MODULE A : FUNDAMENTALS OF ECONOMICS PRACTICE QUESTIONS
1. If in market, money supply increases and interest rate is down, the LM curve will be ...... a. Shift up and to left b. Shift down and to right c. Shift up and to right d. Shift down and to left Ans - b
2. Lowering the elasticity of liquidity preference with respect to the changes in interest rate, the LM curve will be ...... a. No effect b. Flat c. Less steep d. steeper Ans - d
3. Service sector is also referred to as ...... a. Primary sector b. Secondary sector c. Tertiary sector d. None of these Ans - c
4. The economy in which individuals and private firms make the major decisions about production and consumption is called a ...... a. Market economy b. Capitalistic economy c. Socialistic economy d. Either of a and b Ans - d
5. Who gave Scarcity Theory of Economics? a. Alfred Marshall b. Lionel Robbins c. Adam Smith d. None of these Ans - b
6. Which phase of business cycle is referred to as “crisis”? a. Recession b. Depression c. Recovery d. Boom Ans - a
7. ...... is a branch of economics that is concerned with the overall performance of the economy. a. Macroeconomics b. Microeconomics c. Both of these d. None of these Ans – a
8. Service Sector is also called as ...... (i) Primary Sector, (ii) Secondary Sector a. Only (i) b. Only (ii) c. Either (i) or (ii) d. Neither (i) nor (ii) Ans - d
9. Which of the following statements is true about ‘Inflation’? a. A rise in the general level of prices b. Leads to fall in purchasing power c. Both a and b d. None of the above Ans - c
10. An increase in government expenditure or transfer payments will shift the IS curve ...... a. To right b. To left c. No change d. Downwards Ans - a
11. Real GDP is also known as ...... a. GDP at current price b. GDP at constant price c. GDP at variable price d. None of these Ans - b
12. In which stage ideal worker are come forward to work on low wages. a. Recession b. Depression c. Recovery d. Boom Ans - c
13. 86th constitutional amendment has made free and compulsory education to all children ...... a. up to age 14 girls child b. up to 10th class to girl c. 6 to 14 yr to all children d. 6 to 14 yr to all female children Ans - c
14. In .......... phase of business cycle, underemployment will be widespread. a. Recession b. Depression c. Recovery d. Boom Ans - b
15. The Equilibrium Price is also known as ...... a. Market price b. Optimum price c. Real price d. Market-clearing price Ans - d
16. According to ......, the economics is a study of mankind in the ordinary business of life. a. Alfred Marshall b. Lionel Robbions c. Adam Smith d. None of these Ans - a
17. ...... is a standard measure of income / expenditure inequality. a. HDI b. Gini coefficient c. GDP d. GNP Ans - b
18. What government of India does in open market operations to suck money from the market? a. Absorbs bonds b. Sells bonds c. Increases CRR d. Increases Interest Rate Ans - b
19. In economics, fiscal policy has got two main instruments, these are ...... a. government reserve and capital b. CRR and SLR c. Base rate and Bank rate d. Government spending and taxation (revenue collection) Ans - d
20. Go through the following data and answer the questions (all in Indian Rupees in Crores) 1. Consumptions - Rs. 50000 2. Gross investment - Rs. 40000 3. Govt spending - Rs. 10000 4. Export - Rs. 90000 5. Import - Rs. 60000 6. Taxes - Rs. 5000 7. Subsidies(on production and import) - Rs. 1000 8. Compensation of employee - Rs. 500 9. Property Income - Rs. 500 7,8,9 - Net receivable from abroad 10. Total capital gains from overseas investment - Rs. 15000 11. Income earned by foreign national domestically - Rs. 5000 Calculate GNP : a. Rs. 110000 b. Rs. 120000 c. Rs. 130000 d. Rs. 140000 Ans – d Solution : GDP = Consumption + Gross investment + Government spending + ( Exports - Imports ) GDP = C + I + G + ( X - M ) = 50000+40000+10000+(90000-60000) = 130000 GNP = GDP + NR ( Total Capital Gains from Overseas investment - Income earned by Foreign National Domestically ) = 130000 + ( 15000 - 5000 ) = 140000