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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Total Questions

Practice Questions

Page 3 of 111
Question #41
Which of the following is a primary function of money?
A. Store of value
B. Standard of deferred payments
C. Unit of account
D. Medium of exchange
Discuss
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Correct Answer: Option D

Explanation:
The primary function of money is to act as a medium of exchange.
This question belongs to: Economy GK Economy Set 1
Question #42
Which of the following is included in M1 in India?
A. National savings certificates
B. Currency with the public plus demand deposits with banks plus other deposits with RBI
C. Post office savings deposits
D. Time deposits with banks
Discuss
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Correct Answer: Option B

Explanation:
M1 includes currency with the public, demand deposits with banks and other deposits with the RBI.
This question belongs to: Economy GK Economy Set 1
Question #43
Broad money M3 in India consists of M1 plus:
A. time deposits with banks
B. government deposits
C. only post office deposits
D. foreign currency reserves
Discuss
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Correct Answer: Option A

Explanation:
M3 is M1 plus time deposits with banks.
This question belongs to: Economy GK Economy Set 1
Question #44
If the reserve ratio is 10%, the simple deposit/money multiplier is:
A. 20
B. 5
C. 10
D. 100
Discuss
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Correct Answer: Option C

Explanation:
Money multiplier = 1/reserve ratio = 1/0.10 = 10.
This question belongs to: Economy GK Economy Set 1
Question #45
The quantity theory of money is expressed by which equation?
A. MC = MR
B. S = I
C. MV = PT
D. Y = C + I
Discuss
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Correct Answer: Option C

Explanation:
The quantity theory of money is expressed as MV = PT.
This question belongs to: Economy GK Economy Set 1
Question #46
In India, the two most commonly used price indices for measuring inflation are:
A. IIP and PMI
B. BSE and NSE
C. GDP deflator and HDI
D. WPI and CPI
Discuss
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Correct Answer: Option D

Explanation:
The Wholesale Price Index and Consumer Price Index are the two main inflation measures in India.
This question belongs to: Economy GK Economy Set 1
Question #47
The Wholesale Price Index in India measures price movements of:
A. services only
B. agricultural products only
C. goods and services
D. goods only
Discuss
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Correct Answer: Option D

Explanation:
WPI measures price movements of goods only; it does not include services.
This question belongs to: Economy GK Economy Set 1
Question #48
The base year currently used for the Consumer Price Index in India is:
A. 2001
B. 2012
C. 2004-05
D. 2016
Discuss
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Correct Answer: Option B

Explanation:
The current CPI series has 2012 as the base year.
This question belongs to: Economy GK Economy Set 1
Question #49
Core inflation excludes which of the following?
A. housing prices
B. food and fuel prices
C. all manufactured goods
D. imported goods
Discuss
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Correct Answer: Option B

Explanation:
Core inflation excludes volatile food and fuel prices to capture underlying inflation trends.
This question belongs to: Economy GK Economy Set 1
Question #50
Demand-pull inflation is caused by:
A. a fall in money supply
B. decrease in government expenditure
C. aggregate demand exceeding aggregate supply at full employment
D. an increase in production costs
Discuss
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Correct Answer: Option C

Explanation:
Demand-pull inflation occurs when aggregate demand exceeds aggregate supply.
This question belongs to: Economy GK Economy Set 1
Question #51
Cost-push inflation is primarily caused by:
A. reduction in taxes
B. excessive consumer demand
C. increase in imports
D. rise in input costs such as wages and raw materials
Discuss
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Correct Answer: Option D

Explanation:
Cost-push inflation arises from an increase in the cost of production.
This question belongs to: Economy GK Economy Set 1
Question #52
Stagflation refers to a situation of:
A. high inflation and high unemployment
B. high inflation and high growth
C. deflation and high growth
D. low inflation and high growth
Discuss
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Correct Answer: Option A

Explanation:
Stagflation is a combination of stagnation (high unemployment) and inflation.
This question belongs to: Economy GK Economy Set 1
Question #53
The Phillips curve shows an inverse relationship between:
A. output and employment
B. inflation and interest rates
C. inflation and unemployment
D. money supply and price level
Discuss
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Correct Answer: Option C

Explanation:
The Phillips curve suggests a short-run trade-off between inflation and unemployment.
This question belongs to: Economy GK Economy Set 1
Question #54
Deflation is best defined as:
A. a decrease in the rate of inflation
B. a fall in GDP
C. a sustained fall in the general price level
D. a rise in unemployment
Discuss
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Correct Answer: Option C

Explanation:
Deflation is a sustained fall in the general price level.
This question belongs to: Economy GK Economy Set 1
Question #55
Hyperinflation is characterized by:
A. stable prices
B. slow price rise
C. extremely rapid and out-of-control rise in prices
D. falling prices
Discuss
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Correct Answer: Option C

Explanation:
Hyperinflation is extremely rapid and uncontrollable price inflation.
This question belongs to: Economy GK Economy Set 1
Question #56
During inflation, the purchasing power of money:
A. increases
B. remains unchanged
C. decreases
D. first increases then decreases
Discuss
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Correct Answer: Option C

Explanation:
Inflation reduces the purchasing power of money because each unit buys fewer goods.
This question belongs to: Economy GK Economy Set 1
Question #57
In India, the repo rate is decided by:
A. RBI Governor
B. Monetary Policy Committee
C. Finance Minister
D. NITI Aayog
Discuss
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Correct Answer: Option B

Explanation:
The Monetary Policy Committee of the RBI decides the policy repo rate.
This question belongs to: Economy GK Economy Set 1
Question #58
The primary objective of the Reserve Bank of India's monetary policy is to:
A. maximize exports
B. eliminate fiscal deficit
C. maintain price stability while keeping in mind the objective of growth
D. manage government expenditure
Discuss
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Correct Answer: Option C

Explanation:
The RBI's monetary policy aims primarily to maintain price stability while supporting economic growth.
This question belongs to: Economy GK Economy Set 1
Question #59
Which of the following is not a monetary policy instrument of the RBI?
A. Government expenditure
B. CRR
C. Repo rate
D. Open market operations
Discuss
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Correct Answer: Option A

Explanation:
Government expenditure is a fiscal policy instrument, not a monetary policy instrument.
This question belongs to: Economy GK Economy Set 1
Question #60
The Liquidity Adjustment Facility of the RBI includes:
A. Currency printing and open market operations
B. Bank rate and MSF
C. CRR and SLR
D. Repo and reverse repo
Discuss
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Correct Answer: Option D

Explanation:
The Liquidity Adjustment Facility comprises repo and reverse repo operations.
This question belongs to: Economy GK Economy Set 1
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