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Economics Questions and Answers for Competitive Exams | Indian Economy Quiz Set 2

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(1) According to Mercantilists, trade is a :
(1) Positive sum game.
(2) Infinite sum game.
(3) Zero sum game.
(4) Negative sum game.
Answer: Zero sum game.
(2) There is incomplete specialization in production when country faces :
(1) constant opportunity costs
(2) decreasing opportunity costs
(3) increasing opportunity costs
(4) indeterminate opportunity costs
Answer: increasing opportunity costs

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(3) Income tax is generally based on the principle of :
(1) Benefit received principle
(2) Willingness to pay principle
(3) Ability to pay principle
(4) None of these
Answer: Ability to pay principle
(4) Which method can help in obtaining a welfare improvement if externalities exist ?
(1) Regulation
(2) Assigning property rights and permitting bargaining
(3) Pigovian taxes
(4) All of the above
Answer: All of the above
(5) Which of the following is a capital receipts in the Government budget ?
(1) Interest receipts on loans given by the Government to other parties.
(2) Dividend and profit of public enterprises.
(3) Borrowings of the government from the public
(4) Property tax receipts
Answer: Borrowings of the government from the public
(6) Which amongst the following would be most effective in mitigating the effect of externalities ?
(1) Fiscal policy
(2) Regulation of monopoly
(3) Active monetary policy
(4) Freeing the markets
Answer: Fiscal policy
(7) Maximum social advantage is achieved when :
(1) Total Social Sacrifice=Total Social Benefits
(2) Marginal Social Sacrifice=Marginal Social Benefits
(3) Net Social Sacrifice=Net Social Benefits
(4) Average Social Sacrifice=Average Social Benefits
Answer: Total Social Sacrifice=Total Social Benefits
(8) Statutory incidence of a tax deals with :
(1) the person(s) legally responsible for paying the tax.
(2) the amount of revenue left over after taxes.
(3) the amount of taxes paid after accounting for inflation
(4) the amount of tax revenue generated after a tax is levied.
Answer: the person(s) legally responsible for paying the tax.
(9) The relationship described by the Expectations - Augmented Phillips curve is correct in which of the following ?
(1) Only in the long run.
(2) Only in the short run.
(3) Both in the short run and in the long run.
(4) Neither in the short run nor in the long run
Answer: Only in the long run.
(10) Non Accelerating Inflation Rate of Unemployment (NAIRU) means :
(1) a rate of unemployment for which the change in the rate of inflation is zero.
(2) a rate of inflation which makes the rate of unemployment zero.
(3) a rate of inflation for which the change in the rate of unemployment is zero.
(4) a rate of unemployment which is equal to the rate of inflation.
Answer: a rate of unemployment for which the change in the rate of inflation is zero.
(11) New Keynesians use which of the following to explain price and wage stickyness ?
(1) Staggered labour contracts
(2) Menu Costs
(3) Behaviour based on bounded rationality
(4) All of the above
Answer: All of the above
(12) For the capitalist economy, the primary objective of the New Classical Economics is to explain which of the following ?
(1) Business cycle phenomenon
(2) Underemployment
(3) Wage - price rigidity
(4) Effectiveness of Government policy
Answer: Business cycle phenomenon
(13) Which of the following growth model(s) assume(s) Neutral Technical Progress ?
(1) Harrod model
(2) Solow model
(3) Both (1) and (2)
(4) Neither (1) nor (2)
Answer: Both (1) and (2)
(14) In an economy, the GDP deflator is found to be 110 for the current year. If the GDP has registered an annual growth rate of 15 percent in the same year, then, the rate of growths of real GDP will be :
(1) 5%
(2) 1.5%
(3) 25%
(4) 2.5%
Answer: 5%
(15) What is the nature of equilibrium in the IS - LM model ?
(1) Stock equilibrium
(2) Flow equilibrium
(3) Stock and flow equilibrium
(4) Oscillating equilibrium
Answer: Stock and flow equilibrium

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