The “Law of Diminishing Marginal Utility” was given by – (A) Adam Smith (B) Alfred Marshall (C) Lionel Robbins (D) Ricardo Answer: (B)
Under perfect competition, in the long run firms earn – (A) Abnormal profit (B) Normal profit (C) Loss (D) Super normal profit Answer: (B)
If average cost is greater than marginal cost, then – (A) Average cost is falling (B) Marginal cost is rising (C) Average cost is rising (D) Profit is maximized Answer: (A)
GDP deflator is – (A) Nominal GDP / Real GDP × 100 (B) Real GDP / Nominal GDP × 100 (C) Real GDP – Inflation (D) None of the above Answer: (A)
The price mechanism works efficiently under – (A) Monopoly (B) Perfect competition (C) Monopolistic competition (D) Oligopoly Answer: (B)
The marginal propensity to save (MPS) is – (A) 1 – MPC (B) MPC + MPS = 0 (C) Always zero (D) Income / Consumption Answer: (A)
Which of the following is not a feature of monopolistic competition? (A) Product differentiation (B) Large number of buyers and sellers (C) Homogeneous product (D) Free entry and exit Answer: (C)
If total product is increasing at an increasing rate, marginal product is – (A) Constant (B) Decreasing (C) Increasing (D) Zero Answer: (C)
The expenditure method of calculating national income includes – (A) Government spending (B) Private consumption (C) Investment (D) All of the above Answer: (D)
A rightward shift in the demand curve means – (A) Increase in demand (B) Decrease in demand (C) Expansion in supply (D) Contraction in demand Answer: (A)
The consumption function shows the relationship between – (A) Income and savings (B) Income and consumption (C) Demand and supply (D) Price and consumption Answer: (B)
The IS curve represents equilibrium in – (A) Goods market (B) Money market (C) Labor market (D) Forex market Answer: (A)
Under Keynesian economics, unemployment is caused due to – (A) Excess demand (B) Wage rigidity (C) Deficient demand (D) Over-investment Answer: (C)
The LM curve shows equilibrium in the – (A) Goods market (B) Money market (C) Foreign exchange market (D) Labor market Answer: (B)
A consumer’s equilibrium is achieved when – (A) Price = marginal utility (B) MU = 0 (C) Marginal utility per rupee is equal for all goods (D) Total utility is maximized Answer: (C)
The classical theory of employment assumes – (A) Full employment (B) Involuntary unemployment (C) Trade unions (D) Government intervention Answer: (A)
A fall in investment shifts the – (A) IS curve leftward (B) IS curve rightward (C) LM curve upward (D) LM curve downward Answer: (A)
Which of the following is a flow variable? (A) Wealth (B) Capital (C) Income (D) Land Answer: (C)
Which sector is known as the “tertiary sector”? (A) Agriculture (B) Industry (C) Services (D) Construction Answer: (C)
The circular flow of income involves – (A) Only households and firms (B) Households, firms, and government (C) All economic agents (D) Only government and banks Answer: (C)
In macroeconomics, “aggregate demand” equals – (A) C + I + G + NX (B) C + S (C) G – T (D) GDP – Depreciation Answer: (A)
The Phillips Curve shows a relationship between – (A) Inflation and unemployment (B) Inflation and output (C) Savings and investment (D) Employment and fiscal deficit Answer: (A)
A tax that takes a larger percentage of income from low-income groups is – (A) Progressive (B) Regressive (C) Proportional (D) Marginal Answer: (B)
Which of the following is a direct tax? (A) Custom Duty (B) Excise Duty (C) Income Tax (D) Sales Tax Answer: (C)
Cost-push inflation is caused by – (A) Excess demand (B) Increase in production cost (C) High tax (D) Increase in subsidies Answer: (B)
Keynes advocated for – (A) Laissez-faire (B) Government intervention (C) Barter system (D) Flexible exchange rate Answer: (B)
“Balance of Trade” is the difference between – (A) Exports and imports of goods (B) Exports and imports of services (C) Receipts and payments of foreign exchange (D) Capital account and current account Answer: (A)
In the short run, at least one factor of production is – (A) Variable (B) Constant (C) Fixed (D) Diminishing Answer: (C)
The difference between nominal and real interest rate is – (A) Price (B) Inflation (C) GDP (D) Tax Answer: (B)
The Keynesian consumption function is – (A) C = a + bY (B) C = Y – S (C) C = S – I (D) C = a + MPS × Y Answer: (A)
The marginal propensity to consume + marginal propensity to save = (A) 0 (B) 1 (C) 10 (D) GDP Answer: (B)
A fall in price of complementary goods leads to – (A) Decrease in demand (B) Increase in demand (C) Increase in price (D) Decrease in supply Answer: (B)
The term “infant industry” argument is used to justify – (A) Import promotion (B) Export subsidies (C) Protectionism (D) Tax incentives Answer: (C)
The “terms of trade” means – (A) Ratio of export price to import price (B) Trade deficit (C) Balance of payment (D) Export + import Answer: (A)
Which of the following is not a part of the capital account in BOP? (A) FDI (B) External borrowings (C) Gold reserves (D) Export of goods Answer: (D)
Which of the following is NOT included in national income? (A) Rent (B) Interest (C) Wages (D) Transfer payments Answer: (D)
Depreciation is deducted from – (A) Net national product (B) Gross national product (C) Net domestic product (D) Gross domestic product Answer: (B)
Investment is equal to – (A) Total income – total output (B) Total savings (C) Total consumption – savings (D) Total output – total consumption Answer: (D)
The production possibility curve is – (A) Concave to origin (B) Convex to origin (C) Straight line (D) Vertical Answer: (A)
Which of the following is not a function of the IMF? (A) Lending to countries (B) Ensuring exchange rate stability (C) Promoting international trade (D) Setting global tax rates Answer: (D)
The slope of the budget line is – (A) Positive (B) Price ratio (C) Income ratio (D) Utility ratio Answer: (B)
The intersection of IS and LM curves gives – (A) Price level (B) GDP (C) Equilibrium interest rate and output (D) Aggregate demand Answer: (C)
The point of satiety in the law of diminishing marginal utility is when – (A) MU is maximum (B) TU is minimum (C) MU = 0 (D) MU < 0 Answer: (C)
Which of the following is a stock variable? (A) Income (B) Savings (C) Investment (D) Wealth Answer: (D)
A firm shuts down in the short run if – (A) Total revenue < total cost (B) Total revenue < total variable cost (C) Average cost < marginal cost (D) Marginal cost = marginal revenue Answer: (B)
In monopolistic competition, the demand curve is – (A) Perfectly elastic (B) Downward sloping (C) Vertical (D) Horizontal Answer: (B)
National Income accounting was developed by – (A) Keynes (B) Marshall (C) Kuznets (D) Ricardo Answer: (C)
Capital formation in an economy depends on – (A) Level of savings (B) Level of consumption (C) Government expenditure (D) Level of taxation Answer: (A)
What is “Velocity of Money”? (A) Speed of cash flow (B) Frequency of money turnover (C) Rate of monetary expansion (D) Speed of deposit growth Answer: (B)