Questions and answers for exam Preparation

MCQs

Total Questions : 89 | Page 4 of 9 pages

Question 31. The process of curing inflation by reducing money supply is called

Disinflation
Cost-push inflation
Down–pull inflation/Demand pull inflation
Reflation

Discuss Question

Answer: Option A. -> Disinflation
Answer: (a)
The process of curing inflation by reducing the money supply is called disinflation.
Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the price level of goods and services in GDP. Cost pull inflation - It is caused by an increase in prices of inputs like Labour, raw material etc.
The increased price of the factors of production leads to the decreased supply of Goods. Demand-pull inflation - It is asserted to arise when Aggregate demand in an economy outpaces aggregate supply.
It involves inflation rising as real GDP rises and unemployment falls.

Question 32. In India, inflation is measured by the

Producer Price Index
National Income deflation
Wholesale Price Index number
Consumers Price Index

Discuss Question

Answer: Option D. -> Consumers Price Index
Answer: (d)

Question 33. Which is incorrect about inflation?

For some commodities retail prices are also considered for measurement of inflation
Inflation rate going down does not mean prices are declining
Inflation indicated the rise in the price of basket of commodities on a point-topoint basis
The inflation rate in India is calculated on the basis of the wholesale price index

Discuss Question

Answer: Option C. -> Inflation indicated the rise in the price of basket of commodities on a point-topoint basis
Answer: (c)

Question 34. Which of the following statements (s) are true with respect to the concept of “efficiency” as used in mainstream economics?

Efficiency occurs when no possible re-organisation of production can make anyone better off without making someone else worse off

An economy is clearly inefficient if it is inside the Production Possibility Frontier (PPF)

At a minimum, an efficient economy is on its Production Possibility Frontier (PPF)

The terms such as ‘ Pareto Efficiency’, ‘Pareto Optimality’ and ‘Allocative Efficiency’ are all essentially one and same which denote ‘efficiency in resource allocation’

Select the correct answer using the code given below:

2 and 3 only
1 and 4 only
1 and 3 only
1, 2, 3 and 4

Discuss Question

Answer: Option B. -> 1 and 4 only
Answer: (b)
When the re-organisation of production is not possible which can make anyone better off without making someone else worse off then efficiency occurs.
Pareto Efficiency, Pareto Optimality and Allocative Efficiency are all the same and indicates “efficiency in resource allocation”.

Question 35. Consider the following statements :

Inflation benefits the debtors.

Inflation benefits the bond-holders.

Which of the statements given above is/are correct?

Both 1 and 2
2 only
1 only
Neither 1 nor 2

Discuss Question

Answer: Option C. -> 1 only
Answer: (c)
Inflation redistributes wealth from creditors to debtors i.e., lenders suffer and borrowers benefit out of inflation.
Bondholders = this person has lent money (to debtors) and received bonds in return.
So he is a lender, he suffers, by the way, they haven’t specifically used the word – “inflation-indexed bonds”, hence we cannot say inflation benefits the bond-holders.

Question 36. In an economy a condition of lack of money supply in comparison to the supply of the goods services, will lead to:

Hyperinflation
Inflation
Deflation
Devaluation

Discuss Question

Answer: Option C. -> Deflation
Answer: (c)Deflation may be caused by a combination of the supply and demand for goods and the supply and demand for money, specifically the supply of money going down and the supply of goods going up.

Question 37. Disinvestment is :

Increase in investment.
Offloading of shares of private companies to government.
Off-loading of government shares to private companies.
Closing down of business concerns.

Discuss Question

Answer: Option C. -> Off-loading of government shares to private companies.
Answer: (c)
Disinvestment is a process in which off-loading of government shares is done to private companies.
A company or government organization will divest an asset or subsidiary as a strategic move for the company, planning to put the proceeds from the divestiture to better use that garners a higher return on investment.

Question 38. Which one among the following is a fixed cost to a manufacturing firm in the short run?

Overtime payment to worker
Cost of energy
Insurance on buildings
Cost of raw materials

Discuss Question

Answer: Option C. -> Insurance on buildings
Answer: (c)In the short run insurance premium are fixed costs because they are independent of the level of production.

Question 39. What is meant by ‘Public Good’?

A commodity whose benefits are indivisibly spread among the entire community
A Government scheme that benefits the poor households
A commodity produced by the Government
Any commodity that is very popular among general public

Discuss Question

Answer: Option A. -> A commodity whose benefits are indivisibly spread among the entire community
Answer: (a)Public good means a commodity or service which is given without profit to everyone in a society by government or any organisation.

Question 40. RESIDEX, an index of residential prices in India, was launched in the year