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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Page 53 of 111
Question #1041
The Bharatmala Pariyojana is related to:
A. development of ports
B. expansion of railways
C. development of national highways and roads
D. airport modernization
Discuss
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Correct Answer: Option C

Explanation:
Bharatmala Pariyojana is a national highways and road development programme.
This question belongs to: Economy GK Economy Set 1
Question #1042
The index used to measure the performance of core sector industries in India is:
A. Index of Industrial Production
B. Consumer Price Index
C. Wholesale Price Index
D. Purchasing Managers' Index
Discuss
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Correct Answer: Option A

Explanation:
The Index of Industrial Production measures the performance of core sector industries.
This question belongs to: Economy GK Economy Set 1
Question #1043
The term 'core inflation' was coined because it excludes items with:
A. high price volatility such as food and fuel
B. high import content
C. high weight in CPI
D. high tax rates
Discuss
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Correct Answer: Option A

Explanation:
Core inflation excludes volatile food and fuel prices to reveal underlying inflation.
This question belongs to: Economy GK Economy Set 1
Question #1044
The 'base effect' in inflation refers to:
A. the effect of money supply on prices
B. inflation measured against a low or high price level in the previous year
C. the effect of exchange rate on imports
D. the effect of changing the base year of GDP
Discuss
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Correct Answer: Option B

Explanation:
Base effect refers to the influence of the previous year's price level on the current inflation rate.
This question belongs to: Economy GK Economy Set 1
Question #1045
The 'Phillips curve' in the long run is generally considered to be:
A. vertical at the natural rate of unemployment
B. downward sloping
C. upward sloping
D. horizontal
Discuss
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Correct Answer: Option A

Explanation:
The long-run Phillips curve is vertical, implying no permanent trade-off between inflation and unemployment.
This question belongs to: Economy GK Economy Set 1
Question #1046
The sacrifice ratio measures:
A. the ratio of tax revenue to GDP
B. the ratio of exports to imports
C. the cost of inflation in terms of lost output
D. the cost of unemployment in terms of inflation
Discuss
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Correct Answer: Option C

Explanation:
The sacrifice ratio is the cumulative output loss required to reduce inflation by one percentage point.
This question belongs to: Economy GK Economy Set 1
Question #1047
The 'Taylor rule' is used by central banks to set:
A. reserve requirements
B. foreign exchange reserves
C. policy interest rates based on inflation and output gap
D. exchange rates
Discuss
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Correct Answer: Option C

Explanation:
The Taylor rule prescribes setting policy interest rates based on inflation and output gap.
This question belongs to: Economy GK Economy Set 1
Question #1048
Forward guidance by a central bank means:
A. regulating stock exchanges
B. fixing exchange rates
C. guiding exporters
D. communicating future policy intentions to influence expectations
Discuss
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Correct Answer: Option D

Explanation:
Forward guidance is communication by a central bank about future policy intentions.
This question belongs to: Economy GK Economy Set 1
Question #1049
The 'repo' in monetary policy means the RBI:
A. gives unsecured loans to banks
B. sells securities to banks and agrees to repurchase them later
C. purchases securities from banks with an agreement to sell them back later
D. borrows from foreign central banks
Discuss
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Correct Answer: Option C

Explanation:
In a repo, the RBI purchases securities from banks with an agreement to resell them later, injecting liquidity.
This question belongs to: Economy GK Economy Set 1
Question #1050
The reverse repo in monetary policy means the RBI:
A. buys government bonds outright
B. reduces CRR
C. lends funds to banks against securities
D. sells securities to banks with an agreement to repurchase them later, absorbing liquidity
Discuss
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Correct Answer: Option D

Explanation:
In reverse repo, the RBI sells securities to banks with an agreement to repurchase later, absorbing liquidity.
This question belongs to: Economy GK Economy Set 1
Question #1051
The 'asymmetric corridor' in Indian monetary policy refers to:
A. fixed exchange rate bands
B. repo and reverse repo being equidistant from the policy rate
C. different widths of the corridor at different times or instruments
D. dual GST rates
Discuss
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Correct Answer: Option C

Explanation:
The asymmetric corridor refers to variations in the distance between policy rate, MSF and reverse repo rates.
This question belongs to: Economy GK Economy Set 1
Question #1052
The 'monetary transmission mechanism' refers to:
A. the process by which monetary policy changes affect output and inflation
B. the transmission of money across banks
C. the exchange of old currency notes
D. the printing of new currency
Discuss
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Correct Answer: Option A

Explanation:
Monetary transmission is the process through which policy rate changes affect the real economy.
This question belongs to: Economy GK Economy Set 1
Question #1053
Which of the following is not a determinant of money demand in Keynesian theory?
A. Precautionary motive
B. Transactions motive
C. Depreciation motive
D. Speculative motive
Discuss
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Correct Answer: Option C

Explanation:
Keynes identified transactions, precautionary and speculative motives for holding money, not depreciation motive.
This question belongs to: Economy GK Economy Set 1
Question #1054
The 'liquidity trap' causes which policy to become ineffective?
A. exchange rate policy
B. expansionary monetary policy
C. fiscal policy
D. trade policy
Discuss
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Correct Answer: Option B

Explanation:
In a liquidity trap, interest rates are near zero and monetary expansion does not lower rates further, making monetary policy ineffective.
This question belongs to: Economy GK Economy Set 1
Question #1055
The concept of 'wealth effect' in consumption refers to:
A. consumption increasing when debt increases
B. consumption increasing when wealth increases
C. saving increasing when wealth falls
D. investment increasing when interest rates rise
Discuss
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Correct Answer: Option B

Explanation:
The wealth effect says consumption rises when household wealth rises.
This question belongs to: Economy GK Economy Set 1
Question #1056
The 'permanent income hypothesis' was proposed by:
A. James Duesenberry
B. Franco Modigliani
C. John Maynard Keynes
D. Milton Friedman
Discuss
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Correct Answer: Option D

Explanation:
Milton Friedman proposed the permanent income hypothesis.
This question belongs to: Economy GK Economy Set 1
Question #1057
The 'life-cycle hypothesis' of consumption was proposed by:
A. Franco Modigliani
B. Paul Samuelson
C. Irving Fisher
D. Milton Friedman
Discuss
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Correct Answer: Option A

Explanation:
The life-cycle hypothesis was developed by Franco Modigliani and others.
This question belongs to: Economy GK Economy Set 1
Question #1058
The Harrod-Domar growth model emphasizes the role of:
A. saving and capital-output ratio
B. technological progress
C. natural resources
D. population growth
Discuss
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Correct Answer: Option A

Explanation:
The Harrod-Domar model emphasises saving rate and capital-output ratio as determinants of growth.
This question belongs to: Economy GK Economy Set 1
Question #1059
The Solow growth model identifies which of the following as a source of long-run per capita income growth?
A. Increase in savings only
B. Population growth
C. Technological progress
D. Capital accumulation
Discuss
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Correct Answer: Option C

Explanation:
In the Solow model, sustained long-run per capita income growth comes from technological progress.
This question belongs to: Economy GK Economy Set 1
Question #1060
The Lewis model of economic development is based on:
A. labour transfer from agriculture to industry
B. foreign aid
C. import substitution
D. export-led growth
Discuss
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Correct Answer: Option A

Explanation:
The Lewis model explains development through transfer of surplus labour from traditional agriculture to modern industry.
This question belongs to: Economy GK Economy Set 1
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