Economics MCQ Questions with Answer

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Economics MCQ Questions with Answer


Q51. The marginal propensity to consume lies between

(a) 0 to 1

(b) 0 to ∞

(c) 1 to ∞

(d) ∞ to ∞

Answer: (a)

Explanation: Marginal propensity to consume is the ratio of change in consumption due to change in income. It lies between0 to 1.

Q52. Inflation is caused by ​

(a) ​Increase in supply of goods ​

(b) ​Increase in cash with the government ​

(c)​ Decrease in the money supply ​

(d) ​Increase in the money supply

Answer: (d)​

Explanation: Inflation is an increase in the prices of commodities. It is caused due to decrease in supply and an increase in the demand for commodities. So when the money supply in the economy increases it means people have more purchasing capacity and thus demand increases which results in inflation.

Some factors affecting inflationary pressure. ​​

(i) Rising property price → Increase consumer wealth → Demand-pull inflation risk

(ii) Increase world oil price → High cost for business → Cost pull inflation risk

(iii) Depreciatory exchange rate → increase import price, rising export → Cost pull and Demand-pull inflation risk

Q53. Given below are two statements, one labeled as Assertion (A) and the other labeled as Reason (R).

Assertion (A): An important policy instrument of economic liberalization is a reduction in import duties on capital goods.

Reason (R): Reduction in import duties would help the local entrepreneurs to improve technology to face the global markets.

In the context of the above two statements, which one of the following is correct?

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

(b) Both A and R are true R is not a correct explanation

(c) A is true but R is false

(d) A is false but R is true

Answer: (a)

Explanation: Both statements are correct and explain one of the instruments to liberalize the Indian economy.

Q54. Which of the following relationship always holds true?

(a) Income = Consumption + Investment

(b) Income = Consumption + Saving

(c) Saving = Investment

(d) Income = Consumption + Saving + Investment

Answer: (b)

Explanation: It is believed that the consumer’s income is used in consumption and if remains left, it is used for savings for future. So income = consumption + savings

Q55. The correct sequence in decreasing order of the four sugarcane producing States in India is:

(a) Maharashtra, U . P, Tamil Nadu, Andhra Pradesh

(b) U. P., Maharashtra, Tamil Nadu, Andhra Pradesh

(c) Maharashtra, U. P., Andhra Pradesh, Tamil Nadu

(d) U. P., Maharashtra, Andhra Pradesh, Tamil Nadu

Answer: (b)

Explanation: Uttar Pradesh has the largest area almost 50 percent of the cane area in the country, followed by Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Gujarat, Bihar, Haryana, and Punjab.

Q56. ​Which one of the following does not implement the Self – Help Groups (SHGs) – Bank Linkage program?

(a) ​NABARD ​

(b) ​Commercial Banks

​(c) ​RRBs ​

(d) ​Co-operative Banks

Answer: (a)  ​

Explanation: The Self-Help Group-Bank Linkage Programme (SBLP), which was started as a pilot program in 1992 on the basis of the recommendation of the S K Kalia Committee. Commercial banks, co-operative banks, and regional rural banks have been actively participating in the SBLP. NABARD does not implement the SBLP.

Q57. Which of the areas given below is/are mainly funded by the International Development Agency in the developing countries?​​​ ​

I. ​Infrastructure ​
II. Education ​
III. Environment-friendly projects
​IV. Health care ​

Select the correct answer using the codes given below—


(a)  ​I, II and IV ​

(b)  ​I, II and III

​(c)  ​I, II and IV ​

(d)  ​All of these

Answer: (a)

Explanation: The areas such as Infrastructure, Education, and Health care are mainly funded by International Development Agency in the poor and developing countries.

Q58. The entire capital of the ECGC is contributed by—

(a)  ​Banks/FI/Corporates ​

(b)  ​Government of India ​

(c)  ​EXIM Bank

​(d)  ​Insurance Companies

Answer: (b)

Explanation: ECGC Ltd.  (Export Credit Guarantee Corporation of India Ltd.) , wholly owned by the Government of India, was set up in 1957 with the objective of promoting exports from the country by providing Credit Risk Insurance and related services for exports.

Q59. The Eighth Five Year Plan is different from the earliest ones.

The critical difference lies in the fact that:

(a) It has a considerably larger outlay compared to the earlier plans

(b) It has a major thrust on agricultural and rural development

(c) Considerable emphasis is placed on infrastructure growth

(d) Industrial licensing has been abolished

Answer: (a)

Explanation: Eighth Five Year Plan (1992-97) had a bigger outlay with energy being given 26.6% of total outlay to a cheque a targeted growth rate of 6.78% per annum.

Q60. Consider the following statements regarding Indian Planning:

  1. The Second Five-Year Plan emphasized the establishment of heavy industries.
  2. The Third Five-Year Plan introduced the concept of import substitution as a strategy for industrialization.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (a)

Explanation: India’s Second Five-Year Plan (1956-61) was to set India on the path of industrialization. P.C. Mahalanobis was the moving spirit behind the second five-year plan. He gave the highest priority to strengthening the industrial base of the economy. India’s Third Five-Year Plan (1961-66) emphasized on long-term development.

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