IAS Prelims 2015: GS Economy MCQ – Set 2

Multiple Choice Question (MCQ) would help candidates to understand the basics of Economy for IAS Prelims Exam

Created On: Oct 14, 2014 16:26 IST
Modified On: Oct 14, 2014 17:37 IST

Economy is very important part for IAS Prelims Exam. Students must have strong command over the basics of Economics. Following are some MCQ which would help candidates to understand the basics of Economy and types of questions they are supposed to face in IAS Prelims 2015:

1.Which of following statement is true about the Economic Growth 

a. It refers to increase in Gross Domestic Product ( GDP)

b. It refers to the long and sustained rise in real  Gross Domestic Product  (GDP) 

c. It is characterized by fall in unemployment rate

d. Rise in GDP on monetary term

Answer:  b  

Explanation : Economic growth implies change or an increase in the real output of country. Such changes should not be momentarily. Such growth should be maintained for certain period of time. Increase in GDP owing to increase in prices cannot be termed as Economic Growth.  

2.Market Based economy means

a. All economic decision are taken based on the demand and supply forces

b. Some economic decision are taken by government and other are left to market forces

c. Government has full control over the private sector

d. Economic decisions are taken after keeping in view the social welfare 

Answer:  a 

Explanation :Market based economy refers to the economic system where all economic decisions are taken based on the demand and supply conditions prevailing in the market. Government has minimal interference in economic activities. Private players are free to produce the goods and services based on the demand and supply signals in the market.

3.Quaternary  sector implies 

a. Activities related to mining and quarrying 

b. Activities related  to manufacturing 

c. Fishing activities 

d. Research and developmental  activities

Answer: d

Explanation :Quaternary sector is characterized by the intellectual persons or individuals or group of individual. It includes the research and development activities. Mining and quarrying and fishing are concerned with primary sector activities 

4.Sustainable Development implies 

a. Sustained rise in real GDP

b. Long lasting development without negatively impacting the environment 

c. Full exploitation of natural resources 

d. Reduction in unemployment and poverty 

Answer: b

Explanation :Brundtland commission in Our Common Future, also known as the Brundtland Report defined sustainable development:

"Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

5.  Mixed Economy Implies

a. Absence of Public Sector

b. Absence of private sector

c. Co-existence of public and private sector

d. All economic activities are motivated by social welfare 

Answer:   c

Explanation :Mixed Economy is characterized by the co-existence of private and public sectors. Generally public sector is motivated by the general welfare while private sector perform economic activities out of profit motive 

6.Sustainable economic growth depends upon

  a. Investment, not saving

  b. Saving, not investment

  c. Both saving and investment

  d. Neither saving nor investment

Answer: c

Explanation :Saving makes the availability of fund for carrying out the investment activities. Investment cannot be carried out without saving. Further, saving is of no use until it is channelized into different investment activities. 

7.  Which of the following are not third-world regions? 

a. Latin America.

b. Asia.

c. Africa.

d. Australia

Answer: d

Explanation :Various terms has been used to developing countries such as the underdeveloped countries, less developed countries, Third world countries or region etc. developing countries exhibit some common features based on which one can differentiate these countries from developed countries. These regions are characterized by low growth rate, low saving and investment rates, low capital formation, high population growth, and lack of technological development. 

8. Economic development means 

a. Economic growth.

b. Economic growth plus structural and qualitative changes. 

c. Improvement in the living standard of the urban population.

d. Sustainable increases in Gross National Product (GDP).

Answer:  b

Explanation :Economic development means the change in growth along with progressive changes in socio-economic conditions of country. While Economic growth implies change or an increase in the real output of country.Growth must be accompanied by the progressive reduction in the inequalities and social vagaries for being called economic development. Economic growth does not take into account the social implications in form of reduction in inequalities. Change or increase in one component such as consumption or investment may be regarded as the economic growth. 

9. Who operates the monetary policy in India?

a. Ministry of Finance

b. Reserve Bank of India (RBI)

c. Security and Exchange Board of India

d. All of above

Answer: b

Explanation :Central Bank, The Reserve Bank of India is responsible for implementing the monetary policy in India. RBI uses the monetary policy for controlling the inflation and getting high rate of growth. Ministry of Finance and SEBI are not concerned with monetary policy. 

10. Consider the following statements:

I) Government disinvesting its share in various public sector undertakings

II) Process of disinvestment is very fast

III) Process of disinvestment is very slow and government always falls short of target

Which of above statements is/ are true about government policy of disinvestment

a. Only I

b. I and III

c. I and II

d. I, II and III

Answer: b

Explanation :Government of India is divesting its share from public sector undertakings,. Most of government undertakings were incurring losses during the pre liberalization period. Hence, after the introduction of new economic policy in 1991, government started downsizing its share in PSU. But the process of disinvestment is very slow due to host of legal and political hurdles. 


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