1140+ Economics (GK) Solved MCQs

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401.

Equilibrium output is deter-mined by:

A. the equality between total Variable cost and Marginal revenue.
B. the equality between Marginal cost and Marginal revenue.
C. the equality between Average cost and Average revenue.
D. the equality between total cost and total revenue.
Answer» B. the equality between Marginal cost and Marginal revenue.
Explanation: Equilibrium Output refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy. It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year. According to MR-MC approach, equilibrium refers to stage of that output level at which Marginal Cost (MC) = Marginal Revenue (MR). As long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more only when MC becomes equal to MR.
402.

An employer goes on employing more and more of a factor units until :

A. the Average Revenue Productivity becomes equal to Marginal Revenue Productivity.
B. the Marginal Revenue Productivity becomes zero.
C. the Diminishing Marginal Returns sets into operation.
D. the Marginal Revenue Productivity of a factor becomes equal to its reward.
Answer» D. the Marginal Revenue Productivity of a factor becomes equal to its reward.
Explanation: 'According to the Marginal Productivity Theory, the reward or the price of a factor unit depends upon its productivity or its contribution to the total product. While employing a factor, an employer compares the marginal revenue productivity (MRP) of the lost unit and the marginal cost of the factor. He will employ a factor up to the point where the reward (marginal cost of the factor) paid to the factor equals its MRP. If MRP is more than the marginal cost, the employer increases its profits by employing more units of the factor; on the other hand, if marginal cost of the factor is greater than MRP, it will reduce employment to reduce its loss.
403.

The main emphasis of Keynesian economics is on -

A. Expenditure
B. Exchange
D. Taxation
Explanation: Keynesian Economics is an economic theory of total spending in the economy and its effects on output and inflation. It emphasizes that government expenditures (or tax cuts) leads to increase in GDP which is a multiple of the original expenditure.
404.

The book which is at the centrepiece of the study of Macro - Economics was written by -

A. Prof. Samuelson
B. Prof. J.M. Keynes
C. Prof. Benham
D. Prof. Baumol
Explanation: J.M. Keynes's magnum opus, The General Theory of Employment, Interest andMoney' is often viewed as the foundation of modern macroeconomics. Macroeconomics deals with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.
405.

Which of the following items is a major item of Indian export?

A. Computer chips
B. Potato chips
C. Textile garments
D. Car engines
Explanation: India exports were worth 23698 Million USD in September of 2012. Historically, from 1994 until 2012, India Exports averaged 8603.18 Million USD reaching an all time high of 30418.00 Million USD in March of 2011 and a record low of 1805.00 Million USD in May of 1994. Exports amount to 22% of India's GDP. Gems and jewelry constitute the single largest export item, accounting for 16 percent of exports. India is also leading exporter of textile goods, engineering goods, chemicals, leather manufactures and services. India's main export partners are European Union, United States, United Arab Emirates and China.
406.

Indian agriculture is typically characterised as -

A. land surplus, labour scarce economy
B. land surplus, labour surplus economy
C. land scarce, labour surplus economy
D. land scarce, labour scarce economy
Answer» C. land scarce, labour surplus economy
Explanation: The labor surplus economy model has as its basic premise the inability of unskilled agricultural labor markets to clear in countries with high man/land ratios. In such situations, the marginal product of labor is likely to fall below a bargaining wage, related to the average rather than the marginal product. Most of the East Asian economies such as Japan, South Korea, and Taiwan are similar to India in being land scarce and labor surplus.
407.

The most accessible medium in India is

A. Television
C. Cinema
D. Newspapers
Explanation: The newspaper's importance in India may be due to the fact t hat it is relatively free from competition despite the rise of the Internet. Though there are a large number of households who own television sets, there are still many more without. Newspapers are highly affordable and arc the more accessible alternative, even for rural areas. Moreover, it is not dependent on other factors such as infrastructure or available of electricity, which are both areas that are lacking in India.
408.

Capital Market Regulator is:

A. NSE
B. RBI
C. SEBI
D. IRDA
Explanation: Capital Market Regulator is the Securities and Exchange Board of India (SEBI).
409.

The term 'Dumping' refers to -

A. The sale of a substandard commodity
B. Sale in a foreign market of a commodity at a price below marginal cost
C. Sale in a foreign market of a commodity just at marginal cost with too much of profit
D. Smuggling of goods without paying any customs duty
Answer» B. Sale in a foreign market of a commodity at a price below marginal cost
Explanation: Dumping is an international price discrimination in which an exporter firm sells a portion of its out-put in a foreign market at a very low price and the remaining output at a high price in the home market. This is done to turn out foreign competitors from the domestic market. If the foreign market is perfectly competitive, the firm may lower the price in comparison with other competitors so that the demand for it may increase. In such a situation, the firm may sell the commodity even below marginal cost of production, incurring loss in the foreign market (International Economics by M. Maria. John Kennedy, p.122).
410.

"Globalisation of Indian Economy" denotes :

A. Increase of external borrowings
B. having minimum intervention in economic relations with other countries
D. relaxing the programmes of import substitution
Answer» B. having minimum intervention in economic relations with other countries
Explanation: Globalization means integrating the economy of a country with the economies of other countries or world economy under conditions of free flow of trade, capital and movement of persons across borders. In the Indian content, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India; removing constraints and obstacles to the entry of MNCs in India allowing Indian companies to enter into foreign collaborations in India and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programmes by switching over from quantitative restrictions to tariffs in the first place and then bringing down the level of import duties considerably; and instead of a plethora of export incentives opting for exchange rate adjustments for promoting exports.
411.

Full convertibility of a rupeee means -

A. purchase of foreign exchange for rupees freely
B. payment for imports in terms of ruppes
C. repayment of loans in terms of rupees
D. determination of rate of exchange between rupee and foreign currencies freely by the market forces of demand and supply
Answer» D. determination of rate of exchange between rupee and foreign currencies freely by the market forces of demand and supply
Explanation: The full convertibility of the Indian currency means that the rupee would be made freely exchangeable into other currencies and vice versa. The rupee was made partially convertible in 1994. Currently, it can be changed freely into foreign currency for business and trade expenses but not freely for activities like acquiring overseas assets. Full converted of the currency means the local currency can be exchanged to foreign currency without any governmental control. Presently, the issue ofcapital account convertibility is in the discussion stage.
412.

The term stagflation refers to a situation where -

A. growth has no relation with the change in prices
B. rate of growth and prices both are decreasing
C. rate of growth in faster than the rate of price increase
D. rate of growth is slower than the rate of price increase
Answer» D. rate of growth is slower than the rate of price increase
Explanation: In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stag-nation increased the inflationary effects.
413.

What does the letter `e' denotes in the term `e - banking'?

A. Essential Banking
B. Economic Banking
C. Electronic Banking
D. Expansion Banking
Explanation: 'e-banking' stands for electronic banking which involves the use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. It is also known as online or interne banking.
414.

The Cash Reserve Ratio is a tool of :

A. Monetary policy
B. Tax policy
C. Agricultural policy
D. Fiscal policy
Explanation: Cash Reserve Ratio (CRR) is a specified minimum fraction of the total depositsof customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is a crucial monetary policy tool and is used for controlling money supply in an economy.
415.

The 'Interest Rate Policy' is a component of -

A. Fiscal Policy
B. Monetary Policy
D. Direct Control
Explanation: Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment. The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates. Monetary authorities in different nations have differing levels of control of economy-wide interest rates.
416.

A mixed economy works primarily through the -

A. market mechanism
B. central allocative machinery
C. market mechanism regulated by Government policy
D. market mechanism guided by Government participation and planning
Answer» D. market mechanism guided by Government participation and planning
Explanation: Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. The basic idea of the mixed economy is that (he means of production are mainly under private ownership; that markets remain the dominant form of economic coordination: and that profit- seeking enterprises and the accumulation of capital remain the fundamental driving force behind economic activity.
417.

Which one of the following is the most appropriate reason for Inequalities in Income?

A. Racial factors
B. Lack of opportunities
C. Inheritance from family Environment
D. Differences in Ability
Explanation: Joseph E. Stiglitz, a Nobel laureate in economics, has pointed how lack of opportunity leads to widening of inequality. It leads to concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.
418.

Which one of the following is not included in current revenue of the Union Government?

A. Tax revenue
B. Non-tax revenue
C. Loans
D. interest payments
Explanation: Loans are not included in the current revenue of the Union Government.
419.

Which is the parameter for the economic development?

A. Per capita monetary income
B. National income
C. Per capita rural income
D. Population
Answer» A. Per capita monetary income
Explanation: A majority of economists such as Simon Kuznets, Meter and Baldwin, Hicks D. Samuelson, Pigeon and others consider national income as the most suitable index of economic development. However, the UNO experts in their report on 'Measures of Economic Development of Under-Developed Countries' have Per Capita Real Income as the best measurement of economic development. They contend that economic growth is meaningless if it does not improve the standard of living of the common masses.
420.

The supply-side economics lays greater emphasis on -

A. Producer
B. Global economy
C. Consumer
D. Middle Man
Explanation: Supply-side economics emphasizes economic growth achieved by tax and fiscal policy that creates incentives to produce goods and service. It lays great emphasis on entrepreneurs, investors and producers who are treated the prime movers on which the economy depends.
421.

Which of the following is not included in the National Income?

A. Imputed rent of owner-occupied houses
B. Government expenditure on making new bridges
C. Winning a lottery
D. Commission paid to an agent for sale of house
Explanation: National income is the total value a country's final output of all new goods and services produced in one year. Transfer payments are not a part of the national income so they are cut from national income to get n.n.p in order to arrive national income such payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc. Private- sector transfers include charitable donations and prizes to lottery winners.
422.

Personal disposable income is -

A. always equal to personal income
B. always more than personal income
C. equal to personal income minus indirect taxes
D. equal to personal income minus direct taxes
Answer» D. equal to personal income minus direct taxes
Explanation: Disposable income is total personal income minus personal current taxes. In national accounts definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.
423.

Depreciation is equal to —

A. Gross national product —Net national product
B. Net national product —Gross national product
C. Gross national product —Personal income
D. Personal income — Personal taxes
Answer» A. Gross national product —Net national product
Explanation: Net national product at market price is the market value of the output of final goods and services produced at current price in one year of a country. If we subtract the depreciation charges from the gross national product, we get net national product at market price. So depreciation = Gross National Product- Net National Product,
424.

National Income Estimates in India are prepared by:

A. National Development Council
B. National Productivity Council
C. National Income Committee
D. Central Statistical Organization
Explanation: Since 1955 the national income estimates are being prepared by Central Statistical Organization. The CSO uses different methods like the Product Method, Income Method and Expenditure method for various sectors in the process of estimating the National Income.
425.

Over short period, when income rises, average propensity to consume usually -

A. rises
B. falls
C. remains constant
D. fluctuates
Explanation: Keynes postulated that aggregate consumption is a function of aggregate current disposable income. The Keynesian consumption function is written as: C = a + eY a > 0, 0 < c < 1; where a is the intercept, a constant which measures consumption at a zero level of disposal income; c is the marginal propensity to consume (MPC); and Y is the disposal in-come. So asincome increases, average propensity to consume (APC = C/Y) falls.
426.

According to Keynes, business cycles are due to variation in the rate of investment caused by fluctuations, in the -

A. Marginal efficiency of capital
B. Marginal propensity to save
C. Marginal propensity to consumption
D. Marginal efficiency to investment
Answer» A. Marginal efficiency of capital
Explanation: According to Keynes' General Theory of Employment, Interest, and Money,' business cycles are caused by variations in the rate of investment which are caused by fluctuations in the marginal efficiency of capital. Marginal efficiency of capital means the expected profits from new investments.
427.

When average product of an input is at its maximum then :........ note:(AP= Average product) (MP= Marginal product.)

A. AP > MP
B. AP < MP
C. AP = 0
D. AP = MP
Explanation: There is a close relationship between marginal product and average product because both are derived from total product. When marginal product is equal to average product, the average product is at its maxi-mum. In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the "cross-over point," when MP = AP, AP is at its maximum.
428.

If total product is at its maximum then:....... note:(AP= Average product) (MP= Marginal product.)

A. AF = 0
B. AP < 0
C. MP = 0
D. AP = MP = 0
Explanation: Total product (TP) is the total output a production unit can produce, using different combination of factors of production. When marginal product =0 (at point D in the figure), the total product is at its maximum (as seen at point C in the figure given below). Then en as the marginal product becomes negative, the total product starts going down.
429.

The innovation theory of profit was proposed by -

A. Marshall
B. Clark
C. Schumpeter
D. Joan Robbinson
Explanation: The Innovation Theory of Profit was proposed by Joseph. A. Schumpeter, who believed that an entrepreneur can earn economic profits by introducing successful innovations. In other words, innovation theory of profit posits that the main function of an entrepreneur is to introduce innovations and the profit in the form of reward is given for his performance.
430.

Aneconomy in which there are no flows of labour, goods or money to and from other nations is a/an -

A. slow economy
B. mixed economy
C. closed economy
D. open economy
Explanation: An economy that does not interact with the economy of any other country is known as closed economy. A closed economy is self- sufficient, meaning no imports are brought in and no exports are sent out. It is the opposite of an open economy, in which a country conducts trade with outside regions.
431.

Seawater, fresh air, etc., are regarded in Economics as -

A. Giffen goods
B. inferior goods
C. free goods
D. normal goods
Explanation: Free goods are what is needed by the society and is available without limits, The free good is a term used in economics to describe a good that is not scarce. A free good is available in as great a quantity as desired with zero opportunity cost to society.
432.

Which of the following does not determine supply of labour?

A. Size and age-structure of population
B. Nature of work
C. Marginal productivity of labour
D. Work-leisure ratio
Answer» C. Marginal productivity of labour
Explanation: The term 'supply of labour' refers to the number of hours of a given type of labour which will be offered for hire at different wage rates. Usually, it is found that higher the wage rates larger is the supply indicating a direct relationship that exists between the wage rate i.e. the price of labour and labour hours supplied.
433.

The 'break-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 the above
Answer» C. total revenue equals total cost
Explanation: Break-even is the point of balance between making either a profit or a loss. In economics & business, specifically cost accounting, 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.
434.

The value of a commodity expressed in terms of money is known as -

A. Price
B. Utility
C. Value
D. Wealth
Explanation: The exchange value of every commodity can be expressed in terms of money. This possibility has enabled money to become a medium for expressing values when the growing elaboration of the scale of values which resulted from the development of exchange necessitated a revision of the technique of valuation. When value is expressed in terms of money, it is called price. Thus, price can be defined as exchange value of a commodity expressed in terms of money.
435.

Total fixed cost curve is -

A. Vertical
B. Horizontal
C. Positively Sloping
D. Negatively sloping
Explanation: The Total Fixed Cost Curve is a curve that graphically represents the relation between total fixed cost incurred by a firm in the short-run product of a good or service and the quantity produced. This curve is constructed to capture the relation between total fixed cost and the level of output, holding other variables, like technology and resource prices, constant. Because total fixed cost are, in fact, fixed, the total fixed cost curve is, in fact, a horizontal line.
436.

Economic rent does not arise when the supply of a factor unit is -

A. Perfectly inelastic
B. Perfectly elastic
C. Relatively elastic
D. Relatively inelastic
Explanation: Economic rent in the sense of surplus over transfer earnings arise when the supply of the factor units is less than perfectly elastic or not perfectly elastic. When the supply of factor units is perfectly elastic, there is no surplus or economic rent and the actual earnings and transfer earnings are equal. In such a scenario, at a given price or remuneration, the entrepreneur can engage any number of factor units.
437.

The supply of labour in the economy depends on -

A. Population
B. National income
C. Per capita income
D. Natural resources
Explanation: The supply curve for labor depends on variables such as population, wage rates, etc. in developing countries, the vast population base explains the relatively lower wage rates and easy accessibility to labour supply. This is just the opposite in the case of developed countries.
438.

Which one of the following pairs of goods is an example for Joint Supply?

A. Coffee and Tea
B. Ink and Pen
C. Tooth brush and Paste
D. Wool and Mutton
Explanation: The production of two or more goods simultaneously from the same imputs is called Joint Supply. Wool and Mutton are an example for joint supply.
439.

Goods which are meant either for consumption or for investment are called -

A. Final goods
B. Giffen goods
C. Inferior goods
D. Intermediate goods
Explanation: All goods which are meant either (i) for consumption by consumers or (ii) for investment by firms are called final goods. They are finished goods, meant for final use. These are neither resold nor do they enter into further stages of production. Cars, television sets, cloth, food, machinery, equipments etc. are final goods.
440.

Which is the most essential function of an entrepreneur?

A. Supervision
B. Management
C. Marketing
D. Risk bearing
Explanation: An entrepreneur performs a series of functions necessary right from the genesis of an idea up to the establishment and effective operation of an enterprise. The functions of an entrepreneur as risk bearer are specific in nature. The entrepreneur assumes all possible risks of business which emerges due to the possibility of changes in the tastes of consumers, modem techniques of production and new inventions. Such risks are not insurable and incalculable. In simple terms such risks are known as uncertainty concerning a loss.
441.

Which of the following most closely approximates our definition of oligopoly?

A. The cigarette industry
B. The barber shops
C. The gasoline stations
D. Wheat farmers
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. Businesses that are part of an oligopoly share some common characteristics: they are less concentrated than in a monopoly, but more concentrated than in a competitive system. This creates a high amount of interdependence which encourages competition in non price-related areas, like advertising and packaging.
442.

One of the essential conditions of perfect competition is :

A. product differentiation
B. multiplicity of prices for identical products at any one time.
C. many sellers and a few buyers.
D. Only one price for identical goods at any one time.
Answer» D. Only one price for identical goods at any one time.
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. There are no trademarks, patents etc. to distinguish the product of one seller from that of another. Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities.
443.

Pump priming should be resorted to at a time of?

A. Inflation
B. Deflation
C. Stagflation
D. Reflation
Explanation: Pump priming is the action taken to stimulate an economy, usually during a recessionary/deflationary period, through government spending, and interest rate and tax reductions. Growth is accomplished through the increase in purchasing power experienced by those affected by the injection of funds, with the goal of prompting higher demand for goods and services.
444.

When will demand become a grant?

A. When a demand is proposed
B. After the discussion on demand is over
C. After the demand is granted
D. When the budget session is closed.
Answer» C. After the demand is granted
Explanation: The estimates of expenditure included in the Budget and required to be voted by Lok Sabha are in the form of Demands for Grants. These Demands are arranged Ministry- wise and a separate Demand for each of themajor services is presented. Each Demand contains first a statement of the total grant and then a statement of the detailed estimate divided into items. A demand becomes a grant after it has been voted. The voting of demands for grants is the exclusive privilege of the Lok Sabha and not of Rajya Sabha.
445.

The value of investment multiplier relates to -

A. change in income due to change in autonomous investment.
B. change in autonomous investment due to change in income.
C. change in income due to change in consumption.
D. change in the income due to change in induced investment.
Answer» B. change in autonomous investment due to change in income.
Explanation: The term investment multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy. The investment multiplier tries to determine the financial impact for a public or private project.
446.

Savings rate is relatively low in developed economies because of -

A. Low per capita income
B. Welfare programmes
C. Liquidity/ Borrowing constraint
D. High interest rate
Explanation: As a general rule, saving is considered as a derivative of consumption. Developed economies have lower saving rates than developing countries because at the same income level, the level of consumption is higher in their cases. Besides, as seen in the recent case of the United States, welfare programmes have been found to be responsible for falling saving rate. Redistributing from young and future generations to older generations raises national consumption and lowers national saving (The Concise Encyclopedia of Economics).
447.

A rising Per Capita Income will indicate a better welfare if it is accompanied by -

A. unchanged Income distribution overall.
B. changed Income distribution in favour of rich.
C. changed Income distribution in favour of poor.
D. changed Income disribution in favour of Industrial Labour.
Answer» C. changed Income distribution in favour of poor.
Explanation: Per capita income has lately been viewed as a better determinant of economic development and welfare. However, high inequality can still diminish economic growth. So equal or more rationale distribution of income in the favour of the poor is the best way to ensure that the welfare is holistic and leaves no quarters deprived as after all, economic welfare is a part and parcel of social welfare.
448.

National Income is generated from:

A. any money making activity
B. any laborious activity
C. any profit-making activity
D. any productive activity
Explanation: National Income is the monetary value of all goods and services produced by nationals of a country. Only productive activities are included in the computation of national income. All incomes earned through productive activities are included in national income. Income earned through unproductive activities is not Included.
449.

Net National Product of a country is -

A. GDP minus depreciation allowances
B. GDP plus net income from abroad
C. GNP minus net income from abroad
D. GNP minus depreciation allowances
Answer» D. GNP minus depreciation allowances
Explanation: Net national product (NNP) is the total market value of all final goods and services produced by residents in a country or other polity during a given time period (gross national product or GNP) minus depreciation. The net domestic product (NDP) is the equivalentapplication of NNP within macroeconomics, and NDP is equal to gross domestic product (GDP) minus depreciation: NDP = GDP - depreciation.
450.

Which one of the following is not a method of estimating National Income?

A. Expenditure method
B. Product method
C. Matrix method
D. Income method
Explanation: The matrix method is a structural analysis method used as a fundamental principle in many applications in civil engineering. The method is carried out, using either a stiffness matrix or a flexibility matrix. Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method.
451.

Who said 'Supply creates its own demand'?

B. J.B.Saw
C. Marshall
D. Ricardo
Explanation: "Supply creates its own demand" is the formulation of Say's law by John Maynard Keynes. The rejection of this doctrine is a central component of The General Theory of Employment, interest and Money (1936) and a central tenet of Keynesian economics. 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
452.

Investment is equal to :

A. gross total of all types of physical capital assets
B. gross total of all capital assets minus wear and tear
C. stock of plants, machines and equipments
D. None of the above
Answer» B. gross total of all capital assets minus wear and tear
Explanation: Capital formation is frequently thought of as a measure of total "investment", in the sense of that portion of capital actually used for investment purposes and not held as savings or consumed. But in fact, in national accounts, the concept of gross capital formation refers only to the accounting value of the "additions of non- financial produced assets to the capital stock less the disposals of these assets". "Investment" is a broader concept that includes investment in all kinds of capital assets, whether physical property or financial assets.
453.

'Gold' is mainly related to -

A. Local market
B. National market
C. International market
D. Regional market
Explanation: Gold is mainly related to the international market as of all the precious metals, it is the most popular as an investment. Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economic regions or countries, until recent times. Gold price has shown a long term correlation with the price of crude oil.
454.

A. output at factor cost
B. output at market prices
C. goods and services less depreciation
D. goods and services less cost of intermediate goods and services
Answer» D. goods and services less cost of intermediate goods and services
Explanation: Value added is an economic term to express the difference between the value of goods and the cost of materials or supplies that are used in producing them. It is a measure of economic activity which eliminates the duplication inherent in the sales value figure which results from the use of products of some establishments as materials or services by others. So it is of goods and services less cost of intermediate goods and services.
455.

In India, disguised unemployment is generally observed in -

A. the Agricultural sector
B. the Factory sector
C. the Service sector
D. All these sectors
Explanation: As the word suggests, disguised unemployment refers to a situation when a person is apparently employed, but in effect unemployed. It is a phenomenon of concealed unemployment, not visible to the open eyes. Here it is not possible to identify as to who are unemployed, as all "appear to be working." Disguised unemployment is especially seen in the field of agriculture. Most of the people are observed to be engaged in agriculture; however, in reality a sufficient number of them are unemployed. Their contribution regarding production is negligible.
456.

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

A. production
B. production and sale
C. production and transportation
D. production, transportation and sale
Explanation: An excise or excise tax (sometimes called a duty of excise special tax) is an inland tax on the sale, or production for sale, of specific goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are distinguished from customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties arc border taxes.
457.

"Smart Money" term is used for -

A. Credit Card
B. Internet Banking
C. eBanking
D. Cash with Public
Explanation: Credit cards are sometimes considered as smart money since they enable transactions without the need for physical cash and that, too, in a convenient manner. It is plastic money that is used to pay for products andservices at over 20 million locations around the world. In pure economic terms, Smart Money refers to investments made by people experienced in matters of finance.
458.

Which of the following brings out the 'Consumer Price Index Number' for Industrial workers?

A. RBI
B. The Labour Bureau
C. Commerce Department
D. NITI Aayog
Explanation: The Consumer Price Index Numbers for Industrial Workers CPI (IW) are being compiled, maintained and disseminated by the Labour Bureau since its inception in October, 1946. These index numbers are being utilized for fixation and revision of wages and de-termination of variable Dearness Allowances payable to workers in organized sectors of the economy. These index numbers are compiled by the Bureau on month to month basis.
459.

'Green Banking' means :

A. Banks financing agriculture
B. Banks financing irrigation projects
C. Banks financing farmers
D. Banks financing pro environmental projects
Answer» D. Banks financing pro environmental projects
Explanation: Green Banking refers to practices and guidelines that make banks sustainable in economic, environment, and social dimensions. Green banking is also known as environment- friendly banking, ethical banking or sustainable banking. A conventional bank becomes a green bank by directing its core operations towards the betterment of the environment.
460.

A currency having a falling exchange rate due to continuing balance of payments deficit is called a-

A. Soft currency
B. Hard currency
C. Scarce currency
D. Surplus currency
Explanation: Soft currency is a currency with a value that fluctuates as a result of the country’s political or economic uncertainty which may be due to balance of payments problem. Currencies from most developing countries are considered to be soft currencies. Often, governments from these developing countries will set unrealistically high exchange rates, pegging their currencies to a currency such as the U.S. dollar
461.

A speculator who enters into a purchase transaction with a view to sell in the near future when the price would have risen is called a -

A. Bear
B. Bull
C. Bison
D. Boar
Explanation: Investors who take a bull approach purchase securities under the assumption that they can be sold later at a higher price. A "bear" is considered to be the opposite of a bull.
462.

Bank rate is that rate on which -

A. Any bank lends money to an individual
B. State Bank of India gives loan to the rural banks
C. Central Bank of Country lends money to the commercial banks
D. Rural bank gives loan to cooperative societies
Answer» C. Central Bank of Country lends money to the commercial banks
Explanation: Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances to a commercial bank. Repo (Repurchase) rate is the rate at which the central bank lends short- term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. The reverse repo rate is the rate at which the banks park surplus funds with reserve bank, while the repo rate is the rate at which the banks borrow from the central bank.
463.

Devaluation usually causes the internal prices to :

A. fall
B. rise
C. remain unchanged
D. None of the above
Explanation: Devaluation reduces the export price in term of foreign currencies in the world market. As a result the exports are increased so as to increase the revenue of the country. When the exports are increased all efforts are made to increase the production of the country. However, devaluation of currency is in relation to external currencies and external trade. It has effects on a country's international trade by alluring traders. But, internal prices remain unaffected.
464.

Which among the following is not a non-customs duty obstacle in the world trade?

A. Quantity restriction
B. Establishment of Standard of labour in manufacturing
C. Determination of import duty uniformly
D. Restrictions on goods quality
Answer» C. Determination of import duty uniformly
Explanation: Non-tariff barriers to trade include import quotas, special licenses, unreasonable standards for the quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and phyto- sanitary measures, rules of origin, etc. Determination of import duty uniformly is comes under the sovereign duty of a nation. It is internal development.
465.

seller or buyer protects his business or holdings from changing prices and takes action against it. It is known as -

A. defence
B. betting
D. mortgage
Explanation: It is known as defence, It is a type of resistance against danger, attack, or harm to business or holding. A seller or buyer resorts to defence as a means of protection.
466.

Which one of the following does not deal with export promotion?

B. Minerals and Metals Trading Corporation
C. Cooperative Marketing Societies
D. Slate Trading Corporation of India
Explanation: According to the Reserve Bank of India, co-operative marketing is a co-operatove association of cultivators formed primarily for the purpose of helping the members to market their produce more profitably than is possible through private trade. Under the system of co- operative marketing whole responsibility of marketing is taken up by the farmers themselves, organized on co-operative basis. The area of operation of marketing society is usually fixed with reference to local conditions - area based or commodity based. The commodity-based societies related to grapes, oranges, banana, pomegranate, etc.
467.

Which of the following sets belongs to Central tax?

A. Excise duty, Sales tax and Custom duty
B. Excise duty, Custom duly and Income tax
C. Income tax, Custom duty and House, Lax
D. Custom duty, Entertainment tax and Income tax
Answer» B. Excise duty, Custom duly and Income tax
Explanation: The Central Indian Government that is officially named as the "Union Government" is responsible for the imposition of both direct taxes as well indirect taxes. Listed below are some of the taxes that are levied by the India Government: Banking Cash Transaction Tax; Capital Gains Tax; Corporate Income Tax: Fringe Benefit Tax; Personal Income Tax; and Securities Transaction Tax. The indirect taxes are: Customs Duty; Excise Duty and Service Tax.
468.

ho defined 'Rent' as that portion or produce of the earth which is paid to the landlord for the use of original and indestructible power of the soil?

A. Ricardo
B. Marshall
C. Keynes
D. Plgou
Explanation: In his The Principles of Political Economy and Taxation (1821), David Ricardo stated: "Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often, however, confounded with the interest and profit of capital, and, in popular language, the term is applied to whatever is annually paid by a farmer to his landlord.
469.

Economies of a firm are :

A. An increase in its profits
B. A reduction in its selling expenses
C. Its dominance of the market
D. Saving in it's production costs
Answer» D. Saving in it's production costs
Explanation: Economics of a firm includes how it combines labour and capital so as to lower the average cost of output, either from increasing, decreasing, or constant returns to scale for one product line or from economies of scope for more than one product line. It includes producing more units of a good or a service on a larger scale, yet with (on average) less input costs.
470.

Nature of unemployment in agriculture in India is -

A. only seasonal
B. only disguised
C. Both (1) and (2)
D. None of the above
Answer» C. Both (1) and (2)
Explanation: Seasonal employment refers to a situation where a number of persons are not able to find jobs during some months of the year. Example: Agriculture is a seasonal activity. There is an increased demand for labour at the time of sowing, harvesting, weeding and threshing. In between there is little or no demand for labour. Besides, disguised unemployment is also seen in agriculture in India.
471.

The monetary policy is India is formulated by -

A. Central Government
B. Industrial Financial Corporation of India
C. Reserve Bank of India
D. Industrial Development Bank of India
Answer» C. Reserve Bank of India
Explanation: Monetary policy is the process by which monetary authority of a country, generally a central bank controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI). is so designed as to maintain the price stability in the economy.
472.

The system of "Memorandum of Understanding” (MoU) was introduced in -

A. 1989 - 90
B. 1990 - 91
C. 1987 - 88
D. 1988 - 89
Explanation: The System of Memorandum of Understanding was introduced in the Public Sector Enterprises during the year 1987-88 in India. It was based on the report of the Arjuna Sengupta Committee (1984).
473.

The upper limit of investment in plant and machinery for small-scale industries has been fixed currently at -

A. Rs. 35 lakhs
B. Rs. 45 lakhs
C. Rs. 60 lakhs
D. Rs. 1 crore
Explanation: The upper limit of investment in plant and machinery for small-scale industries has been fixed at Rs. one crore.
474.

What is USP in marketing field?

A. Uninterrupted power supply
B. Universal standards of production
C. Us Programme based
D. Exclusive marketing features
Explanation: The Unique Selling Proposition (a.k.a. Unique Selling Point, or USP) Is a marketing concept that was first proposed as a theory to understand a pattern among successful advertising campaigns of the early 1940s. It states that such campaigns made unique propositions to the customer and that this convinced them to switch brands. The term was invented by Rosser Reeves of Ted Bates & Company.
475.

When too much money is chasing too few goods, the situation is -

A. deflation
B. inflation
C. recession
D. stagflation
Explanation: Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods". More accurately, it should be described as involving "too much money spent chasing too few goods", since only money that is spent on goods and services can cause inflation.
476.

When there is an official change in the exchange rate of domestic currency, then it is called

A. Appreciation
B. Depreciation
C. Revaluation
D. Deflation
Explanation: Revaluation is a calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency. It is opposite of devaluation.
477.

Inflation redistributes income and wealth in favour of :

A. Pensioners
B. Poor
C. Middle class
D. Rich
Explanation: A group of economists including Keynes is of the opinion that 'inflation, in one form or the other, is a factor which helps economic growth. Usually, it is argued that inflation tends to redistribute income and wealth. The redistributive effect of inflation is always in favour of profit-earning class, that is to say, It redistributes income always from the wage- recipient class towards the profit-recipient class in the community. As a result, the saving ratio will increase because the marginal propensity to save of the profit earners is generally high as against the high margin-al propensity to consume of the wage- earners because of their near-subsistence level of income.
478.

Money market is a market for -

A. Short term fund
B. Long term fund
C. Negotiable instruments
D. Sale of shares
Explanation: The money market is where financial instruments with high liquidity and very short maturities are traded. It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year. Some of the common money market instruments are: commercial paper, municipal notes, interest rate swaps, etc.
479.

MUDRA Bank has been launched to help -

B. Marginal farmers
C. Poor women
D. Rural sector
Explanation: Micro Units Development and Refinance Agency Bank (or MUDRA Bank)is a new institution setup by the Government of India to provide the funding to the non-corporate small business sector. It will provide its services tosmall entrepreneurs outside the service area of regular banks, by using last mile agents.
480.

Industrial exit policy means -

A. forcing foreign companies to leave India
B. forcing business units to move out of congested localities
C. allowing manufacturers to shift their line of products
D. allowing business units to close down
Explanation: The term 'exit' is the obverse of the term 'entry' into industry. It refers to the right or ability of an industrial unit to withdraw from or leave an industry or in other words to close down. The proposal to introduce an exit policy was first mooted in 1991 when it was felt that without labor market flexibility, efficient industrialization would be difficult to achieve.
481.

Capital formation in an economy depends on -

A. Total Income
B. Tot al demand
C. Total savings
D. Total production
Explanation: Capital formation refers to capital accumulation, referring to the total "stock of capital" that has been formed, or to the growth of this total capital stock. It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period.
482.

If the tax rate increases with the higher level of income, it shall be called -

A. Proportional tax
B. Progressive tax
C. Lump sum tax
D. Regressive tax
Explanation: A progressive tax is a tax by which the tax rate increases as the taxable base amount increases." Progressive" describes a distribution effect on income or expenditure,referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence increasingly to those with a higher ability-to-pay.
483.

New capital issue is placed in -

A. Secondary market
B. Grey market
C. Primary market
D. Black market
Explanation: The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).
484.

If a country devalues its currency, its - (1)

A. Exports become cheaper and imports become costlier
B. (2) Exports become costlier and imports become cheaper.
C. Exports value is equivalent to imports value
D. No effect on exports and imports
Answer» A. Exports become cheaper and imports become costlier
Explanation: Devaluation means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. Devaluation causes a country's exports to become less expensive, making them more competitive in the global market. This, in turn, means that imports are more expensive, making domestic consumers less likely to purchase them.
485.

'Residex' is associated with -

A. Share prices
B. Price inflation
C. Mutual fund prices
D. Land prices
Explanation: The RESIDEX was first launched in 2007 by the National Housing Bank (NHB) to provide an index of residential prices in India across cities and over time. It is the first housing price index in India. It was launched in order to fill price information gap and to streamline the process of development of property in various cities across the country.
486.

Which one of the following is not a function of the central bank in an economy?

A. Dealing with foreign exchange
B. Controlling monetary policy
C. Controlling government spending
D. Acting as a banker's bank
Explanation: A central bank, reserve bank, or monetary authority is a public institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries.
487.

In a period of inflation and price rises the supply of money remains -

A. the same
B. increases
C. decreases
D. increases or decreases pro-portionately.
Explanation: Money supply is the total amount of monetary assets available in an economy at a specific time. The relation between money and prices is historically associated with the quantity theory of money. There is strong empirical evidence of a direct relation between long-term price inflation and money-supply growth, at least for rapid increases in the amount of money in the economy.
488.

Which of the following groups suffer the most from inflation?

A. Debtros
B. Creditors
D. Holders of real assets
Explanation: Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal). Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power. Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed.
489.

What is "narrow money"?

A. The sum of currency in circulation and the demand deposits in banks
B. The sum of MI money and the time deposits
C. The sum of currency in circulation with the public and the cash reserves held by banks
D. The market value of the stocks held by all the holders excluding the promoters
Answer» A. The sum of currency in circulation and the demand deposits in banks
490.

Legal Tender Money is -

A. accepted only by Government
B. accepted by people and Government as per the law
C. not accepted for business purposes by law
D. not accepted by Government
Answer» B. accepted by people and Government as per the law
Explanation: Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. So it is accepted by people and government on a legal basis. Paper currency and coins are common forms of legal tender in many countries.
491.

Bank rate is the rate of interest:

A. At which public borrows money from Commercial Banks
B. At which public borrows money from R.B.I.
C. At which Commercial Banks borrow money from R.B.I.
D. At which Commercial Banks borrow money from the public
Answer» C. At which Commercial Banks borrow money from R.B.I.
Explanation: Bank Rate is the interest rate at which a nation's central bank lends money to domestic banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Regulation of the economy through management of the money supply is referred to as monetary policy.
492.

Which of the following can be used for checking inflation temporarily?

A. Increase in wages
B. Decrease in money supply
C. Decrease in taxes
D. None of these
Answer» B. Decrease in money supply
Explanation: An open market operation (also known as OMO) is an activity by a central bank to buy or sell government bonds on the open market. India's Open Market Operation is much influenced by the fact that it is a developing country and that the capital flows are much different than those in the other developed countries. Economists claim that an increase in money supply alone constitutes inflation.
493.

he annual record for all the monetary transactions of a country with other countries of the world is known as -

B. Balance of monetary-receipts
C. Balance of payments
D. Balance Sheet
Explanation: Balance of payments (BoP) accounts arc an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The BoP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned.
494.

A country's balance of trade is unfavorable when —

A. exports exceed imports
B. imports exceed exports
C. terms of trade become unfavorable
D. None of these
Explanation: The balance of trade, or net exports is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports. A positive balance is known as a trade surplus if it consists of exporting more than is imported: a negative balance is referred to as a trade deficit or, informally, a trade gap.
495.

Which one of the following categories of workers is termed as cultivators?

A. Those who own land and cultivate
B. Those who lease in land and cultivate
C. Those who cultivate the land of others
D. Those who own land and lease in from others or institutions and cultivate
Answer» C. Those who cultivate the land of others
Explanation: Agricultural laborers are those who cultivate the land of others but own no (or very little) land of their own. Owner cultivators are those who own and cultivate their own land. Landowners are those who own land but do not cultivate it themselves. So basically, a cultivator is an agricultural labourer who tills the land of others.
496.

The reserves held by Commercial Banks over and above the statutory minimum, with the RBI are called -

A. Cash reserves
B. Deposit reserves
C. Excess reserves
D. Momentary reserves
Explanation: In banking, excess reserves are bank reserves in excess of the reserve requirement set by a central bank. They are reserves of cash more than the required amounts. Holding excess reserves has an opportunity cost if higher risk-adjusted interest can be earned by putting the funds elsewhere; the advantage of holding some funds in excess reserves is that doing so may provide enhanced liquidity and therefore more smooth operation of payment system.
497.

J. B. Say's Law of Market was not accepted by -

B. Marshall
C. Malthus
D. David Ricardo
Explanation: Malthus opposed what has come to be described as Say's Law: that supply creates its own demand. He rejected the proposition that the demand for commodities will automatically provide a motive for sufficient investment and production to satisfy such demand, or that investment and production would alone and automatically lead to an adequate demand to absorb supply. He argued that production and consumption were impelled by very different motives. Demand adjusted slowly, according to 'habit and tastes' and hence if productivity increased significantly, demand would not
498.

The time element in price analysis was introduced by :

A. J.M. Keynes
B. Alfred Marshall
C. J.S. Mill
D. J.R. Hicks
Explanation: Marshall, who propounded the theory that price is determined by both demand and supply, also gave a great importance to the time element in the determination of price. He introduced time period analysis into pricing process to bring out the varying influence of each of two forces over price of the product in different time periods. He said, "as a general rate", "the shorter the period which one considers the greater must be the share of our attention which is given to the influence of demand on value, and the longer the period more important will be the influence of cost of production on value."
499.

Selling cost have to be incurred in case of -

A. Perfect Competition
B. Monopoly
C. Monopolistic Competition
D. None of the given options
Explanation: Selling costs are the expenses on advertisement, salesmanship, free sampling, free service, door-todoor canvassing, and so on. There is no selling problem under perfect competition where the product is homogeneous. Under monopolistic competition where the product is differentiated, selling costs are essential to push up the sales. They are incurred to persuade a buyer to purchase one product in preference to another.
500.

Inflation is a situation characterized by

A. Too much money chasing too few goods
B. Too few money chasing too much goods
C. Too many people chasing too few goods
D. Too many people chasing too little money
Answer» A. Too much money chasing too few goods
Explanation: Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods."