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# Economics MCQ Questions with Answer

 Economics MCQ Questions with Answer Quiz-1 Quiz-2 Quiz-3 Quiz-4 Quiz-5 Quiz-6 Quiz-7 Quiz-8 Quiz-9 Quiz-10 Quiz-11 Quiz-12 Quiz-13 Quiz-14 Quiz-15

Q1. Devaluation usually causes the internal price to ​

(a)​Fall

​(b)​Rise ​

(c)​Remain unchanged ​

(d)​None of these

 Answer: ​(c)​Explanation: Devaluation is a deliberate downward adjustment to the value of a country’s currency, relative to another currency, group of currencies. Since it is relative to other currencies so the internal price remains unchanged. It causes a country’s exports to become less expensive and imports more expensive. ​​Devaluation is a monetary policy tool used by countries that have a fixed exchange rate or semi-fixed exchange rate. It is often confused with Depreciation and is the opposite of revaluation.

Q2. Which of the following is not an example of economic overheads?

​(a)​Schools ​

(b)​Sanitary facilities

(d)​Coal mines

 Answer: ​(d)Explanation: Coal mines are not an example of economic overheads. Economic overhead is a capital investment into the infrastructure which should encourage new industrial growth and social wellbeing. The other three schools, sanitary facilities, and roads and railways are economic overheads. ​​Overheads are indirect costs that cannot be traced into any specified cost objects.

Q3. Which is not included in the private income arising in a country? ​

(a) ​Factor income from net domestic product ​

(b) ​Net factor income from abroad ​

(c) ​Current transfers from government ​

(d) ​Current payments on foreign loans

 Answer: (d)Explanation: ​Private income arising in a country does not include current payments on foreign loans. Private income includes any type of income received by a private individual or household, often derived from occupational activities, or income of an individual that is not in the form of a salary (e.g. income from investments). Thus private income includes factor income from the net domestic product, net factor income from abroad & current transfers from the government. ​​[Private income = Domestic product accruing to the private sector + Net factor income from abroad + Net other transfer income.]

Q4. In an economy, the sectors are classified into public and private on the basis of

​(a)  ​Employment condition ​

(b)  ​Nature of economic activities ​

(c)  ​Ownership of enterprises

​(d)  ​Use of raw materials

 Answer: (c) ​Explanation: In an economy, the sectors are classified into private and public on the basis of ownership. ​​Public Ownership – Majority or controlling share (51%) of a firm by Government.​​Private Ownership – Being owned by a private individual or organization rather than by the state or public.

Q5. Which one among the following countries has the lowest GDP per capita? ​

(a) ​China ​

(b) ​India

​(c) ​Indonesia

​(d) ​Sri Lanka

 Answer: (b) ​Explanation: India, among the countries has the lowest GDP per capita.

Q6. According to the 1991 Census, the highest percentage of the population in India is to be found in the age group of:

(a) 60 years and above

(b) 35 to 55 years

(c) 25 to 34 years

(d) 5 to 14 years

 Answer: (d)Explanation: The highest percentage of the population in India in 1997 is in the age group of 5-14 years.

Q7. Which of the following benefits are likely to accrue to India from the World Trade Organization?

1. India’s share in world trade is to go up from the present 600 million US dollars to 5 billion US dollars by 2000 AD.
2. It will help boost exports of agricultural commodities from India.
3. India’s share in world trade is likely to triple by the year 2000 A.D.

(a) 1, 2 and 3

(b) 1 and 3

(c) 1 and 3

(d) 2 and 3

 Answer: (d)Explanation: World Trade Organization is attempting to lower trade barriers across nations. Hence export of all member nations will go up.

Q8. Which of the following is among the non-plan expenditures of the Government of India?

1. Defence expenditure
2. Subsidies
3. All expenditures linked with the previous plan periods
4. Interest payment

Codes:

(a) 1 and 2

(b) 1 and 3

(c) 2 and 4

(d) 1, 2, 3 and 4

 Answer: (d)Explanation: non-plan expenditures include non-developmental expenditure (interest payment, subsidies, defence expenditure, and civil administration), developmental expenditure, and expenditure incurred on projects which remained unfinished in the earlier plans.

Q9. Scheme of

(i) Urban Micro-Enterprises, (ii) Urban Wage Employment, and (iii) Housing and Shelter Up-gradation are parts of:

(a) Integrated Rural Development Program

(b) Nehru Rojgar Yojana

(c) Jawahar Rojgar Yojana

(d) Prime Minister’s Rojgar Yojana

 Answer: (b)Explanation: The Nehru Rozgar Yojana (1989) has been designed to provide employment to the urban unemployed and under-employed poor.

Q10. Which of the following constitutes the World Bank?

1. International Bank for Reconstruction and Development
2. International Finance Corporation
3. International Development Association
4. International Monetary Fund

Codes:

(a) 1, 2 and 3

(b) 1 and 2

(c) 3 and 4

(d) 1, 2, 3 and 4

 Answer: (a)Explanation: World Bank is made up of two development institutions owned by 187 member countries: International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA). IBRD aims to reduce poverty in middle-income and creditworthy poorer countries, while IDA focuses on the world’s poorest countries. Their work is complemented by that of the International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID). There is a difference between the World Bank and the World Bank Group.

Q11. The problem of Economics arises from-

(a) Plenty

(b) Scarcity of goods

(c) More wants and fewer goods

(d) All of the above

 Answer: (b)Explanation: Economics problem is all about choosing alternative among finite resources available that means a scarcity of resources.

Q12.Hire and Fire’ is the policy of-

(a) Capitalism

(b) Socialism

(c) Mixed economy

 Answer: (a)Explanation: Capitalism is a theory that believes in profit maximization and regulation by demand and supplies itself only. Therefore there is no regulation on what to hire and whom to fire.

Q13. Which of the following does not determine the supply of labour?

(a) Size and age structure of the population

(b) Nature of work

(c) Marginal productivity of labour

(d) Work-leisure ratio

 Answer: (c)Explanation: Marginal productivity of labour is a change in output resulting from employing one more unit of labour. It does not play any role in the supply of labour.

Q14. If the price of an article decreases from Rs. 100 to Rs. 80, when quantity demanded increases from Q1 units to 4600 units, and if point elasticity of demand is -0.75. Q1 =?

(a) 5000 units

(b) 4000 units

(c) 3000 units

(d) 2000 units

 Answer: (b)Explanation: Point Elasticity is finding elasticity at the point on the demand curve.Elasticity = $\frac{\%\Delta \mathrm{Q}}{\%\Delta \mathrm{P}}\,\,$By putting value we will receive 4000 units as the answer.

Q15. A fall in demand or rise in the supply of a commodity–

(a)Increases the price of that commodity

(b)Decreases the price of that commodity

(c)Neutralizes the changes in the price

(d)Determines the price elasticity

 Answer: (b)Explanation: Fall in demand and rise in the supply of the commodity will create excessive ‘Buffer stock. So to sell the product there will be a decrease in the price of that commodity so that sell could occur.

Q16. The difference between the price the consumer is prepared to pay for a commodity and the price which he actually pays is called

(a) Consumer’s Surplus

(b) Producer’s Surplus

(c) Landlord’s Surplus

(d) Worker’s Surplus

 Answer: (a)Explanation: Consumer surplus is an extra amount that the consumer realizes when he is willing to pay more than the seller’s selling price.Or simply consumer surplus = Expected payment-Actual payment.

Q17. Economic rent refers to-

(a) Payment made for the use of land

(b) Profit

(c) Producer’s surplus

(d) Consumer’s surplus

 Answer: (a)Explanation: Economic Rent only includes income or payment that arises due to the use of land only.

Q18.Marginal efficiency of capitals

(a) Expected rate of return of 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: Marginal efficiency of capital displays the expected rate of return. ‘’J.M. Keynes described marginal efficiency as the rate of discount which would make the present value of the series of annuities given by the returns expected from the capital asset during its life just equal to its supply price’’.

Q19. When Average Cost Production (ACP) 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)Explanation: Average cost is the cost per unit of output. Marginal cost is an addition to total cost by producing one more unit. So marginal cost of production lies below-average cost when the average cost falls.

Q20. Economic Survey in India is published officially, every year by the:

(a) Reserve Bank of India

(b) Planning Commission of India

(c) Ministry of Finance, Govt. of India

(d) Ministry of Industries, Govt. of India

 Answer: (c)Explanation: Economy Survey in India is published officially, every year by the Ministry of Finance, Govt. of India, and issued before the annual budget. It reviews the development in the Indian economy over the previous 12 months.

Q21. The contribution of India’s small scale sector to the gross turnover in the manufacturing sector since 1992has been of the order of

(a) 40%

(b) 34%

(c) 30%

(d) 45%

 Answer: (a)Explanation: The contribution of small-scale industries to employment and exports is substantial. The sector contributes over 40 percent of the gross turnover in the manufacturing sector, 45 percent of manufactured exports, and 25 percent of total exports. As in 2015.

Q22. Who recommends the MSP and issues prices? ​

(a)​Ministry of agriculture

​(b)​Planning commission ​

(c)​Commission for Agricultural Costs and Prices

​(d)​NABARD

 Answer: (c)​Explanation: CACP was set up in 1985 and recommends for MSP, issue prices as well as procurement prices.

Q23. Development expenditure of the Central government does not include ​

(a) ​Defence expenditure

​(b)​ Expenditure on economic services

​(c) ​Expenditure on social and community services

​(d) ​Grant to states

 Answer: (a)Explanation: All expenditures that promote economic growth and development are termed development expenditures. Expenditure on infrastructure development, public enterprises, or the development of agriculture increase productive capacity in the economy and bring income to the government. Expenditures in the nature of consumption such as Defence, interest payments, expenditure on law and order, public administration, do not create any productive asset which can bring income or returns to the government are non-development expenditures. ​​Govt. grant is a financial award given by the federal State local Govt. to an eligible grantee.

Q24. GDP is defined as the value of all ​

(a) ​Goods produced in an economy in a year ​

(b) ​Goods and services in an economy in a year ​

(c) ​Final goods produced in an economy in a year ​

(d) ​Final goods and services produced in an economy in a year.

Explanation: GDP is defined as the value of all final goods and services produced in an economy in a year. The total quantity of goods produced in an economy during the year is multiplied by their current prices to get the GDP. ​​Gross Domestic Product can be calculated using formulas.

 GDP = C + G + I + NX

​​C – Private consumption or consumer spending in the national economy. ​​

G – Sum of Govt. spending. ​​

I – Sum of all the country’s investment including business Capital expenditure. ​​

NX – Nation’s total next exports

 NX = Export – Import

Q25. Which of the following areas has been excluded, by the Ministry of Corporate Affairs, from the ambit of Corporate Social Responsibility (CSR)   activities?

​(a)  ​Livelihood enhancement and rural development projects.

​(b)  ​Contributions made ‘directly or indirectly to any political party.  ​

(c)  ​Promoting preventive health care and sanitation.

​(d)  ​Making safe drinking water available would be considered CSR activities.

 Answer: (b) ​Explanation: According to new CSR rules, companies must spend at least 2% of their 3-year average annual profit on social welfare activities. However, funds given to political parties and money spent on their own employees and their families will not count as CSR.

### Economics MCQ Questions with Answer

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Q26. Sustainable development is a case of inter-generational sensibility in respect of the use of ​

(a) ​Natural resources ​

(b) ​Material resources ​

(c) ​Industrial resources

​(d) ​Social resources

 Answer: (a) ​Explanation: Sustainable development is that development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development is a case of inter-generational sensibility in respect of the use of natural resources. ​​Sustainable development – Economic development that is conducted without depletion of natural resources.

Q27. Which of the following pairs are correctly matched?

1. An increase in—monetary expansion
2. The low import growth rate in India-Recession in Indian industry
3. Euro-issues—Shares held by Indian companies in European countries
4. Portfolio investment—Foreign institutional investors.

Codes:

(a) 1, 2 and 4

(b) 3 and 4

(c) 1, 2 and 3

(d) 1, 2, 3 and 4

 Answer: (a)Explanation: The euro issue includes the issue of ADR (American Depositary Receipts) and GDR (Global Depositary Receipts). A scheme has been initiated during 1992 under which Indian companies are permitted to raise foreign currency resources through the issue of Foreign Currency Convertible Bonds (FCCBs) and/or issue of ordinary equity shares through Global Depositary Receipts (GDRs)/American Depositary Receipts (ADRs) to foreign investors i.e. institutional investors or individuals (including NRIs) residing abroad.

Q28. In which one of the following crops international trade is low in the context of total produce?

(a) Rice

(b) Coffee

(c) Rubber

(d) Wheat

 Answer: (a)Explanation: Rice production is highest in India among cereals but its quality of rice cannot compete with other rice-producing countries. Most of the rice produced in India is meant for internal consumption. India is a major producer and exporter of Basmati rice.

Q29. Quasi rent is a ____ phenomenon.

(a) Medium-term

(b) Long term

(c) Short term

(d) No time

 Answer: (c)Explanation: Quasi-rent is a type of return to the organization that is different from price rent. Quasi rent is additional income and is a temporary phenomenon in the short run.

Q30. Why is rent earned by land even in the long run?

(a) Land has original and indestructible power

(b) Land is a manmade factor

(c) Its supply is inelastic in the short run

(d) Its supply is inelastic in the long run

 Answer: (d)Explanation: Rent supply is inelastic in the long run in the sense that no human effort can increase or decrease their amount of supply in long run.

Q31. The four factors of production are-

(a) Land, labour, capital, organization

(b) Land, electricity, water labour

(c) Labor, capital, land rainfall

(d) Labor, climate, land, rainfall

 Answer: (a)Explanation: Factors of production are resourced by which production is done or essential resources which are core for production. Examples are land, labour, capital, and organization.

Q32. Consider the following actions by the Government: ​

1.​ Cutting the tax rates. ​

2.​ Increasing government spending. ​

3.​ Abolishing the subsidies. ​In the context of economic recession,

Which of the above actions can be considered a part of the ‘fiscal stimulus package? ​

(a) ​1 and 2 only ​

(b)​ 2 only ​

(c)​ 1 and 3 only ​

(d)​ 1, 2 and 3

 Answer: (a)Explanation: ​Fiscal stimulus – Government measures, normally involving increased public spending and lower taxation is aimed at giving a positive jolt to economic activity.

Q33. If the Sales tax on a commodity is raised, but the revenue earned through its sale decrease sharply, which one of the following statements about the nature of this commodity would be correct?​​​ ​

(a) ​Price elasticity of demand for it is unity ​

(b) ​It must be essential goods ​

(c) ​Price elasticity of demand for it is high ​

(d) ​Price elasticity of demand for it is low

 Answer: (c) ​Explanation: The price elasticity of demand for goods also depends on the proportion of the income the buyers spend on the goods. Therefore, if the sales tax on a commodity is raised, but the revenue earned through its sale decrease sharply, the price elasticity of demand for the commodity would be high.

Q34. Which one of the following is true regarding the Jawahar Rozgar Yojana (JRY)?

(a) It was launched during the Prime Ministership of Indira Gandhi

(b) It aims at creating one million jobs annually

(c) The target group of JRY is the urban poor living below the poverty line

(d) Under the scheme 30% of the employment generated is reserved for women

 Answer: (d)Explanation: Though the people below the poverty line were the target group for employment, the preference was to be given to the Scheduled Castes, Scheduled Tribes, and freed bonded labourers. Thirty percent of the employment opportunities were to be reserved for women in rural areas.

Q35. The largest source of financing the public sector outlay of the Eighth Five Year Plan comes from:

(a) Balance from current revenue

(b) Contribution of public enterprises

(c) Government borrowings

(d) Deficit financing

 Answer: (d)Explanation: Under Deficit financing, the government spends more money than it collects as revenue, the difference being made up by borrowing from the Reserve Bank of India by the issue of Promissory notes.

Q36. Assertion (A): India’s software exports increased at an average growth rate of 50% since 1995-96.

Reason (R): Indian software companies were cost-effective and maintained international quality.

(a) Both A and R are individually true and R is the correct explanation of A

(b) Both A and R are individually true but R is not the correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

 Answer: (a)Explanation: The only negative factor is the time difference which causes large turnover as most IT work is conducted during the night shift.

Q37. Depreciation is equal to ​

(a) ​GNP – NNP ​

(b) ​NNP – GNP ​

(c) ​GNP – Personal Income ​

(d) ​Personal Income – Personal Taxes

 Answer: (a) ​Explanation: Depreciation is equal to GNP–NNP (Gross national products–Net national products)​​In economics, Depreciation is the gradual decrease in the economic value of the capital stock of a form nation or other entity.

Q38. .​Which of the following Tax is levied by Union and collected and appropriated by States?​

​(a)​Stamp Duties

​(b)​Passenger and Goods Tax ​

(c)​Estate Duty

​(d)​Taxes on Newspapers

 Answer: (a) ​Explanation: As mention in article 268 of the Indian Constitution, Stamp Duties are mentioned in the Union List shall be levied by the Government of India but collected and appropriated by the States.

Q39. Investment is equal to-

(a) Gross total of all types of physical capital assets

(b) A Gross total of all capital assets minus wear and tear

(c) Stock of plants, machines

(d) None of the above

 Answer: (b)Explanation: Investment is a portion of the amount that is used for capital formation and all the wear and tear is deducted to know the actual amount of investment.

Q40. Extension or contraction of quantity demanded of a commodity is a result of a change in the-

(a) Unit price of the commodity

(b) Income of the consumer

(c) Tastes of the consumer

(d) Climate of the region

 Answer: (a)Explanation: Law of demand represents the inverse relationship between demand and price. So change in the unit price of the commodity will result from the change in demand i.e. extension and contraction of quantity demanded.

Q41. If the price of an article decreases from P1 to Rs. 25, the quantity demanded increases from 900units to 1200 units. If point elasticity of demand is 2 find P1?

(a) Rs. 20

(b) Rs. 30

(c) Rs. 35

(d) Rs. 15

 Answer: (b)Explanation: Point Elasticity = $\frac{\%\Delta \mathrm{Q}}{\%\Delta \mathrm{P}}\,\,\mathrm{i}.\mathrm{e}. \frac{\mathrm{P}}{\mathrm{Q}}\times \frac{\Delta \mathrm{Q}}{\Delta \mathrm{P}}$by putting values to the formula we will get Rs. 30

Q42. Which one of the following is an example of joint supply?

(a) Petrol and Bus

(b) Ink and Fountain pen

(c) Sugar and Coffee

(d) Wool and Cotton

 Answer: (b)Explanation: Ink and fountain Pen is an example of joint supply because usually are produced by a single producer.

Q43. What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’? ​

1.​ It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. ​

2.​ It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.

​3.​ It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future. ​

Select the correct answer using the code given below: ​

(a) ​1 only ​

(b) ​2 and 3 only

​(c)​ 1 and 3 only

​(d)​ 1, 2 and 3

 Answer: (a) ​Explanation: Exports will become ZERO RATED under GST, so statements 2 and 3 would have been correct if the examiner had used moderate words “GST will help”. But he has used ‘extreme’ words. GST is unlikely to ‘drastically’ reduce CAD Because of crude oil import and OPEC cartel that manipulates its prices. Similarly, GST is unlikely to enormously increase the size of our economy (IMF projection ~1-1.5% addition in growth rate.) and we can’t overtake China in near future, because unlike China we are keeping our currency undervalued against the dollar. Hence statements 2 and 3 are wrong. We are left with Answer A.

Q44. ​The First Five Year Plan of India was based on the—

(a) ​Harrod-Domar Model ​

(b) ​Mahalanobis Model

​(d) ​J. L.  Nehru Model

 Answer: (a) ​Explanation: The First Five-year Plan was launched in 1951 which mainly focused on the development of the primary sector, and was based on the Harrod–Domar model with few modifications.

Q45. ​As per the RBI guidelines, which one of the following is the minimum tenure of Masala Bonds that an Indian Company can issue offshore?​

(a)  ​Five years

​(b)  ​Four years ​

(c)  ​Three years

​(d)  ​Two years

 Answer: (c) ​Explanation: The minimum period of maturity for Masala bonds up to an INR equivalent of USD 50 million in a financial year will be 3 years, and for above USD 50 Million  (INR equivalent)  will be 5 years.

Q46. The New Exim Policy announced in 1992, is for a period of:

(a) 3 years

(b) 4 years

(c) 7 years

(d) 5 years

 Answer: (d)Explanation: The New Exim Policy was for five years (April 1, 1992 – March 31, 1997).

Q47. Which one of the following statements is correct?

(a) Alliance Air is a wholly-owned subsidiary of Indian Airlines

(b) The Airports Authority of India manages seven of the country’s international airports

(c) The Airports Authority of India is the regulatory organization for enforcing civil air regulations in India

(d) It is the function of the Directorate General of Civil Aviation to plan and construct runways and terminal buildings and to provide air safety services

 Answer: (a) Explanation: Alliance Air was formed in 1996 and was completely owned by Indian Airlines. Then are plans to convert it into a Cargo Airline.

Q48. . Match List-I with List-II and select the correct answer using the codes given below the lists:

 List – I List-II A. Boom 1. Business activity at a high level with increasing income, output, and employment at the macro level B. Recession 2. Gradual fall of income, output, and employment with business activity in a low gear C. Depression 3. Unprecedented level of underemployment, and unemployment, drastic fall in income output and employment. D. Recovery 4. Steady rise in the general level of prices, income, output, and employment.

Codes:

(a) A-1; B-2; C-3; D-4

(b) A-1; B-2; C- 4; D-3

(c) A-2; B-1; C- 4; D-3

(d) A-2; B-1; C-3; D-4

 Answer: (a)Explanation: Boom is a period of time during which sales of a product or business activity increase very rapidly. In the stock market, booms are associated with bull markets, whereas busts are associated with bear markets. A recession is a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income, and wholesale retail trade. Depression is a severe and prolonged downturn in economic activity. In economics, a depression is commonly defined as an extreme recession that lasts two or more years. Economic Recovery is a period of increasing business activity signalling the end of a recession. Much like a recession, an economic recovery is not always easy to recognize until at least several months after it has begun.

Q49. NABARD was established in the ​

(a) ​Fourth Five Year Plan

​(b) ​Fifth Five Year Plan

​(c) ​Sixth Five Year Plan

​(d) ​Eighth Five Year Plan

 Answer: (c)Explanation: ​It was established on 12 July 1982 in the sixth five-year plan by a special act by the parliament and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non-farm sector.

Q50. Indian farmers are unhappy over the introduction of “Terminator Seed Technology” because the seeds produced by this technology are expected to:

(a) Show poor germination

(b) From low-yielding plants despite the high quality

(c) Give rise to sexually sterile plants

(d) Give rise to plants incapable of forming viable seeds

 Answer: (c) Explanation: The terminator gene is a specific genetic sequence inserted into a seed’s DNA. Once activated by a synthetic chemical catalyst of the manufacturer’s choosing, the sequence renders the seed and crop it produces sterile. This means that the farmer cannot retain seeds for future crops as is the practice in India. The farmer has to repurchase the seeds at a heavy cost.

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