Practice Demand supply profit loss inflation price index - indian economy mcq Online Quiz (set-1) For All Competitive Exams
Q-1) RESIDEX, an index of residential prices in India, was launched in the year
(a)
(b)
(c)
(d)
Q-2) The base of Consumer Price Index for Industrial Workers is being shifted from 1982 to—
(a)
(b)
(c)
(d)
The base of CPI for industrial worker is being shifted from 1982 to 2001.
Q-3) Devaluation usually causes the internal price to
(a)
(b)
(c)
(d)
Devaluation is a deliberate downward adjustment to the value of a country’s currency, relative to another currency, group of currencies. Since it is relative to other currencies so the internal price remains unchanged.
It causes a country’s exports to become less expensive and imports more expensive.
Devaluation is a monetary policy tool used by countries that have a fixed exchange rate or semi-fixed exchange rate. It is often confused with Depreciation and is the opposite of revaluation.
Q-4) Many times we read a term “Free Market” in newspapers. What does it mean? - It is a market where pricing is driven by the laws of supply and demand.
- In free market things are available without restraints of the government.
- In such market, goods are free from extraneous influences such as buffer or quotas.
Codes :
(a)
(b)
(c)
(d)
Q-5) Consider the following actions by the Government:- Cutting the tax rates.
- Increasing the government spending.
- Abolishing the subsidies.
In the context of economic recession, which of the above actions can be considered a part of the ‘fiscal stimulus’ package?
(a)
(b)
(c)
(d)
Fiscal stimulus - Government measures, normally involving increased public spending and lower taxation are aimed at giving a positive jolt to economic activity.
Q-6) In view of the fact that kerosene is an inferior good in India, what is/are its implication(s)?- As households get richer, they consume less kerosene.
- Over time there is a decline in quality of kerosene.
- Government needs to stop subsidies on kerosene.
Select the correct answer using the code given below.
(a)
(b)
(c)
(d)
Generally Kerosene is used as fuel by the poor, as they get prosperity, they use little of this fuel.
Q-7) Which of the following statements is/are true?- If increase in demand and supply are of equal magnitude, the price will remain unchanged, but the equilibrium quantity will increase.
- If increase in demand is of greater magnitude than increase in supply, both equilibrium price and equilibrium quantity will increase.
- If increase in supply is of greater magnitude than increase in demand, equilibrium price will fall but equilibrium quantity will increase.
Select the correct answer using the code given below :
(a)
(b)
(c)
(d)
Q-8) Economic growth is usually coupled with
(a)
(b)
(c)
(d)
Q-9) The income elasticity of demand for inferior goods is
(a)
(b)
(c)
(d)
Inferior goods have a negative(less than 0) income elasticity of demand meaning that demand falls as income rises.
Q-10) Which of the following steps that will result in containing inflation?
- Increasing Cash Reserve Ratio (CRR)
- Decreasing Statutory Liquidity Ratio (SLR)
- Permitting Central/State agencies to import duty free pulses and sugar.
Select the correct answer using the codes given below:
(a)
(b)
(c)
(d)
In order to curb inflation if CRR is increased, then it may take liquidity from markets as banks will have to deposit more money with RBI.
Moreover, inflation may also be curbed by Permitting Central/State agencies to import duty-free pulses and sugar.
However, Decreasing SLR will leave more money to banks to give loans, which in turn will lead to inflation.
Q-11) The way total output changes due to change in all inputs in same proportion is known as law of
(a)
(b)
(c)
(d)
The way total output changes due to change in all inputs in the same proportion is known as “law of return to scale”.
Q-12) Who recommends the MSP and issue prices?
(a)
(b)
(c)
(d)
CACP was set up in 1985 and recommends for MSP, issue prices as well as procurement prices.
Q-13) Which one of the following causes the condition in which prices increase rapidly as a currency loses its value ?
(a)
(b)
(c)
(d)
Hyperinflation occurs when a country experiences very high and usually accelerating rates of monetary and price inflation, causing the population to minimize their holdings of money.
Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value.
Stagflation: Persistent high inflation combined with high unemployment.
Conflation: The merging of two or more sets of information texts, ideas etc into one.
Stealth inflation: It is a type of charge or fee created by the business to gain extra profit and revenue from its customers.
Q-14) The price at which the Government purchase foodgrains for maintaining the public distribution system and for building up buffer stocks are known as
(a)
(b)
(c)
(d)
The price at which the Government purchases foodgrains for maintaining the public distribution system and for building up buffer stocks are known as procurement prices.
Minimum support price: It is a form of market Intervention by Govt. of India to insure agricultural producers against any sharp fall in farm price. M.S.P. was announced by the Govt of India.
Issue price: It is the price at which shares are offered to retail investors in the IPO issue.
Q-15) Which one of the following is the act of stimulating the economy by increasing the money supply or by reducing taxes ?
(a)
(b)
(c)
(d)
Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy (specifically price level) back up to the long-term trend, following a dip in the business cycle.
Disinflation: Reduction in the rate of inflation.
Inflation Hedge: It is an investment with intrinsic value such as Oil, Natural Gas, Gold, farmland and to a lesser degree commercial real state.
Q-16) Gilt-edged market means
(a)
(b)
(c)
(d)
The gilt-edged market refers to the market for Government and semi-government securities, backed by the Reserve Bank of India (RBI).
Government securities are tradeable debt instruments issued by the Government for meeting its financial requirements. The term gilt-edged means ‘of the best quality’.
Q-17) Inflation is best described as
(a)
(b)
(c)
(d)
Q-18) Which one of the following is not a method to control inflation?
(a)
(b)
(c)
(d)
Q-19) Inflation in India is measured on which of the following indexes / indicators?
(a)
(b)
(c)
(d)
Inflation in India is measured on the Wholesale Price Index (WPI). The wholesale price index (WPI) is based on the wholesale price of a few relevant commodities or over commodities available.
Cost of Living Index - It is a theoretical price index that measures the relative cost of living over time or regions.
Consumer Price Index - It is a measure that examines the weighted average of prices of a basket of consumer goods & services such as transportation food and medical care.
Q-20) Assertion (A):
The rate of inflation in India has come down in the last three years.
Reason (R):
The country has received a large amount of foreign capital during these years.
Select the correct answer from the codes given below.
(a)
(b)
(c)
(d)