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

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 two.

Key Points

• Only two types of loans can be seen in Indian Credit Market. 
  • Formal Sector Loans
  • Informal Sector Loans
• Among the formal sector loans come from banks and cooperatives.
• The informal lenders include moneylenders, traders, employers, relatives and friends, etc.

The correct answer is All of the above.Key PointsEconomics development

• Economic development is a multidimensional process.
• It involves major changes in social structures, popular attitudes, and national institutions as well as the acceleration of economic growth, the reduction of inequality and the eradication of absolute poverty.
• It needs various factors like Infrastructure, human capital formation, rural development, employment, poverty eradication, environmental protection etc.
• The availability of credit plays a significant role in the development of a country.
• It enhances the demand level in the economy
• Further, it increases production activities which positively impacts employment, poverty eradication and other determinants of development
• Availability of loans depends upon the number of organizations providing credit, the rate of interest, the process of advancing loans, banking awareness etc.​

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 15 percent.

Key Points

•  Bank should always be able to pay the depositors who might come to withdraw money from their bank account.
• This is why all Indian banks generally holds 15 percent of their deposits as cash as a provision. 

Important Points

•  What does banks do? 
  • a bank borrows money from their depositors by using the deposited funds
  • to lend money to other customers.
  • In turn, the bank pays the depositor interest for their savings account balance 
  • simultaneously charging their loan customers a higher interest rate than what was paid to their depositors.

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

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 D2D (Distributor-to-Distributor).Key Points

• B2C (Business-to-Consumer):
  • Business-to-consumer marketing describes the practice of companies selling goods and services directly to customers without the use of a middleman.
  • B2C mainly refers to online merchants who use the internet to sell goods and services to customers.
• C2C (Consumer-to-Consumer):
  • A business model known as "consumer to consumer" (C2C) allows for private customers to deal for goods or services without the involvement of a business on either end of the transaction.
  • Today, online businesses handle the majority of C2C transactions.
• B2B (Business-to-Business):
  • Business-to-business (B2B) refers to a deal or transaction made between two companies, like a wholesaler and a retailer.
  • B2B transactions typically take place in the supply chain, where one business buys raw materials from another in order to utilise them in the production process.
  • Companies in the auto business, as well as those in property management, housekeeping, and industrial cleanup, frequently engage in B2B transactions.

Additional Information

• E-commerce is the electronic purchase or sale of goods through online stores or the Internet.
• E-commerce makes use of technology like supply chain management, mobile commerce, electronic payments transfer, Internet marketing, etc.
• Online retail, electronic markets, and online auctions are the three subfields of e-commerce.
• Electronic business provides a foundation for e-commerce.
• There are five essential categories of E-commerce:
  • Business to Business
  • Business to Consumer
  • Business to Government
  • Consumer to Business
  • Consumer to Consumer

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 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.

The correct answer is Δs/Δy.

Key Points

The marginal propensity to save

• The marginal propensity to save (MPS) refers to the proportion of an aggregate raise in income that a consumer saves rather than spends on the consumption of goods and services.
• Put differently, the marginal propensity to save is the proportion of each added money of income that is saved rather than spent.
• MPS is a component of Keynesian macroeconomic theory and is calculated as the change in savings divided by the change in income, or as the complement of the marginal propensity to consume (MPC).
• Marginal propensity to save is the proportion of an increase in income that gets saved instead of spent on consumption.
• MPS varies by income level. MPS is typically higher at higher incomes.
• MPS helps determine the Keynesian multiplier, which describes the effect of increased investment or government spending as an economic stimulus.

Formula: MPS= dS/dY                         

• where: MPS = marginal propensity to save
• dS = change in savings
• dY = change in income  

Casual work is a temporary and flexible position with a company that has no set requirements beyond completing a specific project. 

• Casual employment differs from traditional full-time employment in various forms.

Important Points

1. Casual employment can include flexible work, contract work, or temporary work, and some people refer to these positions interchangeably. 
2. Casual work is a type of employment where professionals work on a temporary or as-needed basis for a company.it has no set working hours or regular pay periods.
3. Workers are called only when the employees need them.

Hence, Casual employment is when Workers are called only when the employees need them. 

Food security means availability, accessibility and affordability of food to all people at all times.

• Poor households are more vulnerable to food insecurity whenever there is a problem with the production or distribution of food crops.
• Food security depends on the Public Distribution System (PDS) and government vigilance and action at times, when this security is threatened.

Important Points

Food is as essential for living as air is for breathing.

• But food security means something more than getting two square meals.
• Food security has the following dimensions
  • availability of food means food production within the country, food imports and the previous years stock stored in government granaries.
  • accessibility means food is within reach of every person.
  • affordability implies that an individual has enough money to buy sufficient, safe and nutritious food to meet one's dietary needs.
• Thus, food security is ensured in a country only if
  • enough food is available for all the persons
  • all persons have the capacity to buy food of acceptable quality
  • there is no barrier to access to food. 

From the above, we can conclude that statement 4 is true regarding food security.

The correct answer is It involves stripping a currency unit of its status as legal tender.

Key Points

• Demonetization:
  • It is the act of replacing old currency with new currency as legal tender.
  • Notes and coins of a certain denomination were banned by the Central government.
  • In India, Demonetization has taken place three times till now.
    • 1^st Demonetization: In 1946, Rs.1000 and Rs.10000 were removed from circulation.
    • 2^nd Demonetization: In 1978, Rs. 1000, Rs. 5000, and Rs. 10000 were removed from circulation.
    • 3^rd Demonetization: In 2016, Rs. 500 and Rs. 1000 were removed from circulation.