Fundamentals of Macroeconomics -
States?
MCQs with answers - Part I
1) Who is credited with brining the term "the
invisible hand"• in economics?
a) Adam Smith
b) John Maynard Keynes
c) F. Hayek
d) Samuelson
ANSWER: a) Adam Smith
"The invisible hand"• refers to the market
forces that lead to eventual benefit of overall
society when individuals are pursuing their goals
for their own good alone. The phrase was used in
his 1776 book "An Inquiry into the Nature and
Causes of the Wealth of Nations"
2) Who is called as the 'founding father of
modern economics'?
a) Adam Smith
b) John Maynard Keynes
c) F. Hayek
d) Samuelson
ANSWER: a) Adam Smith
Adam Smith's “1776 book "An Inquiry into
the Nature and Causes of the Wealth of
Nations"― many of the major ideas that we
use in economics today
3) Macroeconomics as a separate branch came to
be studied after the contributions of which
economist?
a) Adam Smith
b) John Maynard Keynes
c) F. Hayek
d) Samuelson
ANSWER: b) John Maynard Keynes
John Maynard Keynes's 1936 book, 'The
General Theory of Employment, Interest, and
Money' laid the foundations for Macroeconomics
4) When did the Great Depression hit the United
a) 2007
b) 1929
c) 1936
d) 2001
ANSWER: b) 1929
The economic depression began after the stock
market crash of 1929 that eventually led to the
loss of over 13-15 million jobs.
5) Consider the following statements:
1. In a Capitalist economy there is private
ownership of means of production
2. In a communist nation, the means of production
are owned by the State
3. In a free-market economy there is minimum role
of the Government
Which of the above 3 statement is/are true?
a) Only 1 and 3
b) Only 2 and 3
c) Only 3
d) All are true
ANSWER: d) All are true
6) Macroeconomics is a study of economics that
deals with which 4 major factors:
a) households, firms, government, and demand-
supply
b) households, firms, government and external
sector
c) firms, government, free-market, and regulations
d) none of the above
ANSWER: b) households, firms, government
and external sector
7) What are consumption goods?
a) Goods used for consumption in the production
process
b) Goods such as tools, machinery, etc which are
used to create final consumption goods
c) Goods and services that are consumed fully when
purchased by the consumers
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d) None of the above Foreign trade - MCQs with
ANSWER: c) Goods and services that are answers
consumed fully when purchased by the
consumers 1. Which of the following is a part of capital
account?
Examples: Tea in a restaurant, packet of chips, a. Private capital
movie at a theater etc b. Banking capital
c. Official capital
8) What are Capital goods? d. All the above
ANSWER: d. All the above
a) Goods used for consumption in the production Capital account is classified into 3 parts in India-
process private, banking and official capital.
b) Goods such as tools, machinery, etc which are 2. Consider the following statements and identify
used to create final consumer goods the right ones.
c) Goods and services that are consumed fully when i. A double entry system of record of all economic
purchased by the consumers transactions between the residents of a country and
d) None of the above rest of the world is called balance of trade
ii. All transactions related to goods, services or
ANSWER: b) Goods such as tools, machinery, income are classified as capital account.
etc which are used to create final consumer a. i only
goods b. ii only
c. both
d. none
9) Intermediate goods are not included to ANSWER: d. none
calculate the final output because: A double entry system of record of all economic
transactions between the residents of a country
a) they do not have value and rest of the world is called balance of
b) they have unknown value payments. All transactions related to goods,
c) their value is included in final goods so they are services or income are classified as current
not added to avoid the problem of double counting account.
d) none of the above 3. The investment in productive assets and
participation in management as stake holders in
ANSWER: c) their value is included in final business enterprises is
goods so they are not added to avoid the problem a. FDI
of double counting b. FII
c. Balance of payment
d. SDR
10) What does the term Gross investment mean ANSWER: a. FDI
while denoting a nation's economy? The investment in productive assets and
participation in management as stake holders in
a) Gross investment= Net investment + business enterprises is foreign direct investment.
Depreciation 4. The portfolio investment by foreign
b) Gross investment= Net investment - Depreciation institutional investors is called
c) Gross investment= Depreciation - Net investment a. FDI
d) None of the above b. FII
c. Balance of payment
ANSWER: a) Gross investment= Net investment d. SDR
+ Depreciation ANSWER: b. FII
The portfolio investment by foreign institutional
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investors is called foreign institutional (ii) Money
investment.
5. Consider the following statements and identify (iii) Bill of exchange
the right ones.
i. India adopted LERMS in 1992 (iv) None of these
ii. In 1993, dual exchange rate system was replaced
by a unified floating exchange rate. (d) Which type of deposits gives highest rate of
a. i only interest?
b. ii only
c. both (i) Current deposit
d. none
ANSWER: c. both (ii) Fixed deposit
Liberalized Exchange Rate Management System
was a dual exchange rate system in which 40% (iii) Recurring deposit
of forex earnings were converted at official
exchange rate and 60% at market determined (iv) None of these
exchange rate.
(e) Which bank deals with short-term credit?
Money (i) Agricultural bank

(a) “Money is what money does” – who said? (ii) Commercial bank

(i) Crowther (iii) Industrial bank

(ii) Robertson (iv) None of these

(iii) Walker (f) Which of the following is not the function of

the commercial bank?
(iv) Marshall
(i) Issue of paper notes.
(b) Direct exchange of goods against goods is
called: (ii) Acceptance of deposits

(i) Charter (iii) Advancing loans

(ii) Money (iv) Credit control

(iii) Barter (g) Which of the following is not near money?

(iv) None of these (i) Paper notes

(a) Walker, (b) Barter, (c) Money, (d) Fixed deposit, (ii) Treasury bill
(e) Commercial bank, (f) issue of paper notes, (g)
paper notes, (iii) Bond

(c) What possess general acceptability? (iv) Bill of exchange

(i) Bank draft (h) Which bank is called lender of last resort?

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(i) Commercial bank (iv) Reserve Bank of India

(ii) Agricultural bank (m) Which of the following is an example of

direct tax?
(iii) Industrial bank
(i) Sales tax
(iv) Central bank
(ii) Commodity tax
(i) In which year the Reserve Bank of the India
was established? (iii) Income tax

(i) 1945 (iv) None of these

(ii) 1947 (n) Who deals with income and expenditure of

public authorities?
(iii) 1935
(i) Public finance
(iv) 1953
(ii) Private finance
(j) Which bank enjoys monopoly power of Note
issue? (iii) Local Govt.

(i) NABARD (iv) None of these

(ii) Commercial Bank Answer:

(iii) Central Bank (a) Walker, (b) Barter, (c) Money, (d) Fixed deposit,
(e) Commercial bank, (f) issue of paper notes, (g)
(iv) None of these paper notes, (h) Central bank, (i) 1935, (j) Central
bank, (k) Measure of value, (l) Bank of England,
(k) For which function, money is accepted as unit (m) Income tax, (n) Public finance.
of account?

(i) Measure of value,

(ii) Medium of exchange

(iii) Standard of deferred payment

(iv) Store of value

(l) Which is considered as the mother of all

Central Banks?

(i) Bank of England

(ii) Risks Bank of Sweden

(iii) Federal Reserve Bank

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