demand & supply, profit loss, inflation & price index section 1 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 1 [CDS-2013-II]

In a perfectly competitive economy production and consumption will both be Pareto optimal, if the economy operates at a point where

a) output levels are above equilibrium

b) there is general equilibrium

c) output levels are below equilibrium

d) consumption is less than output

Answer: (b)

General equilibrium involving both production and consumption also ensures the achievement of Pareto efficiency.

Pareto efficiency in this regard requires that the marginal rate of transformation should be equal to the marginal rate of substitution of the individuals.

Question : 2

Who among the following has suggested migration to accrual accounting system from cash based accounting system in India?

a) D.N. Ghosh

b) R.H. Patil

c) C. Rangarajan

d) I.V. Reddy

Answer: (c)

Question : 3 [CDS-2016-I]

Which one of the following terms is used in Economics to denote a technique for avoiding risk by making a counteracting transaction?

a) Hedging

b) Discounting

c) Deflating

d) Dumping

Answer: (a)

Hedging is used in limiting or offsetting the probability of loss from fluctuations in the prices of commodities, currencies or securities.

Question : 4

Inflation is caused by

a) Decrease in money supply

b) Increase in supply of goods

c) Increase in cash with the government

d) Increase in money supply

Answer: (d)

Inflation is increased in the prices of commodities. It is caused due to decrease in supply and an increase in demand for commodities.

So when the money supply in the economy increases it means people have more purchasing capacity and thus demand increases which result in inflation. Some factors affecting inflationary pressure.

Question : 5

The price at which the Government purchase foodgrains for maintaining the public distribution system and for building up buffer stocks are known as

a) Procurement prices

b) Issue prices

c) Minimum support prices

d) Coiling prices

Answer: (a)

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.

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