Question 1

Q1. Which of the following is a stock variable?

Accepted Answer

Option C: Capital stock. Stock variables are measured at a particular point of time. Capital stock represents the value of assets existing on a specific date.

Question 2

Q2. In a centrally planned economy, the basic economic problems are mainly solved by:

Accepted Answer

Option C: Government authorities. In a centrally planned economy, the government decides what, how, and for whom to produce.

Question 3

Q3. Which of the following is likely to increase the supply of a commodity?

Accepted Answer

Option C: Subsidy provided by government. Subsidies reduce production costs and encourage firms to produce more, increasing supply.

Question 4

Q4. When Total Product reaches maximum, Marginal Product becomes:

Accepted Answer

Option B: Zero. Total Product is maximum when Marginal Product becomes zero. Beyond this point, TP starts falling.

Question 5

Q5. Which of the following is included in the current account of Balance of Payments?

Accepted Answer

Option C: Export and import of services. The current account includes trade in goods and services, income receipts, and transfer payments.

Question 6

Q6. A consumer buys more rice even when its price rises sharply because rice is a necessity and takes a major share of income. This is an example of:

Accepted Answer

Option B: Giffen good. Giffen goods are inferior goods where demand rises with increase in price due to strong income effect.

Question 7

Q7. A country's central bank reduces the bank rate during recession. What is the expected impact?

Accepted Answer

Option B: Increase in borrowing and investment. Lower bank rate reduces borrowing cost for commercial banks, encouraging lending and investment.

Question 8

Q8. A firm's Average Revenue is Rs. 50 and it sells 200 units. Total Revenue will be:

Accepted Answer

Option A: Rs. 10,000. Total Revenue = Average Revenue x Quantity Sold = 50 x 200 = Rs. 10,000.

Question 9

Q9. If the price of tea increases and demand for coffee rises, tea and coffee are:

Accepted Answer

Option C: Substitute goods. Substitute goods can replace each other. Rise in tea prices increases demand for coffee.

Question 10

Q10. Which of the following is an example of direct tax?

Accepted Answer

Option D: Income tax. Direct taxes are imposed directly on income or wealth and cannot be shifted to others.

Question 11

Q11. Assertion (A): Depreciation is deducted while calculating Net Domestic Product from Gross Domestic Product. Reason (R): Depreciation represents loss in value of fixed assets due to wear and tear.

Accepted Answer

Option A: Both A and R are true, and R is the correct explanation of A. Depreciation accounts for reduction in value of capital assets, so it is deducted from GDP to obtain NDP.

Question 12

Q12. Assertion (A): Under monopoly, a firm is a price maker. Reason (R): There are many sellers producing identical products.

Accepted Answer

Option C: A is true, but R is false. A monopolist controls market supply and can influence price. The reason is false because monopoly has only one seller.

Question 13

Q13. Read the following case carefully: The government increased expenditure on metro rail projects and renewable energy infrastructure. Which economic effect is most likely in the long run?

Accepted Answer

Option B: Increase in employment and economic growth. Infrastructure investment increases productive capacity, creates jobs, and promotes long-term growth.

Question 14

Q14. Read the passage carefully: A commercial bank notices that customers are withdrawing more cash due to festive demand. To maintain liquidity, the bank borrows short-term funds from RBI. Which facility is most likely used by the bank?

Accepted Answer

Option B: Repo rate. Under repo facility, commercial banks borrow funds from RBI against securities for short-term liquidity needs.

Question 15

Q15. If MPC = 0.6, then MPS will be:

Accepted Answer

Option B: 0.4. MPC + MPS = 1 MPS = 1 - 0.6 = 0.4.

Question 16

Q16. Which of the following situations may cause cost-push inflation?

Accepted Answer

Option B: Rise in wages and production costs. Cost-push inflation occurs when production costs rise, causing firms to increase prices.

Question 17

Q17. A firm in perfect competition shuts down production in the short run when:

Accepted Answer

Option C: Price falls below average variable cost. If price cannot cover average variable cost, the firm cannot recover even variable expenses and shuts down.

Question 18

Q18. Suppose an economy has high unemployment and low demand. Which fiscal policy measure is most appropriate?

Accepted Answer

Option C: Increase in government spending. Higher government spending raises aggregate demand and employment during recessionary conditions.

Question 19

Q19. A rise in foreign exchange reserves due to heavy foreign investment may lead to:

Accepted Answer

Option A: Appreciation of domestic currency. Large inflow of foreign currency increases supply of foreign exchange, causing domestic currency to appreciate.

Question 20

Q20. In an economy, investment increases by Rs. 500 crore and MPC is 0.5. The total increase in national income will be:

Accepted Answer

Option B: Rs. 1,000 crore. k = 1 / (1 - MPC) Multiplier = 1 / (1 - 0.5) = 2 Increase in income = 2 x 500 = Rs. 1,000 crore.

Mock Test 04 Performance Solutions

Detailed Question Analysis

Q1. Which of the following is a stock variable?

Q2. In a centrally planned economy, the basic economic problems are mainly solved by:

Q3. Which of the following is likely to increase the supply of a commodity?

Q4. When Total Product reaches maximum, Marginal Product becomes:

Q5. Which of the following is included in the current account of Balance of Payments?

Q6. A consumer buys more rice even when its price rises sharply because rice is a necessity and takes a major share of income. This is an example of:

Q7. A country's central bank reduces the bank rate during recession. What is the expected impact?

Q8. A firm's Average Revenue is \(\mathrm{Rs.\ 50}\) and it sells 200 units. Total Revenue will be:

Q9. If the price of tea increases and demand for coffee rises, tea and coffee are:

Q10. Which of the following is an example of direct tax?

Q11. Assertion (A): Depreciation is deducted while calculating Net Domestic Product from Gross Domestic Product. Reason (R): Depreciation represents loss in value of fixed assets due to wear and tear.

Q12. Assertion (A): Under monopoly, a firm is a price maker. Reason (R): There are many sellers producing identical products.

Q13. Read the following case carefully: The government increased expenditure on metro rail projects and renewable energy infrastructure. Which economic effect is most likely in the long run?

Q14. Read the passage carefully: A commercial bank notices that customers are withdrawing more cash due to festive demand. To maintain liquidity, the bank borrows short-term funds from RBI. Which facility is most likely used by the bank?

Q15. If \(\mathrm{MPC}\) = 0.6, then \(\mathrm{MPS}\) will be:

Q16. Which of the following situations may cause cost-push inflation?

Q17. A firm in perfect competition shuts down production in the short run when:

Q18. Suppose an economy has high unemployment and low demand. Which fiscal policy measure is most appropriate?

Q19. A rise in foreign exchange reserves due to heavy foreign investment may lead to:

Q20. In an economy, investment increases by \(\mathrm{Rs.\ 500\ crore}\) and \(\mathrm{MPC}\) is 0.5. The total increase in national income will be:

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Mock Test 04 Performance Solutions

Detailed Question Analysis

Q1. Which of the following is a stock variable?

Q2. In a centrally planned economy, the basic economic problems are mainly solved by:

Q3. Which of the following is likely to increase the supply of a commodity?

Q4. When Total Product reaches maximum, Marginal Product becomes:

Q5. Which of the following is included in the current account of Balance of Payments?

Q6. A consumer buys more rice even when its price rises sharply because rice is a necessity and takes a major share of income. This is an example of:

Q7. A country's central bank reduces the bank rate during recession. What is the expected impact?

Q8. A firm's Average Revenue is \(\mathrm{Rs.\ 50}\) and it sells 200 units. Total Revenue will be:

Q9. If the price of tea increases and demand for coffee rises, tea and coffee are:

Q10. Which of the following is an example of direct tax?

Q11. Assertion (A): Depreciation is deducted while calculating Net Domestic Product from Gross Domestic Product. Reason (R): Depreciation represents loss in value of fixed assets due to wear and tear.

Q12. Assertion (A): Under monopoly, a firm is a price maker. Reason (R): There are many sellers producing identical products.

Q13. Read the following case carefully: The government increased expenditure on metro rail projects and renewable energy infrastructure. Which economic effect is most likely in the long run?

Q14. Read the passage carefully: A commercial bank notices that customers are withdrawing more cash due to festive demand. To maintain liquidity, the bank borrows short-term funds from RBI. Which facility is most likely used by the bank?

Q15. If \(\mathrm{MPC}\) = 0.6, then \(\mathrm{MPS}\) will be:

Q16. Which of the following situations may cause cost-push inflation?

Q17. A firm in perfect competition shuts down production in the short run when:

Q18. Suppose an economy has high unemployment and low demand. Which fiscal policy measure is most appropriate?

Q19. A rise in foreign exchange reserves due to heavy foreign investment may lead to:

Q20. In an economy, investment increases by \(\mathrm{Rs.\ 500\ crore}\) and \(\mathrm{MPC}\) is 0.5. The total increase in national income will be:

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