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Total Questions : 89 | Page 7 of 9 pages
Question 61. The average fixed cost curve will always be
  1.    a downward sloping convex to the origin curve
  2.    a downward sloping straight line
  3.    a rectangular hyperbola
  4.    a U-shaped curve
 Discuss Question
Answer: Option C. -> a rectangular hyperbola
Answer: (c)
Total fixed costs are constant, so the average fixed cost curve diminishes with the output. Thus, the average fixed cost curve is a rectangular hyperbola.
Question 62. Economic growth is usually coupled with
  1.    Hyper inflation
  2.    Deflation
  3.    Inflation
  4.    Stagflation
 Discuss Question
Answer: Option C. -> Inflation
Answer: (c)
With the increase in GDP, aggregate demand increases, because more production means people have more disposable income, which means more consumer spending.
As a result, prices rise in response, and in conclusion, because aggregate demand grows faster than long-term aggregate supply, economic growth will be coupled with inflation.
Hyperinflation - In economics, hyperinflation occurs when a country experiences very high and usually actuarially rates of inflation. Economic growth is usually coupled with inflation.
Question 63. Consider the following statements and state which is/are correct?
  1. The sub-prime crisis which hit the U.S. economy was caused by sudden increase in oil prices.
  2. The crisis led to default in home loan repayment.
  3. It led to failure of some U.S. Banks.
  4. Sub-prime crisis caused crash in Indian stock market.
Choose your answer from the given codes.
  1.    Only 2, 3 and 4
  2.    1, 2, 3 and 4
  3.    Only 1
  4.    Only 2 and 4
 Discuss Question
Answer: Option A. -> Only 2, 3 and 4
Answer: (a)
Question 64. The way total output changes due to change in all inputs in same proportion is known as law of
  1.    Increasing returns
  2.    Returns to scale
  3.    Diminishing returns
  4.    Constant returns
 Discuss Question
Answer: Option B. -> Returns to scale
Answer: (b)The way total output changes due to change in all inputs in the same proportion is known as “law of return to scale”.
Question 65. A market in which there are large numbers of sellers of a particular product, but each seller sells somewhat differentiated but close products is termed as
  1.    Monopolistic competition
  2.    Perfect competition
  3.    Monopoly
  4.    Oligopoly
 Discuss Question
Answer: Option A. -> Monopolistic competition
Answer: (a)Monopolistic competition is a form of market in which there are large numbers of sellers of a particular products but each seller sells somewhat differentiated but close products.
Question 66. Which one of the following causes the condition in which prices increase rapidly as a currency loses its value ?
  1.    Stealth inflation
  2.    Stagflation
  3.    Conflation
  4.    Hyper inflation
 Discuss Question
Answer: Option D. -> Hyper inflation
Answer: (d)
Hyperinflation occurs when a country experiences very high and usually accelerating rates of monetary and price inflation, causing the population to minimize their holdings of money.
Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value.
Stagflation: Persistent high inflation combined with high unemployment.
Conflation: The merging of two or more sets of information texts, ideas etc into one.
Stealth inflation: It is a type of charge or fee created by the business to gain extra profit and revenue from its customers.
Question 67. Match List-I with List-II and select answers using the codes given below in the lists.
List
List II
A. Boom
1. Business activities are at a high level with increasing income, output and employment at the macro level.
B. Recession
2. Gradual fall of income, output and employment with business activity in a low gear.
C. Depression
3. Unprecedented level of underemployment and unemployment, drastic fall in income, output.
D. Recovery
4. Steady rise in the general level of prices, income, output and employment.
Codes: A B C D
  1.    2 1 4 3
  2.    2 1 3 4
  3.    1 2 3 4
  4.    1 2 4 3
 Discuss Question
Answer: Option C. -> 1 2 3 4
Answer: (c)
Question 68. Gilt-edged market means
  1.    Market dealing with metals
  2.    Market of government securities
  3.    Bullion market
  4.    Market dealing with exports
 Discuss Question
Answer: Option B. -> Market of government securities
Answer: (b)
The gilt-edged market refers to the market for Government and semi-government securities, backed by the Reserve Bank of India (RBI).
Government securities are tradeable debt instruments issued by the Government for meeting its financial requirements. The term gilt-edged means ‘of the best quality’.
Question 69. Consider the following statements in regard to Headline inflation :

  1. It provides an accurate picture of the inflation in the country.

  2. It is affected by short term transitory effects on the prices of products.


Which of the statements given above is/are correct?
  1.    Both 1 and 2
  2.    1 only
  3.    2 only
  4.    Neither 1 nor 2
 Discuss Question
Answer: Option C. -> 2 only
Answer: (c)
Headline inflation also called as WPI inflation is a measure of the total inflation within an economy and is affected by areas of the market which may experience sudden inflationary spikes such as food or energy.
As a result, headline inflation may not present an accurate picture of the current state of the economy as it doesn’t take account of the service sector.
Question 70. Which of the following statements is true about supply-side economics?
  1.    The Laffer Curve says that, if marginal tax rates fall, tax revenues will rise, and the budget deficit will decrease
  2.    If the tax laws of 1981 and 1986 had had their intended effect, consumption would have risen, causing an increase in both real GDP and in the price level
  3.    The main change made by the tax laws of 1981 and 1986 was to increase marginal tax rates in order to balance the budget
  4.    All of these
 Discuss Question
Answer: Option A. -> The Laffer Curve says that, if marginal tax rates fall, tax revenues will rise, and the budget deficit will decrease
Answer: (a)
The Laffer Curve says that, if marginal tax rates fall, tax revenues will rise, and the budget deficit will decrease.
Supply-side economics is a macroeconomic theory that gives economic growth can be most effectively created by investing in capital and by lowering barriers to the production of goods and services.

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