Economics Basic Questions|UPSC, PSC, WBCS Economics Solved Questions
1. The problem of Economics arises from
(B) Scarcity of goods
(C) More wants and less goods
(D) All of the above
Ans. (B) Scarcity of goods
Explanation : Economics problem is all about choosing alternatives among finite resources available that means scarcity of resources.
2. Why is rent earned by land even in the long run?
(A) Land has original and indestructible power
(B) Land is a man made factor
(C) Its supply is inelastic in the short run
(D) Its supply is inelastic in the long run
Ans. (D) Its supply is inelastic in the long run.
Explanation : Rent supply is inelastic in the long run in the sense that no human effort can increase or decrease their amount of supply in the long run.
3. The theory of distribution relates to which of the following?
(A) The distribution of assets
(B) The distribution of income
(C) The distribution of factor payments
(D) Equality in the distribution of income and wealth.
Ans. (D) Equality in the distribution of income and wealth.
Explanation: Distribution theory refers to the way in which distribution of income and expenditure is made between individuals or between productive assets (such as labor, land and capital, etc.) and therefore distribution theory is related to equity in the distribution of income and wealth.
4. From the national point of view which of the following indicates Micro Approach?
(A) Per capita income in India
(B) Study of sales of TISCO
(C) Inflation of India
(D) Educated Unemployment in India
Explanation : From an economics point of view there are two approaches to study economics–
(i) Micro Approach, (ii) Macro Approach
Micro approach is study at the single point or individual level like study of human behaviour in relation to price change and its effect on demand and supply etc.
Macro approach is study at population point or wholesome level like study of interest rates in relation to inflation and deflation etc.
5. The four factors of production are
(A) Land, labour, capital, organisation
(B) Land, electricity, water labour
(C) Labour, capital, land rainfall
(D) Labour, climate, land, rainfall
Ans. (A) Land, labour, capital, organisation.
Explanation: Factors of production are resources by which production is done or essential resources which are core for production. Examples are land, labour, capital and Organisation.
6. Who is called the father of Economics?
(A) J.M. Keynes
(D) Adam Smith
Ans. (D) Adam Smith
Explanation : Adam smith is known as father of economics. Hebwas pioneer in identifying market as a force i.e. self regulating force by giving idea of invisible hands in his first book “The theory of moral sentiments”.
7. Division of labour is the result of
(A) Complicated work
(B) Excessive pressure
(C) Excess supply of labour
Explanation: Division of labour principle works on specialisation of workers in a particular task so that work can be divided Into stages. So production can be efficient and effective.
8. Who said, “Economics is the Science of
(B) J.S. Mill
(C) Adam Smith
Ans. (C) Adam Smith.
Explanation : Adam Smith and Ricardo and other classical economists defined economics as science of national wealth. The understanding of economics was that by studying economics we can know allocation and distribution of wealth.
9. Microeconomics is also called
(A) Income theory
(B) Investment theory
(C) Price theory
(D) Expenditure theory
Ans. (C) Price theory
Explanation: Price theory is associated with micro economics which is basically concerned with determination of output and price for an individual firm or industry.
10. Quasi rent is a ____ phenomenon.
(A) Medium term
(B) Long term
(C) Short term
(D) None of them
Ans. (C) Short term
Explanation: Quasi-rent is a type of return to organization which is different from price rent.Quasi rent is additional income and is a temporary phenomenon for the short run.
11. Investment is equal to
(A) Gross total of all types of physical capital assets
(B) Gross total of all capital assets minus wear and tear
(C) Stock of plants, machines
(D) None of the above
Ans. (B) Gross total of all capital assets minus wear and tear.
Explanation: Investment is a portion of the amount that is used for capital formation and all the wear and tear are deducted to know the actual amount of investment.
12. Which among the following statements is not true when there is an increase in interest rate in an economy?
(A) Increase in saving
(B) Decrease in loan
(C) Increase in production cost
(D) Increase in capital return
Ans. (D) Increase in capital return.
Explanation: Increase of interest rate in the economy leads to increase in saving, decrease in loan and increase in cost of product with decrease in capital return.
Economics Basic Questions
13. Which of the following is not an economic problem?
(A) Deciding between paid work and leisure.
(B) Deciding between expenditure on one good and the other.
(C) Deciding between alternative methods of personal savings.
(D) Deciding between different ways of spending leisure time.
Ans. (D) Deciding between different ways of spending leisure time.
Explanation : Economic problem is all about choosing alternatives among finite resources available that means scarcity of resources.
14. Rent is a factor payment paid to
Explanation: Factor payments are payment done for factors of production like for land, labour, capital. The payment done will be called as rent, wage and interest respectively.
15. According to Modern Theory of Rent, rent accrues to
(A) Capital only
(B) Any factor
(C) Labour only
(D) Land only
Ans. (B) Any factor.
Explanation: Rent is surplus earn by organization and it does not include rent as the payment of land but also other surplus earning by other factors.
16. Investment and savings are kept equal through a change in the level of
(C) Government expenditure
Ans. (A) Consumption .
Explanation:Investment is generally equal to savings. Savings are amounts that are reserved for further investment keeping inflation in mind so Investment and savings are kept equal through a change in level of consumption.
17. Imputed gross rent of owner occupied buildings is a part of-
(A) Capital formation
(B) Final consumption
(C) Intermediate consumption
(D) Consumer durable
Ans. (D) Consumer durable.
Explanation: Imputed gross rent is the amount of rent that the owner of the house would like to pay to live in his own house. So imputed gross rent is final consumption for the owner of the house.
18. Which one of the following would not
constitute an economic activity?
(A) A teacher teaching students in his class.
(B) A teacher students under Sarva Shiksha Abhiyan.
(C) A teacher teaching his own daughter at home.
(D) A teacher providing consultancy services from his residence.
Ans. (C) A teacher teaching his own daughter at home.
Explanation : An economic activity is defined as work done by an individual with expectation of getting monetary rewards or it can also be understood by the activities which result in monetary production.
19. Trickle down theory ignores the impact of economic growth on
(C) Income distribution
Ans. (C) Income distribution.
Explanation : Trickle down in economics is a term used to describe the belief that if high income earners gain an increase in salary, then everyone in the economy will benefit as their increased income and wealth is filtering down to all sections in society.
20. From the national point of view, which of the following indicate a micro approach?
(A) Study of sales of mobile phones by BSNL
(B) Unemployment among Women
(C) Per capita income in India
(D) Inflation in India
Ans. (A) Study of sales of mobile phones by BSNL.
Explanation : Microeconomics is one of the branches of economics that deals with human behavior in relation to scarce resources at ‘Individual level. Like study of pricing, demand supply.
Economics Basic Questions
21. The concept of joint sector implies cooperation between-
(A) Public sector and private sector industries
(B) State Government and Central Government
(C) Domestic and Foreign Companies
(D) None of these
Ans. (A) Public sector and private sector industries.
Explanation : Concept of joint sector implies that public and private sector come together for establishment of new enterprise for a project.
22. Hire and Fire’ is the policy of
(C) Mixed economy
(D) Traditional economy
Ans. (A) Capitalism
Explanation : Capitalism is a theory which believes in profit maximization and regulation by demand and supply itself only. Therefore there is no regulation on what to hire and whom to fire.
23. “Economics is what it ought to be” This statement refers to–
(A) Normative Economics
(B) Positive Economics
(C) Monetary Economics
(D) Fiscal Economics
Ans. (A) Normative Economics.
Explanation : Normative economics is economics that is opinion based neither facts nor objective, so it cannot be actually proved or disapproved, it is totally subjective quality based.
24. Price theory is also known as
(A) Macro Economics
(B) Development Economics
(C) Public Economics
(D) Micro Economics
Ans. (D) Micro Economics.
Explanation : Price theory is associated with micro which is basically concerned with determination of output and price for individual firms or industries.
25. Economics is a—-
(A) Computer Science
(B) Physical Science
(C) Social Science
(D) Natural Science
Ans. (C) Social Science .
Explanation : Economics is the study of human behaviour in relation to utilization of scarce resources available with maximum efficiency for production and distribution of goods and services.
26. The Production of a commodity mostly through the natural process is an activity of
(A) Primary Sector
(B) Secondary Sector
(C) Tertiary Sector
(D) Technology Sector
Ans. (A) Primary Sector
Explanation : Primary sector includes all those economic activities where there is the direct use of natural resources like agriculture, forestry, fishing, fuels, metals etc.
27. A ‘Market Economy’ is one which
(A) Is controlled by the Government
(B) Is free from the Government control
(C) In influenced by international market forces
(D) All of these
Ans. (B) Is free from Government control.
Explanation: Market economy is also called an open economy in which price is decided according to demand and supply in the market. There is less or no government intervention.
28. Economics assumes that
(A) People have unlimited desires but limited resources
(B) People have limited desires but unlimited resources
(C) Allocation of resources of not centrally planned will cause inefficiency
(D) People are emotional and make irrational decisions
Ans. (A) People have unlimited desires but limited resources.
Explanation : Economics is the study of human behaviour in relation with human needs to scarce resources available to fulfil these needs.
29. Microeconomics deals with
(A) The circular flow of income
(B) The decision making of a single economic variable like demand
(C) Understanding unemployment
(D) Economic growth
Ans. (B) The decision making of a single economic variable like demand
Explanation : Microeconomics is the branch of economics which studies economics at individual level like demand, supply price (at singular level) etc.
30. Which of the following statements is incorrect, if resources were unlimited?
(A) There would still be scarcity and opportunity costs
(B) There would still be scarcity but no opportunity costs
(C) There would be no scarcity, but there would be opportunity costs.
(D) There would neither be scarcity nor
Ans. (C) There would be no scarcity, but there would be opportunity costs.
Explanation : In the case of unlimited resources there will be no scarcity but choosing one resource will be lost to other alternatives so there will be opportunity costs.
31. Which of the following statements deals with microeconomics?
(A) Government spending will decrease
(B) Increase in money supply will increase inflation.
(C) Lower interest rates will increase investment.
(D) Higher fees at private schools will increase admissions at public schools.
Ans. (D) Higher fees at private schools will increase admissions at public schools.
32. The Economic development depends on–
(A) Natural resources
(B) Capital formation
(C) Size of the market
(D) All of these
Ans. (D) All of these.
Explanation : Economic development refers to development by promoting standard of living and economic health by applying policies related to them and for economic development we need things like resources, natural or artificial capital market and many more.
33. What are the main components of basic social infrastructure of an economy?
(A) Education, Industry and Agriculture
(B) Education, Health and Civil Amenities
(C) Transport, Health and Banks
(D) Industry, Trade and Transport
Ans. (B) Education, Health and Civil Amenities.
Explanation : Basic social infrastructure of the economy constitutes the structures which helps society to grow as an economy. Infrastructures like health facilities, education, public amnesty etc helps in social growth. Hence these are part of basic social infrastructure of the economy.
34. A mixed economy works primarily through the
(A) Market mechanism
(B) Central allocative machinery
(C) Market mechanism regulated by government
(D) Market mechanism guided by government participation and planning
Ans. (D)Market mechanism guided by government participation and planning.
Explanation : Mixed economy is an economy in which there is a certain amount of freedom of operation to market but with government regulation on Hence, this market mechanism is guided by government participation and planning.
35. A closed economy is one which
(A) Does not trade with other countries
(B) Does not possess any means of international transport.
(C) Does not have a coastline.
(D) is not a member of the UNO
Ans. (A) Does not trade with other countries.
Explanation : Closed economies are those economies which survive on the supply from the domestic market only with no foreign trade, (totally dependent on domestic resources to fulfil demands.)
36. In an economy, the sectors are classified into public and private on the basis of-
(A) Employment conditions
(B) Nature of economic activities
(C) Ownership of enterprises
(D) Use of raw materials
Ans. (C) Ownership of enterprises.
Explanation : Sectors which are owned by the state are called public sectors and sectors which are owned by private entities are called private sectors.
37. Which of the following is a part of the tertiary sector?
(A) Power and Transportation
(B) Animal Husbandry
(C) Cotton Manufacturing
(D) Cultivation of Crops.
Ans. (A) Power and Transportation.
Explanation : Classification of economy on the basís of production can be done into three sectors Primary sectors deals with production from natural resources Secondary sector-production from the produce of primary sector as raw material activities related with services i.e. Tertiary sector intangible activities.
38. Which one of the following categories of workers is termed as cultivators?
(A) Those who own land and cultivate
(B) Those who lease in land and cultivate
(C) Those who cultivate the land of others
(D) Those who own land and lease in from others or institutions and cultivate.
Ans.(C) Those who cultivate the land of others.
Explanation : Workers are classified on the basis of industrial category of workers in following four categories: (a) Cultivators (b) Agricultural labourers, (c) Household Industry workers (d) Other workers. According to the census , a cultivator is the person who is engaged in cultivation of land owned by another person.