Economics Questions (MCQs) for Competitive Examinations
Economics Multiple Choice Questions (MCQs) for General Studies and GK preparation of SSC, NDA, CDS, UPSC, UPPSC and State PSC Examinations.
1. An autonomous increase in expenditure should result in an increase in a country’s real GNP only if ?
[A] The country’s balance of trade is negative
[B] The country’s economy is working under conditions of less than full employment
[C] It is government expenditure
[D] The multiplier is at least 1.5
Show Answer
Correct Answer: B [The country’s economy is working under conditions of less than full employment]
Notes:
When the economy is working under conditions of less than full employment, the GDP gap is positive and the economy operates at less than potential. At this point, an increase in expenditure would result in an increase in a country’s real GNP.
2. A systematic record of all economic transactions completed between residents of a country and the rest of the world in a year is known as..?
[A] Net Capital Flow
[B] Balance of Payment
[C] Balance of Trade
[D] Absolute Flow
Show Answer
Correct Answer: B [Balance of Payment]
Notes:
The Balance of International payments or Balance of Payments refers to the systematic and summary record of a country’s economic and financial transactions with the rest of the world, over a period of time.
The three main components of BoP are Current Account, Capital Account and Official Reserve Transactions
3. Which among the following is a suitable term for the state of economy in which economic activity is slowing down but wages and prices continue to rise ?
[A] Inflation
[B] Deflation
[C] Skweflation
[D] Stagflation
Show Answer
Correct Answer: D [Stagflation]
Notes:
Stagflation refers to persistent high inflation coupled with high unemployment and stagnant demand /growth in economy.
High Inflation + Low Economic Growth {or conditions of recession} + Low Employment Generation = Stagflation
4. Which among the following is the branch of economics that deals with the performance, structure, and behavior of the economy of the entire community, either a nation, a region, or the entire world?
[A] Heterodox approaches
[B] Micro Economics
[C] Macro Economics
[D] All of the above
Show Answer
Correct Answer: C [Macro Economics]
Notes:
Macroeconomics is a branch of economics, which deals with how an economy functions on a large scale. It deals with the structure, and behavior of the economy of either a region, country or the whole world.
5. If a commodity has more number of substitutes, the demand for this commodity will be _______?
[A] more elastic
[B] less elastic
[C] inelastic
[D] perfectly elastic
Show Answer
Correct Answer: A [more elastic]
Notes:
Substitute goods are those goods which can be used in place of each other. Examples of substitute goods are : tea and coffee; ghee and edible oil. In case of substitute goods like tea and coffee, demand for a commodity falls with a fall in the price of other substitute goods.
6. In context with the macroeconomics , Philips Curve is a relationship between the rates of ___?
[A] Unemployment & Exim trade
[B] Unemployment and Inflation
[C] Unemployment and Demand
[D] Unemployment and Poverty
Show Answer
Correct Answer: B [Unemployment and Inflation]
Notes:
Phillips curve developed by A. W. Phillips says that the inflation and unemployment have a stable and inverse relationship; which means that higher inflation is associated with lower unemployment and vice versa. However, later it was proved that this curve is applicable only in the short-run, and in long-run, inflationary policies would not decrease unemployment.
7. Economic growth is normally coupled with?
[A] Inflation
[B] Hyper Inflation
[C] Deflation
[D] Stagflation
Show Answer
Correct Answer: A [Inflation]
Notes:
Economic growth results in higher disposable income available with the consumers which increases the overall demand along with the supply available for the consumers. This increase in demand spurs inflation, which eventually becomes a necessary evil for a growing economy.
8. Which of the following items is characterised by highest income elasticity of demand among others?
[A] Car
[B] Milk
[C] Paddy
[D] Tobacco
Show Answer
Correct Answer: A [ Car ]
Notes:In case of High-income elasticity of demand, an increase in income is accompanied by a relatively larger increase in quantity demanded for normal goods. Thus, among the given options Car has highest income elasticity of demand.
- Car: A luxury good with high income elasticity; demand rises sharply with an increase in income.
- Milk: A necessity good with low to moderate income elasticity.
- Paddy: A basic necessity and staple food, with very low income elasticity.
- Tobacco: Considered an addictive good with low or even negative income elasticity in some cases, as demand is less income-sensitive.
9. Which one of the following is NOT a sign of economic development?
[A] Changing structure of GDP in favour of industry
[B] Larger share of GDP coming from primary sector
[C] Larger capital inflows
[D] Institutional changes in an economy.
Show Answer
Correct Answer: C [ Larger capital inflows ]
Notes:
Larger capital inflows are not always sign of economic development.
10. The central Statistical Office (CSO) has started measuring economic growth by gross value-added (GVA) at basic prices, replacing the practice of measuring it by GDP at factor cost. What is the difference between GDP at factor cost and GVA at basic prices?
[A] Production taxes are included and production subsidies excluded from GVA at basic prices
[B] Production taxes are excluded and production subsidies included in GVA at basic prices
[C] Production taxes and production subsidies included in GVA at basic prices
[D] Production taxes and production subsidies excluded from GVA at basic prices
Show Answer
Correct Answer: A [ Production taxes are included and production subsidies excluded from GVA at basic prices ]
Notes:
The difference between GDP at factor cost and GVA at basic prices is that production taxes are included and production subsidies excluded from the latter.
