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 3 of 111
Question #41
Which of the following is a primary function of money?
A. Standard of deferred payments
B. Unit of account
C. Store of value
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. Post office savings deposits
B. National savings certificates
C. Time deposits with banks
D. Currency with the public plus demand deposits with banks plus other deposits with RBI
Discuss
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Correct Answer: Option D

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. only post office deposits
B. time deposits with banks
C. foreign currency reserves
D. government deposits
Discuss
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Correct Answer: Option B

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. 100
D. 10
Discuss
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Correct Answer: Option D

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. Y = C + I
B. MC = MR
C. MV = PT
D. S = 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. BSE and NSE
B. IIP and PMI
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. agricultural products only
B. services 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. 2016
C. 2012
D. 2004-05
Discuss
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Correct Answer: Option C

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. all manufactured goods
C. food and fuel prices
D. imported goods
Discuss
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Correct Answer: Option C

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. an increase in production costs
B. decrease in government expenditure
C. aggregate demand exceeding aggregate supply at full employment
D. a fall in money supply
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. increase in imports
B. rise in input costs such as wages and raw materials
C. reduction in taxes
D. excessive consumer demand
Discuss
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Correct Answer: Option B

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. deflation and high growth
B. high inflation and high growth
C. high inflation and high unemployment
D. low inflation and high growth
Discuss
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Correct Answer: Option C

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. money supply and price level
B. inflation and unemployment
C. output and employment
D. inflation and interest rates
Discuss
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Correct Answer: Option B

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 sustained fall in the general price level
B. a decrease in the rate of inflation
C. a fall in GDP
D. a rise in unemployment
Discuss
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Correct Answer: Option A

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. extremely rapid and out-of-control rise in prices
B. falling prices
C. slow price rise
D. stable prices
Discuss
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Correct Answer: Option A

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. NITI Aayog
D. Finance Minister
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. Repo rate
B. Open market operations
C. Government expenditure
D. CRR
Discuss
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Correct Answer: Option C

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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