1 introduction to micro economics€¦ · 5. in ppf, the points lying on the curve show optimum...

J.K.SHAH CLASSES C.P.T. - ECONOMICS

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1 – INTRODUCTION TO MICRO ECONOMICS

1. The law of scarcity is applicable to rich and poor countries alike.

2. Robbins said that economics should be neutral between ends (means positive economics).

3. Marco economics is also known as aggregate economics.

4. In a free market economy, consumer preference decides the allocation of resources.But due

to this not all demands will be met and there will be uneven distribution of income in the

society.

5. In PPF, the points lying on the curve show optimum utilization of resources.

6. Trade off on a PPF is the shifting of a producer from one point of production to another point

of production ,this involves sacrificing one commodity to gain more of another commodity

7. The points on PPF shows full employment , point inside indicates unemployment or

underutilization ,Reduction in unemployment doesn’t shift the PPF to rightwards .

8. The best definition of economics would be that deals with human wants and scarce means.

9. Positive economics tries to explain the relationship between causes and effects of various

economic events or situations. Normative economics tries to work out or suggest solutions for

those situations (problems)

10. Captialist economies – US Socialist – Finland,China, Denmark|Mixed economies – India.

11. MOC increasing – PPC concave | MOC decreasing – PPC Convex | MOC constant – PPC

downward straight line.

12. The PPC shows the maximum amount of any good that can be produced with the available

resources. It also shows the limited number of combinations possible with the given

resources.

13. PPC helps us to understand the problem of scarcity and guides us goods to be produced with

limited resources.

14. If there is no scarcity in the world then there is no need to study economics.

15. Deductive method is based on abstract reasoning and subsequent verification with facts.

16. PPC is also known as Production possibility Frontier or Transformation curve .

17. Abstract , analytical , Prori are names for Deductive method

18. Wealth is Stock , Income is flow

19. Economics is what economics do - Jacob Viner

20. Negative Slope of PPC is due to Scarcity


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2 –THEORY OF DEMAND & SUPPLY

1. The consumer is in equilibrium at a point where the budget line is tangent to an indifference

curve .

2. The indifference curve are parallel which shows that higher IC gives higher satisfaction and

no two ICs intersect each other.

3. The slope of indifference curve show diminishing marginal rate of substitution between two

commodities.

4. In the case of giffen (inferior) good, the demand curve will be upwards-sloping to the right.

5. TU is maximum when MU is zero.

6. If the demand for a goods is inelastic, an increase in its price will cause the total expenditure

to rise (because expenditure is equal to P*Q).

7. If the quantity demanded remains unchanged in spite of change in its price then the elasticity

is said to be perfectly inelastic and the demand curve will be vertical.

8. A decrease in price will result in an increase in the total revenue of a firm for a particular

product if the price elasticity (expenditure method) is greater than one. As we know that the

expenditure of a consumer is equal to the total revenue for a firm.

9. Consumer surplus can be defined as the difference between the maximum amount a

consumer is ready to pay for a product and the actual price he pays.E.g. If you are ready to

pay Rs.1000 for a product but you are able to buy that product for Rs. 850, then Rs.150 is

your consumer surplus (assumed profit).

10. Consumer surplus can also be described as Extra Utility.

11. Consumer has infinite consumer surplus on the first unit of consumption and zero consumer

surplus on the last unit of consumption as he has nothing to pay for last unit .

12. In CPT exam, more preference is given to arc method of measuring elasticity.

13. If there is an increase in both number of consumers and sellers of particular commodity, then

as a result both the demand and price of that commodity will rise.

14. Competitive and substitute goods are one and the same thing.

15. The main aim of a consumer in allocating his income is to maximize his utility.

16. If demand of a product is more than its supply, the pressure on its price will be

upwards(means price will rise as D > S).

17. Under ordinal approach, when a consumer`s income rises, his equilibrium point rises and

moves higher indifference curve.

18. The elasticity of substitution between two substitutes goods is positive, between two prefect

substitutes is infinity, between two complimentary goods is negative and its is zero between

two unrelated goods.

19. The concept of price elasticity of demand was developed by Alfred Marshall.

20. If the income of a consumer is given then the slope of the price line will be determined by

ratio of prices of both the goods.It means the price line will depend upon the portion of

consumer`s income spent on the two goods taken into consideration.


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21. If income of the consumer changes,then his price line will also change because with change

in income,his spending pattern will also change.

22. The value of coefficient of price elasticity varies between zero and infinity.

23. ꞌ,Ceteris paribus’ term means ꞌall other things remaining the sameꞌ.

24. Joint demand and complementary goods are two points of same concept.

25. In short period demand and supply are less elastic because there is very less time to adjust.

In long period both can become more elastic.

26. The demand curve becomes rectangular hyperbola when price elasticity is unitary(it is equal

to 1).

27. Under cardinal approach, the market price of a commodity is determined by its marginal utility

because a consumer changes his demand for that product due to marginal utility.

28. Cross demand can be defined as the changes in the demand of one commodity due to

change in price of the other commodity.

29. The budget line shows various combinations obtained by spending a particular amount of

money on two goods these points show equal expenditure but in different proportion.

30. The demand curve for giffen goods is positive sloped but sometimes it may happen that a

particular giffen goods is giffen for only a small section of society so in that case its demand

curve will be negative (downward sloping) for some and upward sloping for the others.

31. Any straight line supply curve passing through origin has unitary elasticity of supply. The

slope of the supply curve doesn’t matter in this case.

32. Any straight line supply curve passing through the quantity axis (X axis) and having a

positive slope(upward towards right slope) has elasticity less than one.

33. Supply of a commodity rises with an increase in its price all other things remaining constant.

34. If two goods are prefect substitutes then they will have a linear indifference curve as the

MRS between those tow goods is constant(it is infinite always!).


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3 – THEORY OF PRODUCTION & COST

1. Diminishing marginal returns means that the marginal cost is rising.

2. In relationship of MP, TP and AP; it can never happen that when MP is maximum then AP is

equal to MP.

3. Implicit cost generally has opportunity cost as its main constituent as it is often difficult to

measure other implicit cost like pain, discomfort etc of the entrepreneur.

4. The falling portion (negatively sloped part) of long run average cost curve occurs due to

economies of scale which is a result of specialization. It implies a decrease in the overall cost

of a firm.

5. The rising portion of LAC occurs due to dis – economies of scale.

6. Mathematically speaking, Marginal Products is the slope of Total Products.(As it is directly

associated with TP).

7. If MP = AP, it means AP constant and maximum.

8. In long run, if a small factory tries to expand, initially it will enjoy economies to scale means

increasing returns to scale.

9. Capital refers to the produced means of production.(it is man-made).

10. In short run MC changes due to TVC.

11. Opportunity cost is the cost associated with the opportunity for gone (sacrificed).It means that

it the cost which has to be incurred to retain a factor of production in its present use.

12. The production function shows the relation between the physical inputs and physical outputs.

13. AFC does not touch the output axis as TFC can`t be zero so AFC also can`t be zero.

14. Normally MC is shown as ‘U’ shaped but if MC has to be shown with TC curve then it will be

drawn as slope of tangent to the TC curve at any given output.

15. LAC curve is also called the envelop curve as it covers many SAC curves. But the point of

coincidence of LAC curve with each SAC curve is different.

16. AFC curve is of the shape of rectangular hyperbola.

17. Minimum MC occur where MP is maximum.

18. The cost associated with those factors of production which are neither hired nor purchased

by the firm is called implicit cost as they are owned by the entrepreneur.

19. The point which shows the maximum MP drawn in relationship to the TP is the point of

inflexion.(see law of variable proportion.

20. A firm making normal profit (AC=AR) is often called Marginal Firm.

21. The point at which the MP= 0 is when TP is maximum and this point is called Saturation

Point.

22. According to law of variable proportion,2nd stage of the law is most relevant for a firm which

aims at maximum economic efficiency as in this stage the production reaches its maximum

point (TP maximum in this stage).

23. The MP of any factor of production in short run can be positive, zero or negative (see law of

variable proportion).

24. Both MC and AC are equal only when AC is minimum.

25. The point on which the long run average cost is minimum and the short run average cost is also minimum occurs only in the long run.In short run, LAC is not considered.

26. SAC curve are also known as PLANT curves & LAC curve ia also known as PLANNING

curves


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4 – PRICE DETERMINATION IN DIFFERENT MARKETS

1. The kinked demand curve tries to depict the problem of price rigidity faced by a firm.

2. In all types of market conditions, the level of profit maximization is MR=MC.

3. In all type of market conditions, the AR curve is known as Demand Curve.

4. The most basic difference between Monopolistic Competition and Perfect Competition is that

in the former the seller can sell heterogeneous (differentiated) products and in the latter the

sellers sell homogeneous (similar) product.

5. Durable goods can be sold in national market as their life is longer.

6. Stock market is an example best suited as Regulated market as it is governed by SEBI.

7. Pure Oligopoly means that kind of oligopoly market which sells homogeneous products.

8. Partial Oligopoly is that kind of oligopoly market which is dominated by one big firm and its is

considered the leader of the industry or group.

9. Price discrimination done by Monopolist can be based on time, size of market, income,

elasticity etc.

10. If there is a fall in the demand for the product in the above market then it will result in fall

price leading to decrease in the number o firm operating in the market further leading to

declined production in each firm .

11. The demand curve for a monopolist firm will be downward sloping as it has to lower the

prices in order to sell more.

12. In monopoly, the AR curve is always above the MRC curve while both are downward sloping.

13. Total profit is equal to TR-TC.So,Average Profit is equal to AR-AC.(difference).

14. In short run a firm will try to survive in the market even if it is able to cover only AVC. But in

long run, firm will always want to cover ATC otherwise it may leave the market.So it means if

in short runTR<TVC(which means AR<AVC),then the firm will tend to close down insteadof

facing losses.

15. In short run a firm`s most effective output level will be where AC is minimum and its most

profitable point will be where MC=MR.

16. Generally under Monopoly and Imperfect competition MC is less than its price which enables

the firm to earn supernormal profit.

17. If an individual firm`s demand curve coinciding with market demand curve then the prevailing

market situation is Monopoly.

18. A monopolist firm practicing price discrimination in two separate market will achieve profit

maximization when the MR from both the markets will be equal to the MC both the markets.

19. A monopolist firm will always try to achieve equilibrium above the middle point of the AR

curve as beyond that the elasticity becomes less than one and MR becomes negative.(see

diagram of relationship between MR, TR and AR given the book).

20. If a monopolist firm is enjoying MR > MC then in order to attract more customers it can

afford to cut prices it has the margin till MR become equal to MC.


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21. In prefect competition, the AR and MR curves are same but in imperfect competition the AR

and MR curves are different.

22. In prefect competition, if the prevailing price is such that the price line is tangent too the

minimum point of the average cost curve then the firm will earn normal profit.(don`t

panic,these lines are confusing but the concept is very simple – remember the diagram of

break-even point in perfect competition).

23. Average profit is the difference between AR and AC (provided AR>AC).This profit is also

known as Normal Profit.

24. MR can be shown as slope of a tangent to any point on the TR curve.

25. At the shut down price is less than AVC.

26. In, short run if the price of the commodity rises then it will lead to more supply of goods. This

happens due to two main reasons : a) existing firms expanding their output and (b) New firms

entering the market getting attracted by bigger profit.

27. In Monopolistic competition, sale of branded articles is common practice undertaken by firms

to showcase their products as differentiated products.

28. In oligopoly, there exists Kinked Demand Curve, the upper part of kinked demand curve is E

> 1( Flatter slope), and the lower part is E<1( steeper slope).

29. In Oligopoly response to price decrease is more than response to price increase

30. Oligopoly charges less price compared to Monopoly and more price compared to Perfect

competitive market


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5 – INDIAN ECONOMY (A PROFILE)

1. Presently the population of India dependent on agriculture is nearly 49% (According to

Planning Commission).

2. Every third poor person in the world is an Indian.

3. 21.9% population is below poverty line 2011-12.

4. India`s per capita income in 2013 was $ 1499.

5. The gross domestic saving rate in India in 2012-13 was 30.1%.

6. According to 66th round of survey by NSSO (2011-12) unemployment rate is 5.6% (based on

CDS) Current Daily Status.

7. HDI was constructed by United Nation Development Index (UNDP).

8. HDI has three basic indicators namely : Longetivity, Knowledge & Standard of Living.

9. Gini Index is used for measuring inequality of income & wealth.

10. Gini Index of India in 0.334 for the period 2011-12 as per HDI report.

11. Gini Index of 0 represents perfect equality & that of 1 represents perfect inequality.

12. India`s National Income was ` 50,00,000 crores in 2013-14. (at constant prices)

13. Contribution of various sectors in the composition of GDP of India of 2013-14 was Primary

Sector -13.9% ,Secondary Sector – 26.1%, Tertiary Sector – 59.9%.

14. In the second plan, a high priority was given for the establishment of basic industries.

15. India has the fourth largest & Asia`s largest rail network under the single management more

than 65,000 Kms.

16. Population Growth Rate in India is more than 2%.

17. The installed electricity generating capacity of India in 2011-12 was 2,43,000 MW.

18. Land under irrigation in2012-13 was 63 million hectares.

19. The number of doctors in 2012 were 9 lakhs .

20. The agro products which were exported at the time of independence were cotton-textile, jute

& tea. They accounted for more than 50% of the total export earnings .

21. Percentage of people working in agriculture is 49% in present time.

22. Agriculture has low capital output ratio.

23. HYV was restricted to five crops – Wheat, Rice, Jowar, Bajra & Maize .

24. Green revolution stressed on (a) Use of HYV seeds (b) Proper irrigation facilities (c)

Extensive use of fertilizers.

25. Agricultural Productivity is measured in terms of yield per hectare of land.

26. The land tenure system or the agrarian system prevailing in the country at the time of

independence were Zamindari System, Mahalwari System and Ryotwari System.

27. Production of wheat – 96 million tonnes in 2011-12.

28. About 55% of the net sown area is rain fed i.e. 45% of area is covered by irrigation facilities.

29. 44% of the gross cropped area is covered by HYVP.

30. Regional Rural banks were established in 1975.

31. NABARD set up in 1982, is known as the apex bank for agriculture based on

recommendation of Shivaraman committee.

32. Manufactured goods contribute about 2\3rd of export earnings of India.

33. NFSM stands for National Food Security Mission was launched in 2007-08.


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34. Mahalonobis Model (in second plan) stressed upon the establishment of capital & basic good

industries.

35. Exports from small scale sector increased to more than ₹1,50,000 crores in 2005-06.It

contributes about 40% of the manufacturing exports & over 40% of total exports.

36. Farm Credit Card Package was in produced in 2004.

37. In manufacturing sector micro enterprise are the unit with an investment upto `25 lahks,

enterprises with an investment between `25 lakhs & 5 crores are called small enterprises,

units with investment between ` 5 crores & ` 10 crores are called medium enterprises .

38. In service sector, investment upto ` 10 lakhs – Micro units, between ` 10 lakhs & ` 2 crores –

small enterprises.

39. Tertiary sector accounts for the largest share in GDP.

40. Services accounted for one-third of total export in India 2012-13.India has the third largest

scientific & technical manpower in the world.

41. Classification of enterprises as per Micro, Small and Medium Enterprise Development

(MSMED)Act ,2006.

a) In case of manufacturing sector :

Investment upto 25 lacs – micro enterprises

25lacs – 5 crores – small enterprises

5 crores – 10 crores – medium enterprises

b) In case of service sector :

Investment upto 10 lacs – micro units

10 lacs – 2 crores – small units

2 crores – 5 crores – medium units

Same as point 64 and 65.

42. APMC – Agriculture produce Market committee Act.

43. Demand for intermediate consumption – All producing sectors of economy.

44. National Mission for Sustainable Agriculture (NMSA) was launched in 2011-12.

45. India has the second largest area under wheat and rice in world and is second largest

producer of these crops but in terms of productivity its world rank is 52nd in rice and 38th in

wheat.

46. GDP of India at current prices in 2010-11 was 72,66,967 crores and at constant price it is

49,37,006 crores basis of price prevalling in 2004-05.

47. Eleventh plan kept a target of 9% p.a. growth rate, however the actual growth rate was 7.8%.

48. NNP – Factor Cost = National Income

49. Gross = Net + Depreciation.

50. Net value added method is also known as Net output method, industry of origin method,

production method.

51. Most Direct taxes are progressive in nature and indirect taxes are regressive or differential in

nature.

52. Income tax was introduced in 1873and reintroduced in 1886.

53. 30% Corporate tax is levied on the income of registered companies & corporations.

54. Estate duty was first introduced in 1953 & abolished in 1985.

55. Wealth tax was introduced in 1957 & abolished w.e.f 01-04-1993.


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56. Gift tax was introduced in 1958 & abolished in 1998 & re-introduced in April2005 for gifts

received without consideration, if value of gift is more than ` 50,000.

57. The maximum rate of custom duty is 10% in 2007-08.

58. MODVAT was introduced in 1986-87

VAT was introduced in 1999 and implemented from 1st April,2005 in some states.

59. CENVAT was introduced in 2000-01.

60. MODVAT was replaced by CENVAT.

61. The cost of tax collection has increased to more than 85,00 crores in 2013-14 but is still

lowest in the world at the rate of 60 paisa for every 100 rupees.

62. Service tax accounts for only 1.3% of GDP. It contributes 12.8% towards tax revenues

(2012-13).

63. GST & DTC are proposed by Booth Lingam Committee & Chelliah Committee.

64. In India, less than 3% population is liable to pay INCOME TAX.


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6 – SELECT ASPECTS OF INDIAN ECONOMY

65. Kerala has the highest life expectancy at birth 71.4 % Madhya Pradesh has the lowest life

expectancy at birth 58 in 2006.

66. Kerala has the lowest birth rate of 14.9(2012) &Bihar has the highest birth rate of 27.7(2012).

67. Haryana has the lowest female sex ratio of 879(2011) among states.

68. India accommodates about 17.5% of world`s population .

69. Every sixth person in the world is an Indian and every third poor person in the world is an

Indian.

70. Year 1921 is known as the `Year of Great Divide` for India`s population.

71. Kerala has the highest literacy rate in India i.e of 92% and Bihar has lowest literacy rate of

53%.

72. Causes of rapid growth of population are (a) high birth rate (b) relatively lower death rate (c)

immigration.

73. Population Explosion is a transitory phase according to the theory of Demographic transition.

India is passing through the phase of population explosion i.e. IInd stage.

74. Infant Mortality rate in India is highest for Madhya Pradesh (62) & lowest for Kerala (13).

75. Family planning was organized in 1966.

76. Arunachal Pradesh is least densely populated state with 17 persons per sq.km.

77. Gini Index is often used for measuring relative poverty.

78. The minimum daily consumption of calories in urban areas is 2100 calories and in rural areas

is 2400 calories.

79. About 1/3rd portion of India`s workforce is disguisedly unemployed.

80. Labour Force Participation rate is defined as the number of persons in the labour force 1000

population.

81. Usual status gives us the lowest measure of unemployment.

82. National Policy on Skill Development was formulated in 2009.

83. Frictional unemployment is a temporary phenomenon.

84. In India there is basically structural unemployment.

85. India ranked 6th Largest energy producer & 4th largest energy consumer.

86. India accounts for 3% of total energy production of the world.

87. The major uses of commercial energy are industries (37%).

88. Of the present capacity of electricity, thermal sector – 69%, Hydel sector – 17%, Nuclear

sector – 2% and rest in others 12%.

89. OPEC stands for Organization of Petroleum Exporting Countries.( It is a prefect example of

oligopolist market.)

90. The percentage of PLF (in 2012-13) in various sectors are SEB -65%; Central Sector – 79%;

Pr

91. Sampoorna Grammen Razgar Yojna (SGRY) – 2001.

92. National Food for Work Programme (NFFWP) – Nov 2004.

93. Swarn Jyanti Shahkari Rozgar Yojna (SJSRY) – December,1997.

94. The percentage of PLF (in 2012-13) in various sectors are SEB – 65%; Central Sector –

79%;Private Sector – 79%.


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95. Electricity Act was passed in 2003 and Electricity Amendment Bills was passed in 2005.

96. Partnership in Excellence Programme was launched by Ministry of power to improve

generation of power.

97. Power Sector in Delhi was privatized in 2002.

98. Total route length length of railways is 65,400 kms out of which 21,000 is electrified during

2011-12, it carried more than 8400 million of passengers and 1 billion tonnes of freight traffic.

Some of the steps taken by the government to improve railways performance are rational

price policy, increased wagon load, faster turn around time, public private partnerships (PPP),

double line freight corridor, etc.

99. Rajeev Gandhi Grameen Vidhyutikaran was started in 2005 to provide access to electricity

including villages.

100. The National Highway carry more than 40% of the total road traffic and a road length of

92,851 kms.

101. In India, there are 12 major % 200 minor ports (64% total traffic).

102. India has 14500 km of navigable waterways.

103. National Telecom policy (NTP) was announced in 2012.

104. India ranks 20th in the world`s shipping tonnage.

105. Kandla is the top traffic handler port in India since last 5 years.

106. On an average one post office serve 7175 person & 21.21 sq.km area.

107. AMPC stands for Automatic Mail Processing Centres.

108. The regulatory authority for telecom sector is Telecom Regulatory Authority of India. (TRAI).

109. NIXI stands for National Internet Exchange of India.

110. Indian telephone network id second largest in the world with a tele density of 72.23%.

111. GER stands for Gross Enrollment Ratio. The GER has increased to 104 in 2013.

112. The main vehicle for providing elementary education to all children is Sarva Shiksha Abhiyan

(SSA) launched in 2001-02.

113. National Literacy Mission was launched in 1998 for adult education.

114. Right of children to Free & Compulsory Education Act was passed in 2009.

115. Almost 95% of India`s global merchandise trade is carried through sea routes.

116. OECD – Organization for economic co – operation & development.

117. Oct.2012, India had more than 935 million telephone connections.

118. The National Rural Health mission was started in 2005.

119. There are three types of inflation – (a) Demand Pull Inflation (b) Cost Push Inflation (c)

Stagflation.

120. Public expenditure has been increased to 28% in 2012-13.

121. Approximately 40% of the government expenditure in India is on non developmental activities.

122. NLM was recast into Shakshar Bharat (SB) in 2009.

123. Inflation occurring because of increased money expenditure is called Demand Pull Inflation.

124. The combined phenomena of demand pull inflation & cost push inflation is called Stagflation.

125. Budget deficit is the difference between total receipts & total expenditure.

126. If borrowings & other liabilities are added to the budget deficit, we get fiscal deficit.

127. FRBM stands for Fiscal Responsibility & Budget Management.

128. FRBM Bill was passed in 2000 & FRBM Act was passed in 2003.


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129. In 2013-14 fiscal deficit as a proportion of GDP was 4.5%.

130. Budget deficit does not show the true picture of government liabilities.

131. Balance of Payment refers to the balance of all economic transactions between two countries

whereas balance of trade refers to the balance of export & imports between two countries.

132. Balance of payments = Balance of current account + balance of capital account.

133. India experienced surplus in the BOP in the Fifth Plan.

134. Special drawing rights (SDRs) were created in 1969 by IMF.

135. In 2008-09, Asia & ASEAN continued to be the major source of India`s imports accounting for

more than 60% (2008-09).

136. Forms of external assistance are grants & loans.

137. About 90% of external assistance received by India has been in the form of loans.

138. Amount of external debt in March,2013 stood more than ₹ 22,00,000 crores.

139. Concession on loans is @ 25% and total concessional loans is 10.5% of total loans (Sep –

end 2012).

140. As per the World Bank, among top 15 debtors countries of world. India improves its ranks

from 3rd debtor after Brazil and Mexico in 1991.

141. Fiscal deficit = Budget deficit + Borrowings.


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7. ECONOMICS REFORMSIN INDIA

1. Recovery of debt`s due to Banks & other financial institutions Act ,1993 was passed.

2. Debt Service Ratio = Principal+ Interest

Total Exports

3. The sectors in which economic reforms were introduced were (a) Industrial sector (b)

Financing sector (c) External sector (d) Fiscal policy.

4. At present, there are 5 industries for which licensing are compulsory.

5. At present, only two industries are reserved for public sector. These are (a) Atomic Energy (b)

Rail Transport.

6. DGTD stands for Director General of Trade Development.

7. 100% FDI was allowed in Drugs & Pharmaceuticals etc.

8. In Private sector banking & telecom sector 74% FDI was allowed.

9. Basel III has been introduced in 2013 and banks are required to implement it by 2019.

10. Fresh Guidelines for licensing of new banks were issued in Jan, 2000.

11. EXIM policy in 1992 gave a push to the process of liberalization.

12. India`s tariff rate in 2007-08 was 10%.

13. Cash Compensatory Scheme was abolished in July,1991.

14. Export Promotion Capital Goods (EPCG), introduced in 1990 & liberalized in 1992 was

introduced to encourage import capital goods.

15. FERA stands for Foreign Exchange Regulation Act in 1973.

16. Government of India constituted the Tax Reform Committee in August 1991.

17. The Tax rate for Domestic - 30% & Foreign -40%,50% on royalty.

18. Dematerialization of TDS certificate will take place from 1st April,2008.

19. Special Economic Zones (SEZ) were announced in 2000. It came into force in 2006.Till May

2009, 586 SEZ`s have been approved.

20. 26% FDI is allowed in defence production, insurance and printing media.

21. The nodal agency for registration of FIIs is the SEBI.

22. National debt constitution 60% of GNP in 1991.

23. MRTP= Monopolistic and Restrictive Trade Policy,1969.

24. FRBMA = Fiscal Responsibility and Budget Management Act, 2003.

25. In the Competition Act,2002 was inacted to replace MRTP Act.

26. Vishesh Krishi Upay Yojana was started to promote agricultural exports.

27. Essential pre-requisites for privatization are Liberalization & Deregulation.

28. Liberalization refers to relaxing of previous government restrictions.

29. Privatization refers to the transfer of assests, functions, services from public to private

ownership.

30. Disinvestments means disposal of public sector unit`s equity in the market or selling of public

investment to private entrepreneur.


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31. Various methods of disinvestments are:

a) Domestic Public Issues (issuing equity to retail investors).

b) Issue of Global Depository Receipts .

c) Cross Holding Method (selling part of shares from one PSU to another).

d) Warehousing (Governments own financial institutions buying Government stake).

e) Retaining Golden share (up to 26 percent).

f) Strategic Sale Method.

32. Disinvestment programme started in 1991-92.

33. Privatization can be achieved through (a) Franchising (b) Leasing (c) Contracting (d)

Divesture (most significant method).

34. The peak rate of custom duty was brought down to 10%in 2007-08.

35. India achieved full convertibility in current A/C in August,1994.

36. In 2013,India`s share in world export was 1.7%.

37. Our Foreign currency reserves are about 304 billion dollars in March 2014.

38. International Monetary fund was organized in 1946 & commenced its operation in

March,1947.

39. International Monetary fund is affiliated to UNO (United Nation Organization.

40. World Bank is also called as International Bank for Reconstruction & Development(IBRD). It

was formed in 1945 in Bretten Woods & has 188 countries as its members.

41. World Bank consist of : (a) International Development Association 1960 (IDA) (b)

International Finance Corporation (IFC) (c) Multilateral Investment Guarantee Agency

(1988)(MIGA) (d) International Centre for Settlement of Investment Disputes 1966 (ICSID)

42. WTO came into existence on 1st January,1995.It has 188 countries as its members.

43. IDA is known as the soft loan window or soft lending arm of World Bank.

44. MIGA helps encourage foreign investment in developing countries by providing guarantee to

foreign investors against loss caused.

45. ICSID settlement of dispute between foreign investor and host countries.


: 64 :

8 – MONEY & BANKING

1. In 1979, the RBI classified money stock into 4 categories as follows:

M1 = Currency with public i.e. coins and currency notes + Demand deposits of public known as

narrow money.

M2 = M1 + Post Office saving deposits.

M3 = M1 + Time deposits of the public with banks called broad money .

M4 = M3 + Total post office deposits.

The RBI working group has new redefined its parameters for money supply i.e. new monetary

aggregates (NM).

NM1 = Currency + Demand deposits + other deposits with RBI

NM2 = M1+ Time liabilities portion of saving deposits with banks + certificate of deposit issued

by bank +Term deposits maturing within a year excluding FCNR (B) Deposits.

NM3 = M2 + Term deposits with banks with maturity over one year + call/term borrowings of

the banking system.

M4 has been excluded from the scheme of monetary aggregate.

2. The basic distinction between broad money and narrow money is in treatment of time deposits

with banks .

3. M1 = narrow money and M3 = Broad Money

4. At the time of independence, India had 645 banks with more than 4800 branches.

5. Out of about 5.6 lacs villages in India, only 5000 were being served by commercial banks.

6. Population per branches office has reduced from 55,000 less than 12,000 in 2013.

7. The aggregate deposits of commercial banks have increased to ₹60,00,000 crores in 2012.

8. RTGS - Real Time Gross Settlement.

9. NEFT – National Electronic Funds Transfer.

10. In July 1969, 14 banks were nationalized and six more were nationalized in 1980.After this in

1993 two banks were merged so the present number is 19.

11. Commercial Banks were nationalized in 1969.

12. Second schedule of RBI Act, 1934.

13. In March 2013, bank lending in priority sector accounted for 36%.

14. The RBI has been vested with extensive power to control and supervise commercial banking

system under the Reserve Bank of India Act,1934 and the Banking Regulation Act,1949.

15. Issue of one rupee coins and notes is the responsibility of the government of India.

16. Minimum reserve system is the system of issue of currency note followed by RBI.

17. Bank rate is the rate at which RBI discounts the bills of commercial banks (9%) (2014).

18. Repo Rate is the rate at which banks borrows from RBI while reserve repo rate is rate at

which RBI borrows money from banks.

19. Cash reserve ratio refers to that portion of total deposits which commercial banks has to keep

with RBI in from of cash reserves.

20. SLR refers to that portion of total deposits which a commercial bank has to keep with itself in

form of liquid assets, cash , gold.

J. K. SHAH CLASSES CPT – ECONOMICS

: 65 :

Chapter – 1 – Introduction To Micro Economics MULTIPLE CHOICE QUESTIONS 1. Growth definition by Samuelson:

(a) has an element of time in it. (b) economic growth and welfare concepts. (c) talks about the problem of scarcity of resources. (d) All of the above

2. Who gave welfare definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 3. Who gave wealth definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 4. Who gave scarcity definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 5. Who wrote 'Nature and Significance of Economic Science'? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 6. Economics is (a) A science (b) An art (c) Both a science and an art (d) Neither a science nor an art 7. Positive economics is based on

(a) Cause and effect of facts (b) Ethics (c) Value judgments (d) All of the above

8. Normative economics is based on: (a) Cause and effect of facts (b) Ethics (c) Value judgments (d) Both (b) and (c)

9. When we start with particular facts and then makes general theory, it is called:

(a) Deductive method (b) Inductive method (c) Partial equilibrium method (d) None of the above

10. Merits of inductive method of economic theory can be:

(a) Realistic and reasonable method (b) Verifies economic facts (c) Scientific method (d) All of the above

11. Economic problem arises because:

(a) Wants are unlimited (b) Resources are scarce (c) Alternative uses of resources exist (d) All of the above


: 66 :

12. Central problem of an economy can be: (a) What goods to produce and how much to produce (b) How to produce (c) For whom to produce (d) All of the above

13. Production possibility curved (PPC) is defined as different combination of goodsand

services that can be produced by whom when the resources are fully employed? (a) firm (b) Industry (c) Economy (d) All of the above

14. Shape of PPC is:

(a) Downward sloping concave to the origin (b) Downward sloping convex to the origin (c) Downward sloping straight line to the origin (d) All of the above

15. PPC is also called:

(a) Opportunity cost curve (b) Transformation curve (c) Production possibility frontier (d) All of the above

16. PP' shifts rightwards to P1P1'. It shows:

(a)

(b) Improvement in technology in good Y (c) Improvement in technology in both good X and good Y (d) Stagnation

17. If earthquake takes place, then what will happen to PPC? (a) Shift inward (b) Remains same (c) Shift outward (d) All of the above

The figure below to answer Questions 36-39


: 67 :

18. Trade -off is shown by: (a) Point N to M (b) Point R to N (c) Point N to S (d) Point R to S

19. Which point "shows under utilisation of resources? (a) Point N (b) Point M (c) Point R (d) Points

20. Which point is not attainable?

(a) Point N (b) Point M (c) Point R (d) Point S 21. Capitalism is also called:

(a) Command economy (b) Planned economy (c) Laissez-faire economy (d) Perfectly competitive economy

22. Socialism is also called:

(a) Free-market economy (b) Laissez-faire economy (c) Command economy (d) Perfectly competitive economy

23. Who takes production decision in India?

(a) Price mechanism (b) Government (c) Both price mechanism and government (d) None of the above


: 68 :

Chapter – 2 – Theory Of Demand & Supply (UNIT -1) – LAW OF DEMAND

MULTIPLE CHOICE QUESTIONS

1. What does„ceteris paribus‟mean?

(a) Other things remaining constant (b) Price of other goods remaining constant (c) Other things are simultaneously changing (d) None of the above

2. What kind of relationship exist between demand for a goods and prices of its substitute

goods? (a) Direct (b) Inverse (c) No effect (d) Can be or inverse

3. Whatkindof relationship exist between price of goods and demand of its complementary goods? (a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse

4. What kind of relationship exist between income and demand of inferior good?

(a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse

5. What kind of relationship exist between income and demand of normal good?

(a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse

6. How will demand for a necessity behave with rise in income?

(a) Initially the demand rises and then become constant (b) Initially the demand shows no change and then it rises (c) Rises (d) Falls

7. How is law of demand expressed functionally?

(a) Dx =f(Px), ceteris paribus (b) Dx=f(Pz), ceteris paribus (c) Dx =f(Y), ceteris paribus (d) Dx=f(T), ceteris paribus

8. When demand curve is downward sloping, its slope is _______. (a) Negative (b) Positive (c) Constant (d) Zero

9. Income effect states that as price of a good falls, demand rises because there isrise in

______. (a) Money income (b) Real income (c) Relative price of other goods (d) Marginal utility

10. Giffen good is:

(a) An inferior good (b) One with high negative income elasticity of demand (c) Consumed by low-paid workers (d) All of the above


: 69 :

11. Veblan good is: (a) Good of status (b) Consumed by very high income group (c) Like diamonds (d) All of the above

12. Law of demand does not hold in case of:

(a) Emergency (b) Expectation ofprice rise (c) Conspicuous goods (d) All of the above

13. Contraction of demand is shown by:

(a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve

14. Increase in demand is shown by: (a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve

15. Expansion of demand is shown by:

(a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve

16. When same units are demanded at a higher price, it shows:

(a) Increase in demand (b) Expansion in demand (c) Decrease in demand (d) Contraction in demand

17. When there is fall in the price of complementary good and rise in the price ofsubstitute

good, it shows: (a) Increase in demand (b) Expansion in demand (c) Decrease in demand (d) Contraction in demand

18. Coefficient of elasticity of demand is negative. It means:

(a) Consumers sometimes buy negative units of a commodity (b) Price and quantity demanded move in same direction (c) Law of demand holds (d) The two goods are complementary to each other

19. Ed= ______

(a)

.

(b)

.

(c)

.

(d)

.

20. Demand is elastic when:

(a) Price level is high (b) More substitutes are available (c) Income of the consumer is less (d) All of the above


: 70 :

21. When cross elasticity of demand is zero, then two goods are: (a) Substitutes (b) Complements(c) Not related (d) Perfect complements

22. When cross elasticity of demand is positive, then two goods are:

(a) Substitutes (b) Complements (c) Not related (d) Perfect complements

23. Cross elasticity of demand between two goods X and Z is given as:

(a) exz =

.

(b)exz=

.

(c) exz =

.

(d)exz =

.

24. Income elasticity is given as:

(a) ey=

.

(b)ey =

.

(c)ey =

.

(d)ey =

.

25. When income elasticity of demand is greater than one, then the good is:

(a) Luxury (b) Necessity(c) Poor quality necessity (d) Inferior good 26. When income elasticity of demand is between zero and one, the good is:

(a) Luxury (b) Necessity (c) Poor quality necessity (d) Inferior good

27. Geometric method of measuring point elasticity of demand is given by what ratio ' on the price axis?

(a)

(b)

(c)

(d)

28. When income elasticity of demand is negative, the good is:

(a) Luxury (b) Necessity (c) Poor quality necessity (d) Inferior goods 29. Price elasticity of demand on a linear demand curve at the x axis is equal to:

(a) zero (b) one (c) infinity (d) 0<Ed<1

30. Price elasticity of demand on a linear demand curve at the y axis isequal to: (a) Zero (b) One (c) infinity (d) 0<Ed<1

31. Price elasticity of demand of a horizontal demand curve is called: (a) Perfectly elastic (b) perfectly inelastic (c) Elastic (d) inelastic

32. Price elasticity of demand of a vertical demand curve is called : (a) Perfectly clastic (b) Elastic(c) Inelastic (d) Perfectly inelastic

33. When percentage change in quantity demanded is more than the percentage changein price than demand curve is: (a) Flatter (b) Steeper (c) Rectangular (d) Horizontal

34. Ed= 1 in case of: (a) Luxuries (b) Normal goods(c) Nacessities (d) Essential

35 . Ed = in case of: (a) Nuxuries (b) Normal goods(c) Necessities (d) perfect competition


: 71 :

(UNIT 2) – THEORY OF CONSUMER BEHAVIOUR MULTIPLE CHOICE QUESTIONS 1. In Marginal utility theory, utility is:

(a) An ordinal concept (b) A cardinal concept (c) Both ordinal and cardinal concept (d) None of the above

2. MU of the commodity when no commodity is consumed is:

(a) Maximum (b) Falling (c) Constant (d) Rising 3. MU of the commodity becomes negative when TU of the commodity is:

(a) Rising (b) Constant (c) Falling (d) Zero 4. When MU of the commodity is zero, slope of TU curve is:

(a) Zero (b) Rising (c) Failing (d) Constant 5. Saturation point means:

(a) TU is rising, and MU is falling (b) TU is falling and MU is negative (c) TU is maximum and MU is zero (d) Falling MU curve

6. Consumer surplus is the difference between the:

(a) Amount a consumer is willing to pay minus amount actually paid by the consumer (b) Amount a consumer actually paid minus the amount consumer is willing topay (c) Amount a consumer actually paid minus the amount charged by the seller (d) Amount a consumer is willing to pay minus the amount producer is wanting

7. MRS is given by

(a)

(b) ∆x-∆Y (c)

(d) ∆Y-∆X

8. Diminishing MRS means:

(a) Consumer wants to give up lesser units of Y in exchange for good X (b) Consumer wants to give up more units of Y in exchange for good X (c) Consumer wants to give up same units of Y in exchange for good X (d) None of the above

9. Higher Indifference curve means:

(a) Consumer has more income (b) Price of goods have reduced (c) Higher utility level (d) All of the above

10. A straight downward sloping indifference curve means: (a) MRS is constant (b) MRS is increasing (c) MRS is decreasing (d) MRS is zero

11. Decreasing slope of indifference curve is explained by: (a) Law of diminishing marginal returns (b) Law of diminishing MRS (c) Law of demand (d) Law of constant MRS


: 72 :

12. While deriving consumer's equilibrium, what is given? (a) Income of the consumer (b) Price of the commodities (c) Both income and price (d) None of the above

13. Point A is:

(a) Attainable (b) Not attainable (c) Desirable and attainable (d) Desirable and not attainable

14. When MRS is constant, X and Y are:

(a) Not related (b) Perfect substitutes (c) Perfect complements (d) Inferior goods

15. When two goods are perfect complements, then elasticity of substitution betweenthe two goods is: (a) Infinity (b) One (c) Zero (d) Between zero and infinity

16. Which of the following is the property of indifference curves?

(a) They are downward sloping (b) They are convex to the origin (c) They are non-intersecting (d) All of the above

17. Which theory assumes ordinality of utility?

(a) Indifference curve theory (b) Marginal utility theory (c) None of the above (d) Both (a) and (b)

18. When MRS is rising, what shape will indifference curve take?

(a) Convex to the origin (b) Concave (c) Straight line (d) Rising


: 73 :

(UNIT -3 ) – SUPPLY MULTIPLE CHOICE QUESTIONS 1. Supply is that part of stock which:

(a) Selller is ready to sell at a certain price during a certain time (b) Seller is ready to sell (c) Wholesaler is ready to sell to retailers (d) Wholesaler is ready to sell to buyers

2. Supply function is a functional relationship between quantity supplied of a commodity and _________ : (a) Factors affecting supply (b) Price of the commodity (c) State of technology (d) Government policy

3. What is constant in the law of supply? (a) Price of related goods (b) State of technology (c) Cost of production (d) All of the above

4. When supply curve is upward sloping, its slope is ______. (a) Positive (b) Negative (c) First positive then negative (d) Zero

5. Market supply curve is ________ summation of individual supply curve: (a) Horizontal (b) Vertical (c) Can be both horizontal or vertical (d) None of the above

6. Movement along the supply curve is also called:

(a) Change in supply (b) Change in quantity supplied (c) Contraction in supply (d) Income in supply

7. An upward movement along a supply curve shows:

(a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply

8. A rightward shift in supply curve shows:


9. When less quantity is supplied at a lower price, it shows:


10. When same quantity is supplied at a higher price, it shows: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply

11. Elasticity of supply is given by the formula:

(a)

.

(b)

.

(c)

.

(d)


: 74 :

12. Slope of supply curve is given by the formula:

(a)

(b)

(c)

(d)

13. The value of elasticity of supply ranges from: (a) Zero to infinity (c) Minus infinity to plus infinity (b) One to infinity (d) Zero to minus infinity. 14. When supply curve is vertical, Es = _____?

(a) Zero (b) 1 (c) (d) Es> 1 15. When to a change in price there is lesser change in quantity supplied then supplycurve

is: (a) Upward sloping originating from x-axis (b) Upward sloping originating from origin (c) Upward sloping originating from j-axis (d) Horizontal

16. When to a change in price there is more change in quantity supplied then supplycurve

is: (a) Upward sloping originating from x-axis (b) Upward sloping originating from origin (c) Upward sloping originating from >'-axis (d) Horizontal

17. Arc elasticity of supply is given by the formula:

(a)

.

(b)

.

(c)

.

(d)

.

18. If value of Es> 1, it is called:

(a) Elastic supply (b) Inelastic supply (c) Perfectly elastic supply (d) Perfectly inelastic supply


: 75 :

Chapter – 3 – Theory Of Production & Cost (UNIT 1) – THEORY OF PRODUCTION

MULTIPLE CHOICE QUESTIONS 1. Creation of economic utility can be:

(a) Form utility (b) Time utility(c) Place utility(d) All of the above 2. Land is a ______factor of production:

(a) Primary (b) Derived (c) Secondary (d) Active 3. Supply of land is:

(a) Variable (b) Inelastic (c) Perfectly inelastic (d) Elastic 4. Feature of land is:

(a) It cannot be destroyed (b) It is a static factor (c) It has no cost of production (d) All of the above

5. When land differs in fertility, it is called:

(a) Heterogeneity of land (b) Homogeneity of land (c) Extensive cultivation of land (d) All of the above

6. Labour is defined as:

(a) Mental exertion to create or produce goods and services (b) Physical exertion to create or produce goods and services (c) Both mental and physical exertion to create and produce goods and services (d) None of the above

7. Feature of labour: (a) It cannot be stored (b) Labourer has to work in person (c) Labourer sells his service (d) All of the above 8. Capital include:

(a) Producer goods (b) Inventory of material goods (c) Consumer goods (d) All of the above

9. Building, bridges and equipments are an example of:

(a) Physical capital (b) Human capital (c) Circulating capital (d) Floating capital

10. Education, better skill, training and good health are examples of:

(a) Physical capital (b) Human capital (c) Circulating capital (d) Floating capital

11. Capital formation is defined as surplus of:

(a) Production over consumption in an accounting year (b) Consumption over production in an accounting year (c) Investment over production in an accounting year (d) Investment over consumption in an accounting year


: 76 :

12. Capital formation leads to: (a) More productive capacity of an economy (b) More employment opportunities (c) More growth of an economy (d) All of the above

13. What should be done after savings have been created?

(a) investment of saving (b) mobilisation of savings (c) Both investment and mobilization of savings (d) None of the above

14. Enterpreneur is a person who is a (an) :

(a) Organiser (b) Manager (c) Risk taker (d) All of the above

15. Function of entrepreneur ca be : (a) To initiate a business enterprise (b) To take advantages or changes in a dynamic economy (c) To bear uncertainties (d) All of the above

16. Production function means: (a) Physical relationship between inputs used and output (b) Technical relationship between inputs used and output (c) Financial relationship between inputs used and output (d) Both physical and technical relationship between inputs used and output

17. Short-run production function means:

(a) At least one factor is in fixed supply (b) Two factors arc in fixed supply (c) All factors are in fixed supply (d) One factor is in variable supply

18. When TP is falling, then MP is: (a) Falling (b) Negative (c) Zero (d) Maximum

19. When TP is maximum, MP is:

(a) Falling (b) Negative (c) Zero (d) Maximum 20. When TP is at its point of inflexion, the MP is:

(a) Falling (b) Negative (c) Zero (d) Maximum 21. When AP = MP, AP is:

(a) Falling (b) Negative (c) Zero (d) Maximum 22. Stage II of law of Variable Proportions is called:

(a) Diminishing returns (b) Decreasing returns (c) Falling returns (d) Negative returns

23. In stage II of law of Variable Proportions, both AP and MP are: (a) Falling but positive (b) Rising (c) Falling and become negative (d) None of the above


: 77 :

24. Marketing economies arises because a large firm: (a) Has bargaining power (b) Can grant margins to wholesalers (c) Can take up advertising (d) All of the above 25. Technical economies can be: (a) Economies of superior techniques(b) Economies of increased dimensions (c) Economies of linked processes (d) All of the above 26. Decreasing return to scale occurs when: (a) Output falls (b) Output rises in less than proportion to increase in inputs (c) Returns are decreasing because inputs are not there (d) None of the above 27. Returns to scale occur:

(a)In the long-run (b) When all inputs are increased (c) When the increase in inputs is in the same proportion (d) All of the above

28. Which is the best stage in returns to scale: (a) Increasing returns (b) Constant returns (c) Decreasing returns (d) None of the above

29. Which is the best stage in law of Variable Proportions: (a) Increasing returns (b) Diminishing returns (c) Constant returns (d) Negative returns


: 78 :

(UNIT-2)–THEORY OF COST MULTIPLE CHOICE QUESTIONS 1. Production function together with _________determines the cost of commodity: (a) Profit Margin (b) Factor prices (c) Depreciation charges (d) All of the above 2. Cost of a commodity together with _________determines prices of commodity:

(a) Profit margin (b) Factor prices (c) Depreciation charges (d) All of the above

3. The supply curve together with ________determines equilibrium prices and quantity (a) Demand curve (b) Cost of production (c) Profit margin (d) Production function

4. Cost of next best alternative opportunity given up is called:

(a) Outlay cost (b) Opportunity cost (c) Explicit cost (d) Implicit cost

5. ________ cost is a payment concept (a) Explicit (b) Implicit(c) Opportunity (d) None of the above

6. Accounting cost + normal return on capital invested by an entrepreneur himself =

________. (a) Explicit cost (b) Economic cost (c) Imputed cost (d) Direct cost

7. Fixed cost is also called: (a) Sunk cost (b) Supplementary cost (c) Overhead cost (d) All of the above

8. Fixed cost is like:

(a) Overhead expenses (b) Salaries (c) Depreciation of machinery (d) All of the above

9. TC curve is ______ shaped starting from ______.

(a) Inverse-S, origin (b) Inverse - S, total fixed cost level (c) Straight line, average fixed cost level (d) Straight line, total fixed cost level

10. AVC is defined as: (a) Variable cost per unit of output produced (b) Cost of one unit of output produced (c) Additional cost of one unit of output produced (d) None of the above


: 79 :

11. When AC = MC, AC is ______. (a) Minimum (b) Falling (c) Rising (d) Maximum

12. Total cost at zero level of output will be = ______ ?

(a) TFC (b) TVC (c) AC (d) AFC

13. MC curve is ______ shaped. (a) L-shaped (b) Straight line(c) U-shaped (d) Inverses-shaped

14. Reason for the shape of MC curve is:

(a) Law of Variable Proportions (b) Returns to Scale (c) Law of diminishing cost (d) Law of increasing cost

15. The _____ distance between TVC and TC is _____ . (a) Vertical, TFC (b) Horizontal, TFC (c) Horizontal, AFC (d) Vertical, AFC

16. How many costs exist in the long run ? (a) 1 (b) 3 (c) 2 (d) 7

17. How many costs exist in the short –run ?

(a) 1 (b) 3 (c) 2 (d) 7 18. What happens when the most appropriate plant size is not built?

(a) Cost rises (b) Production falls (c) Profit rises (d) All of the above

19. Long-run AC curve is also called:

(a) Planning curve (b) Envelope curve (c) Cost frontier (d) All of the above

From the Table given below, answer question 26 to question 31 20. What is the value of TFC when 1 unit of output is produced?

(a) 100 (b) 80 (c) 10 (d) 50 21. What is TVC when 1 unit of output is produced?

(a) 20 (b) 30 (c) 38 (d) 60 22. What is the value of AFC when 2 units of output are produced?

(a) 80 (b) 100 (c) 40 (d) 0 23. What is the value of AVC when 3 units of output are produced?

(a) 20 (b) 19 (c) 30 (d) 3

Units TC

0 80

1 100

2 118

3 140


: 80 :

24. What is the value of MC when 2 units of output are produced? (a) 18 (b) 20 (c) 22 (d) 24

25. What is the value of TVC when 3 units of output are produced?

(a) 60 (b) 20 (c) 38 (d) 30 26. (AC - AVC) x output = ______?

(a) TFC (b) AC (c) AFC (d) TVC 27. When long-run AC is falling, it is tangent to________of the short-run AC curve: (a) Falling portion (b) Rising portion (c) Minimum point (d) Can be any of the situation given above. 28. When long-run AC is minimum, it is tangent to _______ of the short run ACcurve: (a) Falling portion (b) Rising portion (c) Minimum point (d) Can be any of the situation given above. 29. When long-run AC is rising, it is due to:

(a) Law of variable proportion (b) Decreasing returns (c) Diminishing returns (d) Negative returns

30. When both AC and MC are rising,rises at a faster rate: (a) AC (b) MC (c) AVC (d) AFC

31. AC cannot cut AVC because: (a) AC includes AFC (b) AFC is a rectangular hyperbola (c) Both the above points (d) None of the above 32. Which costs are absent in the long-run?

(a) AFC (b) TFC (c) Both AFC and TFC (d) TVC


: 81 :

Chapter – 4 – Price Determination Under Different Market CHUNIT 1 – MEANING & TYPES OF MARKET

MULTIPLE CHOICE QUESTIONS 1. Durable goods will have a:

(a) Wider market (b) Narrow market (c) Local market (d) State level market

2. Perishable goods will have a:

(a) Wider market (b) Narrow market (c) International (d) State level market

3. Homogenous product exists under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

4. One seller exists under:

(a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

5. Selling cost is zero under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

6. Limited monopoly power of making the price exists under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

7. Large amount of selling cost is incurred under:


8. Commodity is unique with no close substitutes under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

9. Entry is restricted under:


10. Demand curve is perfectly elastic under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

11. Demand curve is elastic under :



: 82 :

12. Demand curve is inelastic under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

13. Differentiated but close substitutes exist under :


14. Perfect mobility of factors exist under:

(a) Perfect competition (b) Oligopoly (c) Monopolistic competition (d) Both perfect competition and oligopoly

15. Entry and exit are free under:

(a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) Both perfect and monopolistic competition

16. Entry and exit are restricted under:

(a) Monopoly (b) Oligopoly (c) Both monopoly and oligopoly (d) Perfect competition

17. Demand curve is undefined under: (a) Monopoly (b) Oligopoly (c) Both monopoly and oligopoly (d) Perfect competition

18. Which market structure has considerable degree of monopoly power?

(a) Oligopoly (b) Monopolistic competition (c) Perfect competition (d) Monopoly

19. When there are two sellers what is the market structure called?

(a) Oligopoly (b) Monopoly (c) Trupoly (d) Duopoly

20. In which market structure, the concept of industry is undefined? (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) Duopoly

21. What word is used instead of industry in monopolistic competition? (a) Product firm (b) Competing firm(c) Cluster (d) Group

22. Who coined the term monopolistic competition?

(a) Chamberlin (b) Joan Robinson (c) Robbins (d) Marshall 23. What makes pure competition a perfect market?

(a) Perfect knowledge (b) Perfect mobility of factors of production (c) Absence of transportation cost (d) All of the above

24. What brings about pure competition?

(a) Large number of buyers and sellers (b) Homogenous product (c) Free entry and -wit of firms (d) All of the above


: 83 :

25. Homogenous products means products are: (a) Perfect substitutes (b) Identical (c) Cross elasticity between products is infinity (d) All of the above

26. Monopoly means: (a) Single firm (b) No close substitutes (c) Barriers to entry (d) All of the above

27. Discriminating monopoly means:

(a) Different prices are changed (b) Consumers might be same or different (c) Commodity is same (d) All of the above

28. When demand is inelastic, MR is _______? (a) Zero (b) Positive (c) Negative (d) Maximum

29. AR is always equal to______?

(a) Revenue (b) Price (c) Cost (d) Profit


: 84 :

(UNIT 2) – DETERMINATION OF PRICE

MULTIPLE CHOICE QUESTIONS 1. Who said that demand and supply are like two blades of a pair of scissors?

(a) Adam Smith (b) Marshall (c) Ricardo (d) Samuelson 2. In the ______ period, supply is fixed.

(a) Short (b) Very short (c) Long (d) Very long 3. At a price above the equilibrium price, there is:

(a) Excess supply (b) Excess demand (c) Ceiling (d) Flooring 4. At a price below the equilibrium price, there is:

(a) Excess supply (b) Excess demand (c) Ceiling (d) Flooring 5. When demand increases with no change in supply, equilibrium priceand quantity

(a) Rises, rises (b) Rises, falls (c) falls, falls (d) Fall rise 6. When demand decreases and there is no shift in supply , the equilibrium price

_____and quantity_______ . (a) Rises, rises (b) Rise , Fall (c) Falls, falls (d) Fall , Rise

7. When supply increases and there is no change in demand , then equilibrium price

______and quantity_______ . (a) Falls, rises (b) Rise , Fall (c) Rises, rises (d) Fall ,falls

8. When supply decreases and there is no change in demand , then equilibrium

price_____ and quantity ______. (a) Falls, rises (b) Rise , Fall (c) Rises, rises (d) Fall, Rise

9. When both demand and supply increases in the same proportion then equilibrium

price will_______ (a) Remain the same (b) Rise (c) Fall (d) None of the above

10. When both demand and supply decreases in the same proportion then equilibrium

price will_______. (a) Remain the same (b) Rise (c) Fall (d) None of the above

11. When increase in demand is more than increase in supply , then equilibrium price

will_______ (a) Remain the same (b) Rise (c) Fall (d) None of the above

12. When increase in demand is more than increase in supply , then equilibrium quantity

will _____ (A) Remain the same (b) Rise (c) Fall (d) None of the above

13. When increase in demand is equal to decrease in supply, then equilibrium quantitywill (a) Remain the same (b) Rise (c) Fall (d) None of the above


: 85 :

14. When decrease in demand is equal to increase in supply, then equilibrium pricewill .

(a) Remain the same (b) Rise (c) Fall (d) None of the above

15. When decrease in demand is equal to increase in supply, then equilibrium price will ______. (a) Remain the same (b) Rise (c) Full (d) None of the above


: 86 :

(UNIT 3) – PRICE – OUTPUT DETERMINATIONOF DIFFERENT MARKET FORMS

MULTIPLE CHOICE QUESTIONS 1. Total revenue is defined as : (a) Revenue per unit of commodity (b) Addition to revenue when one more unit of commodity is sold (c) Proceeds from the sale of commodity (d) All of the above 2. Under perfect competition, shape of TR curve is: (a) Horizontal (b) Inverted –U shaped (c) Straight positivity sloping line from origin (d) Inverse – S shaped 3. Under monopoly, shape of TR curve is: (a) Horizontal (b) Inverted –U shaped (c) Straight positivity sloping line from origin (d) Inverse – S shaped 4. Under perfect competition, MR curve: (a) Coincides with demand curve (b) Starts from same point as the demand curve but falls at twice the rate (c) Vertical (d) Inverted –U shaped 5. Under monopoly, MR curve: (a) Coincides with demand curve (b) Starts from same point as the demand curve but falls at twice the rate (c) Vertical (d) Inverted –U shaped 6. What is the basic condition regarding slope of MR and MC curve for equilibrium? (a) Slope of MC > slope of MR (b) Slope of MC< slope of MR (c) Slope of MC = slope of MR (d) All of the above 7. When MR is a horizontal line, its slope is _______ (a) Zero (b) one (c) Infinity (d) positive 8. Accounting profit = Total revenue minus________. (a) Total explicit cost (b) Total implicit cost (c) Total cost (d) Average cost 9. When AR is above AC ,Firm earns: (a) Supernormal profit (b) Loss (c) Breakeven point (d) Minimise losses 10. When AR = AC,firm is at: (a) Supernormal profit (b) Loss making point (c) Breakeven point (d) Minimise losses point


: 87 :

11. When AC is more than AR,What is the firm doing? (a) Making supernormal profit (b) Incurring losses (c) Having breakeven point (d) Minimising losses 12. When AR passes through minimum point of AVC, it is called : (a) Break even point (b) Shutdown point (c) Normal profit point (d) Supernormal profit point 13. What does perfectly competitive industry earn in the long –run? (a) Normal profit (b) Break even point (c) No profit, no loss (d) All of the above 14. Break even point means: (a) AR =AC (b TR = TC(c)No profit, no loss (d) All of the above 15. From where does the demand curve pass in case of perfectly competitive industry in the

long –run ? (a) From the minimum point of long - run AC curve (b) From the minimum point of short - run AC curve (c) From the falling portion of short -run AC curve (d) From the minimum point of MC curve 16. For price discrimination , it is essential that: (a) There is no contact among buyers (b) There is imperfect competition in the market (c) The elasticity of demand is different in different markets (d) All of the above 17. Excess capacity is the difference between : (a) Least cost output and profit maximising output (b) Maximum capacity and minimum capacity to produce (c) AR minus AC (d) All of the above 18. Oligopoly is caused by :

(a) Huge capital investment (b) Absolute cost advantage to the existing firms (c) Mergers (d) All of the above

19. Assumption of Sweezy- kinked demand curve model is: (a) Oligopolists do not co-operate (b) Oligopolists match price cuts (c) Oligopolists do not match price rises (d) All of the above 20. In Sweezy kinked –demand curve model, firms prefer to compete on the basis of:

(a) Quality (b) Product design (c) Advertisement (d) All of the above

21. Above the kink,the demand curve is : (a) Elastic (b) Inelastic(c) Perfectly elastic (d) Perfectly inelastic 22. Sweezy‟skinked demand curve model shows that prices are: (a) Rigid in an oligopolistic market (b) Fixed in an oligopolistic market (c) Sticky in an oligopolistic market (d) All of the above


: 88 :

Chapter- 5: Indian Economy (A Profile) Unit – 1:Nature of Indian Economy

MULTIPLE CHOICE QUESTIONS 1. Level of knowledge is measured in terms of

(a) Knowledge (c) Memory (b) Education (d) Training 2. As per latest report of UNDP, 2010 India‟s HDI ranking isout of 169 countries.

(a) 120th rank (c) 119th rank (b) 125th rank (d) 130th rank 3. As per 2013,HDR,India‟s rank among 187 countries was___

(a) 130th (c) 129th (b) 136th (d) None 4. Gini Index is used for the measurement of :

(a) Equality of income & wealth (b) Equality of income & expenditure (c) Inequality of income & wealth (d) Equality/ inequality of income & wealth

5. Gini index should lie (a) Below 0 (c) More than 0 (b) Below 1 (d) More than 0 but below 1.

6. Gini index in zero shows

(a) Perfect equality (c) Imperfect equality (b) Perfect inequality (d) Imperfect inequality

7. Gini-Index in one shows ____________

(a) Perfect – equality (c) Imperfect inequity (b) Perfect- inequality (d) None

8. Sector which include agriculture and other allied activities such as forestry, poultry

farming, animal husbandry etc, is known as : (a) Primary sector (c) Secondary sector (b) Tertiary sector (d) Organised sector

9. Sector which includes all types of manufacturing and construction activity is known as :

(a) Primary sector (c) Secondary sector (b) Tertiary sector (d) Organised sector

10. Sector which includes trade, transport, banking, communication and services. is known

as: (a) Primary sector (c) Secondary sector (b) Tertiary sector (d) Organised sector

11. Which of the following does NOT contribute to the development of the India economy?

(a) Population growth (c) Modern technology (b) Rising industrial output (d) Green revolution


: 89 :

Chapter- 5: Indian Economy (A Profile)

Unit – 2: (Role of Different Sectors in India-Agriculture, Industry, Services)

1. Five crops, wheat, rice, bajra, Jawar & Maize are restricted to : (a) Operation flood programme (c) HYVP programme (b) Green revolution programme (d) None

2. High yielding variety programme (HYVP) stressed upon the use of

(a) High-yielding varieties of seeds (b) Proper use of irrigation facilities, pesticides and insecticides (c) Extensive use of fertilizers (d) All of the above

3. Green revolution is also known as (a) Rice revolution (c) Wheat revolution (b)Maize revolution (d) Forest revolution

4. Which one of the following measures have been adopted to modernize Indian agriculture? (a) Use of HYV seeds (b) Expansion in area under irrigation (c) Adequate supply of credit (d) All of the above

5. NABARD is a

(a) Subsidiary of the R.B.I. (c) Cooperative bank (b) Private bank (d) Autonomous public sector institution.

6. Productivity of Indian agriculture is low because of:

(a) Inefficient farming techniques (b) Lack of cheap and easy availability of credit (c) Absence of irrigation over a large part of the sown area (d) All of the above

7. Which of the following is correct regarding RRB?

(a) Its chairman is appointed by the sponsor Bank in consultation with NABARD (b) Its authorised capital is provided by the sponsor bank (c) Its progress is monitored by the sponsor bank (d) All of the above

8. The NABARD work as

(a) The only body looking after all the needs of credit of farmers (b) Successor to RRB (c) An alternative agency to provide rural credit and supplement state co-operative

credit societies (d) An apex body to look after the credit requirements of the rural sector

9. NABARD was established on the recommendation of : (a) Public accounts committee (c) Narasimhan committee (b) Shivaraman committee (d) None

10. Which of the following has been specifically established to meet the requirements of credit of the farmers & villagers? (a) ICICI Bank (c) SBI (b) RRB (d) EXIM Bank


: 90 :

Chapter- 5: Indian Economy (A Profile)

Unit – 3: (National Income in India) MULTIPLE CHOICE QUESTIONS : 1. GNP at market price minus is equal to GDP at market price. (a) Depreciation (b) Direct taxes (c) Subsidies (d) Net income from abroad. 2. Net National Product at factor cost is :

(a) Equal to National income (b) Less than National income (c) More than National income (d) Sometimes less than national income & sometimes more than it.

3. Identify the items which is not a factor payment.

(a) Free uniform to defense personnel. (b) Salaries to the members of parliament. (c) Imputed rent of an owner occupied building. (d) Scholarships given to the scheduled cast students.

4. Demand for intermediate consumption arises in

(a) Consumer households (b) Govt enterprises only. (c) Corporate enterprises only (d) All producing sectors of an economy

5. Demand for final consumption arises in :

(a) Household sector only. (b) Govt. sector only. (c) Both household & govt. sectors (d) Neither household nor govt. sector.

6. Which of the following is not to be included in National Product? (a) Wheat produced by the farmer and consumed by him (b) House built by the owner himself (c) Old House sold by its owner X to Y (d) Machine made by firm A

7. The term „subsidies‟ includes :

(a) Transfer by government or by business firms (b) Transfer in business firms to individuals (c) Payment in exchange for which no goods or services are provided (d) Payments to business in exchange for which no goods or services are provided

by government. 8. The „3‟ methods of calculating NI measure :

(a) The same thing from different angles (b) Different things from different angles (c) Different things from same angles (d) The same thing from the same angles


: 91 :

9. Which of the following is an example of double counting in the computation on national Income? (a) Sale of bread by the baker to the consumer (b) A doctor going to examine his patient charging a heavy fee (c) Electricity consumption by the cotton textile mills (d) Electricity consumption by the households of a city

10. As the consequences of double counting NI gets :

(a) Over estimated (c) Rightly estimated (b) Under estimated (d) None

11. Which of the following is not necessarily a final product ?

(a) Finished product (b) Product sold to end users (c) Product lying with shopkeepers as stock (d) Product used for self consumption


: 92 :

Chapter- 5: Indian Economy (A Profile) Unit – 4: (Basic Understanding of Tax System)

Multiple Choice Questions

1. Which is not a benefit of the VAT. (a) Overall tax pressure/burden will be rationalised (b) Set off will be given for input tax as well as tax paid on previous purchase (c) Price will be generally in high (d) Other taxes such as turnover tax, surcharges etc. will be abolished. 2. Which of the following is a progressive tax? (a) Income tax (b) Sales tax (c) Custom duty (d) Excise duty 3. The most important source of public revenue is (a) Taxes (b) Interest (c) Dividends and profits (d) Licence fees 4. Which of the following are direct taxes? i) corporation tax ii) income-tax iii) wealth-tax iv) gift tax (a) (i) and (ii) only (b) (i) (ii) and (iii) only (c) (i), (iii) and (iv) only (d) (i), (ii), (iii) and (iv) 5. Which of the following taxes does not directly increase the price of the commodity to the

buyers? (a) Import duty (b) Income Tax (c) Sales tax (d) None of the above 6. Which of the following are indirect taxes? i) Custom duties ii) Excise duties iii) Sales-tax iv) Estate duty (a) (i), (ii), (iii) & (iv) (b) (ii), (iii) & (iv) (c) (i), (ii) & (iii) (d) (i), (ii), & (iv) 7. Estate duty was levied on . (a) The total property (b) Total wealth (c) The total capital introduced in a company (d) The total property passing to the heirs on the death of a person. 8. Which of the following taxes are levied by the centre and not divided between the

Centre and the States? (A) Income tax (B) Union Excise duties (C) Custom duties (D) Corporation tax (a) A, C and D (b) C and D only (c) A, B and D (d) B, C and D 9. Which one of the following types of revenue is NOT shared by the Central Government

with the State Governments? (a) Central Sales tax (b) Income Tax (c) Excise Duty (d) Customs duty


: 93 :

10. Raja Chelliah Committee was set up to make proposals on (a) Banking reform (b) Tax reform (c) Trade reform (d) Land reform 11. States earn maximum revenue through (a) Land revenue (b) Custom duties (c) Commercial taxes (d) Excise duties on intoxicants


: 94 :

Chapter- 6 Unit – 1 (Population) (Select Aspects of Indian Economy)

Multiple Choice Questions 1. Which of the following states / UTs is highly densely populated?

(a) Delhi, (b) Pondichery, (c) Bihar, (d) Chandigarh 2. According to 2001 census, the male literacy is highest in

(a) Kerala, (b) Maharashtra, (c) Mizoram, (d) West Bengal

3. The female literacy is highest in

(a) Kerala, (b) Maharashtra, (c) Mizoram, (d) West Bengal

4. India is passing through –––––– stage of Demographic transition (a) Fourth (b) Third (c) First (d) Second

5. Over the years, birth rate in India has –––– & death rate has –––––

(a) Fallen, Fallen (b) Risen, Fallen (c) Risen, Risen (d) Fallen, Risen

6. Among all the states ________________ has the lowest birth rate & ____________ has

the highest birth rate. (a) Kerala, Uttar Pradesh (c) West Bengal (b) Kerala, West Bengal (d) Kerala, Bihar

7. Which state has the lowest life expectancy at birth! (a) Kerala (b) Bihar (c) Madhya Pradesh (d) Uttar Pradesh

8. Maternal Mortality Rate is highest in _____:

(a) Kerala (b) Bihar (c) Madhya Pradesh (d) Uttar Pradesh 9. Which state shows lowest & which shows highest Infant Mortality Rate:

(a) Kerala, UP (b) Bihar, Tamil Nadu (c) Kerala, Madhya Pradesh (d) Uttar Pradesh, Bihar

10. In the 2nd stage of Demographic Transition Theory, birth rate comes down ______ death rate comes down ______ (a) Steadily, very lightly (c) Slightly, very heavily

(b) Slightly, very slowly (d) None

11. The population census provides comprehensive details of _________ in a country.

(a) Size of population (b) nature of birth rate (c)Demographic trends (d)All

12. Among the states and union territories _____continues to the most populous state, followed by Maharashtra :

a) Uttar Pradesh (b) West Bengal (c) Haryana(d) None.

J.K.SHAH CLASSES C.P.T. – ECONOMICS RAPID REVISION

: 95 :

Chapter- 6 - Unit – 2 (Poverty) Multiple Choice Questions

1. On which one of the following basis the Planning Commission has defined poverty in India ? (a) Nutritional requirements of 2,400 calories per person per day for urban areas. (b) Nutritional requirements of 2,100 calories per person per day for rural areas (c) Neither of these (d) Both of (a) and (b)

2. Which one of the following measures cannot remove poverty ? (a) Population control (b) Government subsidies (c) Increase in production (d) Equitable distribution.

3. All estimates of the incidence of poverty are based on: (a) Head count (b) Family count (c) Both of the above. (d) None of the above.

4. According to the Planning Commission, how many average daily calories per person define the poverty line in urban areas ? (a) 2100 (b) 2400 (c) 2700 (d) 3000.

5. „„Direct Attack on Poverty‟‟ includes (a) JRY (b) IRDP (c) JRY and IRDP (d) None of the above.

6. ––––––– are often used for measuring poverty in relative sense: (a) Human Development Index (b) Gini-Coefficient (c) Planning Commission (d) All

7. Which of the following statement is correct?

(a) Gini coefficients are often used for measuring poverty in relative sense. (b) When poverty is related to the distribution of income or consumption

expenditure, it is absolute poverty. (c) In India, we mainly use the concept of relative poverty for measuring poverty. (d) None.

8. Identify the incorrect statement. (a) The problems of poverty & unemployment are inter-related. (b) The problem of poverty has been solved in India. (c) Growing population has also contributed to the problem of poverty in India. (d) None

9. SJSRY Stands for : (a) Shahari Jeewansudhar Rashtriya Yojana. (b) Sampoorna Jeewan Shahari Rozgar Yojana. (c) Swarna Jayanti Shahari Rozgar Yojana. (d) None


: 96 :

Chapter- 6 Unit – 3 (Unemployment)

Multiple Choice Questions

1. Works force refers to that part of (a) Labour force which is employed (b) Population which is unemployed (c) Population which is forced to work (d) Labour force which is unemployed

2. The NSS estimates of labour force and unemployment are based on

(a) Usual status, daily status and weekly status concepts (b) Time willingness and productivity (c) Income recognition and production (d) Labour coefficient concepts

3. Some people who are unwilling to work at the prevailing wage rate is callled :

(a) Frictional unemployment (b) Casual unemployment (c) Disguised unemployment (d) Voluntary unemployment

4. Seasonal unemployment refers mainly to

(a) Private sector industry (b) Public sector industry (c) Agriculture (d) Banks

5. Which type of unemployment characterises in developed economies ?

(a) Cyclical unemployment, (b) Frictional unemployment (c) Disguised unemployment (d) Structural unemployment

6. The nature of usual status unemployment is :

(a) Seasonal (b) Disguised (c) Chronic (d) Frictional 7. _____ measure estimates the number of persons is chronically unemployed

(a) Usual Status (b) Current weekly status (c) Current daily status (d) Current yearly status.

8. Voluntary unemployment may be a national waste of _____________

(a) Capital (b) Wealth (c) Human energy (d) Natural resources.

9. When unemployment is for long term feature of a country is called __________ . (a) Structural unemployment (b) Disguised unemployment (c) Casual unemployment (d) Chronic unemployment.

10. Open unemployment refers to :

(a) Usual status (b) Weekly status (c) Daily status (d) None of these.

11. ––––– is defined as the number of person in the labour force per 1000 persons

(a) WFPR (b) LFPR (c) CWS (d) CDS


: 97 :

Chapter- 6 Unit – 4 (Infrastructural Challenges)

Multiple Choice Questions 1. The first railway train In India steamed off in 1853 from

(a) Bombay to Thane (c) Delhi to Meerut (b) Howrah to Burdwan (d) Bombay to Delhi

2. The principal means of transport of goods in India is:

(a) Railways (c) Roadways (b) Inland water ways (d) Airways.

3. The Railway system was started in India

(a) 1856 (b) 1863 (c) 1853 (d) 1893

4. “Pradhan Mantri Bharat Jodu‟ Pariyojana is related to : (a) Communication (c) Linking of rivers (b) Social Integration (d) Development of highways

5. “Pradhan Mantri Gram Sadak Yojana” is related to:

(a) Communication (c) Rural road connectivity (b) Social Integration (d) Development of highways

6. NHDP stands for : (a) National Hydro – Development project (b) National Highways-Development Project (c) National Hydel – Development Programme (d) None.

7. Which of the following statements is incorrect?

(a)The Indian road network is one of the longest network in the world. (b)The rural road network connects around 65% of all weather roads. (c)Most of the State Road Transport corporations are running on profits. (d)The national highways carry more than 40% of the total road traffic.

8. Of the major 12 ports ____ is the top traffic handler.

(a) Paradip (b) Cochin (c) Kandla (d) Mumbai 9. In the civil aviation sector, there are _______ parts.

(a) Two: operational, infrastructural (b) Four: operational, infrastructural ,development and social (c) Three: operational, infrastructural & development (d) All

10. With effect from Nov, 2010, the name of national aviation company ltd has been changed to ____________ (a) All India Ltd (c) Air India Ltd (b) National Airport Authority (d) None


: 98 :

Chapter- 6: Special Aspects of Indian Economy

Unit – 5: (Inflation)

Multiple choice question : 1. Inflation is the result of increase in the cost of production. This kind of inflation is

known as : (a) Cost-push inflation (b) Demand-pull inflation (c) Either (a) or (b) (d) None of these 2. Of the following which is a cause of cost push inflation? (a) Increased consumption expenditure (b) A reduction in taxation (c) Increase in demand (d) Increase in wages and salaries. 3. New inflation refers to (a) Demand pull inflation (b) Cost push inflation (c) Dynamic inflation (d) Full-employment inflation. 4. In India inflation is measured on the basis of :

(a) Whole sale Price Index (b) Consumer Price Index (c) Marshall Index (d) Both (a) and (b)

5. The price of a representative basket of wholesale goods is known as ______. (a) CPI (b) WPI (c) Cost of living Index (d)

None 6. WPI measuring basket comprises of ________ items which carry different weights (a) 660 (b) 676 (c) 680 (d) None 7. WPI measures _________ inflation, which includes entire set of commodities

(a) Demand-poll (b) Cost-push (c) Headline (d) None

8. Change in price level of consumer goods and services purchased by households is

measured by ____________. (a) WPI (b) CPI (c) Both (a) and (b) (d) None

9. There are _________ CPI indices in India.

(a) 4 (b) 2 (c) 3 (d) None 10. Consumption of industrial workers, agricultural labourers, urban- non-manual

employees & rural employees are measured by ___________ (a) CPI (b) WPI (c) Both (a) and (b) (d) None

11. Inflation results into (a) Higher unemployment (b) Higher price (c) Higher burden on economy (d) All of the above. 12. Inflation has an (a) Increasing effect on BOP. (b) Adverse effect on BOP (c) No effect on BOP (d) None of the above.


: 99 :

Unit – 6 : (Budget & Fiscal Deficits in India)

MULTIPLE CHOICE QUESTIONS

1. Deficit financing includes (a) Borrowing from the central bank (b) Issue of new currency by the government (c) Withdrawal of past accumulated cash balance by the government (d) All of the above.

2. If borrowings and other liabilities are added to the budget deficits we get___ , (a) Fiscal deficit (b) Primary deficit (c) Capital deficit (d) Revenue deficit

3. The Zero Base Budgeting approach has been adopted from (a) April 1, 1986 (b) April 1, 1987 (c) April 1, 1988 (d) April 31, 1987

4. The most important sources of Plan finance to cover up gap between intended

expenditure and available resources is in (a) Direct taxes (b) Indirect taxes (c) Deficit financing (d) Foreign aid.

5. Fiscal Policy means

(a) Planning policy (b) Credit policy (c) Taxation policy and policy of expenditure and public debt policy. (d) None

6. The process of budget making after revaluating every item of expenditure in every

financial year is known as (a) Deficit Budgeting (b) Zero Based Budgeting (c) Fresh Budgeting (d) Performance Budgeting

7. When the economy is experiencing deflation, what kind of a budget should be

prepared by the government? (a) Deficit budget (b) Surplus budget (c) Increase in direct taxes (d) Increase in indirect taxes.

8. What type of a budget should be prepared to curb an inflationary situation in the

economy? (a) Deficit budget (b) Surplus budget (c) Decrease in direct taxes (d) Decrease in indirect taxes.

9. Which of the following is not a productive public expenditure? (a) Expenditure on defence (b) Expenditure on infrastructure development (c) Expenditure on setting up basic industries (d) Expenditure to increase the welfare of the population.


: 100 :

Unit – 7 & 8 : (Balance of Payment & External Debt) Multiple choice question

1. How can a country rectify disequilibrium in the Balance of Payment ? (a) Through the exchange rate movement (b) By controlling the capital markets (c) By raising interest rates (d) By controlling inflation rates.

2. What is the fundamental rule of the Balance of Payment account ?

(a) The sum of current account and capital account should be equal to zero (b) Current account should be greater than capital account (c) Capital account should be greater than current account (d) The sum of current account and capital account should be greater than one.

3. Which of the following refers to Balance of Trade ?

(a) Economic transaction between the residents of different countries. (b) A record of import of visible and invisible goods. (c) A record of import and export of visible goods. (d) A record of export and import of both visible and invisible goods.

4. EPCG scheme stands for (a) Export Package for Capital Goods (b) Export Promotion Capital Goods (c) Excise Promotion Capital Goods (d) Excise Package for Capital 5. Devaluation means : (a) To reduce the value of home currency in other currency (b) To appreciate the value of home currency (c) To issue new currency in place of old currency (d) None of these. 6. By Devaluation, to rectify adverse B/P we can ________ export & _________ import. (a) Decrease, Decrease (b) Increase, Increase (c) Increase, Decrease (d) Decrease, Increase 7. Which steps improve adverse Balance of Payments ? (a) Overvaluation (b) Devaluation (c) Demonetization (d) None of these 8. Through which elasticity concept can a BOP crisis be tackled ? (a) Income elasticity (b) Price elasticity (c) Cross elasticity (d) Elasticity of demand. 9. In India export goods worth Rs. 20 crores and imports goods worth Rs. 30 crores, it

will : (a) Have a surplus of Rs. 10 crores in balance of trade (b) Have a deficit of Rs. 10 crores in balance of trade (c) Have a deficit of Rs. 50 crores in balance of trade

(d) Can‟t Say


: 101 :

Chapter- 7: Economic Reforms in India Unit – 1: (Economic Reforms in India)

1. Which of the following statements is correct with regard to external sector in the post

reform period? (a) Quantitative restrictions have been imposed on a number of tradable items. (b) Quantitative restrictions have been removed on most of the items except a few

goods. (c) The tariff walls have been further raised. (d) Foreign investment is now being discouraged.

2. When residents of a country acquire securities in a foreign country‟s stock & bond

market, it is called: (a) Foreign Direct Investment(FDI) (b) Foreign Portfolio Investment(FPI) (c) Foreign Investment Promotion Board (d) None 3. FPI is for ____term investment & FDI is for _____ term investment: (a) Short ; Long (b) Long ; Short (c) Medium ; Short (d) None 4. Securities and Exchange Board of India(SEBI) is related to : (a) Money market (b) Capital market (c) Bill market (d) All 5. FDI gets permission from:

(a) Foreign Investment Bureau (b) Foreign Investment Promotion Board (c) Foreign Banks (d) None

6. ___ ____ scheme has been revamped & recast into the 'served from India' scheme. (a) Export Promotion Capital Goods (EPCG) (b) Duty Free Export Credit (DFEC) (c) Duty Drawback (d) None

7. Devaluation of rupee was carried out in order to control :

(a) Adverse balance of payment (b) Adverse monetary position (c) Adverse fiscal policy (d) Adverse CRR.

8. Economic reform to the external sector does not include :

(a) Exchange rate stabilisation (b) Foreign investments (c) Export subsidies (d) Repo rate Policy.

9. "Vishesh Krishi Upaj Yojana" has been started to promote .

(a) Agricultural production (b) Agricultural marketing (c) Agricultural financing (d) Agricultural export.

10. "Served from India" scheme was introduced to accelerate growth of (a) Export of goods (b) Export of capital goods (c) Export of services (d) Export of agriculture goods.


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Unit – 2&3 : (Liberalisation, Privatisation, Disinvestment & Globalisation)

Multiple choice question

1. Globalisation involves i) increasing integration among national market ii) integration of financial market iii)

higher factor mobility and economies of trade iv) spread of knowledge and technology throughout the world.

Code : (a) (i) only (b) (i) and (ii)(c) (i), (iii) and (iv) (d) (i), (ii), (iii) and (iv) 2. __________of Indian Economy means having minimum possible restrictions on

economic relations with other countries. (a) Globalisation (b) Liberalization (c) Privatization (d) Economic reforms. 3. Globalisation includes (a) Free trade with less restriction on import and export (b) Free flow of technology (c) Free flow of capital (d) All of the above 4. In order to generate adequate resources for public sector enterprises to sustain their

growth, their had been an increasing demand for their . i) liberalisation ii) privatisation iii) disinvestment iv) globalisation Code : (a) (i) only (b) (ii) only(c) (i), (ii) and (iii) only (d) (i), (ii), (iii) and (iv). 5. Select the correct matching

(A) Liberalisation 1. refers to particular money transfer of owner-ship and control of PSUS to the private sector

(B) Privatisation 2.refers to relaxation of government's restrictions in the scope of economic and social policies

(C) Disinvestment 3. refers as a method of privatisation in which selling of government share in one PSU to other PSUs or private sector or banks was made.

Codes : (a) A(2) B(1) C(3) (b) A(1) B(3) C (2) (c) A(3) B(1) C(2) (d) A(1) B(2) C(3), 6. Main objective(s) for setting up of IMF is/are : i) To eliminate or reduce the existing 36 exchange control ii) To establish and maintain

currency convertibility with stable exchange rate. iii) To solve the short-term balance of payment problems faced by the country iv) To extend the multilateral trade and payments.

Code : (a) (i) & (ii) (b) (ii) & (iii) (c) (i), (iii) and (iv) (d) (i), (ii), (iii) & (iv) 7. International Bank for Reconstruction and Development (IBRD) is popularly known as. (a) International Bank (b) World Bank (c) Reconstruction Bank (d) Bank of Development. 8. World Bank provides on reasonable terms to its member countries. (a) Long term investment loan (b) Short term investment loan (c) Infrastructure loan (d) Mid-term investment loan.


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Chapter – 8 – Money and Banking

Unit – 1 : (money)


1. Money in traditional sense: (a) Serves as a medium of exchange (b) Serves as a store of value (c) Both a & b (d) Serves neither a medium of exchange nor a store of value 2. The chief function of money is that of (a) A medium of exchange (b) A reserve base for credit creation (c) Providing liquidity (d) None of the above. 3. When the commodity value of money equals its value as money, it is called (a) Illegal money (b) Full-bodied money (c) Token money (d) Fiat money 4. The issue of one rupee currency note in India is the liability at the: (a) Issue department of the RBI (b) Government of India (c) State bank of India (d) Banking department of the RBI 5. Which of the following will not come under narrow money? (a) Currency in circulation (b) Demand deposit (c) Time deposit (d) None 6. In the present context, total money stock in India refers to (a) M

1 (b) M2 (c) M

3 (d) M

4

7. The basic distinction between narrow and broad money is the (a) Treatment of Post-office deposits (b) Treatment of time deposits (c) Treatment of savings deposits (d) Treatment of currency 8. In the Indian economy, the greater portion of money consists of (a) Currency (b) Time deposits (c) Bank money (d) None of the above


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Unit – 2 : (Commercial Bank)


1. An increase in the public's preference for cash over deposits would lead to

(a) An increase in the money supply (b) A decrease in bank credit (c) An increase in bank credit (d) An increase in the rate of interest.

2. If a bank decides to "play it safe" it will be (a) Maximising liquidity while sacrificing potential income (b) Minimising safety while maximising liquidity (c) Maximising safety while minimising liquidity. (d) Minimising solvency while maximising risk. 3. Commercial banks are regarded as creators of money because

(a) They buy securities from the Central Bank (b) Their loans create doposits (c) They are bound to honour their obligations (d) None of the above.

4. Commercial banks in India were nationalized in 1969 because:

(a) There was urban bias. (b) Agriculture sector was neglected (c) There was concentration of economic power (d) All of the above

5. Nationalisation of banks aimed at all the following except:

(a) Removal of control by a few (b) Provision of credit to big industries only (c) Provision of adequate credit for agriculture, small industry & export units. (d) Encouragement of a new class of entrepreneur.


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Unit - 3 : (The Reserve Bank of India) Multiple choice question

1. What effect would the buying of securities by the central bank have on the money

supply? (a) Money supply decreases (b) Money supply increases (c) Money supply may increase or decrease (d) Money circulation is not affected by the buying selling of securities.

2. Which of the following selective credit control instruments is used against commercial banks who do not adhere to the credit regulations of the Central Bank? (a) Rationing of credit (b) Direct action (c) Changes in margin requirements (d) Regulation of consumer credit.

3. Which of the following selective credit control instruments is used to curb speculative

activities? (a) Direct action (b) Changes in margin requirements (c) Regulation of consumer credit (d) Moral suasion 4. Which of the following could be the results of the Central Bank selling government

securities? (a) It increases the quantity of money and credit (b) It reduces the quantity of money and credit (c) It reduces the quantity of money and increases the credit (d) It increases the quantity of money and reduces the credit. 5. The Central Bank can decrease the bank credit component of the money supply by (a) Lowering the cash reserve requirements (b) Increasing the bank rate (c) Lowering the bank rate (d) None of the above. 6. The Reserve Bank of India (RBI) acts as a banker's bank. This would imply which of

the following? I. Other banks retain their deposits with the RBI II. RBI lends funds to the commercial banks in times of need III. RBI advises the commercial banks on monetary matters. Select the correct answer using the codes given below : (a) (II) and (III (b) (I) and (II) (c) (I) and (III) (d) (I), (II) and (III)


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7. Moral suasion is (a) A term descriptive of the corrupt practices of many banks (b) A term applied to banks that are conservative in their banking practices (c) Persuasion of banks to adhere to Central Bank desires (d) None of the above. 8. In order to control credit (a) CRR should be increased & Bank rate should be decreased (b) CRR should be reduced & Bank rate should be reduced (c) CRR should be increased & Bank rate should be increased (d) CRR should be reduced & Bank rate should be increased. 9. During depression, it is advisable to: (a) Lower Bank Rate & purchase securities in the market (b) Increase Bank Rate & purchase securities in the open market (c) Decrease Bank Rate & sell securities in the open market (d) None


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1. Perfectly elastic demand curve implies that

A The Firm has no control over price B The firm can sell any quantity at the ruling price C The firm is price taker and output adjuster at ruling price D All a, b and c

2. The demand curve of a commodity faced by a competitive firm is –

A very elastic B perfectly inelastic C very inelastic D perfectly elastic

3. If the demand for the good is less elastic, the Demand Curve will be –

A Horizontal Line B Vertical Line C Downward Sloping to the right , flatter D Downward Sloping to the right, steeper

4. When the price of a Reynolds pen falls, ceteris peribus, buyers substitute Reynolds pen for

other pens that are now relatively more expensive. This is called• A Price effect B Substitution effect C Income effect D Veblen effect

5. If income Levels increase, and the demand for goods increase by more than proportionate

extent, such goods will be – A Inferior Goods B Necessary Goods C Luxury Goods D Nothing can be said

6. When the price of a substitute of X commodity falls, the demand for X commodity:

A Falls B Rises C Remains unchanged D Any of the above

7. Which of the following is not a method of measurement of price elasticity of demand in

economics A Total outlay B Total saving C Point method D Arc method

8. A good can be considered a normal good in economics if increase in disposable income of

the consumer causes A An increase in its demand B No change in demand C Decrease in demand D Less than proportionate change in demand

9. The coefficient of price elasticity of demand is calculated as

A The change in price divided by the change in quantity demanded B The percentage change in quantity demanded divided by the percentage change in price C The change in quantity demanded divided by the change in price D The percentage change in price divided by the percentage change in demand

COMBINED MICRO & MACRO MCQ’s

QUESTIONS


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10. Price elasticity of demand of a product will be more inelastic if A It forms a major part of consumer household budget B It forms a very small part of consumer household budget C It has many uses D It is a luxury good

11. All but one is incorrect with regard to the assumptions of marginal utility analysis

A Utility can be cardinally measured B The marginal utility of money remains constant C The consumer is rational D Preferences can be ranked

12. The concept of Consumer Surplus arises since for all earlier units purchased (i.e. prior to

equilibrium point)– A MU < Price B MU = Price C MU > Price D MU = Zero

13. The slope of indifference curve show –

A marginal rate of substitution B level of satisfaction to the consumer C elasticity of indifference curve D none of the above

14. The consumer will maximise his satisfaction and be in equilibrium at a point where– A Price line or budget line is tangent to an IC B Price line crosses an IC C Price line does not touch the IC D none of the above

15. Law of diminishing marginal utility may not apply to ______________:

A Money B Butter C Pepsi, Coke etc. D Ice cream 16. Which of the following is an assumption under Cardinal Approach to Utility Analysis?

A Measurability of Utility in monetary terms B Change in Marginal Utility of Money C Utility arises even at zero consumption D All of the above

17. Consumer Surplus is highest in the case of ______.

A Necessities B Luxuries C Comforts D All of the above 18. As per the assumptions to the Law of Diminishing Marginal Utility, in case of money, gold,

etc. a greater quantity may A Increase the lust and utility thereof B Decrease the lust and utility thereof C Not affect utility at all D Nothing can be said

19. A point above the Price Line will be….. the reach of the Consumer, at his present levels of income andspending. A Beyond B Within C Either (a) or (b) D Neither (a) nor (b)


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20. Which of the following is a property of an Indifference Curve? A It is convex to the origin. B The marginal rate of Substitution is constant as one moves along an indifference curve C Marginal utility is constant as one move along an Indifference Curve D Total Utility is greatest where the 45 degree line cuts the Indifference Curve

21. Which of the following statements is true?

A National income is the money value of final goods and services produced by a country during aperiod of 1 year.

B National income excludes the money value of service C National income excludes the money value of goods D None of the above is true.

22. Which is not the major source of Government Saving?

A Taxes B Surpluses of Public Enterprises C Transfer Payments D None of the above

23. Net Domestic Expenditure is Consumption Expenditure plus

A Net Foreign Investment B Net Foreign Investment plus Net Domestic Investment C Net Domestic Investment D Replacement Expenditure

24. Net national product at factor cost is also known as: A Net Domestic product B Gross National Product C National Income D Personal Income

25. Transfer payments refer to payments, which are made :

A Without any exchange of goods and services B To workers on transfer from one job to another C As compensation to employees D None

26. The difference between value of output and value added is :

A Depreciation B Intermediate Consumption C Net indirect taxes D NFIA

27. National income differs from Net National Product at market price by the amount of

A Current transfers from rest of the world B Net Indirect Taxes C National debt interest D If does not differ

28. Highly elastic negatively sloped demand curve is related to – A Monopoly B Monopolistic competition C Perfect competition D Both (a) and (b)

29. The industry‟s demand curve and the average revenue curve are same in case of

A Perfect competition B Monopoly C Oligopoly D None of the above


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30. Which of these does not apply to Monopolistic Competition? A Aggressive Advertising and Publicity B Product improvement and Development C Price Competition D Efficient after sales service

31. Toilet Soaps Industry is an example of

A Perfect Competition B Monopoly C Monopolistic Competition D Oligopoly

32. Which of these does not apply to Monopoly?

A Single Seller B Firm = Industry C Free Entry and Exit of Firms D No substitutes

33. A price War in an Oligopoly refers to

A Successive and continued price cuts by the Firms to increase sales and revenues B Free gift offers by all firms on competitive basis C Flooding the market with its goods by one Firm leading to price reduction by others D Increase in the price by one Firm and other Firms following in a reverse way by

decreasing theirprices 34. Under perfect competition the price of commodity

A Can be controlled by a firm B Cannot be controlled by a firm C Controlled up to some extent by firm D none of the above

35. There is no difference between firm and industry in case of• A Pure monopoly B Pure oligopoly C Duopoly D Perfect competition

36. Lux Supreme, Rexona, Dove Soap, Pears Soap, Liril Soap, etc. indicates A perfectly competitive market B monopoly market C monopolistic competitive market D duopoly market

37. In which of the following types of market structures can a Firm earn abnormal profits in the

long run? A Perfect Competition B Monopolistic Competition C Monopoly D None of the above

38. Which of the following is not the characteristic of Monopoly ?

A Many Buyers B Heterogeneous Products C Free Entry of new Firms D Both b & c

39. Which of the following is not an essential condition of pure competition?

A Large number of buyers and sellers B Homogeneous product C Freedom of entry D Absence of transport cost

40. Under monopoly price discrimination depends upon :

A Elasticity of demand for commodity B Elasticity of supply for commodity C Size of market D All of above


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41. Average revenue curve is also known as ____________ : A Profit curve B Demand curve C Supply curve D Average cost curve

42. Which of the following industries are not reserved for public sector presently?

A Atomic energy B Railways C Defence D Substances specified in the schedule to the notification of the government of India in

the department of atomic energy 43. Which of the following is a positive impact of Economic Reforms on the Indian Economy?

A Improvement in work culture B Increase in quality and cost consciousness C Increase in Value Added Exports D All of the above

44. Which is the apex bank in India for agricultural Financing?

A Industrial Development Bank of India B Reserve Bank of India C State bank of India D NABARD

45. The precondition for privatisation to be successful requires A Liberalisation and deregulation of the economy B Capital markets should be sufficiently developed. C None of the above. D (a) & (b) both

46. Long term loans to various countries are given by :

A World Bank B WTO C IMF D None

47. Which of the following is not a Government Receipt? A Direct and Indirect Taxes B Profits from various Financial Institutions, PSU, Government Commercial

Undertakings C Interest from Loans given to other Governments , Local Bodies, etc D Profits of all Private sector Enterprise

48. Government Expenditure in a budget consist of – A Developmental Expenditure B Non Developmental Expenditure C Both (a) and (b) D Neither (a) and (b)

49. Which of the following is a Developmental Expenditure of the Government ?

A Salary and Allowances for Defence Personnel, Police B Improvement in Telecommunications Network C Subsidies D Maintenance of Law and Order


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50. Deficit Financing means : A Public expenditure in excess of public revenue B Public revenue in excess of public expenditure C Both (a) and (b) D None.

51. Which of the following is a source of government receipts?

A taxes B profits from variousundertakings C interest on loans D all above are sources

52. Overall balance of payments includes

A Balance of payments on capital and current accounts B Balance of trade balance of current account C Balance of trade balance of capital account D None of above

53. In India which authority is responsible to implement monetary policy?

A EXIM B RBI C ministry of finance D Ministry of commerce 54. Tax revenues (according to the latest figures) constitute about _____of the national income

of India : A 10% B 17% C 25% D 50%

55. when the firm charges different prices to different customers for the same commodity, it is

engaged in – A Price determination B Price rigidity C Price discrimination D None of these

56. In case of a profit maximizing Monopolist, what point determines the Selling Price?

A Point where marginal cost equals average revenue B Point where average cost equals marginal revenue C Point where average cost equals average revenue D Point where marginal cost equals marginal revenue

57. Discriminating Monopoly is possible if two markets have –

A Rising Cost Curves B Rising and declining Cost Curves C Different Elasticities of Demand D Equal Elasticities of Demand

58. Under Monopoly, in the short•run, the Firm can never make Losses. This statements is A True B False C Partially True D None of the above 59. Under Monopolistic Competition ,in the shortrun, the condition for shutdown is –

A AR < AC B AR> AC C AR > AVC D AR < AVC

60. Globalisation is a process of increasing economic integration among . A Nations B Trade organisations C Social institutions D Cultural Forms


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61. Long terms investment loans to various countries are given by. A World Bank B World Trade Organization C International monetory fun D None of the above

62. Which of the following statements is an argument in favour of Globalisation ?

A Re –distribution of political power B Improvement of Service Sector C Helps Developed Economies more than the Developing Economies D Superior economic and financial clout of the Multi• National Corporations

63. Which of the following institute performs the function of short term credit?

A IMF B World Bank C WTO D All of these 64. BPO stands for –

A Bharat Petro Organisation B Business Process Outsourcing C Big Portfolio Outsourcing D Business Partners Organisation

65. Which of the following statement is against globalization?` A It will improve allocative efficiency of resources B It will redistribute economic power C It will impose tariff barriers among nations D It will provide update technology

66. Which of the following is correct ?

A World Bank provides debt funding to retail borrowers B World Bank provides loan to eligible foreign institutional investors C World Bank provides loan to all those who need money D World Bank provides loan to member countries

67. Which of the following is not a feature of Globalisation?

A Free flow of technology and spread of knowledge throughout the world B Ability to manufacture in the most cost effective way anywhere in the world C Restrictions in mobility of factors of production D Higher economies of trade

68. Under Expenditure Method, Consumption Expenditure + Net Domestic Investment + Net ForeignInvestment + Replacement Expenditure equals – A Gross Domestic Expenditure B Gross National Expenditure C Net Domestic Expenditure D Net National Expenditure

69. Inequality in the Distribution of Income and Wealth is measured in terms of –

A Real GDP Per Capita B Standard of Living C Fiscal Deficit D Gini Index

70. In an under•developed economy, the rate of Capital Formation and Investment is low due to

A Low levels of savings B Lack of institutions to mobilize Savings C Lack of proper Entrepreneurial Class D All of the above


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71. In occupational structure of India, which sector has the lowest share? A Agriculture B Service C Industry D Construction

72. Which of these is not a feature of an underdeveloped economy?

A Wide•spread Poverty B Low Growth Rate of Population C Low ability to Save D Predominance of Agriculture Sector

73. In an underdeveloped economy, the incidence of unemployment and underemployment is: A Quite high B Quite low C Moderate D Lowest

74. When prices are falling continuously, the phenomenon is called : A Inflation B Stagflation C Deflation D Reflation

75. If net factor income from abroad is positive, then which of the following equation is correct?

A GNP > GDA B GDP > GNP C GNP = GDP D GNP = 0 76. The effect of increase in CRR will be reduced or nullified if –

A Bank Rate is reduced B Securities are sold in the Open Market C SLR is increased D People do not borrow from Non Banking Institutions

77. Inflation can be checked and regulated by

A Monetary Measures B Fiscal Measures C Controlling Investment D All of the above

78. Which of the following is not a cause of Demand – Pull Inflation?

A Population Growth Rate B Deficit Financing C Poverty D Increase in Non – Developmental Expenditure

79. Disinvestment is a process of :

A Disposal of public sector unit‟s equity in the market B Relaxation of government restrictions C Transfer of assets from public to private sector D All of above

80. Increasing role of private sector comes under A Liberalization B Globalization C Privatization D None of the above

81. Conservative Economic Policies were followed by India, immediately after independence in –

A Industrial Sector B External Trade Sector C Financial Sector D All of above

82. What can RBI do, if it wants to control credit in the economy?

A Decrease Bank rate and CRR B Increase Bank rate and CRR C Increase Bank rate and decrease CRR D Any of above


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83. The objective of the Central Bank is to – A Ensure monetary stability in the country B Maintain the international value of the Country‟s currency C Issue currency D ll of the above

84. Lender of last resort means A Govt. Coming for rescue of poor families B Central bank comes for rescue of commercial banks C Deficit financing D Distribution of essential goods in fair price shops

85. Which of the following policies is usually formulated and implemented by the Central Bank of

a country ? A Monetary Policy B Fiscal Policy C Export – Import Policy D Prices and Incomes Policy

86. The objective of Selective Credit Controls is mainly to –

A Selectively allocate credit to Commercial Banks B Selectively allocate credit among Borrowers C Regulate the quantity of Demand Deposits created by Commercial Banks D Regulate the quantity of credit created by Commercial Banks

87. Which of the following functions are not performed by Money?

A As a medium of exchange B As a unit of account C As a store of value D None of the above

88. In the present context, Total Money Stock in India refers to A M1 B M2 C M3 D M4 89. Which of the following will not be included under Narrow Money?

A Currency in circulation B Demand Deposits C Time Deposits D All of these

90. Money in traditional sense :

A Serves as a medium of exchange B Serves as a store of value. C Serves as both medium of exchange and store of value. D Serves neither as medium of exchange and store of value.

91. Bills of exchange are sometimes known as :

A Near money B Transferable assets C Claims receivable D Business obligations

92. If marginal Cost = MC, and Marginal Revenue = MR, then, for achieving equilibrium output,

the conditions are – A MC = MR B MC Curve should cut MR Curve from below C Both (a) and (b) D Neither (a) or (b)


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93. An Implicit Cost can be defined as the – A Payment to the nonowners of the Firm for the resources they supply B Money payment which the self – employed resources could have earned in their best

alternative employment C Costs which the Firm incurs but does not disclose D Costs which do not change over a period of time

94. When industries offer employment for only a certain period of time in a year, it leads to unemployment. A Structural B Frictional C Casual D Seasonal

95. Most of the unemployment in India is : A Voluntary B Structural C Frictional D Technical

96. When workers are tend to be replaced by machines and technological improvements, it is known as A. Industrial Unemployment B Technological Unemployment C Chromic Unemployment D Seasonal Unemployment

97. Measure which generally gives the lowest estimated of unemployment especially for poor economy: A Usual status B CWS C CDS D CMS

98. The cross elasticity of substitute goods is generally

A >1 B <1 C <0 D >0 99. Decrease in price of a product results in increased consumption of the product as the

product becomes cheaper compared to other products. This effect is known as A Substitution effect B Income effect C Diminishing marginal utility concept D Law of diminishing returns

100. Which of the following statements is correct?

A The concept of absolute poverty is used for measuring poverty in India. B The concept of relative poverty is more relevant for the less developed countries. C The concept of Absolute poverty is more relevant for the developed countries D None of the above

101. If Budget Deficit is ` 11,350 crores and borrowings are ` 33,300 crores, what is Fiscal Deficit? (a) ` 11,350 crores (b) `44,650 crores

(c) `33,300 crores (d) `21,950 crores 102. ______________ is an implicit cost of production.

(a) Wages for the labour (b) Charges for electricity (c) Interest on owned money capital (d) Payment for raw material


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103. Indifference Curve, Analysis is propounded by ____________. (a) Alfred Marshall (b) Adam Smith (c) Hicks & Allen (d) None of these

104. If demand for a good is elastic, an increase in its price will cause total expenditure of consumersof the goods

(a) Increase (b) Decrease (c) Remain the same (d) None of these

105. The LAC Curve : (a) Falls when the LMC Curve falls (b) Rises when LMC Curve rises (c) Goes through the lowest point of LMC Curve (d) Falls when LMC<LAC and rises when LMC>LAC

106. Suppose the price of fashionable shirts rises from ₹ 400 per piece to ₹ 700 per piece . The Shopping Mall manager observes that the rise in price causes demand of shirts to fall from 500 shirts per week to 300 shirts per week. What is the are price elasticity of demanded for shirts? (a) 0.916 (b) 1.5 (c) 53333 (d) 1.667

107. The basic distinction between M1 & M2 is in the :

(a) Treatment of post Office Deposits (b) Treatment of Time Deposits in Bank (c ) Treatment of Saving Deposits of Bank (d) Treatments of Currency

108. After 1950, commercial banks in India were nationalized:

(a) Once in 1969 (b) Twice in 1969 &1980 (c) thrice in 1969,1980,1991 (d) None of these

109. Which one of the following agencies in India is responsible for calculation of National Income ? (a) NCAER (b) CSO (c ) NSS (d) RBI

110. Which of the following is incorrect ?

(a) The shapes of average cost curve & marginal cost curve is U (b) The AR & MR curves of a firm under perfect competition are parallel X axis (c ) At equilibrium AR = MR (d) At equilibrium MC = MR

111. The slope of indifferent curve indicates______________.

(a) Price ratio between two commodities (b) Marginal rate of substitution (c) Factor substitution (d) Level of indifference


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112. If the quantity of banana demanded is 100kgs and quantity supplied is 50kgs then price per kg of banana is : (a) `18 (b) `24 (c ) less than equilibrium price (d) Greater than equilibrium price

113. A condition needed for perfectly competitive industry to exist is that : (a) Buyers are able to influence the price of the commodity (b) Any unit of commodity are considered by buyer to b different (c) Buyers discriminates in their purchases based on non price factors (d) There are no obstacles to the free mobility of resources.

114 If the price of petrol rises by 25% and the demand for car falls by 40%, then cross

elasticity between petrol & car (a) -1.6 (b) 1.6 (c) -2.6 (d) 2.6

115. There are 12 major ports & ___________ minor ports in India.

(a) 200 (b) 187 (c) 300 (d) None of these 116. Banking Regulation Act, of India pertains of the year:

(a) 1945 (b) 1949 (c) 1943 (d) 1934 117. When too much money chases too few goods the resulting inflation is called :

(a) Deflation (b) Cost Push inflation (c) Stagflation (d) Demand Pull inflation

118. In the long run, a firm in monopolistic competition : (a) Always earns super profit (b) Incurs losses (c) Earns Normal profits only (d) May earn normal profits, super normal profits or incur losses

119. In the short run, when the output of the firm increases its average fixed cost :

(a) Increases (b) Decreases (c ) Remains Constant (d) First declines then rises

120. Dematerialization of TDS certificate took place on __________

(a) 1st April, 2008 (b) 1st April, 2007 (c) 1st September,2008 (d) 1st September, 2007

121. Suppose that an owner is earning total revenue or `1,00,000 and is incurring explicit cost

of `60,000. If the owner could work for another company for `30,000 a year we would conclude that : (a) The firm is earning economic profit of `10,000

(b) The firm is earning accounting profit of `40,000 (c) The firm is earning economic profit of `40,000 (d) Both (a) & (b)

122. What is the shape of AR curve faced by a firm under perfect competition?

(a) Horizontal (b) Vertical (c) Positively sloped (d) Negatively sloped


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123. Which of the following is the condition for equilibrium of the firm ? (a) AC = AR (b) MR = AR (c) MC = MR (d) AC = MR

124. If marginal opportunity cost is falling, the PPF would be _______________

(a) Straight Line (b) Concave (c) Backward bending (d) Convex

125. DFEC stands for :

(a) Duty Freedom Export Credit (b) Duty Free Export Credit (c) Direct Foreign Exchange Control (d) Duty Free Exchange Credit

126. NIXI stands for :

(a) National internet Exchange of India (b) New Information Exchange of India (c) National Information Exchange of India (d) Nutrition Information Exchange of India

127. Which of the following is not included on Foreign Exchange Reserves. (a) Foreign Currency assets held by RBI (b) Gold Holdings of the RBI (c) Special drawings Right (d) None of these 128. Basel II frameworks is for ___________ (a) Banks (b) Insurance Companies (c) RBI (d) All of those 129. The total areas under demand curve of a good measure _________ (a) Marginal Utility (b) Total Utility (c) Consumer Surplus (d) Producer Surplus 130. In prefect competition in long run there will be _______________ (a) Normal profits (b) Super normal profits (c) Less Production (d) Cost will be falling 131. Which of the following is not an Indirect Tax Reform? (a) Reducing the peak rate of custom duties (b) Rectifying anomalies like inverted duty structure (c) Introduction of VAT for achieving harmonized taxation regime (d) The tax rate on foreign companies has also been reduced from 55% to 40% 132. Which of the following is not a characteristic of price taker? (a) Negatively sloped demand curve (b) TR = P * Q (c) AR = Price (d) MR = AR 133. For the price taking firm : (a) Marginal Revenue is less than price (b) Marginal Revenue is greater than price (c) The relationship between MR and price is not clear (d) MR = AR


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134. In 2007-08 Budget, the peak rate of custom duty was brought down to _________ (a) 5% (b) 15% (c) 10% (d) 20 % 135. Which is the other name given to the long Run Average Cost Curve ? (a) Enveloping Curve (b) Profit Curve (c) Demand Curve (d) Supply Curve 136. The kinked demand curve model of oligopoly assumes that: (a) Response to a price increase is less than the response to a price decrease. (b) Response to a price increase is more than the response to a price decrease. (c) Elasticity of demand is constant regardless of whether price increases or decreases. (d) Elasticity of demand is prefect inelastic if price increases and perfectly inelastic if price decreases. 137. Which one of the following offers the least liquidity? (a) Treasury Bills (b) Immoveable property (c) Bill of exchange (d) Bearer cheques 138. Net National Income at market price is equal to: (a) Gross National Income at market price minus depreciation (b) Net Domestic Product at factor price plus or minus earnings from abroad. (c) Gross Domestic Product minus indirect taxes and subsidies (d) Gross National Product at factor price plus or minus depreciation 139. Dumping involves (a) selling at a price in another market which is lower than the price or cost in home market (b) price discrimination between the two markets (c) surplus production at lower cost (d) none of above 140. The consumer is in equilibrium at a point where the budget line : (a) is above an indifference curve (b) is below an indifference curve (c) is tangent to an indifference curve (d) cuts an indifference curve 141. The Foreign Trade Policy 2004-09 has : (a) identified certain thrust areas for growth (b) started “served from India” brand (c) revamped Duty Free Export-Credit (d) All of the above 142. Positive income elasticity implies that as income rises, demand for the commodity (a) rises (b) falls (c) remains unchanged (d) become zero 143. W.T.O. was established on: (a) 1st Jan 1991 (b) 2nd March 1992 (c) 1st Jan 1995 (d) 2nd March 1997


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144. Which of the following is not a determinant of the firm„s cost function? (a) The production function (b) The price of labour (c) Taxes (d) The price of the firm„s output 145. Which is the other name that is given to the long run average cost curve ? (a) profit curve (b) planning curve (c) demand curve (d) indifference curve 146. Diminishing marginal returns imply (a) decreasing average variable costs. (b) decreasing marginal costs (c) increasing marginal costs (d) decreasing average fixed costs 147. Which cost increases continuously with the increase in production? (a) Average cost (b) cost (c) Fixed cost (d) Variable cost 148. According to table, the opportunity cost of increasing guns„ production from 20 to 30 units is

equal to (a) 10 units of bread (b) 15 units of bread (c) 25 units of bread (d) 24 units of bread 149. Given the data in table, one moves successively from point A to point B,C,D,E and F, the opportunity cost of guns: (a) Increases as more of guns are produced (b) Decreases as more of guns are produced (c) Remains as more of guns are produced (d) Nothing can be said 150. Point D is efficient while point H (30 guns and 45 bread) is inefficient. Why? (a) Point D is outside the PPF while point H is on the PPF (b) Point D is inside the PPF while point H is on the PPF (c) Point D is on the PPF while point H is inside the PPF (d) Nothing can be said 151. The share of concessional debt in total external debt of India has: (a) Remained the same (b) Doubled (c) Reduced (d) Increased 152. If a farmers can do a field job which is being done by 6 farmers, this means there is (a) Frictional Unemployment (b) Disguised Unemployment (c) Voluntary Unemployment (d) Seasonal Unemployment 153. Identify the correct statements. (a) The problem of unemployment and poverty are not interrelated. (b) The birth rate in India is high because of low incidence of poverty. (c) The problem of poverty have been solved in India. (d) None of these. 154. Unemployment rate among educated was ____________ than for uneducated. (a) Higher (b) Equal (c) Lower (d) None of above


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155. Indian Postal Network is the ____________ in the world. (a) Largest (b) 3rd largest (c) 2nd largest (d) 4th largest 156. Indian Railway Network is the _________ in the world. (a) Largest (b) Second largest (c) Smallest (d) Second smallest 157. The combined phenomenon of stagnation and inflation is called – (a) Demand – Pull Inflation (b) Money Inflation (c) Cost – Push Inflation (d) Stagflation 158. _______________ refers to a situation where price persistently rise because of growing factor costs. (a) Demand Pull Inflation (b) Cost Push Inflation (c) Stagflation (d) Deflation 159. If Receipts are higher than Expenditure, the Budget is known to be – (a) Surplus (b) Balanced (c ) Deficit (d) Any of these 160. Nationalization of Banks aimed at all of the following except – (a) Removal of control by a few (b) Provision of adequate credit for agriculture, small industry and export units. (c) Provision of credit to big industries only (d) Encouragement of a new class of entrepreneurs. 161. The Central Bank performs the following function(s) (a) Regulate Currency (b) Performance of general banking and agency services for the State (c) Custody of Cash Reserve of Commercial Banks (d) All of the above 162. Which of the following is not a selective credit control method: (a) Rationing of credit (b) Changes in margin requirements (c) Direct Action (d) Reserve requirement changes 163. Commercial banks have direct dealings with the public in mobilization of deposits. This statement is – (a) True (b) Partially true (c) False (d) Nothing can be said 164. Deposits withdrawable after the expiry of an agreed period are known as – (a) Current Deposit (b) Fixed Deposit (c) Saving Deposit (d) General Deposit 165. NPA denotes- (a) Now Performing Asset (b) Not at all Performing Asset (c) Non Performing Asset (d) Now and then Performing Asset


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166. Which of these is a cause for High Birth Rate? (a) Agrarian Economy (b) Slow Urbanization (c) Joint Family (d) All of above 167. Growth rate of population can be measured by (a) Division of death rate by birth rate (b) Addition of death rate and birth rate (c) Multiplication of death rate by birth rate (d) Subtraction of death rate from birth rate 168. Gini, co-efficient is used for measuring poverty in ___________ sence. (a) Absolute (b) Gross (c) Relative (d) Net 169. ____________ aims at ensuring not less than 100 days of guaranteed employment in afinancial year, to every household on the rural area. (a) Indira AwasYojana (IAY) (b) PradhanMantri Gram SadakYojana (PMGSY) (c) SwaranJayanti Gram SwarozgarYojana (SJGSY) (d) National Rural Employment Guarantee Programme (MGNREGP) 170. As part of Banking Sector Reforms in 1991,________ banks can now operate in India. (a) Private Sector Banks belonging to resident person (b) Both (a) and (b) (c) Foreign Banks (d) Neither (a) nor (b) 171. If a point on a Demand Curve of any Product lies on X Axis, then Price Elasticity of that commodity at that point will be (a) Infinite (b) More than zero (c) Less than zero (d) Zero 172. Household Demand is also called – (a) Producer Demand (b) Individual Demand (c ) Industry Demand (d) Market Demand 173. An Increase in the Supply of a product is caused by (a) Reduction in the price of Related Commodities (b) Reduction in Cost of Production of this Commodity (c) Subsidies by Government for producing this commodity (d) All of these

174. As per Law of Supply, other things being equal, if the Price of a Commodity Decreases,its Supply Quantity will – (a) Increase (b) Decrease (c) Remain Constant (d) Become Zero 175. If decrease in demand is greater than the decrease in supply, then the equilibrium Price – (a) Decreases (b) Increases (c ) Does not change at all (d) Cannot be commented upon 176. Change in Quantity Supplied causes -


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(a) A movement on the same Supply Curve (b) Shift of the Supply Curve (c) Both (a) and (b) (d) Neither (a) nor (b) 177. The market of computers is not kin equilibrium, then which of the following statements is definitely true? (a) The price of computer will rise (b) The price of computer will fall (c) The price of computer will change, but not enough information is given to determine the direction of the change. (d) None of the above 178. If decrease in demand is equal to the decrease in supply, then – (a) Equilibrium Price and Quantity both increase. (b) Equilibrium Price and Quantity both decrease. (c) Equilibrium Price remains the same but Quantity increase. (d) Equilibrium Price remains the same but Quantity decrease. 179. Incase of better rainfall, improvement in irrigation, improved seeds, etc. the supply of agricultural commodities will – (a) Increase (b) Decrease (c) Remain constant (d) Became zero 180. One of the assumptions is the Law of Diminishing Marginal Utility is not applicable to – (a) Money (b) Gold (c) Both (a) and (b) (d) Neither (a) nor (b) 181. Consumer Surplus is the area – (a) Below the Demand Curve and above the price (b) Above the Supply Curve and below the price (c) Above the Demand Curve and below the price (d) Below the Supply Curve and above the price 182. In the case of two perfect substitutes, the indifference curve will be : (a) Straight Line (b) L – shaped (c) U – shaped (d) C – shaped 183. A consumer is at equilibrium when – (a) Slope of the Price Line is equal to indifference curve. (b) He saves 30% of his income (c) Borrows an amount equal to his income from the bank (d) None of above 184. Which of the theories is applicable under Cardinal Approach to Utility? (a) Law of Diminishing Marginal Utility (b) Law of Equi-Marginal Utility (c) Both (a) and (b) consumer surplus theory (d) Neither (a) nor (b) 185. Which of the following is not an assumption of Law of Diminishing Marginal Utility?


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(a) Units consumed should be identical in all respects (b) There is no time gap between consumption (c) Units consumed should be of a standard size (d) None of above 186. A higher indifference Curve shows – (a) A higher level of satisfaction (b) A higher level of production (c) A higher level of income (d) None of above 187. At the equilibrium point on indifference curve which of the following is satisfied? (a) Slope of price line = slope of IC (b) Slope of price line > slope of IC (c) Slope of price line < slope of IC (d) Any of the above 188. Cardinal Measure of Utility is required in – (a) Marginal Utility Theory (b) Indifference Curve Theory (c) Revealed Preference Theory (d) None of the above 189. If the price paid is more than the additional satisfaction derived from that item, the Consumer will – (a) Continue buying the item (b) Stop buying the item (c) Will start selling the item (d) Nothing can be said 190. In Which of the following situation, the Law of Variable Proportion will not apply ? (a) Long-Run (b) Same level of technology (c) Change in proportions in which factors are used (d) Short-Run 191. The demand for a Factor of Production is said to be a Derived Demand because – (a) It is a function of the profitability of an enterprise (b) It depends on the supply of complementary factors (c) Its stems from the demand for the final product (d) It arises out of means being scarce in relation to wants 192. Variable factors means those factors of production (a) Which can be only changed in the long run (b) Which can be changed in the short run (c) Which can be never be changed (d) None of the above 193. In the very beginning of production, generally the increasing returns to scale is found because – (a) Input is increased (b) Production problems are less (c) Plant and machinery will be new (d) Economies of scale 194. Raw material converted into Finished Product in the manufacturing process, refers to creation of (a) Form Utility (b) Place Utility (c) Time Utility (d) Personal Utility


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195. A Rational Producer will operate in – (a) Stage I (b) Stage II (c) Stage III (d) All of above 196. In the long-run, the firm will decide on which SAC Curve it should operate to produce a given output, so that its – (a) AC is Minimum (b) MC is Maximum (c) AC is Maximum (d) MC Minimum

197. If the LAC curve falls as output expands, this is due to –

(a) Law of Diminishing Returns (b) Law of Variable proportions

(c) Economies of Scale (d) Diseconomies of Scale

198. If a change in scale inputs lead to a proportional change in the output, it is a case of – (a) Increasing Returns to Scale (b) Diminishing Returns to Scale (c) Constant Returns to Scale (d) Variable Returns to Scale 199. The Law of Diminishing Returns is applicable in _____________ . (a) Only manufacturing industries (b) Only Agriculture (c) Neither in Agriculture nor in industries (d) All Economic activities after a point 200. ISO quants are equal to : (a) Product Lines (b) Total Utility Lines (c) Cost Lines (d) Revenue Lines

1 introduction to micro economics€¦ · 5. in ppf, the points lying on the curve show optimum...

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