HCS Exam Topic Wise Question Series: Economics-I
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HCS Exam Topic Wise Question Series: Economics-I

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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-I

Q1. The process of curing inflation by reducing the money supply is called

(a) Cost-push inflation             

(b) Demand-pull inflation          

(c) Disinflation           

 (d) Reflation

Answer (C )

Explanation: There are several main reasons that can cause an economy to experience disinflation. If a central bank decides to impose a tighter monetary policy and the government starts to sell off some of its securities, it could reduce the supply of money in the economy, causing a disinflationary effect. Similarly, a contraction in the business cycle or a recession can also cause disinflation

Q2. Indian agriculture is typically characterized as

(a) land surplus, labour scarce economy

(b) land surplus, labor surplus economy

(c) land-scarce, labour surplus economy

(d) land-scarce, labour scarce economy

Answer (C )

Explanation: Indian agriculture is typically characterized as a land scare, labor surplus economy. India has a high man/land ratio. There are a large number of skilled laborers but there is the absence of land or capital.

Q3. Which of the following items is a major oilitem of Indian export?   

(a) Computer chips

(b) Potato chips                    

(c) Textile garments                

(d) Car engines

Answer (D) 

Explanation: Car engines are a major oil item of Indian export.

Q4. Price theory is also known as

(a) Macroeconomics

(b) Development Economics

(c) Public Economics               

(d) Micro Economics

Answer (D )

Explanation: Microeconomics (from the Greek prefix mikro- meaning "small" + economics) is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results.

Q5. Which of the statements is correct about India’s national income?

(a) Percentage share of agriculture is higher than services

(b) Percentage share of industry is higher than agriculture

(c) Percentage share of services is higher than industry

(d) Percentage share of services is higher than agriculture and industry put together

Answer (D)

Explanation: Sectors of Indian Economy
Three sectors – Primary, Secondary, and Tertiary.
Primary = Agriculture related.
Secondary = Industry related.
Tertiary = Service related.
Sector share towards GDP : Tertiary (60%)> Secondary (28%)> Primary(12%).
Sector share by working force : Primary (51%)> Tertiary (27%) > Secondary (22%)>

Q6. 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 )

Explanation: The Directorate of Marketing and Inspection (DMI), an Attached Office of the Department of Agriculture, Cooperation and Farmers Welfare under Ministry of Agriculture & Farmers Welfare , was set up in the year 1935 to implement the agricultural marketing policies and programmes for the integrated development of marketing of agricultural and other allied produce in the country with a view to safeguard the interests of farmers as well as the consumers. It maintains a close liaison between the Central and the State Governments.

Q7. When too much money is chasing too few goods, the situation is

(a) Deflation               

(b) Inflation    

(c)  Recession                                

(d) Stagflation

Answer (B )

Explanation: In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of accounts in an economy

Q8. One of the main factors that led to the rapid expansion of Indian exports is

(a) Imposition of import duties

(b) Liberalization of the economy

(c) Recession in other countries                            

(d) Diversification of exports

Answer (D )

Explanation: Diversification is an act of an existing entity branching out into a new business opportunity. In terms of exports, diversification means expanding exports into new segments outside the scope of existing exports.

Q9. Cheap money means

(a) Low rates of interest

(b) Low level of saving   

(c) Low level of income      

(d) Low level of standard of living

Answer (A )

Explanation: Cheap money in the market means that the money for lending is available at low rates of interest

Q10. Compared to the rich the poor save

(a) A larger part of their income                                         

(b) An equal part of their income

(c) A smaller part of their income

(d) All of their incomes 

Answer (C )

Explanation: As disposable incomes is less with the poor they tend to save less

Q11. Kisan Credit Card scheme was introduced in

(a) 1991                           

 (b) 1996                          

(c) 1998                        

(d) 2000

Answer (C )

Explanation: The Kisan Credit Card (KCC) scheme is a credit scheme introduced in August 1998 by Indian banks. This model scheme was prepared by the National Bank for Agriculture and Rural Development (NABARD) on the recommendations of the R.V.GUPTA committee to provide term loans and agricultural needs. Its objective is to meet the comprehensive credit requirements of the agriculture sector by giving financial support to farmers. Participating institutions include all commercial banks, Regional Rural Banks, and state co-operative banks. The scheme has short term credit limits for crops and term loans. KCC credit holders are covered under personal accident insurance up to ?50,000 for death and permanent disability, and up to ?25,000 for other risk. The premium is borne by both the bank and borrower in a 2:1 ratio. The validity period is five years, with an option to extend for up to three more years. Kisan Credit Card (KCC) offering credit to the farmers in two types viz, 1. Cash Credit 2. Term Credit ( for allied activities such as pump sets, land development, plantation, drip irrigations).

Q12. The government takes ‘ways and means advances’ from

(a) RBI                              

(b) IDBI                            

(c) SBI                                

(d) ICICI

Answer (A )

Explanation: The Reserve Bank of India gives temporary loan facilities to the center and state governments as a banker to the government.  This temporary loan facility is called Ways and Means Advances (WMA).

The WMF for the Central Government- The WMA scheme for the Central Government was introduced on April 1, 1997, after putting an end to the four-decade-old system of ad hoc (temporary) Treasury Bills to finance the Central Government deficit. The WMA scheme was designed to meet temporary mismatches in the receipts and payments of the government. This facility can be availed by the government if it needs immediate cash from the RBI. The WMA is to be vacated after 90 days. The interest rate for WMA is currently charged at the repo rate. The limits for WMA are mutually decided by the RBI and the Government of India.

Q13. ‘NABARD’ is associated with the development of 

(a) the agricultural sector and rural areas

(b) heavy industries

(c) banking sector   

(d) real estates

Answer (A )

Explanation: NABARD came into existence on 12 July 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC). It was dedicated to the service of the nation by the late Prime Minister Smt. Indira Gandhi on 05 November 1982. Set up with an initial capital of Rs.100 crore, its paid-up capital stood at Rs.10,580 crore as on 31 March 2018. Consequent to the revision in the composition of share capital between the Government of India and RBI, NABARD today is fully owned by the Government of India. 

VISION- Development Bank of the Nation for Fostering Rural Prosperity.                 

MISSION- Promote sustainable and equitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology, and institutional development for securing prosperity.

Q14. The permission given to a bank customer to draw cheques in excess of his current account balance is called

(a) a personal loan

(b) an ordinary loan

(c) discounting a bill of exchange 

(d) an overdraft

Answer (D )

Explanation: What is an Overdraft

An overdraft is an extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it or not enough to cover the withdrawal. Basically, overdraft means that the bank allows customers to borrow a set amount of money.

Q15. Which of the following taxes is not collected by the Central Government? 

(a) Income tax          

(b) Customs duty

(c) Professional tax      

(d) Excise duty

Answer (C )

Explanation: Professional Tax is a tax levied on the income earned by salaried employees and professionals, including chartered accountants, doctors, and lawyers, etc. to the state government

Q16. The supply of agricultural products is generally 

(a) elastic       

(b) inelastic                    

(c) perfectly elastic         

(d) perfectly inelastic

Answer (B )

Q17. 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)

Explanation: What is Laissez-Faire

Laissez-faire is an economic theory from the 18th century that opposed any government intervention in business affairs. The driving principle behind laissez-faire, a French term that translates as "leave alone" (literally, "let you do"), is that the less the government is involved in the economy, the better off business will be – and by extension, society as a whole. Laissez-faire economics are a key part of free-market capitalism.

Q18. When the total product rises at an increasing rate, the

(a) marginal product is zero                                                   

(b) marginal product is rising

(c) marginal product is falling

(d) marginal product remains constant

Answer (B )

Explanation: Marginal Product

The additional output produced as a result of employing an additional unit of the variable factor input is called the Marginal Product. Thus, we can say that marginal product is the addition to Total Product when an extra factor input is used. Marginal Product = Change in Output/ Change in Input.Thus, it can also be said that Total Product is the summation of Marginal products at different input levels.

Total Product = ? Marginal Product

Relationship between Marginal Product and Total Product

The law of variable proportions is used to explain the relationship between Total Product and Marginal Product. It states that when only one variable factor input is allowed to increase and all other inputs are kept constant, the following can be observed:

When the Marginal Product (MP) increases, the Total Product is also increasing at an increasing rate. This gives the Total product curve a convex shape in the beginning as variable factor inputs increase. This continues to the point where the MP curve reaches its maximum.

When the MP declines but remains positive, the Total Product is increasing but at a decreasing rate. This Gives the Total product curve a concave shape after the point of inflexion. This continues until the Total product curve reaches its maximum.

When the MP is declining and negative, the Total Product declines.

When the MP becomes zero, Total Product reaches its maximum.

Q19. The definition of ‘small-scale industry’ in India is based on

(a) sales by the unit                         

(b) Investment in machines and equipments

(c) market coverage

(d) export capacity

Answer (B)           

Explanation: Small scale industries are the industrial undertakings having fixed investment in plant and machinery, whether held on ownership basis or lease basis or hire purchase basis not exceeding Rs. 1 crore.

Q20. Economies of Scale means reduction in

(a) unit cost of production     

(b) unit cost of distribution      

(c) total cost of production      

(d) total cost of distribution  

Answer (A)         

Explanation: What are the Economies of Scale? Economies of scale refer to reduced costs per unit that arise from the increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure  

Q21. Free Trade refers to                

(a) free movement of goods from one country to another

(b) movement of goods free of cost

(c) unrestricted exchange of goods and service

(d) trade free of duty                  

Answer (A )                      

Explanation: Free trade is the total absence of government policies restricting the import and export of goods and services.

Q22. Imputed gross rent of owner-occupied buildings is a part of

(a) capital formation   

(b) final consumption

(c) intermediate consumption                       

(d) consumer durable 

Answer (B )

Explanation: Imputed rent is an estimate in economic theory of the rent a house owner would be willing to pay to live in his own house. Imputed rent can thus serve as an important measure between homeowners and tenants. Imputed rent is the economic theory of imputation applied to real estate: that the value is more a matter of what the buyer is willing to pay than the cost the seller incurs to create it.  In this case, market rents are used to estimate the value to the property owner. That’s why it is included in the final consumption.

Q23. Purchasing Power Parity theory is related with

(a) Interest rate                             

(b) Bank rate                

(c) Wage rate               

(d) Exchange rate 

Answer (D )

Explanation: Purchasing power parity (PPP) is a way of measuring economic variables in different countries so that irrelevant exchange rate variations do not distort comparisons. Purchasing power exchange rates are such that it would cost exactly the same number of, for example, US dollars to buy euros and then buy a basket of goods in the market as it would cost to purchase the same goods directly with dollars. The purchasing power exchange rate used in this conversion equals the ratio of the currencies' respective purchasing powers (reciprocals of their price levels).

Q24. Excise duty on a commodity is payable with reference to its

(a) production

(b) production and sale

(c) production and transportation

(d) production, transportation, and sale

Answer (A )

Explanation: An excise or excise tax (sometimes called an excise duty) is a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country). It is a tax on the production or sale of a good.

Q25. Knowledge, technical skill, education, etc. in economics, are regarded as

(a) social-overhead capital        

(b) human capital        

(c) tangible physical capital    

(d) working capital

Answer (B )

Explanation: Human capital is the stock of competencies, knowledge, social, and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural, and psychological complexity as they interact in explicit and/or economic transactions.

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