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between nation like reducing duties and Mixed economy. A mixed economy is
surcharges, relaxing licensing rules, defined as an economic system consisting
quotas. of a mixture of either markets and
economic planning, public ownership and
7. Which one of the following is not an private ownership, or markets and
instrument of credit control in India? economic interventionism.
A. Rationing of credit
B. Direct Act ion 10. What was the main motive of Third
C. Open Mark et operations Five Year Plan in India?
D. Variable cost reserve ratios A. Rural development
Ans. D B. Agriculture
Sol. C. Financial inclusion
• Variable cost reserve ratios are not D. Economic reform
an instrument of qualitative credit Ans. D
control in India instead variable cash Sol. the main motive of Third Five Year
reserve ratio is an instrument of Plan in India is Economic reform. The
quantitative credit control. term of this plan being from the year
• It indicates the minimum amount 1961 to 1966. The main objective of this
which the commercial banks have to plan was to increase the national income
keep with the central bank which can more than 5% annually but India failed to
be increased or decreased for purpose achieve its target due to wars with China
of credit control. in 1962 and Pakistan in 1965 and bad
monsoon.A Sino-Indian war took place in
8. Which among the following is an 1962 so the government changed its
example of micro-economic variable? focus to the defense sector.
A. National Income
B. Aggregate Supply 11. Which among the following is not a
C. Employment direct tax?
D. Consumer's Equilibrium A. Income tax
Ans. D B. Wealth tax
Sol. Consumer’s equilibrium is an C. Corporate tax
example of micro-economic variable. D. None of these
Micro economic variable studies the Ans. D
behavior of individuals and firms in Sol. The Direct taxes are those taxes that
making decisions regarding the allocation cannot be transferred or shifted to
of scarce resources. Consumer another person, i.e., individual pays
Equilibrium refers to the amount of goods directly to the government. Major types
and services consumer can purchase of direct tax are:
using their present level of income and Income Tax, Corporate Tax, Wealth Tax,
the current level of prices with maximum Estate Duty, Gift Tax, Fringe Benefit Tax,
satisfaction. etc.
While the Indirect taxes are those taxes
9. An economic system combining private that can be shifted to other person. Some
and state enterprise is called as _____ types of indirect tax are:
A. Market economy Sales Tax, Custom Duty, Entertainment
B. Centrally planned economy Tax, Service Tax. Value Added Tax (VAT),
C. Private economy etc.
D. Mixed economy
12. MTNL comes under which of the
Ans. D following category?
Sol. An economic system combining A. Navratna
private and state enterprise is called as B. Maharatna
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five year plan and started new plan for However to measure the income
the year 1978-83. However, when inequality in a numerical format Gini
congress government again came back in coefficient is used to quantity the findings
power, they started a sixth five year plan of the curve.
for the year 1980-85.
22.In centrally planned economy, the
19. Which tax causes a burden on the _______ plans all the important activities
poorer section of the society? in the economy.
A. Direct Tax A. Industrialists
B. Indirect Tax B. Citizens
C. Both Direct and Indirect Tax C. Government
D. None of these D. Judiciary
Ans. B Ans. C
Sol. It’s the indirect tax which is the Sol.
burden on the poorer section of the • A centrally planned economy is an
society. It’s for the very fact that, it is economic system in which the state or
levied evenly on certain goods and government makes economic
services which are consumed by all decisions rather than the these being
sections of the society Ex- eatables, made by the interaction between
consumers and businesses.
railways and so on. Thus it doesn’t
• The government determines the price
differentiate between the incomes level of
of goods and services.
consumers, unlike direct taxes which
involves income slabs.
23. ______ says that if we keep
increasing the employment of an input,
20. In which of the following market
with other inputs fixed, eventually a point
forms a firm does not exercise control
will be reached after which the resulting
over price?
addition to output (i.e., marginal product
A. Mixed Competition of that input) will start falling.
B. Monopoly A. Law of diminishing marginal product
C. Oligopoly B. Law of variable proportions
D. Perfect Competition C. The Short Run
Ans. D D. The Long Run
Sol. It’s in the perfect competition that a Ans. A
firm doesn’t not exercise control over Sol. It’s the Law of Diminishing marginal
price. It is so as in such market set up, product, which is an economic principle
buyers and sellers have perfect that states that while increasing one input
information about the product, so any and keeping other inputs as constant may
increase in price would give a firm initially increase output, further increases
competitive disadvantage, and a in that input will have a limited effect, and
decrease in the price of the product would eventually no effect or a negative effect,
also lead to decrease in prices by other on output. This law then highlights how
sellers. increasing production every time is not
the best way to increase profitability.
21. Which of the following is represented 24. In a market system, the central
by 'Lorenz Curve'? problems regarding how much and what
A. Employment to produce are solved through the
B. Inflation coordination of economic activities
C. Deflation brought about by ________ signals.
D. Income Distribution A. Supply
Ans. D B. Demand
Sol. Lorenz curve represents income C. Price
distribution in the country. This curve is D. Stock Market
used to determine the inequality of the Ans. C
wealth distribution in the country.
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Sol. It’s the price changes which then 27. ____________ is the relationship
ensures how to resolve the central between the variable input and output,
problems of how much and what to keeping all other inputs are held
produce. In the market system, as per constant.
the classical theory, it’s the invisible hand A. Total product
of market which facilitates supply and B. Average product
demand to meet at a price, which enables C. Isoquant
transaction to taken place, thus enabling D. The Long Run
economic activities. Ans. A
Sol.
25. _________ says that the marginal • Total product is the overall quantity of
product of a factor input initially rises with output that a firm produces, usually
its employment level. But after reaching specified in relation to a variable input.
• Total product is the starting point for
a certain level of employment, it starts
the analysis of short-run production. It
falling.
indicates how much output a firm can
A. Law of diminishing marginal product
produce according to the law of
B. Law of variable proportions
diminishing marginal returns.
C. The Short Run
D. The Long Run
28. From which of the following, is the
Ans. B GDP of a country not derived from?
Sol. Law of Variable proportion states A. Agricultural sector
that as the quantity of one factor is B. Industrial sector
increased, keeping the other factors as C. International sector
constant, the marginal product of that D. Service sector
factor will eventually decline. Thus this Ans. C
law is applicable in short run, also Sol. Gross domestic product (GDP) is a
assumes that technology is constant and monetary measure of the market value of
also assumes that factor proportions are all final goods and services produced in a
variable. period (quarterly or yearly) of time. GDP
is an aggregate measure of production
26. The closest example of a centrally equal to the sum of the gross values
planned economy is the __________ for added of all resident and institutional
the major part of the 20th Century. units engaged in production (plus any
A. USA taxes, and minus any subsidies, on
B. India products not included in the value of their
C. Soviet Union outputs). Agriculture , industrial and
D. Japan service sector from these sector we can
Ans. C derived GDP but from International
Sol. The closest example of a centrally Sector we can’t derived GDP.
planned economy is the Soviet Union for 29. _______ is the set of all possible
the major part of the 20th Century. A combinations of the two inputs that yield
planned economy is a type of economic the same maximum possible level of
system where investment and the output.
allocation of capital goods is performed A. The Short Run
through economy-wide economic and B. The Long Run
production plans. A planned economy C. Isoquant
may be based on centralized, D. Average product
decentralized or participatory forms of Ans. C
economic planning. The economy of the Sol. An isoquant is a firm's counterpart of
Soviet Union was based on a system of the consumer's indifference curve. An
state ownership of the means of
isoquant is a curve that shows all the
production, collective farming, industrial
combinations of inputs that yield the
manufacturing and centralized
same level of output. 'Iso' means equal
administrative planning.
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36. The collection of all possible 38. In India the reform policies were first
combinations of the goods and services introduced in which year?
that can be produced from a given A. 1951 B. 1971
amount of resources and a given stock of C. 1991 D. 2001
technological knowledge is called the Ans. C
____________ of the economy. Sol. The economic liberalisation in India
A. Resource Probability Set refers to the economic liberalisation,
B. Production Probability Set initiated in 1991, of the country's
C. Resource Possibility Set economic policies, with the goal of
D. Production Possibility Set making the economy more market and
Ans. D service-oriented and expanding the role
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Sol. Non-Banking Financial institutions 48. The short run average cost curve is
refer to those institutions that doesn’t ________ shaped.
accept chequable deposits nor extend A. U B. V
loans to general public. So going by this C. X D. W
definition, Bank of India, is not an NBFC,
but rather a commercial bank. Ans. A
Sol. The short run average cost curve is
45. ___________ is the number of U shaped.
deaths in the population during a given In economics, a cost curve is a graph of
period. the costs of production as a function of
A. Natality B. Mortality total quantity produced. Short-run
C. Immigration D. Emigration average total cost curve (SRATC or SRAC)
Ans. B is constructed to capture the relation
Sol. Mortality is the number of deaths in between cost per unit of output and the
the population during a given period. level of output, ceteris paribus. A
* Mortality rate is typically expressed in perfectly competitive and productively
units of deaths per 1,000 individuals per efficient firm organizes its factors of
year. production in such a way that the factors
of production is at the lowest point. In the
46. ______________ scheme by the
short run, when at least one factor of
Central Government aims at setting up an
production is fixed, this occurs at the
organized rural Panchayat in order to
output level where it has enjoyed all
make the villages more self-sustained.
possible average cost gains from
A. Gram Uday Se Bharat Uday Abhiyan
increasing production. This is at the
B. Pradhan Mantri Ujjwala Yojana
minimum point in the diagram on the
C. Pradhan Mantri Surakshit Matritva
right.
Yojana
D. Vidyanjali Yojana
Ans. A 49. A commodity market has a ________
Sol. Gram Uday Se Bharat Uday Abhiyan structure, if there is one seller of the
scheme was launched by the Central commodity, the commodity has no
Government aiming at setting up an substitute, and into the industry by
organized rural Panchayat in order to another firm is prevented.
make the villages more self-sustained. A. Perfect Competition
⋆ The abhiyan was launched on the birth B. Monopoly
C. Oligopoly
anniversary of Dr. Bhimrao Ambedkar by
Prime Minister Shri Narendra Modi. D. Monopolistic Competition
⋆ It was launched in April 2016.
Ans. B
Sol. A commodity market has a Monopoly
47. The demand for a normal good
structure, if there is one seller of the
increases with ________ in the
commodity, the commodity has no
consumer's income.
substitute, and into the industry by
A. Increase B. Decrease
another firm is prevented.
C. Constant D. Double
A monopoly exists when a specific person
Ans. A
or enterprise is the only supplier of a
Sol. The demand for a normal good
particular commodity. This contrasts with
increases with increase in income of
a monopsony which relates to a single
consumer.
entity's control of a market to purchase a
⋆ This is called positive income elasticity
good or service, and with oligopoly which
of demand.
consists of a few sellers dominating a
⋆ A good is normal when the income
market. Monopolies are thus
elasticity of demand is greater than or
characterized by a lack of economic
equal to zero.
competition to produce the good or
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service, a lack of viable substitute goods, 52. The demand for a inferior good
and the possibility of a high monopoly decreases with ________ in the
price well above the seller's marginal cost consumer's income.
that leads to a high monopoly profit. A. Increase B. Decrease
C. Constant D. Double
50. If the ___________ firm has zero Ans. A
costs or only has fixed cost, the quantity Sol.
supplied in equilibrium is given by the • An inferior good is a type of good
point where the marginal revenue is zero. whose demand decreases when
A. Perfect Competition income of consumer increases or we
can say that demand of inferior good
B. Monopoly
is inversely related to consumer’s
C. Oligopoly
income.
D. Monopolistic Competition
53. Goods for which the quantity that a
Ans. B consumer chooses, increases as the
Sol. consumer's income increases and
• If the Monopoly firm has zero costs or decreases as the income decreases are
only has fixed cost, the quantity called?
supplied in equilibrium is given by the A. Inferior goods
point where the marginal revenue is B. Normal goods
zero. C. Complementary goods
• A monopoly is a firm who is the sole D. Substitute goods
seller of its product, and where there Ans. B
are no close substitutes. An Sol.
unregulated monopoly has market • Goods for which the quantity that a
power and can influence prices. consumer chooses, increases as the
Examples: Microsoft and Windows, consumer's income increases and
DeBeers and diamonds, your local decreases as the income decreases are
natural gas company. called Normal goods.
• In other words, we can say that the
51. The short run marginal cost curve is
demand of Normal goods is directly
____ shaped.
related to consumer’s income.
A. U B. V
C. X D. W
54. The demand for an inferior good
Ans. A
Sol. The short run maginal cost curve is U increases with ________ in the
shaped. consumer's income.
In economics, a cost curve is a graph of A. increase B. decrease
the costs of production as a function of C. constant D. double
total quantity produced. A short-run Ans. B
marginal cost curve graphically Sol. An inferior good is a type of good
represents the relation between marginal whose demand decreases when income of
(i.e., incremental) cost incurred by a firm consumer increases or vice versa. In
in the short-run production of a good or other words, we can say that the demand
service and the quantity of output of an inferior good is inversely related to
produced. This curve is constructed to consumer’s income
capture the relation between marginal
cost and the level of output, holding other 55. Goods for which demand move in the
variables, like technology and resource opposite direction of the income of the
prices, constant. The marginal cost curve consumer are called?
is usually U-shaped. Marginal cost is A. Inferior goods
relatively high at small quantities of B. Normal goods
output; then as production increases, C. Complementary goods
marginal cost declines, reaches a D. Substitute goods
minimum value, then rises.
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61. The demand for a normal good The current balance is the sum of the
decreases with ________ in the balance of merchandise trade, services
consumer's income. and net transfers received from the rest
A. increase B. double of the world. All items that carries
C. constant D. decrease changes in the stock are listed in the
Ans. D balance of capital account and all other
Sol. The demand for a normal good flows of goods and services are recorded
decreases with decrease in the in the balance of current account.
consumer's income. A good is known as 64. If a consumer's demand for a good
normal good if the income elasticity of moves in the same direction as the
demand is greater than or equal to zero. consumer's income, the consumer's
For normal good the change in income is demand for that good must be inversely
directly proportional to the change in related to the price of the good is called
demand. For example if decreased. in _______.
income causes decrease in chicken A. Law of demand
consumption and increase in potato B. Law of supply
consumption, than chicken is normal C. Law of substitution
good and potato is inferior good. D. Law of optimal choice
Ans. A
62. Short run marginal cost curve cuts Sol. If a consumer's demand for a good
the short run average cost curve from moves in the same direction as the
_______ at the minimum point of short consumer's income, the consumer's
run average cost. demand for that good must be inversely
A. top B. below related to the price of the good is called
C. right D. left Law of demand. Law of demand was
Ans. B coined by Alfred marshal in 1892, which
Sol. Short run marginal cost curve cuts states that if all the other conditions
the short run average cost curve from remains same then the quantity
below at the minimum point of short run demanded is inversely proportional to the
average cost. Marginal cost is that excess price. e.g if a person demand two kg of
cost which incurred while producing one mango at rs 50 per kg, but according to
more extra unit, it has no relation with
law of demand he demand one kg mango
the average fixed cost. It is the
if price rises to 60per kg. So price and
measurement of production which
demand are opposite to each other and
determines how much production is
optimal has wider effects on each other.
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