Indian Economy MCQ for CAT Exam with Solutions. We covered all the Indian Economy MCQ for CAT Exam with Solutions in this post for free so that you can practice well for the exam.
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Indian Economy MCQ for CAT Exam with Solutions
Expenditure on advertisement and public relations by an enterprise is a part of its –
(a) Fixed capital
(b) Intermediate consumption
(c) Consumption of fixed capital
(d) Final consumption expenditure
Option b – Intermediate consumption
If the supply curve is a straight line passing through the origin, the price elasticity of supply will be –
(a) Equal to unity
(b) Greater than unity
(c) Less than unity
(d) Infinitely large
Option a – Equal to unity
Which of the following is not an economic problem?
(a) Deciding between paid work and leisure
(b) Deciding between different ways of spending leisure time
(c) Deciding between expenditure on one good and the other
(d) Deciding between alternative methods of personal savings
Option b – Deciding between different ways of spending leisure time
The decimal system of Indian currency was started in –
(a) 1950
(b) 1955
(c) 1957
(d) 1960
Option c – 1957
In Economics, the terms ‘Utility’ and ‘Usefulness’ have –
(a) The same meaning
(b) Different meanings
(c) Opposite meanings
(d) None of these
Option b – Different meanings
(a) Wage rate
(b) Bank rate
(c) Interest rate
(d) Exchange rate
Option d – Exchange rate
“Economics is what it ought to be.” This statement refers to –
(a) Positive economics
(b) Monetary economics
(c) Normative economics
(d) Fiscal economics
Option c – Normative economics
The economic problem arises mainly due to –
(a) Lack of industries
(b) Unemployment
(c) Scarcity of resources
(d) Overpopulation
Option c – Scarcity of resources
Who propounded the Innovation Theory of Profits?
(a) Alfred Marshall
(b) David Ricardo
(c) P. A. Samuelson
(d) J. A. Schumpeter
Option d – J. A. Schumpeter
Demand in Economics means –
(a) Market demand
(b) Aggregate demand
(c) Individual demand
(d) Demand backed by purchasing power
Option d – Demand backed by purchasing power
Demand for complementary goods is known as –
(a) Cross demand
(b) Direct demand
(c) Joint demand
(d) Derived demand
Option c – Joint demand
Which of the following cost curves is never ‘U’ shaped?
(a) Average cost curve
(b) Marginal cost curve
(c) Average fixed cost curve
(d) Average variable cost curve
Option c – Average fixed cost curve
The basic objective of production is to –
(a) Satisfy human wants
(b) Increase physical output
(c) Make profits
(d) Provide employment
Option a – Satisfy human wants
Microeconomics is also called –
(a) Income theory
(b) Expenditure theory
(c) Price theory
(d) Investment theory
Option c – Price theory
The demand for labor is called –
(a) Market demand
(b) Factory demand
(c) Direct demand
(d) Derived demand
Option d – Derived demand
Funds that flow into a country to take advantage of favorable interest rates are called –
(a) Cold money
(b) Black money
(c) Hot money
(d) White money
Option c – Hot money
Who among the following has suggested a tax on expenditure?
(a) Kaldor
(b) Musgrave
(c) Dalton
(d) Gautam Mathur
Option a – Kaldor
The food stocks built up during a year of bumper harvest are called –
(a) Capital stock
(b) Grain stock
(c) Buffer stock
(d) Production stock
Option c – Buffer stock
The duties levied on alcoholic liquors, narcotic drugs, and opium come under –
(a) Land revenue
(b) Central excise duty
(c) General sales tax
(d) State excise duty
Option b – Central excise duty
What was the objective of the Command Area Development Programme?
(a) To develop the areas under the command of the army
(b) To ensure better utilization of irrigation potential
(c) Poverty alleviation in selected areas
(d) To ensure that land is given to the tillers
Option b – To ensure better utilization of irrigation potential
Which of the following is a part of the tertiary sector?
(a) Cultivation of crops
(b) Animal husbandry
(c) Power and transportation
(d) Cotton manufacturing
Option c – Power and transportation
On the administered price of which of the following articles no subsidy is given?
(a) Kerosene oil
(b) LPG
(c) DAP
(d) ATF
Option d – ATF
Dumping is a form of price discrimination at –
(a) National level
(b) International level
(c) Local level
(d) Within an industry
Option b – International level
A closed economy is one which –
(a) Does not have a coastal line
(b) Does not possess any means of international transport
(c) Is not a member of the U.N.O
(d) Does not trade with other countries
Option d – Does not trade with other countries
The CACP (Commission for Agricultural Costs and Prices) recommends the minimum support price for –
(a) Agricultural products
(b) Industrial products
(c) Pharmaceutical products
(d) None of these
Option a – Agricultural products
(a) Indian Overseas Bank
(b) State Bank of India
(c) Ministry of Finance
(d) Reserve Bank of India
Option c – Ministry of Finance
The ISI mark is not given to which of the following products?
(a) Biscuit
(b) Cloth
(c) Electrical goods
(d) Hosiery goods
Option a – Biscuit
Pegging up of a currency means fixing its value –
(a) At a constant level
(b) At a higher level
(c) At a lower level
(d) Leaving it to market forces
Option a – At a constant level
Which of the following is an example of optional money?
(a) Bond
(b) Cheque
(c) Coins
(d) Currency note
Option b – Cheque
Who among the following is not a classical economist?
(a) J. M. Keynes
(b) Thomas Malthus
(c) J. S. Mill
(d) David Ricardo
Option a – J. M. Keynes
National Income Estimates in India are prepared by –
(a) Central Statistical Organisation
(b) National Income Committee
(c) National Development Council
(d) National Productivity Council
Option a – Central Statistical Organisation
At present, India is following –
(a) Fixed exchange rate
(b) Pegged down exchange rate
(c) Pegged up exchange rate
(d) Floating exchange rate
Option d – Floating exchange rate
The Wage Fund Theory was propounded by –
(a) J. S. Mill
(b) J. M. Keynes
(c) J. B. Say
(d) Marshall
Option a – J. S. Mill
The third stage of the Law of Variable Proportion is called –
(a) Negative returns
(b) Positive returns
(c) Constant returns
(d) Increasing returns
Option a – Negative returns
Which of the following is a better measurement of economic development?
(a) Disposable income
(b) GDP
(c) NNP
(d) Per capita income
Option d – Per capita income
Price mechanism is a feature of –
(a) Barter economy
(b) Mixed economy
(c) Capitalist economy
(d) Socialist economy
Option c – Capitalist economy
If a good has negative income elasticity and positive price elasticity of demand, it is a –
(a) Normal good
(b) Superior good
(c) An inferior good
(d) Giffen good
Option d – Giffen good
Who propounded the Dynamic Theory of Profit?
(a) Hawley
(b) Knight
(c) Schumpeter
(d) Clark
Option d – Clark
Subsidies are payments by the government to –
(a) Banking units
(b) Producing units
(c) Retired persons
(d) Consuming units
Option b – Producing units
In calculating national income, which of the following is included?
(a) Income of watchmen
(b) Pensions
(c) Services of housewives
(d) Income of smugglers
Option a – Income of watchmen
In a business, raw materials, components, work-in-progress, and finished goods are jointly regarded as –
(a) Net worth
(b) Inventory
(c) Investment
(d) Capital stock
Option b – Inventory
According to the classical system, saving is a function of –
(a) The real wages
(b) Income
(c) The price level
(d) The interest rate
Option b – Income
National income accounting is the study of the income and expenditure of the entire –
(a) State
(b) Organisation
(c) Family
(d) Economy
Option d – Economy
J. B. Say’s law of market was not accepted by –
(a) David Ricardo
(b) Marshall
(c) Adam Smith
(d) Malthus
Option b – Marshall
(a) Imports
(b) Licensing
(c) Buffer stock
(d) Support price
Option b – Licensing
The Minimum Wages Act was first passed in the year –
(a) 1950
(b) 1951
(c) 1947
(d) 1948
Option d – 1948
Coal mines were nationalized in the year –
(a) 1970
(b) 1971
(c) 1972
(d) 1976
Option c – 1972
Which of the following groups suffer the most from inflation?
(a) Business class
(b) Debtors
(c) Creditors
(d) Holders of real assets
Option c – Creditors
(a) Supply and demand
(b) Deficit financing
(c) Circulation of money
(d) Consumption and demand
Option c – Circulation of money
The theory of Maximum Social Advantage in Public Finance was given by –
(a) Dalton
(b) Findley
(c) Musgrave
(d) Robbins
Option a – Dalton
If the tax rate increases with a higher level of income, it is called –
(a) Regressive tax
(b) Lump sum tax
(c) Progressive tax
(d) Proportional tax
Option c – Progressive tax
Foreign currency that has a tendency of quick migration is called –
(a) Scarce currency
(b) Hot currency
(c) Gold currency
(d) Soft currency
Option b – Hot currency
When too much money is chasing too few goods, the situation is –
(a) Stagflation
(b) Inflation
(c) Deflation
(d) Recession
Option b – Inflation
Which of the following most closely approximates an oligopoly?
(a) Barber shops
(b) The gasoline industry
(c) The cigarette industry
(d) Wheat farmers
Option c – The cigarette industry
The excess of the price a person is willing to pay rather than consume is called –
(a) Consumer’s surplus
(b) Profits
(c) Price
(d) Producer’s surplus
Option d – Producer’s surplus
Production function relates –
(a) Cost to output
(b) Wages to profit
(c) Inputs to output
(d) Cost to input
Option c – Inputs to output
The demand curve shows that price and quantity demanded are –
(a) Inversely related
(b) Directly related only
(c) Directly proportional and also directly related
(d) Inversely proportional and also inversely related
Option d – Inversely proportional and also inversely related
Under full cost pricing, the price is determined –
(a) By comparing marginal cost and marginal revenue
(b) By the total cost of production
(c) By adding normal profit to the marginal cost
(d) By adding a margin to the average cost
Option d – By adding a margin to the average cost
Which of the following is not considered as national debt?
(a) National saving certificates
(b) Provident fund
(c) Insurance policies
(d) Long-term government bonds
Option c – Insurance policies
Who among the following has suggested tax on expenditure?
(a) Musgrave
(b) Gautam Mathur
(c) Dalton
(d) Kaldor
Option d – Kaldor
Deficit financing is an instrument of –
(a) Fiscal policy
(b) Tax policy
(c) Credit policy
(d) Monetary policy
Option a – Fiscal policy
Taxes are as certain as death because –
(a) Government has no other source of revenue
(b) Government has its own budget constraints
(c) Most PSUs are inefficiently run
(d) They constitute the major source of government revenue
Option a – Government has no other source of revenue
The question of full capital account convertibility of India’s money was examined by the committee known as –
(a) Hashim Committee
(b) Rangarajan Committee
(c) Tarapore Committee – II
(d) Vagul Committee
Option c – Tarapore Committee – II
Parallel economy emerges due to –
(a) Tax compliance
(b) Tax estimation
(c) Tax evasion
(d) Tax avoidance
Option c – Tax evasion
Beyond a certain point, deficit financing will certainly lead to –
(a) Recession
(b) Inflation
(c) Deflation
(d) Economic stagnation
Option b – Inflation
Which of the following is an indirect tax?
(a) Estate duty
(b) Wealth tax
(c) Excise duty
(d) Capital gains tax
Option c – Excise duty
Value added means –
(a) Goods and services less depreciation
(b) Output at factor cost
(c) Output at market prices
(d) Goods and services less cost of intermediate goods and services
Option d – Goods and services less cost of intermediate goods and services
Disinvestment in the public sector is called –
(a) Globalization
(b) Liberalization
(c) Privatization
(d) Industrialization
Option c – Privatization
In an economy, the sectors are classified into public and private on the basis of –
(a) Use of raw materials
(b) Nature of economic activities
(c) Employment conditions
(d) Ownership of enterprises
Option d – Ownership of enterprises
The tax levied on gross sales revenue from a business transaction is called –
(a) Sales tax
(b) Corporation tax
(c) Turnover tax
(d) Capital gains tax
Option c – Turnover tax
A black market is a situation where –
(a) Goods are sold secretly
(b) Goods are hoarded by producers
(c) Goods are made available only after a rise in prices
(d) Goods are sold at prices higher than those fixed by the government
Option a – Goods are sold secretly
In the context of the stock market, IPO stands for –
(a) Initial Public Officer
(b) Internal Policy Obligation
(c) Immediate Payment Order
(d) Initial Public Offering
Option a – Initial Public Officer
Which of the following are not fixed costs?
(a) Wages paid to workers
(b) Insurance charges
(c) Rent on land
(d) Municipal taxes
Option a – Wages paid to workers
The demand for which of the following commodities will not rise in spite of a fall in its price?
(a) Meat
(b) Salt
(c) Refrigerator
(d) Television
Option b – Salt
Why is rent earned by land even in the long run?
(a) Land is a man-made factor
(b) Its supply is inelastic in the short run
(c) Its supply is inelastic in the long run
(d) Land has original and indestructible properties
Option c – Its supply is inelastic in the long run
In calculating National Income, which of the following is included?
(a) Pension
(b) Services of housewives
(c) Income of watchmen
(d) Income of smugglers
Option c – Income of watchmen
The difference between GNP and NNP is equal to –
(a) Direct tax revenue
(b) Capital depreciation
(c) Indirect tax revenue
(d) Consumer expenditure on durable goods
Option b – Capital depreciation
Marginal efficiency of capital is –
(a) Expected rate of return on new investment
(b) Value of output per unit of capital invested
(c) Difference between rate of profit and rate of interest
(d) Expected rate of return on existing investment
Option a – Expected rate of return on new investment
Rate of interest is determined by –
(a) Central government
(b) Liquidity preference
(c) Commercial banks
(d) The rate of return on capital invested
Option b – Liquidity preference
Which one of the following is not a method of estimating National Income?
(a) Matrix method
(b) Income method
(c) Product method
(d) Expenditure method
Option a – Matrix method
According to the classical system, saving is a function of –
(a) The real wage
(b) The interest rate
(c) The price level
(d) Income
Option d – Income
Which of the following is a better measurement of Economic Development?
(a) GDP
(b) NNP
(c) Per capita income
(d) Disposable income
Option c – Per capita income
National income is also called –
(a) NNP at factor cost
(b) GNP at factor cost
(c) GNP at market price
(d) NNP at market price
Option b – GNP at factor cost
Collective consumption means –
(a) Individual consumption
(b) Self-consumption
(c) Household consumption
(d) Consumption by citizens of the country
Option d – Consumption by citizens of the country
Production of a commodity mostly through the natural process is an activity of –
(a) Technology sector
(b) Primary sector
(c) Tertiary sector
(d) Secondary sector
Option b – Primary sector
Investment multiplier shows the effect of investment on –
(a) Consumption
(b) Saving
(c) Income
(d) Employment
Option c – Income
Returns to scale is a –
(a) Short-run phenomenon
(b) Long-run phenomenon
(c) Timeless phenomenon
(d) Directionless phenomenon
Option b – Long-run phenomenon
The father of Economics is –
(a) Karl Marx
(b) Marshall
(c) Adam Smith
(d) J. M. Keynes
Option c – Adam Smith
Minimum payment to a factor of production is called –
(a) Rent
(b) Wages
(c) Transfer payment
(d) Quasi rent
Option c – Transfer payment
Production refers to –
(a) Exchange value
(b) Creation of utilities
(c) Use of a product
(d) Destruction of utility
Option b – Creation of utilities
The law of demand is based on –
(a) Seller’s preference
(b) Consumer’s preference
(c) Supplier’s preference
(d) Manufacturer’s preference
Option b – Consumer’s preference
Demand for complementary goods is known as –
(a) Direct demand
(b) Cross demand
(c) Joint demand
(d) Derived demand
Option c – Joint demand
The value of a commodity expressed in terms of money is known as –
(a) Wealth
(b) Value
(c) Price
(d) Utility
Option c – Price
A situation where a large number of firms produce similar goods is termed as –
(a) Pure competition
(b) Perfect competition
(c) Oligopoly
(d) Monopolistic competition
Option b – Perfect competition
The result of division of labour is –
(a) Excessive pressure
(b) Complicated work
(c) Specialisation
(d) Excess supply of labour
Option c – Specialisation
Bank money refers to –
(a) Cheques
(b) Coins
(c) Currency notes
(d) Gold bullion
Option a – Cheques
Who benefits the most during an inflationary period?
(a) Government servants
(b) Corporate employees
(c) Entrepreneurs
(d) Creditors
Option c – Entrepreneurs
Debenture holders of a company are its –
(a) Debtors
(b) Creditors
(c) Directors
(d) Shareholders
Option b – Creditors
The Cash Reserve Ratio is a tool of –
(a) Fiscal policy
(b) Tax policy
(c) Monetary policy
(d) Agriculture policy
Option d – Agriculture policy
Money is an example of –
(a) Social capital
(b) Floating capital
(c) Sunk capital
(d) Concrete capital
Option b – Floating capital
Dear money means –
(a) Depression
(b) Inflation
(c) Low rate of interest
(d) High rate of interest
Option d – High rate of interest
Which of the following groups suffer the most from inflation?
(a) Business class
(b) Debtors
(c) Creditors
(d) Holders of real assets
Option c – Creditors
Which one of the following has elastic demand?
(a) Rice
(b) Medicines
(c) Electricity
(d) Matchboxes
Option c – Electricity
Monopoly means –
(a) Single seller
(b) Single buyer
(c) Many sellers
(d) Many buyers
Option a – Single seller
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