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 74 of 111
Question #1461
The 'break-even point' in consumption occurs when:
A. consumption equals saving
B. consumption equals income
C. MPC equals zero
D. saving equals investment
Discuss
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Correct Answer: Option B

Explanation:
At break-even point, consumption equals income, so saving is zero.
This question belongs to: Economy GK Economy Set 1
Question #1462
The 'average propensity to consume' is calculated as:
A. total saving divided by total income
B. total consumption divided by total income
C. total income divided by total consumption
D. change in consumption divided by change in income
Discuss
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Correct Answer: Option B

Explanation:
APC is total consumption divided by total income.
This question belongs to: Economy GK Economy Set 1
Question #1463
The 'average propensity to save' is calculated as:
A. consumption divided by income
B. change in saving divided by change in income
C. income divided by saving
D. saving divided by income
Discuss
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Correct Answer: Option D

Explanation:
APS is total saving divided by total income.
This question belongs to: Economy GK Economy Set 1
Question #1464
The 'accelerator coefficient' is the ratio of:
A. investment to output
B. investment to consumption
C. saving to investment
D. change in investment to change in output
Discuss
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Correct Answer: Option D

Explanation:
The accelerator is the ratio of induced investment to a change in output.
This question belongs to: Economy GK Economy Set 1
Question #1465
The 'multiplier-accelerator interaction' explains:
A. business cycles and fluctuations in income
B. monetary policy only
C. inflation only
D. exchange rates
Discuss
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Correct Answer: Option A

Explanation:
Multiplier-accelerator interaction explains cyclical fluctuations in income.
This question belongs to: Economy GK Economy Set 1
Question #1466
The 'Keynesian cross' model shows equilibrium income where:
A. interest rate equals inflation
B. money supply equals money demand
C. exports equal imports
D. aggregate demand equals aggregate supply
Discuss
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Correct Answer: Option D

Explanation:
The Keynesian cross shows equilibrium where aggregate demand equals aggregate supply.
This question belongs to: Economy GK Economy Set 1
Question #1467
The 'aggregate supply curve' in the short run is typically:
A. horizontal
B. upward sloping
C. vertical
D. downward sloping
Discuss
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Correct Answer: Option B

Explanation:
The short-run aggregate supply curve is upward sloping due to sticky wages and prices.
This question belongs to: Economy GK Economy Set 1
Question #1468
The 'long-run aggregate supply curve' is:
A. vertical
B. downward sloping
C. U-shaped
D. horizontal
Discuss
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Correct Answer: Option A

Explanation:
The long-run aggregate supply curve is vertical at the full employment level of output.
This question belongs to: Economy GK Economy Set 1
Question #1469
The 'natural rate of unemployment' in monetarist economics is:
A. only cyclical unemployment
B. zero unemployment
C. the unemployment rate consistent with stable inflation
D. the maximum unemployment
Discuss
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Correct Answer: Option C

Explanation:
The natural rate of unemployment is the rate consistent with stable inflation, including frictional and structural unemployment.
This question belongs to: Economy GK Economy Set 1
Question #1470
The 'adaptive expectations' hypothesis assumes people form expectations based on:
A. past values of the variable
B. random guesses
C. future policy announcements only
D. rational models only
Discuss
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Correct Answer: Option A

Explanation:
Adaptive expectations are formed based on past observations.
This question belongs to: Economy GK Economy Set 1
Question #1471
The 'rational expectations' hypothesis assumes people:
A. have no expectations
B. only use past values
C. use all available information to form expectations
D. ignore information
Discuss
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Correct Answer: Option C

Explanation:
Rational expectations assumes agents use all available information efficiently.
This question belongs to: Economy GK Economy Set 1
Question #1472
The 'non-accelerating inflation rate of unemployment' is called:
A. NREGA
B. NAFTA
C. NAIRU
D. NATO
Discuss
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Correct Answer: Option C

Explanation:
NAIRU is the non-accelerating inflation rate of unemployment.
This question belongs to: Economy GK Economy Set 1
Question #1473
The 'long-run Phillips curve' is vertical at:
A. maximum inflation
B. zero inflation
C. full employment with zero unemployment
D. the natural rate of unemployment
Discuss
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Correct Answer: Option D

Explanation:
The long-run Phillips curve is vertical at the natural rate of unemployment.
This question belongs to: Economy GK Economy Set 1
Question #1474
The 'supply-side economics' emphasizes which policies?
A. raising taxes
B. increasing aggregate demand
C. increasing money supply
D. reducing tax rates and regulation to increase output
Discuss
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Correct Answer: Option D

Explanation:
Supply-side economics emphasizes lower taxes and reduced regulation to stimulate production.
This question belongs to: Economy GK Economy Set 1
Question #1475
The 'Laffer curve' was popularized by which economist?
A. Milton Friedman
B. John Maynard Keynes
C. Paul Samuelson
D. Arthur Laffer
Discuss
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Correct Answer: Option D

Explanation:
The Laffer curve was popularized by Arthur Laffer.
This question belongs to: Economy GK Economy Set 1
Question #1476
The 'Washington Consensus' refers to a set of policies emphasizing:
A. import substitution and state control
B. trade barriers
C. nationalization
D. liberalization, privatization and macroeconomic stability
Discuss
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Correct Answer: Option D

Explanation:
The Washington Consensus emphasized liberalization, privatization and macroeconomic stability.
This question belongs to: Economy GK Economy Set 1
Question #1477
The 'dependency theory' of economic development argues that developing countries are:
A. unaffected by global trade
B. dependent on developed countries and face unequal exchange
C. growing faster than developed countries
D. independent and self-sufficient
Discuss
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Correct Answer: Option B

Explanation:
Dependency theory argues developing countries are economically dependent on developed countries.
This question belongs to: Economy GK Economy Set 1
Question #1478
The 'big push theory' of development was proposed by:
A. Amartya Sen
B. Paul Rosenstein-Rodan
C. W.W. Rostow
D. Arthur Lewis
Discuss
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Correct Answer: Option B

Explanation:
The big push theory was proposed by Paul Rosenstein-Rodan.
This question belongs to: Economy GK Economy Set 1
Question #1479
The 'balanced growth theory' emphasizes simultaneous investment in:
A. multiple sectors to create demand
B. one sector only
C. agriculture only
D. banking only
Discuss
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Correct Answer: Option A

Explanation:
Balanced growth advocates simultaneous investment in mutually supporting sectors.
This question belongs to: Economy GK Economy Set 1
Question #1480
The 'unbalanced growth theory' was proposed by:
A. Arthur Lewis
B. Paul Rosenstein-Rodan
C. John Maynard Keynes
D. Albert Hirschman
Discuss
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Correct Answer: Option D

Explanation:
Albert Hirschman proposed the theory of unbalanced growth.
This question belongs to: Economy GK Economy Set 1
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