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Part 032 – Macro Economics Previous Year Questions

Q1. An indifference curve measures ______________ level of satisfaction derived from different combinations of commodity X and Y.
(a) same (b) higher
(c) lower (d) minimum
Ans: (a) An indifference curve may be defined as the locus of points, each representing a different combination of two substitute goods, which yield the same utility or level of satisfaction to the consumer. Therefore, he is indifferent between any two combinations of goods when it comes to making a choice between them. So if, for example, a consumer makes five combinations a, b, c, d and e of two substitute commodities, X and Y, all these combinations yield the same level of satisfaction indicated by U.

Q2. A motion that seeks to reduce the amount of demand presented by government to Re. 1/is known as

(a) Disapproval of policy Cut
(b) Token cut
(c) Economy cut
(d) Vote on account
Ans: (a) Disapproval of Policy Cut seeks to reduce the amount of the demand be reduced to Re.1/-’ representing disapproval of the policy underlying the demand. A member giving notice of such a motion shall indicate in precise terms the particulars of the policy which he proposes to discuss. The discussion shall be confined to the specific point or points mentioned in the notice and it shall be open to members to advocate an alternative policy.

Q3. What is included in the Tetiary sector ?

(a) Banking
(b) Manufacturing
(c) Forestry
(d) Mining
Ans: (a) The tertiary industry is the segment of the economy that provides services to its consumers. It includes a wide range of activities that service based and give non-tangible value to customers such as provision of trading, insurance, banking, etc. The other sectors are the secondary sector (manufacturing), and the primary sector (agriculture and allied activities).

Q4. According to Malthusian theory of population

(a) Population increases in geometric ratio, food supply increases in arithmetic ratio
(b) Population increases in arithmetic ratio, food supply increases in geometric ratio
(c) Population increases in a harmonic mean, food supply increases in geometric ratio
(d) Population increases in a harmonic ratio, food supply increases in a arithmetic ratio
Ans: (a) In his 1798 work, An Essay on the Principle of Population, Malthus examined the relationship between population growth and resources and developed the Malthusian theory of population growth. He proposed that human populations grow exponentially (i.e., doubling with each cycle) while food production grows at an arithmetic rate (i.e. by the repeated addition of a uniform increment in each uniform interval of time).

Q5. The innovation theory of profit was proposed by

(a) Marshall
(b) Clark
(c) Schumpeter
(d) Joan Robbinson
Ans: (c) The Innovation Theory of Profit was proposed by Joseph. A. Schumpeter, who believed that an entrepreneur can earn economic profits by introducing successful innovations. In other words, innovation theory of profit posits that the main function of an entrepreneur is to introduce innovations and the profit in the form of reward is given for his performance.

Q6. An economy in which there are no flows of labour, goods or money to and from other nations is a/an

(a) slow economy
(b) mixed economy
(c) closed economy
(d) open economy
Ans: (c) An economy that does not interact with the economy of any other country is known as closed economy. A closed economy is self-sufficient, meaning no imports are brought in and no exports are sent out. It is the opposite of an open economy, in which a country conducts trade with outside regions.

Q7. Elasticity of demand is the degree of responsiveness of demand of a commodity to a

(a) change in consumers’ wealth
(b) change in the price of substitutes
(c) change in consumers’ tastes
(d) change in its price
Ans: (d) The elasticity of demand, also known as price elasticity of demand, is the degree of responsiveness of demand to change in price. Its measure depends upon comparing the percentage change in the price with the resultant percentage change in the quantity demanded. Thus, elasticity of demand is the ratio of percentage change in amount demanded to a percentage change in price.

Q8. The price of a commodity is the same as

(a) Average revenue
(b) Total cost
(c) Average cost
(d) Total revenue
Ans: (a) Average Revenue refers to revenue received per unit of output sold. It is the same as Price of the commodity. Average revenue can be obtained by dividing the total revenue by the number of units sold. Thus, Average Revenue (AR) = Total Revenue (TR)/Quantity sold (Q)

Q9. Which one of the following is not a feature of monopoly ?

(a) Single seller of the product
(b) Heavy selling costs
(c) Barriers to entry of new firms
(d) Price discriminations
Ans: (b) Heavy selling cost is one of the defining features of an oligopoly. Firms resort to heavy selling cost to attract customers. Under this market form, the firms have to compete to promote their sale by largely homogenous products, differentiated mainly by heavy advertising and promotional expenditure that ultimately adds to the total selling cost.

Q10. The supply of labour in the market depends on

(a) the proportion of the population in the labour force
(b) the number of person hours put in by each person
(c) the size of population
(d) All the above
Ans: (d) Supply of labour in an economy depends upon both economic as well as non-economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.

Q11. The first computer made available for commercial use was :

(a) MANIAC (b) ENIAC
(c) UNIVAC (d) EDSAC
Ans: (c) The UNIVAC computer was the first commercially available computer invented by John Presper Eckert and John Mauchly. As well as being the first American commercial computer, the UNIVAC I was the first American computer designed at the outset for business and administrative use (i.e., for the fast execution of large numbers of relatively simple arithmetic and data transport operations, as opposed to the complex numerical calculations required by scientific computers). As such the UNIVAC competed directly against punch-card machines (mainly made by IBM).

Q12. Malthusian theory of population explored the relationship between

(a) food supply and techno-logy
(b) food supply and popula-tion growth
(c) population growth and development
(d) optimum growth and resources
Ans: (b) According to Malthusian theory of population, population increases in a geometrical ratio, whereas food supply increases in an arithmetic ratio. This disharmony would lead to widespread poverty and starvation, which would only be checked by natural occurrences such as disease, high infant mortality, famine, war or moral restraint.

Q13. Economic development depends on :

(a) Natural resources
(b) Capital formation
(c) Size of the market
(d) All of the above
Ans: (d) Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives.

Q14. Human Development Index was developed by :

(a) Amartya Sen
(c) Friedman
(b) Mahbub-ul-Haq
(d) Montek Singh
Ans: (b) The origins of the Human Development Index (HDI) are found in the annual Human Development Reports of the United Nations Development Programme (UNDP). These were devised and launched by Pakistani economist Mahbub ul Haq in 1990. To produce the Human Development Reports, Mahbub ul Haq brought together a group of well-known development economists including: Paul Streeten, Frances Stewart, Gustav Ranis, Keith Griffin, Sudhir Anand and Meghnad Desai. But it was Nobel laureate Amartya Sen’s work on capabilities and functionings that provided the underlying conceptual framework.

Q15. The Great Depression occurred during

(a) 1914-18 (b) 1929-34
(c) 1939-45 (d) 1922-26
Ans: (b) Depression is referred to a period of time during which economic activity is so low for such a long period of time that large numbers of people are permanently unemployed. The great Depression originated in the United States, after the fall in stock prices that began around September 4, 1929 and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday).

Q16. The worldwide Great Depression took place in

(a) 1936 (b) 1929
(c) 1928 (d) 1930
Ans: (b) Depression is referred to a period of time during which economic activity is so low for such a long period of time that large numbers of people are permanently unemployed. The great Depression originated in the United States, after the fall in stock prices that began around September 4, 1929 and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday).

Q17. An economic theory is a/an

(a) Axion
(b) Proposition
(c) Hypothesis
(d) Tested hypothesis
Ans: (b) A theory is an established explanation that accounts for known facts or phenomenon. Specifically, economic theories ate statements or propositions about patterns of economic behavior under certain circumstances. These theories help us sort out and understand the complexities of economic behavior (Exploring Economics by Robert L. Sexton, p 9).

Q18. The hypothesis that rapid growth of per capita income will be associated with a reduction in poverty is called

(a) trickle down Hypothesis
(b) trickle up hypothesis
(c) U shaped hypothesis
(d) poverty estimation hypothesis
Ans: (a) According to the trickle down hypothesis the rapid growth of per capita income will be associated with a reduction in poverty. In India, this hypothesis has been interpreted to suggest that with growth in agriculture output without radical institution reform will reduce the incidence of poverty in the context of agricultural development in India.

Q19. ‘Take-off stage’ in an economy means

(a) Steady growth begins.
(b) Economy is stagnant.
(c) Economy is about to collapse.
(d) All controls are removed.

Ans: (a) Rostow’s ‘Stages of Economic Growth’ (1960) presented five stages through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity, and 5) age of high mass consumption. Take-off is the short period of intensive growth, in which industrialization begins to occur, and workers and institutions become concentrated around a new industry.

Q20. Gross National Product – Depreciation Allowance = ?

(a) Per Capita Income
(b) Gross Domestic Product
(c) Personal Income
(d) Net National Product
Ans: (d) Net National product (NNP) is Gross National Product minus a depreciation allowance for the wearing out of machines and buildings during the period. In other words, NNP= Gross National Product – Depreciation Allowance. Since NNP counts only the net additions to the nation’s stock, it is less than GNP.

Q21. The business in Stock Markets and other securities markets is regulated

(a) Securities and Exchange Board of India
(b) Sole Trade and Exchange Bank of India
(c) State and Exchange Bank of India
(d) Stock and Exchange Bank of India
Ans: (a) As per the Securities and Exchange Board Of India (SEBI) Act, 1992, SEBI is responsible for protecting the interests of investors in securities and to promote the development of, and to regulate the securities market. It is the duty of SEBI to regulate the business in stock exchanges and any other securities markets.

Q22. Liberalism stands for

(a) religious orthodoxy
(b) a movement and an attitude
(c) self-emancipation
(d) freedom in social, political and economic aspects
Ans: (d) Liberalism includes a broad spectrum of political philosophies that consider individual liberty to be the most important political goal, and emphasize individual rights and equality of opportunity. It supports market economy and a transparent and democratic system of government. The same applies to social and religious aspects as well.

Q23. The difference in the value of visible exports and visible imports is called :

(a) Balance Sheet of items
(b) Balance of Payments
(c) Balance of Trade (d) Balance of Account
Ans: (c) Balance of Trade refers to the difference between the value of a country’s visible imports and visible exports. Also known as the visible balance, it forms part of the balance of payments current account. When the value of visible imports totals more than the value of visible exports, it is known as an adverse balance of trade.

Q24. Which of the following best indicates economic growth of a Nation?

(a) Agriculture income
(b) Per capita income
(c) Gross industrial production
(d) Inflation
Ans: (b) Some economists believe that economic growth is meaningless if it is not distributed across different segments of population. So per capita income is considered by some as a better indicator of economic growth since it measures the average income earned per person in countryin a specified year. It serves as an indicator of a country’s living standards and how wealth or income is distributed across the population. However, to a vast majority Gross Domestic Product (GDP) is the most comprehensive measure of overall economic performance.

Q25. Which is the parameter for the economic development ?

(a) Per capita monetary income
(b) National income
(c) Per capita rural income
(d) Population
Ans: (a) A majority of economists such as Simon Kuznets, Meier and Baldwin, Hicks D. Samuelson, Pigeon and others consider national income as the most suitable index of economic development. However, the UNO experts in their report on ‘Measures of Economic Development of Under-Developed Countries’ have Per Capita Real Income as the best measurement of economic development. They contend that economic growth is meaningless if it does not improve the standard of living of the common masses. They define economic development as a process by which the real per capita income increases over a long period of time.

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