Economics Test - 1

Q.
1 Consider the following statements:
Other things remaining unchanged, market demand for a good might increase if
1. Price of its substitute increases
2. Price of its complement increases
3. The good is an inferior good and income of the consumer’s increases
4. Its price falls
Which of the above statements are correct?
(a) 1 and 4 only
(b) 2, 3 and 4
(c) 1, 3 and 4
(d) 1, 2 and 3
Q.2 If a commodity is provided free to the public by the Government, then
(a) the opportunity cost is zero.
(b) the opportunity cost is ignored.
(c) the opportunity cost is transferred from the consumers of the product to the tax-paying
public.
(d) the opportunity cost is transferred from the consumers of the product to the Government.
Q.3 Increase in absolute and per capita GNP do not connote a higher level of economic
development, if
(a) industrial output fails to keep pace with agriculture output.
(b) agricultural output fails to keep pace with industrial output.
(c) poverty and unemployment increase.
(d) imports grow faster than exports.
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Q.4 Despite being a high-saving economy, capital formation may not result in significant increase
in output due to
(a) weak administrative machinery.
(b) illiteracy.
(c) high population density.
(d) high capital-output ratio.
Q.5 Which of the following best describes the term 'import cover' sometimes seen in the news?
(a) It is the ratio of value of imports to the GDP of a country.
(b) It is the total value of imports of a country in a year.
(c) It is the ratio between the value of exports and that of imports between two countries.
(d) It is the number of months of imports that could be paid for by a country's international
reserves.
Q.6 With reference to Indian economy, consider the following statements:
1. The rate of growth of Real GDP has steadily increased in the last decade.
2. The GDP at MP (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
(a) 1 only
(c) Both 1 and 2
(b) 2 only
(d) Neither 1 nor 2
Q.7 Economic growth in country X will necessarily have to occur if
(a) there is technical progress in the world economy.
(b) there is population growth in X.
(c) there is capital formation in X.
(d) the volume of trade grows in the world economy.
Q.8 The NI of a country for a given period is equal to the
(a) total value of goods and services produced by the nationals.
(b) sum of total consumption and investment expenditure.
(c) sum of PI of all individuals.
(d) money value of final goods and service produced.
Q.9 A 'closed economy' is an economy in which
(a) The money supply is fully controlled.
(b) Deficit financing takes place.
(c) Only exports takes place.
(d) Neither exports nor imports take place.
Q.10 In the context of Indian economy, consider the following statements:
1. The growth rate of GDP has steadily increased in the last five years.
2. The growth rate of PCI has steadily increased in the last five years.
Which of the following given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.11 Which of the following can aid in furthering the government's objective of inclusive growth?
1. Promoting self-help groups.
2. Promoting micro, small and medium enterprises.
3. Implementing the right to education act.
Select the correct answer using the codes given below:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Q.12 Consider the following statements:
Human capital formation as a concept is better explained in terms of a process which enables
1. individuals of a country to accumulate more capital.
2. increasing the knowledge, skill levels and capacities of the people of the country.
3. accumulation of tangible wealth.
4. accumulation of intangible wealth.
(a) 1 and 2
(b) 2 only
(c) 2 and 4 only
(d) 1, 3 and 4 only
Q.13 Economic growth in country X will necessarily have to occur if
(a) there is technical progress in the world economy.
(b) there is population growth in X.
(c) there is capital formation in X.
(d) the volume of trade grows in the world economy.
Q.14 Which of the following can be said to be essentially the parts of Inclusive Governance?
1. Permitting the Non-Banking Financial Companies to do banking
2. Establishing effective District Planning Committees in all the districts
3. Increasing the government spending on public health
4. Strengthening the Mid-Day Meal Scheme
(a) 1 and 2 only
(b) 3 and 4 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4
Q.15 With reference to the Indian economy demand-pull inflation can be caused/increased by
which of the following?
1. Expansionary policies
2. Fiscal stimulus
3. Inflation-indexing wages
5. Rising interest rates
4. Higher purchasing power
Select the correct answer using the code given below.
(a) 1, 2 and 4 only
(b) 3, 4 and 5 only
(c) 1, 2, 3 and 5 only
(d) 1, 2, 3, 4 and 5
Q.16 Consider the following statements
1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index
(WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on
changing the key policy rates.
(a) 1 and 2 only
(b) 2 only
(c) 3 only 4
(d) 1, 2 and 3
Q.17 Which of the following brings out the CPI number for industrial workers?
(a) The RBI
(b) The Department of Economic Affairs
(c) The Labour Bureau
(d) The Department of Personnel and Training
Q.18 With reference to inflation in India, which of the following statements is correct?
(a) Controlling the inflation in India is the responsibility of the GOI only.
(b) The RBI has no role in controlling the inflation.
(c) Decreased money circulation helps in controlling the inflation.
(d) Increased money circulation helps in controlling the inflation.
1. Inflation benefits the debtors.
2. Inflation benefits the bond holders.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.20 A rise in general level of prices may be caused by
1. An increase in the money supply.
2. A decrease in the aggregate level of output.
3. An increase in the effective demand.
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only

(d) 1, 2 and 3
Q.21 Which one of the following is likely to be the most inflationary in its effect?
(a) Repayment of public debt
(b) Borrowing from the public to finance a budget deficit
(c) Borrowings from banks to finance a budget deficit
(d) Creating new money to finance a budget deficit
Q.22 Economic growth is usually coupled with
(a) Deflation
(b) Inflation
(c) Stagflation
(d) Hyperinflation.
Q.23 A rapid increase in inflation is sometimes attributed to the 'base effect'. What is base effect?
(a) It is the impact in drastic deficiency in supply due to failure of crops.
(b) It is the impact of the surge in demand due to rapid economic growth.
(c) It is the impact of the price levels of the previous year on the calculation of inflation rate.
(d) None of the statements given above is correct in this context
Q.24 India has experienced persistent and high food inflation in the recent past. What could be
the reasons?
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the
cultivation of food grains has steadily decreased in the last 5 years by about 30 per cent.
2. As a consequence of increasing incomes, the consumption patterns of the people have
undergone a significant change.
3. The food supply chain has structural constraints
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Q.25 With reference to India, consider the following statements
1. The WPI in India is available on a monthly basis only.
2. As compared to CPI for industrial workers [CPI (IW)], the WPI gives less weight to food
articles.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.26 Which of the following statements is an appropriate description of deflation?

(a) It is a sudden fall in the value of a currency against other currencies
(b) It is a persistent recession in both the financial and real sectors of economy.
(c) It is a persistent fall in the general price level of goods and services
(d) It is a fall in the rate of inflation over a period of time
Q.27 Which one of the following effects of creation of black money in India has been the main
cause of worry to the Government of India?
(a) Diversion of resources to the purchase of real estate and investment in luxury housing
(b) Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.
(c) Large donations to political parties and growth of regionalism
(d) Loss of revenue to the State Exchequer due to tax evasion
Q.28 Along with the budget, the Finance Minister also places other documents before the
Parliament, which include "The Macro Economic Framework Statement' The aforesaid
document is presented because this is mandated by
(a) Long-standing parliamentary convention.
(b) Article 112 and Article 110 (1) of the Constitution of India.
(c) Article 113 of the Constitution of India.
(d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003.
Q.29 With reference to India's decision to levy an equalisation tax of 6 per cent on online
advertisement services offered by non-resident entities, which of the following statements is/are
correct?
1. It is introduced as a part of the Income Tax Act.
2. Non-resident entities that offer advertisement services in India can claim a tax credit in their
home country under the 'Double Taxation Avoidance Agreements.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has
recommended a debt-to-GDP ratio of 60 per cent for the general (combined) Government by 2023,
comprising 40 per cent for the Central Government and 20 per cent for the State Governments.
2. The Central Government has domestic liabilities of 21 per cent of GDP as compared to
that of 49 per cent of GDP of the State Governments.
3. As per the Constitution of India, it is mandatory for a state to take the Central Government's
consent for raising any loan if the former owes any outstanding liabilities to the latter
Which of the statement given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Q.31 What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)?
1. It will replace multiple taxes collected by multiple authorities and will thus create a single
market in India.
2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its
foreign exchange reserves.
3. It will enormously increase the growth and size of economy of India and will enable it to
overtake China in the near future.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Q.32 With reference to the 'Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)',
consider the following statements:
1. A property transaction is not treated as a benami transaction if the owner of the property is not
aware of the transaction
2. Properties held benami are liable for confiscation by the Government.
3. The act provides for three authorities for investigations but does not provide for any appellate
mechanism.
(a) 1 only
(b) 2 only
(c) 1 and 3 only
(d) 2 and 3 only
1. Tax revenue as a percentage of GDP of India has steadily increased in the last decade.
2. Fiscal deficit as a percentage of GDP of India has steadily increased in the last decade.
(a) 1 only
(b) 2 only
(c) Both 1 and 2

(d) Neither 1 nor 2
Q.34 There has been a persistent deficit budget year after year. Which action/actions of the
following can be taken by the Government to reduce the deficit?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalising subsidies
4. Reducing import duties

Select the correct answer using the code below:
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, 3 and 4
Q.35 Which of the following is/are included in the capital budget of the Government of India?
1. Expenditure on acquisitions of assets like roads, buildings, machinery, etc.
2. Loans received from foreign Governments.
3. Loans and advances granted to the states and union territories.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1,2 and 3
Q.36 The term 'Base Erosion and Profit Shifting (BEPS)' is sometimes seen in the news in the
context of
(a) mining operation by multinational companies in resource- rich but backward areas.
(b) curbing of the tax evasion by multinational companies
(c) exploitation of genetic resources of a country by multinational companies
(d) lack of consideration of environmental costs in the planning and implementation of

developmental projects.
Q.37 A decrease in tax to GDP ratio of a country indicates which of the following?
1. Slowing economic growth rate.
2. Less equitable distribution of national income.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.38 The sales tax you pay while purchasing a toothpaste is a
(a) tax imposed by the Central Government
(b) tax imposed by the Central Government but collected by the State Government.
(c) tax imposed by the State Government but collected by the Central Government.
(d) tax imposed and collected by the State Government.
Q.39 With reference to Union Budget, which of the following is/are covered under non plas
expenditure?
1. Defence expenditure
2. Interest payments
3. Salaries and pensions
4 Subsidies
(a) 1 only
(b) 2 and 3 only
(c) 1, 2, 3 and 4
(d) None
Q.40 Which of the following is/are among the noticeable features of the recommendations of the
13 Finance Commission?
1. A design for the goods and services package linked to adherence to the proposed design
2. A design for the creation of lakhs of jobs in the next 10 years in consonance with India's
demographic dividend
3. Devolution of a specific share of central taxes to local bodies as grants
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1,2 and 3
Q.41 Which one of the following is not a feature of Value Added Tax?
(a) It is multipoint destination-based system of taxation.
(b) It is levied on value addition at each stage of transaction in the production distribution cham.
(c) It is a tax on the final consumption of goods or services and must ultimately be borne by the
consumer.
(d) It is basically a subject of the Central Government, and the State Governments are only a
facilitator for its successful implementation.
Q.42 In India, the tax proceeds of which one of the following as a percentage of gross tax revenue
has significantly declined in the last five years?
(a) Service tax
(b) Personal income tax
(c) Excise duty
(d) Corporation tax
Q.43 Consider the following actions by the Government:
1. Cutting the tax rates
2. Increasing the Government spending
3. 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) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Q.44 Which one of the following was not stipulated in the Fiscal Responsibility and Budget
Management Act, 2003?
(a) Elimination of revenue deficit by the end of the fiscal year 2008-09.
(b) Non-borrowing by the Central Government from the Reserve Bank of India except under
certain circumstances.
(c) Elimination of primary deficit by the end of the fiscal year 2008-09.
(d) Fixing Government guarantees in any financial year as a percentage of GDP.
Q.1 Explain the difference between computing methodology of India’s GDP before the year 2015
and after the year 2015. (100 Words 10 Marks)
Q.2 Do you agree that Indian economy has recently experienced V-shaped recovery?
Give remarks in support of your answer (100 Words 10 Marks)

Economics Test - 1

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Q.

1 Consider the following statements:

1. Price of its substitute increases

2. Price of its complement increases

3. The good is an inferior good and income of the consumer’s increases

4. Its price falls

Which of the above statements are correct?

(a) 1 and 4 only

Q.2 If a commodity is provided free to the public by the Government, then

(a) the opportunity cost is zero.

(b) the opportunity cost is ignored.

(a) industrial output fails to keep pace with agriculture output.

(b) agricultural output fails to keep pace with industrial output.

(c) poverty and unemployment increase.

(d) imports grow faster than exports.

(a) weak administrative machinery.

(c) high population density.

(d) high capital-output ratio.

(a) It is the ratio of value of imports to the GDP of a country.

(b) It is the total value of imports of a country in a year.

Q.6 With reference to Indian economy, consider the following statements:

Which of the statements given above is/are correct?

(c) Both 1 and 2

(d) Neither 1 nor 2

(a) there is technical progress in the world economy.

(b) there is population growth in X.

(c) there is capital formation in X.

(d) the volume of trade grows in the world economy.

Q.8 The NI of a country for a given period is equal to the

(a) total value of goods and services produced by the nationals.

(b) sum of total consumption and investment expenditure.

(c) sum of PI of all individuals.

(d) money value of final goods and service produced.

Q.9 A 'closed economy' is an economy in which

(a) The money supply is fully controlled.

(b) Deficit financing takes place.

(c) Only exports takes place.

(d) Neither exports nor imports take place.

Q.10 In the context of Indian economy, consider the following statements:

Which of the following given above is/are correct?

(c) Both 1 and 2

1. Promoting self-help groups.

2. Promoting micro, small and medium enterprises.

3. Implementing the right to education act.

Select the correct answer using the codes given below:

(b) 1 and 2 only

(c) 2 and 3 only

Q.12 Consider the following statements:

1. individuals of a country to accumulate more capital.

3. accumulation of tangible wealth.

4. accumulation of intangible wealth.

Which of the statements given above is/are correct?

(c) 2 and 4 only

(d) 1, 3 and 4 only

(a) there is technical progress in the world economy.

(b) there is population growth in X.

(c) there is capital formation in X.

(d) the volume of trade grows in the world economy.

1. Permitting the Non-Banking Financial Companies to do banking

2. Establishing effective District Planning Committees in all the districts

3. Increasing the government spending on public health

4. Strengthening the Mid-Day Meal Scheme

Select the correct answer using the codes given below: