Economics MCQ Questions with Answer

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Economics MCQ Questions with Answer
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Q76. 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 the 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.

Q77. Some time back, the Government of India decided to de-license a ‘white goods’ industry. ‘White goods’ include:

(a) Stainless steel and aluminium utensils

(b) Milk and milk products

(c) Items purchased for conspicuous consumption

(d) Soaps, detergents, and other mass consumption goods

Answer: (c)

Explanation: White goods are large electrical goods used domestically such as air conditioners, refrigerators, cooking range, etc., which had a white enamel finish. Despite their availability in varied colors now, they are still called white goods. The term is used where British English is spoken. In the year 1993 the govt. of India had decided to de-license these goods.

Q78. Hawala transactions relate to payments:

(a) Received in rupees against overseas currencies and vice versa without going through the official channels

(b) Received for sale/transfer of shares without going through the established stock exchanges

(c) Received as commission for services rendered to overseas investors/buyers/sellers in assisting them to get over the red tape and/or in getting preferential treatment

(d) Made to political parties or to individuals for meeting election expenses

Answer: (a)

Explanation: Hawala is an illegal method of remittance across countries. There are money brokers who are the middlemen who undertake hawala transfers. This method of remittance does not involve the physical movement of cash. It is also known as Hundi. The word Hawala means trust. The Hawala system works as it is based on mutual trust between the hawala agents. It works outside the banking system and legal financial systems. The remittance happens based on communication between the hawala agents. It is an alternative to the traditional remittance system.

Q79. Micro-economics is also called-

(a) Income theory

(b) Investment theory

(c) Price theory

(d) Expenditure theory

Answer: (c)

Explanation: Price theory is associated with microeconomics which is basically concerned with the determination of output and price for an individual firm or industry.

Q80. The self-employed in a developing country who are engaged in small scale labour-intensive work belong to the-

(a) Informal sector

(b) Primary sector

(c) Secondary sector

(d) Tertiary sector

Answer: (b)

Explanation: The above scenario can be observed in the primary sector of developing countries. Since developing stage work done in the primary sector is more labour-intensive like agriculture employees, farmers engaging in small scale is labour-intensive work.

Q81. Who generally presents the Finance Budget in the Indian Parliament?

(a) RBI Governor

(b) Budget Minister

(c) Finance Minister

(d) Finance Secretary

Answer: (c)

Explanation: The finance budget is a government plan of revenue and expenditure for a year and it is generally presented by the finance minister of the country.

Q82. Special Economic Zone (SEZ) concept was first introduced in–

(a) China

(b) Japan

(c) India

(d) Pakistan

Answer: (a)

Explanation: China first introduced the concept of a Special Economic Zone (SEZ) in 1980.

Q83. What is meant by ‘Public Good’?​

(a) A commodity produced by the Government

​(b)​ A commodity whose benefits are indivisibly spread among the entire community ​

(c)​ A Government scheme that benefits the poor households

​(d)​ Any commodity that is very popular among the general public

Answer: (b)​

Explanation: Public good means a commodity or service which is given without profit to everyone in society by the government or any organization.

Q84. Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I (Term)List-II (Explanation)
A. Fiscal deficit1. Excess of total expenditure over total receipts
B. Budget deficit2. Excess of revenue expenditure over revenue receipts
C. Revenue deficit3. Excess of total expenditure over total receipts fewer borrowings
D. Primary deficit4. Excess of total expenditure over total receipts fewer borrowings & interests payments.

Codes: A B C D

(a) ​       3 1 2 4

(b) ​       4 3 2 1

(c) ​       1 3 2 4

(d) ​       3 1 4 2

Answer: ​(a) ​

Explanation: Fiscal deficit – Excess of total expenditure over total receipts fewer borrowings. ​​

Budget deficit – Excess of total expenditure over total receipts.

Revenue deficit-Excess of total expenditure over revenue receipts. ​​

Primary deficit-Excess of total expenditure over total receipts fewer borrowings & Interest payments.

Q85. Consider the following statements—

​I. ​Sick Company is defined as one whose accumulated losses in any financial year are equal to or more than 50% of its average net worth during the previous four financial years.

II. The Government set up Board of Industrial and Financial Reconstruction in 1987.

Which of the statement given above is/are correct? ​

Select the answer from the codes given below— ​

Codes:

​(a)  ​Only I

​(b)  ​Only II

​(c)  ​Both I and II ​

(d)  ​Neither I nor II

Answer: (c)

Explanation: ​An industrial unit is also regarded as a potentially sick or weak unit if, at the end of any financial year, it has accumulated losses equal to or exceeding 50 per cent of its average net worth in the immediately preceding four financial years and has failed to repay debts to its creditor (s) in three consecutive quarters on demand made in writing for such repayment. ​​The Board for Industrial and Financial Reconstruction was established under The Sick Industrial Companies (Special Provisions) Act, 1985. The board was set up in January 1987 and became functional as of 15 May 1987.

Q86. Where is the Headquarters of WTO located?

​(a) ​Rome ​

(b) ​Geneva ​

(c) ​Washington ​

(d) ​New York

Answer: (b) ​

Explanation: The World Trade Organization (WTO) is an organization that supervises and liberalizes international trade. It officially commenced on 1 January 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT) The headquarters of the World Trade Organization (WTO) is located in Geneva.

Q87. The main reason for the low growth rate in India, inspire by high rate of savings and capital formation is:

(a) High birth rate

(b) Low level of foreign and

(c) Low capital-output ratio

(d) High capital-output ratio

Answer: (d)

Explanation: The capital-output ratio is used to produce output over a period of time. This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output, hence the resulting capital-output ratio is low.

Q88. Which one of the following is the objective of the National Renewal Fund?

(a) To safeguard the interests of workers who may be affected by technological up-gradation of industry or closure of sick units

(b) To develop the core sector of the economy

(c) For the development of infrastructures such as energy, transport communications, and irrigation

(d) For human resource development such as full literacy, employment-population control, housing, and drinking water

Answer: (a)

Explanation: The concept of the National Renewal Fund was announced by the Government as a part of the New Industrial Policy, 1991. The Government established the National Renewal Fund (NRF) by a Government of India resolution on 3rd February 1992.

Q89. Match List-I with List-II and select the correct answer using the codes given the lists:

List-I (Industries)List-II  (Industrial Centers)
A. Pearl fishing1. Pune
B. Automobiles2. Tuticorin
C. Shipbuilding3. Pinjore
D. Engineering goods4. Marmagao

Codes:

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

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

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

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

Answer: (a)

Explanation: Industries Industrial centres A. Pearl fishing Tuticorin

  1. Automobile industry – Pune
  2. Shipbuilding – Marmagao
  3. Engineering goods – Pinjore

Q90. The “Law of Market” propounded by J.B. Say was not acceptable to –

(a) Adam Smith

(b) Marshall

(c) David Recordo

(d) Malthus

Answer: (d)

Explanation: Law of market or Say’s law is propounded by J.B. Say. It states that production is the main cause of demand.

Q91. Which of the following statements deals with microeconomics?

(a) Government spending will decrease unemployment

(b) Increase in money supply will increase inflation.

(c) Lower interest rates will increase investment

(d) Higher fees at private schools will increase admissions at public schools

Answer: (d)

Explanation: Microeconomics is one of the branches of economics that deals with human behaviour in relation to scarce resources at the ‘Individual level’, like the study of pricing, demand, and supply.

Q92. If the main objective of the government is to raise revenue, it should tax commodities with–

(a) High elasticity of demand

(b) Low elasticity of supply

(c) Low elasticity of demand

(d) High-income elasticity of demand

Answer: (c)

Explanation: Low elasticity of demand because it will generate income for the government and due to low elasticity, the consumer will consume in any way the goods which are essential in nature.

Q93. The degree of monopoly power is to be measured in terms of the firms–

(a) Normal profit

(b) Supernormal profit

(c) Both normal and supernormal profit

(d) Selling price

Answer: (d)

Explanation: The degree of monopoly is decided by the decision of fixing the selling price by the firm.

Q94. ​Which country became a member of the European Union on 1st July 2013? ​

(a) ​Bulgaria ​

(b) ​Romania

​(c) ​Croatia

​(d) ​Serbia

Answer: (c)

Explanation: ​Croatia applied for EU membership in 2003 and was in negotiations from 2005 until 2011. On 9 December 2011 leaders from the EU and Croatia signed the accession treaty. The country became the 28th EU member country on 1 July 2013.

​​European Union: Political & Economic union of 28 member states that are located primarily in Europe.

Q95. Which of the following is/are the example (s) of Transfer Payment(s)? ​

1. ​Unemployment Allowance ​

2. ​Payment of salary ​

3.​ Social Security Payment ​

4.​ Old age Pension

Select the correct answer using the code given below:​​​​​​​

(a) ​1 and 3 only

​(b) ​1, 2, and 3 only

​(c) ​1, 3 and 4 only ​

(d) ​None of the above

 

Answer: (c) ​

Explanation: Transfer payment is a payment of money to individuals by the government without taking any goods or services.

​​Examples:

  • ​Unemployment allowance ​
  • ​Social security payments
  • ​Old-age pension ​
  • Student grant ​
  • Subsidies to farmers, exporters & manufacturers.

Q96. . ​Net National Product (NNP) of a country is ​

(a) ​GDP minus depreciation allowances

​(b) ​GDP plus net income from abroad

​(c) ​GNP minus net income from abroad ​

(d) ​GNP minus depreciation allowances

Answer: (d) ​

Explanation: Net National Product (NNP) of a country is GNP minus depreciation allowances. NNP is the actual addition to the year’s wealth. While calculating GNP, we ignore depreciation of assets but in reality, the process of production uses up the fixed assets or there are some wear and tear or fixed assets by process of depreciation. In order to arrive at NNP, we deduct depreciation from GNP.

Q97. One of the important goals of the economic liberalization policy is to achieve full convertibility of the Indian rupee.

This is being advocated because:

(a) Convertibility of the rupee will stabilize its exchange value against major currencies of the world

(b) It will attract more foreign capital inflow to India

(c) It will help to promote exports

(d) It will help India secure loans from the world financial markets at attractive terms

Answer: (a)

Explanation: The full convertibility of the Indian currency means that the rupee is freely exchangeable into other international currencies and vice versa. Also, this would mean that international investors can buy and sell Indian assets at will. After 1994, the rupee has been partially convertible which means that the currency is changed freely into foreign currency for business and trade expenses. But it cannot be converted freely for acquiring overseas assets. Experts feel the full convertibility of the rupee would facilitate growth and higher foreign investments.

Q98. 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.

Q99. Assertion (A): India does not export natural rubber.

Reason (R): About 97% of India’s demand for natural rubber is met from domestic production. [2004]

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

(b) Both A and R are true but R is NOT a correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

Answer: (b)

Explanation: India is the fourth largest country, regarding the consumption of rubber with a total consumption of 631000 tons in 2001, after the USA and Japan. Due to high consumption in the domestic market, India does not export natural rubber. However small quantities of natural rubber are exported to get higher prices.

Q100. While computing national income estimates, which of the following is required to be observed?

(a) The value of exports to be added and the value of imports to be subtracted

(b) The value of exports to be subtracted and the value of imports to be added

(c) The value of both exports and imports to be added

(d) The value of both exports and imports to be subtracted

Answer: (a)

Explanation: While computing national income estimates value of export will be added because by export there is earning of some value and the value of import will be deducted because import leads to deduction of income (because of payment). Export and Import are part of national income when we calculate National income by expenditure method.

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