McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: General Knowledge (GK) , Union Public Service Commission (UPSC) .
| 251. |
Investment multiplier shows the effect of investment on - |
| A. | Employment |
| B. | Savings |
| C. | Income |
| D. | Consumption |
| Answer» C. Income | |
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Explanation: Investment multiplier is simply the multiplier effect of an injection of investment into an economy. The multiplier effect refers to the idea that an initial spending rise can lead to even greater increase in national income |
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| 252. |
Barter transactions means - |
| A. | Goods are exchanged with gold. |
| B. | Coins are exchanged for goods. |
| C. | Money acts as a medium of exchange. |
| D. | Goods are exchanged with goods. |
| Answer» D. Goods are exchanged with goods. | |
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Explanation: Barter is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. Barter, as a replacement for money as the method of exchange, is used in times of monetary crisis, such as when the currency may be either un- stable or simply unavailable for conducting commerce, |
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| 253. |
The supply-side measure to control inflation is - |
| A. | Reducing public expenditure |
| B. | Price control through Public Distribution System |
| C. | Higher taxation to mop up liquidity |
| D. | Credit control |
| Answer» B. Price control through Public Distribution System | |
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Explanation: The issue of inflation is addressed from both demand and supply sides. demand management is achieved by measures such as postponing public expenditure, mopping up excess liquidity either through taxes or savings schemes, etc. On the supply side, the mechanism of Public Distribution System (PDS) ensures availability of essential commodities for the vulnerable sections of society, This helps to maintain price levels. Coupled with this is the open market sale of rice and wheat resorted to by FCI from its buffer stock in times of price rise. |
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| 254. |
HDI is an aggregate measure of progress in which of the three dimensions? |
| A. | Health, Education, Income |
| B. | Food Security, Employment, Income |
| C. | Agriculture, Industry, Services |
| D. | Height, Weight, Colour |
| Answer» A. Health, Education, Income | |
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Explanation: The Human Development Index (HDI) is an aggregate measure of progress in three dimensions—health, education and income which are used to rank countries into four tiers of human development. The FIDI was developed by the Pakistani economist Mahboob ul Haq working alongside Indian economist Amartya Sen. |
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| 255. |
What is an octroi? |
| A. | Tax |
| B. | Tax collection centre |
| C. | Tax processing centre |
| D. | Tax information centre |
| Answer» A. Tax | |
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Explanation: Octroi is a local tax which is collected by the state government on those goods that have been bought into the city/state for the purpose of personal use and sale. The charges on the items are generally levied after on the weight, value and total number of goods. It is levied on certain articles, such as foodstuffs, on their entry into a city. |
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| 256. |
Demand of commodity mainly depends upon - |
| A. | Purchasing will |
| B. | Purchasing power |
| C. | Tax policy |
| D. | Advertisement |
| Answer» B. Purchasing power | |
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Explanation: The demand of commodity mainly stems from the consumption capacity of the buyer. Demand is equal to desire plus ability to pay plus will to spend. Demand for a commodity depends upon number of factors called Determinants. |
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| 257. |
NIFTY is associated with - |
| A. | Cloth Market Price Index |
| B. | Consumer Price Index |
| C. | BSE Index |
| D. | NSE Index |
| Answer» D. NSE Index | |
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Explanation: The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. Nifty Fifty was an informal term used to refer to 50 popular large cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks. NIFTY means National Index for Fifty. |
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| 258. |
The data collection for national income estimation is conducted in India by— |
| A. | The Finance Ministry of the Government of India |
| B. | The RBI |
| C. | The NSSO (National Sample Survey Organization |
| D. | None of these |
| Answer» C. The NSSO (National Sample Survey Organization | |
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Explanation: The National Sample Survey Office (NSSO) in India is a unique setup to carry out surveys on socioeconomic, demographic, agricultural and industrial subjects for collecting data from households and from enterprises located in villages and in the towns. It is a focal agency of the Government of India for collection of statistical data in the areas which are vital for developmental planning. |
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| 259. |
What is AGMARK? |
| A. | It is a marketing seal issued on the graded agricultural commodity |
| B. | It stands for agricultural marketing |
| C. | It represents agricultural management and regulation |
| D. | None of these |
| Answer» B. It stands for agricultural marketing | |
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Explanation: AGIVIARK is a certification mark employed on agricultural products in India, assuring that they conform to a set of standards approved by the Directorate of Marketing and |
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| 260. |
The Imperial Bank of India, after its nationalization came to be known as : |
| A. | Reserve Bank of India |
| B. | State Bank of India |
| C. | United Bank of India |
| D. | Indian Overseas bank |
| Answer» B. State Bank of India | |
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Explanation: The State Bank of India, the largest banking and financial services company in India by revenue, assets and market capitalization: traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which in turn became the State Bank of India. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India |
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| 261. |
Floating Exchange Rate is also referred to as - |
| A. | Flexible Exchange Rate |
| B. | Fixed Exchange Rate |
| C. | Real Exchange Rate |
| D. | Controlled Exchange Rate |
| Answer» A. Flexible Exchange Rate | |
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Explanation: A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. In this sense, it is quite flexible and not something fixed or constant. Such rates automatically adjust, enabling a country to dampen the impact of shocks and foreign business cycles, and to preempt the possibility of having a balance of payments crisis. |
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| 262. |
Countries that depend mainly on the export of primary products for their income, are prone to - |
| A. | inflation |
| B. | economic instability |
| C. | increasing unemployment |
| D. | stable economic growth |
| Answer» C. increasing unemployment | |
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Explanation: Most of the world's poorest countries depend for increasing export earnings on agricultural products that are vulnerable to fluctuating or declining terms of trade. Disadvantageous terms of technology transfer, protectionism, and decline in financial flows compound the already existing poverty and lack of work. Being labour-intensive, such sectors are prone to various types of unemployment. Developing countries that rely on the export of primary products were hit particularly hard by falling commodity prices between 1980 and 1984. |
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| 263. |
Bank deposits that can be withdrawn without notice are called - |
| A. | account payee deposits |
| B. | fixed deposits |
| C. | variable deposits |
| D. | demand deposits |
| Answer» D. demand deposits | |
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Explanation: Demand deposits are funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be "demanded" by an account holder at any time. Many checking and savings accounts today are demand deposits and are accessible by the account holder through a variety of banking options, including teller, ATM and online banking. In contrast, a term deposit is a type of account which cannot be accessed for a predetermined period (typically the loan's term). |
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| 264. |
What does ECS in banking transactions stand for? |
| A. | Excess Credit Supervisor |
| B. | Extra Cash Status |
| C. | Exchange Clearing Standard |
| D. | Electronic Clearing Service |
| Answer» D. Electronic Clearing Service | |
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Explanation: Electronic Clearing Service is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons. |
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| 265. |
Which one is not a function of money? |
| A. | Transfer of value |
| B. | Store of value |
| C. | Price stabilization |
| D. | Value measurement |
| Answer» C. Price stabilization | |
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Explanation: Generally, economists have defined four types of functions of money which are as follows: (i) Medium of exchange (transfer of value) (ii) Measurement of value, (iii) Standard of deferred payments, and (iv) Store of value. Price stabilization is a function of monetary policy. |
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| 266. |
Inflation is caused by - |
| A. | increase in money supply and decrease in production |
| B. | increase in money supply |
| C. | increase in production |
| D. | decrease in production |
| Answer» A. increase in money supply and decrease in production | |
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Explanation: Economists generally agree that in the long run, inflation is caused by increases in the money supply. According to the theory of Demand-Pull Inflation, if demand grows faster than supply, prices will increase. There is too much money chasing too few goods. The increase in money supply is not matched by the equivalent production of goods. |
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| 267. |
State which of the following is correct? The Consumer Price Index reflects - |
| A. | the standard of living |
| B. | the extent of inflation in the prices of consumer goods |
| C. | the increasing per capita income |
| D. | the growth of the economy |
| Answer» B. the extent of inflation in the prices of consumer goods | |
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Explanation: A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. |
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| 268. |
What are the main components of basic social infrastructure of an economy? |
| A. | Education, Industry and Agriculture |
| B. | Education, Health and Civil amenities |
| C. | Transport, Health and Banks |
| D. | Industry, Trade and Transport |
| Answer» B. Education, Health and Civil amenities | |
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Explanation: Social infrastructure refers to the facilities and mechanisms that ensure education, health care, community development, income distribution, employment and social welfare. It Includes health care system, including hospitals, the financing of health care, including health insurance, the systems for regulation and testing of medications and medical procedures; the educational and research system, including elementary and secondary schools, universities, specialized colleges, research institutions; Social welfare systems; Sports and recreational infrastructure, such as parks, sports facilities, the system of sports leagues and associations: Cultural infrastructure; and business travel and tourism infrastructure, including both man-made and natural attractions, etc. |
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| 269. |
The tax levied on gross sales revenue from business transactions is called - |
| A. | Turnover Tax |
| B. | Sales Tax |
| C. | Capital Gains Tax |
| D. | Corporation Tax |
| Answer» A. Turnover Tax | |
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Explanation: A turnover tax is similar to a sales |
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| 270. |
Ad Valorem tax is levied - |
| A. | according to value added by the Government. |
| B. | according to value addition to a commodity |
| C. | according to value given by producers |
| D. | according to value added by the finance ministry |
| Answer» C. according to value given by producers | |
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Explanation: An ad valorem tax (Latin for "according to value") is a tax based on the value of real estate or personal property. It is more common than a specific tax, a tax based on the quantity of an item, such as cents per kilogram, regardless of price. It is levied on the basis of value given by producers. So sometimes, the primary difficulty with such taxation, especially in the case of tariffs, is in establishing a satisfactory value figure. |
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| 271. |
Equilibrium price means - |
| A. | Price determined by demand and supply |
| B. | Price determined by Cost and Profit |
| C. | Price determined by Cost of production |
| D. | Price determined to maximize profit |
| Answer» A. Price determined by demand and supply | |
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Explanation: Equilibrium price is a state in economy where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively equal and that the market is in a stale of equilibrium. In short, it is the market price at which the supply of an item equals the quantity demanded. |
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| 272. |
Opportunity cost of production of a commodity is - |
| A. | the cost that the firm could have Incurred when a different technique was adopted |
| B. | the cost that the firm could have incurred under a different method of production |
| C. | the actual cost incurred |
| D. | the next best alternative output |
| Answer» D. the next best alternative output | |
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Explanation: The concept of opportunity cost is based on scar-city and choice. The opportunity cost of a commodity is the next best alternative commodity sacrificed. In other words opportunity cost of a commodity is forgoing the opportunity to produce alternative goods and services. If one commodity is produced another commodity is sacrificed. |
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| 273. |
Surplus earned by a factor other than land in the short period of referred to as- |
| A. | economic rent |
| B. | net rent |
| C. | quasi-rent |
| D. | super-normal rent |
| Answer» C. quasi-rent | |
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Explanation: Quasi-rent is the surplus which is received in the short period because of demand exceeding the supply by the man made factors besides land. It is an analytical term in economics, for the income earned, in excess of post-investment opportunity cost, by a sunk cost investment. In general, an economic rent is the difference between the income from a factor of production in a particular use, and either the cost of bringing the factor into economic use (Classical factor rent), or the opportunity cost of using the factor, where opportunity cost is defined as the current income minus the income available in the next best use. |
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| 274. |
If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is - |
| A. | perfectly inelastic |
| B. | elastic |
| C. | perfectly elastic |
| D. | inelastic |
| Answer» C. perfectly elastic | |
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Explanation: If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would beundefined but it approaches negative infinity as demand becomes more elastic. |
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| 275. |
Which of the following are not fixed costs? |
| A. | Rent on land |
| B. | Municipal taxes |
| C. | Wages paid to workers |
| D. | Insurance charges |
| Answer» C. Wages paid to workers | |
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Explanation: In economics, fixed costs are 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 being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost. |
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| 276. |
Cost of production of the producer is given by: |
| A. | sum of wages paid to labourers. |
| B. | sum of wages and interest paid on capital. |
| C. | sum of wages, interest, rent and supernormal profit. |
| D. | sum of wages, interest, rent and normal profit. |
| Answer» D. sum of wages, interest, rent and normal profit. | |
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Explanation: The following elements are included in the cost of production: (1) Purchase of raw machinery, (2) Installation of plant and machinery, (3) Wages of labor, (4) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges, |
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| 277. |
The market price is related to : |
| A. | very short period |
| B. | short period |
| C. | long period |
| D. | very long period |
| Answer» A. very short period | |
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Explanation: Marshall was the first economist who analyzed the importance of time in price determination. Market period is a very short period in which supply being fixed, price is determined by demand. The time period is of few clays or weeks in which the supply of a product can be amplified out of given stock to match the demand. This is possible for durable goods. |
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| 278. |
The demand for necessities is - |
| A. | elastic |
| B. | perfectly inelastic |
| C. | inelastic |
| D. | perfectly elastic |
| Answer» B. perfectly inelastic | |
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Explanation: Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand. |
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| 279. |
If a good has negative income elasticity and positive price elasticity of demand, it is a |
| A. | giffen good |
| B. | normal good |
| C. | superior good |
| D. | an inferior good |
| Answer» A. giffen good | |
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Explanation: A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up. |
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| 280. |
A unit price elastic demand curve will touch - |
| A. | both price and quantity axis |
| B. | neither price axis, nor quantity axis |
| C. | only price axis |
| D. | only quantity axis |
| Answer» B. neither price axis, nor quantity axis | |
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Explanation: Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis. |
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| 281. |
If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be - |
| A. | less than unity |
| B. | infinitely large |
| C. | greater than unity |
| D. | equal to unity |
| Answer» D. equal to unity | |
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Explanation: Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below: |
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| 282. |
According to Modern Theory of Rent, rent accrues to - |
| A. | capital only |
| B. | any factor |
| C. | labour only |
| D. | land only |
| Answer» B. any factor | |
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Explanation: Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship. |
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| 283. |
As the number of investments made by a firm increases, its internal rate of return - |
| A. | declines due to diminishing marginal productivity. |
| B. | declines because the market rate of interest will fall, ceteris paribus. |
| C. | increases to compensate the firm for the current consumption foregone. |
| D. | increases because the level of savings will fall. |
| Answer» C. increases to compensate the firm for the current consumption foregone. | |
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Explanation: Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital. |
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| 284. |
The opportunity cost of a factor of production is - |
| A. | what it is earning in its present use. |
| B. | what it can earn in the long period. |
| C. | what has to be paid to retain it in its present use. |
| D. | what it can earn in some other use. |
| Answer» D. what it can earn in some other use. | |
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Explanation: The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses. |
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| 285. |
The demand for labour is called - |
| A. | Market demand |
| B. | Direct demand |
| C. | Derived demand |
| D. | Factory demand |
| Answer» C. Derived demand | |
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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. |
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| 286. |
Equilibrium price is the price when : |
| A. | supply is greater than demand |
| B. | supply is less than demand |
| C. | demand is very high |
| D. | supply is equal to demand |
| Answer» D. supply is equal to demand | |
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Explanation: The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy. |
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| 287. |
Elasticity of demand measures the responsiveness of the quantity demanded of a goods to a |
| A. | change in the price of the goods |
| B. | change in the price of substitutes |
| C. | change in the price of the complements |
| D. | change in the price of joint products |
| Answer» A. change in the price of the goods | |
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Explanation: Price elasticity of demand is a measure of responsiveness of the quantity of a good or service demanded to changes in its price. This measure of elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.e., the elasticity of demand with respect to the good's own price, in order to distinguish it from the elasticity of demand for that good with respect to the change in the price of some other good, a complementary or substitute good. |
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| 288. |
Product differentiation is the most important feature of - |
| A. | Pure competition |
| B. | monopolistic competition |
| C. | monopoly |
| D. | oligopoly |
| Answer» B. monopolistic competition | |
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Explanation: There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation; (2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (e) market power; and (0 Buyers and Sellers do not. have perfect information. |
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| 289. |
Division of labour is the result of - |
| A. | Complicated work |
| B. | excessive pressure |
| C. | excess supply of labour |
| D. | specialization |
| Answer» D. specialization | |
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Explanation: Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages. |
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| 290. |
Which from the following is not true when the interest rate in the economy goes up? |
| A. | Saving increases |
| B. | Lending decreases |
| C. | Cost of production increases |
| D. | Return on capital increases |
| Answer» D. Return on capital increases | |
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Explanation: The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital. |
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| 291. |
Labour Intensive Technique would get chosen in a - |
| A. | Labour Surplus Economy |
| B. | Capital Surplus Economy |
| C. | Developed Economy |
| D. | Developing Economy |
| Answer» A. Labour Surplus Economy | |
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Explanation: Labour' refers to the people required to carry out a process in a business. Labour-intensive processes are those that require a relatively high level of labour compared to capital investment. These processes are more likely to be used to produce individual or personalized products, or to produce on a smallscale. The costs of labour are: wages and other benefits, recruitment, training and so on. Labour intensive processes are more likely to be seen in Job production and in smaller-scale enterprises. |
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| 292. |
When marginal utility is zero, the total utility is - |
| A. | Minimum |
| B. | Increasing |
| C. | Maximum |
| D. | Decreasing |
| Answer» C. Maximum | |
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Explanation: Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum. |
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| 293. |
Operating Surplus arises in the - |
| A. | Government Sector |
| B. | Production for self consumption |
| C. | Subsistence farming |
| D. | Enterprise Sector |
| Answer» A. Government Sector | |
| 294. |
The definition of 'small-scale industry' in India is based on - |
| A. | sales by the unit |
| B. | Investment In machines and equipments |
| C. | market coverage |
| D. | export capacity |
| Answer» B. Investment In machines and equipments | |
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Explanation: Generally, small-scale sector is defined in terms of investment ceilings on the original value of the installed plant and machinery. As per the Ministry of Micro, Small & Medium Enterprises of India, a small scale industry is an industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs 10 million. Fixed capital investment in a unit has been adopted as criteria to make a distinction between small-scale and large-scale industries. This limit is being continuously raised up wards by government. |
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| 295. |
What type of products, does CACP recommend minimum support price for? |
| A. | Industrial products |
| B. | Agricultural products |
| C. | Pharmaceutical products |
| D. | None of the above |
| Answer» B. Agricultural products | |
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Explanation: The Agricultural Prices Commission was set up in January. 1965 to advise the Government on price policy of major agricultural commodities. Since March 1985, the Commission has been known as Commission for Agricultural Costs and Prices (CACP). The minimum support prices (MSP) for major agricultural products are fixed by the government. each year, after taking into account the recommendations of CACP. |
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| 296. |
Special Economic Zone (SEZ) concept was first introduced in - |
| A. | China |
| B. | Japan |
| C. | India |
| D. | Pakistan |
| Answer» A. China | |
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Explanation: Worldwide, the first known instance of an SEZ seems to have been an industrial park set up in Puerto Rico in 1947 to attract investment from the US mainland. In the 1960s, Ireland and Taiwan followed suit, but in the 1980s China made the SEZs gain global currency with its largest SEZ being the metropolis of Shenzhen. |
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| 297. |
Externality theory is the basic theory of the following branch of Economics: |
| A. | Environomics |
| B. | Fiscal Economics |
| C. | International Economics |
| D. | Macro Economics |
| Answer» A. Environomics | |
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Explanation: In economics, an externality is a cost or benefit which results from an activity or transaction and which affects an otherwise uninvolved party who did not choose to incur that cost or benefit. Environmental pollution is a classic case of an externality. Externality theory forms the basic theory of environmental economics. |
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| 298. |
The balance of payments of a country is in equilibrium when the - |
| A. | demand as well as supply of the domestic currency are the highest |
| B. | demand for the domestic currency is equal to its supply |
| C. | demand for the domestic currency is the highest |
| D. | demand for the domestic currency is the lowest |
| Answer» B. demand for the domestic currency is equal to its supply | |
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Explanation: When the balance of payments (BOP) of a country is in equilibrium, the surplus or deficit is eliminated from the BOP. When the BOP of a country is in equilibrium, the demand for domestic currency is equal to its supply. The demand and supply situation is thus neither favourable nor unfavourable. |
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| 299. |
Cheap money means - |
| A. | Low rates of interest |
| B. | Low level of saving |
| C. | Low level of income |
| D. | Low level of standard of livtrig |
| Answer» A. Low rates of interest | |
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Explanation: Cheap money is a loan or credit with a low interest rate, or the setting of low interest rates by a central bank like the Federal Reserve. Cheap money is good for borrowers, but had for investors, who will see the same low interest rates on investments like savings accounts, money market funds, CDs and bonds. Cheap money can have detrimental economicconsequences as borrowers take on excessive leverage. |
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| 300. |
When too much money is chasing too few goods, the situation is - |
| A. | Deflation |
| B. | Inflation |
| C. | Recession |
| D. | Stagflation |
| Answer» B. Inflation | |
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Explanation: Inflation occurs when too much money is chasing too few goods. The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. In general, mainstream economists divide into two camps: those who believe that monetary effects dominate all others in setting the rate of inflation, or broadly speaking, monetarists, and those who believe that the interaction of money, interest and out-put dominate over of her effects, or broadly speaking Keynesians. Other theories, such as those of the Austrian school of economies, believe that inflation of the general price level and of specific prices is a result from an increase in the supply of money by central banking authorities. |
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