IAS Questions of Economy Set 15 for Prelims Exam

1. Angus Deaton, who has received Nobel Prize for economics in 2015 has done work on

(a) Government policies and development
(b) Consumption, poverty and welfare
(c) Purchasing Parity and globalization
(d) Free trade and vulnerability of economies

Ans. b

Explanation: Angus Deaton looks at economic development from the starting point of consumption rather than income.

2. Which of the following methods can be used to estimate national income?

(1) Expenditure method
(2) Output method
(3) Matrix method
(4) Income method

Codes
(a) 1 and 2 only
(b) 3 and 4 only
(c)  1, 2 and 4 only
(d) All of these

Ans. c

Explanation: Generally, there are three methods of measuring national income of a country, namely, product method (output method), income method and expenditure method.  

3. National Income statistics can help in

(1) Economic planning
(2) Estimating poverty
(3) Formulating trade policy

Codes
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. d

Explanation: The real national income is defined as the aggregate value of goods and services produced during a year net of the changes in the prices.

4. Which of the following is most liquid asset?

(a) Shares
(b) Bonds
(c) Demand Deposit
(d) Term Deposit

Ans. c

Explanation: Demand deposit or saving accounts deposit can be withdrawn at any time.

5. Generally, cost push inflation will lead to

(a) Increase in Profit
(b) Decrease in profit
(c) Constant Profit
(d) No relation

Ans. b

Explanation: Cost of manufacturing will increase. So, generally profit percentage will come down.

6. Which of the following statements are correct?

(1) Disguised unemployment is highest in primary sector.
(2) The production is almost zero in disguised unemployment.

Codes:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. c

Explanation: Disguised unemployment is prevalent in agriculture. More number of people engaged in work than required leads to zero production by the extra persons.

7.  Which of the following statements are correct?

(1) People’s desire for transactions balance increases with increase in income.
(2) People’s spend an increasing proportion of their income on consumption.
(3) Consumption is high when saving is high.

Codes
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. d

Explanation: The increase in income results in more saving and increase in consumption.

8.  Which of the following statements are correct?

(1) In developing countries, taxation is preferred over government borrowing in financing public expenditure.
(2) Taxation would require a curtailment in current consumption.
(3) Investment is high, when rate of interest is low.

Codes
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. c

Explanation: In developing countries government borrowings are given more preference in financing public expenditure.

9. Which of the following statements are correct?

(1) There is an inter-locking of product and factor markets in Indian agriculture.
(2) India’s agricultural economy is overwhelmingly market oriented.

Codes:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. a

Explanation: India’s agricultural economy cannot be said overwhelmingly market oriented as it is interfered by government’s policies such as Minimum Support Price (MSP).

10. Which of the following pairs are correctly matched?

(1) Recession accompanied by inflation                                              : Stagflation
(2) Fall in prices                                                                                        : Disinflation
(3) Inflation rate increasing exponentially                                           :  Hyper-inflation
(4) Raise in price due to increased money supply during recession: Reflation

Codes
(a) 1 and 2 only
(b) 3 and 4 only
(c) 1, 2 and 4 only
(d) All of these

Ans. c

Explanation: Fall in prices is called as deflation. Fall in inflation rate is called disinflation.