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 29 of 111
Question #561
Which of the following is a characteristic of the Indian financial system?
A. Complete self-regulation without government oversight
B. Absence of regulatory institutions
C. Presence of multiple regulators including RBI, SEBI, IRDAI and PFRDA
D. Only one regulator for all financial markets
Discuss
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Correct Answer: Option C

Explanation:
India's financial system is regulated by multiple specialised bodies: RBI for banking, SEBI for capital markets, IRDAI for insurance and PFRDA for pensions.
This question belongs to: Economy GK Economy Set 1
Question #562
In the context of economic theory, the 'Law of Demand' is derived from:
A. Only the substitution effect
B. Only the income effect
C. Increasing marginal utility
D. Both substitution and income effects for normal goods
Discuss
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Correct Answer: Option D

Explanation:
For normal goods, both the substitution effect and the income effect of a price change work in the same direction, reinforcing the inverse relationship between price and quantity demanded.
This question belongs to: Economy GK Economy Set 1
Question #563
The concept of 'Break-even Analysis' is used to determine:
A. The level of output at which total revenue equals total cost
B. The level of output at which profit is maximised
C. The level of output at which marginal cost is minimum
D. The level of output at which average cost is maximum
Discuss
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Correct Answer: Option A

Explanation:
Break-even analysis identifies the output level at which total revenue equals total cost, so that the firm makes neither profit nor loss.
This question belongs to: Economy GK Economy Set 1
Question #564
Which of the following is a feature of globalisation in the economic sense?
A. Only cultural exchange without economic linkages
B. Complete ban on cross-border capital flows
C. Increasing integration of national economies through trade, investment and technology
D. Increasing isolation of national economies
Discuss
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Correct Answer: Option C

Explanation:
Economic globalisation refers to the growing interdependence of national economies through the expansion of cross-border trade, capital flows, technology transfer and information exchange.
This question belongs to: Economy GK Economy Set 1
Question #565
In the context of public finance, 'Tax Buoyancy' measures:
A. The progressivity of the tax system only
B. The share of indirect taxes only
C. The administrative cost of tax collection
D. The responsiveness of tax revenue to changes in GDP without discretionary changes
Discuss
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Correct Answer: Option D

Explanation:
Tax buoyancy is the ratio of the percentage change in tax revenue to the percentage change in GDP, reflecting both automatic and discretionary changes in the tax system.
This question belongs to: Economy GK Economy Set 1
Question #566
The term 'Open Market Operations' are conducted by the RBI to:
A. Manage liquidity and influence short-term interest rates
B. Fix the long-term fiscal deficit target
C. Determine tax rates
D. Regulate the stock market directly
Discuss
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Correct Answer: Option A

Explanation:
Open Market Operations involve the buying and selling of government securities by the RBI to inject or absorb liquidity and thereby influence money market interest rates.
This question belongs to: Economy GK Economy Set 1
Question #567
Which of the following is a feature of the short-run cost curves?
A. Average fixed cost declines continuously as output increases
B. There are no fixed costs
C. All costs are variable
D. Marginal cost is always constant
Discuss
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Correct Answer: Option A

Explanation:
Average fixed cost falls continuously with an increase in output because total fixed cost is spread over a larger number of units; the AFC curve is a rectangular hyperbola.
This question belongs to: Economy GK Economy Set 1
Question #568
In the context of economic growth models, the Harrod-Domar model emphasises:
A. Only technological progress
B. Only natural resource endowment
C. The role of savings rate and capital-output ratio in determining growth
D. Only labour force growth
Discuss
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Correct Answer: Option C

Explanation:
The Harrod-Domar model states that the growth rate of output depends on the savings rate and the capital-output ratio (or the productivity of capital).
This question belongs to: Economy GK Economy Set 1
Question #569
Which of the following is a major objective of the Reserve Bank of India?
A. Formulation of the Union Budget
B. Formulation of Five Year Plans
C. Maintaining monetary stability and regulating the financial system
D. Collection of direct taxes
Discuss
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Correct Answer: Option C

Explanation:
The RBI's primary responsibilities include maintaining price and financial stability, regulating banks and the financial system, and managing the currency and foreign exchange.
This question belongs to: Economy GK Economy Set 1
Question #570
Which of the following is a component of the capital account of India's balance of payments?
A. Foreign direct investment and portfolio investment
B. Interest payments on external debt
C. Remittances from abroad
D. Software service exports
Discuss
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Correct Answer: Option A

Explanation:
Foreign direct investment and portfolio investment are capital account transactions. Software exports, remittances and interest payments form part of the current account.
This question belongs to: Economy GK Economy Set 1
Question #571
In the context of inflation, 'Headline Inflation' includes:
A. Only manufactured goods prices
B. Only core components excluding food and fuel
C. Only housing prices
D. All items in the consumer price basket including food and fuel
Discuss
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Correct Answer: Option D

Explanation:
Headline inflation measures the overall change in the price level of a comprehensive basket of goods and services, including volatile items such as food and fuel.
This question belongs to: Economy GK Economy Set 1
Question #572
The term 'Primary Market' in the capital market is the market for:
A. Only short-term money market instruments
B. Trading of existing securities
C. Only agricultural commodities
D. Issue of new securities by companies and governments
Discuss
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Correct Answer: Option D

Explanation:
The primary market is where new securities are issued and sold for the first time to raise fresh capital. The secondary market deals with subsequent trading of existing securities.
This question belongs to: Economy GK Economy Set 1
Question #573
Which of the following is a type of elasticity of demand?
A. Price elasticity, income elasticity and cross elasticity
B. Only supply elasticity
C. Only cost elasticity
D. Only production elasticity
Discuss
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Correct Answer: Option A

Explanation:
The main types of demand elasticity are price elasticity of demand, income elasticity of demand and cross elasticity of demand.
This question belongs to: Economy GK Economy Set 1
Question #574
In the context of economic reforms, 'Disinvestment' involves:
A. Increasing government stake in public sector enterprises
B. Nationalisation of private firms
C. Complete closure of all public enterprises
D. Sale of government equity in public sector enterprises
Discuss
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Correct Answer: Option D

Explanation:
Disinvestment refers to the sale of government-held shares in public sector enterprises to private investors or the public, thereby reducing the government's ownership stake.
This question belongs to: Economy GK Economy Set 1
Question #575
Which of the following is a major source of tax revenue for the Central Government?
A. Only property tax collected by local bodies
B. Corporation tax, income tax and central GST
C. Only entertainment tax
D. Only professional tax
Discuss
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Correct Answer: Option B

Explanation:
The major sources of central tax revenue include corporation tax, personal income tax, and the central share of GST, along with customs duties.
This question belongs to: Economy GK Economy Set 1
Question #576
The concept of 'Intergenerational Equity' in fiscal policy emphasises:
A. Only reducing taxes for the current generation
B. Only short-term stabilisation
C. Fair distribution of the burden of public debt between present and future generations
D. Only maximising current consumption
Discuss
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Correct Answer: Option C

Explanation:
Intergenerational equity requires that the burden of financing public expenditure and debt is distributed fairly across generations so that future generations are not unduly burdened.
This question belongs to: Economy GK Economy Set 1
Question #577
Which of the following is a desirable characteristic of money?
A. Durability, portability, divisibility and limited supply
B. Unlimited supply
C. Difficulty in storage
D. Perishability
Discuss
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Correct Answer: Option A

Explanation:
Good money should be durable, portable, divisible, uniform, recognisable and relatively scarce so that it can effectively perform its functions.
This question belongs to: Economy GK Economy Set 1
Question #578
In the context of the Indian economy, the demographic dividend can be harnessed through:
A. Investing in education, skill development and job creation for the working-age population
B. Raising the fertility rate continuously
C. Increasing the dependency ratio
D. Reducing the labour force participation rate
Discuss
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Correct Answer: Option A

Explanation:
To realise the demographic dividend, a country must invest in human capital and create productive employment opportunities for its large working-age population.
This question belongs to: Economy GK Economy Set 1
Question #579
The term 'Base Year' in national income accounting is important because it:
A. Determines the fiscal deficit target
B. Provides the price structure for calculating real GDP
C. Fixes the exchange rate
D. Determines the tax rates
Discuss
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Correct Answer: Option B

Explanation:
The base year supplies the constant price weights used to compute real GDP and other volume measures, enabling meaningful comparisons over time.
This question belongs to: Economy GK Economy Set 1
Question #580
Which of the following is a type of foreign capital inflow?
A. Domestic bank deposits of residents
B. Only government tax revenue
C. Foreign direct investment, portfolio investment and external commercial borrowings
D. Only domestic equity issuance
Discuss
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Correct Answer: Option C

Explanation:
Foreign capital inflows include FDI, FPI, external commercial borrowings, trade credit and other external liabilities.
This question belongs to: Economy GK Economy Set 1
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