HCS Exam Question Series: Economics-II
Baljit Dhaka

HCS Exam Question Series: Economics-II

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Economics Multiple Choice Questions For HCS Exam

Haryana Civil Services Exam 2020

Important 20000 MCQ Series For HCS Exam: ECONOMICS PART-II

Q1. Which is the most essential function of an entrepreneur? 

(a) Supervision             

(b) Management         

(c) Marketing                  

(d) Risk bearing

Answer (D )

Explanation: Risk-taking is perhaps the most important function of an entrepreneur. Modern production is very risky as an entrepreneur is required to produce goods or services in antici­pation of their future demand.

Q2. 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 )

Explanation: Bank Rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial/cooperative banks, development banks, etc. Such loans are given out either by direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills. Thus, the bank rate is also known as the discount rate. Bank rate is used as a signal by the RBI to the commercial banks on RBI’s thinking of what the inter

Q3. All of the goods which are scarce and limited in supply are called

(a) Luxury goods          

(b) Expensive goods  

(c) Capital goods           

(d) Economic goods 

Answer (D )

Explanation: An economic good will have some degree of scarcity in relation to demand. It is the scarcity that creates a value people become willing to pay for. It is the scarcity which creates opportunity cost. – For example, if we pick apples from a tree, it means that other people will not be able to enjoy them. If we devote resources to mining gold, the opportunity cost is that we can’t devote this time and effort to growing corn.

Q29. Which of the following is a better measurement of Economic Development?

(a) GDP            

(b) Disposable income               

(c) NNP                            

(d) Per capita income

Answer (D )

Explanation: Income per capita is a measure of the amount of money earned per person in a certain area. It can apply to the average per-person income for a city, region, or country, and is used as a means of evaluating the living conditions and quality of life in different areas. It can be calculated for a country by dividing the country's national income by its population.

Q30. 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 )

Explanation: "Hot money" refers to funds that are controlled by investors who actively seek short-term returns. These investors scan the market for short-term, high-interest rate investment opportunities. A typical short-term investment opportunity that often attracts "hot money" is the certificate of deposit (CD).

Q31. In India, disguised unemployment is generally observed in

(a) the Agricultural sector         

(b) the Factory sector

(c) the service sector 

(d) All these sectors

Answer (A )

Explanation: Disguised unemployment or hidden unemployment is a kind of unemployment where some people seem to be employed but are actually not. ( clear from the word disguise which means attire to hide one's identity) This type usually occurs when there is over employment in a particular work

Q32. The demand curve for a Giffen good is/ 

(a) upward rising       

(b) downward falling   

(c) parallel to the quantity axis   

(d) parallel to the price axis

Answer (A )

Explanation: A Giffen good is a good for which demand increases as the price increases, and falls when the price decreases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand which states that quantity demanded a product falls as the price increases, resulting in a downward slope for the demand curve. A Giffen good is typically an inferior product that does not have easily available substitutes, as a result of which the income effect dominates the substitution effect. Giffen goods are quite rare, to the extent that there is some debate about their actual existence. The term is named after the economist Robert Giffen.

Q33. "Supply creates its own 

demand" - Who said this? 

(a) J. B. Say                    

(b) J.S. Mill                      

(c) J. M. Keynes                                       

d) Senior

Answer (A ) 

Explanation: "Supply creates its own demand" is the formulation of Say's law. He meant: build it, take it to market, and you’ll see, someone will pay money for it, whatever it is. He also meant; the wise business person does this process as rapidly as possible. The sooner they make it, the sooner it is sold, and the sooner their investment of time and money is recouped, to do it all again.

Q34. Engel’s Law states the relationship between

(a) quantity demanded and price of a commodity      

(b) quantity demanded and price of substitutes

(c) quantity demanded and tastes of the consumers   

(d) quantity demanded and income of the consumers

Answer (D )

Explanation: Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if absolute expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. The law was named after the statistician Ernst Engel (1821–1896). Engel's law does not imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products in percentage terms less than their increases in income

Q35. Which one of the following items are not included in the current account of India's Balance of Payments?

(a) Short-term commercial borrowings              

(b) Non-monetary gold movements

(c) Investment income                                              

(d) Transfer payments 

Answer (B )

Explanation: The balance of payments is a statement of all transactions made between entities in one country and the rest of the world over a defined period of time, such as a quarter or a year. The balance of payments divides transactions in two accounts: the current account and the capital account (sometimes the capital account is called the financial account, with a separate, usually very small, capital account listed separately). The current account includes transactions in goods, services, investment income, and current transfers. The capital account, broadly defined, includes transactions in financial instruments and central bank reserves. Narrowly defined, it includes only transactions in financial instruments. The current account is included in calculations of national output, while the capital account is not. 

Q36. Capital: Output Ratio  measures

(a) its per-unit cost of production                          

(b) the amount of capital invested per unit of output

(c) the ratio of capital depreciation to quantity of output       

(d) the ratio of working capital employed to quantity of output

Answer (B )

Explanation: A capital-output ratio which is abbreviated as COR is related to the availability of natural resources in a country. It is used to measure the capital ratio that would be used for the production of some output over a certain period of time.

Q37. ‘The national income consists of a collection of goods and services reduced to common basis by being measured in terms of money.”— Who says this?

(a) Samuelson              

(b) Kuznets                    

(c)  Hicks                           

(d) Pigou

Answer (C )

Explanation: ‘The national income consists of a collection of goods and services reduced to common basis by being measured in terms of money” is said, Hicks.

Q38. 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 )


ECS is an electronic mode of funds transfer from one bank account to another. It can be used by institutions for making payments such as distribution of dividend interest, salary, pension, among others. It can also be used to pay bills and other charges such as telephone, electricity, water, or for making equated monthly installments payments on loans as well as SIP investments. ECS can be used for both credit and debit purposes

Q39. Which of the following is the classification of Industries on the basis of raw materials?

(a) Small Scale -Large scale                                                                     

(b) Primary and Secondary

(c) Basic and Consumer                                                           

(d)Agro-based and Mineral-based

 Answer (D )


Agro-Based Industries

(1) Agro-based industries use agricultural products as their basic raw material.

(2) Example - Cotton and jute textiles, Sugar, Food processing, etc.

Mineral Based Industries

(1)Mineral-based industries use both metallic and non-metallic minerals as

raw materials. 

(2) Example- Iron and Steel, Aluminium, Cement, Petrochemicals, etc.

Q40. Who propounded the 'market law?

(a) Adam Smith             

(b) J.B. Say                    

(c) T.R. Malthus           

(d) David Ricardo

 Answer (B )

Explanation: Say's Law of Markets is theory from classical economics arguing that the ability to purchase something depends on the ability to produce and thereby generate income. Say reasoned that to have the means to buy, a buyer must first have produced something to sell. Thus, the source of demand is production, not money itself.

Q41. The practice of selling goods in a foreign country at a price below their domestic selling price is called

(a) 'diplomacy'              

(b) 'discrimination'                      

(c) ‘dumping’                

(d) ‘double pricing 

Answer (C )

Explanation: Dumping is a term used in the context of international trade. It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market. Because dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product's manufacturers or producers in the importing nation.

Q42. An expenditure that has been made and cannot be recovered is called

(a) Variable cost            

(b) Opportunity cost                   

(c) Sunk cost                

(d) Operational cost

Answer (C )

Explanation: In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered. In other words, a sunk cost is a sum paid in the past that is no longer relevant to decisions about the future.

Q43. 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 )

Explanation: What is a Demand Deposit?: A demand deposit consists of funds held in an account from which deposited funds can be withdrawn at any time from the depository institution, such as a checking or savings account, accessible by a teller, ATM, or online banking. In contrast, a term deposit is a type of account that cannot be accessed for a predetermined period of time. M1 is a category of the money supply that includes demand deposits as well as physical money and negotiable order of withdrawal (NOW) accounts that have no maturity period but limited withdrawals or transfers.

Q44. The new capital issue is placed in

(a) Secondary market               

(b) Grey market                          

(c) Primary market      

(d) Black market

Answer (C )

Explanation: The Primary Market, also known as a New IssueMarket, is where new securities are issued – it is part of the capital market. Corporations, national and local governments, and other public sector institutions can get financing through the sale of new stock or bond issues through the primary market

Q45. Prime cost is equal to

(a) Variable cost plus administrative cost                                         

(b) Variable cost plus fixed costs

(c) Variable cost only                                                                           

(d) Fixed cost only

Answer (C )

Explanation: Prime costs are a firm's expenses for the direct materials and labor used in production.  It refers to a manufactured product's costs, which are calculated to ensure the best profit margin for a company. The prime cost calculates the use of raw materials and direct labor but does not factor in indirect expenses, such as advertising and administrative cost

Q46. If the tax rate increases with a higher level of income, it shall be called 

(a) Proportional tax     

(b) Progressive tax       

(c) Lump sum tax        

(d) Regressive tax

Answer (B )

Explanation: A progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) 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.

Q47. Capital formation in an economy depends on

(a) Total Income           

(b) Total demand          

(c) Total savings                          

(d) Total production

Answer (C )

Explanation: More will be the savings of an economy more will be the capital formation

Q48. Industrial exit policy means 

(a) forcing foreign companies to leave India                 

(b) forcing business units to move out of congested localities

(c) allowing manufacturers to shift their line of products

(d) allowing business units to close down

Answer (D )

Explanation: It refers to the right or ability of an industrial unit to withdraw from or leave an industry or in other words to close down. The proposal to introduce an exit policy was first mooted in 1991 when it was felt that without labour market flexibility, efficient industrialization would be difficult to achieve.

Q49. Which of the following does not determine supply of labour?

(a) Size and age-structure of population                      

(b) Nature of work

(c) Marginal productivity of labour                                                      

(d) Work-leisure ratio

Answer (C )

Explanation: Supply of labour is related with that quantity and rate at which the labourers are ready to work. According to Rees following are four factors which affect the supply of labour: 1. Participation Rate as Labour Force 2. Number of Hours the Labourers is Willing to Work 3. Speed or Intensity of Work 4. Efficiency or Skill of Work.

Q50. If the price of tea falls, demand for coffee will

(a) increase                     

(b) decrease               

(c) remain same                           

(d) None of these

 Answer (B )

Explanation: As these are perfect substitutes the falling of price of one will lead to decrease in demand of other and vice versa

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