MCQ’s

MACRO ECONOMICS MCQs

1. Excess demand for money, according to Say’s law in the Economy:

(A) Is greater

(B) Is very less

(C) Is equal to zero

(D) There is no relationship between excess demand for money and Say’s Law✔

2. Which of the following is not an assumption of classical theory?

(A) Price flexibility
(B) Unemployment✔
(C) Say’s law
(D) Neutrality of money

3. In classical theory the equality between saving and investment is brought about by:

(A) Rate of interest✔
(B) Income
(C) Consumption
(D) Multiplier

4. The normal condition of a capitalist economy in classical theory is:

(A) Underemployment
(B) Full employment✔
(C) General unemployment
(D) Frictional unemployment

5. Equation of exchange is associated with:

(A) Pigou
(B) J.B.Say
(C) Marshall
(D) Irving Fisher✔

6. The theory explaining the direct relationship between the price level and quantity of money is known as :
   (A) Quantity theory of money✔
   (B) Say’s law of markets
   (C) Real theory of interest
   (D) None of these
7. In classical theory the level of employment is a function of:

(A) Price level
(B) Money wage rate
(C) Quantity of money
(D) Real wage rate✔

8. Equation of exchange is converted into the quantity theory of money by assuming the

following variables as constants:

(A) V and T ✔
(B) M and V
(C) M and P
(D) V and P

9. Which of the following is not an obstacle to full employment in classical theory?

(A) Excess of saving over investment

(B) Liquidity trap

(C) Price rigidity

(D) Wage Flexibility✔

10. Fisher’s Equation of quantity theory states that :

(A) P varies directly with income
(B) P varies directly with M✔
(C) P and M are constants
(D) None of the above

11. The classical economists believed that the demand for labour is a function of:

(A) Total money wages
(B) Money wage rate
(C) Total real wages
(D) Real wage rate✔

12. In classical theory of employment, there is the possibility of:

(A) Voluntary unemployment✔
(B) No unemployment
(C) Involuntary unemployment
(D) Disguised unemployment

13. The idea that a general cut in wages will finally lead to a state of full employment was suggested by :

(A) Keynes
(B) Marshall
(C) J.B.Say
(D) A.C.Pigou✔

14. Say’s law of market says:

(A) Supply creates its own demand✔

(B) Demand creates supply

(C) Income generates demand

(D) Savings create demand

15. The aggregate production function implied under classical theory is :

(A) Long run ✔
(B) Short run
(C) No time element
(D) None of the above

16. In the Cambridge equation of M = kPR, the value of k is:

(A) M/V
(B) 1/V✔
(C) V in Fisher’s equation
(D) None of these

17. As a result of an increase in capital, ceteris paribus, —— the marginal productivity of labour:
    (A) Remains constant
    (B) Increase✔
    (C) decreases
    (D) none of these
18. In the classical theory, one of the following is an important assumption:

(A) Wages and prices are inflexible
(B) There is full employment✔
(C) Agents are price setters
(D) Adjustment is through quantity.

19. In the Fisher’s extended equation of exchange MI VI represents:

(A) Credit money✔
(B) Primary money
C) Both primary and credit money
(D) General price level

20. In Fisher’s transaction velocity model, one of the following is not an assumption:

(A) Velocity of circulation of money is constant

(B) The volume of transactions is constant

(C) Full employment

(D) P is considered as an active factor✔

21. The cash balance equation M = KPO was given by:

(A) Keynes
(B) Pigou
(C) Robertson
(D) Marshall✔

22. “Supply creates its own demand “is a law of:

(A) Investment
(B) Inflation
(C) Consumption
(D) Market✔

23. In the equation MV+ MI VI = PT, ‘M ‘denotes:

(A) Velocity of money
(B) Money in circulation✔
(C) Bank deposit
(D) None of these

24. I classical demand for money, the relationship between money supply and price level is:

(A) Proportional

(B) Non-proportional✔

(C) Neither proportional nor non-proportional

(D) None of these

25. As per classical theory saving is:

(A) An increasing function of rate of interest✔

(B) Decreasing function of rate of interest

(C) Decreasing function of level of income

(D) None of these

26. The Cambridge version of the quantity theory of money was developed by:

(A) Fisher
(B) Alfred Marshall
(C) Pigou
(D) Keynes✔

27. In classical system which of the following keeps the economy at full employment:

(A) Level of saving
(B) Increase in money supply
(C) Adjustment in investment
(D) Adjustment in money wages✔

28. In Fisher’s equation of exchange MV=PT, the variation of which produces a
    proportional change in price:
    (A) M ✔
    (B) V
    (C) P
    (D) T
29. According to classical economists, variations in savings are due to:

(A) Level of investment
(B) Rate of interest✔
(C) Level of employment
(D) None of the above

30. In classical theory which of the following is found in the economy:

(A) Unemployment
(B) Involuntary unemployment
(C) Less than full employment
(D) Full employment✔

31. In MV=PT, if M doubles and V and T remain constant, then P will:

(A) Double✔
(B) 1/2
(C) 1
(D) 4

32. Pigou’s version of Cambridge equation is:

(A) M = KP/Y
(B) P= KR/M✔
(C) MV = PT
(D) MV = MI VI

33. The quantity theory of money was restated by:

(A) Alfred Marshall
(B) Milton Friedman✔
(C) Irving Fisher
(D) J.M. .Keynes

34. The law which states that supply creates its own demand and overproduction is impossible is known as:

(A) The law of supply
(B) Say’s law of market✔
(C) Law of demand
(D) Law of macro economics

35. Wages and prices do not adjust quickly to restore general equilibrium is a property of

(A) Classical economics
(B) Keynesian economics✔
(C) Monetary economics
(D) Supply side economics

36. Classicals treated money as a:

(A) Medium of exchange ✔
(B) Store of value
(C) Both
(D) None

37. When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:

(A) Leftward
(B) Rightward✔
(C) No shift
(D) None

38. An Economic model is a statement of relationship among economic ——

(A) Variables ✔
(B) Phenomena
(C) Development
(D) None of these

39. LM curve shows the equilibrium condition in ———- market

(A) Goods market
(B) Product market
(C) Money market✔
(D) None of these

40. Supply creates its own demand is the Basis of:

(A) Classical economics ✔
(B) Keynesian economics
(C) Monetarism
(D) None of these

41. The simplest ISLM model consists of:

(A) Two markets✔
(B) Three markets
(C) Four markets
(D) Five markets

42. The equilibrium in the product market is represented by which curve?

(A) IS ✔
(B) LM
(C) Demand
(D) Supply curve

43. The IS curve has a ——slope

(A) Positive
(B) Negative✔
(C) Zero
(D) None of these

44. The LM curve has a —– slope

(A) Positive✔
(B) Negative
(C) Zero
(D) None of these

45. ISLM model was developed by:

(A) Hicks ✔
(B) Keynes
(C) Friedman
(D) None of these

46. The perfectly elastic segment of the LM curve is:

(A) Keynesian range✔
(B) Classical range
(C) Intermediate range
(D) None of these

47. Which policy is effective in the Classical range?

(A) Monetary policy✔
(B) Fiscal policy
(C) Incomes policy
(D) None of these

48. Which policy is effective in the Keynesian range?

(A) Monetary policy
(B) Fiscal policy✔
(C) Incomes policy
(D) None of these

49. Which policy is effective in the intermediate range?

(A) Monetary policy
(B) Fiscal policy
(C) Both policies✔
(D) None of these

50. IS-LM model was developed by:

(A) Keynes
(B) Walras
(C) J.R.Hicks✔
(D) Don-Patinkin

51. Frictional unemployment exists:

(A) When there is a decrease in real GDP

(B) Because it takes time to find a job when one is first entering the labour force✔

(C) As a result of technological change

(D) When an individual retires

52. The natural rate of unemployment equals the sum of those who are:

(A) Frictionally and structurally unemployed✔

(B) Frictionally and cyclically unemployed

(C) Structurally and cyclically unemployed

(D) Frictionally structurally and cyclically unemployed

53. The marginal productivity of labour is:

(A) The incremental output due to an increase in capital, ceteris paribus

(B) The incremental output due to an increase in labour, ceteris paribus.✔

(C) The incremental output due to a change in technology, ceteris paribus

(D) The incremental output due to a change in technology and a change in the

amount of capital.

54. The marginal productivity of labour:

(A) Increases when the price of the good sold increases, ceteris paribus

(B) Decreases when there is an adverse supply shock, ceteris paribus✔

(C) Increase when more workers are hired, ceteris paribus

(D) Decreases when there is an increase in the quantity of capital, ceteris paribus

55. When saving is greater than investment in a two-sector model,

(A) Output should increas
(b) Output should decrease✔
C) Output should not change
(d) None of these

56. When output exceeds spending:

(A) There is unsold output, and level of output will fall✔

(B) There is unsold output, and level of output will rise

(C) There is unsold output, and level of spending will rise

(D) There is no unsold output since the level of spending will rise

57. When investment is negatively related to the rate of interest, equilibrium output in the

goods market:

(A) Is unrelated to the rate of interest

(B) Is inversely related to the rate of interest✔

(C) Is positively related to the rate of interest

(D) Falls as the rate of interest decreases

58. Simultaneous equilibrium in the money (LM) and goods (IS) market exists:

(A) At an unlimited number of output levels and rates of interest

(B) At only one output level and rate of interest✔

(C) At an unlimited number of output levels and only one rate of interest

(D) At only one output level and an unlimited number of rates of interest

59. In which of the following situations will an increase in the money supply have no effect

upon output?

(A) LM is steeply sloped and IS is steeply sloped

(B) LM is vertical and IS is steeply sloped

(C) LM is steeply sloped and IS is vertical✔

(D) LM is relatively flat as is IS

60. Crowding out occurs when:

(A) A decrease in the money supply raises the rate of interest which crowds out

interest – sensitive private sector spending

(B) An increase in taxes for the private sector reduces private sector disposable

income and spending

(C) A reduction in income taxes results in a higher interest rate, which crowds

out interest–sensitive private sector spending✔

(D) A reduction in government spending induces less consumption spending

61. Policy Neutrality is the main proposition of:

(A) Supply Side Economics.
(B) Keynesian Economics
(C) Monetarism
(D) Rational expectations hypothesis✔

62. Who invented the General Equilibrium analysis?

(A) L. Walras. ✔
(B) W. Leontief
(C) J.M.Keynes.
(D) None of these.

63. Employment equilibrium in the Classical theory is achieved through:

(A) Wage-Price flexibility. ✔
(B) Changes in aggregate demand
(C) Changes in aggregate supply
(D) None of these.

64. Market does not clear is a proposition of:

(A) Neoclassical theory.
(B) Keynesian Economics✔
(C) Monetarism
(D) Rational expectations

65. The interest rate paid on bonds is known as:

(A) Call rate
(B) Coupon rate✔
(C) Repo rate
(D) Bank rate

66. The monetary policy is completely ineffective when the LM curve is:

(A) Vertical .
(B) Horizontal.✔
(C) Upward sloping
(D) Downward sloping

67. Monetarism is associated with:

(A) Keynesian school
(B) Chicago school✔
(C) Cambridge school.
(D) Neo-Classical school.

68. Changes in the subjective or objective factors

(A) Never affect consumption function

(B) Always cause downward shift in consumption function

(C) Always cause upward shift in consumption function

(D) They cause upward or downward shifts in consumption function✔

69. Saving is a function of

(A) Export
(B) Import
(C) Investment
(D) Income✔

70. Entrepreneurs will have no tendency to expand or contract output and employment

when

(A) AD>AS
(B) AD<AS
(C) AD=AS✔
D) None of the above

71. The slope of the consumption function is called

(A) MPC✔
(B) MPS
(C) APC
(D) APS

72. The concept of effective demand is associated with the name of

(A) Marshall
(B) Keynes✔
(C) Krugman
(D) Say

73. In a closed economy, the value of multiplier , when MPC is 0.90

(A) 25
(B) 90
(C) 10✔
(D) 9

74. Income is a ——- variable

(A) Flow✔
(B) Discontinuous
(C) Stock
(D) None of the above

75. Ratio of consumption expenditure to any particular level of income

(A) MPS
(B) APS
(C) APC✔
(D) MPC

76. Psychological law of consumption states that the value of MPC is lies between zero and

(A) 1 ✔
(B) 2
(C) 3
(D) 4

77. Net investment is also known as

(A) Depreciation
(B) Induced investment
(C) Autonomous investment
(D) Capital formation✔

78. In the saving function S = -a + (1-b)Y, the term ‘b’ denotes

(A) Saving
(B) MPC✔
(C) MPS
(D) APS

79. Who propounded Psychological law of consumption

(A) Adam Smith
(B) Ricardo
(C) Keynes ✔
(D) Pigou

80. When MPS = 0.2, MPC will be

(A) 0.8 ✔
(B) 0.2
(C) 1.2
(D) 20

81. In the linear consumption function C = a + bY, coefficient ‘a’ denotes

(A) MPC
(B) APC
(C) Autonomous consumption✔
(D) Induced consumption

82. According to Keynes, rising aggregate income is always associated with

(A) Higher saving rate ✔
(B) Higher import
(C) Lower export
(D) Low production

83. When MPC = 0.5, the value of multiplier is

(A) 5
(B) 0.5
(C) 2 ✔
(D) 4

84. Who postulated the law Supply creates its own demand

(A) Keynes
(B) J B say✔
(C) Marshall
(D) Pigou

85. Autonomous investment is

A. Income inelastic✔

B. Instable

C. Interest elastic

D. Income elastic

86. MEC for a capital good was found out to be 10% and the market rate of interest is 9%,

then the investment is

A. Not profitable

B. Profitable✔

C. Breakeven

D. Cannot say

87. In the Keynesian two sector economy, AD>AS, then

A. S=I

B. S>I

C. S<I✔

D. S=0

88. Value of MPC is

A. >1

B. <1

C. 0

D. 0≤ MPC ≥1✔

89. Schedule that expresses relationship between rate of interest and corresponding amount

of investment

A. MEI✔

B. MEC

C. Effective Demand

D. Aggregate Demand

90. Net investment is

A. Value of gross minus subsidies

B. Investment after providing for depreciation✔

C. Value of gross output before providing for subsidies

D. None of the above

91. MEC is directly related to

A. Prospective yield✔

B. Supply price

C. Rate of interest

D. All of the above

92. According to Keynes the most important determinant of consumption

A. Rate of interest

B. Saving

C. Income✔

D. Investment

93. In the Keynesian two sector economy, AD<AS, then

A. S=I

B. S>I✔

C. S<I

D. S=0

94. In the equation C = 60 + 0.6 Y, MPC is

A. 60

B. 0.6✔

C. 0

D. 1

95. Keynes assumed the presence of ——— economy for the fundamental law of

consumption

A. Capitalistic✔

B. Socialistic

C. Planned

D. None of the above

96. According to Keynes the most important determinant of investment

A. MEC✔

B. Effective demand

C. Aggregate demand

D. Rate of interest

97. When disposable income rises from Rs 500 to Rs 600 and consumption expenditure

changes from Rs 470 to Rs 560, MPC will be equal to

A. 900

B. 100

C. 0.9✔

D. 1

98. In a two sector economy, aggregate demand is equal to

A. C+I✔

B. C+S

C. S+I

D. All of the above

99. In Keynesian terminology, investment means:

A. Financial investment

B. Real investment✔

C. Induced investment

D. None of the above

100. Rate of change in savings to change in income:

A. APS

B. APC

C. MPS✔

D. MPC
MCQ’s

1. Under Cournot Model of Duopoly, each duopolist will produce

(A) half the output

(B) one-fourth of the output

(C) one-sixth of the output

(D) one-third of the total output

Answer: (D)

2. As long as the substitution effect dominates the income effect, the labour supply curve is

(A) negatively sloped

(B) positively sloped

(C) bend backward

(D) shifting towards left

Answer: (B)

3. The distinguishing characteristics of monopolistic competition are

I. Product differentiation

II. Non-price competition

III. Large number of firms and freedom to entry and exit

IV. Firms are interdependent

Codes :

(A) I & III are correct.

(B) I, II and IV are correct.

(C) I, II and III are correct.

(D) I, III and IV are correct.

Answer: (C)

4. Assertion (A) : Monopoly is Pareto inefficient.

Reason (R) : It would be possible to change the allocation of resources to make the amount of income he would be prepared to pay in exchange of the reduction in price.

Codes :

(A) Both (A) and (R) are correct and (R) is the correct explanation of (A).

(B) (A) is correct, but (R) is not correct.

(C) Both (A) and (R) are correct, but (R) is incorrect explanation of (A).

(D) (R) is correct, but (A) is incorrect.

Answer: (A)

5. If MPL/MPK does not change with any proportionate change in labour and capital then the production function is

(A) Linear

(B) Non-linear

(C) Homogeneous

(D) Homothetic

Answer: (D)

6. Match the items in the List – I with items in List – II. Select the correct answer from the code given below :

List – I List – II

I. Agency Theory of Firm 1. O.E. Williamson

II. Xinefficiency 2. M.C. Jensen and W.J. Meckling

III. The Utility Maximisation Model 3. Wilfredo Paretowww.netugc.com

IV. Edgeworth box diagram first used by 4. Harvey Leibenstein

Codes :

   I II III IV

(A) 3 2 1 4

(B) 2 4 1 3

(C) 2 3 4 1

(D) 3 4 1 2

Answer: (B)

7. At the point of tangency between short- run average total cost and longrun average cost, the short-run marginal cost

(A) greater than long-run marginal cost

(B) less than long-run marginal cost

(C) is far above long-run marginal cost

(D) equals long-run marginal cost

Answer: (D)

8. The equilibrium in a market is incomplete with increasing returns to scale only in the case of

(A) imperfectly competitive market

(B) monopolistic market

(C) perfectly competitive market

(D) none of the above

Answer: (C)

9. If 1 = Involuntary unemployment;

2 = Disguised unemployment;

3 = Frictional unemployment; and

4 = Structural unemployment, then full employment is consistent with

(A) 1 & 2

(B) 2 & 3

(C) 3 & 4

(D) 1 & 4

Answer: (C)

10. In Keynes’ equation of absolute income hypothesis, C = α0 + by, where C = Consumption expenditure; α0 = Consumption expenditure when income (y) is zero; and b = Marginal Propensity to Consume (MPC), then which of the following statements is false ?

(A) MPC is independent of the level of income.

(B) MPC is dependent on the level of income.

(C) APC falls as income rises.

(D) APC > MPC.

Answer: (B)

11. Which of the following statements is false ?

(A) The balanced budget multiplier is unity when taxes are lump sum taxes.

(B) The balanced budget multiplier is less than unity when taxes are ad valorem taxes.

(C) Tax multiplier is less than government expenditure multiplier.

(D) Tax multiplier is more than government expenditure multiplier.

Answer: (D)

12. Match the theory/criterion of investment determination as given below in List – II with their propounders given below in List – I :

List – I List – II

I. Dale Jorgenson a. Q-Theory

II. J.M. Keynes b. Neo-classical Theory

III. James Cohin c. Accelerator Theory

IV. James Clark d. Present Value Criterion

Codes :

  I II III IV

(A) a d b c

(B) b d a c

(C) c d a b

(D) c a d b

Answer: (Wrong Question)

13. Assertion (A) : In liquidity trap, the demand for money is perfectly interest elastic.

Reason (R) : Because in this situation, all the investors expect the market rate of interest to rise towards the natural rate of interest.

Codes :

(A) (A) and (R) both are correct and (R) is the correct explanation of (A).

(B) (A) and (R) both are correct, but (R) is not the correct explanation of (A).

(C) (A) is correct, but (R) is incorrect.

(D) Both (A) and (R) are incorrect.

Answer: (A)

14. The rate of net investment spending per time period depends on steepness of the downword slope of

(A) Marginal efficiency of Investment Schedule

(B) Marginal efficiency of Capital Schedule

(C) LM-Schedule

(D) IS-Schedule

Answer: (A)

15. Which of the following is not specifically mentioned as a determinant of the demand for money ?

(A) Wealth

(B) Nominal yield on alternative assets

(C) Inflation rate

(D) Real rate of interest

Answer: (D)

16. Whose model of the following economists makes use of the stock adjustment principle to explain business cycles ?

(A) N. Kaldor

(B) J.R. Hicks

(C) P. Samuelson

(D) J.M. Keynes

Answer: (A)

17. The concept of vicious circle of poverty is associated with

(A) J.M. Keynes

(B) Ragner Nurkse

(C) Karl Marx

(D) J.S. Millwww.netugc.com

Answer: (B)

18. Inverted ‘U’ shaped income distribution hypothesis is associated with

(A) J.B. Clark

(B) David Ricardo

(C) Simon Kuznets

(D) Adam Smith

Answer: (C)

19. Components of HDI are

I. Longevity

II. Infant mortality

III. Educational attainment

IV. Decent standard of living

Codes :

(A) I, II and III are correct.

(B) II, III and IV are correct.

(C) II, I, and IV are correct.

(D) I, III and IV are correct.

Answer: (D)

20. Arrange the proponents of classical theory of development in a sequential order :

I. David Ricardo

II. Adam Smith

III. J.S. Mill

IV. Robert Malthus

Codes :

(A) II IV III I

(B) IV III I II

(C) III II IV I

(D) I II III IV

Answer: (A)

21. Assertion (A) : In Marxian scheme of things, M → C → M’, where M’ > M and M’ – M is surplus value.

Reason (R) : The main cause of this surplus value is raw materials, machines, etc.

Codes :

(A) (A) is wrong but (R) is correct.

(B) (A) is correct but (R) is wrong.

(C) Both (A) and (R) are correct.

(D) Both (A) and (R) are wrong.

Answer: (B)

22. Match the items in the List – I with items in List – II :

List – I List – II

I. Structural view of Underdevelopment 1. Classical Economists

II. Laissez-faire Policy 2. Hollis Chenery

III. Departmental Scheme of Expanded Reproduction 3. Steady State Growth

IV. Golden Age of Accumulation 4. Karl Marx

Codes :

   I II III IV

(A) 2 1 4 3

(B) 4 2 3 1

(C) 1 4 2 3

(D) 3 4 1 2

Answer: (A)

23. Match the items in the List – I with items in List – II :

List – I List – II

I. Critical Minimum Effort Thesis 1. R.F. Kahn

II. Knife-edge Equilibrium 2. Rosentein- Rodan

III. Bastard Golden Age 3. Leibenstein

IV. Big Push Theory 4. Harrod

Codes :

   I II III IV

(A) 3 4 1 2

(B) 1 3 4 2

(C) 2 1 3 4

(D) 4 2 1 3

Answer: (A)

24. Which years in India have been the best and the worst in terms of growth rate of national income ?

(A) 2007-08 and 1997-98

(B) 2006-07 and 1966-67

(C) 1988-89 and 1979-80

(D) 2003-04 and 1957-58

Answer: (C)

25. Rank the States in ascending order of the crude birth rate in the recent years :

I. Andhra Pradesh

II. Karnataka

III. Madhya Pradesh

IV. Uttar Pradesh

Codes :

(A) I, II, III, IV

(B) II, III, I, IV

(C) I, II, IV, III

(D) II, I, IV, III

Answer: (A)

26. Which five year plan of India has recorded the largest gap in terms of growth rate between the services sector and the industrial sector ?

(A) Seventh Plan

(B) Eighth Plan

(C) Ninth Plan

(D) Tenth Plan

Answer: (C)

27. Provide the correct answer about the desired growth target of the manufacturing sector in the medium term as per the National Manufacturing Policy of India.

(A) 6 – 8 percent

(B) 8 – 10 percent

(C) 10 – 12 percent

(D) 12 – 14 percent

Answer: (D)

28. Which of the following countries have better Human Development Index (HDI) as per the HDR 2011 ?

I. Sri Lanka

II. Pakistan

III. Kenya

IV. Egypt

Codes :

(A) Sri Lanka and Egypt

(B) Sri Lanka and Kenya

(C) Pakistan and Sri Lanka

(D) Pakistan and Kenya

Answer: (A)

29. What was the amount of outlay under MGNREGA in 2011-12 by the Government of India ?

(A) Rs. 25,000 crore

(B) Rs. 30,000 crore

(C) Rs. 40,000 crore

(D) Rs. 55,000 crore

Answer: (C)

30. Provide correct answer about the share of India in the world merchandize exports in 2010 :

(A) 0.5 percent

(B) 0.9 percent

(C) 1.1 percent

(D) 1.5 percent

Answer: (D)

31. If the cost of transporting a goods between two nations exceeds the pretrade difference for the goods between two nations, then trade in that goods is

(A) possible

(B) impossible

(C) reversal

(D) cannot say

Answer: (B)

32. According to the Rybczynski theorem, the growth of only one factor at constant relative commodity prices, leads to an absolute expansion in the output of

(A) both commodities

(B) the commodity using the growing factor intensively

(C) the commodity using the no growing factor intensively

(D) any of the above

Answer: (B)

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33. The exchange rate is kept the same in all parts of the market by

(A) exchange arbitrage

(B) interest arbitrage

(C) hedging

(D) speculation

Answer: (A)

34. Which are relevant conditions assumed by the factor price equalization theorem ?

I. The countries are characterized by different factor endowments.

II. The countries are characterized by different production functions.

III. The industries are characterized by different factor intensities.

IV. Each country will export the commodity which uses its abundant factor relatively intensively.

Codes :

(A) I, II, III, IV

(B) I, III, IV

(C) I, II, IV

(D) I, III, II

Answer: (B)

35. Which of the following is true with respect to the monetary approach to the balance of payments ?

(A) It views the balance of payments as an essentially monetary phenomenon.

(B) A balance of payments deficit results from an excess demand of money in the nation.

(C) A balance of payments surplus results from an excess supply of money.

(D) Balance of payments disequilibrium are not automatically corrected in the long run.

Answer: (A)

36. When a nation imposes an import tariff, the nation’s offer curve will

(A) shift away from the axis measuring its export commodity.

(B) shift away from the axis measuring its import commodity.

(C) not shift.

(D) any of the above is possible.

Answer: (A)

37. If the international terms of trade settle at a level that is between each country’s opportunity cost then

(A) there is no basis for gainful trade for either country.

(B) both countries gain from trade.

(C) only one country gains from trade.

(D) one country gains and the other country loses from trade.

Answer: (B)

38. Arrange the following in chronological order :

I. The Indirect Tax Enquiry Committee (Jha Committee)

II. Tax Reforms Committee (Chelliah Committee)

III. Taxation Enquiry Commission (Matthur Commission)

IV. The Direct Tax Enquiry Committee (Wanchoo Committee)

Codes :

(A) III, II, IV, I

(B) III, I, IV, II

(C) II, III, I, IV

(D) III, IV, I, II

Answer: (D)

39. Which of the following are relevant in Zero Base Budgeting ?

I. Each item of expenditure is challenged in pre-budget review.

II. No minimum level of expenditure is allowed to be taken as given.

III. Expenditure of each item is increased marginally.

IV. Most item of expenditure is taken for granted when budget is prepared for the next year.

Codes :

(A) I and III are correct.

(B) I, II and IV are correct.

(C) I and II are correct.

(D) I, III and IV are correct.

Answer: (C)

40. Match the items given in List – I with those in List – II :

List – I List – II

I. Optimal Income Taxation 1. Charles Tiebout

II. An Economic Theory of Politics 2. Peter A. Phyrr

III. Local Public Goods 3. F. Ramsey

IV. Zero Base Budgeting 4. Anthony Downs

Codes :

   I II III IV

(A) 3 1 4 2

(B) 2 3 1 4

(C) 3 2 1 4

(D) 3 4 1 2

Answer: (D)

41. Which of the following is tantamount to absence of taxation ?

(A) Shifting of the tax

(B) Tax transformation

(C) Evasion of tax

(D) Tax capitalisation

Answer: (C)

42. Which of the following tax is within the jurisdiction of States as enumerated in List – II of the Schedule VII of the Constitution of India ?

(A) Taxes on Railway freights and fares.

(B) Taxes on sale and purchase of newspapers and on advertisement therein.

(C) Rate of stamp duty in respect of certain financial documents.

(D) Taxes on luxuries, including entertainments, betting and gambling.

Answer: (D)

43. Cohin Clark has argued that for most countries of the world, the safe upper limit of taxation is

(A) 40 percent of national income

(B) 30 percent of national income

(C) 25 percent of national income

(D) 20 percent of national income

Answer: (C)

44. Which of the following tax can be shifted easily ?

(A) Lump-sum tax imposed on the monopolist

(B) Tax imposed on residential house

(C) Capital goods meant for sale

(D) Succession duty

Answer: (C)

45. In a binomial distribution, the sum of mean and variance is 15 and the product of mean and variance is 54, then the number of observations (n) is equal to

(A) 27

(B) 30

(C) 24

(D) 33

Answer: (A)

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Answer: (D)

47. χ2 (chi-square) test is used to test

(A) analysis of variance

(B) association between the qualitative variables

(C) difference between means of two distributions drawn from the same population.

(D) difference between the means of two distributions drawn from different population.

Answer: (B)

48. Random sampling implies that

(A) the observations are selected purposively.

(B) the observations are selected in a systemic manner.

(C) the observations are selected in an adhoc manner.

(D) the observations are selected in clusters.

Answer: (B)

Answer: (C)

50. Assertion (A) : Fisher’s index is an ideal index.

Reasoning (R) : Fisher’s index satisfies Time Reversal and Factor Reversal Tests.

Codes :

(A) Both (A) and (R) are true and (R) is correct explanation of (A).

(B) Both (A) and (R) are true, but (R) is not correct explanation of (A).

(C) (A) is true, but (R) is false.

(D) (A) is false, but (R) is true.

Answer: (A)