D

Explanation:
In classical theory, the rate of interest is a real phenomenon determined by the demand for investment and the supply of savings.
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?