Economics Multiple Choice Questions (MCQs) for General Studies and GK preparation of SSC, NDA, CDS, UPSC, UPPSC and State PSC Examinations.
1. Which among the following is considered to be the main determinant of the level of activity is in national income terms?
[A] The level of taxation
[B] Realized investment
[C] Planned saving
[D] Factor mobility
Show Answer
Correct Answer: B [Realized investment]
Notes:
Realized Investment means an Investment resulting in a sale, transfer or restructuring of a good or service. It is considered to be the main determinant of the level of activity in national income.
2. Which among the following is a suitable term for the state of economy in which economic activity is slowing down but wages and prices continue to rise ?
[A] Inflation
[B] Deflation
[C] Skweflation
[D] Stagflation
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Correct Answer: D [Stagflation]
Notes:
Stagflation refers to persistent high inflation coupled with high unemployment and stagnant demand /growth in economy.
High Inflation + Low Economic Growth {or conditions of recession} + Low Employment Generation = Stagflation
3. Which among the following imposes a greater burden (relative to resources) on the poor than on the rich ?
[A] Progressive tax
[B] Regressive Tax
[C] Lump Sum tax
[D] Proportional tax
Show Answer
Correct Answer: B [Regressive Tax]
Notes:
A regressive tax is the one in which tax rate decreases as the amount subject to taxation increases; and the tax rate progresses from high to low. The lowest amount is subject to higher taxation and this leads to individuals with low income bear the highest burden of regressive taxes. Such tax does not take into account the ability to pay.
4. Which among the following phrases generally denotes National Income?
[A] Gross National Product at Market Prices
[B] Net National Product at Market Prices
[C] Gross National Product at Factor Cost
[D] Net National Product at Factor Cost
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Correct Answer: D [Net National Product at Factor Cost]
Notes:
Net National Product at Factor Cost generally denotes National Income.
5. If a commodity has more number of substitutes, the demand for this commodity will be _______?
[A] more elastic
[B] less elastic
[C] inelastic
[D] perfectly elastic
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Correct Answer: A [more elastic]
Notes:
Substitute goods are those goods which can be used in place of each other. Examples of substitute goods are : tea and coffee; ghee and edible oil. In case of substitute goods like tea and coffee, demand for a commodity falls with a fall in the price of other substitute goods.
6. Which among the following is used for a situation of “Too much money chasing too few goods?
[A] Demand Pull Inflation
[B] Cost pull inflation
[C] Stagflation
[D] Hyperinflation
Show Answer
Correct Answer: A [Demand Pull Inflation]
Notes:
Demand-pull inflation refers to the inflation from rapid growth in aggregate demand and when excess demand causes ‘too much money chasing too few goods.’ This generally happens when an economy is growing at a faster rate.
7. Which among the following does not come under Land Resources:
[A] Fertility of Land
[B] Location of Land
[C] Composition of Land
[D] all of the above are land resources
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Correct Answer: D [all of the above are land resources]
Notes:
Fertility of Land, Location of Land as well as Composition of Land come under Land Resources.
8. A monopolist will be able to maximize his profits when _________?
[A] His output is maximum
[B] He charges a Higher price
[C] His average cost is minimum
[D] His marginal cost is equal to the marginal revenue
Show Answer
Correct Answer: D [His marginal cost is equal to the marginal revenue]
Notes:
A monopolist can maximize profits when the marginal cost is equivalent to the marginal revenue. This strategy is implemented because the greatest profit occurs at the output level where the difference between total revenue and total cost is the greatest. This ensures economic efficiency and profit gains for the monopolist.
9. In economy, which among the following can be measured by calculating concentration ratios?
[A] Devlopment
[B] Inflation
[C] Competition
[D] Social Security
Show Answer
Correct Answer: C [Competition]
Notes:
Competition is generally measured by calculating concentration ratios. Concentration ratios indicate whether an industry consists of a few large firms or many small firms. Two of the most commonly used metrics are the Herfindahl Hirschman Index (HHI) and the N-firm concentration ratio.
10. Which of the following items is characterised by highest income elasticity of demand among others?
[A] Car
[B] Milk
[C] Paddy
[D] Tobacco
Show Answer
Correct Answer: A [ Car ]
Notes:In case of High-income elasticity of demand, an increase in income is accompanied by a relatively larger increase in quantity demanded for normal goods. Thus, among the given options Car has highest income elasticity of demand.
- Car: A luxury good with high income elasticity; demand rises sharply with an increase in income.
- Milk: A necessity good with low to moderate income elasticity.
- Paddy: A basic necessity and staple food, with very low income elasticity.
- Tobacco: Considered an addictive good with low or even negative income elasticity in some cases, as demand is less income-sensitive.
