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MCQs

Total Questions : 150 | Page 1 of 15 pages
Question 1. Imputed gross rent of owneroccupied buildings is a part of
  1.    intermediate consumption
  2.    consumer durable
  3.    final consumption
  4.    capital formation
 Discuss Question
Answer: Option C. -> final consumption
Answer: (c)
The figure of final private consumption expenditure includes the imputed gross rent of owner-occupied dwellings, consumption of own-account production and payment by households of wages and salaries in kind valued at cost, e.g., provision for food, shelter and clothing to the employees, wherever they exist.
Production for self-consumption is a part of the production and hence an income and is also a part of final consumption expenditure.
Question 2. When average product of an input is at its maximum then : (AP= Average product) (MP= Marginal product)
  1.    AP > MP
  2.    AP < MP
  3.    AP = MP
  4.    AP = 0
 Discuss Question
Answer: Option C. -> AP = MP
Answer: (c)
There is a close relationship between marginal product and average product because both are derived from the total product. When marginal product is equal to average product, the average product is at its maximum.
In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the “cross-over point,”
when MP = AP, AP is at its maximum.
Question 3. What will be the effect on inferior commodities when income of the consumer rises?
  1.    No effect
  2.    First increase then decrease
  3.    Positive effect
  4.    Negative effect
 Discuss Question
Answer: Option D. -> Negative effect
Answer: (d)
In economics, an inferior good is a good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases), unlike normal goods, for which the opposite is observed.
Normal goods are those for which consumers’ demand increases when their income increases. Cheaper cars are examples of inferior goods.
Question 4. Who propounded the ‘market law ?
  1.    T.R. Malthus
  2.    David Recardo
  3.    J.B. Say
  4.    Adam Smith
 Discuss Question
Answer: Option C. -> J.B. Say
Answer: (c)
Say’s law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767–1832), who stated that “products are paid for with products” and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another.
Question 5. The self-employed in a developing country who are engaged in small scale labour intensive work belong to the
  1.    Secondary sector
  2.    Tertiary sector
  3.    Primary sector
  4.    Informal sector
 Discuss Question
Answer: Option C. -> Primary sector
Answer: (c)
Such a scenario is seen in the case of primary economic activities such as agriculture in the developing countries like India. Most of the primary activities are labour intensive where the volume of manpower substitutes the lack of technology. Besides, farmers are ‘self-employed.’
Question 6. While estimating national income which of the following is not taken into account?
  1.    Services of a housewife
  2.    Services of a maid servant
  3.    Services of a doctor
  4.    Services of a teacher
 Discuss Question
Answer: Option A. -> Services of a housewife
Answer: (a)Services provided by housewives can be categorized as non-economic services and thus cannot be accounted in national income which is the sum total of all the goods and services produced in a country, in a particular period of time.
Question 7. Backward bending supply curve belongs to which market?
  1.    Money
  2.    Inventories
  3.    Labour
  4.    Capital
 Discuss Question
Answer: Option C. -> Labour
Answer: (c)
In economics, the backward bending supply curve is related to labour.
Also known as the backwards-bending supply curve of labour, This curve models a situation where workers choose to substitute leisure time for work time, i.e. wages, thus reducing the pool of labour available.
It shows how the change in real wage rates affects the number of hours worked by employees.
Question 8. Which one of the following items is included in the national income account?
  1.    Services of Sadhus
  2.    Services of night-watchmen
  3.    Income of smugglers
  4.    Services of housewives
 Discuss Question
Answer: Option B. -> Services of night-watchmen
Answer: (b)
National income is the total value of a country's final output of all new goods and services produced in one year.
Services provided by housewives, the income of smugglers and services of sadhus can be categorized as non-economic services and thus cannot be accounted for.
Question 9. Which among the following statements is not true when there is an increase in interest rate in an economy ?
  1.    increase in production cost
  2.    increase in capital return
  3.    decrease in loan
  4.    increase in saving
 Discuss Question
Answer: Option B. -> increase in capital return
Answer: (b)
Interest rates increase the cost of borrowing, which results in lesser investment activity and the purchase of consumer durables.
In a low interest-rate environment, shares become a more attractive buy, raising households’ financial assets. This may also contribute to higher consumer spending, and makes companies’ investment projects more attractive.
Lower interest rates also tend to cause currencies to depreciate: Demand for domestic goods rises when imported goods become more expensive. All of these factors raise output and employment as well as investment and consumer spending.
Question 10. Value of out put and value added can be distinguished if we know:
  1.    the value of the sales
  2.    the value of consumption of fixed capital
  3.    the value of net indirect taxes
  4.    the value of intermediate consumption
 Discuss Question
Answer: Option D. -> the value of intermediate consumption
Answer: (d)
Intermediate consumption is an accounting flow that consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses.
Intermediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net output by sector of activity.
Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.

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