Ecomomic

1-A tariff that maximises the difference between the terms of trade gain and the dead weight
loss is called
(a) Retaliatory tariff
(b) Optimum tariff
(c) Countervailing tariff
(d) Double-column tariff
2-Which one of the following is not a non-tariff barrier ?

(a) Voluntary export restraint
(b) Quota
(c) Advalorem tariff
(d) Technical barriers
3-The Absorption Approach is developed by

(a) Sidney Alexander
(b) Alfred Marshall
(c) A. Lerner
(d) Jacob Viner
4-A curve that goes through all the tangency points of an x and y isoquants in a Edgeworth Box
is called
(a) Indifference curve
(b) Trade indifference curve
(c) Offer curve
(d) Contract curve
5-According to monetary approach of Balance of Payments, the demand for money is a stable
function of
(a) income, prices and rate of interest
(b) income and prices
(c) prices and rate of interest
(d) income, prices and foreign exchange reserves
6-Producers’ surplus is equal to the difference between

(a) Price and Marginal cost curve
(b) Price and Marginal utility curve

(c) Average cost and Marginal cost
(d) Total cost and Marginal cost
7-A demand curve is considered as Rectangular Hyperbola when :

(a) e > 1
(b) e = 1 at all points
(c) e < 1
(d) e = 0
8-When cost of production is zero, monopoly equilibrium will be established at a level where
elasticity of demand curve is :
(a) Greater than one
(b) Equal to one
(c) Less than one
(d) Infinity
9-If the total production in an economy for a product is produced by a few big firms, then this
market is known as :
(a) Monopolistic Competition
(b) Oligopoly
(c) Duopoly
(d) Discriminating Monopoly
10-“Natural Monopoly” is the monopoly

(a) which is provided by nature.
(b) which needs large amount of capital.
(c) when there is only one producer.
(d) when average costs declines with increase in output.
11-When average cost is increasing, marginal cost is

(a) Equal to average cost
(b) Less than average cost
(c) Greater than average cost
(d) Uncertain
12-A firm should cease production in the short run if

(a) Price is less than average fixed cost
(b) Price is less than average cost
(c) Profits are negative
(d) Price is less than average variable cost
13-Engel’s curve illustrates the relationship between

(a) Consumption and Utility
(b) Production and Productivity
(c) Income and Consumption
(d) Income and Production
14-If total revenue rises when price falls, the demand curve is
(a) Elastic
(b) Unitary elastic
(c) Inelastic
(d) None of the above
15-A movement along the supply curve can be caused by a change in

(a) Technology
(b) Factor prices
(c) The price of the good
(d) All of these
16-An indifference curve indicates

(a) No choice among goods
(b) No need of any good
(c) Disinterested in acceptance of goods
(d) One combination is preferred to another
17-According to W.W. Rostow, the stages of economic growth are :

(a) 5
(b) 4
(c) 3
(d) 2
18-Vicious circle of poverty should be broken for economic development. This fact has been
emphasised by :
(a) Ragnar Nurkse
(b) Lewis
(c) Rosenstein
(d) Singer
19-‘Wage Fund Theory’ has been given by

(a) Adam Smith
(b) Malthus
(c) David Ricardo
(d) J.S. Mill
20-Unbalanced Theory of Growth was propounded by

(a) Singer
(b) Hirschman
(c) W.W. Rostow
(d) Kindleberger
21-Input – Output technique was invented by

(a) Lewis
(b) Hicks
(c) Todaro
(d) Leontief
22-Deficit financing leads to

(a) Price rise
(b) Price fall
(c) Price control
23-The Diffusion theory in Taxation was given by

(a) Adam Smith
(b) Seligman
(c) Findlay Shirras

(d) Mansfield and Canard
24-Okun’s law shows the relationship between the following :

(a) Unemployment and Growth
(b) Employment and Growth
(c) Tax rate and Tax revenue
(d) Inflation and Employment
25-Milton Friedman gave emphasis in his quantity theory of money on

(a) Production and Income
(b) Price level
(c) Supply of Money
(d) Demand for Money
26-Money is said to be neutral if

(a) it affects the real variables of the economy.
(b) it does not affect the real variables of the economy.
(c) it affects only the production.
(d) it affects both production & employment.
ANSWERS:
1-(b). 2-(c), 3-(a), 4-(c), 5-(a), 6-(a), 7-(b), 8-(b), 9-(b), 10-(b), 11-(c), 12-(d), 13-(c), 14-(a), 15-(a),
16-(d), 17-(a), 18-(a), 19-(c), 20-(b), 21-(d), 22-(a), 23-(d), 24-(a), 25-(c), 26-(b)
Multiple Choice Questions on Economics
1-Investment Multiplier is a
(a) ratio between income and investment.
(b) ratio between investment and savings
(c) ratio between consumption and investment
2-If other things remaining the same, the quantity of money in Fisher’s approach has
(a) direct proportional relationship with price level.
(b) direct proportional relationship with value of money.
(c) inverse proportional relationship with price level.
(d) no relation with the value of money.

3-Who propounded the theory of unlimited supply of labour ?
(a) Schumpeter
(b) Rosestien Rodan
(c) Mill
(d) Lewis
4-The theory of stages of growth is associated with

(a) Simon Kuznets
(b) W.W. Rostow
(c) Paul Samuelson
(d) Colin Clark
5-A monopolist is able to maximise his profit when

(a) his output is maximum
(b) he charges higher prices
(c) his average cost is minimum
(d) his marginal cost is equal to marginal revenue
6-Price discrimination will be profitable only if the elasticity of demand in different markets
will be
(a) uniform
(b) less
(c) zero
(d) different
7-Wagner’s hypothesis is associated with

(a) Public receipts
(b) Public expenditure
(c) Supply of money
(d) Public debt
8-Marginal cost of allowing another person to benefit from a pure public goods is
(a) Zero
(b) one
(c) both (a) and (b)

(d) more than one
9-If elasticity of demand is perfectly inelastic, then burden of tax will be on

(a) Buyer
(b) Seller
(c) on both (a) and (b)
(d) More on seller
10-Given competitive conditions, a firm in the long run earn

(a) Quasi-rent
(b) Pure-rent
(c) Normal profit
(d) Economic profit
11-According to Engel’s Law of consumption, the following commodities are likely to have
income elasticity of less than one
(a) Garments
(b) Motor car
(c) Cosmetics
(d) Wheat and Rice
12-In Cobb-Douglas production function Q = ALα Kβ there will be increasing returns to scale,
if
(a) α + β = 1
(b) α + β > 0
(c) α + β > 1
(d) α + β < 1
13-Find out the price elasticity in the following example : Price Demand 5(P1) 10(Q1) 4(P2)
15(Q2)
(a) – 2.5
(b) + 3.5
(c) + 4.0
(d) + 2.5
14-Which one of the following is NOT an assumption of classical theory of employment ?

(a) Full employment
(b) Laissez-faire policy
(c) State intervention.
(d) Perfect competition
15-Under the liquidity trap conditions, an increase in money supply will

(a) increase investment
(b) increase level of employment
(c) reduce the rate of interest
(d) have no effect on interest rate, investment and employment
16-The final resting place of a tax is called

(a) impact of taxation
(b) incidence of taxation
(c) effect of taxation
(d) shifting of taxation
17-The most important source of Public Revenue is

(a) Taxation
(b) Fees
(c) Fines and Penalties
(d) Subsidies
18-“Any asset capable of serving as a temporary abode of purchasing power is money.” This
definition of money is given by
(a) Milton Friedman
(b) Gurley and Shaw
(c) Francis Walker
(d) Crowther
19-Which indivisibilities have been described in Rodan’s development model ?

(a) Indivisibilities in the production function only.
(b) Indivisibilities of the Demand only.
(c) Indivisibilities in the supply of savings only.
(d) All the above indivisibilities.

20-The Exponent of Critical Minimum Effort thesis was
(a) Liebenstein
(b) Schumpeter
(c) Domar
(d) Meade
21-Economic growth is measured by

(a) Increase in national income
(b) increase in infrastructure
(c) increase in economic welfare
(d) urbanisation
22-Under progressive taxation, the real value of tax on a given level of real income :
(a) decreases under inflation
(b) rises under depression
(c) rises under inflation
(d) remains unchanged under inflation
23-The relationship between elasticity of demand (e), Average Revenue (AR) and Marginal
Revenue (MR) is shown by which of the following formula ?
(a) e = MR / (AR – MR)
(b) e = AR/MR
(c) e = MR/AR
(d) e = AR / (AR – MR)
24-In case of Complementary goods cross elasticity of demand will be

(a) Negative
(b) Zero
(c) Unitary
(d) Infinite
25-Implicit costs are

(a) equal to total fixed costs
(b) comprised entirely of variable costs
(c) payments for self-employed resources

(d) always greater in the short run than in the long run
ANSWERS:
1-(A), 2-(A), 3-(D), 4-(B), 5-(D), 6-(D), 7-(B), 8-(A), 9-(A), 10-(C), 11-(D), 12-(C), 13-(A), 14-(C),
15-(C), 16-(B), 17-(A), 18-(A), 19-(D), 20-(A), 21-(A), 22-(C), 23-(D), 24-(A), 25-(C)
1-Formula to determine optimum population as given by Dalton is
(a) M = (A – O) /O
(b) M = (A + O) /O
(c) M = (O – A) /A
(d) M = (O + A) /A
Where, M=Deviation from optimum, A=Actual population, O=Optimum population
2-Which one of the following is normally NOT included in production cost ?

(a) Cost of raw material
(b) Cost of labour
(c) Cost of advertisement
(d) indirect material cost
3-Which of the following is true to Euler’s theorem of factor pricing ?

(a) Constant return to scale
(b) Static and risk free economy
(c) Perfect competition
(d) All of the above
4-If the total production in an economy is produced by “a few big firms” than this market is
known as
(b) Duopoly
(c) Oligopoly
(d) Discriminating Monopoly
5-Which of the following is an investment ?

(a) Betting a horse race
(b) Buying a new car
(c) Building a house
(d) Extending a loan

6-Which of the following is NOT a component of PQLI ?
(a) Morbidity
(b) Infant mortality
(c) Life expectancy at age one
(d) Basic literacy at the age of 15 years
7-Which one of the following economists is associated with Portfolio approach of demand for
money ?
(a) Keynes
(b) Tobin
(c) Friedman
(d) Baumol
8-Population explosion in a country takes place due to

(a) Birth rate is high.
(b) Death rate is high.
(c) Birth rate is high and death rate is low.
(d) Birth rate is high and death rate is high.
9-Which of the followings cannons of taxation have been propounded by Adam Smith ?
(a) Economy, Elasticity, Simplicity, Sufficiency.
(b) Certainty, Convenience, Economy, Elasticity.
(c) Economy, Co-ordination, Convenience, Expediency.
(d) Equity, Certainty, Convenience, Economy.
10-Interaction of Multiplier and accelerator is known as

(a) Investment Multiplier
(b) Employment Multiplier
(c) Super Multiplier
(d) Dynamic Multiplier
11-Backward bending supply curve is related to which of the following factors of production ?
(a) Labour
(b) Capital
(c) Land
(d) Entrepreneur
12-Assume that the required ratio is 10 percent and bank receives $1,000 deposit. What is the
excess reserves ?
(a) $100
(b) $9,000
(c) $900
(d) $10,000
13-The degree of Monopoly power can be measured by the formula :

(a) (P – MC) / P
(b) AR / (AR – MR)
(c) MR / (AR – MR)
(d) MC / (AR – MR)
14-‘Normal Profit’ means

(a) Profit earned by the marginal firm in a normal year.
(b) Minimum amount needed to keep a firm in the same business.
(c) The payment made to marginal firm for its ability.
(d) Surplus profit earned by the least efficient firm.
15-Laffer curve is related to

(a) Tax rate and tax revenue.
(b) Aggregate tax and aggregate non-tax revenue.
(c) Total tax burden and total payment burden.
(d) Total income and total expenditure.
16-Under which market conditions “products of the sellers are differentiated yet they are close
substitutes of each other” ?
(b) Monopoly
(c) Perfect Competition
17-Who is credited for the concept that there could be equilibrium in an economy at less than
full employment also ?
(a) J.B. Say
(b) Keynes
(c) Fisher
(d) Milton Friedman
18-Which of the following is Stock concept ?

(a) Capital
(b) Investment
(c) Income
(d) Profit
19-Which one of the followings is not a type of growth rate as mentioned in Harrod-Domar
model ?
(a) Actual growth rate
(b) Sustainable growth rate
(c) Natural growth rate
(d) Warranted growth rate
20-Theory of Demographic Transition is propounded by

(a) Malthus
(b) Karl Marx
(c) Thompson and Notestein
(d) Mrs. Joan Robinson
21-The child who is called infant is in the age group of

(a) 0-5 years
(b) 0-4 years
(c) 0-2 years
(d) 0-1 year
22-According to theory of Demographic Transition, population explosion is related to

(a) First stage
(b) Second stage
(c) Fourth stage
(d) None of these

23-Which of the following does not cause a shift in aggregate demand ?
(a) Consumption
(b) Government expenditure
(c) Investment
(d) Prices
24-Revealed preference theory of demand is given by

(a) Paul M. Sweegy
(b) Marshall
(c) Paul Samuelson
(d) Hicks
25-Quasi-Rent arises from

(a) Land
(b) Labour
(c) Capital
(d) Factors whose supply in the short run is inelastic.
26-In case of perfectly inelastic demand, demand curve will be

(a) Vertical straight line parallel to Y-axis
(b) Horizontal straight line parallel to X-axis
(c) Positively sloped
(d) Negatively sloped
27-“Big Push theory” is propounded by

(a) Rosenstein Rodan
(b) Schumpeter
(c) Nurkse
(d) Marshall
28-As per Leibenstein’s theory of critical minimum effort, every economy is influenced by two
forces
(a) Demand and supply
(b) Savings and investment
(c) Cost and Revenue

(d) Stimulants and shocks
29-“Popular enthusiasm is both the lubricating oil of planning and petrol for economic
development.” This statement is made by
(a) Lewis
(b) Singer
(c) Nurkse
(d) Dobb
30-Which of the following economists is of the view that “Demand for commodity is NOT
demand for labour” ?
(a) Adam Smith
(b) Ricardo
(c) Malthus
(d) J.S. Mill
ANSWERS:
1-(a), 2-(c), 3-(d), 4-(c), 5-(c), 6-(a), 7-(a), 8-(c), 9-(d), 10-(c), 11-(a), 12-(c), 13-(a), 14-(b), 15-(a),
16-(a), 17-(b), 18-(b), 19-(b), 20-(c), 21-(d), 22-(b), 23-(d), 24-(c), 25-(a), 26-(a), 27-(a), 28-(d), 29-
(a), 30-(d)
1:
Demand curve can be derived from the law of diminishlng marginal utility on which of the following
assumptions?
(i) Utility can be measured in quantitative terms
(ii) Utility of money is constant
Of these statements:
A.Only (i) is true
B. Both (i) and (ii) are true
C.Only (ii) is true
D.Neither (i) nor (ii) is true
Answer Report Discuss

Option: B
Explanation :
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52:
Law of diminishlng marginal rate of substitution is associated with
A.Marshall
B. Hicks
C.Slutsky
D.Keynes

Option: B
Explanation :
53:
According to principle of diminishing marginal rate of substitution
a. One commodity must be decreased while other is increased
b. Commodity which is increased has higher marginal significance
c. Commodity which is decreased has higher marginal significance.
Of these statemenls:
A.Only a is correct
B. Both a and b are correct
C.Both a and c are correct
D.All are correct

Option: C
Explanation :
48:
Put into chronological order on the basis of development:
l. Law of demand
2. Law of indifference
3. Law of diminishing marginal utility
4. Revealed preference curve
5. Indifference curve
A.1 3 4 2 5
B. 1 5 3 4 2
C.1 3 2 5 4
D.1 2 3 4 5

Option: C
Explanation :
49:
Other things remaining the same, when a consumer's income increases, his equilibrium point moves to
A.A higher indifference curve

B. To the left-hand side on the same indifference curve
C.Remains unchanged on the same indifference curve
D.A lower indifference curve
Option: A
Explanation :
50:
Law of diminishing marginal utility is based on the assumption that
a. Tastes change over time
b. Consumption is continuous
c. Different units of goods consumed are homogeneous
Of these statements:
A.Only a is true
B. a and c are true
C.b and c are true
D.All are true

Option: D
Explanation :
Law is Based Upon Three Facts:

The law of diminishing marginal utility is based upon three facts.
First, total wants of a man are unlimited but each single want can be satisfied. As a man gets more and more
units of a commodity, the desire of his for that good goes on falling. A point is reached when the consumer no
longer wants any more units of that good.
Secondly, different goods are not perfect substitutes for each other in the satisfaction of various particular
wants. As such the marginal utility will decline as the consumer gets additional units of a specific good.
Thirdly, the marginal utility of money is constant given the consumer’s wealth.
Study of demand over two periods is called
A.Static
B. Comparative static
C.Dynamic
D.None of these

Option: B
Explanation :
42:
In case of monopoly, a firm in the long run can have
A.Loss
B. Super Normal Profit
C.Break even
D.All of these

Option: B
Explanation :
43:
Marginal cost curve cuts the average cost curve from below at
A.its lowest point
B. the left of the lowest point

C.right of the lowest point
D.All of the above

Option: A
Explanation :
44:
On an indifference map, if the income consumption curve slopes downwards to the right it shows that
A.Both X and Y are superior goods
B. Y is an inferior good
C.X is an inferior good
D.Both X and Y are inferior goods

Option: B
Explanation :
45:
Impact of change in demand in one sector on other sectors is studied by
A.General equilibrium
B. Partial equilibrium
C.Both (a) and (b)
D.None of these

Option: A
Explanation :
36:
Average revenue is calculated by
A.TRn - TRn-1
B. P x Q
C.TR / MR
D.TR / Q

Option: D
Explanation :
37:
Cross elasticity of demand between two perfect substitutes will be
A.low
B. high
C.zero
D.infinity

Option: D
Explanation :
38:
At elasticity of one, marginal revenue is equal to
A.one
B. zero
C.infinity
D.none

Option: B
Explanation :
If elasticity of demand is equal to one or E = 1, in that case MR = 0.
If E > 1, in that case MR will be positive.
39:
Shifts in demand curve include
A.Increase in Demand (Upward shift)
B. Extention in demand
C.Contraction in demand
D.None of the above

Option: A
Explanation :
40:
An indifference curve is always
A.A vertical straight line
B. Convex to the origin
C.Concave to the origin
D.A horizontal straight line

Option: B
A firm's marginal revenue
A.is always negative
B. can be positive
C.is always positive
D.is zero at point at which the total revenue is maximum

Option: D
Explanation :
32:
In a monopoly market, an upward shift in the market demand results in a new equilibrium with
A.A higher quantity and a lower price
B. A higher quantity and the same price
C.A higher quantity and higher price
D.All of the above

Option: C
Explanation :
33:
Demand Analysis includes:
A.Demand Forecasting
B. Demand Differentials
C.Demand Determinations
D.All of the above

Option: D
Explanation :
34:
In the case of monopolistic competition
A.MR curve cannot be defined
B. AR curve cannot be defined
C.The short run supply curve cannot be defined
D.None of the above

Option: C
Explanation :
35:
Which economist stated the positive impact of monopoly?
A.Marshall
B. Adam Smith
C.Joseph Schumpeter
D.Pigou

Option: C
Explanation :
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26:
Under perfect competition, price of the product
A.Can be controlled
B. Cannot be controlled
C.Can be controlled within certain limit
D.None of the above

Option: B
Explanation :
27:
If the demand curve confronting an individual firm is perfectly elastic, then firm is
A.Price taker
B. Adjust output
C.Adjust price
D.All of these

Option: A
Explanation :
28:
Given:
Epx = Percentage change in Qy / Percentage change in Px
The above relationship is :
A.Arc Cross Price Elasticity
B. Cost Output
C.Cost Profit
D.Capital Budgeting

Option: A
Explanation :
29:
Cartels is a form of
A.Collusive oligopoly
B. Monopoly
C.Non-Collusive oligopoly
D.None of these

Option: A
Explanation :
30:
Which one is not normally possible in case of monopoly?
A.MC = MR
B. AC = AR
C.MR = AR
D.MR = P

Option: C
Explanation :
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16:
Price elasticity of demand provides
A.A measure of the responsiveness of the quantity demanded to changes in the price of the
product, holding constant
the values of all other variables in the demand function.
B. A technical change in the goodwill of the firm
C.A technical change in the cost of product
D.Technical change in the value.

Option: A
Explanation :
17:
Demand curve is related to
A.MU curve
B. Marginal revenue
C.Both (a) and (b)
D.None of these

Option: C
Explanation :
18:
Market with one buyer and one seller is called
A.Monopsony
B. Monopoly
C.Bilateral Monopoly
D.None of the above

Option: C
Explanation :
19:
The upper portion of the kinked demand curve is relatively
A.More inelastic
B. More elastic
C.Less elastic
D.Inelastic

Option: B
Explanation :
20:
Which of the following is an important dynamic variable?
A.Superior's style and behaviour

B. Organisational nature
C.The task structure
D.Cultural variables

Option: C
Explanation :
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11:
A market in which only two firms exist is
A.Oligopoly
B. Duopoly
C.Duopsony
D.Oligopsony

Option: B
Explanation :
12:
Value maximization theory fails to address the problem of
A.self-serving management.
B. risk
C.uncertainty
D.sluggish growth.

Option: A
Explanation :
13:
Selling costs have to be incurred in case of
A.Perfect competition
B. Monopolistic competition
C.Imperfect competition
D.None

Option: B
Explanation :
14:
Which type of competition leads to exploitation of consumer?
A.Oligopoly
B. Monopolistic competition
C.Monopoly
D.All of the above

Option: D
Explanation :
15:
The equilibrium is unstable and indeterminate under
A.Edgeworth model
B. Cournot Model
C.Sweezy Model
D.Pareto Model

Option: A
Explanation :
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6:
Price effect in indifference curve analysis arises
A.When the consumer becomes either better off or worse off because price change is not
compensated by income change.
B. When the consumer is betler off due to a change in income and price
C.When income and price change
D.None of the above

Option: A
Explanation :
7:
A situation where there is only one buyer is called
A.Monopoly
B. Oligopoly
C.Monopsony
D.Perfect competition

Option: C
Explanation :
8:
Elasticity of demand measures the
A.Sensitivity of sales to changes in a particular causal factor

B. Sensitivity of production to changes in a particular cost
C.Value of price and cost
D.Volume of product

Option: A
Explanation :
9:
Factors responsible for creating conditions for emergence and growth of monopoly are
A.Control over strategic raw materials
B. Patents
C.Licensing
D.All of the above

Option: D
Explanation :
10:
In the case of an inferior good, the income effect
A.Partially offsets the substitution effect
B. Is equal to the substitution effect

C.Reinforces the substitution effect
D.More than offsets the substitution effect

Option: A
Explanation :
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 This section contain multiple choice questions answers on business economics.
 Business Economics mcq can also be used in the preparation of ugc net exams.
 Business Economics objective type questions answers can be used to gain a credit score in various
undergraduate and post graduate commerce courses like B com and Mcom
 These questions answers can also be used by management students for improving their knowledge in
business economics.
 These multiple choice questions answers can also be used by any student of XI or XII standard who has
opted to study commerce to increase his knowledge in Business Economics.
 This section can be used for the preparation of quizzes by any commerce student.
X
 UGC NET Paper1

 Online Test
 UGC NET Exam
 GATE Exam
Business Economics

1. Home
1:
The kinked demand curve explains
A.Price rigidity
B. Price flexibility
C.Demand rigidity
D.Demand flexibility

Option: A
Explanation :
2:
Imperfect competition was introduced by
A.Marshall
B. Chamberlin
C.Keynes
D.None

Option: B
Explanation :
3:
A situation in which the number of competing firms is relatively small is known as
A.Monopoly
B. Perfect competition
C.Monopsony
D.Oligopoly

Option: D
Explanation :
4:
Demand is a function of
A.Price
B. Firm
C.Product
D.Cost

Option: A
Explanation :
5:
The term group equilibrium is related to
A.Monopolistic competition
B. Oligopoly
C.Duopoly

Option: A
Explanation :
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business economics.
X
 UGC NET Paper1

 Online Test
 UGC NET Exam
 GATE Exam
Business Economics

1. Home
1:
The kinked demand curve explains
A.Price rigidity
B. Price flexibility
C.Demand rigidity
D.Demand flexibility

Option: A
Explanation :
2:
Imperfect competition was introduced by
A.Marshall
B. Chamberlin
C.Keynes
D.None

Option: B
Explanation :
3:
A situation in which the number of competing firms is relatively small is known as
A.Monopoly
B. Perfect competition
C.Monopsony
D.Oligopoly

Option: D
Explanation :
4:
Demand is a function of
A.Price
B. Firm
C.Product
D.Cost

Option: A
Explanation :
5:
The term group equilibrium is related to
A.Monopolistic competition
B. Oligopoly
C.Duopoly

Option: A
Explanation :
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business economics.
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Fundamentals of Macroeconomics - 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
View Answer / Hide Answer
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
c) F. Hayek
d) Samuelson
ANSWER: a) Adam Smith
Adam Smith's â€œ1776 book "An Inquiry into the Nature and Causes of the Wealth of
Nations"â€• 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
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 States?
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
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
d) None of the above

ANSWER: c) Goods and services that are consumed fully when purchased by the
consumers
Examples: Tea in a restaurant, packet of chips, movie at a theater etc
8) What are Capital goods?
a) Goods used for consumption in the production process

b) Goods such as tools, machinery, etc which are used to create final consumer goods
c) Goods and services that are consumed fully when purchased by the consumers
ANSWER: b) Goods such as tools, machinery, etc which are used to create final
consumer goods
9) Intermediate goods are not included to calculate the final output because:
a) they do not have value

b) they have unknown value
c) their value is included in final goods so they are not added to avoid the problem of
double counting
ANSWER: c) their value is included in final goods so they are not added to avoid the
problem of double counting
10) What does the term Gross investment mean while denoting a nation's
economy?
a) Gross investment= Net investment + Depreciation

b) Gross investment= Net investment - Depreciation
c) Gross investment= Depreciation - Net investment
ANSWER: a) Gross investment= Net investment + Depreciation
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Discussion
 RE: Fundamentals of Macroeconomics - MCQs with answers - Part I -Govind (10/14/17)

 question standard is good but need improvement
 RE: Fundamentals of Macroeconomics - MCQs with answers - Part I -J.E. ATINSE (06/06/17)
 GOOD DAY! I WILL LOVE TO HAVE QUESTIONS AND ANSWERS LIKE THIS FROM YOU FROM
TIME TO TIME! I TRY TO DOWNLOAD PART 1 BUT WAS DIFFICULT TO DO, PLEASE, CAN
YOU SEND IT TO MY EMAIL: jeatinse@gmail.com. thanks!
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Fundamentals of Macroeconomics - MCQs with answers - Part

II
1) What does the term free-market denote in terms of economy?
a) Minimal government intervention in trade and minimum regulations

b) Maximum government intervention in trade and maximum regulations
c) Means of production owned by the state

ANSWER: a) Minimal government intervention in trade and minimum regulations
2) What is the term in economics for the consumption of fixed capital?
a) Investment
b) Value added
c) Production flow
d) Depreciation
ANSWER: d) Depreciation
3) The difference between the Gross value added and Net value added is:
a) Investment
b) Value added
c) Production flow
d) Depreciation
ANSWER: d) Depreciation
4) What is the sum total of gross value added of all the firms in the country?
a) Gross Domestic Product

b) Gross National Product
c) Net Domestic Product
d) Net National product
ANSWER: a) Gross Domestic Product

5) What is the sum total of gross value added of all the firms in the country minus
the depreciation?

ANSWER: c) Net Domestic Product
6) What is the sum total of gross value added of all the firms in the country added
with the net factor income from abroad?

ANSWER: b) Gross National Product
7) What is the Gross National Product minus the depreciation?

ANSWER: d) Net National product

8) In terms of economics, what is an "externality"•?
a) Benefits or harm caused by a firm without payment/penalty

b) Net income from foreign countries
c) Total exports by a country in a given year
ANSWER: a) Benefits or harm caused by a firm without payment/penalty
9) What is the correct formula for GDP Deflater?
a) Nominal GDP - (minus) Real GDP

b) Nominal GDP + Real GDP
c) Nominal GDP/ Real GDP
d) Real GDP/ Nominal GDP
ANSWER: c) Nominal GDP/ Real GDP
10) Friedrich Hayek was a proponent of :
a) Keynesian economics
b) Communism
c) Classical Liberalism
d) Socialism
ANSWER: c) Classical Liberalism
6) A market in which there is only one seller of a good is known as:
a) monopoly
b) monopsony
c) duopoly
d) perfectly competitive
ANSWER: a) monopoly
7) A market in which there are only 2 sellers of a good is known as:
a) monopoly
b) monopsony
c) duopoly
d) perfectly competitive
ANSWER: c) duopoly
8) Das Kapital, published in German in 1867, was authored by:
a) Karl Marx
c) F. Hayek
d) Samuelson
9) Which economist is famous for his theory of comparative advantage?
a) Karl Marx
c) F. Hayek
d) David Ricardo
ANSWER: d) David Ricardo
David Ricardo was a British political economist and his most famous theory was that
of comparative advantage. Comparative advantage refers to the doctrine that any
nation should use its resources solely in industries where it has the most
international competitiveness
10) What is India's rank in ease of doing business index for 2014, as developed by
the World Bank Group?
a) 3rd
b) 52nd
c) 134th
d) 178th
11) Laissez-faire economics refers to:
a) a term denoting economic transactions carried out by the State/government

b) economic transactions in private parties where there is no intervention by the
State/government
c) a branch of socialism focusing on welfare economics
ANSWER: b) economic transactions in private parties where there is no intervention

by the State/government
acroeconomics: Money, Banking, and RBI - MCQs with

answers - Part I
1) Which among the following is considered to be the most liquid asset?
a) Gold
b) Money
c) Land
d) Treasury bonds

ANSWER: b) Money
Liquid assets are those assets that can be exchanged most readily with minimum
number of obstacles and minimum time.
2) The number of times a unit of money exchanges hands during a unit period of
time is known as:
a) velocity of circulation of money

b) speed of circulation of money
c) momentum of circulation of money
d) count of circulation of money
ANSWER: a) velocity of circulation of money
3) Who is author of the ancient book on economics, Arthashastra?
a) Kautilya
b) Chanakya
c) Sushrut
d) Bhattacharya
ANSWER: b) Chanakya
4) Historically, the Indian rupee was a ____ coin:
a) Copper
b) Gold
c) Silver
d) Bronze

5) Currency notes and coins are called as:
a) Flat money
b) Legal tenders
c) Fiat money
d) Both b and c
ANSWER: d) Both b and c
6) In the terminology of economics and money demand, the terms M1 and M2 are
also known as :
a) Short money
b) Long money
c) Broad money
d) Narrow money
ANSWER: d) Narrow money
M1= Currency notes plus demand deposits, and M2 means M1 plus Savings deposits
with post office savings banks
7) In the terminology of economics and money demand, the terms M3 and M4 are
also known as :
a) Short money
b) Long money
c) Broad money
d) Narrow money
ANSWER: c) Broad money

M3 is M1 plus net time deposits of commercial banks. M4 is M3 plus Total deposits
with Post Office savings organisation (excluding National Savings certificate)
8) What is the currency deposit ratio (cdr)?
a) ratio of money held by the public in currency to that of money held in bank deposits
b) ratio of money held by public in bank deposits to that of money held by public in
currency
c) ratio of money held in demand drafts to that of money held in treasury bonds
ANSWER: a) ratio of money held by the public in currency to that of money held in
bank deposits
9) What is the reserve deposit ration (rdr)?
a) the proportion of money RBI lends to commercial banks

b) the proportion of total deposits commercial banks keep as reserves
c) the total proportion of money that commercial banks lend to the customers
ANSWER: b) the proportion of total deposits commercial banks keep as reserves
10) What is the Cash Reserve Ratio (CRR)?
a) the fraction of the deposits that commercial banks lend to the customers
b) the fraction of the deposits that RBI must keep with commercial banks
c) the fraction of the deposits that commercial banks must keep with RBI
ANSWER: c) the fraction of the deposits that commercial banks must keep with RBI
Macroeconomics - Money, Banking, and RBI - MCQs with
answers - Part II
1) What is 'Bank rate'?
a) The rate at which commercial banks borrow money from RBI

b) The rate at which commercial banks lend money to customers
c) The rate at which commercial banks lend money to RBI
ANSWER: a) The rate at which commercial banks borrow money from RBI
Bank rate is the rate at which commercial banks can borrow money from the RBI. If
the rate is higher, then taking money from RBI becomes difficult, so the banks will
lend less to public. And vice-versa.
2) In monetary terminology, what is called the 'monetary base' or 'high powered

money'?
a) the total assets of RBI

b) the total liability of RBI
c) the total debt of the government
d) the total foreign exchange of RBI
ANSWER: b) the total liability of RBI
This includes the currency (notes and coins in circulation and vault cash of
commercial banks) along with the deposits held by the Government of India ad
commercial banks with RBI.
3) The RBI can increase the money supply in the market by:
a) selling government securities

b) buying government securities
c) borrowing money from commercial banks
ANSWER: b) buying government securities
4) The RBI can decrease the money supply in the market by:
a) selling government securities

b) buying government securities
c) borrowing money from commercial banks
ANSWER: a) selling government securities
5) By increasing the 'Bank Rate', the RBI can:
a) provide incentives to commercial banks to lend more to public

b) provide incentives to commercial banks to lend less to public
c) increase the money supply in the market
ANSWER: b) provide incentives to commercial banks to lend less to public
Bank rate is the rate at which commercial banks can borrow money from the RBI. If
the rate is higher, then taking money from RBI becomes difficult, so the banks will
lend less to public. And vice-versa.
6) The process by which RBI or any Central bank protects the economy against
adverse economic shocks is known as :
a) protection
b) liberalization
c) stabilization
d) sterilization
ANSWER: d) sterilization
RBI does this by performing a host of operations, for example controlling the Bank
Rate, buying or selling government securities, etc
Macroeconomics : Functions and Scope of Government in

Economic Affairs - MCQs with answers
1) What among the following is NOT an example of 'public goods'?
a) National defense
b) Roads
c) Cars
d) National Forests
ANSWER: c) Cars
Public goods are those goods that cannot be provided by market mechanisms.
2) What among the following is NOT an example of 'private goods'?
a) Clothes
b) Cars
c) Military
d) Food items
ANSWER: c) Military
3) The function of a government to provide goods that cannot normally be

provided by market mechanisms between individual customers and producers, is
known as:
a) Distribution function
b) Allocation function
c) Stabilization
d) Protection
ANSWER: b) Allocation function
4) The function of a government to fairly share the public's resources is known as
c) Stabilization
d) Protection
ANSWER: a) Distribution function

5) The function of a government by which it seeks to seek a balance of
employment, demand-supply, and inflation, is known as:
c) Stabilization
d) Protection
ANSWER: c) Stabilization
6) The Government Budget consists of which main component/s?
a) Revenue Budget and Capital Budget

b) Capital Budget only
c) Revenue Budget only
ANSWER: a) Revenue Budget and Capital Budget
7) Loans raised by the government from the public are known as:
a) Corporate borrowings
b) Common borrowings
c) Market borrowings
d) Private borrowings
ANSWER: c) Market borrowings
8) Whenever the government spends more than it collects through revenue, the
resulting imbalance is known as :
a) Public deficit
b) Market deficit
c) Government deficit
d) Budget deficit
ANSWER: d) Budget deficit
9) The idea that government's fiscal policy can be used to stabilize the level of
output and employment can be attributed to which of the following economists:
a) Frederich Hayek
b) Ludwig von Mises
c) Frederic Bastiat
d) John Maynard Keynes
ANSWER: d) John Maynard Keynes
John Maynard Keynes's 1936 book, 'The General Theory of Employment, Interest,
and Money' laid the foundations for Macroeconomics
10) The deliberate action of the government to stabilize the economy, as opposed
to the inherent automatic stabilizing properties of the fiscal system, is known as
a) Forced fiscal policy

b) Manual fiscal policy
c) Discretionary fiscal policy
d) Automatic fiscal policy
ANSWER: c) Discretionary fiscal policy
11) The idea that irrespective of how a government chooses to increase

spending, either by debt financing or tax financing, the outcome will be the same
and demand will remain unchanged, is popularly known as:
a) Ricardian theory of equivalence

b) Ricardian theory of competitive advantage
c) Ricardian theory of stability
ANSWER: a) Ricardian theory of equivalence
David Ricardo was a British political economist and his most famous theory was that
of comparative advantage (along with above theory of Ricardian equivalence) .
Comparative advantage refers to the doctrine that any nation should use its
resources solely in industries where it has the most international competitiveness
The theory of Ricardian equivalence, as stated above in the question, was also
further developed by Harvard professor Robert Barro who took it much further
12) When was the Fiscal Responsibility and Budget Management Act
implemented?
a) 1950
b) 1970
c) 1993
d) 2003
ANSWER: d) 2003
It was enacted in August 2003 that made it obligatory for the government to pursue a
prudent fiscal policy through the institutional framework. The rules under FRBMA,
2003 were notified with effect from July, 2004
The Act includes several provisions such as ensuring greater transparency in fiscal
operations
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Discussion
 RE: Macroeconomics: Functions and Scope of Government in Economic Affairs - MCQs with
answers -Yordanos Ayaliew (02/18/19)
 Macroeconomics - Open Economy - MCQs with answers


1) Which among the following could be said to be an 'Open Economy'?
a) A nation that follows the doctrine of Free-market and Laissez-faire economics
b) A nation that trades with other nations in goods and services and financial
assets
c) An economy that operates without government intervention


 ANSWER: b) A nation that trades with other nations in goods and services and
financial assets


2) The records of exports and imports in goods and services and transfer
payments is known as
a) Current account
b) Budget surplus
c) Economic leakage
d) degree of openness


 ANSWER: a) Current account


3) Exchange rates for one currency against another currency, are known
as:
a) Real exchange rate

b) Nominal exchange rate
c) Superfluous exchange rate


 ANSWER: b) Nominal exchange rate


4) The ratio of foreign rates to domestic rates measured in the 'same'

currency is known as:


 ANSWER: a) Real exchange rate


5) Which among the following is taken as the real measure of a country's

international competitiveness?



 ANSWER: a) Real exchange rate


6) When the exchange rate is determined by the market forces of demand

and supply, it is known as :

d) Floating exchange rate


 ANSWER: d) Floating exchange rate


7) The Gold Standard was prevalent in the world from:
a) 15th century to 18th century

b) 9th century to 18th century
c) From 1870 till First World War
d) From 1670 till First World War


 ANSWER: c) From 1870 till First World War


8) When was the International Monetary Fund (IMF) set up?
a) 1912
b) 1214
c) 1942
d) 1944


 ANSWER: d) 1944
It was set up by the Bretton Woods conference held in 1944



9) An increase in foreign income generally leads to:
a) increased exports, increased domestic output

b) decreased exports, increased domestic output
c) decreased exports, decreased domestic output
d) increased exports, decreased domestic output


 ANSWER: a) increased exports, increased domestic output
Foreign income is brought by exports and leads to further exports in future,

and increased exports means increase in domestic output to meet the demand
of exports.


10) What records a country's transactions (made by individuals, firms and

government bodies.) with the rest of the world?
a) Trade deficit
b) Capital Budget
c) Foreign imports
d) Balance of Payments or BoP


 ANSWER: d) Balance of Payments or BoP
Macroeconomics: Income Determination - MCQs with answers
1) What does the term ceteris paribus mean?
a) things are different

b) other things remaining equal
c) with the view that
d) in reference to
ANSWER: b) other things remaining equal
2) The "planned"• value of the variables like consumption, investment, output, etc, is
known as:
a) ex post measures
b) ex ante measures
c) ex pre measures
ANSWER: a) ex post measures
3) The "actual"• value of the variables like consumption, investment, output, etc, is
known as:
a) ex post measures
b) ex ante measures
c) ex pre measures
ANSWER: b) ex ante measures
4) What is "mps"• or the 'marginal propensity to save'?
a) the proportion of total additional planned savings to total additional income

b) the proportion of total additional income to total additional planned savings
c) the fraction of total additional income that is used for consumption

ANSWER: a) the proportion of total additional planned savings to total additional
income
5) What is "mpc"• or the 'marginal propensity to consume'?
a) the proportion of total additional planned savings to total additional income

b) the proportion of total additional income to total additional planned savings
c) the fraction of total additional income that is used for consumption
ANSWER: c) the fraction of total additional income that is used for consumption
6) According to the effective demand principle:
a) at a certain price, the output shall not be determined by any known factor
b) at a certain price, the output will remain unaffected by rise or fall in demand
c) at a certain price, equilibrium output will be solely determined by the aggregate demand
ANSWER: c) at a certain price, equilibrium output will be solely determined by the

aggregate demand
7) According to the Paradox of Thrift:
a) as people become more thrifty they end up saving more

b) as people become more thrifty they end up saving less or same
c) as people become more thrifty their saving remains unaffected by their thriftiness
ANSWER: b) as people become more thrifty they end up saving less or same
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Growth and Development - MCQs with answers - Part 1
1. Which of the following explains the term economic growth?
a. Increase in per capita production

b. Increase in per capita real income
c. structural change in the economy
d. all the above are right
ANSWER: d. all the above are right
There is no single definition that can define the term economic growth. However,
there are various indicators that explain the term.
Growth and Development - MCQs with answers - Part 2
1. Which of the following about strategy of unbalanced growth is right?
a. Deliberate imbalance in favor of some sectors

b. Simultaneous investment in all sectors
c. Both
d. None
ANSWER: a. Deliberate imbalance in favor of some sectors
This strategy says that there will be positive impact on the sectors that are lagging
behind and they will also try to catch up with it.
2. Consider the following statements and identify the right ones.
i. Unbalanced growth strategy is also known as Mahalanobis strategy
ii. This strategy was adopted in India after the 7th five year plans.
a. I only
b. ii only
c. both
d. none
ANSWER: a. I only
India adopted this growth strategy after independence itself. The second five year
plan emphasized on the development of heavy industries.
3. The concept of PQLI was developed by
a. Morris D Morris
b. UNO
c. UNDP
d. Oxford Poverty and Human Development Initiative
ANSWER: a. Morris D Morris
Physical Quality of Life Index is one of the indicator to measure human development.
It is calculated by using simple average.
4. The parameter/s of the PQLI is/are
a. Life Expectancy Index

b. Standard of living index
c. Infant mortality rate
d. A and C
ANSWER: d. A and C
PQLI has 3 parameters- life expectancy index, infant mortality rate and basic literacy
index.
5. Consider the following statements and identify the right ones
i. The Oxford PHI publishes Human Development Report

ii. The HDR is published biennially.
a. I only
b. ii only
c. both
d. none
ANSWER: d. none
The United Nations Development Programme (UNDP) published the HDR every year
since 1990.
6. The concept of HDI was popularized by
a. Morris D Morris
b. Adam Smith
c. Keynes
d. Mahbub Ul Haq
ANSWER: d. Mahbub Ul Haq
The concept developed in the 1990s. It has 3 important parameters- life expectancy,
education achievement index and standard of living index.
7. The component/s of HDI is/are
a. Life expectancy index

b. Infant mortality rate
c. Population growth rate
d. All the above
ANSWER: a. Life expectancy index
The concept developed in the 1990s. It has 3 important parameters- life expectancy,
education achievement index and standard of living index.
8. The Multidimensional Poverty Index has been developed by
a. The UNDP
b. Oxford HDI
c. The UNO
d. Morris D Morris
ANSWER: b. Oxford HDI
The MPI concept is developed by the Oxford Human Development Initiative. It has
three main dimensions to it.
9. Which of following is not a component of MPI?
a. Health
b. Education
c. Occupation
d. Standard of living
ANSWER: c. Occupation
MPI has 3 important dimensions to it- health, education and standard of living. Based
on these , there are ten parameters.
i. Each indicator in educational dimesion is equally weighted at 1/6

ii. Each indicator in standard of living is equally weighted at 1/8
a. I only
b. ii only
c. both
d. none
ANSWER: a. I only
while education and health dimensions measure each indicators at equal weightage
of 1/6, for standard of living it is 1/18
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2. Economic development is characterized by
a. Structural change in the economy

b. Change in the occupational structure
c. Both a and b
d. None of the above
ANSWER: c. Both a and b
The structural change is the shift from primary sector to secondary and tertiary
sectorsâ€™ contribution to the GDP. Change in occupational structure involves
falling share of agriculture in the total employment.
3. Which of the following explains the term economic development?
a. Improvement in the technology involved

b. Improvement in production
c. Improvement in distribution system
d. All the above
ANSWER: d. All the above
Economic development is a wider concept than growth. There are various

parameters used to define and measure it.
4. An underdeveloped economy is characterized by

a. High per capita real income
b. Large proportion of labor force in the tertiary sector
c. State of deprivation of large proportion of population
d. All the above
ANSWER: c. State of deprivation of large proportion of population
Underdeveloped countries face the problem of deprivation of large section of the

population, low per capita real income etc.
5. Scarcity of capital , technological backwardness and unemployment are

generally found in
a. Developed countries
b. Underdeveloped countries
c. Both
ANSWER: b. Underdeveloped countries
Underdeveloped countries lag behind in various factors like availability of resources,

technology etc.
6. Which of the following denotes an underdeveloped economy?
a. High level of inequalities

b. Low level of capital productivity
c. A relatively closed economy
d. All the above
Other than the above features, there is High incidence of poverty, rapid population
growth and technological backwardness too.
7. Capital formation in underdeveloped countries is a major bottleneck. The

reason can be
a. Small size of market with no incentive for investment

b. Low level of income
c. Demonstration effect
d. All the above
Capital formation refers to investment in tools, machinery, buildings etc. inequalities

in the economy is also a reason behind this.
i. Higher level of capital-output ratio indicates efficient use of capital.
ii. It reflects the productivity of capital in the economy
a. I only
b. ii only
c. both
d. none
i. COR is relatively low in labour intensive sectors.

ii. COR will be high in capital intensive sectors
iii. Both
iv. None
ANSWER: iii. Both
It is high in capital intensive industries because of more use of capital and timelag
between investment and production.
10. Which of the following about strategy of balanced growth is right?
a. Simultaneous investment in all sectors

b. All sectors are independent.
c. Both
d. None
ANSWER: a. Simultaneous investment in all sectors
The supporters of this theory argue that simultaneous investment in all the sectors
will help in faster growth. It is based on the idea that all sectors are interlinked.
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3. The investment by government to create socio-economic infrastructure is
a. Induced investment
b. Autonomous investment
c. Incremental COR
ANSWER: b. Autonomous investment
Autonomous investment is made by the government. Welfare rather than profit is the
primary objective here.
4. The additional capital used per unit of additional production is called
a. Induced investment
b. Autonomous investment
c. Incremental COR
ANSWER: c. Incremental COR
COR refers to the number of units of capital required to produce one unit of output.
5. Economic growth in India will happen necessarily if there is
a. Population growth
b. Capital formation
c. Technical progress in the global economy
d. All the above
ANSWER: b. Capital formation
Capital formation refers to investment in tools, machinery, buildings etc.
6. Inclusive governance includes
a. Allowing NBFCs to do banking

b. Increase government spending on health
c. Strengthening mid-day meals scheme
d. All the above
Inclusive governance denotes inclusion of schemes and other measures for benefit
of all the sections of the society.
7. An open economy is one where

a. Deficit financing is absent
b. No export activities
c. No import activities
d. Economy opened to the world
ANSWER: d. Economy opened to the world
A closed economy is one where there is no exporting or importing activity. it is

generally a feature of underdeveloped economies.
8. Depression is characterized by
a. unprecedented level of underemployment

b. Drastic fall in income
c. Drastic fall in output and employment
d. All the above
Depression is one of the business cycles. Boom, recession, depression and recovery
are the phases of a business cycle.
9. Which of the following denotes business activity at high level with increasing output
and income?
a. Boom
b. Recession
c. Depression
d. Recovery
ANSWER: a. Boom
Boom, recession, depression and recovery are the phases of a business cycle.
10. The phase of gradual fall in income, output and employment is
a. Boom
b. Recession
c. Depression
d. Recovery
ANSWER: b. Recession
Boom, recession, depression and recovery are the phases of a business cycle. In this
phase, business activity is in low gear.
11. A successful inclusive growth strategy includes
a. Equal opportunities
b. Financial inclusion
c. equity
d. all the above
ANSWER: d. all the above
Inclusive growth strategy involves all the sections of the society.
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 Most important mcqs
 1. Which of the following IS a function of money?
a. medium of exchange
b. store of value
c. unit of accounting
d. all of the above
2. Which of the following is a component of M-1?

a. savings deposits
b. credit card
c. checkable deposits
d. gold
3. Which of the following is a NOT component of M-2?

a. small time deposits
b. money market mutual funds
c. stocks
d. checkable deposits
4. Which of the following is true about the Federal Reserve System (Fed)?
a. it is a system of 12 central banks
b. its Board of Governors is elected by a vote of the people
c. its main policy-making body is the FDIC
d. it accepts deposits from the public and makes loans to businesses
e. all of the above
5. An IOU of the Federal Reserve Bank of San Francisco to Bank of America is called:
a. discounts
b. federal funds
c. reserves
d. collateral
6. Which of the following is the most liquid?
a. a savings account
b. a 6 month CD
c. a home
d. water
7. The monetary base is composed of:

a. gold and silver
b. currency only
c. currency and reserves
d. currency and checkable deposits
8. If the monetary base is increased by $1,000 and the reserve requirement is 10%
(1/10), by how much will the money supply be increased?
a. $100
b. $1,000
c. $5,000
d. $10,000
9. If the Federal Reserve wishes to increase the money supply, it should:

a. raise the reserve requirement
b. raise the discount rate
c. buy Treasury securities in the open market
d. all of the above
10. An increase in the money supply will cause interest rates to

a. rise
b. fall
c. remain unchanged
Answers: D C C A C A C D C B
1. Assume that there are only two goods: A and B
In the base year, Quantity Price
A 10 $1
B 10 $4
In the current year, Quantity Price
A 20 $ 5
B 25 $20
The Consumer Price Index (CPI) for the current year is:
a. 50
b. 100
c. 200
d. 500
e. 600:
2. Which of the following groups is most hurt by unexpected inflation?

a. workers with cost of living adjustments in their labor contracts
b. homeowners
c. people with large debts to pay for their homes and cars
d. people with large retirement savings held in savings accounts
3. If the nominal interest rate is 5% and the inflation rate is 2%, the real
interest rate is:
a. 2%
b. 3%
c. 5%
d. 7%
e. 2 ½%
4. For which of the following reasons might inflation cause Real GDP to grow
slower than it otherwise would?
a. Inflation makes everyone poorer
b. Inflation reduces the value of consumer debt
c. Inflation increases business investment spending
d. Inflation decreases savings in financial form
5. Disposable Income is equal to:

a. National Income c. National Income Minus Taxes
b. Real GDP
c. National Income Minus Taxes
d. National Income Minus Taxes Plus Transfers
6. Assume that Potential Real GDP equals $10,000. National Income is

therefore $10,000. Of this, consumers will pay $2,000 in taxes, save $1,000,
and spend $7,000 on consumer goods. Business Investment spending is
$2000. In order to avoid recessions and inflation (to have equilibrium), the
government should have a:
a. balanced budget
b. budget deficit of $1000
c. budget surplus of $1000
d. budget deficit of $2000
CCAAC
7. According to Keynes, when the Great Depression started, the government
should have:
a. done nothing
b. decreased the money supply
c. had a large increase in government spending
d. enacted high tariffs, such as the Smoot-Hawley Tariff
8. If the government lowers taxes by $10 billion, the Real GDP will rise by
a. more than $10 billion
b. less than $10 billion
c. exactly $10 billion
9. Which of the following is an automatic stabilizer?
a. unemployment benefits
b. spending on education
c. defense spending
d. net interest
10. “Crowding out” means that

a. a government budget deficit lowers interest rates and causes investment
spending to rise
b. an increase in marginal tax rates lowers production
c. a government budget deficit raises interest rates and causes investment
spending to fall
d. a government budget deficit raises American exports and lowers American
imports
Answers: D D B D D C C A A C
Economics 100 Makeup for Quiz 6
1. Define average tax rate

Define marginal tax rate
2. Define progressive tax

Define regressive tax
Define proportional tax
3. Define indexation
4. Define Nominal Gross Domestic Product (GDP)

Define Real Gross Domestic Product (GDP)
5. Define business investment spending
6. Briefly explain how the official unemployment rate is calculated.
7. Define frictional unemployment

Define cyclical unemployment
Define structural unemployment
Define “full employment”
Economics 100 Quiz 6, Fall 2002
1. The largest source of tax revenue for the federal government is:
a. the personal income tax
b. the social security tax
c. the property tax
d. the sales tax
2. When my income was $100,000, I paid $10,000 in taxes. When my income

became $200,000, I paid $40,000 in taxes. My marginal tax rate is:
a. 10%
b. 20%
c. 30%
d. 40%
3. The tax is question #2 is:

a. progressive
b. regressive
c. proportional
4. Which of the following taxes is regressive?

a. the federal income tax
b. the state income tax
c. the sales tax
d. the Medicare tax
5. Assume that there are two goods, A and B. In 1996, Americans produced
10 units of A at a price of $10 and 20 units of B at a price of $20. In 2002,
Americans produced 20 units of A at a price of $20 and 30 units of B at a
price of $30. The Nominal GDP for 2002 is:
a. $100
b. $400
c. $500
d. $900
e. $1300
6. Using the numbers in question 5, the Real GDP for 2002 is:
a. $400 b. $500 c. $800 d. $900 e. $1,300
7. Which of the following statements is/are true?

a. Business Investment Spending occurs when individuals buy stock in the
stock market
b. Productivity is the United States grew very slowly between 1973 and 1996
c. Because of discouraged workers, the official unemployment rate is too high
d. “Full employment” occurs when there is no frictional unemployment
8. Immediately after a trough, we would expect to have a/an

a. peak
b. recession
c. recovery
d. another trough
9. Last week, Martha spent one day cleaning a house. For this, she was paid
$50. The rest of the week, she spent looking for a job. Martha would be
classified as
a. employed
b. unemployed
c. not in the labor force
10. John lost his accounting job when Montgomery Wards closed its stores in
San Diego. He looked for a similar job for ten months before finding an
accounting job at Sears. During the month John was unemployed, he was
a. frictionally unemployed
b. seasonally unemployed
c. cyclically unemployed
d. structurally unemployed
Answers: A C A C E C B C A D
Economics 100 Quiz #5, Fall 2001
1. If there are 50 firms in a industry, each selling 2% of the total sales, the
concentration ratio is:
a. 50%
b. 2% €
c. 100%
d. 8%
2. When Daimler Benz, maker of the Mercedes, bought Chrysler, the merger
was
a. horizontal
b. vertical
c. conglomerate
Questions 3 through 10 involve the functions of the government in a world of

laissez faire. The functions are the following:
A. Create and Enforce the "Rules"
B. Promote or Maintain Competition
C. Provide Information
D. Provide Public Goods
E. Reduce Negative Externalities (External Costs) through regulations or
through taxes
F. Subsidize Positive Externalities (External Benefits)
G. Provide Merit Goods
H. Redistribute Income on the Basis of Need
For each of the following, choose the letter that best describes the function of
government.
3. The government provides anti-trust laws.
4. The government subsidizes the building of new stadiums and arenas.
5. The government provides for military defense.
6. The government has a program of social security to provide a pension for

the elderly.
7. The government requires that all gasoline stations post their prices in signs
large enough
to be seen by a reasonable person from the street.
8. The government requires people to have a smog control device in their

cars.
9. The government makes the beach free for everyone
10. The government makes laws that determine certain behaviors that a
corporation must engage in and other behaviors that a corporation cannot
engage in.
Answers: D A B F D H C E G A
Economics 100 Quiz #4, Fall 2002
1. Which of the following concepts represents the extra revenue a firm

receives from the services of an additional unit of a factor of production?
a. total revenue
b. marginal physical product
c. marginal revenus product
d. marginal revenue
2. Workers Quantity Produced

1 15
2 28
3 39
4 48
5 55
6 60
This company is a profit-maximizing firm selling in a competitive product

market and hiring in a competitive labor market. It uses semi-skilled labor to
produce dampers used in office building ventilation systems. Assume that the
current market price per damper is $50 and that the prevailing weekly salary
per semi-skilled worker is $550. This company should employ ______
workers.
a. 2
b. 3
c. 4
d. 5
e. 6
3. The demand for labor is the same as the

a. marginal revenue product
b. marginal physical product
c. marginal cost
d. wage
4. The demand for labor slopes down and to the right because of
a. the law of demand
b. the iron law of wages
c. the law of diminishing marginal returns
d. economies of scale
5. The demand for labor will be more elastic if:

a. there are few substitutes for labor
b. there is a short time under consideration
c. labor is a large percent of the total cost of production
d. the demand for the product is relatively inelastic
e. all of the above
6. Skills that can be transferred to other employers are called:

a. general skills
b. specific skills
c. non-pecuniary skills
d. all of the above
7. Which skills are most likely to be paid for by the employer?

a. General skills
b. Specific skills
c. Educational skills
8. If worker A earns more in wages than worker B, it could be because:

a. The product made by worker A sells for a higher price than that made by
worker B
b. Worker A uses more capital per worker than worker B
c. Worker A has more natural ability than worker B
d. All of the above
9. Skills that embodied in a person are called

a. Human capital
b. Embodied skills
c. Physical capital
d. Experience skills
10. “Treating an individual as typical of a group” is the definition of

a. pure discrimination
b. statistical discrimination
c. human capital
d. specific skills
Answers: C B A C C A B D A B
Economics 100 MW Quiz #3
1. Which of the following is a characteristic of pure monopoly?

a. one seller of the product
b. low barriers to entry
c. close substitute products
d. perfect information
2. In pure monopoly, what is the relation between the price and the marginal
revenue?
a. the price is greater than the marginal revenue
b. the price is less than the marginal revenue
c. there is no relation
d. they are equal
3. In order to maximize profits, a monopoly company will produce that

quantity at which the:
a. marginal revenue equals average total cost
b. price equals marginal revenue
c. marginal revenue equals marginal cost
d. total revenue equals total cost
4. Quantity Price Total Cost

1 $100 $ 60
2 95 130
3 90 210
4 85 300
5 80 400
This monopolist should produce:

a. 1
b. 2
c. 3
d. 4
e. 5
5. Compared to the case of perfect competition, a monopolist is more likely

to:
a. charge a higher price
b. produce a lower quantity of the product
c. make a greater amount of economic profit
d. all of the above
6. Which of the following is necessary for a natural monopoly?

a. economies of scale
b. a high proportion of the total cost is the cost of capital goods
c. the market is very small
d. all of the above
7. Which of the following is true about the way by which SDG&E has been
regulated by the PUC?
a. SDG&E has been allowed to earn very high economic profits
b. The profits of SDG&E are calculated as a percent of the value of the capital
goods
c. When the demand for electricity would fall, the price of electricity would
also fall
d. All of the above
8. Which of the following best defines price discrimination?

a. charging different prices on the basis of race
b. charging different prices for goods with different costs of production
c. charging different prices based on cost-of-service differences
d. selling a certain product of given quality and cost per unit at different
prices to different buyers
9. In order to practice price discrimination, which of the following is needed?

a. some degree of monopoly power
b. an ability to separate the market
c. an ability to prevent reselling
d. all of the above
10. In price discrimination, which section of the market is charged the higher
price?
a. the section with the richest people
b. the section with the oldest people
c. the section with the most inelastic demand
d. the section with the most elastic demand
Answers: A A C C D D B D D C
onomics 100 Quiz #3 Friday, September 22, 2000
1. In the case of agriculture,

a. the demand has shifted to the right more than the supply has shifted to the
right
b. the demand has shifted to the right less than the supply has shifted to the
right
c. the demand has shifted to the left more than the supply has shifted to the
left
d. the demand has shifted to the left less than the supply has shifted to the
left
2. The agricultural price support program is an example of

a. a price ceiling
b. a price floor
c. equilibrium pricing
3. If there is a price floor, there will be

a. shortages
b. surpluses
c. equilibrium
4. If there is a price ceiling, there will be

a. shortages
b. surpluses
c. equilibrium
5. If there is a price ceiling, which of the following is NOT likely to occur?

a. rationing by first-come, first-served
b. black markets
c. gray markets
d. sellers providing goods for free that were formerly not free
6. The goal of a pure market economy is to best meet the desires of

a. consumers
b. companies
c. workers
d. the government
7. In a pure market economy, which of the following is a function of the
price?
I. provide information to sellers and buyers , II. provide incentives to sellers

and buyers
a. I only
b. II only
c. both I and II
d. neither I nor II
8. In a market system, sellers act in ____________ interest , but this leads

to behaviors in ____________ interest.
a. self; self
b. self; society’s
c. society’s; society’s
d. society’s; self
9. The law of diminishing (marginal) returns states that as more of a variable

factor is added to a certain amount of a fixed factor, beyond some point:
a. Total physical product begins to fall
b. The marginal physical product rises
c. The marginal physical product falls
d. The average physical product falls
10. Why is the law of diminishing marginal returns true?

a. specialization and division of labor
b. spreading the average fixed cost
c. limited capital
d. all factors being variable in the long-run
Answers: B B B A D A C B C C
onomics 100 Quiz #1, Page 2
8. The price elasticity of demand is the:

a. percentage change in quantity demanded divided by the percentage
change in price
b. percentage change in price divided by the percentage change in quantity
demanded
c. dollar change in quantity demanded divided by the dollar change in price
d. percentage change in quantity demanded divided by the percentage
change in quantity supplied
9. Community Colleges desired to increase revenues. They decided to raise

fees paid by students with Bachelors degrees to $50 per unit because they
believed this would result in greater revenues. But in reality, total revenues
fell. Therefore, the demand for Community College courses by people with
Bachelors degrees must have actually been:
a. relatively inelastic
b. unit elastic
c. relatively elastic
d. perfectly elastic
10. The demand for a product would be more inelastic:

a. the greater is the time under consideration
b. the greater is the number of substitutes available to buyers
c. the less expensive is the product in relation to incomes
d. all of the above
Answers: D C D C A D C A C C
onomics 100 Quiz #1, Page 2
1. The fundamental economic problem faced by all societies is:

a. unemployment
b. inequality
c. poverty
d. scarcity
2. "Capitalism" refers to:

a. the use of markets
b. government ownership of capital goods
c. private ownership of capital goods
d. private ownership of homes & cars
3. There are three fundamental questions every society must answer. Which
of the following is/are one of these questions?
a. What goods and services are to be produced?
b. How are the goods and services to be produced?
c. Who will get the goods and services that are produced?
d. All of the above
4. If you were working full-time now, you could earn $20,000 per year.
Instead, you are working part-time while going to school. In your current
part-time job, you earn $5,000 per year. At your school, the annual cost of
tuition, books, and other fees is $2,000. The opportunity cost of completing
your education is:
a. $2,000
b. $5,000
c. $17,000
d. $20,000
e. $22,000
5. The bowed shape of the production possibilities curve illustrates:

a. the law of increasing marginal cost
b. that production is inefficient
c. that production is unattainable
d. the demand is relatively inelastic
6. You have taken this quiz and received a grade of 3 out of a possible 10
points (F). You are allowed to take a second version of this quiz. If you score
7 or more, you can raise your score to a 7 (C). You will need to study for the
second version. In making a rational decision as to whether or not to retake
the test, you should
a. always retake the quiz
b. consider only the marginal benefits from of retaking the quiz (four extra
points)
c. consider only the marginal opportunity costs from taking the quiz (the time
spent
studying and taking the quiz)
d. consider both the marginal benefits and the marginal opportunity costs of
retaking the quiz
7. The law of demand states that:

a. as the quantity demanded rises, the price rises
b. as the price rises, the quantity demanded rises
c. as the price rises, the quantity demanded falls
d. as supply rises, the demand rises
8. The price elasticity of demand is the:

a. percentage change in quantity demanded divided by the percentage
change in price
b. percentage change in price divided by the percentage change in quantity
demanded
c. dollar change in quantity demanded divided by the dollar change in price
d. percentage change in quantity demanded divided by the percentage
change in quantity supplied
9. Community Colleges desired to increase revenues. They decided to raise

fees paid by students with Bachelors degrees to $50 per unit because they
believed this would result in greater revenues. But in reality, total revenues
fell. Therefore, the demand for Community College courses by people with
Bachelors degrees must have actually been:
a. relatively inelastic
b. unit elastic
c. relatively elastic
d. perfectly elastic
10. The demand for a product would be more inelastic:

a. the greater is the time under consideration
b. the greater is the number of substitutes available to buyers
c. the less expensive is the product in relation to incomes
d. all of the above
Answers: D C D C A D C A C C

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1-A tariff that maximises the difference between the terms of trade gain and the dead weight

(b) Optimum tariff

(c) Countervailing tariff

(d) Double-column tariff

2-Which one of the following is not a non-tariff barrier ?

(c) Advalorem tariff

(d) Technical barriers

3-The Absorption Approach is developed by

(b) Alfred Marshall

(d) Jacob Viner

(b) Trade indifference curve

(c) Offer curve

(d) Contract curve

(b) income and prices

(c) prices and rate of interest

(d) income, prices and foreign exchange reserves

6-Producers’ surplus is equal to the difference between

(b) Price and Marginal utility curve

(d) Total cost and Marginal cost

7-A demand curve is considered as Rectangular Hyperbola when :

(b) e = 1 at all points

(b) Equal to one

(c) Less than one

(d) Discriminating Monopoly

10-“Natural Monopoly” is the monopoly

(b) which needs large amount of capital.

(c) when there is only one producer.

(d) when average costs declines with increase in output.

11-When average cost is increasing, marginal cost is

(b) Less than average cost

(c) Greater than average cost

12-A firm should cease production in the short run if

(b) Price is less than average cost

(c) Profits are negative

(d) Price is less than average variable cost

13-Engel’s curve illustrates the relationship between

(b) Production and Productivity

(c) Income and Consumption

(d) Income and Production

(b) Unitary elastic

(d) None of the above

15-A movement along the supply curve can be caused by a change in

(b) Factor prices

(c) The price of the good

(d) All of these

16-An indifference curve indicates

(b) No need of any good

(c) Disinterested in acceptance of goods

(d) One combination is preferred to another

17-According to W.W. Rostow, the stages of economic growth are :

19-‘Wage Fund Theory’ has been given by

(c) David Ricardo

(d) J.S. Mill

20-Unbalanced Theory of Growth was propounded by

(c) W.W. Rostow

21-Input – Output technique was invented by

22-Deficit financing leads to

(b) Price fall

(c) Price control

(d) None of the above

23-The Diffusion theory in Taxation was given by

(c) Findlay Shirras

24-Okun’s law shows the relationship between the following :

(b) Employment and Growth