ECONOMICS

CLASS-XII

QUESTION BANK ON MCQs.

MACROECONOMICS

PREPARED BY

S.SHANTHI,
PGT-ECONOMICS
KV, MINAMBAKKAM.
CHENNAI
 CHAPTER - 1
NATIONAL INCOME & RELATED AGGREGATES

1. Consider the following statements and identify the right ones.

I. National income is the monetary value of all final goods and services produced.
II. Depreciation is deducted from gross value to get the net value.
(a) I only
(b) II only
(c) Both
(d) None

2. Consider the following statements and identify the right ones.

I. While calculating GDP, income generated by foreigners in a country is taken into consideration.
II. While calculating GDP, income generated by nationals of a country outside the country is taken
into account.
(a) I only
(b) II only
(c) Both
(d) None

3. The net value of GDP after deducting depreciation from GDP is

(a) Net national product
(b) Net domestic product
(c) Gross national product
(d) Disposable income.

4. Consider the following statements and identify the right ones.

I. While calculating GNP, income generated by foreigners in a country is taken into consideration.
II. While calculating GNP, income generated by nationals of a country outside the country is taken
into account.
(a) I only
(b) II only
(c) Both
(d) None

5. When depreciation is deducted from GNP, the net value is

(a) Net national product
(b) Net domestic product
(c) Gross national product
(d) Disposable income.

6. If indirect taxes are deducted from NNP and subsidies are added, we achieve:
(a) Personal savings
(b) DPI
(c) NI
(d) Per capita income
7. To determine the correct level of GNP, it is necessary to:
(a) Add up the values of goods and services during that year
(b) Add up all savings
(c) Count all imports
(d) Add up the value of goods and services of previous year

8. GNP is always:
(a) Less than NNP
(b) Greater than NNP
(c) Equal to NNP
(d) Any of (a), (b), (c)
9. Intermediate goods are
(a) Capital goods, which are used up in the production of other goods but were produced in
earlier periods
(b) Final goods that remain in inventories
(c) Goods that are used up in the production of other goods in the same period that they were
produced
(d) Either capital goods or inventories

10. The circular flow of goods and incomes shows the relationship between
(a) Income and money
(b) Wages and salaries
(c) Firms and households
(d) Goods and services
11. What are consumption goods?
(a) Goods used for consumption in the production process
(b) Goods such as tools, machinery, etc which are used to create final consumption goods
(c) Goods and services that are consumed fully when purchased by the consumers
(d) None of the above
12. The study of inflation is a part of
(a) Normative economics
(b) Macroeconomics
(c) Microeconomics
(d) Descriptive economics

13. An Indian farmer produces wheat without incurring cost of inputs and sells for Rs.1,000 to a
miller who grinds wheat into flour and sells for Rs.1,200 to baker. The baker sells bread to
consumers for Rs.1,600. Total value added is Rs..........
(a) 1,600
(b) 2,200
(c) 1,000
(d) 1,400
14. Intermediate goods are not included to calculate the final output because:
(a) They do not have value
(b) They have unknown value
(c) Their value is included in final goods so they are not added to avoid the problem of double
counting
(d) None of the above
15. If factor cost greater than market price, it means that
(a) Indirect taxes < subsidies
(b) Indirect taxes > subsidies
(c) I.T = subsidies
(d) None
16. What does the term Gross investment mean while denoting a nation’s economy?
(a) Gross investment = Net Investment + Depreciation
(b) Gross investment = Net Investment – Depreciation
(c) Gross investment = Depreciation – Net investment
(d) None of the above
17. Who is called as the ‘founding father of modern economics’?
(a) Adam smith
(b) John Maynard Keynes
(c) F. Hayek
(d) Samuelson
18. Real national income increases when:
(a) Prices of goods are rising
(b) National savings increased
(c) Quantity of goods and services increases
(d) None of the above
19. GDP measures:
(a) A country’s income
(b) A country’s wealth
(c) Consumer spending
(d) Net trade income
20. Gross National Product equals:
(a) Net National Product adjusted for inflation
(b) Gross Domestic Product adjusted for inflation
(c) Gross Domestic Product plus Net property income from abroad
(d) Gross domestic Product Plus Net factor income from abroad
21. The most appropriate measure of a country’s economic growth is
(a) GDP
(b) NDP
(c) Per capita real income
(d) GNP
22. Car used as a taxi
(a) Capital good
(b) Consumer good
(c) Intermediate good
(d) None of these
23. Milk purchased by tea stall
(a) Capital good
(b) Consumer good
(c) Intermediate good
(d) None of these
24. Air conditioner in a house
(a) Capital good
(b) Final good
(c) Intermediate good
(d) None of these

25. The value of intermediate consumption will be ____________, if purchase of raw material is ₹
1,200, exports are of ₹ 600 and imports are of ₹ 200.
(a) 1,200
(b) 800
(c) 1,800
(d) 1,400

26. “Operating Surplus” refers to:

(a) Income from property
(b) Income from entrepreneurship
(c) Income from property and entrepreneurship
(d) None of these

27. If NDPFC = ₹ 2000, and Net Factor income to Abroad = ₹ 500, then NNPFC will be:
(a) 2,000
(b) 1,500
(c) 1,000
(d) 2,500
28. Value added means:
(a) Output at the market prices
(b) Output less Depreciation
(c) Output less cost of intermediate goods and services
(d) Output plus cost of intermediate goods and services
29. Value added by a firm is equal to:
(a) Sales
(b) Profits
(c) Sales – Intermediate consumption
(d) Sales + intermediate consumption
30. National income includes:
(a) Transfer income
(b) Factor income
(c) Both (a), (b)
(d) Neither (a), (b)
31. The Net value added at factor cost of a producing unit is equal to:
(a) Sum of factor payments
(b) Sum of intermediate consumption
(c) Sum of final consumption
(d) Sum of intermediate and final consumption
32. Which of the following will be included in national income?
(a) Sale of bonds by a company
(b) Transport expenses by a firm
 (c) Interest on loan paid by household to banks
(d) None of these
33. Which of the following is not included in compensation of employees?
(a) Wages and salaries in cash
(b) Wages in salaries in kind
(c) Employees contribution to social security schemes
(d) Retirement pension
34. National product at current prices is higher than national product at constant prices during a
period of:
(a) Rising prices
(b) Falling prices
(c) Constant prices
(d) Both (a), (b)
35. Which of the following comes under the category of “tertiary sector”?
(a) Primary sector
(b) Secondary sector
(c) Service sector
(d) None of these

36. Change in stock is negative when:

(a) Closing stock > opening stock
(b) Closing stock < opening stock
(c) Closing stock = 0
(d) Opening stock = 0
37. National income can be calculated by 3 methods. By which method, we get the maximum
value of national income?
(a) Expenditure method
(b) Income method
(c) Value added method
(d) All of these
38. Which of the following is a part of Expenditure method?
(a) Rent and royalty
(b) Mixed income
(c) Net exports
(d) Sales
39. When the entire output is sold in an accounting year, then value of output is equal to:
(a) Sales + change in stock
(b) Sales – change in stock
(c) Sales
(d) None of these

40. A growing country is one with:

(a) Rising GNP at constant prices
(b) Constant GNP at constant prices
(c) Rising GNP at current prices
(d) None of these
 ANSWER KEY

Q.No Answer Q.No Answer Q.No Answer Q.No Answer

1. c 11. c 21. c 31. a

2. a 12. b 22. a 32. d
3. b 13. a 23. c 33. c
4. b 14. c 24. b 34. a
5. a 15. a 25. a 35. c
6. c 16. a 26. c 36. b
7. a 17. a 27. b 37. d
8. b 18. b 28. c 38. c
9. c 19. a 29. c 39. b
10. c 20. d 30. b 40. a
 CHAPTER - 2
MONEY AND BANKING
1. Which function of money is highlighted in the given statement “it has separated the acts of
sale and purchase”
(a) Standard of deferred payments
(b) Store of value
(c) Measure of value
(d) Medium of exchange

2. Which items are not included in measure of supply?

(a) Currency and coins with public
(b) Interbank deposits
(c) Other deposits with RBI
(d) Net demand deposit with banks

3. Which of the following is not a function of money

(a) Medium of exchange
(b) Unit of account
(c) Standard of deferred payment
(d) Store of metal

4. Which function of money is also known as by the name of “unit of account”?

(a) Medium of exchange
(b) Standard of deferred payment
(c) Measure of value
(d) Store of value

5. High powered money consist of __________

(a) Currency and coins held by public
(b) Currency, cash reserves with banks and demand deposits
(c) Currency, cash reserves with banks and public
(d) Currency and demand deposits

6. Money supply refers to _______________

(a) Total volume of money held by public at a particular point of time
(b) Total volume of money held by public over a period of time
(c) Total volume of money held by government
(d) Both (a) and (b)

7. Identify the function of money which has led to capital formation and economic development of
the economy?
(a) Medium of exchange
(b) Standard of deferred payment
(c) Measure of value
(d) Store of value
8. Money supply is a ________ concept.
(a) Stock
(b) Flow
(c) Both (a) and (b)
(d) Neither (a) nor (b)

9. Which function of money is highlighted in the given statement “ It works as a common

denomination”
(a) Store of value
(b) Medium of exchange
(c) Unit of value
(d) None of the above.

10. Which one of these is a limitation of barter exchange?

(a) Lack of double coincidence of wants
(b) Lack of store of value
(c) Lack of common measure of value
(d) All of these

11. Which function of money has overcome the problem of lack of double coincidence of wants.
(a) Measure of value
(b) Medium of exchange
(c) Standard of deferred payments
(d) Store of value

12. Name the institution which performs the function of accepting deposits, granting loans and
making investments with the aim of earning profits.
(a) Commercial banks
(b) Central banks
(c) Punjab national bank
(d) Indian overseas banks

13. This function of central bank involves buying and selling of govt securities from or to the public
and commercial banks.
(a) Selective credit controls
(b) Legal reserve requirements
(c) Open market operations
(d) All of the above

14. This bank operates in public interest without any profit motive
(a) Reserve bank of India
(b) Central bank of India
(c) Jeevan Shanthi bank
(d) All of the above
15. Through the process of __________ commercial banks are able to create credit
(a) Advancing of loans
(b) Money creation
(c) Accepting deposits
(d) NOTA

16. What will be the effect of increases in the REPO RATE on the money supply
(a) Money supply will increase
(b) Money supply will decrease
(c) Money supply will remain same
(d) None of the above.

17. The ratio of total deposits that a commercial bank has to keep with reserve of India is called
(a) Statutory liquidity ratio
(b) Deposit ratio
(c) Cash reserve ratio
(d) Legal reserve ratio

18. Banks create credit

(a) Out of nothing
(b) On basis of their securities
(c) On basis of their total assets
(d) On basis of total deposits

19. Which of the following will increase the money supply?

(a) Fall in repo rate
(b) Purchase of security in open market
(c) Decrease of cash reserve ratio
(d) All of these

20. What is other name of money multiplier

(a) Credit multiplier
(b) Deposit multiplier
(c) Cash reserve ratio
(d) None of the above

21. The one rupee coin and note are issued by

(a) Reserve bank of India
(b) Commercial bank
(c) Ministry of finance
(d) Jeevan Shanthi bank

22. Which of the following is not function of central bank?

(a) Accepting deposits
(b) Custodian of foreign exchange reserves
(c) Bankers bank
(d) Currency authority
23. Other name for legal reserve requirements ________________ is
(a) Cash reserve ratio
(b) Statuary liquidity ratio
(c) Variables reserve ratio
(d) Bank rate

24.____________ refers to those deposits in which amount is deposited with bank for fixed period
of time
(a) Current deposits
(b) Time deposits
(c) Demand deposits
(d) Saving deposits

25. Which one of the following is not a tool of monetary policy?

(a) Open market operation
(b) Bank rate
(c) Selective credit control
(d) Governor spending

26. What happens when there is an increase in margin requirements?

(a) It reduces the borrowing capacity and money supply
(b) Encourages people to borrow more and money supply rises
(c) No change in money supply
(d) NOTA

27. Which institute performs the activity of credit creation?

(a) Commercial bank
(b) Central bank
(c) Both (a) and (b)
(d) Neither (a) nor (b)

28. Demand deposit includes

(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Fixed deposits and current account deposits
(d) All types of deposits

29. Which of the following is not a quantitative method of credit control?

(a) Open market operation
(b) Margin requirements
(c) Variable reserve ratio
(d) Bank rate policy

30. Name the credit control method which refer to difference between the amount of loan and
market value of the security offered by the borrower against the loan?
(a) Selective credit controls
(b) Moral suasion
(c) Margin requirements
(d) Legal reserve requirements
 ANSWER KEY

Question Question Question

Answer Answer Answer
no. no. no.

1. d 11. b 21. c
2. b 12. a 22. a
3. d 13. c 23. c
4. c 14. a 24. b
5. c 15. b 25. d
6. a 16. b 26. a
7. d 17. c 27. a
8. a 18. d 28. b
9. b 19. d 29. b
10. d 20. b 30. c
 CHAPTER 3:
DETERMINATION OF INCOME & EMPLOYMENT
1.__________ is exercised through discussions , letters and speeches to banks .

(a) Moral suasion

(b) Selective credit controls
(c) Margin requirements
(d) Open market operations
2. Which of the following is not the reason for excess of demand?

(a) Fall in the propensity

(b) Reduction in taxes to consume
(c) Increase in investment
(d) Deficit financing
3.___________ refers to the situation when aggregate supply falls short of aggregate demand
corresponding to full employment level of output in the economy .

(a) Deficient demand

(b) Excess demand
(c) Inflationary gap
(d) Deflationary gap
4. Excess demand leads to:

(a) Increase in the level of employment

(b) Decrease in the level of employment
(c) No change in the level of employment
(d) None of these

5. Deficient demand indicates

(a) Under employment equilibrium
(b) Over full employment equilibrium
(c) Full employment equilibrium
(d) None of these
6. Which of the following expansion is correct?

(a) APC = consumption / national income

(b) APC = change in consumption/ change in national income
(c) APC = APS - 1
(d) APC = national income / consumption
7. Aggregate supply and ___________ are always equal.
(a) National income
(b) Aggregate demand
(c) Marginal propensity to save
(d) Average propensity to consume
8. Consumption function is the functional relationship between _________ and ________.

(a) Consumption , aggregate demand

(b) Consumption, national income
(c) Aggregate demand, aggregate supply
(d) National income, private income
9.________ refers to actual saving in an economy during a year .

(a) Ex-ante saving

(b) APS
(c) MPS
(d) Ex-post saving
10. Which of these is a component of aggregate demand?

(a) Private consumption expenditure

(b) Investment expenditure
(c) Government expenditure
(d) All of these
11. The various monetary policy measures can increase aggregate demand, and thus , the control
problem of deficient demand are:

(a) Reduction in bank rate.

(b) Purchase of government securities in the open market by the central bank.
(c) Reduction in CRR and SLR.
(d) All of them.
12. If an economy has to control recession like most of the Euro-Zone nations, which of the
following can be appropriate.

(a) Reduction Repo Rate

(b) Reducing CRR
(c) Both (a) and (b)
(d) None of (a) and (b)
13. Monetary policy is the policy of _______ to control money supply and credit creation in the
economy .

(a) Central government

(b) Central bank
(c) Both (a) and (b)
(d) None of these
14. The various fiscal policy measures that can increase aggregate demand and thus, control the
problem of deficient demand are:

(a) Increasing the level of government expenditure.

(b) Reduction in the level of taxes.
(c) A mix of increasing government expenditure and decreasing the rate of taxes.
(d) All of them
15. What is the impact of deficient demand on production and employment?

(a) Increase
(b) Decrease
(c) Remain constant
(d) None of them
16. At equilibrium level :

(a) Consumption = investment

(b) Aggregate demand = saving
(c) Saving = investment
(d) Consumption = saving
17. The maximum value of multiplier is _______ when the value of MPC is ___________.

(a) Infinity, zero

(b) Infinity, one
(c) One, infinity
(d) None of these
18. ___________ refers to a situation when AD is equal to AS beyond the full employment .

(a) Full employment equilibrium

(b) Over full employment equilibrium
(c) Underemployment equilibrium
(d) None of these
19. When aggregate demand > aggregate supply , inventories
(a) Fall
(b) Rise
(c) Do not change
(d) First fall, then rise
20. In determination of equilibrium level of income by AD-AS approach ,AD curve is represented
by.
(a) (C+S) Curve
(b) (C+I)Curve
(c) (S+I) Curve
(d) (C+Y) Curve
21. In the marginal propensity of consume is greater than marginal propensity to save, the value
of the multiplier will be:
(a) Greater than 2
(b) Less than 2
(c) Equal to 2
(d) Equal to 5
22. An economy is in equilibrium when;

(a) AD=AS
(b) AS=C+Y
(c) AD=C+Y
(d) AS=S+I

23. Which consumption in the following is wrong ?

(a) Price level is assumed to remain constant

(b) Equilibrium output is to be determined in the context of long run
(c) Investment expenditure is autonomous
(d) The determination of equilibrium is studied on context of 2 sectors

24. The equilibrium level of income is determined by ;

(a) S=I
(b) S>I
(c) S<I
(d) None of these above

25. The minimum value off multiplier is one when the value of MPC is

(a) 1
(b) -1
(c) 0
(d) 0.5

26. Out of the following , which can have a value more than one ?

(a) MPC
(b) APC
(c) APS
(d) MPS
27. Break -even point is achieved when :

(a) National income = consumption

(b) Consumption = saving
(c) Consumption =investment
(d) National income > consumption
28. Aggregate supply and ____________are always equal

(a) National income

(b) Aggregate demand
(c) Marginal propensity to save
(d) Average propensity to consume
29. If investment falls to zero , national income doesn't fall to zero because of ;

(a) Autonomous consumption

(b) Induced investment
(c) Autonomous investment
(d) Multiplier

30. Which of the following can be a negative value

(a) APC
(b) MPC
(c) MPS
(d) APS
 ANSWER KEY

Question Question Question

Answer Answer Answer
no. no. no.

1. a 11. d 21. a
2. a 12. c 22. a
3. b 13. b 23. b
4. c 14. d 24. a
5. a 15. b 25. c
6. a 16. c 26. b
7. b 17. b 27. a
8. b 18. b 28. a
9. d 19. a 29. a
10. d 20. a 30. a
 CHAPTER 4
THE GOVERNMENT: FUNCTIONS AND SCOPE
1. Which one of the following is not an objective of government budget?

(a) Reallocation of resources

(b) Economic Stability
(c) Increasing regional disparities
(d) None of these
2. Capital receipts include:

(a) Tax Revenue

(b) Non-tax Revenue
(c) Grants from World Bank
(d) Borrowings
3. Which of the following statement is true?

(a) Loans from IMF is a Revenue Receipts

(b) Higher revenue deficit necessarily leads to higher fiscal deficit
(c) Borrowing by a government represents a situation of fiscal deficit
(d) Revenue deficit is the excess of capital receipts over the revenue receipts
4. Escheats is an example of:

(a) Capital Receipts

(b) Revenue Receipts
(c) Capital Expenditure
(d) Revenue Expenditure

5. Borrowings are equivalent to:

(a) Revenue deficit

(b) Primary deficit
(c) Fiscal deficit
(d) None of these
6. Borrowings is a capital receipt because

(a) It creates a liability

(b) It creates an asset
(c) It reduces a liability
(d) All of the above

7. Union Budget is the budget of

(a) Central Government

(b) Local Government
(c) State Government
(d) Election Commission
8. Revenue Deficit is equal to:

(a) Total Expenditure-Revenue Receipts

(b) Revenue Expenditure – Revenue Receipts
(c) Fiscal Deficit – Interest Payments
(d) Fiscal Deficit – Revenue Expenditure

9. Interest income is a part of:

(a) Non-tax Revenue

(b) Revenue Receipts
(c) Both (a) and (b)
(d) Neither (a) nor (b)

10. In a government budget, revenue deficit is Rs. 50,000 crores and borrowings are Rs.75,000
crores. The fiscal deficit will be:

(a) Rs. 25,000 crores

(b) Rs. 75,000 crores
(c) Rs. 1,25,000 crores
(d) Rs. 50,000 crores

11. Which one is a capital receipt?

(a) License and court fees received by the government in year 2014-2015
(b) Financial help from Microsoft for the victims of flood affected areas
(c) Sale of 40% shares of public sector undertaking to a private enterprise
(d) Profit of LIC, a public enterprise

12. Which one of the following is a part of capital expenditure?

(a) Salary paid to army officers

(b) Expenditure on construction of Metro
(c) Pension paid to retired government employees
(d) Interest paid on national debt

13.”Policies of surplus budget during inflation” is a part of which objective of government budget?

(a) Economic Growth

(b) Economic Stability
(c) Reducing Regional Disparities
(d) Reallocation of Resources

14. Which of the following conditions satisfy the concept of revenue receipts?

(a) Does not create a liability

(b) Does not reduce an asset
(c) Neither (a) nor (b)
(d) Both (a) and (b)
15. Identify the non-tax revenue from the following statement: “It refers to claim of the government
on the property of a person who dies without leaving behind any legal heir or a will”.

(a) Special Assessment

(b) Escheats
(c) Forfeitures
(d) Fees
16. Which one of the following statements is incorrect?

(a) Revenue receipts are regular in nature

(b) There is no future obligation to return the amount in case of revenue receipts
(c) Capital receipts either create an asset or cause a reduction in the liabilities of the
government
(d) Borrowings are treated as capital receipt as they lead to an increase liability

17.Fees of the government college is a revenue receipt because:

(a) It creates liability of the government

(b) It neither creates any liability nor reduces any asset of the government
(c) It neither creates any asset nor reduces any liability of the government
(d) It increases asset of the government

18.If the budgetary deficit of the government is Rs. 25,000 crores and the borrowings and other
liabilities are Rs. 7,000 crores , how much will be the fiscal deficit?

(a) Rs. 25,000 crores

(b) Rs. 32,000 crores
(c) Rs. 18,000 crores
(d) Rs. 7,000 crores

19.Identify the indirect tax from the following options:

(a) Corporate Tax

(b) Income Tax
(c) Goods and Services Tax (GST)
(d) Capital Gains Tax

20.Which of the following are the components of a budget?

(a) Capital Budget

(b) Revenue Budget
(c) Both (a) and (b)
(d) Neither (a) nor (b)

21.’Construction of a school building’ is a:

(a) Capital Receipt

(b) Revenue Expenditure
(c) Capital Expenditure
(d) Revenue Receipt
22.If estimated government receipts are more than estimated government expenditure, it is said
to be a:

(a) Surplus Budget

(b) Deficit Budget
(c) Balanced Budget
(d) None of these

23.Budget Deficit means:

(a) Total Expenditure – Total Receipts

(b) Capital Expenditure – Capital Receipts
(c) Total Expenditure – Total Receipts (excluding borrowings)
(d) Total Expenditure – Revenue Receipts

24.If borrowings and other liabilities are added to the budgetary deficit, we get:

(a) Fiscal deficit

(b) Primary deficit
(c) Capital deficit
(d) Revenue deficit

25.The incidence of tax refers to:

(a) Level and rate of taxation

(b) Who ultimately bears the money burden of the tax
(c) Growth of taxation
(d) Way in which a tax is collected

26.The government budget has a revenue deficit. This gets financed by:

I) Borrowing

II) Disinvestment

III) Tax revenue

IV) Indirect taxes

(a) (I) and (IV)

(b) (III) and (IV)
(c) (I) and (II)
(d) (III) and (II)

27.Which of the following statement is not true for fiscal deficit?

A fiscal deficit:

(a) Represents the borrowing of the government

(b) Is the difference between total expenditure and total receipts of the government
(c) Is the difference between total expenditure and total receipts other than borrowing
(d) Increases the future liability of the government
28.Borrowing in government budget is:

(a) Revenue deficit

(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes

29.The non-tax revenue in the following is:

(a) Income Tax

(b) Corporate Tax
(c) Dividends
(d) Borrowings

30.Primary deficit in a government budget is:

(a) Revenue expenditure – Revenue receipts

(b) Total expenditure – Total receipts
(c) Revenue deficit – Interest payments
(d) Fiscal deficit – Interest payments

31.Direct tax is called direct because it is collected directly from:

(a) The producers on goods produced

(b) The sellers on goods sold
(c) The buyers of goods
(d) The income earners

32.Primary deficit in a government budget equals:

(a) Interest payments

(b) Interest payments less borrowings
(c) Borrowings less interest payments
(d) None of the above

33.Which one of these is a revenue expenditure?

(a) Purchase of shares

(b) Loan advanced
(c) Subsidies
(d) Expenditure on acquisition of land

34.Which of the following is a source of capital receipt?

(a) Foreign Donations

(b) Dividends
(c) Disinvestment
(d) Indirect Taxes
35.Which of the following status is true

(a) Fiscal deficit is the difference between total expenditure and total receipts
(b) Primary deficit is the difference between total receipt and interest payments
(c) Fiscal deficit is the sum of primary deficit and interest payment
(d) None of these

36. Which of the following is not a revenue receipt?

(a) Recovery of loans

(b) Foreign grants
(c) Profits of public enterprises
(d) Corporate Tax

37.Identify the missing item in the following expression:___________=Fiscal deficit – Interest

Payments

(a) Revenue Deficit

(b) Primary Deficit
(c) Both (a) and (b)
(d) Neither (a) nor (b)

38. Fiscal deficit equals:

(a) Interest payments

(b) Borrowings
(c) Interest payments less borrowing
(d) Borrowings less interest payments

39.Primary deficit equals:

(a) Borrowings
(b) Interest payments
(c) Borrowings less interest payments
(d) Borrowings and interest payments both

40. Disinvestment by government means:

(a) Selling of its fixed capital assets

(b) Selling of shares of public enterprises held by it
(c) Selling of its buildings
(d) All the above
ANSWER KEY

Question no. Answer Question no. Answer

1. c 21. c
2. d 22. a
3. c 23. a
4. b 24. a
5. c 25. b
6. a 26. c
7. a 27. b
8. b 28. b
9. c 29. c
10. b 30. d
11. c 31. d
12. b 32. d
13. b 33. c
14. d 34. c
15. b 35. c
16. c 36. a
17. b 37. b
18. b 38. b
19. c 39. c
20. c 40. b
 CHAPTER 5
OPEN ECONOMY MACROECONOMICS
1. Who out of the following is not included in “Residents” in BOP transactions?

(a) Firms
(b) Foreign military personnel
(c) Government agencies
(d) Individuals

2. An accounting statement that provides systematic record of all the economic transitions,
between residents of a country and the rest of the world is ______________.

(a) Balance of payments

(b) Balance of trade
(c) Government budget
(d) None of these

3. Balance of payments is a __________ concept.

(a) Stock
(b) Flow
(c) Both (a) and (b)
(d) Neither (a) nor (b)

4. Inflow of foreign exchange is recorded on the _________ side.

(a) Credit
(b) Debit
(c) Either (a) or (b)
(d) Neither (a) nor (b)

5. When receipts of foreign exchange are more than payments of foreign exchange, BOP is:

(a) Balanced
(b) Surplus
(c) Deficit
(d) None of these

6.”Unilateral transfers” are also known as:

(a) Bilateral transfers

(b) One way transfers
(c) Both (a) and (b)
(d) Neither (a) nor (b)
7. Balance on ‘Balance of trade’ can be:

(a) Surplus
(b) Balanced
(c) Deficit
(d) Either (a) or (b) or (c)

8. Which of the following is not a component of balance of payments?

(a) Current account

(b) Capital account
(c) Nominal account
(d) None of these

9. Export and import of goods is also known as:

(a) Indivisible trade

(b) Visible trade
(c) One-sided transactions
(d) Unrequited transfers

10.__________ refers to the difference between exports and imports of visible items.

(a) Balance of payments

(b) Balance of trade
(c) Both (a) and (b)
(d) Neither (a) nor (b)

11. Autonomous transactions take place on

(a) Current account

(b) Capital account
(c) Both (a) and (b)
(d) Neither (a) nor (b)

12.______________transactions are undertaken to cover the deficit or surplus in autonomous

transactions.

(a) Current account

(b) Capital account
(c) Accommodating
(d) None of these

13.________________is the difference between value of goods sold to the rest of the world and
value of goods imported from rest of the world.

(a) Balance of payment

(b) Balance of trade
(c) Balance of current account
(d) Balance of capital account
14. Gifts and remittances to abroad are recorded on the:

(a) Credit side of current account

(b) Debit side of capital account
(c) Debit side of current account
(d) Credit side of capital account

15. Export of machinery is recorded on the:

(a) Debit side of current account

(b) Credit side of current account
(c) Credit side of capital account
(d) Debit side of capital account

16. Surplus on BOP arises when:

(a) Autonomous payments>autonomous receipts

(b) Accommodating receipts > accomodating payments
(c) Accommodating payments>accommodating receipts
(d) Autonomous receipts > autonomous payments

17. Autonomous transactions take place on:

(a) Current account only

(b) Capital account only
(c) Both current and capital accounts
(d) Neither current account nor capital account

18.’Import on machinery’ is recorded in the ___________account and ‘Borrowings from abroad ‘is
recorded in the _____________account.

(a) Current, capital

(b) Capital, current
(c) Capital, capital
(d) Current, current

19. Foreign exchange transactions dependant on other foreign exchange transactions are called:

(a) Current account transactions

(b) Capital account transactions
(c) Autonomous transactional
(d) Accommodating transactions

20. Foreign exchange transactions which are independent of other transactions in the balance of
payments account are called:

(a) Current transactions

(b) Capital transactions
(c) Autonomous transactions
(d) Accommodating transactions
21. Balance of payments ‘deficit’ is the excess of:

(a) Current account payments over current account receipts

(b) Capital account payments over capital account receipts
(c) Autonomous payments over autonomous receipts
(d) Accommodating payments over a accommodating receipts

22. A company located in India receives as loan from a company located abroad. How is this
transactions recorded in India’s balance of payments account?

(a) Credit side of current account

(b) Debit side of current account
(c) Credit side of capital account
(d) Debit side of capital account

23. An Indian company located in India invests in a copy located abroad. This transaction is
entered in India’s balance of payments account on:

(a) Credit side of current account

(b) Debit side of current account
(c) Credit side of capital account
(d) Debit side of capital account

24. The balance of trade shows a deficit of Rs.300 cars. And the value of exports is Rs.500 cars.
What is the value of imports?

(a) 1500 crs.

(b) 800 crs.
(c) 200 crs
(d) 700 crs.

25. What are the two items of the capital accounts of balance of payments?

(a) Loan
(b) Direct foreign investment
(c) Both (a) and (b)
(d) Neither (a) nor (b)

26. What is the name of those economic transactions which are made by the government to make
equilibrium in balance of payment?

(a) Accommodating items

(b) Autonomous items
(c) Capital account
(d) Current account

27. What is the slope of demand curve of foreign exchange?

(a) Negative slope

(b) Positive slope
(c) Both (a) and (b)
(d) Neither (a) nor (b)

28. What is the slope of supply curve of foreign exchange?

(a) Positive slope

(b) Negative slope
(c) Both (a) and (b)
(d) Neither (a) nor (b)

29. IMF represents:

(a) International monetary fund

(b) International money flow
(c) International money forum
(d) International monetary finance

30. What are the two invisible items of the balance of payments account?

(a) Banking services

(b) Insurance service
(c) Both (a) and (b)
(d) Only (a)

31. Foreign exchange rate of a country is:

(a) Price of a foreign good in terms of the domestic good

(b) Price of a foreign factor in terms of the domestic factor
(c) Price of a foreign currency in terms of the domestic currency
(d) Price of a foreign trade in terms of the domestic trade

32. A country that does not trade with other countries is called an economy:

(a) Open
(b) Closed
(c) Independent
(d) None of these

33. Invisible items in balance of payments include:

(a) Foreign remittances

(b) Income from to tourists
(c) Internet chares
(d) All the three

34. Which of the following us always balance:

(a) Balance of visible trade

(b) Balance of invisible trade
(c) Balance on the current balance
(d) Balance of payments
35. The balance of payments account of a country includes:

(a) Official transfer of foreign exchange

(b) Smuggling transactions
(c) Loans and aids
(d) Both (a) and (c) of the above

36. IMF gives loans:

(a) To fill gap in balance of payments

(b) To fill gap in government budget
(c) To decrease inflation
(d) To increase employment opportunities

37.Foreign exchange reserves increase if :

(a) Govt. increases taxes

(b) Exports increase imports remain the same
(c) Imports increase exports remain the same
(d) Both (a) and (b)

38.Export of goods is called trade in :

(a) Visible goods

(b) Invisible goods
(c) Basic goods
(d) Real goods

39.Visible export includes:

(a) Remittance
(b) Machinery
(c) Computer software
(d) Transport cost

40.Flexible exchange rate system has the advantage :

(a) Automatic adjustment of balance of payments

(b) Easy to borrow from world bank
(c) Encourages exports
(d) None of the above
ANSWER KEY

Question no. Answer Question no. Answer

1. b 21. c
2. a 22. c
3. b 23. d
4. a 24. b
5. b 25. c
6. b 26. a
7. d 27. a
8. c 28. a
9. b 29. b
10. b 30. c
11. c 31. c
12. c 32. b
13. b 33. a
14. c 34. d
15. b 35. d
16. d 36. a
17. c 37. d
18. a 38. a
19. d 39. b
20. c 40. a

ENJOY ECONOMICS-CLASS-XII-QUESTION BANK ON MCQs.

PREPARED BY S.SHANTHI, PGT-ECONOMICS-KV, MINAMBAKKAM.
Send your suggestions and review to shanthiravieco@gmail.com.