The concept of 'wealth effect' in consumption refers to: MCQ with Answer and Explanation

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The concept of 'wealth effect' in consumption refers to:

A. saving increasing when wealth falls

B. consumption increasing when wealth increases

C. consumption increasing when debt increases

D. investment increasing when interest rates rise

Answer: Option B

Solution (By JKSSB Mock Tests)

The wealth effect says consumption rises when household wealth rises.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

Buffer stock of food grains is maintained by the government mainly to:

A. meet shortages and stabilize prices

B. reduce agricultural production

C. increase exports

D. support private traders

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Correct Answer: Option A

Explanation:
Buffer stocks are maintained to meet emergencies and stabilize food grain prices.

This question belongs to: Economy GK Economy Set 1

Question #2

The concept of 'Hysteresis' in unemployment refers to:

A. The tendency of unemployment to persist even after the original cause has disappeared

B. Only frictional unemployment

C. Only seasonal unemployment

D. Temporary unemployment that disappears quickly

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Correct Answer: Option A

Explanation:
Hysteresis in unemployment means that high unemployment can become self-perpetuating through loss of skills, reduced employability or changes in wage-setting behaviour, so that the natural rate itself rises.

This question belongs to: Economy GK Economy Set 1

Question #3

Commercial paper is a short-term instrument issued by:

A. state governments

B. individuals

C. RBI

D. highly rated corporate borrowers

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Correct Answer: Option D

Explanation:
Commercial paper is an unsecured short-term instrument issued by highly rated corporate borrowers.

This question belongs to: Economy GK Economy Set 1

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