Economy Quiz -1

26 Questions

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Economy Quiz -1

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Questions and Answers
  • 1. 
    An economy interacts with other world economies through- 1. product market linkage 2. financial market linkage 3. factor market linkage 4. labour market linkage Which of the above is/are correct? Page- 76
    • A. 

      1,2,4

    • B. 

      1,2,3,4

    • C. 

      1,4

    • D. 

      2,4

  • 2. 
    1. Degree of openness = (export + import)/ GDP. 2. Leakage from circular flow of income is caused due to Indians buying foreign goods. 3. Injection into circular flow of income is due to export of Indian goods to foreign market. Which of the above is/are correct? Page- 76
    • A. 

      2,3

    • B. 

      1,2,3

    • C. 

      1,3

    • D. 

      None

  • 3. 
    Which of the followings is/are true about balance of payment? 1. It records transaction in goods and services only between a country and rest of the world. 2. It is for a specified time period. 3. It has two main accounts- current account and past account. Page - 77
    • A. 

      1,2,3

    • B. 

      2,3

    • C. 

      1,2

    • D. 

      2 only

  • 4. 
    An open economy has import to GDP ration of 70%. It implies- 1. In case of increased demand, 70% of the increase goes to higher imports and 30% to increase in demand for domestic goods. 2 Increase in govt. expenditure is likely to increase trade deficit rather than increase domestic production. Which of the above is/are correct? Page- 92
    • A. 

      1

    • B. 

      2

    • C. 

      None

    • D. 

      1,2

  • 5. 
    1. Currency depreciation of a country increases its aggregate domestic demand by increasing exports. 2. Currency appreciation increases its aggregate domestic demand by increasing export. Which of the above is/are correct?
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 6. 
    1. It is not at all worrying when trade deficit reflects smaller savings or a larger budget deficit as expenditure is always high in such cases. 2. It is less worrying when trade deficit reflects a rise in investment. Which of the above is/are correct? Page- 94
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 7. 
    1. Capital budget is an account of assets and liabilities of the govt. 2. Revenue budget shows current receipts and expenditure of govt. 3. Only classification of budget is Railway budget and non-Railway budget. Which of the above is/are correct? Page-62/63
    • A. 

      3 only

    • B. 

      1 only

    • C. 

      1,2

    • D. 

      2,3

  • 8. 
    1. Loans raised by govt. from foreign countries and international agencies come under capital receipts. 2. Grants in aid to govt. by foreign countries and international organisations come under non-tax revenue. 3. Recovery of loans granted by central govt. -> capital receipts. 4. Interest on loans given by central govt. - > non tax revenue. Which of the above is/are correct? Page- 62/63
    • A. 

      1,3

    • B. 

      2,4

    • C. 

      2,3

    • D. 

      All

  • 9. 
    • A. 

      2,4

    • B. 

      All

    • C. 

      1,2,4,6

    • D. 

      1,2

  • 10. 
    1. Proportional income tax as practised in India makes consumer spending less sensitive to GDP fluctuations. 2. Budget deficit cannot be financed by printing money. Which of the above is/are correct? Page- 70/71
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 11. 
    1. Deficit is a flow variable and debt is a stock variable. 2. Debt is a flow variable and deficit is a stock variable. 3. Concept of stock and flow cannnot be applied to debt and deficit. Which of the above is/are correct? Page- 71
    • A. 

      3

    • B. 

      1

    • C. 

      2

    • D. 

      None

  • 12. 
    1. Govt. debt is a burden when it reduces capital formation and growth. 2. Govt. debt is always a burden irrespective of its future prospects. Which of the above is/are correct? Page- 71
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 13. 
    1. Fiscal deficit can be inflationary if the resulting increase in demand is not met by a corresponding increase in production. 2. Fiscal deficit can never be inflationary as deficit implies a money crunch in a country. Which of the above is/are correct? Page- 72
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 14. 
    • A. 

      1

    • B. 

      2

    • C. 

      3

    • D. 

      4

  • 15. 
    1. Difference between borrowing rate and lending rate is called spread. 2. Deposits by public is the only liability of commercial banks. 3. Banks can invest in govt. securities and other approved bonds. Which of the above is/are correct? Page- 40
    • A. 

      1,2 only

    • B. 

      2,3 only

    • C. 

      All

    • D. 

      3 only

  • 16. 
    1. Currency deposit ratio(cdr) reflects people's preference for liquidity. 2. cdr is a behavioral parameter and depends on seasonal pattern of expenditure. Which of the above is/are correct? Page- 39
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 17. 
    1. Reserve deposit ratio(rdr) is for commercial banks while cdr is for public. 2. rdr is controlled by CRR, SLR and bank rate. Which of the above is/are correct? Page- 39
    • A. 

      1

    • B. 

      2

    • C. 

      1,2

    • D. 

      None

  • 18. 
    1. Banks get some interest on their CRR. 2. Banks can borrow money from RBI on bank rate to meet short-term shortages. 3. Deposits with RBI of a bank is its asset. Which of the above is/are correct? Page- 40
    • A. 

      1,3

    • B. 

      1 only

    • C. 

      All

    • D. 

      2,3

  • 19. 
    1. Open market operations by RBI is a tool to perform sterilisation. 2. Sterilisation is a tool to perform OMO. 3. Open market sale of govt. securities to suck surplus cash due to increased FII investment, to control inflation is called Sterilisation. Which of the above is/are correct? Page- 45
    • A. 

      1,3

    • B. 

      1,2

    • C. 

      2,3

    • D. 

      All

  • 20. 
    1. "Consumer" refers only to individuals. 2. Consumers can be both individuals and enterprise. 3. "Final goods" always go through further stages of production in economic cycle. Which of the above is/are correct? Page- 9
    • A. 

      1,3

    • B. 

      2,3

    • C. 

      3

    • D. 

      2

  • 21. 
    Capital goods- 1. are transformed in production process. 2. are a part of capital 3. never undergo wear and tear. Which of the above is/are correct? Page- 9
    • A. 

      1,3

    • B. 

      2,3

    • C. 

      2 only

    • D. 

      3 only

  • 22. 
    1. Consumer durables like TV, refrigerators are counted as capital goods. 2. Stocks are defined over a period of time. 3. Flows are defined at a particular point of time. Which of the above is/are correct? Page- 10/11
    • A. 

      1,2

    • B. 

      1,3

    • C. 

      2,3

    • D. 

      1 only

  • 23. 
    Suppose a factory has many machines with new ones being added depending on requirement- 1. total no. of machines at a particular time is a stock variable. 2. no. of machines added in particular year is a flow variable. 3. a particular machine can be counted as stock variable in multiple years. 4. a particular variable can be counted as flow variable in multiple years. Which of the above is/are correct? Page- 11
    • A. 

      1,2

    • B. 

      1,2,4

    • C. 

      1,2,3

    • D. 

      All

  • 24. 
    1. Depreciation takes into account damage due to natural disasters, accidents etc. 2. There are multiple ways to calculate GDP - value added method, income method, expenditure method. 3. Calculating final value of goods and services is the only way to calculate GDP. Which of the above is/are correct? Page- 12/20
    • A. 

      1,2

    • B. 

      1,3

    • C. 

      3

    • D. 

      None

  • 25. 
    1. Inventory can be finished goods or semi-finished goods or raw material. 2. Inventory is treated as capital. 3. Inventory is the difference in production and sale of a firm. 4. change in inventory is the difference in production and sale of a firm. Which of the above is/are correct? Page- 18
    • A. 

      1,2,3

    • B. 

      1,2,4

    • C. 

      3

    • D. 

      4

  • 26. 
    • A. 

      1

    • B. 

      2

    • C. 

      3

    • D. 

      All