Economics MCQ Quiz - Objective Question with Answer for Economics - Download Free PDF

The correct answer is On expenditure of Rs 27 per day

Key Points

• In 2011, the Suresh Tendulkar Committee defined the poverty line on the basis of monthly spending on food, education, health, electricity and transport.
• According to this estimate, a person who spends Rs. 27.2 in rural areas and Rs. 33.3 in urban areas a day are defined as living below the poverty line. 

Important Points

• The official poverty line is the expenditure incurred to obtain the goods in a “poverty line basket” (PLB).
• Poverty can be measured in terms of the number of people living below this line (with the incidence of poverty expressed as the head count ratio). 

The correct answer is Per Capita Income.

Key Points

• Per Capita Income is the average income, that is, the total income of the country divided by its total population.
• Per Capita Income is the criteria used in World Developments Report to classify countries.
• Countries with a per capita income of US$ 49,300 per annum and above in 2019 are called rich countries.
• Countries with a per capita income of US$ 2500 or less are low-income countries.
• India had a per capita income of US$ 6700 per annum in 2019 and is a low-middle-income country.

 Thus, we can say that Per Capita Income is the criteria used in World Development Reports to classify countries.

Addition to the value of commodities is closest to the concept of economic production.

Key Points

• Economic production is the process of creating goods and services that have utility and contribute to the satisfaction of human needs and wants.
• It refers to the creation of value through the transformation of raw materials and inputs into finished products that can be used or consumed.
• Thus, the concept of economic production is closely related to the addition to the value of commodities.
• In other words, economic production involves adding value to raw materials or inputs through various production processes, such as manufacturing, processing, and assembly, to create finished products that can be sold or consumed.

Additional Information

• Sale of goods and services for profit is an outcome of economic production but not the concept of production itself.
• Manufacture of goods refers to one of the methods of production but not the concept of production itself.
• Addition to the stock of goods and services for future use refers to investment and accumulation of capital, which is an outcome of production but not the concept of production itself.

A financial crisis is a generalized term for systemic problems in the larger financial sector of a country or countries. Financial crises often, but not always, lead to recessions.

Of all the sectors in an economy, the financial sector is considered to be the most dangerous epicenter of a crisis since every other sector relies on it for monetary and structural support.

A fiscal crisis, on the other hand, refers to a problem with government balance sheets. If a government's debt load creates funding or performance issues, it may be said to experience a fiscal crisis.

A fiscal crisis can also occur following a recession and periods of high unemployment, which usually results in less tax revenue being collected, creating a revenue shortfall for the government.

The Bombay Plan was the popular title of ‘A Plan of Economic Development for India’, which was prepared by a cross-section of India’s leading capitalists. The eight capitalists involved in this plan were Purshotamdas Thakurdas, J. R. D. Tata, G. D. Birla, Lala Sri Ram, Kasturbhai Lalbhai, A. D. Shroff, Avdeshir Dalal and John Mathai. The Plan was published in 1944–45.

The correct answer is Hyderabad.

Key Points

• The head office of the Insurance Regulatory and Development Authority of India (IRDAI) is situated in Hyderabad. 
• Insurance Regulatory and Development Authority of India (IRDAI):
  • It was constituted by the recommendations of the Malhotra Committee report, in 1999.
  • It is an autonomous body.
  • It regulates and develops the insurance industry.
  • The IRDA was incorporated as a statutory body in April 2000.
  • Objective: Enhance customer satisfaction through increased consumer choice and lower premiums while ensuring the financial security of the insurance market.
  • Today there are 34 general insurance companies and 24 life insurance companies operating in the country.

Additional Information

The correct answer is agricultural rural hinterland.

Key Points

• Industrially developed urban centers are usually surrounded by an "agricultural rural hinterland."
• In geographical terms, a 'hinterland' refers to the area surrounding a town or port, which is served by the port or town for the transportation of goods.
• In context, an agricultural rural hinterland serves as the region that supplies the urban center with agricultural products or raw materials and in return, it receives industrial goods and services.
• However, it's important to note that the exact nature and characteristics of the hinterland can change based on specific geographical or economic contexts.
• For instance, a seaport city might indeed have a "seaport hinterland" where the surrounding areas rely on the port for trade and transportation access.

Macroeconomics is also called the theory of income.

Key Points

•  Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole.
• It focuses on the aggregate changes in the economy such as unemployment, growth rate, gross domestic product, and inflation.  
• Macroeconomics is also known as the Theory of Income and Employment, or income analysis, as it focuses on how income and employment levels are determined in an economy. The subject of macroeconomics revolves around the determination of income and employment.
• Income and employment theory, a body of economic analysis concerned with the relative levels of output, employment, and prices in an economy. By defining the interrelation of these macroeconomic factors, governments try to create policies that contribute to economic stability.

The correct answer is The rate of inflation would increase.

Important Points 

• When the actual unemployment rate is less than the natural rate, inflation increases.
• When the actual unemployment rate exceeds its natural rate, inflation decreases.
• So, the natural rate of unemployment can be seen as the rate of unemployment required to keep inflation constant.

Key Points 

• The natural rate of unemployment:
  • The natural rate of unemployment is the unemployment rate that would exist in a growing and healthy economy.
  • In other words, the natural rate of unemployment includes only frictional and structural unemployment and not cyclical unemployment.
  • The natural rate of unemployment is related to two other important concepts: full employment and potential real GDP.
  • The economy is considered to be at full employment when the actual unemployment rate is equal to the natural rate.
  • When the economy is at full employment, real GDP is equal to potential real GDP.
  • When the economy is below full employment, the unemployment rate is greater than the natural unemployment rate and real GDP is less than potential.
  • When the economy is above full employment, then the unemployment rate is less than the natural unemployment rate and real GDP is greater than potential.

Additional Information

• Inflation:
  • Inflation is the rate of increase in prices over a given period of time.
  • Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
  • But it can also be more narrowly calculated—for certain goods, such as food, or for services, such as a haircut, for example.
• Deflation:
  • Deflation is a serious economic issue that can exacerbate a crisis and turn a recession into a full-blown depression.
  • When prices fall and are expected to drop in the future, businesses and individuals choose to hold on to money rather than spend or invest.
  • This leads to a drop in demand, which in turn forces businesses to cut production and sell off inventories at even lower prices.
  • In order to correct the situation of deflation Securities are purchased by the central bank.
• Stagflation:
  • Stagflation refers to an economic condition where economic growth is very slow or stagnant and prices are rising. 
  • The term stagflation was coined by British politician Iain Macleod, who used the phrase in his speech to parliament in 1965.
• Hyperinflation:
  • Hyperinflation is a situation where the price increases are too sharp. 
  • Hyperinflation often occurs when there is a large increase in the money supply, which is not supported by growth in Gross Domestic Product (GDP). 
  • Such a situation results in an imbalance in the supply and demand for money. 

The correct answer is agglomeration economies.Key Points

• Agglomeration economies refer to the benefits that arise from the clustering of industries in urban centers. These benefits include:
  • Economies of scale: Firms can share infrastructure and resources, reducing costs and increasing efficiency.
  • Access to skilled labor: A concentration of industries in one area can attract a skilled workforce, making it easier for firms to find and hire qualified employees. 
  • Innovation: Proximity to other firms can lead to knowledge spillovers and collaboration, fostering innovation and growth.
  • Reduced transportation costs: By locating near other firms and suppliers, firms can reduce transportation costs and increase speed of delivery.

Additional Information

• Rural economies refer to economies that are based on agriculture and natural resources.
• Amalgamation economies refer to the benefits that arise from the consolidation of firms in a particular industry.
• Urban economies refer to the overall economic activity and growth of urban areas.

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a flagship Programme of the Government of India.

Important Points MGNREGA:

• The scheme was introduced as a social measure that guarantees “the right to work”.

The correct answer is Reserve bank of India.

Key PointsReserve Bank of India (RBI) is India’s central bank.

• In compliance with the terms of the Reserve Bank of India Act, 1934, it was founded on April 1, 1935 in Calcutta.
  • It was permanently moved to Mumbai in 1937.
• Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
• It also functions as the "lender of last resort" and is considered Banker to Banks.
• It regulates the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.
• It also monitors the monetary policies through its Monetary Policy Committee (MPC).

Additional InformationState Bank of India:

• The Imperial Bank of India was nationalized to establish the State Bank of India on July 1, 1955.
• It is the biggest public-sector bank in India.
• Its first chairman was John Mathai.
• Its present chairman is Dinesh Kumar Khara.
• It administers public debt, acts as the government's bank, and collects money and makes payments on the government's behalf.
• It lends money to commercial banks and takes deposits from them.
• It acts as a representative for cooperative banks.

​Nationalised Bank:

• These are also known as Public Sector Bank.
• Banks are classified as public sector, where the public interest is the primary goal and the government has retained a majority of its share.
• In order to enter the banking industry after gaining independence, the Indian government began nationalising the Imperial Bank of India in 1955.
• It was renamed the State Bank of India after the Reserve Bank of India acquired 60% of the company.
• The Indian government nationalized fourteen more banks in 1969.

​Union Bank of India:

• It was founded in 1919.
• The Government of India nationalized it in 1969.
• It is the fifth-largest public-sector bank.
• Mahatma Gandhi officially opened it as a limited corporation.
• The present MD and CEO of Union Bank of India is A. Manimekhalai.

The correct answer is Marshall.

Key Points

•  Indifference curve:
  • An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent.
  • Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve.
  • Typically, indifference curves are shown convex to the origin, and no two indifference curves ever intersect.
  • Standard indifference curve analysis operates on a simple two-dimensional graph.
  • Each axis represents one type of economic good.
  • Along the indifference curve, the consumer is indifferent between any of the combinations of goods represented by points on the curve because the combination of goods on an indifference curve provides the same level of utility to the consumer.
  • The slope of the indifference curve is equal to the marginal rate of substitution.

Additional Information

• Property of indifference curves:
  • The indifference curve convex to the origin.
  • The indifference curves, higher is the level of satisfaction.
  • The indifference curve is downward sloping.
  • Two indifference curves cannot intersect each other.
  • As we move down the indifference curve from left to right, the slope of the indifference curve tends to Decline.
  • Two indifference curves cannot cut each other because Each indifference curve represents a different level of satisfaction.

Important Points

• Alfred Marshall:
  • Alfred Marshall was the dominant figure in British economics (itself dominant in world economics) from about 1890 until his death in 1924.
  • His specialty was microeconomics—the study of individual markets and industries, as opposed to the study of the whole economy.
  • In his most important book, Principles of Economics, Marshall emphasized that the price and output of a good are determined by both supply and demand: the two curves are like scissor blades that intersect at equilibrium. 

The correct answer is Geometrically

Key Points

Malthus' theory of population:

• Population and Food Supply: Malthus theorised that any population grows in geometric progression.
•  He believed that a balance between population growth and food supply can be established through preventive and positive checks.

Important Points Major Elements of the Malthusian Theory

Population and Food Supply: 

• The Malthusian theory provided an explanation for why population growth is geometric.
• At this rate, the population would double in 25 years. However, there is an arithmetic increase in the food supply.
• The amount of food available grows more slowly than the population. In other words, there won't be enough food in a few years.
• A growing population is indicated by the food supply shortfall.

Checks on Population:

• Disequilibrium occurs when there is a gap between the rate of population growth and the availability of food.
• People will therefore not have access to even enough food for survival. Due to a scarcity of food, many will perish.
• Malthus referred to the occurrence of adversities like epidemics, wars, starvation, famines, and other natural disasters as positive checks.
• Contrarily, there are artificial checks referred to as preventive checks.

Positive Checks:

• The natural world has its own mechanisms for regulating the expanding human population.
• It raises the population to the level at which food is readily available.
• Famines, earthquakes, floods, diseases, wars, etc. are examples of the positive checks.
• When population expansion becomes out of control, nature becomes more active.

Preventive Checks:

• Late marriage, self Control, and simple living are preventive strategies that help to balance population increase and food availability.
• These procedures not only limit population increase but also have the potential to avoid the terrible effects of positive checks.

• All the public sector establishments and those private sector establishments which employ 10 hired workers or more are called formal sector establishments and those who work in such establishments are formal sector workers.
• All other enterprises and workers working in those enterprises form the informal sector. Thus, the informal sector includes millions of farmers, agricultural labourers, owners of small enterprises and people working in those enterprises as also the self-employed who do not have any hired workers.
• It also includes all non-farm casual wage labourers who work for more than one employer such as construction workers and headload workers. 
• The government, through its labour laws, enable workers to protect their rights in various ways. This section of the workforce forms trade unions, bargains with employers for better wages and other social security measures.
• Workers in formal and informal sectors, which are also referred to as organised and unorganised sectors.