The 'money illusion' in economics occurs when people: MCQ with Answer and Explanation

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The 'money illusion' in economics occurs when people:

A. only hold cash

B. avoid using money

C. focus on nominal values rather than real values

D. fully adjust for inflation

Answer: Option C

Solution (By JKSSB Mock Tests)

Money illusion is the tendency to think of money in nominal rather than real terms.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

Which of the following is NOT a function of commercial banks?

A. Issuing currency notes

B. Credit creation

C. Providing loans and advances

D. Accepting deposits

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Correct Answer: Option A

Explanation:
Issuing currency notes is the sole prerogative of the Reserve Bank of India. Commercial banks accept deposits, provide loans and create credit.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'Bretton Woods Conference' was held in which year?

A. 1950

B. 1944

C. 1947

D. 1940

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Correct Answer: Option B

Explanation:
The Bretton Woods Conference was held in 1944.

This question belongs to: Economy GK Economy Set 1

Question #3

The concept of 'Automatic Stabilisers' in fiscal policy includes:

A. Progressive taxation and unemployment benefits

B. Discretionary changes in tax rates

C. Changes in bank rate

D. Open market operations

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Correct Answer: Option A

Explanation:
Automatic stabilisers such as progressive income taxes and unemployment benefits automatically moderate economic fluctuations without requiring new policy decisions.

This question belongs to: Economy GK Economy Set 1

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