Question 1

Q1. Which of the following is excluded while calculating Gross Domestic Product at market price?

Accepted Answer

Option C: Services of housewives within their own homes. Services of housewives are not included because they are non-market services and difficult to measure monetarily.

Question 2

Q2. The problem of "for whom to produce" is related to:

Accepted Answer

Option C: Distribution of national income among people. This problem concerns how goods and services are distributed among different sections of society based on income.

Question 3

Q3. Under which market structure can a firm influence the market price partially?

Accepted Answer

Option C: Monopolistic competition. In monopolistic competition, product differentiation gives firms some control over pricing.

Question 4

Q4. If Marginal Cost is below Average Cost, then Average Cost will:

Accepted Answer

Option B: Fall. Marginal Cost pulls Average Cost downward when it is less than Average Cost.

Question 5

Q5. Which of the following is a liability of the Reserve Bank of India?

Accepted Answer

Option B: Currency notes issued. Currency notes issued by RBI are liabilities because RBI promises to pay the bearer the value of the note.

Question 6

Q6. A rise in the income of consumers causes demand for coarse cereals to fall. Coarse cereals are most likely:

Accepted Answer

Option C: Inferior goods. Demand for inferior goods falls as consumer income rises because consumers shift to better alternatives.

Question 7

Q7. A firm's Total Fixed Cost is Rs. 1,200. At output level of 300 units, Average Fixed Cost will be:

Accepted Answer

Option C: Rs. 4. Average Fixed Cost = Total Fixed Cost / Output = 1200 / 300 = Rs. 4.

Question 8

Q8. During inflation, RBI sells government securities in the open market. What is the likely effect?

Accepted Answer

Option B: Reduction in money supply. Sale of securities withdraws money from circulation, reducing liquidity and helping control inflation.

Question 9

Q9. Which of the following is an example of a capital good?

Accepted Answer

Option C: Machine purchased by a factory. Capital goods are durable goods used for further production of other goods and services.

Question 10

Q10. Which of the following transactions creates foreign exchange outflow for India?

Accepted Answer

Option D: Import of machinery from Germany. Imports require payment in foreign currency, leading to foreign exchange outflow.

Question 11

Q11. Assertion (A): Under monopoly, Average Revenue curve slopes downward. Reason (R): A monopolist must lower price to sell additional units.

Accepted Answer

Option A: Both A and R are true, and R is the correct explanation of A. Since the monopolist faces the market demand curve, selling more units requires lowering the price.

Question 12

Q12. Assertion (A): Fiscal deficit can increase inflationary pressure in the economy. Reason (R): Higher government borrowing may increase aggregate demand.

Accepted Answer

Option A: Both A and R are true, and R is the correct explanation of A. Higher borrowing and spending by government can raise aggregate demand and contribute to inflation.

Question 13

Q13. Read the following case carefully: The government announces a subsidy on solar panels to promote renewable energy usage among households. Which effect is most likely?

Accepted Answer

Option C: Increase in supply and demand of solar panels. Subsidies lower prices and encourage both production and consumption of solar panels.

Question 14

Q14. Read the passage carefully: An economy faces a severe recession with rising unemployment and falling private investment. The central bank decides to reduce repo rate. What is the expected objective of this step?

Accepted Answer

Option B: Encourage borrowing and investment. Lower repo rate reduces cost of borrowing, encouraging businesses and consumers to spend and invest more.

Question 15

Q15. If Marginal Propensity to Save (MPS) is 0.25, the value of multiplier will be:

Accepted Answer

Option C: 4. k = 1 / MPS k = 1 / 0.25 = 4.

Question 16

Q16. Which of the following situations represents deficient demand?

Accepted Answer

Option C: Aggregate demand is less than aggregate supply at full employment. Deficient demand occurs when total spending in the economy is insufficient to purchase full-employment output.

Question 17

Q17. A firm in monopolistic competition spends heavily on advertisements mainly because:

Accepted Answer

Option C: Products are differentiated. Advertising helps firms distinguish their differentiated products from competitors' products.

Question 18

Q18. Which of the following combinations is most suitable to control inflation?

Accepted Answer

Option B: Increase in repo rate and reduction in public expenditure. Contractionary monetary and fiscal policies reduce aggregate demand and help control inflation.

Question 19

Q19. If price elasticity of demand for a commodity is perfectly inelastic, then rise in price will:

Accepted Answer

Option B: Increase total revenue. With perfectly inelastic demand, quantity demanded remains unchanged despite price rise, increasing total revenue.

Question 20

Q20. Autonomous investment in an economy rises by Rs. 250 crore. If MPC = 0.8, what will be the total increase in income?

Accepted Answer

Option D: Rs. 1,250 crore. k = 1 / (1 - MPC) Multiplier = 1 / (1 - 0.8) = 5 Increase in income = 5 x 250 = Rs. 1,250 crore.

Mock Test 06 Performance Solutions

Detailed Question Analysis

Q1. Which of the following is excluded while calculating Gross Domestic Product at market price?

Q2. The problem of "for whom to produce" is related to:

Q3. Under which market structure can a firm influence the market price partially?

Q4. If Marginal Cost is below Average Cost, then Average Cost will:

Q5. Which of the following is a liability of the Reserve Bank of India?

Q6. A rise in the income of consumers causes demand for coarse cereals to fall. Coarse cereals are most likely:

Q7. A firm's Total Fixed Cost is \(\mathrm{Rs.\ 1,200}\). At output level of 300 units, Average Fixed Cost will be:

Q8. During inflation, RBI sells government securities in the open market. What is the likely effect?

Q9. Which of the following is an example of a capital good?

Q10. Which of the following transactions creates foreign exchange outflow for India?

Q11. Assertion (A): Under monopoly, Average Revenue curve slopes downward. Reason (R): A monopolist must lower price to sell additional units.

Q12. Assertion (A): Fiscal deficit can increase inflationary pressure in the economy. Reason (R): Higher government borrowing may increase aggregate demand.

Q13. Read the following case carefully: The government announces a subsidy on solar panels to promote renewable energy usage among households. Which effect is most likely?

Q14. Read the passage carefully: An economy faces a severe recession with rising unemployment and falling private investment. The central bank decides to reduce repo rate. What is the expected objective of this step?

Q15. If Marginal Propensity to Save (\(\mathrm{MPS}\)) is 0.25, the value of multiplier will be:

Q16. Which of the following situations represents deficient demand?

Q17. A firm in monopolistic competition spends heavily on advertisements mainly because:

Q18. Which of the following combinations is most suitable to control inflation?

Q19. If price elasticity of demand for a commodity is perfectly inelastic, then rise in price will:

Q20. Autonomous investment in an economy rises by \(\mathrm{Rs.\ 250\ crore}\). If \(\mathrm{MPC}\) = 0.8, what will be the total increase in income?

ExamSpark Quick Economics Revision Signals

Quick Links & ExamSpark Resources

Mock Test 06 Performance Solutions

Detailed Question Analysis

Q1. Which of the following is excluded while calculating Gross Domestic Product at market price?

Q2. The problem of "for whom to produce" is related to:

Q3. Under which market structure can a firm influence the market price partially?

Q4. If Marginal Cost is below Average Cost, then Average Cost will:

Q5. Which of the following is a liability of the Reserve Bank of India?

Q6. A rise in the income of consumers causes demand for coarse cereals to fall. Coarse cereals are most likely:

Q7. A firm's Total Fixed Cost is \(\mathrm{Rs.\ 1,200}\). At output level of 300 units, Average Fixed Cost will be:

Q8. During inflation, RBI sells government securities in the open market. What is the likely effect?

Q9. Which of the following is an example of a capital good?

Q10. Which of the following transactions creates foreign exchange outflow for India?

Q11. Assertion (A): Under monopoly, Average Revenue curve slopes downward. Reason (R): A monopolist must lower price to sell additional units.

Q12. Assertion (A): Fiscal deficit can increase inflationary pressure in the economy. Reason (R): Higher government borrowing may increase aggregate demand.

Q13. Read the following case carefully: The government announces a subsidy on solar panels to promote renewable energy usage among households. Which effect is most likely?

Q14. Read the passage carefully: An economy faces a severe recession with rising unemployment and falling private investment. The central bank decides to reduce repo rate. What is the expected objective of this step?

Q15. If Marginal Propensity to Save (\(\mathrm{MPS}\)) is 0.25, the value of multiplier will be:

Q16. Which of the following situations represents deficient demand?

Q17. A firm in monopolistic competition spends heavily on advertisements mainly because:

Q18. Which of the following combinations is most suitable to control inflation?

Q19. If price elasticity of demand for a commodity is perfectly inelastic, then rise in price will:

Q20. Autonomous investment in an economy rises by \(\mathrm{Rs.\ 250\ crore}\). If \(\mathrm{MPC}\) = 0.8, what will be the total increase in income?

ExamSpark Quick Economics Revision Signals

Quick Links & ExamSpark Resources

Related Study Links