Most relevant MCQ for Economics asked in UPSC, HCS exam
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Most relevant MCQ for Economics asked in UPSC, HCS exam
As we all know, economics is really subject which requires in-depth knowledge to crack any exam be it UPSC/ HCS/RAS. Sometimes gathering all the knowledge can become a bit challenging but we can still cover them all by practicing a lot of multiple-choice questions i.e., MCQ.
Before starting this series, complete the set of the previous 100 Most important multiple-choice questions in Economics and check your practice so far.
Q101. Interest on public debt is part of
(a) Transfer payments by the enterprises
(b) Transfer payments by the government
(c) National income
(d) Interest payments by households
Answer (B )
Explanation:
In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income and wealth (payment) made without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government making subsidies for certain businesses (firms).
For the purposes of calculating gross domestic product (GDP), government spending does not include transfer payments – the reallocation of money from one party to another – which includes Social Security, Medicare, unemployment insurance, welfare programs, and subsidies. Because these are not payments for goods or services, they do not represent a form of final demand or GDP
Q102. Which of the following can be used for checking inflation temporarily?
(a) Increase in wages
(b) Decrease in money supply
(c) Decrease in taxes
(d) None of these
Answer (B )
Explanation:
Causes of Inflation
1) Consumer Confidence: When unemployment is low and wages are stable, consumers are more confident and more likely to spend money. This confidence drives up prices as manufacturers and providers charge more for goods and services that are in high demand. One example is the market for new housing. In a booming economy, people purchase more new houses. Contractors experience greater demand for their services, and they raise their prices to capitalize on that demand. Similarly, the building materials included in the houses also cost more as supplies dwindle and consumers increase what they are willing to pay to complete the project. (For related reading, see: How Inflation and Unemployment Are Related.)
2) Decreases in Supply: One of the basic causes of inflation is the economic principle of supply and demand. As demand for a particular good or service increases, the available supply decreases. When fewer items are available, consumers are willing to pay more to obtain the item. Supply decreases for several reasons. Oftentimes a natural disaster or environmental effect is at fault for a supply-chain interruption, such as when a tornado destroys a factory or a severe drought kills crops. Supplies also decrease when an item is immensely popular, a phenomenon that frequently is seen when new cell phones or video games are released
Q103. Operating Surplus arises in the
(a) Government Sector
(b) Production for self-consumption
(c) Subsistence farming
(d) Enterprise Sector
Answer (A )
Explanation:
Operating surplus is an accounting concept used in national accounts statistics (such as the United Nations System of National Accounts (UNSNA)) and in corporate and government accounts. It is the balancing item of the Generation of Income Account in the UNSNA. It may be used in macroeconomics as a proxy for total pre-tax profit income, although entrepreneurial income may provide a better measure of business profits. According to the 2008 SNA, it is the measure of the surplus accruing from production before deducting property income, e.g., land rent and interest.
The operating surplus of an enterprise measures the difference between revenue and expenditure - i.e. the surplus or deficit - accruing from production. It is calculated before taking account of any interest, rent, or similar charges payable on financial or tangible non-produced assets borrowed or rented by the enterprise, or any interest, rent, or similar receipts receivable on financial or tangible non-produced assets owned by the enterprise.
Q104. Repo Rate is the rate of interest:
(a) At which public borrows money from Commercial Banks
(b) At which public borrows money from R.B.I.
(c) At which Commercial Banks borrow money from R.B.I.against government securities
(d) At which Commercial Banks borrow money from the public
Answer (C )
Explanation:
Repo rate is the rate at which RBI lends to its clients generally against government securities. Reduction in repo rate helps the commercial banks to get money at a cheaper rate and an increase in repo rate discourages the commercial banks to get money as the rate increases and becomes expensive. The reverse repo rate is the rate at which RBI borrows money from commercial banks. The increase in the repo rate will increase the cost of borrowing and lending of the banks which will discourage the public to borrow money and will encourage them to deposit. As the rates are high the availability of credit and demand decreases resulting in a decrease in inflation. This increase in repo rate and reverse repo rate is a symbol of the tightening of the policy.
Q105. A closed economy is one which
(a) Does not trade with other countries
(b) Does not possess any means of international transport
(c) Does not have a coastline
(d) Is not a member of the U.N.O.
Answer (A )
Explanation:
A closed economy is self-sufficient, which means no imports come into the country and no exports leave the country. A closed economy's intent is to provide domestic consumers with everything they need from within the country's borders
Q106. Deficit financing is an instrument of
(a) monetary policy
(b) credit policy
(c) fiscal policy
(d) tax policy
Answer (C )
Explanation:
Deficit financing is the budgetary situation where expenditure is higher than the revenue. It is a practice adopted for financing the excess expenditure with outside resources. The expenditure revenue gap is financed by either printing of currency or through borrowing.
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Q107. 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 )
Explanation:
Net national product (NNP) refers to the gross national product (GNP), i.e. the total market value of all final goods and services produced by the factors of production of a country or other polity during a given time period, minus depreciation. Similarly, net domestic product (NDP) corresponds to gross domestic product (GDP) minus depreciation. Depreciation describes the devaluation of fixed capital through wear and tear associated with its use in productive activities.
In national accounting, net national product (NNP) and net domestic product (NDP) are given by the two following formulas:
NNP=GNP-Depreciation
NDP=GDP-Depreciation
Q108. 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 )
Explanation:
Inventory is a current asset account found on the balance sheet, consisting of all raw materials, work-in-progress, and finished goods that a company has accumulated. It is often deemed the most illiquid of all current assets and, thus, it is excluded from the numerator in the quick ratio calculation.
Q109. Investment is equal to
(a) gross total of all types of physical capital assets
(b) gross total of all capital assets minus wear and tear
(c) the stock of plants, machines, and equipment
(d) None of these
Answer (B )
Explanation:
An investment is an asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.
Q110. The ratio of a bank's cash holdings to its total deposit liabilities is called the
(a) Variable Reserve Ratio
(b) Cash Reserve Ratio
(c) Statutory Liquidity Ratio
(d) Minimum Reserve Ratio
Answer (B )
Explanation:
The Cash Reserve Ratio is the number of funds that the banks are bound to keep with the Reserve bank of India as a portion of their Net Demand And Time Liabilities (NDTL). The objective of CRR is to ensure the liquidity and solvency of the Banks.
Q111. Which amidst the following is not a credit rating agency?
(a) CRISIL
(b) CARE
(c) ICRA
(d) IFCI
Answer (D )
Explanation:
IFCI, previously Industrial Finance Corporation of India, is a Non-Banking Finance Company in the public sector. Established in 1948 as a statutory corporation, IFCI is currently a company listed on BSE and NSE. IFCI manages seven subsidiaries and one associate under its fold.
It provides financial support for the diversified growth of Industries across the spectrum. The financing activities cover various kinds of projects such as airports, roads, telecom, power, real estate, manufacturing, services sector, and such other allied industries. During its 70 years of existence, megaprojects like Adani Mundra Ports, GMR Goa International Airport, Salasar Highways, NRSS Transmission
CRISIL- Credit Rating Information Services of India Limited
CARE- Credit Analysis and Research
ICRA- Investment Information and Credit Rating Agency
Q112. Which unit of valuation is known as “Paper gold”?
(a) Eurodollar
(b) Petrodollar
(c) SDR
(d) GDR
Answer (C )
Explanation:
Paper Gold, otherwise known as Special Drawing Rights (SDR), refers to the asset transferred by the International Monetary Fund (IMF) to its member countries as lending. All member countries are obliged to accept it. It provides a bigger base of earning for the IMF and greater liquidity amongst the member countries. It is the currency of the IMF and due to its acceptability, it is referred to as Paper Gold.
GDR- Global Depository Receipt
Q113. 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 )
Explanation:
Except for land revenue, all other taxes are collected by the central government
Q114. When marginal utility is zero, the total utility is
(a) Minimum
(b) Increasing
(c) Maximum
(d) Decreasing
Answer (C )
Explanation:
Total utility - It is total psychological satisfaction that a consumer derives from the consumption of a commodity is known as total utility
Marginal utility - It is an addition made in total utility by consuming an additional unit of a commodity is known as marginal utility
When marginal utility is positive, total utility increases
When marginal utility is zero, total utility is at maximum
When marginal utility is negative, total utility decreases
Q115. Equilibrium price means:
(a) Price determined by demand and supply
(b) Price determined by Cost and Profit
(c) Price determined by Cost of production
(d) Price determined to maximize profit
Answer (A )
Explanation:
The equilibrium price is the price where the demand for a product or a service is equal to the supply of the product or service. At equilibrium, both consumers and producers are satisfied, thereby keeping the price of the product or the service stable.
Q116. When aggregate supply exceeds aggregate demand/
(a) unemployment falls
(b) prices rise
(c) inventories accumulate
(d) unemployment develops
Answer (C )
Explanation:
An inventory accumulation is an excess of inventory that a business owner has difficulty moving after an unplanned event adversely affects sales.
Q117. Who are the creditors of a Corporation?
(a) Bondholders
(b) Stockholders
(c) Both / Bond and Stockholders
(d) Holders of preferred stock
Answer (C )
Explanation:
A creditor is an individual or institution that lends money or services to another entity under a repayment agreement.
How it works (Example):
There are generally two types of creditors: personal and real. Personal creditors are people who loan money to friends or family. Real creditors are financial entities who require borrowers to sign legal contracts that grant the creditor some sort of collateral -- e.g. car, house, jewelry if the borrower fails to repay the loan.
Individuals and companies can have several creditors at any given time, for many different types of debt. Additional examples of creditors who extend credit lines of money or services include utility companies, health clubs, phone companies, and credit card issuers.
Not all creditors are considered equal. Some creditors are considered superior to others (senior), while others are subordinate.
Q118. According to the Keynesian theory of income determination, at full employment, a fall in aggregate demand causes
(a) a fall in prices of output and resources
(b) a fall in real gross national product and employment
(c) a rise in real gross National product and investment
(d) a rise in prices of output and resources
Answer (A )
Explanation:
According to Keynes's theory, in the short run, the level of income, output, or employment is determined by the level of aggregate effective demand. In short, a higher level of aggregate demand will result in greater output, income, and employment. And vice versa
Q119. Devaluation usually causes the internal prices to
(a) fall
(b) rise
(c) remain unchanged
(d) None of the above
Answer (C )
Explanation:
Devaluation is a deliberate downward adjustment of the value of a country's currency relative to another currency, group of currencies, or standard. Countries that have a fixed exchange rate or semi-fixed exchange rate use this monetary policy tool. It is often confused with depreciation and is the opposite of revaluation. It does not have any effect on internal prices
Q120. A seller or buyer protects his business or holdings from changing prices and takes action against it. It is known as-
(a) defense
(b) betting
(c) inter-trading
(d) mortgage
Answer (A )
Explanation:
A seller or buyer protects his business or holdings from changing prices and takes action against it. It is known as defense.
Q121. Evaluating all the options to find out the most suitable solution to business problems in interdisciplinary activities. It is called
(a) Professional research
(b) Management research
(c) Operational research
(d) Commercial research
Answer (C )
Explanation:
Operations research (OR) is an analytical method of problem-solving and decision-making that is useful in the management of organizations. In operations research, problems are broken down into basic components and then solved in defined steps by mathematical analysis.
Q122. Basic infrastructure facilities in Economics are known as:
(a) Human capital
(b) Physical capital
(c) Social overheads capital
(d) Working capital
Answer (C )
Explanation:
Social Overhead Capital (SOC) is defined as basic services without which primary, secondary, and tertiary productive activities cannot function. In a narrow sense, Social Overhead Capital is defined to include transportation and electricity, while in a wider sense, it includes all public services, including law and order and education.
Q123. What are the main components of the basic social infrastructure of an economy?
(a) Education, Industry, and Agriculture
(b) Education, Health and Civil amenities
(c) Transport, Health, and Banks
(d) Industry, Trade, and Transport
Answer (B )
Explanation:
Social infrastructure can be broadly defined as the construction and maintenance of facilities that support social services. Types of social infrastructure include healthcare (hospitals), education (schools and universities), public facilities (community housing and prisons), and transportation (railways and roads)
Q124. Which of the following concepts are most closely associated with J.M. Keynes?
(a) Control of money supply
(b) Marginal utility theory
(c) Indifference curve analysis
(d) Marginal efficiency of capital
Answer (D )
Explanation:
Keynesian economics are the various macroeconomic theories about how in the short run – and especially during recessions – economic output is strongly influenced by aggregate demand (total demand in the economy). In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy; instead, it is influenced by a host of factors and sometimes behaves erratically, affecting production, employment, and inflation except d all are microeconomics concepts
Q125. The best measure to assess a country’s economic growth is
(a) per capita income at constant prices
(b) per capita income at current prices
(c) gross domestic product at current prices
(d) gross national product at current prices.
Answer (A )
Explanation:
Per capita income, also known as income per person, is the mean income of the people in an economic unit such as a country, state, or District. 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 of the country, state.
National income at a constant price: It is the money value of final goods and services produced by normal residents of a country in a year, measured at base year price. Base Year is a normal year that is free from price fluctuations. Presently 2004-2005 is taken as the base year in India. If we measure India’s National Income of 2013-2014 at the prices of 2004-2005, then it is termed as ‘National Income at a constant price’.
Q126. Which nationalized bank of India has a shining star as its emblem?
(a) Syndicate Bank
(b) Indian Bank
(c) Bank of India
(d) Bank of Baroda
Answer (C )
Q127. Transfer earning or alternative cost is otherwise known as
(a) Variable cost
(b) Implicit cost
(c) Explicit cost
(d) Opportunity cost (economic cost)
Answer (D )
Explanation:
What is Opportunity Cost
Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. While financial reports do not show opportunity costs, business owners can use them to make educated decisions when they have multiple options before them. Because they are unseen by definition, opportunity costs can be overlooked if one is not careful. By understanding the potential missed opportunities one forgoes by choosing one investment over another, better decisions can be made.
Q128. The main source of long-term credit for a business unit is
(a) sale of stocks and bonds to the public
(b) borrowing from banks
(c) loans from the Government
(d) deposits from the public and financial institutions
Answer (A )
Explanation:
Long-Term Credit
credit given for long periods and used primarily for the expanded reproduction of fixed capital (under capitalism) and fixed assets (under socialism).
Q129. State which of the following is correct? The Consumer Price Index reflects
(a) the standard of living
(b) the extent of inflation in the prices of consumer goods
(c) the increasing per capita income
(d) the growth of the economy
Answer (B )
Explanation:
A consumer price index (CPI) measures changes in the price level of the market basket of consumer goods and services purchased by households.
Q130. What is “narrow money”?
(a) The sum of currency in circulation and the demand deposits in banks
(b) The sum of M, money, and the time deposits
(c) The sum of currency in circulation with the public and the cash reserves held by banks
(d) The market value of the stocks held by all the holders excluding the promoters
Answer (A )
Explanation:
Narrow money is a category of money supply that includes all physical money such as coins and currency, demand deposits, and other liquid assets held by the central bank. In the United States, narrow money is classified as M1 (M0 + demand accounts)
Q131. Entrepreneurial ability is a special kind of labor that
(a) is hired out to firms at high wages
(b) organizes the process of production
(c) produces new capital goods to earn interest
(d) manages to avoid losses by continual innovation
Answer (B )
Q132. Equilibrium is a condition that can
(a) never change
(b) change only if some outside factor changes
(c) change only if some internal factor changes
(d) change due to both internal or external factors
Answer (D )
Explanation:
In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences, the (equilibrium) values of economic variables will not change. It can change due to both internal as well as external factors.
Q133. Devaluation of money means :
(a) decrease in the internal value of money
(b) decrease in the external value of money
(c) decrease in both internal and external value of money
(d) the government takes back currency notes of any denominations
Answer (B )
Explanation:
Devaluation of money or domestic currency means a decrease in the currency value of a country by its monetary authority, RBI in the case of India. Devaluation of a currency can take place under a fixed exchange rate.
Q134. 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 )
Explanation:
Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.
Market liquidity refers to the extent to which a market, such as a country's stock market or a city's real estate market, allows assets to be bought and sold at stable prices. Cash is considered the most liquid asset, while real estate, fine art, and collectibles are all relatively illiquid.
Accounting liquidity measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them. There are several ratios that express accounting liquidity highlighted below.
Q135. The method of calculating the national income by the product method is otherwise known as :
(a) Income method
(b) Value added method
(c) Expenditure method
(d) Net output method
Answer (D )
Explanation:
Product Method (or Value Added Method, Output Method)
- It is used by economists to calculate GDP at market prices, which are the total values of outputs produced at different stages of production.
Some of the goods and services included in production are:
- Goods and services actually sold in the market.
- Goods and services not sold but supplied free of cost. (No Charge/Complementary)
Some of the goods and services not included in production are:
- Second-hand items and purchase and sale of the same. The sale and purchase of second cars, for example, are not a part of GDP calculation as no new production takes place in the economy.
- Production due to unwarranted/ illegal activities.
- Non-economic goods or natural goods such as air and water.
- Transfer Payments such as scholarships, pensions, etc. are excluded as there is income received, but no good or service is produced in return.
- Imputed rental for owner-occupied housing is also excluded.
- Here the Gross Value of final goods and services produced in a country in a certain year is calculated.
- GDP is a concept of value-added; it is the sum of gross value added of all resident producer units (institutional sectors, or industries) plus that part of taxes (total) less subsidies, on products that are not included in the valuation of output.
- Gross Value Added = Output of Final Goods and Services – Intermediate Consumption
- National Income = Gross Value Added + Indirect Taxes – Subsidies
Q136. What is “book-building”?
(a) Preparing the income and expenditure ledgers of a company (book-keeping)
(b) Manipulating the profit and loss statements of a company
(c) A process of inviting subscriptions to a public offer of securities, essentially through a tendering process
(d) Publishers' activity
Answer (C )
Explanation:
Book building is a systematic process of generating, capturing, and recording investor demand for shares during an initial public offering (IPO), or other securities during their issuance process, in order to support efficient price discovery
Q137. The incidence of sales tax falls on
(a) Consumers
(b) Wholesale dealers
(c) Retail dealers
(d) Producers
Answer (A )
Explanation:
In economics, tax incidence is the analysis 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 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 supply. A tax on the sale of goods will ultimately be paid by either the consumer or the firm based on elasticities, regardless of who the government actually levies the taxon.
Q138. An economy is in equilibrium when
(a) planned consumption exceeds planned saving
(b) planned consumption exceeds planned investment
(c) intended investment equals intended savings
(d) intended investment exceeds intended savings
Answer (C )
Explanation:
In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences, the value of economic variables will not change. The condition of equilibrium of income is the equality of intended saving and intended investment. An economy is in equilibrium when total savings equal total investment.
Q139. Which of the following groups suffer the most from inflation?
(a) Debtors
(b) Creditors
(c) Business class
(d) Holders of real assets
Answer (B )
Explanation:
Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to the pre-inflation level of wealth. Inflation reduces the value of each unit of currency with lower purchasing power. Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it are creditors.
Q140. The existence of a Parallel Economy or Black Money
(a) makes the economy more competitive
(b) makes the monetary policies less effective
(c) ensures a better distribution of income and wealth
(d) ensures increasing productive investment
Answer (B )
Explanation:
The existence of black is injurious just not for the tax revenues but it distorts the systematic resource allocation process and upsets the accuracy of economic forecasts. Inflation is both the cause and consequence of black money in our economy. Black money results in social injustice and fallacy in the economy. The rich get richer and the poor get poorer. So, the existence of black money eroded the very rationale of growth behind the monetary policy.
Q141. In equilibrium, a perfectly competitive firm will equate
(a) marginal social cost with marginal social benefit
(b) market supply with market demand
(c) marginal profit with marginal cost
(d) marginal revenue with marginal cost
Answer (D )
Explanation:
A perfectly competitive firm maximizes its profit by producing the quantity of output that equates to price and marginal cost. In that, price equals marginal revenue for a perfectly competitive firm, price is also equal to marginal cost. In other words, the firm produces by moving up and down along its marginal cost curve.
Q142. The Marginal Utility Curve slopes downward from left to right indicating
(a) A direct relationship between marginal utility and the stock of commodity
(b) A constant relationship between marginal utility and the stock of commodity
(c) A proportional relationship between marginal utility and the stock of commodity
(d) An inverse relationship between marginal utility and stock of commodity
Answer (D )
Explanation:
The marginal utility curve is the curve illustrating the relation between the marginal utility obtained from consuming an additional unit of a good and the quantity of good consumed. The negative slope of the marginal utility curve reflects the law of diminishing marginal utility. The marginal utility curve can also be used to derive the demand curve. Marginal utility is the utility derived from the last unit of a commodity purchased.
Q143. If the price of an inferior good falls, its demand
(a) rises
(b) falls
(c) remains constant
(d) can be any of the above
Answer (A )
Explanation:
An inferior good is a type of good for which demand declines as the level of income or real GDP in the economy increases. This occurs when a good has more costly substitutes that see an increase in demand as the society's economy improves. An inferior good is the opposite of a normal good, which experiences an increase in demand along with increases in the income level. Inferior goods can be viewed as anything a consumer would demand less of if they had a higher level of real income.
Q144. 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 safekeeping of securities
(d) An advisory service to investors
Answer (C )
Explanation:
A Central Securities Depository (CSD) is an organization holding securities either in certificated or uncertificated (dematerialized), to enable the book-entry transfer of securities. In some cases, these organizations also carry out centralized comparisons and transaction processing such as clearing and settlement of securities. The physical security may be immobilized by depository or securities may be dematerialized (so that they exist only as electronic records).
Q145. Economic rent refers to
(a) Payment made for the use of labor
(b) Payment made for the use of capital
(c) Payment made for the use of the organization
(d) Payment made for the use of land
Answer (D )
Explanation:
Rent refers to that part of a tenant which is made only for the use of land i.e, free gift of nature. The payment made by an agriculturist tenant to the landlord is not necessarily equated to the economic rent. A part of this payment may consist of interest on capital invested in the land by the landlord in the form of buildings, fences, tube wells, etc. The term ‘economic rent’ refers to that part of the payment that is made for the use of land only, and a total payment made by a tenant to a landlord is called ‘contract rent’. Economic rent is also called surplus because it emerges without any efforts on the part of the landlord.
Q146. Average Revenue means
(a) the revenue per unit of the commodity sold
(b) the revenue from all commodities sold
(c) the profit realized from the marginal unit sold
(d) the profit realized by the sale of all commodities
Answer (A )
Explanation:
Average revenue is the revenue per unit of the commodity sold. It can be obtained by dividing the TR by the number of units sold. Then, AR=TR/Q. In other words, it means price.
Q147. The measure of a worker's real wage is
(a) The change in his productivity over a given time
(b) His earnings after deduction at source
(c) His daily earnings
(d) The purchasing power of his earnings
Answer (D )
Explanation:
A real wage rate is a nominal wage rate divided by the price of a good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. While differences in earnings or incomes may be misleading indicators of worker welfare, real wage rates are comparable across time and location. Nominal wage rates are not sufficient to tell us if workers gain since, even if wages rise, the price of one of goods also rises when moving to free trade. The real wage represents the purchasing power of wages, that is, the number of goods the wage will purchase.
Q148. When there is one buyer and many sellers then that situation is called
(a) Monopoly
(b) Single buyer right
(c) Downright
(d) Double buyers right
Answer (B )
Explanation:
In economics, a monopoly is a market form in which only one buyer faces many sellers. It is a market of imperfect competition, similar to a monopoly, in which only one seller faces many buyers.
Q149. The standard of living in a country is represented by its:
(a) poverty ratio
(b) per capita income
(c) national income
(d) unemployment rate
Answer (B )
Explanation:
Per capita income or average income or income per person is the 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 total population. It does not attempt to reflect the distribution of income or wealth.
Q150. The buoyancy of a tax is defined as
(a) percentage increase in tax revenue/percentage increase in the tax base
(b) increase in tax revenue/ percentage increase in tax coverage
(c) increase in tax revenue
(d) percentage increase in tax revenue/ increase in tax coverage
Answer (C )
Explanation:
Tax buoyancy is an indicator to measure the efficiency and responsiveness of revenue mobilization in response to growth in the Gross domestic product or National income.
A tax is said to be buoyant if the tax revenues increase more than proportionately in response to a rise in national income or output.
Q151. ‘Marginal efficiency of capital is
(a) expected rate of return on new investment
(b) expected rate of return of existing investment
(c) difference between the rate of profit and rate of interest
(d) value of output per unit of capital invested
Answer (A )
Explanation:
The MEC is the net rate of return that is expected from the purchase of additional capital. It is calculated as the profit that a firm is expected to earn considering the cost of inputs and the depreciation of capital. It is influenced by expectations about future input costs and demand. The MEC and capital outlay are the elements that a firm takes into account when deciding about an investment project.
Factors affecting Marginal Efficiency of Capital:
- Cost of capital
- Demand for goods
- Marginal rate of tax
- Availability of finance
- Expectations and confidence
- Technological innovation
Q152. The income elasticity of demand is greater than one, the commodity must be/
(a) a necessity
(b) a luxury
(c) an inferior good
(d) None of these
Answer (B )
Explanation:
Luxury goods represent normal
goods associated with income elasticities of demand greater than one. Consumers will buy proportionately more of a particular good compared to a percentage change in their income. Consumer discretionary products such as premium cars, boats, and jewelry represent luxury products that tend to be very sensitive to changes in consumer income. When a business cycle turns downward, demand for consumer discretionary goods tends to drop as workers become unemployed
Basically, negative income elasticity of demand is linked with inferior goods, meaning rising incomes will lead to a drop in demand and may mean changes to luxury goods. Positive income elasticity of demand is linked with normal goods. In this case, a rise in income will lead to a rise in demand.
Q153. When there is a change in demand leading to a shift of the Demand Curve to the right, at the same price as before, the quantity demanded will
(a) decrease
(b) increase
(c) remain the same
(d) contract
Answer (B )
Q154. When very little money is chasing too many goods, the situation is
(a)deflation
(b) inflation
(c) recession
(d) stagflation
Answer (A )
Explanation:
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation increases it.
Q155. What does a Leasing Company provide?
(a) Machinery and capital equipment on hire
(b) Legal guidance in establishing an enterprise
(c) Office accommodation on hire
(d) Technical consultancy and experts for a fee
Answer (A)
Explanation:
A leasing company provides a physical asset or service for use by a commercial client or individual for an established period of time (sometimes with provisions to purchase assets at the end of the contract) in return for regular payments, known as financial leasing. The lessee is the receiver of the assets or services under the lease contract and the lessor is the owner of the assets or provider of services.
Q156. A tax is characterized by horizontal equity if its liability is
(a) proportional to the income of taxpayers
(b) similar for taxpayers in similar circumstances
(c) proportional to the expenditure of taxpayers
(d) the same for every taxpayer
Answer (B )
Explanation:
The principle of equity includes both horizontal and vertical. Equity is determined by first assessing an individual’s ability to pay. The idea of the ability to pay principle considers whether or not it is fair to tax someone higher just because that person has the ability and resources to pay. If it is decided that they should be required to pay more, the question of how much arises. These questions can be analyzed through horizontal and vertical equity which are subsets of the ability to pay principle. Horizontal equity suggests that it is fair for people of equal ability to pay the same amount in taxes. Vertical equity is the idea that people who have a higher ability to pay more than those who have a lower ability to pay, as long as the increase in tax level is considered to be reasonable.
Q157. What is USP in the marketing field?
(a) Uninterrupted power supply
(b) Universal standards of production
(c) US Programme based
(d) Unique Selling Proposition
Answer (D )
Explanation:
USP stands for Unique Selling Proposition. It is also known as Unique Selling Point. It is a new concept of marketing to differentiate your product from the rest of your competitors.
Q158. Movement along the same demand curve is known as
(a) Extension and Contraction of Demand
(b) Increase and Decrease of Demand
(c) Contraction of supply
(d) Increase of supply
Answer (A )
Explanation:
When the quantity demanded of commodity changes due to a change in its price, keeping other factors constant, it is known as a change in quantity demanded. It is graphically expressed as a movement along the same demand curve.
Q159. Say’s Law of Market holds that
(a) supply is not equal to demand
(b) supply creates its own demand
(c) demand creates its own supply
(d) supply is greater than demand
Answer (B )
Explanation:
Say's law, or the law of markets, states that aggregate production necessarily precedes an equal quantity of aggregate demand
Q160. If an industry is characterized by economies of scale then
(a) barriers to entry are not very large
(b) long-run unit costs of production decreases as the quantity the firm produces increases
(c) capital requirement is small due to the efficiency of the large scale operation
(d) the costs of entry into the market are likely to be substantial
Answer (B )
Explanation:
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation (typically measured by the amount of output produced), with cost per unit of output decreasing with increasing scale. (In economics, "scale" is synonymous with quantity.)
Economies of scale apply to a variety of organizational and business situations and at various levels, such as a business or manufacturing unit, plant, or an entire enterprise. When average costs start falling as output increases, then economies of scale are occurring. If a firm's marginal cost of producing a good or service is beneath its average cost of producing that good or service, then the firm is experiencing economies of scale. Some economies of scale, such as capital cost of manufacturing facilities and friction loss of transportation and industrial equipment, have a physical or engineering basis.
Q161. The theory of distribution relates to which of the following?
(a) The distribution of assets
(b) The distribution of income
(c) The distribution of factor payments
(d) Equality in the distribution of the income and wealth
Answer (D )
Explanation:
In economics, distribution is the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labor, land, and capital). In general theory and the national income and product accounts, each unit of output corresponds to a unit of income. One use of national accounts is for classifying factor incomes and measuring their respective shares, as in National Income. But, where the focus is on the income of persons or households, adjustments to the national accounts or other data sources are frequently used. Here, interest is often on the fraction of income going to the top (or bottom) x percent of households, the next x percent, and so forth (defined by equally spaced cut points, say quintiles), and on the factors that might affect them (globalization, tax policy, technology, etc.).
Q162. Structural unemployment arises due to:
(a) deflationary conditions
(b) heavy industry bias
(c) shortage of raw materials
(d) inadequate productive capacity
Answer (D )
Explanation:
Structural unemployment is a form of unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (also known as the skills gap). Structural unemployment is often brought about by technological changes that make the job skills of many workers obsolete.
Q163. Interest on public debt is a part of :
(a) transfer payments by the enterprises
(b) transfer payments by the Govt.
(c) national income
(d) interest payments by households
Answer (B )
Explanation:
In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government making subsidies for certain businesses.
Q164. 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 )
Explanation:
In modern monetary policy, a devaluation is an 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 or currency basket.
One reason a country may devalue its currency is to combat a trade imbalance. Devaluation reduces the cost of a country's exports, rendering them more competitive in the global market. This, in turn, increases the cost of imports so domestic consumers are less likely to purchase them, further strengthening domestic businesses. Because exports increase and imports decrease, it favors a better balance of payments, shrinking trade deficits. That means a country that devalues its currency can reduce its deficit because of the strong demand for cheaper exports.
Q165. Which one of the following is NOT an example of indirect tax?
(a) Sales tax
(b) Excise duty
(c) Customs duty
(d) Expenditure tax
Answer (D )
Explanation:
An indirect tax is collected by one entity in the supply chain (usually a producer or retailer) and paid to the government, but it is passed on to the consumer as part of the purchase price of a good or service. The consumer is ultimately paying the tax by paying more for the product.
Expenditure tax is a direct tax levied on the total consumption expenditure of an individual. It may be a proportional or a progressive tax; its advantage is that it eliminates the supposed adverse effect of the personal income tax on investment and saving incentives.
Q166. Investment is equal to:
(a) gross total of all types of physical capital assets
(b) gross total of all capital assets minus wear and tear
(c) the stock of plants, machines, and equipment
(d) None of the above
Answer (B )
Explanation:
Investment is equal to the gross total of all capital assets minus normal wear and tear.
Q167. One of the essential conditions of perfect competition is:
(a) product differentiation
(b) multiplicity of prices for identical products at any one time.
(c) many sellers and a few buyers.
(d) Only one price for identical goods at any one time.
Answer (D )
Explanation:
An essential aspect of perfect competition is the absence of any monopolistic element. These are the three essential features of perfect competition:
1. The number of buyers and sellers in the market is very large. These buyers and sellers compete among themselves. Due to the large number, no buyer or seller influences the demand or supply in the market.
2. The commodity sold or bought is homogeneous. In other words, goods produced by different firms are identical in nature so the same products have the same prices.
3. Firms can enter or exit the market freely.
Q168. Indirect tax means :
(a) there is no direct relationship between the taxpayer and the government.
(b) the direct relationship between the taxpayer and the government.
(c) the tax base is income
(d) the incidence and impact are on the same person on whom tax is imposed.
Answer (A)
Explanation:
An indirect tax (such as sales tax, per unit tax, value-added tax (VAT), or goods and services tax (GST ), excise, tariff) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax proceeds to the government with the return.
Q169. Agricultural Technology is hard to spread because :
(a) it has to be adapted to local conditions.
(b) rural people may not be receptive
(c) farmers are afraid to experiment on land for fear of failure.
(d) all of the above.
Answer (D )
Explanation:
Agricultural Technology is hard to spread because farmers usually do not like to change their local habits and are afraid of trying any kind of new experiments.
Q170. which curve shows the inverse relationship between unemployment and inflation rates:
(a) Supply curve
(b) Indifference curve
(c) IS curve
(d) Phillips curve
Answer (D )
Explanation:
The Phillip curve relates the rate of inflation with the rate of unemployment. Phillip argues that unemployment and inflation are inversely related as levels of unemployment decrease, inflation increases.
Q171. Which of the following most closely approximates our definition of oligopoly?
(a) The cigarette industry
(b) The barbershops
(c) The gasoline stations
(d) Wheat farmers
Answer (A )
Explanation:
An oligopoly is a market form wherein a market or industry is dominated by a stop of large sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopolies have their own market structure.[With few sellers, each oligopolist is likely to be aware of the actions of the others. According to game theory, the decisions of one firm therefore influence and are influenced by the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market. Entry barriers include high investment requirements, strong consumer loyalty for existing brands, and economies of scale. In developed economies oligopolies dominate the economy as the perfectly competitive model is of negligible importance for consumers. Oligopolies differ from price takers in that they do not have a supply curve. Instead, they search for the best price-output combination.
Q172. Personal disposable income is
(a) always equal to personal income.
(b) always more than personal income.
(c) equal to personal income minus direct taxes paid by household
(d) equal to personal income minus indirect taxes.
Answer (C )
Explanation:
Disposable income, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.
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Q173. A financial instrument is called ‘primary security if it represents the liability of :
(a) some ultimate borrower
(b) the Government of India
(c) a primary cooperative bank
(d) a commercial bank
Answer (A )
Explanation:
These are the assets directly related to your business or project for which you have taken a loan and kept that as security. So primary security can be the thing that is being financed. For example, a factory for which you have taken a loan and kept that as security, taken a loan for a car and kept that as security, etc.
Q174. Multiplier process in economic theory is conventionally taken to mean :
(a) the manner in which prices increase.
(b) the manner in which banks create credit
(c) income of an economy grows on account of an initial investment
(d) the manner in which government expenditure increases
Answer (D )
Explanation:
In economics, a multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in an exogenous variable. E.g, suppose a one-unit change in some variable X causes another variable Y to change by M units, then the multiplier is M. In monetary macroeconomics and banking, the money multiplier measures how much the money supply increases in response to a change in the monetary base.
Q175. If people’s income of a country is denoted in a curved line space that it has increased, then what does it denote?
(a) the income is increasing
(b) the income is decreasing
(c) dissimilarity is decreasing in income distribution
(d) dissimilarity in income distribution is increasing
Answer (D )
Explanation:
It shows inequality in income distribution. Inequality indices can also be derived directly from the Lorenz curve. Perhaps the most commonly used inequality index is the Gini coefficient, which ranges from 0 (perfect equality) to 1 (perfect inequality). It is the ratio of the area enclosed by the Lorenz curve and the perfect equality line to the total area below that line.
Q176. Which among the following is not the outcome of a decrease in the prime lending rate?
(a) to raise the bank loan
(b) the decline in saving rate
(c) decline in productivity
(d) Increased demand for consumer products
Answer (C )
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 workers, driving unemployment higher.
Q177. Which among the following is not a non-customs duty obstacle in world trade?
(a) Quantify restriction
(b) Establishment of Standard of labor in manufacturing
(c) Determination of import duty uniformly
(d) Restrictions on goods quality
Answer (C )
Explanation:
non - tariff barriers to trade include import quotas, special licenses, unreasonable standards for the quality of goods, bureaucratic delays at custom, export restrictions, limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and phytosanitary measures, rules of origin, etc. Determination of import duty uniformly comes under the sovereign duty of a nation. It is internal development.
Q178. Which among the following has the least possibility of globalization?
(a) selection of labor force
(b) location of capital works
(c) to manage resources for investment
(d) increase in infrastructure
Answer (B )
Explanation:
Globalization can affect the labor market by increasing the capacity of developing countries to create new opportunities for work and production following the alleviation of price distortions with respect to both labor and capital. Globalization on business management is the interconnection of international markets and managing businesses in a global industry. This includes the management of resources for foreign investments whereby a company expands its business and invests in foreign countries. Globalization means inter-linkage among the countries of the globe. This can only happen when infrastructure is in proper shape. A well-developed infrastructure is an indispensable condition for faster globalization.
Q179. How the interest level of a country is affected by FDI?
(a) increases
(b) decreases
(c) remains unaffected
(d) there is increase or decrease
Answer (B )
Explanation:
A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company.
FDI increases the money flow in the economy thus reducing the interest rates.
Q180.In which of the following market forms, a firm does not exercise control over price?
(a) Monopoly
(b) Perfect competition
(c) Oligopoly
(d)Monopolistic competition
Answer (B )
Explanation:
A Perfect Competition is a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers.
Q181. Capital output ratio of a commodity 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 the quantity of output
(d) the ratio of working capital employed to the quantity of output
Answer (B )
Explanation:
The capital-output ratio is the amount of capital needed to produce one unit of output.
Q182. The demand of commodity mainly depends upon-
(a) Purchasing will
(b) Purchasing power
(c) Tax policy
(d) Advertisement
Answer (B )
Explanation:
The following points highlight the important factors on which an individual demand depends.
The factors are:
- Price of the Commodity
- Income of the Purchaser (purchasing Power)
- Person’s Taste’s and Habits
- Substitutes and Complementary Products and their Relative Prices 5. Consumer’s Expectation About the Future Change in Price
Q183. Bank rate is that rate on which-
(a) Any bank lends money to an individual
(b) State Bank of India gives loan to the rural banks
(c) Central Bank of Country lends money to the commercial banks
(d) Rural bank gives loan to cooperative societies
Answer (C )
Explanation:
A bank rate is the interest rate at which a nation's central bank lends money to domestic banks, often in the form of very short-term loans. Managing the bank rate is a method by which central banks affect economic activity. Lower bank rates can help to expand the economy by lowering the cost of funds for borrowers, and higher bank rates help to reign in the economy when inflation is higher than desired.
Q184. Who among the following is not a classical economist?
(a) David Ricardo
(b) John Stuart Mill
(c) Thomas Malthus
(d) John Maynard Keynes
Answer (D )
Q185. Long-term funds in the capital market can be raised either by borrowing from certain institutions or through
(a) issue of note
(b) taking a loan from the Government
(c) issue of securities
(d) taking a loan from foreign institutions
Answer (C )
Explanation:
Capital markets provide for the buying and selling of long-term debt or equity-backed securities. When they work well, the capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Capital markets allow businesses to raise long-term funds by providing a market for securities, both through debt and equity. Capital markets offer a whole range of sometimes complicated products which allow businesses and banks not just to raise capital but also to ‘hedge’ (protect) against risks.
Q186. How far does the Exclusive Economic Zone of a country extend from her coast? /
(a) 120 km
(b) 220 km
(c) 370 km
(d) 420 km
Answer (C )
Explanation:
The concept of the exclusive economic zone is one of the most important pillars of the 1982 Convention on the law of the Sea. it establishes the principle of a 200-nautical-mile limit on a nation’s exclusive economic zone (EEZ) whereby a nation controls the undersea resources, primarily fishing and seabed mining, for a distance of 200 nautical miles from its shore. Generally, a state’s EEZ extends to a distance of 200 nautical miles (370 km) out from its coastal baseline.
Q187. Which of the following is not considered as National Debt?
(a) National Savings Certificates
(b) Long-term Government Bonds
(c) Insurance Policies
(d) Provident Fund
Answer (C )
Explanation:
Insurance policies are not considered the national debt.
Q188. The main determinant of real wage is
(a) extra earning
(b) nature of work
(c) promotion prospect
(d) the purchasing power of money
Answer (D )
Explanation:
Real wage refers to the proportion of wage which is spent on consumption and which decides the purchasing power in the economy. It is that part of the wage that regulates the price level in the economy and vice versa. The main determinant of real wage is purchasing power as it is the power of money in the economy to acquire the wants that are desired.
Q189. Which of the following is not included in the National Income?
(a) Imputed rent of owner-occupied houses
(b) Government expenditure on making new bridges
(c) Winning a lottery
(d) Commission paid to an agent for the sale of the house
Answer (C )
Explanation:
Winning a lottery is not Included in the National Income.
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Q190. Personal disposable income is
(a) always equal to personal income
(b) always more than personal income
(c) equal to personal income minus indirect taxes
(d) equal to personal income minus direct taxes
Answer (D )
Explanation:
Disposable income, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after income taxes have been accounted for.
Q191. Who prepared the first estimate of National Income for the country?
(a) Statistical Organization
(b) National Income Committee
(c) Dadabhai Naoroji
(d) National Sample Survey Organization
Answer (C )
Explanation:
Dadabhai Naoroji prepared the first estimate of National Income for the country.
Q192. A refrigerator operating in a chemist's shop is an example of
(a) free good
(b) final good
(c) producers good
(d) inferior goods
Answer (B )
Explanation:
A consumer good or final good is any commodity that is produced or consumed by the consumer to satisfy current wants or needs. Consumer goods are ultimately consumed, rather than used in the production of another good. In that context, the economic definition of goods includes what are commonly known as services.
Q193. Disinvestments is
(a) offloading of shares of privates companies to government
(b) offloading of government Shares to private companies
(c) increase in investment
(d) closing down of business concerns
Answer (B )
Explanation:
Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. Absent the sale of an asset, disinvestment also refers to capital expenditure reductions, which can facilitate the re-allocation of resources to more productive areas within an organization or government-funded project. Whether a disinvestment action results in divestiture or the reduction of funding, the primary objective is to maximize the return on investment (ROI) on expenditures related to capital goods, labor, and infrastructure.
Q194. Which one of the following is a developmental expenditure?
(a) irrigation expenditure
(b) Civil administration
(c) Debt services
(d) Grant-in-aid
Answer (A )
Explanation:
Developmental expenditure refers to the expenditure of the government which helps in economic development by increasing production and real income of the country. Some people call it productive expenditure because it helps in increasing the production and productivity of the economy.
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Q195. When average cost production (AC) falls, the marginal cost of production must be.
(a) rising
(b) Falling
(c) Greater than the average cost
(d) Less than the average cost
Answer (D )
Q196. Green banking means
(a) development of forestry by banks
(b) financing of environmentally friendly projects by banks
(c) financing of irrigation projects by banks
(d) None of the above
Answer (B )
Explanation:
A green bank (sometimes referred to as a green investment bank, clean energy finance authority, or clean energy finance corporation) is a financial institution, typically public or quasi-public, that uses innovative financing techniques and market development tools in partnership with the private sector to accelerate deployment of clean energy technologies.
Q197. Which one of the following is not a quantitative credit control technique?
(a) Bank Rate
(b) Cash Reserve Ratio
(c) Statutory Liquidity Ratio
(d) Increase of interest rate on saving deposit
Answer (D )
Explanation:
The quantitative measures of credit control are :
- Bank Rate Policy: The bank rate is the Official interest rate at which RBI rediscounts the approved bills held by commercial banks. For controlling the credit, inflation, and money supply, RBI will increase the Bank Rate.
- Open Market Operations: OMO The Open market Operations refer to direct sales and purchase of securities and bills in the open market by the Reserve bank of India. The aim is to control the volume of credit.
- Cash Reserve Ratio: Cash reserve ratio refers to that portion of total deposits in commercial Bank which it has to keep with RBI as cash reserves.
- Statutory Liquidity Ratio: It refers to that portion of deposits with the banks that it has to keep with itself as liquid assets(Gold, approved govt. securities, etc.).If RBI wishes to control credit and discourage credit it would increase CRR & SLR.
Q198. Which one of the following statements is correct?
(a) Good money drives bad money out of circulation
(b) Bad money drives good money out of circulation
(c) Good and bad money cannot circulate together
(d) Cannot say
Answer (B )
Explanation:
In economics, Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation.
Q199. Devaluation of currency leads to
(a) expansion of export trade
(b) contraction of import trade
(c) expansion of import substitution
(d) All of the above
Answer (D )
Explanation:
Devaluation of money or domestic currency means a decrease in the currency value of a country by its monetary authority, RBI in the case of India. Devaluation of currency leads to expansion of exports and import substitution as well as a reduction in imports.
Q200. Economic planning is a subject of:
(a)in the union list
(b)in the state list
(c)in the concurrent list
(d)unspecified in any special list
Answer (A )
Explanation:
Economic planning, the process by which key economic decisions are made or influenced by central governments. It falls in the union list.
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