Practice Quiz set 6 - indian economy mcq Online Quiz (set-1) For All Competitive Exams
Q-1) Who defined investment as “the construction of a new capital asset like machinery or factory building” ?
(a)
(b)
(c)
(d)
Investment expenditure refers to the creation of new assets i.e. an addition to the stock of existing capital assets.
According to Keynes investment demand depends upon two factors:
- Expected rate of profit which he calls Marginal Efficiency of Capital (MEC). Investment demand increases with the increase in the expected rate of profit;
- the rate of interest (IR). Investment demand decreases with the increase in the rate of interest.
Q-2) In terms of economics, if it is possible to make someone betteroff without making someone worseoff, then the situation is
(a)
(b)
(c)
(d)
Pareto efficiency is said to occur when it is impossible to make one party better off without making someone worse off.
An inefficient situation is one where it is possible to make some people better off without making anyone else worse off.
Q-3) Surplus budget is recommended during :
(a)
(b)
(c)
(d)
A surplus budget is a budget in which government receipts are greater than government expenditures.
Such a budget is desired when the economy is battling inflation due to excess aggregate demand (AD). The surplus budget plugs the inflationary gap by lowering the level of aggregate demand. AD is lowered on account of
- rising in revenue collection by the government, and
- a fall in government expenditure.
Q-4) National income accounting is the study of the income and expenditure of the entire
(a)
(b)
(c)
(d)
National Income Accounting is a set of principles and methods used to measure the income and production of a country.
There are basically two ways of measuring national economic activity:
- as the money value of the total production of goods and services during a given period (usually a year) or
- as the total of incomes derived from economic activity after allowance has been made for capital consumption.
Q-5) In which of the following market forms, a firm does not exercise control over price?
(a)
(b)
(c)
(d)
In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product.
The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry.
As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.
Q-6) What happens when there is a demand deficiency in an economy?
(a)
(b)
(c)
(d)
Deficient demand refers to the situation when aggregate demand for goods and services falls short of aggregate supply of output which is produced by fully employing the given resources of the economy. This deficient demand leads to the decrease in output, employ-ment and prices in the econo-my.
According to Malthus, deficiency of demand could lead to stagnation in which both capital and labor are redundant relative to the opportunities for employing them profitably.
Q-7) Consumption function expresses the relationship between consumption and
(a)
(b)
(c)
(d)
The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes.
The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy.
Q-8) A motion that seeks to reduce the amount of demand presented by government to Re. 1/is known as
(a)
(b)
(c)
(d)
Disapproval of Policy Cut seeks to reduce the amount of the demand be reduced to Re.1/-’ representing disapproval of the policy underlying the demand.
A member giving notice of such a motion shall indicate in precise terms the particulars of the policy which he proposes to discuss. The discussion shall be confined to the specific point or points mentioned in the notice and it shall be open to members to advocate an alternative policy.
Q-9) Pump priming should be resorted to at a time of ?
(a)
(b)
(c)
(d)
Pump priming is the action taken to stimulate an economy, usually during a recessionary/deflationary period, through government spending, and interest rate and tax reductions.
Growth is accomplished through the increase in purchasing power experienced by those affected by the injection of funds, with the goal of promoting higher demand for goods and services.
Q-10) Price mechanism is a feature of
(a)
(b)
(c)
(d)
The price mechanism is an economic term that refers to the manner in which the prices of commodities affect the demand and supply of goods and services.
It is essentially a feature of market-driven or capitalist economic systems. It is based on the principle that only by allowing prices to move freely will the supply of any given commodity match demand.