Q1. A firm operating under monopolistic competition finds that at its current output level, Marginal Revenue (MR) is ₹50 and Marginal Cost (MC) is ₹40. To maximize its profits in the short run, the firm should:
Correct Answer: Option A (Decrease its output and increase its price.)
Explanation: Detailed explanation will be updated shortly.
Q2. Consider the following data for a hypothetical economy: The money multiplier is 4, and the total money supply is ₹20,000 crore. If the central bank reduces the Legal Reserve Ratio (LRR) such that the new money multiplier becomes 5, what is the initial amount of High-Powered Money (H) in the economy?
Correct Answer: Option A (₹4,000 crore)
Explanation: Detailed explanation will be updated shortly.
Q3. In the context of the Balance of Payments, if a foreign institutional investor (FII) purchases shares of an Indian company from the Indian stock market, this transaction will be recorded as:
Correct Answer: Option A (A credit item in the Current Account.)
Explanation: Detailed explanation will be updated shortly.
Q4. The 'Paradox of Thrift', in a Keynesian framework, suggests that if all individuals in an economy attempt to increase their savings simultaneously, the most likely macroeconomic outcome will be:
Correct Answer: Option A (A significant increase in aggregate investment and economic growth.)
Explanation: Detailed explanation will be updated shortly.
Q5. For a Giffen good, which of the following relationships between the price effect, substitution effect, and income effect holds true?
Correct Answer: Option A (The negative substitution effect is weaker than the negative income effect.)
Explanation: Detailed explanation will be updated shortly.
Q6. The government of India announces a policy to disinvest 20% of its stake in a Public Sector Undertaking (PSU) and uses the entire proceeds to finance a rural road construction project. How would this be reflected in the government budget?
Correct Answer: Option A (It increases the Revenue Receipts and increases the Capital Expenditure.)
Explanation: Detailed explanation will be updated shortly.
Q7. A consumer's indifference curve for two goods, X and Y, is a right-angled 'L' shape. This implies that the two goods are:
Correct Answer: Option A (Perfect substitutes for each other.)
Explanation: Detailed explanation will be updated shortly.
Q8. Which of the following is an example of a 'normative' economic statement?
Correct Answer: Option A (An increase in the repo rate by the RBI will likely reduce inflation.)
Explanation: Detailed explanation will be updated shortly.
Q9. In the long run, a key difference between a firm in perfect competition and a firm in monopolistic competition is that the latter:
Correct Answer: Option A (Earns supernormal profits.)
Explanation: Detailed explanation will be updated shortly.
Q10. If the Nominal GDP of a country is ₹120 lakh crore and the Real GDP is ₹100 lakh crore, and the Consumer Price Index (CPI) for that year is 115, what can be inferred?
Correct Answer: Option A (The GDP Deflator is 120, indicating higher inflation than the CPI.)
Explanation: Detailed explanation will be updated shortly.
Q11. The kinked demand curve model of oligopoly is primarily used to explain:
Correct Answer: Option A (How firms in an oligopoly collude to form a cartel.)
Explanation: Detailed explanation will be updated shortly.
Q12. 'Devaluation' of a currency differs from 'Depreciation' in that devaluation is:
Correct Answer: Option A (A fall in currency value under a flexible exchange rate system.)
Explanation: Detailed explanation will be updated shortly.
Q13. A production possibility frontier (PPF) is concave to the origin. What does the slope of the PPF at any given point represent?
Correct Answer: Option A (The average rate of technical substitution.)
Explanation: Detailed explanation will be updated shortly.
Q14. In the context of Indian economic development, the term 'Jobless Growth' refers to a situation where:
Correct Answer: Option A (The GDP of the economy is stagnant, but the unemployment rate is rising.)
Explanation: Detailed explanation will be updated shortly.
Q15. If the Marginal Propensity to Consume (MPC) is 0.75, and the government increases its autonomous expenditure by ₹200 crore, which is entirely financed by a lump-sum tax increase of ₹200 crore, what will be the net change in the national income?
Correct Answer: Option A (It will increase by ₹800 crore.)
Explanation: Detailed explanation will be updated shortly.
Q16. A farmer sells wheat worth ₹50,000 to a flour mill. The flour mill grinds it and sells the flour for ₹70,000 to a bakery. The bakery makes bread and sells it to consumers for ₹1,00,000. What is the total value added at all stages?
Correct Answer: Option A (₹2,20,000)
Explanation: Detailed explanation will be updated shortly.
Q17. The 'crowding-out' effect, a potential consequence of expansionary fiscal policy, refers to:
Correct Answer: Option A (Government borrowing leading to higher interest rates, which in turn reduces private investment.)
Explanation: Detailed explanation will be updated shortly.
Q18. Consider the relationship between the Total Product (TP) curve and the Marginal Product (MP) curve of a variable factor. The point of inflection on the TP curve corresponds to:
Correct Answer: Option A (The point where the MP curve is at its minimum.)
Explanation: Detailed explanation will be updated shortly.
Q19. Under a managed floating exchange rate system, if the central bank observes that the domestic currency is appreciating excessively and wants to curb it, it will:
Correct Answer: Option A (Buy foreign currency from the market by selling domestic currency.)
Explanation: Detailed explanation will be updated shortly.
Q20. The primary deficit in a government budget is a measure of:
Correct Answer: Option A (The government's total borrowing requirement.)
Explanation: Detailed explanation will be updated shortly.