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. 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.
3. In economy, which among the following can be measured by calculating concentration ratios?
[A] Devlopment
[B] Inflation
[C] Competition
[D] Social Security
Show Answer
Correct Answer: C [Competition]
Notes:
Competition is generally measured by calculating concentration ratios. Concentration ratios indicate whether an industry consists of a few large firms or many small firms. Two of the most commonly used metrics are the Herfindahl Hirschman Index (HHI) and the N-firm concentration ratio.
4. 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.
5. 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.
6. Which scenario best describes a Goldilocks economy?
[A] High inflation, High economic growth
[B] Low inflation, High economic growth
[C] Low inflation, Steady economic growth
[D] High inflation, Low economic growth
Show Answer
Correct Answer: C [Low inflation, Steady economic growth]
Notes:
A Goldilocks economy signifies a balance of low inflation and steady growth, avoiding extremes. The term is widely used in macroeconomics to represent optimal conditions for policy makers. It is named after the fairy tale character Goldilocks, indicating “just right” economic conditions.
7. Per Capita Income of a country is obtained by dividing National Income by which of the following?
[A] Total working population
[B] Total population of the country
[C] Area of the country
[D] Volume of the capital used
Show Answer
Correct Answer: B [ Total population of the country ]
Notes:
Per capita income or average income measures the average income earned per person in a given area in a specified year. It is calculated by dividing the area’s total income by its total population.
8. Which of the following is not included in the calculation of national income?
[A] Value of annual goods production
[B] Value of annual services
[C] Value of old goods sold
[D] Value of new technology
Show Answer
Correct Answer: D [Value of new technology]
Notes:
In the calculation of national income, the value of old goods sold is not included. National income accounting typically focuses on the value of goods and services produced within a specific period, usually a year. It includes the production of new goods and the provision of services. However, the resale of old goods does not contribute to the current production of goods and services and therefore is not counted. Additionally, non-market services such as the services of a housewife, which are not paid for in the market, are also not included in the national income calculations. This exclusion is due to the difficulty in accurately measuring the economic value of such non-market services.
9. Which of the following curves represents the demand of all consumers in the market taken together at different levels of the price of the good?
[A] Monotonic
[B] Indifferent
[C] Market demand
[D] Diminishing
Show Answer
Correct Answer: C [Market demand]
Notes:
The market demand curve is the summation of all the individual demand curves in a given market. It shows the quantity demanded of the good by all individuals at varying price points.
10. On the basis of distribution, resources can be classified into which of the following?
[A] Potential resources
[B] Ubiquitous resources
[C] Actual resources
[D] Abiotic resources
Show Answer
Correct Answer: B [Ubiquitous resources]
Notes:
A ubiquitous resource is a natural resource that is available just about anywhere you live. Air, wind, water are all ubiquitous resources. Localized resources are natural resources only found in certain places.
