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 national highways and roads
B. airport modernization
C. development of ports
D. expansion of railways
Discuss
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Correct Answer: Option A

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. Purchasing Managers' Index
B. Index of Industrial Production
C. Consumer Price Index
D. Wholesale Price Index
Discuss
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Correct Answer: Option B

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 import content
B. high tax rates
C. high weight in CPI
D. high price volatility such as food and fuel
Discuss
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Correct Answer: Option D

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 changing the base year of GDP
B. the effect of exchange rate on imports
C. inflation measured against a low or high price level in the previous year
D. the effect of money supply on prices
Discuss
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Correct Answer: Option C

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. horizontal
B. vertical at the natural rate of unemployment
C. upward sloping
D. downward sloping
Discuss
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Correct Answer: Option B

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 cost of unemployment in terms of inflation
B. the ratio of tax revenue to GDP
C. the cost of inflation in terms of lost output
D. the ratio of exports to imports
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. policy interest rates based on inflation and output gap
C. foreign exchange reserves
D. exchange rates
Discuss
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Correct Answer: Option B

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. guiding exporters
B. fixing exchange rates
C. communicating future policy intentions to influence expectations
D. regulating stock exchanges
Discuss
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Correct Answer: Option C

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. borrows from foreign central banks
B. purchases securities from banks with an agreement to sell them back later
C. gives unsecured loans to banks
D. sells securities to banks and agrees to repurchase them later
Discuss
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Correct Answer: Option B

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. sells securities to banks with an agreement to repurchase them later, absorbing liquidity
B. lends funds to banks against securities
C. reduces CRR
D. buys government bonds outright
Discuss
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Correct Answer: Option A

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. different widths of the corridor at different times or instruments
B. dual GST rates
C. repo and reverse repo being equidistant from the policy rate
D. fixed exchange rate bands
Discuss
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Correct Answer: Option A

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 exchange of old currency notes
C. the transmission of money across banks
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. Depreciation motive
B. Speculative motive
C. Transactions motive
D. Precautionary motive
Discuss
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Correct Answer: Option A

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. expansionary monetary policy
B. fiscal policy
C. trade policy
D. exchange rate policy
Discuss
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Correct Answer: Option A

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. investment increasing when interest rates rise
B. consumption increasing when debt increases
C. consumption increasing when wealth increases
D. saving increasing when wealth falls
Discuss
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Correct Answer: Option C

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. Franco Modigliani
B. John Maynard Keynes
C. James Duesenberry
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. Irving Fisher
B. Franco Modigliani
C. Paul Samuelson
D. Milton Friedman
Discuss
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Correct Answer: Option B

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. technological progress
B. saving and capital-output ratio
C. population growth
D. natural resources
Discuss
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Correct Answer: Option B

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. Capital accumulation
B. Population growth
C. Increase in savings only
D. Technological progress
Discuss
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Correct Answer: Option D

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. export-led growth
B. foreign aid
C. import substitution
D. labour transfer from agriculture to industry
Discuss
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Correct Answer: Option D

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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Practice Mix
Which dance of Nagaland is performed during the 'Moatsu' festival?
The compound interest on Rs. 3000 at 8% per annum for 1 year compounded half-yearly is:
The Right to Education Act was enacted in:
Select the antonym of 'KNOTTY'.
A man buys a book for Rs. 150 and sells it for Rs. 180. What is the gain percent?