Economics Questions and Answers for Competitive Exams | Indian Economy Quiz Set 1

Questions
1 Which of the following will be true for both monopoly and monopolistic competition in the short run ?
1 Price is greater than marginal revenue.
2 Price is equal to marginal revenue.
3 Price is equal to marginal cost.
4 Price is equal to average cost.

Answer:Price is greater than marginal revenue.
2 When the marginal cost is equal to average cost, the slope of the average cost is :
1 positive
2 negative
3 zero
4 infinite

Answer: zero

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3 For the function Q=A ⋅ Kα ⋅ Lβ, which of the following is correct ?
1 The degree of homogeneity is 1
2 Elasticity of substitution is equal to α+β
3 Output elasticity with respect to capital is α
4 Marginal product of a factor=Average product of the factor

Answer:Output elasticity with respect to capital is α
4 When an information asymmetry is observed after an agreement is obtained between individuals, it is called :
1 Signalling
2 Moral hazard
3 None of the above
4 Both (1) and (2) above

Answer:Moral hazard
5 The first fundamental Theorem of Welfare Economics requires :
1 that there be an efficient market for every commodity.
2 that the economy operates at some point on the utility possibility curve.
3 producers and consumers to be price takers.
4 All of the above.

Answer:All of the above.
6 The Theory in which trade cycle is generated due to excess of actual over the desired investment has been given by who amongst the following ?
1 R.G. Hawtry
2 F. Hayek
3 P. Samuelson
4 J. Schumpeter

Answer: F. Hayek
7 ‘Menu costs’ in relation to inflation refers to :
1 Cost of revaluing currency.
2 Cost of altering price lists.
3 Cost of the maintenance of monetary base.
4 Cost of finding better rates of return.

Answer: Cost of altering price lists.
8 According to M. Friedman, Quantity Theory of Money is the theory of :
1 Value of money
2 Price determination
3 Nominal income
4 Demand for money

Answer: Demand for money
9 Gilt - edged market means :
1 Bullion Market
2 Market of pure metals
3 Market of government securities
4 Market of commodities

Answer:Market of government securities
10 Which of the following is likely to be most inflationary in its impact ?
1 Repayment of public debt
2 Borrowings from the public to finance a budget deficit
3 Borrowings from banks to finance a budget deficit
4 Creating new money to finance a budget deficit

Answer: Creating new money to finance a budget deficit
11 “The absorption approach” of analyzing balance of payments was formulated by :
1 M. Friedman
2 Marshall and Lerner
3 Sydney Alexander
4 Haberler

Answer:Sydney Alexander
12 Prebisch - singer hypothesis relates to :
1 Balance of payments problem of developing countries.
2 Terms of trade of developing countries.
3 Prevalency of poverty among developing countries.
4 Inequality of income in developing countries.

Answer: Terms of trade of developing countries.
13 Which of the following statement about the India’s balance of payments is not correct ?
1 If a foreign citizen deposits some money in a bank in India, the accounts regard this as a credit.
2 The current account balance shows only the balance for the trade in goods and services combined.
3 Allowing for errors and omissions, the accounts always balance.
4 If the country’s reserves of foreign currencies increase then there is a minus sign for this entry.

Answer: The current account balance shows only the balance for the trade in goods and services combined.
14 Let elasticity of demand for exports for a certain country be ex and elasticity of demand for imports be em. Assume that the country devalues its currency. Its balance of payments will almost certainly show an improvement if :
1 ex + em > 1
2 ex + em < 1
3 ex + em= 1
4 ex = em =1

Answer:ex + em > 1
15 Which of the following would cause Rupee to depreciate against U.S. Dollar, other things being equal ?
1 A rise in interest rates in India.
2 A fall in incomes in U.S.A.
3 An expected rise in the external value of rupee.
4 An increased flow of foreign investment into India.

Answer:A fall in incomes in U.S.A.

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