1140+ Economics (GK) Solved MCQs

301.

Who benefits the most during the inflationary period?

A. corporate servants
B. creditors
C. entrepreneurs
D. government servants
Answer» C. entrepreneurs
Explanation: Inflation has the effect of redistributing income because prices of all factors do not decline in the same proportion. Entrepreneurs stand to gain more than wage earners or fixed income groups. Speculators, hoarders, black marketers and smugglers gain on account of windfall profits.
302.

Pegging up of a currency means, fixing the value of a currency -

A. at a constant level
B. at a lower level
C. at a higher level
D. leaving it to market forces
Answer» A. at a constant level
Explanation: Currency pegging is the idea of fixing the exchange rate of a currency by matching its value to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold or silver. A fixed exchange rate is usually used to stabilize the value of a currency, with respect to the.currency or the other valuable it is pegged to.
303.

Deficit financing is an instrument of -

A. monetary policy
B. credit policy
C. fiscal policy
D. tax policy
Answer» C. fiscal policy
Explanation: In economics, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure. Deficit financing is defined as financing the budgetary deficit through public loans and creation of new money. Deficit financing in India means the expenditure which in excess of current revenue and public borrowing.
304.

Interest on public, debt is part of -

A. Transfer payments by the enterprises
B. Transfer payments by the government.
C. National income
D. Interest payments by households
Answer» B. Transfer payments by the government.
Explanation: In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output. Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses (firms). Government debt is the debt owed by a central government. In the budget, it is listed among the transfer payments by the government.
305.

The incidence of Tax refers to -

A. Who pays the Tax?
B. Who bears the burden of Tax?
C. How Taxes can be shifted?
D. Who transfers the Tax burden?
Answer» B. Who bears the burden of Tax?
Explanation: In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall' upon the group that ultimately bears the burden of, or ultimately has to pay, the tax.
306.

Core Industries are -

A. Basic industries
B. Consumer goods industries
C. Capital goods industries
D. Government industries
Answer» A. Basic industries
Explanation: Core Industries are those necessary industries in an economy that are necessary for industrialization of a country. Such industries include Machine tools, chemicals, power, steel, etc. The Planning Commission of India has defined them as industries "involving significant investments or foreign exchange." The Commission indicated that the core sector should include all t he basic strategic and critical industries, and no single criterion such as that of foreign exchange requirements should govern the definition of the core sector.
307.

An economic theory is a/an -

A. Axion
B. Proposition
C. Hypothesis
D. Tested hypothesis
Answer» B. Proposition
Explanation: A theory is an established explanation that accounts for known facts or phenomenon. Specifically, economic theories ate statements or propositions about patterns of economic behavior under certain circumstances. These theories help us sort out and understand the complexities of economic behavior (Exploring Economics by Robert L. Sexton, p 9).
308.

The hypothesis that rapid growth of per capita income will be associated with a reduction in poverty is called -

A. trickle down Hypothesis
B. trickle up hypothesis
C. U shaped hypothesis
D. poverty estimation hypothesis
Answer» A. trickle down Hypothesis
Explanation: According to the trickle down hypothesis the rapid growth of per capita income will be associated with a reduction in poverty. In India, this hypothesis has been interpreted to suggest that with growth in agriculture output without radical institution reform will reduce the incidence of poverty in the context of agricultural development in India.
309.

Who propounded the 'market law?

A. Adam Smith
B. J.B. Say
C. T.R. Malthus
D. David Recardo
Answer» B. J.B. Say
Explanation: Say's law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767-1832), who stated that "products are paid for with products" and "a glut can take place only when there are too many means of production applied to one kind of product and not enough to another.
310.

"he national income consists of a collection of goods and services reduced to common basis by being measured in terms of money,"— Who says this?

A. Samuelson
B. Kuznets
C. Hicks
D. Pigou
Answer» C. Hicks
Explanation: British economist John Hicks said that National income is a collection of goods and services reduced to a common basis by being measured in terms of money. Hicks was one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model (1937), which summarized a Keynesian view of macroeconomics. His bookValue and Capital (1939) significantly extended general-equilibrium and value theory.
311.

Gross National Product means -

A. gross value of finished goods
B. money values of the total national production for any given period
C. gross value of raw materials and semi- finished products
D. money value of inputs and outputs
Answer» B. money values of the total national production for any given period
Explanation: Gross national product (GNP) is the market/monetary value of all products and services produced in one year by labour and property supplied by the residents of a country.
312.

The self-employed in a developing country who are engaged in small scale labour intensive work belong to the -

A. Informal sector
B. Primary sector
C. Secondary sector
D. Tertiary sector
Answer» B. Primary sector
Explanation: Such a scenario is seen in the case of primary economic activities such as agriculture in the developing countries like India. Most of the primary activities are labour intensive where the volume of man-power substitutes the lack of technology. Besides, farmers are 'self-employed.'
313.

The incomes of Indians working abroad are a part of -

A. domestic income of India
B. income earned from Abroad
C. net domestic product of India
D. gross domestic product of India
Answer» C. net domestic product of India
Explanation: Domestic Product is the ross money value of all final goods and services produced in the domestic territory of a country during a year. National Product is the gross money value of all final goods and services produced by the normal residents of a country during a year. It includes net factor income from abroad.
314.

Production of a commodity mostly through the natural process is an activity of -

A. Primary Sector
B. Secondary Sector
C. Tertiary Sector
D. Technology Sector
Answer» A. Primary Sector
Explanation: The primary sector of the economy is the sector of an economy making direct use of natural resources. This includes agriculture, forestry, fishing, mining, and extraction of oil and gas.
315.

Average Fixed Cost Curve is -

A. Upward sloping
B. `U' shaped
C. 'V' shaped
D. Downward sloping
Answer» D. Downward sloping
Explanation: The Average Fixed Cost Curve graphically represents the relation between average fixed cost incurred by a firm in the short-run product of a good or service and the quantity produced. It is relatively high at small quantities of output.
316.

In which of the following market forms, a firm does not exercise control over price?

A. Monopoly
B. Perfect competition
C. Oligopoly
D. Monopolistic competition
Answer» B. Perfect competition
Explanation: In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product. The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry. As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.
317.

Lorenz curve shows -

A. Inflation
B. Unemployment
C. Income distribution
D. Poverty
Answer» C. Income distribution
Explanation: In economics, the Lorenz curve is a graphical representation of the distribution of income or of wealth. It was developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution. On the graph, a straight diagonal line represents perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of wealth distribution.
318.

Which of the following is a tertiary activity?

A. Farming
B. Manufacturing
C. Dairying
D. Trading
Answer» D. Trading
Explanation: The tertiary sector or service sector is the third of the three economic sectors of the three-sector theory. The others are the secondary sector (manufacturing), and the primary sector (agriculture). Tertiary activities are service based and give non-tangible value to customers such as provision of services, trading, etc.
319.

Sellers market denotes a situation where :

A. commodities are available at competitive rates
B. demand exceeds supply
C. supply exceeds demand
D. supply and demand are evenly balanced
Answer» B. demand exceeds supply
Explanation: Seller's market is a market which has more buyers than sellers. High prices result from this excess of demand over supply. The opposite of the seller's market is the buyer's market, where supply greatly exceeds demand.
320.

The fixed cost on such factors of production which are neither hired nor bought by the firm is called -

A. social cost
B. opportunity cost
C. economic cost
D. surcharged cost
Answer» A. social cost
Explanation: Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by entire society, city or even country. This is not a one-time cost like private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs. The cost may result from an event, action, or policy changes. Social costs are not calculated whenever a seller sells any product or item to buyer. This cost is added up from the use of that product.
321.

Under which market condition do firms have excess capacity?

A. Perfect compettion
B. Monopolistic competition
C. Duopoly
D. Oligopoly
Answer» B. Monopolistic competition
Explanation: Unlike a perfectly competitive firm, a monopolistically competitive firm ends up choosing a level of output that is below its minimum efficient scale. When the firm produces below its minimum efficient scale, it is under-utilizing its available resources. In this situation, the firm is said to have excess capacity because it can easily accommodate an increase in product ion. This excess capacity is the major social cost of a mo-nopolistically competitive market structure.
322.

Price theory is also known as -

A. Macro Economics
B. Development Economics
C. Public Economics
D. Micro Economics
Answer» D. Micro Economics
Explanation: Price theory is also known as micro economics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as "it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts ofthe flow. It is concerned too with the now of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses."
323.

Different firms constituting the industry, produce homogeneous goods under

A. monopoly
B. monopolistic competition
C. oligopoly
D. perfect competition
Answer» D. perfect competition
Explanation: The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
324.

Gross Profit means -

A. Total investment over total saving
B. Changes in methods of production
C. Changes in the form of business organisation
D. Total receipts over total expenditure
Answer» D. Total receipts over total expenditure
Explanation: In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting over-head, payroll, taxation, and interest payments. Gross profit = Net sales (total receipts) - Cost of goods sold (total expenditure).
325.

Which of the following is not a fixed cost?

A. Salaries of administrative staff
B. Rent of factory building
C. Property taxes
D. Electricity charges
Answer» A. Salaries of administrative staff
Explanation: Fixed costs arc business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents beingpaid per month, and are often referred to as overhead costs. The salaries of administrative staff are variable costs.
326.

Inwhich market structure is the demand curve of the market represented by the demand curve of the firm?

A. Monopoly
B. Oligopoly
C. Duopoly
D. Perfect Competition
Answer» A. Monopoly
Explanation: Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
327.

If a firm is operating at loss in the short- period in perfect combination, it should :

A. decrease the production and the price.
B. increase the production and the price
C. continue to operate as long as it covers even the variable costs.
D. shut-down and leave the industry
Answer» C. continue to operate as long as it covers even the variable costs.
Explanation: The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
328.

At "Break-even point",

A. the industry is in equilibrium in the long run.
B. the producers suffers the minimum losses
C. the seller earns maximum profit
D. the firm is at zero-profit point
Answer» D. the firm is at zero-profit point
Explanation: The break-even point (BEP) is the point at which cost or expenses and revenue areequal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
329.

The internal rate of return -

A. must be less than the interest rate if the firm is to in-vest.
B. makes the present value of profits equal to the present value of costs.
C. falls as the annual yield of an investment rises.
D. is equal to the market interest rate for all the firm's in-vestment.
Answer» C. falls as the annual yield of an investment rises.
Explanation: The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
330.

Which of the following occurs when labour productivity rises?

A. The equilibrium nominal wage falls.
B. The equilibrium quantity of labour falls.
C. Competitive firms will be induced to use more capital
D. The labour demand curve shifts to the right
Answer» D. The labour demand curve shifts to the right
Explanation: As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
331.

Which of the following are consumer semi-durable goods?

A. Cars and television sets
B. Milk and Milk products
C. Foodgrains and other food products
D. Electrical appliance like fans and electric irons.
Answer» C. Foodgrains and other food products
Explanation: Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
332.

Which of the following statements is correct?

A. Most workers will work for less than their reservation wage.
B. The reservation wage is the maximum amount any firm will pay for a worker.
C. Economic rent is the difference between the market wage and the reservation wage.
D. Economic rent is the amount one must pay to enter a desirable labour market.
Answer» C. Economic rent is the difference between the market wage and the reservation wage.
Explanation: The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage com-pared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
333.

The basic object of all production is to

A. satisfy human wants
B. provide employment
C. make profits
D. increase physical output
Answer» A. satisfy human wants
Explanation: According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes,by which human labor creates goods and services, bring them to the ultimate consumer.
334.

The equilibrium of a firm under perfect competition will be determined when -

A. Marginal Revenue > Average Cost
B. Marginal Revenue > Average Revenue
C. Marginal Revenue = Marginal Cost
D. Marginal Cost > Average Cost
Answer» C. Marginal Revenue = Marginal Cost
Explanation: 173. (3) When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
335.

Which of the following is an inverted `U' shaped curve?

A. Average cost
B. Marginal cost
C. Total cost
D. Fixed cost
Answer» A. Average cost
Explanation: In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
336.

Which one of the following is having elastic demand?

A. Electricity
B. Medicines
C. Rice
D. Match boxes
Answer» A. Electricity
Explanation: In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can beused for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
337.

Same price prevails throughout the market under -

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» A. perfect competition
Explanation: Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
338.

Selling cost means:

A. Cost of selling a product
B. Cost incurred in transportation
C. Cost Incurred in advertisement
D. Cost Incurred on fact ors of production
Answer» C. Cost Incurred in advertisement
Explanation: Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
339.

A want becomes a demand only when it is backed by the -

A. Ability to purchase
B. Necessity to buy
C. Desire to buy
D. Utility of the product
Answer» A. Ability to purchase
Explanation: Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needsbecome wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
340.

"Economics is what it ought to be" - This statement refers to -

A. Normative economics
B. Positive economics
C. Monetary economics
D. Fiscal economics
Answer» A. Normative economics
Explanation: Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
341.

The 'breali-even point' is where -

A. marginal revenue equals marginal cost
B. average revenue equals average cost
C. total revenue equals total cost
D. None of these
Answer» B. average revenue equals average cost
Explanation: The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk- adjusted, expected return.
342.

One of the essential conditions of Monopolistic competition is -

A. Many buyers but one seller
B. Price discrimination
C. Product differentiation
D. Homogeneous product
Answer» C. Product differentiation
Explanation: Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
343.

The General Equilibrium Analysis" was developed by -

A. Marshall
B. Ricardo
C. Walras
D. Adam Smith
Answer» C. Walras
Explanation: French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.the place of manufacturer. Formerly called the Central Excise duty, this tax is now known as the Central Value Added Tax (CENVAT).
344.

Capital market deals with -

A. Short term fund
B. Long term fund
C. Cash
D. Both long and short term funds
Answer» B. Long term fund
Explanation: Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.
345.

Debenture holders of a company are its -

A. Shareholders
B. Creditors
C. Debtors
D. Directors
Answer» B. Creditors
Explanation: Companies issue debentures instead of shares to extend their business. These debentures are issue to borrow loan from general public; interest is paid on the borrowed money to the debenture holders. So a debenture holder is essentially a creditor who simply gives loan to the company.
346.

Excise duty on a commodity is payable with reference to its -

A. production
B. production and sale
C. production and transportations
D. production, transportation and sale
Answer» A. production
Explanation: Excise duty is a type of tax charged on goods produced within the country. In India, an excise tax is levied on the manufacturer of goods when those goods leave
347.

Compared to the rich the poor save -

A. A larger part of their income
B. An equal part of their income
C. A smaller part of their income
D. All of their incomes
Answer» C. A smaller part of their income
Explanation: A "subsistence" or necessary level of consumption produces differences in consumption growth rates across income levels. This implies that poor households have lower saving rates because they cannot "afford to save" after buying the necessities. Institutional and behavioral mechanism also leads to low levels of saving among the poor.
348.

One of the main factors that led to rapid expansion of Indian exports is -

A. Imposition of import duties
B. Liberalization of the economy
C. Recession in other countries
D. Diversification of exports
Answer» D. Diversification of exports
Explanation: India has rapidly diversified its exports markets from the traditional export partners towards emerging and developing economies. This has played a crucial role in cushioning India's exports growth during the recent years, which has remained fairly steady despite global economic slowdown. The rapid diversification of India's export destinations is encouraging. The widely spreading export markets can be noted from the narrowing dependence on selected economies for exports.
349.

The Minimum Wages Act was first passed in India in the year:

A. 1947
B. 1948
C. 1950
D. 1951
Answer» B. 1948
Explanation: The Minimum Wages Act, 1948 was enacted to safeguard the interests of workers, mostly in the unorganized sector by providing for the fixation of minimum wages in certain specified employments. It binds the employers to pay their workers the minimum wages fixed under the Act from time to time.
350.

AGMARK is a guarantee of standard:

A. quality
B. quantity
C. weight
D. size
Answer» A. quality
Explanation: The present AGMARK standards cover quality guidelines for 205 different agricultural commodities spanning a variety of Pulses, Cereals, Essential Oils, Vegetable Oils, Fruits & Vegetables, and semiprocessed products.
351.

In the balance of payments account, unrequited receipts and payments are also regarded as -

A. bilateral transfers
B. unilateral transfers
C. capital account transfers
D. invisible transfers
Answer» B. unilateral transfers
Explanation: Unrequited receipts and payments are also regarded as unilateral transfers as the flow is only in one direction with no automatic reverse flow in the other direction. There is no repayment obligation attached to these transfers because they are neither borrowings nor lending, but gifts and grants exchanged between governments and people in the world.
352.

"Wall Street" is the name of the :

A. Stock Exchange of New York
B. Indian Township in Washington
C. Super market in Munthai
D. Stock Exchange of kolkata
Answer» A. Stock Exchange of New York
Explanation: Wall Street, a 1.1 km street in the Financial District of lower Manhattan, New York City, is home to the world's two largest stock exchanges by total market capitalization,the New York Stock Exchange and NASDAQ. Over time, the term has become a metonym for the financial markets of the United States as a whole, the American financial sector.
353.

Which one of the following is a developmental expenditure?

A. Irrigation expenditure
B. Civil administration
C. Debt services
D. Grant-in-aid
Answer» A. Irrigation expenditure
Explanation: Public expenditure whether plans or non-plan or capital or revenue is classified into developmental and non-developmental expenditure. The expenditure which is incurred on activities directly related to economic development is called developmental expenditure. Hence, expenditure incurred on education, health care, scientific research: infrastructure and so on is developmental expenditure. Expenditure incurred on general essential services required for normal running of the government is termed as non-developmental expenditure. Therefore, expenditure incurred on services relating to general administration, police, defense, judiciary etc. is non- developmental expenditure.
354.

Green banking means -

A. development of forestry by banks
B. financing of environmental friendly projects by banks
C. financing of irrigation projects by banks
D. None of the above
Answer» B. financing of environmental friendly projects by banks
Explanation: Green banking is like a normal bank, which considers all the social and environmental/ecological factors with an aim to protect the environment and conserve natural resources. It is also called as an ethical bank or a sustainable bank. They are controlled by the same authorities but with an additional agenda toward taking care of the Earth's environment/ habitats/resources.
355.

The best Index of Economic Development is provided by:

A. Growth in Percapita Real Income from year to year.
B. Growth in National Income at Current Prices.
C. Growth in savings ratio.
D. Improvement in the Balance of Payments Position.
Answer» A. Growth in Percapita Real Income from year to year.
Explanation: Per capita Gross National Product (GNP) is the best index of development. It can be derived by dividing the GNP of a country with its population. Higher the level of per capita income, higher is the economic development. The World Bank, in its world development report 1998, classified the countries in the world on the bases of per capita GNP.
356.

Which one of the following is not a 'canon of taxation' according to Adam Smith?

A. Canon of certainty
B. Canon of simplicity
C. Canon of convenience
D. Canon of economy
Answer» B. Canon of simplicity
Explanation: In this book, titled The Wealth of Nations, 'Adam smith only gave four canons of taxation: (i) canon of equity; (ii) canon of certainty; (iii) canon of convenience; and (iv) canon of economy.
357.

The business in Stock Markets and other securities markets is regulated -

A. Securities and Exchange Board of India
B. Sole Trade and Exchange Bank of India
C. State and Exchange Bank of India
D. Stock and Exchange Bank of India
Answer» A. Securities and Exchange Board of India
Explanation: As per the Securities and Exchange Board Of India (SEBI) Act, 1992, SEBI is responsible for protecting the interests of investors in securities and to promote the development of, and to regulate the securities market. It is the duty of SEBI to regulate the business in stock exchanges and any other securities markets.
358.

Liberalism stands for -

A. religious orthodoxy
B. a (movement and an attitude
C. self-emancipation
D. freedom in social, political and economic aspects
Answer» D. freedom in social, political and economic aspects
Explanation: Liberalism includes a broad spectrum of political philosophies that consider individual liberty to be the most important political goal, and emphasize individual rights and equality of opportunity. It supports market economy and a transparent and democratic system of government. The same applies to social and religious aspects as well.
359.

Which of the following is a better measurement of Economic Development?

A. GDP
B. Disposable income
C. NNP
D. Per capita income
Answer» D. Per capita income
Explanation: Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population, Measurement of personal income is the best measure of economic well- being of individuals and nation. Besides, it helps to show the level of inequality in a society or country.
360.

Imputed gross rent of owner-occupied buildings is a part of -

A. capital formation
B. final consumption
C. intermediate consumption
D. consumer durable
Answer» B. final consumption
Explanation: The figure of final private consumption expenditure includes the imputed gross rent of owner-occupied dwellings, consumption of own-account production and payment by households of wages and salaries in kind valued at cost, e.g., provision for food, shelter and clothing to the employees, wherever they exist. Production for self consumption is apart of production and hence an income and is also a part of final consumption expenditure.
361.

An increase in per capital income is not an indication of an increase in the economic welfare of the people -

A. When such increase is the result of an increased production action of comforts
B. When such increase is the result of an increase in agricultural production
C. When it is the result of an increase in the production of industrial goods
D. When such increase is the result of increased production of intoxicants
Answer» D. When such increase is the result of increased production of intoxicants
Explanation: An increase in per capita income due to increased production of intoxicants cannot be taken as economic welfare as it defeats the very notion of welfare. Economic welfare refers to the level of prosperity and living standards of either an individual or a group of persons. Factors used to measure the economic welfare of a population, include: GDP, literacy, access to health care, and assessments of environmental quality.
362.

The functional relationship between income and consumption expenditure is explained by -

A. Consumer' Surplus
B. Law of Demand
C. Law of Supply
D. Keynes's psychological law of consumption
Answer» D. Keynes's psychological law of consumption
Explanation: Keynes defined Psychological Law of Consumption in terms of, "The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average, to increase their consumption as their income in- creases but not by as much as the increase in the income."
363.

Preparation of butter, ghee by a household for their own use is a part of :

A. own-account production
B. household capital formation
C. industrial production
D. consumption
Answer» D. consumption
Explanation: The processing of agricultural products; the production of grain by threshing: the production of flour by milling; the curing of skins and the production of leather; the production and preservation of meat and fish products; the preservation of fruit by drying, bottling, etc.; the production of daily products such as butter or cheese; the production of beer, wine or spirits; the production of baskets and mats; etc, come under processing of primary commodities for own consumption.
364.

Average propensity to consume is defined as -

A. Aggregate consumption +Total population
B. Aggregate income ÷ Aggregate consumption
C. Change in consumption ÷ Change in income
D. Aggregate consumption +Aggregate income
Answer» D. Aggregate consumption +Aggregate income
Explanation: In economics, the average propensity to consume (APC) is defined as the ratio of aggregate or total consumption to aggregate income in a given period of time. Thus, the value of average propensity to consume, for any income level, may be found by dividing consumption by income.
365.

Market segmentation is:

A. Group of Sales Persons
B. Dividing target groups as per their needs
C. Market Division
D. Market Space
Answer» B. Dividing target groups as per their needs
Explanation: Market segmentation is a marketing strategy which refers to the aggregating of prospective buyers into groups, or segments, having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
366.

What will be the effect on inferior commodities when income of the consumer rises?

A. Negative effect
B. Positive effect
C. No effect
D. First increase then decrease
Answer» A. Negative effect
Explanation: In economics, an inferior good is a good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases), unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers' demand increases when their income increases. Cheaper cars are examples of the inferior goods.
367.

An indiference curve measures               level of satisfaction derived from different combinations of commodity X and Y.

A. same
B. higher
C. lower
D. minimum
Answer» A. same
Explanation: An indifference curve may be defined as the locus of points, each representing a different combination of two substitute goods, which yield the same utility or level of satisfaction to the consumer. Therefore, he is indifferent between any two combinations of goods when it comes to making a choice between them.
368.

motion that seeks to reduce the amount of demand presented by government to Re. 1/is known as -

A. Disapproval of policy Cut
B. Token cut
C. Economy cut
D. Vote on account
Answer» A. Disapproval of policy Cut
Explanation: Disapproval of Policy Cut seeks to reduce the amount of the demand be reduced to Re.1/-' representing disapproval of the policy underlying the demand. A member giving notice of such a motion shall indicate in precise terms the particulars of the policy which he proposesto discuss. The discussion shall be confined to the specific point or points mentioned in the notice and it shall be open to members to advocate an alternative policy.
369.

In the law of demand, the statement "Other things remain constant" means -

A. income of consumer should not change
B. price of other goods should not change
C. taste of consumer should not change
D. All of the above
Answer» D. All of the above
Explanation: In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher (ceteris paribus). The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
370.

A firm is in equilibrium when its

A. marginal cost equals the marginal revenue
B. total cost is minimum
C. total revenue is maximum
D. average revenue and marginal revenue are equal
Answer» A. marginal cost equals the marginal revenue
Explanation: A consumer is in a state of equilibrium when he achieves maximum aggregate satisfaction on the expenditure that he makes depending on the set of conditions relating to his tastes and preferences, income, price and supply of the commodity etc. Producers' equilibrium occurs when he maximizes his net profit subject to a given set of economic situations. A firm's equilibrium point is when it has no inclination in changing its production. In short run Marginal revenue = Marginal Cost is the condition of equilibrium.
371.

The excess of price a person is to pay rather than forego the consumption of the commodity is called -

A. Price
B. Profit
C. Producers' surplus
D. Consumer's surplus
Answer» C. Producers' surplus
Explanation: Producer Surplus' is an economic measure of the difference between the amount that a producer of a good receives and the minimum amount that he or she would be willing to accept for the good. The difference, or surplus amount, is the benefit that the producer receives for selling the good in the market.
372.

When the price of a commodity falls, we can expect -

A. the supply of it to increase
B. the demand for it to fall
C. the demand for it to stay constant
D. the demand for it to increase
Answer» D. the demand for it to increase
Explanation: In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher. The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good
373.

A situation of large number of firms producing similar goods is termed as :

A. Perfect competition
B. Monopolistic competition
C. Pure competition
D. Oligopoly
Answer» A. Perfect competition
Explanation: The fundamental condition of perfect competition • is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical.
374.

The difference between the price the consumer is prepared to pay for a commodity and the price which he actually pays is called

A. Consumer's Surplus
B. Producer's Surplus
C. Landlord's Surplus
D. Worker's Surplus
Answer» A. Consumer's Surplus
Explanation: Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they do pay. If a consumer would be willing to pay more than the current asking price, then they are getting more benefit from the purchased product than they spent to buy it.
375.

For an inferior good, demand falls when -

A. price rises
B. income rise
C. price falls
D. income falls
Answer» B. income rise
Explanation: In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good. An Inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers' demand increases when their income increases.
376.

Wage fund theory was propounded by

A. J.B. Say
B. J.S. Mill
C. J.R. Hicks
D. J.M. Keynes
Answer» B. J.S. Mill
Explanation: J.S. Mill developed the wages- fund theory. This theory of wage was an attempt to show that in certain circumstances wages could rise above subsistence level. According to this theory a fund of capital has to he accumulated in advance before wage could be paid. This fund of capital is called wages-fund out of which wages are paid to labourers.
377.

Cross demand expresses the functional relationship between -

A. demand and prices of related commodities
B. demand and income
C. demand and prices
D. demand and supply
Answer» A. demand and prices of related commodities
Explanation: Other things being constant, cross demand expresses the relation between demand for good ‘A’ due to change in the price of its related good 'B’. It shows that at different prices of good ‘B’ what different quantities of good A’ will be demanded.
378.

Third stage of Law of Variable Proportion is called -

A. negative returns
B. positive returns
C. constant returns
D. increasing returns
Answer» A. negative returns
Explanation: The stages of Law of Variable Proportion are: Stage 1: Increasing return: Stage 2: Diminishing return; and Stage 3: Negative Return. In the third stage Marginal Product of variable factor is zero. In this stage the Total Product starts diminishing.
379.

Other things being equal, a decrease in quantity demanded of a commodity can be caused by –

A. a rise in the price of the commodity
B. a rise in the income of the consumer
C. a fall in the price of a commodity
D. a fall in the income of the consumer
Answer» A. a rise in the price of the commodity
Explanation: In economics, the law states that, all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases.
380.

Which of the following is not an economic problem?

A. Deciding between paid work leisure
B. Deciding between expenditure on one good and the other
C. Deciding between alternative methods of personal savings
D. Deciding between different ways of spending leisure time
Answer» C. Deciding between alternative methods of personal savings
Explanation: The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desire of all human beings. The fundamental economic problem is how to allocate scarce resources to the provision of various goods and services within the economy.
381.

The Psychological law of consumption states that –

A. proportionate increase in consumption is less than proportionate increase in income
B. increase in income is equal to increase in consumption
C. increase in consumption is greater than increase in income
D. consumption does not change with a change in income
Answer» A. proportionate increase in consumption is less than proportionate increase in income
Explanation: According to Keynes’ psychological law of consumption, increased aggregate consumption due to increased aggregate income — aggregate consumption increases with increase in aggregate income but the increase in consumption is less than the increase in the income. This is because when the basic necessities or demand of the people are already fulfilled, they start saving the extra additional income.
382.

Subsidies are payment by government to –

A. Consuming units
B. Producing units
C. Banking units
D. Retired persons
Answer» B. Producing units
Explanation: A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs of production and encourages them to increase output.
383.

Tha Law of Demand is based on -

A. Manufacturer's preference
B. Seller's preference
C. Supplier's preference
D. Consumer's preference
Answer» D. Consumer's preference
Explanation: The Law of Demand states that, all else being equal, as the price of a product increases, quantily demanded lowers; likewise, as the price of a product decreases, quantity demanded increases. Demand is derived from consumers’ tastes and preferences, and it is bound by income. In other words, given a limited income, the consumer must decide what goods and services to purchase. Each consumer will purchase different things because individual preferences and incomes differ.
384.

The expenses on advertising is called -

A. Implicit cost
B. Surplus cost
C. Fixed cost
D. Selling cost
Answer» D. Selling cost
Explanation: Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost
385.

The most distinguishing feature of oligopaly is -

A. number of firms
B. interdependence
C. negligible influence on price
D. price leadership
Answer» B. interdependence
Explanation: An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oilgopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Some of its characteristics are: Profit maximization conditions; Number of firms; Product differentiation; Interdependence; Non-Price Competition, etc. The distinctive feature of an oligopoly is interdependence. Oligopolies are typically composed of a few large firms.
386.

'Law of demand' implies that when there is excess demand for a commodity, then

A. price of the commodity falls
B. price of the commodity remains same
C. price of the commodity rises
D. quantity demanded of the commodity falls
Answer» C. price of the commodity rises
Explanation: The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good. When there is excess demand of the commodity the price starts rising and it continues to rise till equilibrium price is reached.
387.

Given the money wages, if the price level in an economy increases, then the real wages will -

A. increase
B. decrease
C. remain constant
D. become flexible
Answer» B. decrease
Explanation: If workers receive a higher nominal wage and the price level does not change, then the real purchasing power of their wages is higher and they are inclined to increase the quantity of labor supplied.
388.

In Economics, production means -

A. manufacturing
B. making
C. creating utility
D. farming
Answer» C. creating utility
Explanation: All factors of production like land, labour, capital and entrepreneur are required in combination at a time to produce a commodity. Production means creation or an addition of utility. Factors of production (or productive 'inputs' or 'resources') are any commodities or services used to produce goods and services.
389.

What is included in the Tetiary sector?

A. Banking
B. Manufacturing
C. Forestry
D. Mining
Answer» A. Banking
Explanation: The led 'my industry is the segment of the economy that provides services to its consumers. It includes a wide range or activities that service based and give non- tangible value to customers such as provision of trading, insurance, banking, etc. The other sectors are the secondary sector (manufacturing), and the primary sector (agriculture and allied activities).
390.

Minimum payment to factor of production is called -

A. Quasi Rent
B. Rent
C. Wages
D. Transfer Payment
Answer» D. Transfer Payment
Explanation: In economics, factors of production are the inputs to the production process. There are three basic factors of production: land, labour, capital. The payment for use and the received income of a land owner is rent. The payment for someone else's laborand all income received from one's own labor is wages. The modern theory of rent is that it is the difference between the actual earning of a factor unit over its transfer earnings. So the Transfer earnings are the mini-mum payment required to keep a factor of production in its present use. It is also known as opportunity cost.
391.

Consumer's surplus is the highest in the case of:

A. durable goods
B. luxuries
C. comforts
D. necessities
Answer» D. necessities
Explanation: Consumer surplus is the difference between the price consumers would be prepared to pay and the actual market price.
392.

Which of the following cost curve is never `U' shaped ?

A. Marginal cost curve
B. Average variable cost curve
C. Average fixed cost curve
D. Average cost curve
Answer» C. Average fixed cost curve
Explanation: Average fixed cost curve is never 'U' shaped. Since total fixed costs are unchanged as output rises, the average fixed cost curve falls continuously as output is increased.
393.

Perfect competition means -

A. large number of buyers and less sellers
B. large number of buyers and sellers
C. large number of sellers and less buyers
D. None of these
Answer» B. large number of buyers and sellers
Explanation: The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market.
394.

Bread and butter, car and petrol are examples of goods which have -

A. composite demand
B. joint demand
C. derived demand
D. autonomous demand
Answer» C. derived demand
Explanation: Derived demand is a term in economics, where demand for one good or service occurs as a result of the demand for another intermediate/final good or service. This may occur as the former-is a good of production of the second. For example, demand for coal leads to derived demand for mining, as coal must be mined for coal to be consumed. As the demand for coal increases, so does its price.
395.

In a Capitalistic Economy, the prices are determined by :

A. Demand and Supply
B. Government Authorities
C. Buyers in the Market
D. Sellers in the Market
Answer» A. Demand and Supply
Explanation: Capitalism generally refers to economic system in which the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation. In general, investments, distribution, income, and pricing is determined by markets. In capitalism, prices are decided by the demand-supply scale. For example, higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices.
396.

Tooth paste is a product sold under :

A. Monopolistic Competition
B. Perfect Competition
C. Monopoly
D. Duopoly
Answer» A. Monopolistic Competition
Explanation: Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. There are six characteristics of monopolistic competition (MC): (1) Product differentiation; (2) many firms; (3) Free entryand exit in the long run: (4) Independent decision making; (e) market power; and (f) Buyers and Sellers do not have perfect information.
397.

Prime cost is equal to -

A. Variable cost plus administrative cost
B. Variable cost plus fixed costs
C. Variable cost only
D. Fixed cost only
Answer» A. Variable cost plus administrative cost
Explanation: Prime Cost refers to a business's expenses for the materials and labor it uses in production. Prime cost is a way of measuring the total cost of the production inputs needed to create a given output. By analyzing its prime costs, a company can determine how much it must charge for its finished product in order to make a profit. Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced.
398.

An expenditure that has been made and cannot be recovered is called -

A. Variable cost
B. Opportunity cost
C. Sunk cost
D. Operational cost
Answer» C. Sunk cost
Explanation: In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. The sunk cost is distinct from economic loss. Sunk costs may cause cost overrun.
399.

Elasticity of demand is the degree of responsiveness of demand of a commodity to a -

A. change in consumers' wealth
B. change in the price of substitutes
C. change in consumers' tastes
D. change in its price
Answer» D. change in its price
Explanation: The elasticity of demand, also known as price elasticity of demand, is the degree of responsiveness of demand to change in price. Its measure depends upon comparing the percentage change in the price with the resultant percentage change in the quantity demanded. Thus, elasticity of demand is the ratio of percentage change in amount demanded to a percent-age change in price.
400.

The price of a commodity is the same as

A. Average revenue
B. Total cost
C. Average cost
D. Total revenue
Answer» A. Average revenue
Explanation: Average Revenue refers to revenue received per unit of output sold. It is the same as Price of the commodity. Average revenue can be obtained by dividing the total revenue by the number of units sold.
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