Economy Test (13 April)

Maximum Marks: 100 Time Allowed: 1 hr.

[Q.1] In view of the fact that kerosene is an inferior [C] System in which there is free provision of
good in India, what is/are its implication(s)? products.
1. As households get richer, they consume less [D] System in which prices of goods are determined
kerosene. by the open market.
2. Over time there is a decline in quality of kerosene.
3. Government needs to stop subsidies on kerosene. [Q.6] Which of the following pairs are correctly
Select the correct answer using the code given matched?
below. Activities Sectors
[A] 1 only [B] 1 and 2 only 1. Forestry Primary
[C] 2 and 3 only [D] 1, 2 and 3 2. Storage Tertiary
3. Transport Secondary
[Q.2] A closed economy is an economy in Select the correct answer using the code given
which_________. below:
[A] the money supply is fully controlled [A] 1 and 2 only [B] 1 only
[B] deficit financing takes place [C] 3 only [D] 1, 2 and 3
[C] only exports take place
[D] neither exports nor imports takes place [Q.7] The ‘law of demand’ implies that:
[A] As the prices fall, quantity demanded increases.
[Q.3] Many times we read the term “Free Market” [B] As the prices rise, quantity demanded increases.
in newspapers. What does it mean? [C] Both (a) and (b)
1. It is a market where pricing is driven by the laws [D] Neither (a) nor (b)
of supply and demand.
2. In the free-market things are available without [Q.8 Which of the following goods, produced in an
restraints of the government. economy in a given period of time, are considered
3. In such a market, goods are free from extraneous as final goods?
influences such as buffers or quotas. [A] Durable Consumer and Capital goods
Codes: [B] Non-durable Consumer and durable Capital
[A] Only 1 [B] Only 2 goods
[C] Only 3 [D] Both 1 and 2 [C] Consumer (both durable and non-durable) and
durable Capital goods
[Q.4] A Giffen Good: [D] Durable Consumer and non-durable Capital
[A] is a good on which people spend a small portion goods
of their income.
[B] is a good that people buy more as their incomes [Q.9] Which of the following can be described as
fall. ‘Factors of Production’?
[C] has a vertical demand curve. 1. Land
[D] is a good which people buy more as its price 2. Tools & machines
increases. 3. Skilled professionals
Select the correct answer using the code given
[Q.5] What is a “free market”? below:
[A] Subsidising of products by the government. [A] 1 only [B] 1 and 2 only
[B] System in which all trade is done via barter. [C] 2 and 3 only [D] 1, 2 and 3

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[Q.10] Consider the following: 3. Undistributed profits
1. Geographical Limitation 4. Corporation Tax
2. Political Boundary How many of the above are necessary to be
3. Maritime border subtracted from National Income (NI) for
4. Atmosphere's Limit computing Personal Income (PI) of households?
How many of the above can be included in the [A] Only one [B] Only two
domestic economic boundary of a country? [C] Only three [D] All four
[A] Only one [B] Only two
[C] Only three [D] All four [Q.16] When the prices of commodities, goods and
services start declining consistently, the
[Q.11] If both prices and money income double in phenomenon is known as
a given period of time, then real income: [A] Discount field [B] Deflation
[A] Will be doubled. [C] Negative growth [D] Market capitalism
[B] Will remain half.
[C] Will remain unchanged. [Q.17] Consider the following statements with
[D] Prices do not affect real income. respect to differences between economic growth
and development:
[Q.12] Which of the following sectors accounts for 1. Economic Growth is the precursor and prerequisite
the largest share of the Gross National Product for economic development.
(GDP) in India? 2. While economic development primarily focuses on
[A] Agriculture and allied sectors the production of goods, economic growth focuses on
[B] Manufacturing, construction, electricity and gas productivity.
[C] Service sector 3. Economic growth is a more relevant metric for
[D] Defense and Public Administration developed countries while economic development is
more relevant for developing countries.
How many of the statements given above are
[Q.13] Which of the following is included in the
correct?
calculation of national income?
[A] Only one [B] Only two
[A] Intermediate goods
[C] Only three [D] None
[B] Transfer payment
[C] Goods produced for self-consumption
[Q.18] Which of the following statements
[D] Black money and illegal income
accurately describes the phenomenon of "growth
without development"?
[Q.14] With reference to ‘GDP Deflator’, consider
[A] Economic growth with reduced income
the following statements:
inequality and better living standards.
Statement I: It is the ratio of nominal GDP to real
[B] Economic growth without improved living
GDP.
standards or reduced poverty.
Statement II: It is a limited measure of price
[C] Industrial activity ensuring effective labour
behaviour as it includes all goods produced in the
training policy and skill development.
country and not services.
[D] GDP growth with increased employment and
Which one of the following is correct in respect of
better education and healthcare.
the above statements?
[A] Both Statement-I and Statement-II are correct and
Statement-II is the correct xplanation for Statement-I [Q.19] With reference to the boom-and-bust cycle
[B] Both Statement-I and Statement-II are correct and in the economy, consider the following
Statement-II is not the correct xplanation for statements:
Statement-I 1. The boom cycle is characterised by a fall in the
[C] Statement-I is correct but Statement-II is incorrect prices of goods.
[D] Statement-I is incorrect but Statement-II is correct 2. The bust cycle is characterised by low
investments.
[Q.15] Consider the following: Which of the statements given above is/are correct?
1. Transfer payments made by the government to [A] 1 only [B] 2 only
households [C] Both 1 and 2 [D] Neither 1 nor 2
2. Net interest paid by households
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[Q.20] Which of the following statements is/are [B] Non-durable Consumer and durable Capital
correct about Market economy? goods
1. Only those consumer goods are produced that are [C] Consumer (both durable and non-durable) and
in demand. durable Capital goods
2. More labour-intensive methods are used if labour [D] Durable Consumer and non-durable Capital
is cheaper than capital. goods
3. Goods are distributed based on Purchasing
Power. [Q.26] Which of the following can be described as
[A] 1 only [B] 2 and 3 only ‘Factors of Production’?
[C] 1 and 2 only [D] 1, 2 and 3 1. Land 2. Tools & machines
3. Skilled professionals
[Q.21] Consider the following statements Select the correct answer using the code given
regarding the Unorganised Sector: below:
1. It is characterised by small and scattered units [A] 1 only [B] 1 and 2 only
which are largely outside the control of the [C] 2 and 3 only [D] 1, 2 and 3
government.
2. There are no rules and regulations by the [Q.27] Which of the following is a measure of
government to be followed. Inflation in an economy?
Which of the above statements is/are correct? 1. GDP deflator 2. Consumer Price Index
[A] 1 only [B] 2 only 3. Wholesale Price Index
[C] Both 1 and 2 [D] Neither 1 nor 2 Select the correct answer using the code given
below:
[Q.22] Which of the following are the [A] 2 only [B] 2 and 3 only
characteristics of a Capitalist Economy? [C] 1 and 3 only [D] All of the above
1. A Market determined price system
2. Competitive markets [Q.28] How many of the following can be included
3. Ownership of factors of production by the State in the domestic economic boundary of a country?
Select the correct answer using the code given 1. Geographical Limitation
below: 2. Political Boundary
[A] 1 and 3 only [B] 1 and 2 only 3. Maritime border
[C] 2 and 3 only [D] 1, 2 and 3
4. Atmosphere's Limit
[A] Only one [B] Only two
[Q.23] The goods whose demand increases as
income of the people increases are: [C] Only three [D] All four
[A] Normal goods [B] Griffin goods
[C] Desired Goods [D] None of these [Q.29] Which of the following sectors accounts for
the largest share of the Gross National Product
[Q.24] Which of the following can be grouped (GDP) in India?
under the Economic Activities? [A] Agriculture and allied sectors
1. Tutor teaching a student free of cost. [B] Manufacturing, construction, electricity and gas
2. Government providing scholarship. [C] Service sector
3. Philanthropist giving out charity to NGOs. [D] Defense and Public Administration
Select the correct answer using the code given
below:
[Q.30] Which of the following is included in the
[A] 1 only [B] 2 only
calculation of national income?
[C] 2 and 3 only [D] None
[A] Intermediate goods

[Q.25] Which of the following goods, produced in [B] Transfer payment

an economy in a given period of time, are [C] Goods produced for self-consumption
considered as final goods? [D] Black money and illegal income
[A] Durable Consumer and Capital goods

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[Q.31] Consider the following difference between [Q.36] Which of the following best describes
GDP and GNP: Potential GDP?
1. GDP considers ‘how much is produced’ while GNP [A] The maximum GDP an economy can achieve
considers ‘who is producing’. under ideal conditions.
2. GDP and GNP are both widely used measures of [B] Maximum output achievable sustainably without
aggregate output. triggering inflation.
3. If residents earn more abroad than foreigners earn [C] GDP measured without considering inflationary
domestically, GNP will be more than GDP. or recessionary gaps.
How many of the above statement/s is/are correct? [D] All of the Above
[A] Only one [B] Only two
[C] All three [D] None [Q.37] Consider the following statements:
1. Nominal GDP is calculated using base-year prices.
[Q.32] With reference to ‘GDP Deflator’, consider 2. GDP Deflator is calculated by comparing Nominal
the following statements: GDP and Real GDP.
Statement I: It is the ratio of nominal GDP to real GDP. 3. Real GDP always provides a better measure than
Statement II: It is a limited measure as it includes all Nominal GDP.
goods but not services. How many of the above statement/s is/are correct?
[A] Both statements are correct and Statement II is [A] Only one [B] Only two
the correct xplanation [C] All three [D] None
[B] Both statements are correct but Statement II is
not the correct xplanation [Q.38] Consider the following statements
[C] Statement I is correct but Statement II is incorrect regarding GVA and GDP Calculations:
[D] Statement I is incorrect but Statement II is correct 1. GVA measures the sectoral contribution to the
economy.
[Q.33] How many of the following are subtracted 2. India calculates GDP at factor costs.
from National Income to compute Personal 3. GDP is the sum of GVA adjusted for taxes and
Income? subsidies.
1. Transfer payments made by the government to Which of the above statement/s is/are correct?
households [A] 1 only [B] 1 and 3 only
2. Net interest paid by households [C] 2 and 3 only [D] All of the above
3. Undistributed profits
4. Corporation Tax [Q.39] Which of the following accurately
[A] Only one [B] Only two distinguishes between GDP and GNP?
[C] Only three [D] All four [A] GDP accounts for income of residents abroad;
GNP excludes it.
[Q.34] The value of all final goods and services [B] GNP includes income generated by residents
produced by residents and their property in a year, abroad; GDP focuses on domestic production.
within or outside the territory, is called: [C] Depreciation is deducted from GDP to calculate
[A] Gross National Income (GNI) GNP.
[B] Net National Income (NNI) [D] None of the above.
[C] Gross Domestic Product (GDP)
[D] Net Domestic Product (NDP) [Q.40] Consider the following statements:
1. Production by foreign entities in the country is
[Q.35] Consider the following statements included in GDP.
regarding Gross Value Added (GVA): 2. GNP includes factor incomes such as remittances.
1. GVA measures the contribution to GDP by 3. GDP at current prices is used for international
producers, industries, or sectors. income comparisons.
2. GVA provides a picture of consumer-side dynamics 4. NNP is greater than GNP due to depreciation.
in an economy. How many of the above statement/s is/are correct?
Which of the above statement/s is/are correct? [A] Only one [B] Only two
[A] 1 only [B] 2 only [C] Only three [D] All four
[C] Both 1 and 2 [D] Neither 1 nor 2

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