FAQ on Economics- UPSC/ HCS/ RAS
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FAQ on Economics- UPSC/ HCS/ RAS

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Economics

FAQ on Economics- UPSC/ HCS/ RAS

Since by this time, we are already done with 250 most important multiple choice questions which are really frequently asked. So let's continue with our practice with some more frequently asked questions i.e., FAQ.

But before that, if you have not given previous tests, then complete them too. Check the links:

100 Most important multiple choice questions on economics asked in various competitive exams.

Most relevant MCQ for Economics asked in UPSC, HCS exam. 

Frequently asked questions on Economics asked in UPPSC, HCS, UPSC

Q251. An individual’s actual standard of living can be assessed by

(a) Gross National Income        

(b) Net National Income                   

(c) Per Capita Income

(d) Disposable Personal Income

Answer (C )

Explanation:

Per capita income is a measure of the amount of money earned per person in a nation or geographic region. Per capita income can be used to determine the average per-person income for an area and to evaluate the standard of living and quality of life of the population. Per capita income for a nation is calculated by dividing the country's national income by its population.

Q252. When there is an official change in the exchange rate of domestic currency, then it is called 

(a) Appreciation                   

(b) Depreciation        

(c) Revaluation       

(d) Deflation

Answer (C )

Explanation:

Revaluation is a change in the price of a good or product, or especially of a currency. It is specifically an official rise of the value of the currency in relation to a foreign currency in a fixed exchange rate system.

Q253. Inflation redistributes income and wealth in favour of : 

(a) Pensioners        

(b) Poor                         

(c) Middle class                       

(d) Rich

Answer (D )

Explanation:

Inflation redistributes income and wealth in favor of the rich and affects the poorer section adversely. 

Q254. The first computer made available for commercial use was :

(a) MANIAC                   

(b) ENIAC                       

(c) UNIVAC                

(d) EDSAC

Answer (C )

Explanation:

UNIVAC (Universal Automatic Computer) is a line of electronic digital stored-program computers starting with the products of the Eckert–Mauchly Computer Corporation. Later the name was applied to a division of the Remington Rand company and successor organizations.

MANIAC-Mathematical Analyzer Numerical Integrator And Computer Model 

ENIAC- Electronic Numerical Integrator and Computer

EDSAC- Electronic delay storage automatic calculator

Q255. The reserves held by Commercial Banks over and above the statutory minimum, with the RBI are called

(a) Cash reserves         

(b) Deposit reserves                 

(c) Excess reserves       

(d) Momentary reserves 

Answer (C )

Explanation:

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

Q256. Who is authorized to issue coins in India?

(a) Reserve Bank of India          

(b) Ministry of Finance  

(c) State Bank of India

(d) Indian Overseas Bank

Answer (B )

Explanation:

The Ministry of Finance is authorized to issue coins in India.

Q257. The ‘break-even’ point is where

(a) marginal revenue equals marginal cost   

(b) average revenue equals average cost

(c) total revenue equals total cost                     

(d) None of the above

Answer (C )

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Q258. The rate of interest is determined by

(a) The rate of return on the capital invested                             

(b) Central Government

(c) Liquidity preference                                                                             

(d) Commercial Banks

Answer (D)

Explanation:

An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, the length of time it is lent deposited, or borrowed.

It is defined as the proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an annual percentage. It is the rate a bank or other lender charges to borrow its money or the rate a bank pays its savers for keeping money in an account.

The annual interest rate is the rate over a period of one year. 

Q259. The total value of goods and services produced in a country during a given period is

(a) Disposable income       

(b) National income             

(c) Per capita income              

(d) Net national income

Answer (B )

Explanation:

The total value of goods and services produced in a country during a given period is national income.

Q260. Which one of the following is not a function of the central bank in an economy?

(a) Dealing with foreign exchange                                                   

(b) Controlling monetary policy

(c) Controlling government spending           

(d) Acting as a banker’s bank

Answer (C )

Explanation:

(1) Bank of Issue, 

(2) Banker, Agent, and Advisor to Government, 

(3) Custodian of Cash Reserves, 

(4) Custodian of Foreign Balances,

(5) Lender of Last Resort, 

(6) Clearing House, 

(7) Controller of Credit, 

(8) Protection of Depositors Interest.

FAQ on Economics, UPSC, HCS, RAS

Q261. The government set up a committee headed by the Chairman; Central Board of Direct Taxes some time back to go into-

(a) codification of tax laws

(b) the entire structure of tax laws including the question of imposition of bank tax

(c) the concerns of the foreign investors in India with regard to taxation matters

(d) aspects of the generation of black money, its transfer abroad, and bringing back such money into India’s legitimate financial system

Answer (D )

Explanation:

The government set up a committee headed by the Chairman; the Central Board of Direct Taxes some time back to go into aspects of the generation of black money, its transfer abroad, and bringing back such money into India’s legitimate financial system.

Q262. Per capita income is equal to

(a) National Income Total Population of the country

(b) National Income + Population

(c) National Income- Population                                                                         

(d) National Income x Population

Answer (A )

Explanation:

Per capita income (PCI) or average income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its total population. Per capita income is national income divided by population size.

Q263. A favorable Balance of Trade of a country implies that

(a) Imports are greater than Exports                                             

(b) Exports are greater than Imports

(c) Both Imports and Exports are equal                                   

(d) Rising Imports and Falling Exports

Answer (B )

Explanation:

A favorable trade balance implies when exports of a country are more than imports, that is the value of exports is more than its value of imports in a particular period of time.

Q264. The value of a commodity expressed in terms of money is known as

(a) Price                      

(b) Utility                 

(c) Value                     

(d) Wealth

Answer (A )

 Explanation:

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

Q265. Reserve. Bank of India was nationalized in

(a) 1935                         

(b) 1947                           

(c) 1949              

(d) 1950

Answer (C )

Explanation:

The Reserve Bank of India was established following the Reserve Bank of India Act of 1934. Though privately owned initially, it was nationalized in 1949 and since then fully owned by the Government of India (GoI). 

Q266. 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 )

Explanation:

National Social Assistance Programme is a social security and welfare program to provide support to aged persons, widows, disabled persons, and bereaved families on the death of a primary breadwinner, belonging to below poverty line households.

Q267. In a Capitalistic Economy, the prices are determined by :

(a) Demand and Supply  

(b) Government Authorities  

(c) Buyers in the Market                          

(d) Sellers in the Market

Answer (A )

Explanation:

The most important aspects of a capitalist system are private property, private control of the factors of production, accumulation of capital, and competition. Since it is privately owned and managed, that's why the prices are determined by demand and supply.

Q268. Toothpaste is a product sold under :

(a) Monopolistic Competition              

(b) Perfect Competition                           

(c) Monopoly         

(d) Duopoly

Answer (A)

Explanation:

Monopolistic competition, the market situation in which there may be many independent buyers and many independent sellers but competition is imperfect because of product differentiation, geographical fragmentation of the market, or some similar condition. 

Q269. In a period of inflation and price rise, the supply of money 

(a) the same                   

(b) increases             

(c) decreases           

(d) increases or decreases proportionately

Answer (B )

Explanation:

Inflation can happen if the money supply grows faster than the economic output under otherwise normal economic circumstances. Inflation, or the rate at which the average price of goods or services increases over time, can also be affected by factors beyond the money supply.

Q270. ‘Personal Income’ equals

(a) The household sector's income  

(b) Private income minus savings of the corporate sector minus corporation tax

(c) Personal disposable income plus miscellaneous receipts of the Government   

(d) All of the above

Answer (C )

Explanation:

Personal income is the amount of money collectively received by the inhabitants of a country. Sources of personal income include money earned from employment, dividends, and distributions paid by investments, rents derived from property ownership, and profit-sharing from businesses. Personal income is generally subject to taxation.

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Q271. What is dual pricing?

(a) Wholesale price and Retail pricing                                

(b) Pricing by agents and Pricing by retailers

(c) Price fixed by Government and Price in an open market  

(d) Daily prices and Weekly prices

Answer (C )

Explanation:

Dual pricing is the practice of setting different prices in different markets for the same product or service. This tactic may be used by a business for a variety of reasons, but it is most often an aggressive move to take market share away from competitors.

Q272. If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for

(a) Coke will decrease

(b) 7-Up will decrease

(c) Coke and 7-Up will increase 

(d) Coke and 7-Up will decrease 

Answer (D )

Explanation:

If Pepsi's price decreases relative to Coke and 7-Up, the demand for Coke and 7-Up will decrease. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when the price rises.

Q273. The demand curve shows that price and quantity demanded are

(a) directly related only                                         

(b) directly proportional and also directly related

(c) inversely proportional and also inversely related             

(d) inversely related only

Answer (C )

Explanation:

Q274. As output increases, average fixed cost

(a) increases         

(b) falls                         

(c) remains constant

(d) first increases then fall

Answer (B )

Explanation:

Average fixed cost is fixed cost per unit of output. As the total number of units of the good produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.

FAQ on Economics, UPSC, HCS, RAS,

Q275. Which of the following is a part of the tertiary sector?

(a) Power and transportation

(b) Animal Husbandly

(c) Cotton manufacturing     

(d) Cultivation of crops

Answer (A )

Explanation:

Primary sector= Agriculture

Secondary sector= Industry

Tertiary sector= Service industry

Q276. Fixed cost is known as

(a) Special cost         

(b) Direct cost       

(c) Prime cost           

(d) Overhead cost

Answer (D )

Explanation:

Fixed costs, indirect costs, or overheads 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 interest or rents being paid per month and are often referred to as overhead costs.

Q277. What was the objective of the Command Area Development Programme?

(a) To ensure that land is given to the tillers

(b) To ensure better utilization of irrigation potential

(c) To develop the areas under the command of the Army

(d) Poverty alleviation in selected areas

Answer (B )

Explanation:

The Centrally sponsored Command Area Development (CAD) Programme was launched in 1974-75 with the main objectives of improving the utilization of created irrigation potential and optimizing agriculture production and productivity from irrigated agriculture through a multi-disciplinary team under an Area Development Authority.

Q278. A mixed economy refers to an economic system where

(a) The economy functions with foreign collaboration

(b) Only the private sector operates under government control

(c) Both the government and the private sectors operate simultaneously'

(d) No foreign investment is allowed

Answer (C )

Explanation:

A mixed economy is variously defined as an economic system blending elements of a market economy with elements of a planned economy, free markets with state interventionism, or private enterprise with public enterprise. While there is no single definition of a mixed economy, one definition is about a mixture of markets with state interventionism, referring specifically to a capitalist market economy with strong regulatory oversight and extensive interventions into markets.

Q279. The demand for which of the Following commodity will not rise in spite of a fall in its price?/ 

(a) Television          

(b) Refrigerator          

(c) Salt                          

(d) Meat

Answer (C)

Explanation:

Since salt among the following options is a basic requirement of one’s life, so the demand for such a commodity will not rise or fall in either case of rising or fall in price.

Q280. In the long-run equilibrium, a competitive firm earns

(a) Super-normal profit  

(b) Profits equal to other firms           

(c) Normal profit        

(d) No profit

Answer (C )

Explanation:

Besides it, the firm under perfect competition to be in equilibrium-price must be equal to average cost. Generally, in the long run, a firm in equilibrium earns normal profits. If the firms happen to earn supernormal profits in the long period, the existing firms will increase their production.

Q281 Production function relates

(a) Cost to output                         

(b) Cost to input                     

(c) Wages to profit                      

(d) Inputs to output

Answer (D )

Explanation:

Production function, in economics, an equation that expresses the relationship between the quantities of productive factors (such as labor and capital) used and the amount of product obtained. It states the amount of product that can be obtained from every combination of factors, assuming that the most efficient available methods of production are used.

Q282. According to the classical system, saving is a function of

(a) Income          

(b) The interest rate               

(c) The real wage                   

(d) The Price level

Answer (A )

Explanation:

The classical theory assumes that saving (s) is a function of the rate of interest. But, according to Keynes, although saving depends on the rate of interest, saving is more dependent on income.

Q283. A Black Market is a situation wherein

(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 (sold) only after there is a rise in prices

Answer (B )

Explanation:

A black market is an economic activity that takes place outside government-sanctioned channels. Black market transactions usually occur “under the table” to let participants avoid government price controls or taxes.

Q284. Distribution of foodgrains operates under a two-tier system with the introduction of

(a) Targeted Public Distribution System                                  

(b) The Consumers Cooperatives

(c) The Cooperative Marketing Societies                                                   

(d) Tire Service Cooperatives

Answer (A )

Explanation:

Targeted Public Distribution System (TPDS) is operated under the joint responsibility of the Central and the State/Union Territory (UT) Governments. The Central Government is responsible for procurement, allocation, and transportation of foodgrains up to the designated depots of the Food Corporation of India. The operational responsibilities for allocation and distribution of foodgrains within the States/UTs, identification of eligible beneficiaries, issuance of ration cards to them, and supervision over and monitoring of functioning of Fair Price Shops (FPSs) rest with the concerned State/UT Governments.

Q285. If total utility is maximum at a point, then marginal utility is

(a) positive                 

(b) zero                                        

(c) negative                    

(d) positive but decreasing

Answer (B )

Explanation:

FAQ on Economics, UPSC, HCS, RAS

Q286. Which one of the following items are included in the national income account?

(a) Services of housewives       

(b) Income of smugglers        

(c) Services of Sadhus 

(d) Services of night-watchmen

Answer (D )

Explanation:

Services of night-watchmen, among the following, will be included in the national income account.

Q287. The situation in which total revenue is equal to the total cost is known as

(a) monopolistic competition

(b) the equilibrium level of output

(c) break-even point 

(d) perfect competition

Answer (C )

Explanation:

FAQ on Economics, UPSC, HCS, RAS

Q288. The relationship between the price of a commodity and the demand for it

(a) is a positive relationship                                                               

(b) is an inverse relationship

(c) They are independent of each other                                                   

(d) They do not have any relationship

Answer (B )

Explanation:

The relationship between the price of a commodity and the demand for it is an inverse relationship.

Q289. An increase in national income because of an increase in price is called

(a) an increase in national income in real terms   

(b) an increase in national income at constant prices

(c) an increase in money national income                 

(d) an increase in national income at base year prices

Answer (D )

Explanation:

An increase in national income because of an increase in price is called an increase in national income at base-year prices.

Q290. Commercialization of agriculture implies

(a) cultivation of timbers   

(b) plantation

(c) production of crops for sale

(d) production of crops like wheat or rice 

Answer (C )

Explanation:

Commercialization of agriculture implies an increase in the cultivation of cash crops- cotton, indigo, opium, jute, silk, etc for sale in the market or commodity production over and above simple self-consumption or local absorption.

Q291. Payment of water charges by the farmers to the government represents

(a) intermediate consumption             

(b) final consumption

(c) fixed investment

(d) inventory investment

Answer (A )

Explanation:

Goods and services used fully during the process of production are intermediate consumption. It also includes maintenance and repair, research, and development. They are valued at the price the purchaser has paid for them. Non-financial firms use various non-durable goods and services as intermediate consumption. In the case of industries, intermediate consumption constitutes domestic goods or imported goods. However, the expenditure incurred on them is treated as compensation to employees and not as intermediate consumption.

Q292. In accounting terms, what constitutes the ‘closings tock’? 

(a) Net Investment                                               

(b) Gross Investment-Capital Losses

(c) Opening Stock-Capital Losses                                   

(d) Opening Stock + Net Investment -Cost of goods sold

Answer (D )

Explanation:

Closing stock = (Opening Stock + Inward)- Outward

  • Opening stock is the unsold stock brought forwarded previous period
  • Inwards are new additions which include purchases and goods produced
  • Outward is the sale or consumption of goods in production. 

Q293. ‘Quota’ is 

(a) tax levied on imports                                       

(b) imports of capital goods    

(c) limit on the number of imports               

(d) limit on the number of exports

Answer (C )

Explanation:

A quota is a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period. Countries use quotas in international trade to help regulate the volume of trade between them and other countries. Countries sometimes impose them on specific products to reduce imports and increase domestic production. 

Q294. The ‘Canons of Taxation’ were propounded by

(a) Edwin Canon                     

(b) Adam Smith                                   

(c) J.M. Keynes                     

(d) Dalton

Answer (B )

Explanation:

By canons of taxation, we simply mean the characteristics or qualities which a good tax system should possess. In fact, canons of taxation are related to the administrative part of a tax. Adam Smith first devised the principles or canons of taxation in 1776.

Q295. 'PROTECTION' means

(a) Restrictions imposed on import trade

(b) Protection to home industries

(c) No free exchange of goods and services between two countries

(d) All of the above

Answer (D )

Explanation:

Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations.

Q296. National income accounting is the study of the income and expenditure of the entire

(a) family                       

(b) state                    

(c) economy           

(d) organization

Answer (C )

Explanation:

National income accounting is the study of the income and expenditure of the entire economy.

Q297. The problem of Economics arises from

(a) Plenty                   

(b) Scarcity of goods 

(c) More wants and fewer goods         

(d) All of the above

Answer (C )

Explanation:

Economic problems arise from the scarcity of resources. Every economy faces scarcity of resources because their wants are unlimited and their resources (means) are limited. Therefore, the economic problem is the problem of economizing scarce resources. It means making the best use of the available resources.

Q298. Agricultural income tax is a source of revenue to

(a) Central Government                     

(b) State Government           

(c) Local Administration  

(d) Centre and State Governments

Answer (B )

Explanation:

Agricultural income tax is a source of revenue to the state government.

Q299. Beyond a certain point, deficit financing will certainly lead to

(a) Inflation       

(b) Deflation             

(c) Recession               

(d) Economic stagnation

Answer (A )

Explanation:

A deficit is an amount by which a resource, especially money, falls short of what is required. A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets. A deficit is synonymous with shortfall or loss and is the opposite of a surplus.

In deficit financing, RBI issues more currency but after a certain point, the excess currency will lead to inflation as people will have large amounts of currency with them.

Q300. In public budgets, zero-base budgeting was first introduced in

(a) USA                                  

(b) UK           

(c) France                

(d) Sweden

Answer (A )

Explanation:

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.

Initially, it was discovered at Texas Instrument, an IT company in the USA by  Peter Pyhrr in the 1970s.

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