Practice Demand supply profit loss inflation price index - indian economy mcq Online Quiz (set-2) For All Competitive Exams
Q-1) Which one of the following agencies of Indian Government implements the price support scheme (PSS)?
(a)
(b)
(c)
(d)
In Order to help the farmers in getting remunerative prices for their produce with a view to encouraging higher investment and also to increase production and productivity of a commodity, the government declares Minimum Support Price (MSPs) for 25 notified agricultural commodities for each Kharif & Rabi crop season.
National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) is one of the Central Nodal Agencies which implements PSS.
Q-2) The base year for All-India Wholesale Price Index (WPI) has been changed by the Government of India from 2004-05 to
(a)
(b)
(c)
(d)
Q-3) Which of the following is included in M1?
(a)
(b)
(c)
(d)
M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency.
M0 + M1 - Narrow money - includes coins and notes in circulation and other money equivalents that are easily convertible into cash.
M2 - M1 + short term deposits in banks.
M3 - M2 + long term deposits and money market fund.
M4 - M3 + other deposits.
Q-4) With reference to India, consider the following statements
- WPI is available on a monthly basis only.
- As compare to Consumer Price Index for the Industrial Worker (CPIIW), the WPI gives less weightage to food articles.
Which of the statements given above is/are correct?
(a)
(b)
(c)
(d)
This rise in wholesale food prices was not captured by WPI as the weightage for food articles is just 14.3% compared to 65% for manufactured products in this index.
On the other hand, the weightage for food is 57% in CPI items which captures the impact of food prices better.
Further, wholesale prices do not take into account the substantial margins at the retail level, which tend to rise when there are shortages.
Q-5) Which one of the following terms is used in Economics to denote a technique for avoiding risk by making a counteracting transaction?
(a)
(b)
(c)
(d)
Hedging is used in limiting or offsetting the probability of loss from fluctuations in the prices of commodities, currencies or securities.
Q-6) Consider the following statements in regard to the Money market in India:
- It is a market for short-term funds with maturity ranging from overnight to one year.
- It acts as an instrument of liquidity adjustment for the Central Bank.
Which of the statements given above is/are correct?
(a)
(b)
(c)
(d)
The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend.
Participants borrow and lend for short periods of time, typically up to twelve months. Money market trades in short-term financial instruments commonly called “paper.”
Q-7) Which one among the following is the total amount of money available in an economy at a specific time ?
(a)
(b)
(c)
(d)
The money supply or money stock, is the total amount of monetary assets available in an economy at a specific time. It includes currency in circulation and demand deposits.
Near money: assess which can readily be converted into cash, such as bells of exchange.
Narrow money: Money in forms that can be used as a medium of exchange generally notes, coins and certain balances held by banks.
Q-8) The process of curing inflation by reducing money supply is called
(a)
(b)
(c)
(d)
The process of curing inflation by reducing the money supply is called disinflation.
Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the price level of goods and services in GDP. Cost pull inflation - It is caused by an increase in prices of inputs like Labour, raw material etc.
The increased price of the factors of production leads to the decreased supply of Goods. Demand-pull inflation - It is asserted to arise when Aggregate demand in an economy outpaces aggregate supply.
It involves inflation rising as real GDP rises and unemployment falls.
Q-9) Which of the following statements (s) are true with respect to the concept of “efficiency” as used in mainstream economics?
- Efficiency occurs when no possible re-organisation of production can make anyone better off without making someone else worse off
- An economy is clearly inefficient if it is inside the Production Possibility Frontier (PPF)
- At a minimum, an efficient economy is on its Production Possibility Frontier (PPF)
- The terms such as ‘ Pareto Efficiency’, ‘Pareto Optimality’ and ‘Allocative Efficiency’ are all essentially one and same which denote ‘efficiency in resource allocation’
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
When the re-organisation of production is not possible which can make anyone better off without making someone else worse off then efficiency occurs.
Pareto Efficiency, Pareto Optimality and Allocative Efficiency are all the same and indicates “efficiency in resource allocation”.
Q-10) Consider the following statements :
- Inflation benefits the debtors.
- Inflation benefits the bond-holders.
Which of the statements given above is/are correct?
(a)
(b)
(c)
(d)
Inflation redistributes wealth from creditors to debtors i.e., lenders suffer and borrowers benefit out of inflation.
Bondholders = this person has lent money (to debtors) and received bonds in return.
So he is a lender, he suffers, by the way, they haven’t specifically used the word – “inflation-indexed bonds”, hence we cannot say inflation benefits the bond-holders.
Q-11) The most common measure of estimating inflation in India is
(a)
(b)
(c)
(d)
Q-12) The basis of determining dearness allowance (D.A.) to government employees in India is
(a)
(b)
(c)
(d)
The basis of determining dearness allowance (D.A.) to government employees in India is the consumer price index. Dearness Allowance (DA) is an allowance paid to employees to compensate them for the erosion of real income/wage due to inflation.
The increase in the cost of living and the consequent erosion of income is measured in terms of a consumer price index number and, DA to be sanctioned to employees is determined on the basis of the percentage increase in that index.
Dearness Allowance - D.A. is calculated as a percentage of an Indian citizen’s basic salary to mitigate the impact of inflation on people.
Q-13) In India, inflation is measured by the
(a)
(b)
(c)
(d)
Q-14) An exceptional demand curve is one that slopes
(a)
(b)
(c)
(d)
When the curve slopes downwards from left to right; higher prices reduce the quantity demanded.
Q-15) Brent index is associated with
(a)
(b)
(c)
(d)
Brent Crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes.
The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum.
The index represents the average price of trading in the 25 days Brent Blend, the Forties, Oseberg, Ekofisk (BFOE) market in the relevant delivery month as reported and confirmed by the industry media.
Q-16) When economic development takes place
(a)
(b)
(c)
(d)
When economic development takes place, specialisation increases. Economic development typically involves improvements in a variety of indicators such as literacy rates, life expectancy and poverty rates.
GDP does not take into account other aspects such as leisure time, environmental quality, freedom, or social justice; alternative measures of economic well-being have been proposed.
Q-17) The acronym SRO, being used in the capital market for various market participants, stands for which one of the following?
(a)
(b)
(c)
(d)
A self-regulatory organization (SRO) is a non-governmental organization that has the power to create and enforce industry regulations and standards.
The priority is to protect investors through the establishment of rules that promote ethics and equality.
Q-18) In calculation of index of wholesale prices, which one of the following sector is assigned maximum weightage?
(a)
(b)
(c)
(d)
Q-19) Which of the following would cause the aggregate demand curve to shift to the right?
(a)
(b)
(c)
(d)
An increase in purchase by the federal Gov. causes the aggregate demand curve to shift to the right.
Q-20) Rise in the price of a commodity means
(a)
(b)
(c)
(d)
When the price level rises, each unit of currency buys fewer goods and services.So rise in the price of a commodity means fall in the value of currency only.