The concept of 'Liquidity Preference' includes which of the following motives? MCQ with Answer and Explanation

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The concept of 'Liquidity Preference' includes which of the following motives?

A. Only transactions motive

B. Only speculative motive

C. Transactions, precautionary and speculative motives

D. Only precautionary motive

Answer: Option C

Solution (By JKSSB Mock Tests)

According to Keynes, the demand for money (liquidity preference) arises from three motives: transactions, precautionary and speculative.

This question belongs to: Economy GK Economy Set 1

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Question #1

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Which of the following is a feature of the 'Permanent Income' versus 'Current Income' debate in consumption theory?

A. Consumption is completely independent of current income

B. Empirical evidence shows that consumption is more sensitive to current income than pure permanent-income theory predicts

C. Only permanent income matters and liquidity constraints are irrelevant

D. The debate has been fully resolved in favour of pure permanent-income theory

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Correct Answer: Option B

Explanation:
Empirical studies often find 'excess sensitivity' of consumption to current income, suggesting that liquidity constraints, myopia or other factors cause departures from pure permanent-income behaviour.

This question belongs to: Economy GK Economy Set 1

Question #2

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Automatic stabilizers in fiscal policy include:

A. progressive income taxes and unemployment benefits

B. discretionary changes in government spending

C. changes in repo rate

D. open market operations

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Correct Answer: Option A

Explanation:
Automatic stabilizers such as progressive taxes and unemployment benefits automatically reduce economic fluctuations.

This question belongs to: Economy GK Economy Set 1

Question #3

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The 'Consolidated Fund of India' includes:

A. only borrowing

B. all government revenues, borrowings and loans received

C. only foreign aid

D. only tax revenues

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Correct Answer: Option B

Explanation:
The Consolidated Fund of India includes all government revenues, borrowings and receipts.

This question belongs to: Economy GK Economy Set 1

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