1140+ Economics (GK) Solved MCQs


The economist who believed that unemployment is impossible and that market mechanism has a built in regulatory system to meet any ups and downs -

A. J.M.Keynes
B. Ohlin
C. J. B. Say
D. Galbraith
Answer» C. J. B. Say
Explanation: The classical economists' belief in full employment as a normal condition of a free market economy is based on Say's Law of Markets. It was on the basis of this law that the classical economists thought that general over- production and hence general unemployment were impossible. The law simply states "supply creates its own demand."

Liquidity Preference means -

A. holding assets in the form of bonds and shares
B. holding assets in the form of cash
C. creation of immovable property
D. assets in the form of jewellery
Answer» B. holding assets in the form of cash
Explanation: Liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936). It is the desire to hold money rather than other assets, in Keynesian theory based on motives of transactions, precaution, and speculation.

Aggregate net value of the output in one year is the -

A. National income at factor cost
B. Gross Domestic Product at market prices
C. Net. National Product at market prices
D. Gross National Product at market prices
Answer» C. Net. National Product at market prices
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, Net national product at market price=Gross national product at market price- Depreciation.

The sum total of incomes received for the services of labour, land or capital in a country is called

A. Gross domestic product
B. National income
C. Gross domestic income
D. Gross national income
Answer» C. Gross domestic income
Explanation: The Gross Domestic Income (GDI) is the total in-come received by all sectors of an economy within a nation. It includes the sum of all wages, profits, and taxes, minus subsidies. Since all income is derived from production (including the production of services), the gross domestic income of a count should exactly equal its gross domestic product (GDP).

Which of the following results by dividing national income by size of population?

A. Per capita income
B. Subsistence level
C. Subsistence expenditure-
D. Per capita production
Answer» A. Per capita income
Explanation: Per capita income or average income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.

The first computer made available for commercial use was -

Answer» C. UNIVAC
Explanation: The UNIVAC computer was the first commercially available computer invented by John Presper Eckert and John Mauchly. As well as being the first American commercial computer, the UNIVAC I was the first American computer designed at the outset for business and administrative use (i.e., for the fast execution of large numbers of relatively simple arithmetic and data transport operations, as opposed to the complex numerical calculations required by scientific computers). As such the UNIVAC competed directly against punch-card machines (mainly made by IBM).

Malthusian theory of population explored the relationship between -

A. food supply and technology
B. food supply and population growth
C. population growth and development
D. optimum growth and resources
Answer» B. food supply and population growth
Explanation: According to Malthusian theory of population, population increases in a geometrical ratio, whereas food supply increases in an arithmetic ratio. This disharmony would lead to widespread poverty and starvation, which would only be checked by natural occurrences such as disease, high infant mortality, famine, war or moral restraint.

In public budgets, zero-base budgeting was first introduced in -

C. France
D. Sweden
Answer» A. USA
Explanation: Zero-based budgeting is an approach to planning and decision-making which reverses the working process of traditional budgeting. This technique of budgeting was developed by Peter Phyrr in the United States and was first implemented at Texas Instruments in the 1960s. In 1973. President Jimmy Carter contracted with Phyrr to implement a ZBB system for the State of Georgia executive budget process.

The sale proceeds of Government Bonds come under the budget head of -

A. Revenue Receipts
B. Current Expenditure
C. Capital Outlay
D. Capital Receipts
Answer» D. Capital Receipts
Explanation: Capital receipts are the funds received into the businesses that are not part of the operating activities of the establishment. Capital receipts primarily include external assistance, market loans, small savings, principal investment in bonds, and Government provident funds. A capital receipt is a receipt which is derived from sale or purchase of capital assets like plant and machinery, furniture, investment (long term) etc., which shall not be occurring all the time.

The incidence of sales tax falls on -

A. Consumers
B. Wholesale dealers
C. Retail dealers
D. Producers
Answer» A. Consumers
Explanation: In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall" upon the group that ultimately bears the burden of, or ultimately has to pay the tax. The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply.

Government securities are considered liquid because they are -

A. backed by the Government treasury
B. convertible into other types of saving deposits
C. quickly and easily marketable
D. stable in value
Answer» C. quickly and easily marketable
Explanation: Liquid Asset is an asset that can be converted into cash quickly and with minimal impact to the price received. In a liquid market, assets can be easily converted without considerable price fluctuation, and with a minimal decline in worth. A liquid market is a type of market that possesses a high level of stability, and low spreads between asking and selling prices. Securities issued by the Government are considered risk-free, and as such, their yields are often used as the benchmarks for fixed- income securities with the same maturities. The government securities market constitutes a key segment of the financial market, heavily traded offering virtually credit risk-free highly liquid financial instruments, which market participants are more willing to transact and take positions.

Deflation is a situation in which -

A. The value of money is falling.
B. The price of goods is increasing.
C. The value of money is increasing.
D. The price level is stagnant.
Answer» C. The value of money is increasing.
Explanation: Deflation is a situation where the prices of goods and commodities in a country go down. i.e., there is negative inflation. This is caused due to reduced supply of money/credit. Inflation reduces the real value of money over time; conversely, deflation increases the real value of money - the currency of a national or regional economy.

Stagflation refers to a situation which is characterized by -

A. stagnant employment and deflation
B. deflation and rising unemployment
C. inflation and rising employment.
D. inflation and rising unemployment
Answer» D. inflation and rising unemployment
Explanation: Stagflation describes a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment, and vice versa.

How will a reduction in 'Bank Rate' affect the availability of credit?

A. Credit will increase
B. Credit will not increase
C. Credit will decrease
D. None of these
Answer» A. Credit will increase
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. Whenever the banks have any shortage of funds they can borrow it from the central 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. When the repo rate increases borrowing from the central bank becomes more expensive. It is more applicable when there is a liquidity crunch in the market.

Inflation occurs when aggregate supply is -

A. more than aggregate demand
B. less than aggregate demand
C. equal to aggregate demand
D. None of these
Answer» B. less than aggregate demand
Explanation: If the supply is less than the demand, the price will increase. Inflation, the persistent increase in the average price level, can be caused by an increase in aggregate demand or a decrease in aggregate supply. This suggests two basics sources, causes, or types of inflation—demand-pull inflation and costpush inflation. In general, prices increase as a result of market shortages, which occur when quantity demanded exceeds quantity supplied. Market shortages can be created by either increases in demand or decreases in supply. Translating thisto the macro-economy suggests that inflation occurs when aggregate demand exceeds aggregate supply.

Multinational Corporation is also called -

A. Trading Corporation
B. International Corporation
C. Finance Corporation
D. Trans-national Corporation
Answer» D. Trans-national Corporation
Explanation: A Multinational corporation, also known as Trans-national Corporation or International corporation, is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries. They play an important role in globalization.

Freeing the economy from all unnecessary controls and regulations is referred to as -

A. Freedom
B. Privatisation
C. Liberalisation
D. Globalisation
Answer» C. Liberalisation
Explanation: Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities; the doctrine is associated with classical liberalism. The arguments for economic liberalization include greater efficiency and effectiveness that would translate to a "bigger pie" for everybody. Thus, liberalization in short refers to "the removal of controls", to encourage economic development.

A high Statutory Liquidity Ratio (SLR)

A. restricts lending
B. increases supply of cash
C. provides funds to the state
D. increases the strength of the banks
Answer» A. restricts lending
Explanation: Statutory Liquidity Ratio refers to the amount that the commercial banks require tomaintain in the form gold or government approved securities before providing credit to the customers. An increase in SLR practically restricts lending, thus controlling credit in the country. In India, the RBI can increase the Statutory Liquidity Ratio to contain inflation, suck liquidity in the market, to tighten the measure to safeguard the customers' money.

Corporation tax is a tax imposed on -

A. the net incomes of the companies
B. the corporate properties
C. the utilities provided by the corporation
D. tax imposed by the corporation on individual properties
Answer» A. the net incomes of the companies
Explanation: Corporate Tax is a levy placed on the profit of a firm, with different rates used for different levels of profits. Corporate taxes are taxes against profits earned by businesses during a given taxable period. Most countries tax all corporations doing business in the country on income from that country.

Which one of the following taxes is collected and utilized by the State Governments?

A. Personal income tax
B. Corporation tax
C. Land revenue
D. Custom duties
Answer» C. Land revenue
Explanation: The Constitution allocates the taxation of agricultural income to states. Lan revenue is a major source of revenue for states in India. For purpose of revenue management, a State is divided into various districts, each in the charge of a Deputy Commissioner, also known as Collector indicating his responsibility for the realization of all Government revenues.

Which amidst the following is not a credit rating agency?

Answer» D. IFCI
Explanation: A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In some cases, the servicers of the underlying debt are also given ratings. CRISIL is the most influential and largest credit rating agency among all the credit rating agencies in India. ICRA Limited (ICRA) is one of lndia's premier financial information services company. It offers credit rating information and professional financial consulting services across India, as well as in the Asia-Pacific region through its subsidiaries.

The basis of determining dearness allowance to employees in India is -

A. National Income
B. Consumer Price Index
C. Standard of Living
D. Inflation Rate
Answer» B. Consumer Price Index
Explanation: The Consumer Price Index Numbers for Industrial Workers CPI (1W) is utilized for fixation and revision of wages and determination of variable Dearness Allowances payable to workers in organized sectors of the economy. Despite the coverage being limited to Industrial Workers, presently, the CPI (IW) is also utilized as an indicator for measuring inflationary trend in the country and for policy formulations.

An indifference curve measures the same level of -

A. Output from two factors
B. Satisfaction from two commodities
C. Satisfaction from Income and Capital
D. Satisfaction from expenditure and savings
Answer» B. Satisfaction from two commodities
Explanation: An indifference curve is a locus of combinations of goods which derive the same level of satisfaction. so that the consumer is indifferent to any of the combination he consumes. If a consumer equally prefers two product bundles, then the consumer is indifferent between the two bundles. The consumer gets the same level of satisfaction (utility) from either bundle. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer

The Ability Principle of Taxation is given by -

A. Adam Smith
B. Edgeworth
C. Joan Robinson
D. J.S.Mill
Answer» A. Adam Smith
Explanation: The 'Ability-to-Pay' principle of Taxation is one of the canons of taxation proposed by Adam Smith in his 'Wealth of Nations.’ It is a progressive taxation principle that maintains that taxes should be levied according a taxpayer's ability to pay. It is concerned with the equitable distribution of taxes according to the stated taxable capacity or ability to pay of an individual or group. The emphasis in this approach is put on redistribution of income.

'Galloping Inflation' is also known as -

A. Walking Inflation
B. Running Inflation
C. Hyper Inflation
D. Creeping Inflation
Answer» C. Hyper Inflation
Explanation: When prices rise between 20% to 100% per annum or even more, it is called galloping or hyperinflation. Such a situation brings a total collapse of the monetary system because of the continuous fall in the purchasing power of money. Galloping inflation has adverse effect on middle and low income groups in the society.

Which of the following is not an investment expenditure in goods and services?

A. Expansion of the main plant of a company
B. Purchase of a house
C. Purchase of machinery
D. An increase in business in ventories
Answer» B. Purchase of a house
Explanation: Investment expenditure refers to the expenditure incurred either by an Individual or a firm or the government for the creation of new capital assets like machinery, building etc. Business inventories are goods that firms produce in one time period with the intent to sell later and they are counted as part of businessinvestment. The purchase of house cannot be considered as investment expenditure as it may be for personal use.

Which one of following represents the Savings of the Private Corporate Sector?

A. Dividends paid to shareholders
B. Total profits of a company
C. Undistributed profits
D. Excess of income over expenditure
Answer» C. Undistributed profits
Explanation: For private corporate sector, retained profits adjusted for non operating surplus/deficit is considered as its Net Saving. Retained profits are those which are ploughed back into business after making commitments to depreciation provision for various fixed assets, debts, government and to shareholders.

Net National Product in National Income Accounting refers to -

A. Gross Domestic Product—Depreciation
B. Gross Domestic Product + Subsidies
C. Gross National Product—Depreciation
D. Gross National Product + Subsidies
Answer» C. Gross National Product—Depreciation
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.

A very high rise in National Income at current market prices and a low rise at constant prices reveals -

A. the high rate of growth in the economy at the current period
B. the increased production in the current period
C. the improper growth of the economy
D. the high rate of inflation prevailing in the economy
Answer» C. the improper growth of the economy
Explanation: When national output is multiplied by present ruling price, we obtain national income at current prices. On the otherhand if the national output is multiplied by the base price if called national income at constant price. But what is seen is that prices of commodities go on changing. When the current outputs are multiplied by the current prices it will give rise to monetary national income. So a very rise in National Income at current or constant prices does not indicate increase in product or output, but is rather due to the rise in price level.

In calculating National Income which of the following is included?

A. Services of housewives
B. Pensions
C. Income of smugglers
D. Income of watchmen
Answer» D. Income of watchmen
Explanation: National Income is defined as the sum total of all the goods and services produced in a country, in a particular period of time. Normally this period consists of one year duration, as a year is neither too short nor long a period. National product is usually used synonymous with National income.

The term 'Green GNP' emphasises -

A. rapid growth of GNP
B. increase in per capita income
C. economic development
D. sustainable development
Answer» D. sustainable development
Explanation: The gross national product (GNP) measures the welfare of a nation's economy through the aggregate of products and services produced in that nation, Although GNP is a proficient measurement of the magnitude of the economy, many economists, environmentalists and citizens have been arguing the validity of the GNP in respect to measuring welfare. They are calling for a green national product that would indicate if activities benefit or harm the economy and well-being.

The Great Depression occurred during

A. 1914-18
B. 1929-34
C. 1939-45
D. 1922-26
Answer» B. 1929-34
Explanation: Depression is referred to a period of time during which economic activity is so low for such a long period of time that large numbers of people are permanently unemployed. The great Depression originated in the United States, after the fall in stock prices that began around September 4, 1929 and became world-wide news with the stock market crash of October 29, 1929 (known as Black Tuesday).

The worldwide Great Depression took place in -

A. 1936
B. 1929
C. 1928
D. 1930
Answer» B. 1929
Explanation: Depression is referred to a period of time during which economic activity is so low for such a long period of time that large numbers of people are permanently unemployed. The great Depression originated in the United States, after the fall in stock prices that began around September 4, 1929 and became world-wide news with the stock market crash of October 29, 1929 (known as Black Tuesday).

Paraellel economy emerges due to -

A. Tax Avoidance
B. Tax Evasion
C. Tax Compliance
D. Tax Estimation
Answer» B. Tax Evasion
Explanation: Parallel economy (black economy) indicates the functioning of an unsanctioned sector in the economy whose objectives run parallel with the social objectives. Major contributory factor to such an economy is black money which is any money that a person or an organization acquires as by a means that involves tax evasion. It is that income from illegal activities that is not reported to the government for tax purposes.

Under-writting refers to -

A. under estimation
B. under selling
C. winding up the business
D. an act of insuring risk
Answer» D. an act of insuring risk
Explanation: The word "underwriter" is said to have come from the practice of having each risk- taker write his or her name under the total amount of risk that he or she was willing to accept at a specified premium. In a way, this is still true today, as new issues are usually brought to market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific allotment.

Basic infrastructure facilities in Economics are known as :

A. Human capital
B. Physical capital
C. Social overheads capital
D. Working capital
Answer» C. Social overheads capital
Explanation: Social overheads capital is the capital spent on social infrastructure, such as schools, universities, hospitals, libraries. They are capital goods of types which are available to anybody, hence social; and are not tightly linked to any particular part of production, hence overhead. Because of their broad availability they often have to be provided by the government. Examples of social overhead capital include roads, schools, hospitals, and public parks.

Which one of the following is a direct tax?

A. Sales Tax
B. Excise Tax
C. Wealth Tax
D. Entertainment Tax
Answer» C. Wealth Tax
Explanation: Direct tax is a tax levied directly on the person or company that has to pay it. These taxes are paid directly to the tax authority.

Custom duty is an instrument of -

A. Monetary Policy
B. Foreign Trade Policy
C. Industrial Policy
D. Fiscal Policy
Answer» B. Foreign Trade Policy
Explanation: Custom duty is a tax on imports imposed on an ad valorem basis, i.e, fixed in the form of a percentage on the value of the commodity imported.

Whe a large number of investors in a country transfer investments elsewhere because of disturbed economic conditions, it is called -

A. Transfer of Capital
B. Escape of Capital
C. Outflow of Capital
D. Flight of Capital
Answer» D. Flight of Capital
Explanation: Flight of capital refers to the movement of money from one investment to another in search of greater stability or increased returns. Sometimes, it specifically refers to the movement of money from investments in one country to another in order to avoid country- specific risk (such as high inflation or political turmoil) or in search of higher returns. Capital flight is seen most commonly in massive foreign capital outflows from a specific country, often at times of currency instability.

'Golden Handshake Scheme' is associated with -

A. inviting foreign companies
B. private investment in public enterprises
C. establishing joint enterprises
D. voluntary retirement
Answer» D. voluntary retirement
Explanation: The voluntary retirement scheme (VRS) is the most humane technique to provide overall reduction in the existing strength of the employees. It is a technique used by companiesfor trimming the workforce employed in the industrial unit. It is also known as 'Golden Handshake' as it is the golden route to retrenchment.

The major objective of monetary policy is to -

A. increase government's tax revenue
B. revamp the Public Distribution System
C. Promote economic growth with price stability
D. weed out corruption in the economy
Answer» C. Promote economic growth with price stability
Explanation: The main objective of monetary policy is to control the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general economic growth. Further goals of a monetary policy are usually to contribute to lower unemployment, and to maintain predictable exchange rates with other currencies.

The rate of tax increase as the amount of the Lax base Increases is called-

A. Proportional tax
B. Progressive tax
C. Regressive tax
D. Degressive tax
Answer» B. Progressive tax
Explanation: A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate

During periods of inflation, tax rates should -

A. increase
B. decrease
C. remain constant
D. fluctuate
Answer» A. increase
Explanation: In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In other words, inflation means continuously decrease in the value of money due to excess supply ofmoney in the market. There are two types of inflation demand pull and cost push inflation. Causes behind inflation are reduced taxes, rate de-crease in saving, increase in supply of goods, increase in the number of producers in the market. To control inflation there should be an increase in the tax rate and increase in the interest rate.

Cheap Money means -

A. Low Rate of Interest
B. Low level of Savings
C. Low level Income
D. Excess of Black Money
Answer» A. Low Rate of Interest
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 bad for investors, who will see the same low interest rates on investments like savings accounts, money market funds, CDs and bonds.

Which among (he following is not the outcome of decrease in prime lending rate?

A. to raise the bank loan
B. decline in saving rate
C. decline in productivity
D. increased demand of consumer products
Answer» C. decline in productivity
Explanation: Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility. When these rates are high, demand decreases and output falls to meet the new lower demand. Less output requires fewer worker, driving unemployment higher.

The major aim of devaluation is to -

A. encourage imports
B. encourage exports
C. encourage both exports and imports
D. discourage both exports and imports
Answer» B. encourage exports
Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or othermonetary units with which that currency can be exchanged. '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. There are two implications for a currency devaluation. First, devaluation makes a country's exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country's trade deficit.

Buffer stock operations are conducted by -

A. Warehousing Corporation of India
B. State Trading Corporation of India
C. Food Corporation of India
D. Ministry of Agriculture
Answer» C. Food Corporation of India
Explanation: 0

Coal mines were Nationalized in the year :

A. 1970
B. 1971
C. 1972
D. 1976
Answer» C. 1972
Explanation: The Coal Conservation and Development Act, 1974 provides for imposition of excise duty on coal despatches for meeting activities like conservation of coal, development of coal mines execution of stowing and other operations for the safety in coal mines and research work connected with conservation and utilisation of coal, and assistance in mining operation. The Coking Coal (Nationalisation) Act was enacted in 1972.

Open market operations of RBI refer to buying and selling of -

A. Commercial bills
B. Foreign exchange
C. Gold
D. Government bonds
Answer» D. Government bonds
Explanation: OMOs are the market operations conducted by the Reserve Bank of India by wayof sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the RBI feels there is excess liquidity in the market. it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market.

A siuation where we have people whose level of income is not sufficient to meet the minimum consumption expenditure is considered as -

A. Absolute Poverty
B. Relative Poverty
C. Urban Poverty
D. Rural Poverty
Answer» A. Absolute Poverty
Explanation: Absolute poverty is defined as a situation in which the individual's basic needs are not covered, in other words, there is a lack of basic goods and services (normally related to food, housing and clothes). This concept of poverty is strongly linked to destitution which is an inability to meet the minimum consumption expenditure. It is a level of poverty as defined in terms of the minimal requirements necessary to afford minimal standards of food, clothing, health care and shelter. According to a UN declaration that resulted from the World Summit on Social Development in Copenhagen in 1995, absolute poverty is "a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services."

Of the following land uses, which is restricted to Special Economic Zones ?

A. Educational Institutions
B. Free trade Centres
C. Marketing Centres
D. Information Technology Companies
Answer» B. Free trade Centres
Explanation: The category Special economic zone includes free trade zones (FTZ), export processing Zones (EPZ), free Zones (FZ), industrial parks or industrial estates (IE), free ports, free economic zones, and urban enterprisezones. The goal of a SEZ structure is to increase foreign direct investment by foreign investors.

As er the TRIPS Agreement-1994, a good originating from a region with specific character/ quality/reputation is covered/to be protected under the IPR as -

A. Patent
B. Trademark
C. Trade secret
D. GI (Geographical Indicator)
Answer» D. GI (Geographical Indicator)
Explanation: Geographical Indication (GI) means the name of a region or a locality, a specific place or, in exceptional cases, a country, used to describe a product originating in that region, locality, specific place or country, which possesses a specific quality, reputation or other characteristics attributable to that geographical origin, and the production and/or processing and/or preparation of which take place in the defined geographical area.

At present, India is following -

A. Fixed exchange rate
B. Floating exchange rate
C. Pegged up exchange rate
D. Pegged down exchange rate
Answer» B. Floating exchange rate
Explanation: Exchange rate can be defined as the value of one currency in terms of another. India follows floating exchange rate system for the determination of the exchange rate. Floating exchange rate system can be defined as a system where the exchange rate between currencies are not fixed but they keep fluctuating, as they are determined by the demand and supply for the domestic currency in the international market. India has been operating on a managed floating exchange rate regime from March 1993, marking the start of an era of a market determined exchange rate regime of the rupee with provision for timely intervention by the central bank

Which of the following taxes are levied and collected by the centre but their net proceeds are wholly transferred to states?

A. Expenditure Tax and Gift Tax
B. Additional Duties of Excise in lieu of Sales Tax
C. Stamps and Registration
D. Taxes on Advertisement
Answer» D. Taxes on Advertisement
Explanation: Apart from taxes levied and collected by the States, the Constitution has provided for the revenues for certain taxes on the Union List to be allotted, partly or wholly to the States. There are taxes which are levied and collected by the Union, but the entire proceeds of which are assigned to the states, in proportion determined by the Parliament. These taxes include: Succession and Estate duty; Terminal Taxes on goods and passengers; Taxes on railway freight and fares; Taxes on transactions in stock exchanges and future markets; and Taxes on sale and purchase of newspapers and advertisements therein.

With which form of economy is the term 'Laissez-faire' associated?

A. Capitalist economy
B. Socialist economy
C. Mixed economy
D. Command economy
Answer» A. Capitalist economy
Explanation: In economics, laissez-faire means allowing industry to be free of state intervention, especially restrictions in the form of tariffs and government monopolies. The growth of industry in England in the early 19th century and American industrial growth in the late 19th century both occurred in a laissezfaire capitalist environment.

National Social Assistance Programme is aimed at providing -

A. financial support to Scheduled Castes and Scheduled Tribes
B. old age pension to very poor
C. insurance for the poor
D. All of the above
Answer» B. old age pension to very poor
Explanation: The National Social Assistance Scheme (NSAS) or National Social Assistance Programme (NSAP) is a flagship welfare programme of the Government of India initiatedon 15 August. 1995. It provides a pension for the elderly who live below the poverty line. Article 41 of the Indian Constitution directs the State to provide public assistance to its citizens in case of unemployment, old age, sickness and disablement and in other cases of undeserved want within the limit of its economic capacity and development.

Which of the following is a part of tertiary sector?

A. Power and transportation
B. Animal Husbandry
C. Cotton manufacturing
D. Cultivation of crops
Answer» A. Power and transportation
Explanation: The service sector, also called the tertiary sector. is one of the three parts of the economy in the Threesector hypothesis. It involves the provision of services to business as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to consumers as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment.

If the average total cost is Rs.54, total fixed cost is Rs.45000 and quantity produced is 2500 units, find the average variable costs (in Rs.) of the firm -

A. 24
B. 18
C. 36
D. 60
Answer» C. 36
Explanation: The standard method of calculating average variable cost is to divide total variable cost by the quantity, illustrated by this equation :
Average Variable Cost = Total Variable Cost/ Quantity of Output
An alternative specification for average variable cost is found by subtracting average fixed cost from average total cost
Average Variable Cost = Average Total Cost - Average Fixed CostAccording to question,
Average Total Cost = 45000/2500 = 18 So Average Variable Cost = 54 - 18= 36

If the fixed costs of a factory producing candles is Rs 20,000, selling price is Rs 30 per dozen candles and variable cost is Rs 1.5 per candle, what is the break-even quantity?

A. 20000
B. 10000
C. 15000
D. 12000
Answer» A. 20000
Explanation: Breakeven quantity is the number of incremental units that the firm needs to sell to cover the cost of a marketing program or other type of investment. It is given by the formula: BEQ = FC / (P-VC)
Where BEQ = Break-even quantity FC = Total fixed costs
P = Average price per unit, and VC = Variable costs per unit,
According to the question, Price per unit = 30/12 = Rs. 2.5
So 20000/ (2.5-1.5) = 20000/1= Rs. 20,000

Equilibrium price in the market is determined by the -

A. equality between marginal cost and average cost.
B. equality between total cost and total revenue.
C. equality between average cost and average revenue.
D. equality between marginal cost and marginal revenue.
Answer» D. equality between marginal cost and marginal revenue.
Explanation: The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect. Both under perfect competition and monopolisticcompetition, the firm is in equilibrium at the point of equality of marginal cost and marginal revenue. (MC = MR).

Internal economies -

A. arise when there is expansion in an industry.
B. arise in an economy as it makes progress.
C. accrue to a firm when it expands its output.
D. arise when there is expansion in internal trade.
Answer» A. arise when there is expansion in an industry.
Explanation: Internal economies are those economies in production—those reductions in production costs—which accrue to the firm itself when it expands its output or enlarges its scale of production. The internal economies arise within a firm as a result of its own expansion independent of the size and expansion of the industry as a whole.

One of the features of a free market economy is -

A. active state intervention
B. public ownership of factors of production
C. rationing and price control
D. consumer's sovereignty
Answer» D. consumer's sovereignty
Explanation: Consumer Sovereignty is one of the features of a free market economy. It refers to the assertion consumer preferences determine the production of goods and services. In a free market system, market performance is in fact responsive to the specific wants of the consumers within the system.

Which of the following costs is related to marginal cost?

A. Variable Cost
B. Implicit Cost
C. Prime Cost
D. Fixed Cost
Answer» A. Variable Cost
Explanation: In economics, marginal cost is the change in the total cost that arises when the quantity produced is Incremented by one unit. That is, it is the cost of producing one more unit of a good. Marginal cost is independent of the fixed cost and depends on the changes in thevariable factors. Since fixed costs do not change with output, there are no marginal fixed costs when output is increased in the short run. It is only the variable costs that vary with output in the short run.

Which one of the following is not a dimension of human development, index?

A. Life expectancy
B. Knowledge
C. Social status
D. Standard of living
Answer» C. Social status
Explanation: Social Status is not a dimension of Human Development Index

Transfer payments mean -

A. Old age pensions
B. Unemployment compensations
C. Social security payments
D. All the above
Answer» D. All the above
Explanation: Transfer payment refers to a payment made by a public authority other than one made in exchange for goods or service produced. Transfer payments are not part of the national income. Examples include Old age pensions, unemployment compensations, social security payments and child benefit.

In accounting terms, what constitutes the 'closing stock'?

A. Net Investment
B. Gross Investment-Capital Losses
C. Opening Stock-Capital Losses
D. Opening Stock + Net Investment - Capital Losses
Answer» D. Opening Stock + Net Investment - Capital Losses
Explanation: Closing stock refers to the goods remaining un-sold during the year. It includes finished products, raw materials, or work in progress and is deducted from the period's costs in the balance sheets. The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation: Opening stock + Purchases - Closing stock = Cost of goods sold.

National income accounting is the study of the income and expenditure of the entire -

A. family
B. state
C. economy
D. organisation
Answer» C. economy
Explanation: National Income Accounting is a set of principles and methods used to measure the income and production of a country. There are basically two ways of measuring national economic activity: as the money value of the total production of goods and services during a given period (usually a year) or as the total of incomes derived from economic activity after allowance has been made for capital consumption.

In a business, raw materials, components, work in progress and finished goods are jointly regarded as -

A. capital stock
B. inventory
C. investment
D. net worth
Answer» B. inventory
Explanation: Inventory refers to raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners.

The gradation and standardization of agricultural products are conducted through

A. Food Corporation of India
B. Directorate of Marketing and Inspection
C. Indian Standards Institution
D. Central Statistical Organization
Answer» B. Directorate of Marketing and Inspection
Explanation: The Directorate of Marketing and Inspection (DMI) is an attached Office of the Ministry of Agriculture. It was set up in the year1935 to implement the agricultural marketing policies and programmes of the Central Government. It aims at bringing integrated development of marketing of agricultural and allied produce in the country. It is entrusted with promotion of standardization and grading of agricultural and allied produce.

According to the Employment Outlook 2007 reports of the Organisation for Economic Cooeration and Development (OECD), the number of new jobs created in India every year from 2000 to 2005 is -

A. 5 million
B. 8 million
C. 11 million
D. 13 million
Answer» C. 11 million
Explanation: Over the period 2000-05, India generated 11.3 million net new jobs per year, on average. The figure was 7 million in China, 2.7 million in Brazil and 0.7 million jobs hi the Russian Federation, compared with an average of 3.7 million net new jobs generated in the OECD area as a whole each year over the same period.

"Marginal Cost" equals -

A. total cost minus total benefit for the last unit produced
B. total cost divided by total benefit for the last unit produced
C. total cost divided by quantity
D. the change in total cost divided by the change in quantity
Answer» D. the change in total cost divided by the change in quantity
Explanation: Marginal cost is the change in the total cost that arises when the quantity produced has an increment by unity. That is, it is the cost of producing one more unit of a good. To illustrate marginal cost let's assume that the total cost of producing 10,000 units is Rs.50,000. If we produce a total of 10,001 units the total cost is Rs.50,002. That would mean the marginal cost—the cost of producing the next unit— was Rs.2.

A low interest policy is also known as –

A. cheap money policy
B. income generating
C. dear money policy
D. investment policy
Answer» A. cheap money policy
Explanation: Cheap money policy involves loan or credit with a low interest rate, or the setting of low interest rates by the central bank of the country. Cheap money is good for borrowers, but bad for investors. Cheap money policy was one of the primary catalysts of the 2008 recession.

Economics classifies the manmade instrument of production as:

A. Organization
B. Capital
C. equipment
D. labour
Answer» B. Capital
Explanation: Some economists have classified factors into two categories, land and labour (or nature and man) on the ground that they are the only original or primary factors. It is said that capital has no independent origin and is merely the outcome of combined efforts of land and labour. However, other economists include all man-made instruments for production in the category of Capital.

A demand curve will not shift:

A. When only income changes
B. When only prices of substitute products change
C. When there is a change in advertisement expenditure
D. When only price of the commodity changes
Answer» D. When only price of the commodity changes
Explanation: In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. A change in price of the commodity leads to a movement along the demand curve without shifting it. In simple words, the increase of decrease in price of a commodity only causes contraction or extension of demand (increase causes contraction while decrease cause extension). Increase or decrease in demand only occurs only when there is achange in other determinants of demand, other than price of the commodity.

Which law states that with constant taste and preferences, the proportion of income spend on food stuff diminishes as income increases?

A. Say's Law
B. Griffin's Law
C. Gresham's Law
D. Engel's Law
Answer» D. Engel's Law
Explanation: According to Engel's Law, as disposable income of a consumer increases, the percentage of income spent for food decreases if all other factors remain constant. This happens even when the actual expenditure on food rises. The income elasticity of demand of food is less than 1. A lower Engel coefficient indicates a higher standard of living.

Extreme forms of markets are -

A. Perfect competition; Oligopoly
B. Oligopoly; Monopoly
C. Perfect competition; Monopoly
D. Perfect competition; Monopolistic competition
Answer» C. Perfect competition; Monopoly
Explanation: There are two extreme forms of market structure: monopoly and, its opposite, perfect competition. Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. A monopoly is a market structure in which there is only one producer/ seller for a product.

National Income include :

A. Financial help to earthquake victims
B. Pocket money of a child
C. Winning of a lottery prize
D. Construction of a new house
Answer» D. Construction of a new house
Explanation: National income is the total value a country's final output of all new goods and services produced in one year. So construction of a new house is certainly output of goods.Transfer payments are not a part of the national income. So private sector transfers including charitable donations and prizes to lottery winners are excluded from it.

Value of out put and value added can be distinguished if we know:

A. the value of intermediate consumption
B. the value of net indirect taxes
C. the value of the sales
D. the value of consumption of fixed capital
Answer» A. the value of intermediate consumption
Explanation: Intermediate consumption is an accounting flow which consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises. including raw materials, services and various other operating expenses. Inter-mediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net out-put by sector of activity. Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.

Who prepared the first estimate of National Income for the country?

A. Central Statistical Organisation
B. National Income Committee
C. Dadabhai Naoroji
D. National Sample Survey Organisation
Answer» C. Dadabhai Naoroji
Explanation: Dadabhai Naoroji prepared the first estimates of National income in 1876. He estimated the national income by first estimating the value of agricultural production and then adding a certain percentage as nonagricultural production. However, such method can only been called as a non-scientific method.

'Supply creates its own demand'. This statement is related to -

A. Prof. J.B. Say
B. John Robinson
C. Adam Smith
D. J.S. Mill
Answer» A. Prof. J.B. Say
Explanation: Jean Baptiste Say was a French economist. I le is well known for Say's Law (or Say's Law of Markets), often summarized as: "Aggregate supply creates its own aggregate demand"; "Supply creates its own demand", or "Supply constitutes its own demand". He argued that production and sale of goods in an economy automatically produces an income for the producers of the same value, which would then be reinjected into the economy and create enough demand to buy the goods. Thus production is determined by the supply of goods rather than demand.

Sectoral distribution of GDP index measures             .

A. Agriculture development of a country
B. Economic development of a country
C. Social development of a country
D. Socio-Economic development of a Country
Answer» B. Economic development of a country
Explanation: The sectoral distribution of GDP index measures the development of a country across several economic activities. It the market value of all final goods and services produced in a period (quarterly or yearly).

Which among the following statements is not true when there is an increase in interest rate in an economy?

A. increase in saving
B. decrease in loan
C. increase in production cost
D. increase in capital return
Answer» D. increase in capital return
Explanation: Interest rate increase the cost of borrowing, which results in lesser investment activity and the purchase of consumer durables. In a low interest-rate environment, shares become a more attractive buy, raising households' financial assets. This may also contribute to higher consumer spending, and makes companies' investment projects more attractive. Lower interest rates also tend to cause currencies to depreciate: Demand for domestic goods rises when imported goods become more expensive. All of these factors raise output and employment as well as investment and consumer spending.

The difference between the GNP and the NNP is equal to the -

A. consumer expenditure on durable goods
B. direct tax revenue
C. indirect tax revenue
D. capital depreciation
Answer» D. capital depreciation
Explanation: Depreciation refers to two very different but related concepts: the decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with (he matching principle). The difference between the GNP and NNP is equal to capital depreciation. It is the wearing out, breaking down, or technological obsolescence.

By whom was the autonomous investment separated from induced investment?

A. Schumpeter
B. Malthus
C. Joan Robinson
D. Adam Smith
Answer» A. Schumpeter
Explanation: Under his concept of creative destruction, Schunipeter distinguished between two types of investment that he called induced and autonomous. Induced investment arose from the discrepancy between supply and demand and autonomous investment from resources and technology created by the entrepreneurs. He also introduced a concept of "saving up" which is different from saving in the neoclassical growth models. Saving up constituted the part of out-put that is withheld from investment and consumption.

When price of a substitute of commodity falls, the demand for -

A. falls
B. remains unchanged
C. increases at increasing rate
D. rises
Answer» A. falls
Explanation: Cross Price Effect refers to effect on the demand for a given commodity due to a change in the price of a substitute commodity. A change (increase or decrease) in the price ofsubstitutes directly affects the demand for a given commodity. When price of substitute goods (say, coffee) rises, demand for the given commodity (say, tea) also rises at its same price. It leads to a rightward shift in the demand curve of the given commodity. With decrease in price of substitute goods (coffee), demand for the given commodity (tea) also decreases. It shifts the demand curve of the given commodity towards left.

A mixed economy refers to an economic system where -

A. The economy functions with foreign collaboration
B. Only t he private sector operates under government control
C. Both the government and the private sectors operate sectors operate simultaneously
D. No foreign investment is allowed
Answer» C. Both the government and the private sectors operate sectors operate simultaneously
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 the means of production are mainly under private ownership: that markets remain the dominant form of economic coordination: and that the government wields indirect influence over the economy through fiscal arid monetary policies.

A Black Market is a situation where in

A. Goods are loaded by the producers
B. Goods are sold secretly
C. Goods are sold at prices higher than what is fixed by the Government
D. Goods are made available
Answer» B. Goods are sold secretly
Explanation: Black market is the market in which illegal goods are traded. Goods acquired illegally take one of two price levels: (i) they may be cheaper than legal market prices as the supplier does not have to pay for production costs or taxes; or (ii) they may be more expensive than legal market prices as the product is difficult to acquire or produce. dangerous to handle or not easily available legally. Black- market transactions typically occur as a way for participants to avoid government price controlsor taxes, conducting transactions 'under the table.' So the most defining feature of black markets is that they have to be carried out secretly as they are illegal.

Buoyancy of a tax is defined as -

A. percentage increase in tax revenue/ percentage increase in tax base
B. increase in tax revenue/ percentage increase in tax coverage
C. increase in tax revenue/increase in tax base
D. percentage increase in tax revenue/ increase in tax coverage
Answer» C. increase in tax revenue/increase in tax base
Explanation: Buoyancy means the growth/increase in tax collections. This is in line with the GDP growth within the economy, the industry profile and the tax structure administered by the government. Tax buoyancy measures the total response of tax revenues to changes in national income. Total response takes into account both increases in income and discretionary changes (i.e., tax rates and bases) made by tax authorities in the system. The responsiveness of tax revenues to discretionary changes in the tax rate and in the tax base in relation to the GDP is termed the buoyancy of the tax system.

What is referred to as "Depository Services"?

A. A new scheme of fixed deposits
B. A method of regulating stock exchanges
C. An agency for safe-keeping of securities
D. An advisory service to investors
Answer» C. An agency for safe-keeping of securities
Explanation: A Central Securities Depository (CSD) is an organization holding securities either in certificated or uncertificated (dematerialized) form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of securities. The physical securities may be immobilized by the depository, or securities may be dematerialized (so that they exist only as electronic records). The following are depository services: Demat accounts; dematerialization; rematerialization; transfer of securities; and pledge services.

Regulated markets aim at the development of the marketing structure to -

A. widen the price spread between the producer and the consumer
B. narrow down the price spread between the producer and the consumer
C. increase the non-functional margins of the traders
D. maximize the non-functional margins of the commission agents
Answer» B. narrow down the price spread between the producer and the consumer
Explanation: Regulated markets aim at the development of marketing structures to ensure remunerative prices to the producers and to narrow down the price spread between the producer and the consumer. It also aims at reducing the non-functional margins of the commission agents.

Evaluating all the options to find out most suitable solution to business problems is interdisplinary activities. It is called -

A. Professional research
B. Management research
C. Operational research
D. Commercial research
Answer» C. Operational research
Explanation: Operational research is a discipline that deals with the application of advanced analytical methods to help make better decisions. Employing techniques from other mathematical sciences, such as mathematical modeling, statistical analysis, and mathematical optimization, operations research arrives at optimal or near-optimal solutions to complex decision-making problems. In a nutshell, operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions.

Variation in Cash Reserve Ratio and Open Market Operations are instruments of

A. Budgetary policy
B. Trade policy
C. Fiscal policy
D. Monetary policy
Answer» D. Monetary policy
Explanation: Bank Rate Policy, open market operations and variation of Cash Reserve Ratios, etc. are instruments of monetary policy. With the help of these instruments, the Reserve Bank of India controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

The purpose of devaluation is to :

A. be little foreign currencies
B. encourage exports
C. discourage exports
D. encourage import
Answer» B. encourage exports
Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. It makes exports more competitive and imports more expensive.

Foreign currency which has a tendency of quick migration is called -

A. Scarce currency
B. Soft currency
C. Gold currency
D. Hot currency
Answer» D. Hot currency
Explanation: Hot money or currency is a term that is most commonly used in financial markets to refer to the now of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called "hot money" because they can move very quickly in and out of markets, potentially leading to market instability.

Bank Rate refers to the interest rate at which -

A. Commercial banks receive deposits from the public
B. Central bank gives loans to Commercial banks
C. Government loans are floated
D. Commercial banks grant loans to their customers
Answer» B. Central bank gives loans to Commercial banks
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.

A Trade Policy consists of -

A. Export-Import Policy
B. Licencing Policy
C. Foreign Exchange Policy
D. Balance of Payment Policy
Answer» A. Export-Import Policy
Explanation: Trade policy, also called Export- Import policy, is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. Things like import and export taxes, tariffs, inspection regulations, and quotas can all be part of a nation's trade policy.

Globalisation means -

A. Integration of economy
B. Integration of financial market
C. Integration of the domestic economy with the world economy
D. Integration of the various sectors of economy
Answer» C. Integration of the domestic economy with the world economy
Explanation: Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalization refers to processes that promote world-wide exchanges of national and cultural resources.

The 'sunrise industries' imply -

A. petrochemicals and electronics industry
B. sunflower oil industry
C. computer industry
D. chemical industry
Answer» A. petrochemicals and electronics industry
Explanation: Sunrise Industry is a colloquial term for a sector or business that is in its infancy,but is growing at a rapid pace. A sunrise industry is typically characterized by high growth rates, numerous startups and an abundance of venture capital funding. A sunrise industry is often characterized by a high degree of innovation.

Regional Rural Banks arc sponsored by

A. Nationalized Commercial Bank
B. Reserve Bank of India
C. State Bank of India
D. Government of India
Answer» A. Nationalized Commercial Bank
Explanation: The Narasimham committee conceptualized the foundation of regional rural banks in India. Five regional rural banks were set up on October 2. 1975. There were five commercial banks, viz. Punjab National Bank, State Bank of India, Syndicate Bank. United Bank of India and United Commercial Bank, which sponsored the regional rural banks.

Which organization collects data for the unorganized sector?

Answer» A. NSSO
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. The unregistered manufacturing sub-sector, a complement set to the registered manufacturing sub-sector, covers all the residual units which are not covered under the registered manufacturing sector.
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