The 'income effect' of a price rise in a normal good leads to: MCQ with Answer and Explanation

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The 'income effect' of a price rise in a normal good leads to:

A. no change in purchase

B. increased purchase of the good

C. purchase of inferior goods only

D. decreased purchase of the good

Answer: Option D

Solution (By JKSSB Mock Tests)

A price rise reduces real income, so the income effect causes less purchase of a normal good.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

The 'Wholesale Price Index' measures:

A. prices at the wholesale level

B. prices of consumer goods only

C. prices of services

D. retail prices

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Correct Answer: Option A

Explanation:
WPI measures price changes at the wholesale level.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'Gross National Product at market prices' equals GDP at market prices plus:

A. depreciation

B. net factor income from abroad

C. indirect taxes

D. subsidies

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Correct Answer: Option B

Explanation:
GNP at market prices = GDP at market prices + net factor income from abroad.

This question belongs to: Economy GK Economy Set 1

Question #3

In the context of the production possibility frontier, an outward shift indicates:

A. Economic growth arising from an increase in resources or improvement in technology

B. A decline in the productive capacity of the economy

C. Underutilisation of resources

D. Inefficient allocation of resources

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Correct Answer: Option A

Explanation:
An outward shift of the PPF reflects an increase in the economy's productive capacity due to growth in resources or technological progress.

This question belongs to: Economy GK Economy Set 1

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