UPSC IAS Prelims : Indian Economy : National Income and Money Supply MCQs

The candidates must see here the most important questions of the Economics related to National Income and Money Supply for the IAS Prelims Exam and State PCS Exams

Created On: May 5, 2015 19:39 IST
Modified On: May 11, 2015 19:34 IST 1. Consider the following statements:

1. GNP=GDP + Net factor income from abroad
2. Net National Product at factor cost is “National Income”
3. National Disposable Income=Net National product at market prices + other current transfers from the rest of the world.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3only

(c) 1, 2 and 3

(d) 1 and 3 only

2. Consider the following statements:

1. Real GDP is calculated in a way such that the goods and services are evaluated at constant prices.

2. Nominal GDP is the value of GDP at the current prevailing prices.

3. The ratio of Real GDP to Nominal is known as Index of prices (GDP Deflator)

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3only

(c) 1, 2 and 3

(d) 1 and 3 only

3. Choose the false statement among the following statements:

(a)   Consumer Price Index (CPI) is the index of prices of a given basket of commodities which are bought by the representative consumer.

(b)   The weights of representative goods are constant in GDP Deflator– but they differ according to production level of each good in CPI.

(c)The index for wholesale prices is called Wholesale Price Index (WPI), in USA it is referred to as Producer Price Index (PPI).

(d) CPI includes prices of goods consumed by the representative consumer, hence

it includes prices of imported goods. GDP deflator does not include prices of imported goods.

4. Choose the false statement among the following statements:

(a)Demand of money=Transaction demand + Speculative demand

(b)Transaction demand ∝ Real GDP + Price level

(c)Speculative demand ∝ 1/Market rate of Interest

(d)When the market rate of interest is minimum, speculative demand for money is zero

5. The total liability of the monetary authority of the country (RBI) is called as

(a) monetary base

(b) high powered money

(c) both (a) and (b)

(d) None of these

6. Consider the following pairs:

Demand deposit                    : Saving deposit & Current account deposits
Time deposit                         :  Fixed deposit
Legal tenders                        :  Cheques
Fiat money                            :  Currency notes and coin

Which of the above pairs are correctly matched?

(a)   1,2 and 3only

(b)    2 and 3 only

(c) 3 and 4 only

(d) 1, 2 and 4 only

7. Currency notes and coins are called Fiat money because

(a) they do not have intrinsic value like gold or silver

(b) made on special imported paper

(c) they are printed by government

(d) exchanged for goods and services

8. ________ is the most commonly used to measure money supply, also known as Aggregate monetary resources.

(a) M1

(b) M2

(c) M3

(d) M4

9. The total stock of money in circulation among the public at a particular point of time is called money supply. RBI publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4.

M1=CU+DD

M2=M1+saving deposits with Post Office saving banks

M3=M1+Net time deposits of commercial banks

M4=M3+Total deposits with Post office saving organisation (excluding National saving Certificates)

Where,     CU=currency with public

DD= Net Demand deposits held by commercial banks

Which among these options represents the narrow money?

(a) M2 and M3

(b)M1 and M2

(c)M3 and M4

(d)M1 and M4

10. The total stock of money in circulation among the public at a particular point of time is called money supply. RBI publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4.

M1=CU+DD

M2=M1+saving deposits with Post Office saving banks

M3=M1+Net time deposits of commercial banks

M4=M3+Total deposits with Post office saving organisation (excluding National saving Certificates)

Where,     CU=currency with public

DD= Net Demand deposits held by commercial banks

Which among these options represents the broad money?

(a)M1, M2 and M3

(b)M1 and M2

(c)M3 and M4

(d)M1 and M4