CLASS 12 Economics MCQs

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Microeconomics MCQ Questions Class 12 Economics with Answers

Question : Which of the following is not concerned with the problem of choice ?
a) Excessive income
b) Alternative use of resources
c) Unlimited wants
d) Limited (scarce) resources
Answer : Excessive income
Question : Example of micro economic variable is:

a) Wholesale price index
b) National income
c) Market demand
d) Aggregate demand
Answer : Market demand
Question : Who controls economic activities under centrally planned economics ?

a) Industrialists
b) Private firms
c) Government
d) Consumers
Answer : Government
Question : Slope of production curve is:

a) a straight line
b) convex to the point of origin ‘O’
c) concave to the point of ‘O’
d) none of these
Answer : concave to the point of ‘O’
Question : The problem of 'what to produce' relates to:

a) The choice of technique
b) Distribution of income
c) Market value of the goods and services
d) The choice of goods and services
Answer : The choice of goods and services
Question : Increase (growth) of resources implies that production possibility curve :

a) Shifts to the Right
b) Shifts to the left
c) Rotates to the right
d) None of these
Answer : Shifts to the Right
Question : The following table show the production of cricket bats and sarres of an imaginary economy :
If the production of cricket bats is increased from 3 thousand to 4 thousand, how much production of sarees
will he to be sacrificed by the economy ?
a) Zero
b) 8 lakh sarees
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c) 30 lakh sarees
d) 20 lakh sarees
Answer : 20 lakh sarees
Question : What satisfying power of commodity is called :

a) Consumption
b) Utility
c) Production
d) Value addiction
Answer : Utility
Question : Consuming two goods, consumer attains equilibrium when :

a) MU1 > MU2
b) MU2> MU1
c) MU1 = MU2
d) TU1 = TU2
Answer : MU1 = MU2
Question : When marginal utility is negative, total utility is :

a) Zero
b) Diminishing
c) Maximum
d) Minimum
Answer : Diminishing
Q1. What is known as the study of individual units?
(A) Macroeconomics
(B) Microeconomics
(C) Income and Employment Theory
(D) Development economics
Show Answer
(B) Microeconomics
Q2. What is the main cause of all economic problems?

(A) Abundance
(B) Convenience
(C) Scarcity
(D) None of these
Show Answer
(C) Scarcity
Q3. Study of aggregates is known as ……………..

(A) Macroeconomics
(B) Microeconomics
(C) Price theory
(D) Factor price determination
Show Answer
(A) Macroeconomics
Q4. What is the name of the book written by J.M. Keynes?

(A) Wealth of Nation
(B) Political economy
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(C) The General Theory of Employment, Interest and Money

(D) None of these
Show Answer
(C) The General Theory of Employment, Interest and Money
Q5. When did the great depression occur?

(A) 1929-30
(B) 1934-35
(C) 1938-39
(D) 1941-42
Show Answer
(A) 1929-30
Q6. Who is known as the father of modern macroeconomics?

(A) Adam Smith
(B) J. M. Keynes
(C) Samuelson
(D) Hicks
Show Answer
(B) J. M. Keynes
Q7. Mr. Skund Kumar wants to study the national income. Which branch of economics will he have to
study?
(A) Microeconomics
(B) Price theory
(C) Factor price determination
(D) Macroeconomics
Show Answer
(D) Macroeconomics
Q8. Which one is a demerit of the flexible exchange rate?

(A) Bad Results of Low Rate
(B) Uncertainty
(C) Instability in Foreign Exchange
(D) All the above
Show Answer
(D) All the above
Q9. Which of the following is a merit of the fixed exchange rate?

(A) Ensures the supply of the fixed exchange rate
(B) Ensures the demand for the fixed exchange rate
(C) Ensures the stability for the fixed exchange rate
(D) None
Show Answer
(C) Ensures the stability for the fixed exchange rate
Q10. Which one is the item of Capital Account?

(A) Government Transaction
(B) Priva Transactions
(C) Foreign Direct Investment
(D) All the above
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Show Answer
(D) All the above
Q11. The foreign exchange rate is determined by:

(A) Government
(B) Bargaining
(C) World Bank
(D) Demand and Supply forces
Show Answer
(D) Demand and Supply forces
Q12. The Gold Standard was prevalent in the world from:

(A) 15th century to 18th century
(B) 9th century to 18th century
(C) From 1870 till First World War
(D) From 1670 till First World War
Show Answer
(C) From 1870 till First World War
Q13. Which one is a merit of fixed exchange rate ?

(A) Promotes Foreign Trade
(B) Induces Foreign Capital
(C) Increases Capital Formation
(D) All the above
Show Answer
(D) All the above
Q14. Foreign exchange transactions dependent on other foreign exchange transactions are called:
(A) Current account transactions
(B) Capital account transactions
(C) Autonomous transactions
(D) Accommodating transactions
Show Answer
(D) Accommodating transactions
Q15. Which one is a merit of the fixed exchange rate?

(A) Promotes Foreign Trade
(B) Induces Foreign Capital
(C) Increases Capital Formation
(D) All the above
Show Answer
(D) All the above
Q16. The operation of future delivery in the foreign exchange market is known as …………….
(A) Spot market
(B) Current market
(C) Forward market
(D) Domestic market
Show Answer
(C) Forward market
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Q17. Structure of balance of payment includes which account:

(A) Current account
(B) Capital account
(C) Both (a) and (b)
(D) None of these
Show Answer
Q18. Which account is included in the composition of Balance of Payments ?

(A) Current Account
(B) Capital Account
(D) None of the above
Show Answer
Q19. Balance of Trade means :

(A) Capital Transaction
(B) Import and export of goods
(C) Total debit and credit
(D) All the above
Show Answer
(B) Import and export of goods
Q20. The records of exports and imports in goods and services and transfer payments is known as
(A) Current account
(B) Budget surplus
(C) Economic leakage
(D) degree of openness
Show Answer
(A) Current account
Consumers Equilibrium and Demand MCQ Questions Class 12 Economics with Answers
Question : Law of Diminishing Marginal Utility states that when more and more units of a commodity ate
consumed, marginal utility:
a) begins to increase
b) remains constant
c) begins to decrease
d) becomes zero
Answer : begins to decrease
Question : When total utility is maximum, marginal utility becomes :

a) Unity
b) Negative
c) Zero
d) Positive
Answer : Zero
Question : If the consumer consume only one commodity ‘X’ he will be in equilibrium when :
[Here, MUx= Marginal utility of the good X (in terms of money); Px= Price of good –X]
a) MUx <Px
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b) MUx= Px
c) MUx >Px
d) None of these
Answer : MUx= Px
Question : What will be the condition of total utility when marginal utility stays positive ?
a) Maximum
b) Diminishing
c) Increasing
d) Minimum
Answer : Increasing
Question : When TU is increasing at a diminishing rate, MU must be :

a) Increasing
b) Decreasing
c) Constant
d) Negative
Answer : Decreasing
Question : Marginal utility of a particular commodity at the point of saturation is :

a) Zero
b) Unity
c) Greater than unity
d) less than unity
Answer : Zero
Question : Which of the following equations is incorrect ?

a) MU= TUn+2 – TUn+1
b) MU= TU/Q
c) MU= TUn-TUn-1
d) TU= ∑MU
Answer : MU= TU/Q
Question : In which analysis can utility be measured in definite numbers such as 1,2,3,4 etc ?
a) Cardinal utility analysis
b) Ordinal utility analysis
c) Both of these
d) None of these
Answer : Cardinal utility analysis
Question : Diagrammatic presentation of consumer’s indifference set is called ?

a) Indifference curve
b) Utility curve
c) Budget line
d) Transformation curve
Answer : Indifference curve
Question : Budget line indicates :

a) Price ratio
b) Income ratio
c) Cost ratio
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d) None of these
Answer : Price ratio
Question : Attainable combinations of X and Y are drawn on the assumption that Px and Py are
a) Constant
b) Variable
c) Change in the same ratio
d) Equal to each other
Answer : Constant
Question : According to IC analysis , a consumer attains equilibrium when :

a) MRSxy = Px/Py
b) MRSxy> Px/Py
c) MRSxy< Px/Py
d) None of these
Answer : MRSxy = Px/Py
Question : Given the fact that MRS between goods X and Y is diminishing , IC is:
a) Convex to the origin
b) Concave to the origin
c) Straight line
d) None of these
Answer : Convex to the origin
Question : An indifference curve is related to

a) Choice and preferences of the consumer
b) Consumer’s income
c) Prices of goods X and Y
d) Total utility from goods X and Y
Answer : Choice and preferences of the consumer
Question : The slope of indifference curves is measured by

a) Marginal rate of transformation
b) Marginal rate of substitution
c) Marginal rate of technical substitution
d) None of these
Answer : Marginal rate of substitution
Question : How are goods X and Y when, as a result of rise in the price of good-X , demand for good-Y
increases ?
a) Substitute goods
b) Complementary goods
c) Normal goods
d) Inferior goods
Answer : Substitute goods
Question : In case of normal goods, demand curve shows :

a) A negative slope
b) A positive slope
c) Zero slope
d) None of these
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Answer : A negative slope
Question : Law of demand must fall in case of :

a) Normal goods
b) Giffen goods
c) Inferior goods
d) None of these
Answer : Giffen goods
Question : Inferior goods are those whose income effect is :

a) Negative
b) Positive
c) Zero
d) None of these
Answer : Negative
Question : Shift in demand curve means :

a) Fall in demand due to rise in own price of the commodity
b) Rise in demand due to fall in own price of the commodity
c) Change in demand due to factors other than the change in own price of the commodity
d) None of these
Answer : Change in demand due to factors other than the change in own price of the commodity
Question : Which of the following pairs represents substitute goods ?

a) Car and petrol
b) Coffee and tea
c) Bread and butter
d) All of the above
Answer : Coffee and tea
Question : In case of Giffen’s Paradox the slope of demand curve is

a) Negative
b) Positive
c) Parallel to X-axis
d) Parallel to Y-axis
Answer : Positive
Question : As a result of rise in consumer’s income , demand curve for coarse grain (inferior good) :
a) Shifts to the left
b) Shifts to the right
c) Becomes a horizontal straight line
d) Becomes a vertical straight line
Answer : Shifts to the left
Question : If two goods are complementary then rise in the price of one results in
a) Rise in demand for the other
b) Fall in demand for the other
c) Rise in demand for both
d) None of these
Answer : Fall in demand for the other
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Question : The graphic presentation of a table showing price and demand relationship for a commodity in
the market is called :
a) Individual demand curve
b) Producer’s demand curve
c) Market demand curve
d) Consumer’s demand curve
Answer : Market demand curve
Question : When there is no change in quantity demand in response to any change in price, it is a situation
of :
a) Zero price elasticity
b) Infinite price elasticity
c) Unitary price elasticity
d) None of these
Answer : Zero price elasticity
Question : When total expenditure increases in response to decrease in the price of the commodity the
elasticity of demand is :
a) Greater than unity
b) Less than unity
c) Unity
d) Infinity
Answer : Greater than unity
Question : Ed> 1 represents

a) Elastic demand
b) Inelastic demand
c) Unitary elastic demand
d) None of these
Answer : Elastic demand
Question : On all points of rectangular hyperbola demand curve, elasticity of demand is

a) Equal to unity
b) Zero
d) Less than unity
Answer : Equal to unity
Question : When demand curve is parallel to X-axis, elasticity of demand is

a) Unity
b) Zero
d) Infinity
Answer : Unity
Question : At the mid-point of as straight line downward sloping demand curve, elasticity of demand (Ed) is
a) 2
b) 1/2
c) 1
d) 4
Answer : 1
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Question : When percentage change in demand is less than percentage change in price, demand is:
a) Perfectly inelastic
b) Perfectly elastic
c) More than unitary elastic
d) less than unitary elastic
Answer : less than unitary elastic
Question : When percentage change in demand is more than percentage change in price, demand is:
a) Inelastic
b) Elastic
c) Perfectly inelastic
d) Unitary
Answer : Elastic
Question : What will be the elasticity of demand (Ed) when demand curve is parallel to Y-axis?
a) Unity
b) Zero
c) Less than unity
d) More than unity
Answer : Zero
Question : If due to fall in price, total expenditure (Ed) when demand curve is parallel to Y-axis?
a) A case of inferior good
b) Price elasticity of demand is less than unity
c) Price elasticity of demand is greater than unity
d) Price elasticity of demand is infinity
Answer : Price elasticity of demand is less than unity
Question : A consumer demands 5 units of a commodity at the price of ₨4 per unit. He demands 10 units
when the price falls to Rs3 per unit. Price elasticity of demand is equal to :
a) 3
b) 4
c) 2
d) 1.5
Answer : 4
Question : Using total expenditure method , what is Ed when price and demand are as under :
a) Ed=1
b) Ed<1
c) Ed>1
d) Ed=0
Answer : Ed>1
Question : Per unit production of the variable factor is called

a) Total product
b) Average product
c) Marginal product
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d) None of these
Answer : Average product
Question : Which of the following equations is correct ?

(AP= Average product)
(Q= Output)
(L=Variable factor)
(MP= Marginal Product)
a) AP=Q/L
b) MP=Q/∆L
c) MP= ∆Q/L
d) None of these
Answer : AP=Q/L

a) MP= TPn-TPn-2
b) MP=AP/L
c) MP=TP/L
d) MP=∆TP/∆L
Answer : MP=∆TP/∆L
Question : Variable proportions type production function exists:

a) When with change in the level of output there is change in factor ratio
b) When it is possible to increase output by increasing the application of the variable factor
c) When scale of production changes with change in the level of output
d) Both (a) and (b)
Answer : Both (a) and (b)
Question : What will be the state of total output when marginal product turns negative?
a) Total output will begin to fall
b) Total output will begin to rise
c) Total output will remain constant
d) None of these
Answer : Total output will begin to fall
Question : When average product (output) increase, marginal product is :

a) Equal to average product
b) Greater than average product
c) Less than average product
d) Zero
Answer : Greater than average product
Question : Which one of the following leads to the law of variable proportions ?
a) Some factors are constant
b) Some factors are more efficient than other
c) Specialization of factors
d) None of these
Answer : Some factors are constant
Question : In case of diminishing returns :

a) Total product increases at diminishing rate
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b) Total product increases at increasing rate

c) Marginal product diminishes
d) Both(a) and (c)
Answer : Both(a) and (c)
Question : When more and more units of a variable factor are combined with the fixed factor, the resulting
law is called :
a) Law of variable proportions
b) Law of increasing Returns to Scale
c) Law of Decreasing Return to Scale
d) Law of Constant Return Scale
Answer : Law of variable proportions
Question : What does break- even point indicate?

a) TR>TC
b) TR<TC
c) TR=TC
d) TC=0
Answer : TR=TC
Question : Difference between TR and TC is maximum when

a) AR=MR
b) MR=MC
c) MR=AC
d) MC=AC
Answer : MR=MC
Question : Under perfect competition, for the producer to be in equilibrium :

a) AR=MR=AC and AC must be rising
b) AR=MR=MC and MC must be falling
c) AR=MR=MC and MC must be rising
d) AR=MR=TC and TC must be rising
Answer : AR=MR=MC and MC must be rising
Question : In the context of producer’s equilibrium which one is wrong

a) Minimum difference between TR and TC
b) MR=MC
c) Producer gets maximum profit
d) In equilibrium situation producer has no tendency to change his production.
Answer : Minimum difference between TR and TC
Q1. Macro Economics Studies:

(a) Employment opportunities in the economy
(b) Theory of supply of Commodities
(c) Elasticity of demand in Scooter
(d) Price of wheat in the market
Show Answer
Q2. Who had made the first attempt at National Income Accounting?
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(A) Prof. D.R.Gadgill

(B) Simon Kuznets
(C) J.M.Keynes
(D) Gregory King
Show Answer
(D) Gregory King
Q3. When did the great depression occur?

(a) 1929-30
(b) 1934-35
(c) 1938-39
(d) 1941-42
Show Answer
(a) 1929-30
Q4. Who is known as the father of modern macroeconomics?

(a) Adam Smith
(b) J. M. Keynes
(c) Samuelson
(d) Hicks
Show Answer
(b) J. M. Keynes
Q5. Mr. Skund Kumar wants to study the national income. Which branch of economics will he have to
study?
(a) Microeconomics
(b) Price theory
(c) Factor price determination
(d) Macroeconomics
Show Answer
(d) Macroeconomics
Q6. Accounting of National Income at constant prices is known as …………………

(a) Money income
(b) Real income
(c) Current income
(d) Domestic income
Show Answer
(b) Real income
Q7. Which of the following items are excluded from GNP measurement?
(a) Purely financial transactions
(b) Transfer of used goods and non-market goods and services
(c) Illegal activities and the value of leisure
(d) All of these
Show Answer
(d) All of these
Q8. The subject of the Study of Macro Economics is:

(a) The Principle of National Income
(b) The Principle of Consumer
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(c) The Principle of Producer

(d) None of these
Show Answer
(a) The Principle of National Income
Q9. Macro Economics Studies:

(b) Theory of supply of Commodities
(c) Elasticity of demand in Scooter
(d) Price of wheat in the market
Show Answer
Q10. General Price Level is studied in:

(a) Micro Economics
(b) Macro Economics
(c) Both (a) and (b)
(d) None of these
Show Answer
(b) Macro Economics
Q11. Employment Theory is related to :

(a) Static Economics
(b) Micro Economics
(c) Macro Economics
(d) None of these
Show Answer
(c) Macro Economics
Q12. Increase in Stock of Capital is known as:

(a) Capital Loss
(b) Capital Profit
(c) Capital Formation
(d) None of these
Show Answer
(c) Macro Economics
Q13. Which one of the following is included in circular flow?

(a) Real Flow
(b) Money Flow
(d) None of these
Show Answer
Q14. Which one of the following is included in ‘Stock’?

(a) Quantity of Money
(b) Wealth
(c) Quantity of wheat stored in a warehouse
(d) All the above
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Show Answer
(d) All the above
Q15. Which one is included inflow ?

(a) Consumption
(b) Investment
(c) Income
(d) All of these
Show Answer
(b) Investment
Q16. Which of the following is included in real flow?

(a) Flow of Goods
(b) Flow of Services
(d) None of these
Show Answer
Q17. Which services are provided by families to a firm?

(a) Land
(b) Labour
(c) Capital and Enterprises
(d) All the above
Show Answer
(d) All the above
Q18. Which one is included in the three-sector model?

(a) Family
(b) Firm
(c) Government
(d) All of these
Show Answer
(d) All of these
Q19. Which one is included in the four-sector model?

(a) Family, Firm, Industry
(b) Family, Firm, Government
(c) Family, Firm, Government, Foreign Sector
(d) None of the above
Show Answer
(c) Family, Firm, Government, Foreign Sector
Q20. For a four sector or open economy the condition for equilibrium is:
(a) Savings + taxes + Imports = Investment + govt, expenditure + exports
(b) Total Leakages = Total Injections
(c) Aggregate output = Aggregate Expenditure
(d) All of these
Show Answer
(d) All of these
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Cost and Revenue MCQ Questions Class 12 Economics with Answers

Question : The costs which vary as the level of output varies are called:
a) Prime costs
b) Indirect costs
c) Real costs
d) None of these
Answer : Prime costs
Question : Per unit cost of a good is called

a) Total fixed cost
b) Variable cost
c) Average cost
d) None of these
Answer : Average cost
Question : What happens to ATC when MC< ATC?

a) ATC will rise
b) ATC will fall
c) ATC will remain constart
d) None of these
Answer : ATC will fall
Question : Under perfect competition :

a) MR curve is below AR curve
b) Price = AR = MR
c) AR remains constant
d) both (b) and (c)
Answer : both (b) and (c)
Question : Under monopoly MR can be negative only when :

a) AR is increasing
b) AR is decreasing
c) AR is constant
d) AR = O
Answer : AR is decreasing
Question : When MR zero, then

a) TR is minimum
b) TR is zero
c) TR is maximum
d) TR is equal to MR
Answer : TR is maximum

a)
b)
c)
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d)
Answer :
Question : When TR increases at constant rate, MR should be:

a) Increasing
b) Decreasing
c) Constant
d) Zero
Answer : Constant
Question : Which is the following statements is appropriate in case of monopoly?

a) AR curve slopes upwards while MR curve slopes downwards
b) Slope of both AR and MR curves is upwards
c) Slope of both AR and MR curves is downwards and MR curve is below AR curve
d) Slope of both AR and MR curves is downwards and MR curve is above AR curve
Answer : Slope of both AR and MR curves is downwards and MR curve is below AR curve
Question : Average revenue :

a) Can be negative
b) Cannot be negative
c) Is zero when TR is zero
d) Both (b) and (c)
Answer : Both (b) and (c)
Q1. In order to encourage investment in the economy, the Central Bank may ……………..
(a) Reduce Cash Reserve Ratio
(b) Increase Cash Reserve Ratio
(c) Sell Government securities in the open market
(d) Increase Bank Rate
Show Answer
(a) Reduce Cash Reserve Ratio
Q2. Banks are able to create credit many times more than initial deposits through
(a) secondary deposits
(b) providing overdraft facilities
(c) accepting deposits
(d) advancing loans
Show Answer
(a) secondary deposits
Q3. The creation is called credit creation.

(a) time deposits
(b) primary deposits
(c) secondary deposits
(d) None of these
Show Answer
(c) secondary deposits
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Q4. The ratio of total deposit that a commercial bank has to keep with the Reserve Bank of India is called
(a) Statutory Liquidity Ratio
(b) Deposit Ratio
(c) Cash Reserve Ratio
(d) Legal Reserve Ratio
Show Answer
(c) Cash Reserve Ratio
Q5. Credit creation by the commercial bank is determined by

(a) Cash Reserve Ratio
(b) Statutory Liquidity Ratio
(c) Initial Deposits
(d) all of the above
Show Answer
(d) all of the above
Q6. ……………. is the rate of interest charged by the central bank on loans given to the commercial bank.
(a) Bank Rate
(b) Cash Reserve Ratio
(c) Statutory Liquidity Ratio
(d) Reverse Repo Rate
Show Answer
(a) Bank Rate
Q7. …………….. is the main function of Central Bank.

(a) Notes issue
(b) Credit creation
(c) Accepting deposits from the public
(d) Advancing loans to public
Show Answer
(a) Notes issue
Q8. The central bank can increase the availability of credit by:
(a) Rasing repo rate
(b) Raising reverse repo rate
(c) Buying government securities
(d) Selling government securities
Show Answer
(d) Selling government securities
Q9. Giving permission to withdraw money by an amount more than deposited to is known as
………………..
(a) Advance
(b) Overdraft
(c) Loan
(d) None of these
Show Answer
(b) Overdraft
Q10. What are the alternative measures of money supply in India?

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(a) M1
(b) M2
(c) M3 and M4
(d) All of these
Show Answer
(d) All of these
Q11. Who circulates all mint and one rupee not in India?
(a) Ministry of Finance
(b) RBI
(c) Ministry of External Affairs
(d) State Government
Show Answer
(a) Ministry of Finance
Q12. Which of the following is the narrow measure of the money supply?
(a) M2
(b) M3
(c) M1
(d) M4
Show Answer
(c) M1
Q13. When was the minimum reserve system started in India?

(a) 1947
(b) 1948
(c) 1951
(d) 1957
Show Answer
(d) 1957
Q14. Which is the most liquid measure of the money supply?

(a) M4
(b) M3
(c) M2
(d) M1
Show Answer
(d) M1
Q15. High Powered Money includes:

(a) C + DD + OD
(b) C + R + OD
(c) C + R + TD
(d) C + DD + TD
Show Answer
(b) C + R + OD
Q16. Indian Monetary System is based on ……………

(a) Paper Standard
(b) Metallic Standard
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(c) Gold Standard

(d) Credit Money Standard
Show Answer
(a) Paper Standard
Q17. Which of the following is the apex bank of India?

(a) RBI
(b) SBI
(c) SBP
(d) PNB
Show Answer
(a) RBI
Q18. Who has the right of note issue?

(a) Central Bank
(b) Commercial Bank
(c) Government
(d) Co-operative Bank
Show Answer
(a) Central Bank
Q19. Which of the following is the function of a Central bank?

(a) Issue of notes
(b) Banker to the Government and Banks
(c) Supply and control of money
(d) All of these
Show Answer
(d) All of these
Q20. What are the necessary conditions of the Barter System?

(a) Limited Needs
(b) Limited Exchange Area
(c) Economically Backward Society
(d) All the above
Show Answer
(d) All the above
Q21. Demand deposits include

(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All type of deposits
Show Answer
(b) Saving account deposits and current account deposits
Producer Behavior and Supply MCQ Questions Class 12 Economics with Answers
Question : MC=MR=AC=AR refers to long term equilibrium of
a) Competitive firm
b) Oligopoly firm
c) Monopoly firm
d) None of these
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Answer : Competitive firm
Question : A firm reaches shut down point when

a) TR=TVC
b) TR=TC
c) TC = AVC
d) MC=AC
Answer : TR=TVC
Question : TR>TC is a situation of

a) Normal profit
b) Normal losses
c) Abnormal profits
d) Abnormal losses
Answer : Abnormal profits
Question : Normal profits occur when

a) AR>AC
b) AR=AC
c) AR<AC
d) TR>TC
Answer : AR=AC
Question : At break-even point , a firm makes :

a) Normal profits
b) Extra normal profits
c) Extra normal losses
d) None of these
Answer : Normal profits
Question : Which of the following statements is correct?

a) There is difference between supply and stock
b) Supply does not depend on governments tax- policy
c) Stock refers to the quantity which comes to market for sale
d) Stock and supply are always equal
Answer : There is difference between supply and stock
Question : When supply curve is a vertical straight-line, it indicates:

a) Unitary elastic supply
b) Perfectly elastic supply
c) Perfectly inelastic supply
d) Relatively elastic supply
Answer : Perfectly inelastic supply
Question : If elasticity of supply is equal to unity, what will be the percentage increase in supply as a result of 15
percent rise in price of a commodity?
a) 8%
b) 12%
c) 0%
d) 15%
Answer : 15%
P a g e | 22
Question : If 8% rise in price causes 27% increase in supply, elasticity of supply will be :
a) 1.5
b) 0.5
c) 3.5
d) 2.5
Answer : 1.5
Question : Movement along the supply curve occurs due to :

a) Increase in own price of the commodity
b) Decrease in own price of the commodity
c) Facton other than own price of the commodity
d) Both (a) and (b)
Question : The rise in supply due to rise in price is called:

a) Increase in supply
b) Decrease in supply
c) Extension of supply
d) None of these
Answer : Extension of supply
Question : When supply falls due to factors other than own price of the commodity it indicates
a) Contraction in supply
b) Decrease in supply
c) Extension in supply
d) None of these
Answer : Decrease in supply
Question : An upward sloping straight line supply curve shooting from the X- axis indicates that:
a) Elasticity of supply is equal to zero
b) Elasticity of supply is equal to one
c) Elasticity of supply is greater than one
d) Elasticity of supply is less than one
Answer : Elasticity of supply is less than one
Question : Which one of the following is correct?

a) TC= TFC x TVC
b) TC= TFC / TVC
c) TC= TFC + TVC
d) TC= TFC- TVC
Answer : TC= TFC + TVC
Question : Average fixed cost (AFC) is indicated by:

a) Rectangular hyperbola
b) a straight line parallel to X- axis
c) a straight line parallel X- axis
d) U- shaped curve
Answer : Rectangular hyperbola
Question : Which of the following indicates fixed cost?

P a g e | 23
a) Electricity bill
b) Expenses on raw material
c) Wages of daily workers
d) Interest on fixed capital
Answer : Interest on fixed capital
Question : When production is zero, total cost (TC) will be:

a) Zero
b) Equal to variable cost
c) Equal to total fixed cost
d) Equal to marginal cost
Answer : Equal to total fixed cost
Question : When MC curve cuts AC curse:

a) AC= MC
b) AC< MC
c) AC> MC
d) Both AC and MC are falling
Answer : AC= MC
Question : When production level is zero, then fixed cost is:

a) Zero
b) Negative
c) Positive
d) Equal to variable cost
Answer : Positive
Question : The costs which do change with change in the quantity of output are called:
a) Supplementary costs
b) Money costs
c) Real costs
d) None of these
Answer : Supplementary costs
Q1. Supply creates its own Demand. Who gave this law?
(a) J.B.Say
(b) J.S.Mill
(c) Keynes
(d) Ricardo
Show Answer
(a) J.B.Say
Q2. If MPC is equal to 1, the value of the multiplier is

(a) 0
(b) 1
(c) Between 0 and 1
(d) Infinity
Show Answer
(d) Infinity
Q3. If the marginal propensity to consume is greater than the marginal propensity to save, the value of the
multiplier will be:
P a g e | 24
(a) greater than 2

(b) less than 2
(c) two equal to 2
(d) equal to 5
Show Answer
(a) greater than 2
Q4. If MPC is zero, the value of the multiplier is

(a) 0
(b) 1
(c) between 0 and 1
(d) infinity
Show Answer
(b) 1
Q5. Average Propensity to Consume can never be ………………

(a) positive
(b) zero
(c) more than one
(d) less than one
Show Answer
(b) zero
Q6. According to classical economists, there always exists an equilibrium in the economy.
(a) Full employment
(b) Underemployment
(c) Over full employment
(d) None of these
Show Answer
(a) Full employment
Q7. According to classical economists, real wage rate is ……………… to the Marginal Productivity of
Labour.
(a) Equal
(b) More
(c) Less
(d) None of these
Show Answer
(a) Equal
Q8. On the basis of government law, the compulsory payment made by the public is known as
………………..
(a) Expenditure
(b) Investment
(c) Tax
(d) Subsidy
Show Answer
(c) Tax
Q9. According to classical economists, there always exists ……………… equilibrium in the economy.
P a g e | 25
(a) Full employment

(b) Underemployment
(c) Over full employment
(d) None of these
Show Answer
(a) Full employment
Q10. What will be APC when APS = 0?

(a) One
(b) Zero
(c) Two
(d) Infinite
Show Answer
(a) One
Q11. If MPC = 1, the value of the multiplier is:

(a) 0
(b) 1
(c) Between 0 and 1
(d) Infinity
Show Answer
(d) Infinity
Q12. Which is the measure of correcting excess demand?

(a) Deficit financing
(b) Reduction in taxes
(c) Increase in public expenditure
(d) Increase in public debt
Show Answer
(d) Increase in public debt
Q13. If the marginal propensity to consume is greater than the marginal propensity to save, the value of the
multiplier will be
(a) greater than 2
(b) less than 2
(c) equal to 2
(d) equal to 5
Show Answer
(a) greater than 2
Q14. Supply creates its own Demand. Who gave this law?
(a) J.B.Say
(b) J.S.Mill
(c) Keynes
(d) Ricardo
Show Answer
(a) J.B.Say
Q15. Aggregate demand can be increased by:

(a) increasing bank rate
(b) selling govt, securities by RBI
P a g e | 26
(c) increasing cash reserve ratio

(d) none of these
Show Answer
(d) none of these
Q16. Which among is the direct tax?

(a) Income tax
(b) Gift and Corporation tax
(c) Wealth tax
(d) All of these
Show Answer
(d) All of these
Q17. Which is the determining factor for investment?

(a) Marginal Efficiency of Capital
(b) Interest Rate
(d) None of these
Show Answer
Q18. According to Keynes, investment implies:

(a) Financial Investment
(b) Real Investment
Show Answer
(b) Real Investment
Q19. With the increase in investment, MEC:

(a) Rises
(b) Falls
(c) Remains Constant
(d) None of these
Show Answer
(b) Falls
Q20. Which of the following is a Read Investment?

(a) Purchasing of a Share
(b) Purchasing of Old Factory
(c) Construction of Buildings
(d) Opening Deposit Account in the Bank
Show Answer
(c) Construction of Buildings
The Theory of Firm Under Perfect Competition MCQ Questions Class 12 Economics with Answers
Question : Perfect competition is an industry with
a) a few firms producing identical goods.
b) many firms producing goods that differ somewhat.
c) a few firms producing goods that differ somewhat in quality.
d) many firms producing identical goods.
P a g e | 27
Answer : D
Question : Firms use marketing to

a) influence a consumer's buying decision.
b) convince customers that their product is worth its price.
c) persuade buyers that their product is superior to others.
d) All of the above answers are correct.
Answer : D
Question : In perfect competition, the elasticity of demand for the product of a single firm is
a) infinite, because many other firms produce identical products.
b) zero, because many other firms produce identical products.
c) zero, because the firm produces a unique product.
d) infinite, because the firm produces a unique product.
Answer : A
Question : Price of a goods is determined at a point where :

a) Demand > Supply
b) Demand < Supply
c) Demand = Supply
d) None of these
Answer : C
Question : Total economic profit is

a) total revenue minus total opportunity cost.
b) marginal revenue minus marginal cost.
c) total revenue divided by total cost.
d) marginal revenue divided by marginal cost.
Answer : A
Question : If you have found the percentage of the value of sales accounted for by the four largest firms in
an industry, you have found the
a) elasticity of supply value.
b) Herfindahl-Hirschman Index.
c) elasticity of demand value.
d) four-firm concentration ratio.
Answer : D
Question : The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is
straight because the firm
a) has perfect information.
b) wants to maximize its profits.
c) is a price taker.
d) faces constant returns to scale
P a g e | 28
Answer : C
Question : In the above table, if the quantity sold by the firm rises from 6 to 7, its marginal revenue is
a) $90.
b) $30.
c) $105.
d) $15.
Answer : D
Question : In the above table, the firm

a) must be in a perfectly competitive industry, because its marginal revenue is constant.
b) cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero.
c) cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero.
d) must be in a perfectly competitive industry, because its marginal cost curve eventually rises
Answer : A
Question : The above figure illustrates a firm's total revenue and total cost curves. Which one of the
following statements is FALSE?
a) At output Q1 the firm makes zero economic profit.
b) At an output above Q3 the firm incurs an economic loss.
c) Economic profit is the vertical distance between the total revenue curve and the total cost curve.
d) At output Q2 the firm incurs an economic loss.
Answer : D
Question : Which of the following is the best example of a natural monopoly?

a) owning the only licensed taxicab in town
b) the United States Postal Service
c) ownership of the only ferry across Puget Sound for twenty miles
d) the cable television company in your hometown
Answer : D
Question : Which of the following is NOT correct about patents?

a) Patents stimulate innovation.
b) A patent is a barrier to entry.
c) Patents enable a firm to be a permanent monopoly.
d) Patents encourage invention of new products.
Answer : C
Question : For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the
firm's marginal cost (Mc) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing
quantity occurs at the point where the
a) MC curve intersects the MR curve from above, going from left to right.
b) slope of the MC curve is zero.
P a g e | 29
c) MC curve intersects the MR curve from below, going from left to right.
d) MC and MR curves are parallel.
Answer : C
Question : A perfectly competitive firm's marginal cost exceeds its marginal revenue at its current output.
To increase its profit, the firm will
a) increase its output.
b) raise its price.
c) lower its price.
d) decrease its output.
Answer : D
Question : Which of the following is different about perfect competition and monopolistic competition?
a) Firms in monopolistic competition compete on their product's price as well as its quality and marketing.
b) In monopolistic competition, entry into the industry is unblocked.
c) Perfect competition has a large number of independently acting sellers.
d) Only firms in monopolistic competition can earn an economic profit in the short run.
Answer : A
Question : Which statement is correct ?

a) In very short period, supply is perfectly inelastic, price is affected by both demand conditions.
b) Supply curve elasticity depends on time period
c) Both a) and b)
d) None of the above
Answer : C
Question : The concept of supply curve is relevant only for?

a) Monopoly
b) Monopolistic competition
c) Perfect competition
d) Oligopoly
Answer : C
Question : In perfect competition, since the firm is a price taker, the ________ curve is straight line
a) Total cost
b) Marginal cost
c) Total revenue
d) Marginal revenue
Answer : D
Question : A firm that shuts down and produces no output incurs a loss equal to its
a) marginal costs.
b) total fixed costs.
P a g e | 30
c) total variable costs.

d) marginal revenue.
Answer : B
Question : In perfect competition, which of the following curves generally lies below the demand curve and
slopes downward?
a) Average revenue
b) Average cost
c) Marginal revenue
d) Marginal cost
Answer : C
Question : While a seller under perfect competition equates price and MC to maximize profits a monopolist
should equate?
a) MR and MC
b) AR and MR
c) AR and MC
d) TC and TR
Answer : A
Question : Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip
a) earns an economic profit, but should shut down in the short run.
b) incurs an economic loss, but should stay open in the short run.
c) incurs an economic loss and should shut down in the short run.
d) earns an economic profit and should stay open in the short run.
Answer : B
Question : In the above figure, if the firm increases its output from Q2 to Q1, it will
a) reduce its marginal revenue
b) increase its profit.
c) increase its marginal revenue.
d) decrease its profit.
Answer : D
Question : Which one is a feature of monopolistic competition ?

a) Differentiated Product
b) Selling Cost
c) Imperfect Knowledge of the Market
d) All the above
Answer : D
Question : Which of the following is an example of perfect competition?

a) Agriculture
b) Banking sector
P a g e | 31
c) Car manufacturing
d) Railways
Answer : A
Question : In perfect competition, a firm earns profit when __________ exceeds the _____________?
a)Total revenue, total fixed cost
b)Marginal cost, marginal revenue
c)Average revenue, average cost"
d)Total cost, total revenue
Answer : C
Question : The short-run supply curve for a perfectly competitive firm is its
a) marginal cost curve above the horizontal axis.
b) average cost curve above the horizontal axis.
c) average cost curve above its shutdown point.
d) marginal cost curve above its shutdown point.
Answer : D
Question : The figure represents a firm in a perfectly competitive market. If the firm does not shut down,
the least amount of output that it will produce is
a) 10 units.
b) 8 units.
c) 5 units.
d) less than 5 units
Answer : B
Question : . Which of the following market types has a large number of firms that sell similar but slightly
different products?
a) perfect competition
b) oligopoly
c) monopolistic competition
d) monopoly
Answer : C
Question : In a perfectly competitive market, the type of decision a firm has to make is different in the short
run than in the long run. Which of the following is an example of a perfectly competitive firm's short-run
decision?
a) what price to charge buyers for the product
b) whether or not to enter or exit an industry
c) the profit-maximizing level of output
d) how much to spend on advertising and sales promotion
P a g e | 32
Answer : C
Question : In a perfectly competitive industry, the industry supply curve is the sum of the
a) average total cost curves of all the individual firms.
b) supply curves of all the individual firms.
c) average variable cost curves of all the individual firms.
d) average fixed cost curves of all the individual firms.
Answer : B
Question : Which of the following would create a natural monopoly?

a) requirement of a government license before the firm can sell the good or service
b) technology enabling a single firm to produce at a lower average cost than two or more firms
c) an exclusive right granted to supply a good or service
d) ownership of all the available units of a necessary input
Answer : B
Question : An industry with a large number of firms, differentiated products, and free entry and exit is
called
a) oligopoly.
b) monopoly.
c) monopolistic competition.
d) perfect competition.
Answer : C
Question : Firms face competition when the good they produce

a) is in a market with natural barriers to entry.
b) is unique.
c) is in a market with legal barriers to entry.
d) has a close substitute.
Answer : D
Question : All of the following are examples of product differentiation in monopolistic competition
EXCEPT
a) new and improved packaging.
b) lower price.
c) acceptance of more credit cards than the competition.
d) location of the retail store.
P a g e | 33
Answer : B
Question : Suppose the cost curves in the above figure apply to all firms in the industry. If the initial price is
P1, firms are
a) making an economic profit and some firms will leave the industry.
b) incurring an economic loss and some firms will leave the industry.
c) making an economic profit and some firms will enter the industry.
d) incurring an economic loss and some firms will enter the industry.
Answer : B
Question : Market situation where there is only one buyer is:

a) Monopoly
b) Monopsony
c) Duropoly
d) None of these
Answer : B
Question : Can TR be a horizontal Straight line?

a) May be
b) Can’t say
c) Yes
d) No
Answer : D
Question : Which of the following market types has all firms selling products so identical that buyers do not
care from which firm they buy?
a) perfect competition
b) oligopoly
c) monopolistic competition
d) monopoly
Answer : A
Question : If the cost curves shown in the above figure apply to all firms in the industry and the initial price
is P1, in the long run the price will be
a) greater than P1.
b) zero.
c) equal to P1.
d) less than P1
Answer : D
Question : External economies are factors beyond the control of an individual firm that ________ as the
total industry output increases.
P a g e | 34
a) raise its marginal revenue

b) raise its costs
c) lower its costs
d) lower its profit
Answer : C
Question : In perfect competition, a firm:

a) Determines price
b) Obtains price
c) Both a) and b)
d) None of these
Answer : B
Question : If demand for a seller's product is perfectly elastic, which of the following is correct?
a) There is no incentive to sell at a price below the market price.
b) It will not sell any output at all if it tries to price its product above the market price.
c) There are a very large number of perfect substitutes for the seller's product.
d) All of the above answers are correct.
Answer : D
Question : If the slope of the long-run supply curve for a perfectly competitive industry is positive, the
industry experiences
a) internal economies.
b) external economies.
c) external diseconomies.
d) internal diseconomies
Answer : C
Question : Among the obstacles to the efficient allocation of resources are all of the following EXCEPT
a) competition.
b) monopoly.
c) external benefits.
d) external costs.
Answer : A
Question : In the short run, a perfectly competitive firm can

a) earn a normal profit.
b) incur an economic loss.
c) earn an economic profit.
d) earn an economic profit, earn a normal profit, or incur an economic loss.
Answer : D
Question : The demand for a product produced in a perfectly competitive market permanently increases.
In the short run the price
P a g e | 35
a) rises and each firm produces less output.

b) does not change because each firm produces more output.
c) rises and each firm produces more output.
d) does not change as new firms enter the industry.
Answer : C
Question : Which is a characteristic of the market ?

a) One Area
b) Presence of both Buyers and Sellers
c) Single Price of the Commodity
d) All the above
Answer : D
Question : In perfect competition, in the long run, ______________?

a) There are large profits for the firm
b) There is no profit and no loss for the firm
c) There are negligible profits for the firm
d) There are large losses for the firm
Answer : B
Question : The elasticity at a point on a straight line supply curve passing through the origin will be
a) 3.0
b) 1.0
c) 4.0
d) 2.0
Answer : B
Q1. Which one of the following is a combination of direct taxes?

(a) Excise duty and wealth tax
(b) Service tax and income tax
(c) Excise duty and service tax
(d) Wealth tax and income tax
Show Answer
(d) Wealth tax and income tax
Q2. Which of the following statement is true?

(a) Loan from IMF is a revenue receipt.
(b) Higher revenue deficit necessarily leads to higher fiscal deficit.
(c) Borrowings by the government represent a situation of fiscal deficit.
(d) Revenue deficit is the excess of capital received over the revenue receipts.
Show Answer
(c) Borrowings by the government represent a situation of fiscal deficit.
Q3. Which of the following is not a revenue receipt?

(a) Recovery of loans
(b) Foreign grants
(c) Profit of public enterprises
(d) Wealth tax
P a g e | 36
Show Answer
(a) Recovery of loans
Q4. Primary deficit is borrowing requirements of the government for payment(s)

(a) of interest
(b) other than interest
(c) of all types
(d) that are specific
Show Answer
(b) other than interest
Q5. Which of the following sources of receipts in the government budget increases its liabilities?
(a) Direct taxes
(b) Recovery of loans
(c) Borrowings
(d) Dividend from PSUs
Show Answer
(c) Borrowings
Q6. Which of the following is an indirect tax?

(a) Profit tax
(b) Wealth tax
(c) Custom duty
(d) Gift tax
Show Answer
(c) Custom duty
Q7. The amount collected by the government in the form of interest, fees, and dividends is known as
……………..
(a) Tax-revenue receipts
(b) Capital receipts
(c) Non-tax revenue receipts
(d) None of these
Show Answer
(c) Non-tax revenue receipts
Q8. Borrowing in the government budget is:

(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes
Show Answer
(b) Fiscal deficit
Q9. The non-tax revenue in the following is:

(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise
Show Answer
(c) Dividends
P a g e | 37
Q10. The primary deficit in a government budget will be zero, when ……………..
(a) Revenue deficit is zero
(b) Net interest payments are zero
(c) Fiscal deficit is zero
(d) Fiscal deficit is equal to interest payment
Show Answer
(d) Fiscal deficit is equal to interest payment
Q11. Direct tax is called direct because it is collected directly from:

(a) The producers on goods produced
(b) The sellers on goods sold
(c) The buyers of goods
(d) The income earners
Show Answer
(d) The income earners
Q12. Financial Year in India is:

(a) April I to March 31
(b) January 1 to December 31
(c) October 1 to September 30
Show Answer
Q13. Which objectives government attempts to obtain by Budget

(a) To Promote Economic Development
(b) Balanced Regional Development
(c) Redistribution of Income and Wealth
(d) All the above
Show Answer
(d) All the above
Q14. Which is a component of Budget?

(a) Budget Receipts
(b) Budget Expenditure
Show Answer
Q15. Which is a component of the Budget Receipt?

(a) Revenue Receipt
(b) Capital Receipt
Show Answer
Q16. Tax revenue of the Government includes :

P a g e | 38
(a) Income Tax

(b) Corporate Tax
(c) Excise Duty
(d) All of these
Show Answer
(d) All of these
Q17. Which is included in the Direct Tax?

(a) Income Tax
(b) Gift Tax
(d) Excise Duty
Show Answer
Q18. Which is included in Indirect Tax?

(a) Excise Duty
(b) Sales Tax
(d) Wealth Tax
Show Answer
Q19. The expenditures which do not create assets for the government is called :
(a) Revenue Expenditure
(b) Capital Expenditure
Show Answer
Q20. In India, one rupee note is issued by:

(a) Reserve Bank of India
(b) Finance Ministry of Government of India
(c) State Bank of India
(d) None of these
Show Answer
Forms of Market and Price Determination MCQ Questions Class 12 Economics with Answers
Question : In which kind of market, a firm is a price- taker?
a) Perfect Competition
b) Monopoly
c) Monopolistic competition
d) Oligopoly
Answer : Perfect Competition
Question : Firm’s demand cuve under monopoly shows:

a) No relationship between price and demand
b) Inverse relationship between price and demand
c) Positive relationship between price and demand
d) None of these
P a g e | 39
Answer : Inverse relationship between price and demand
Question : Charging different prices from different buyers for the same good is called :
a) Price extension
b) Price contraction
c) Price discrimination
d) Price control
Answer : Price discrimination
Question : What is the shape of the average revenue curve in perfect competition?
a) Horizontal straight line
b) Vertical straight line
c) Rectangular hyperbola
d) Downward to the right
Answer : Horizontal straight line
Question : Under perfect competition ‘Average Revenue’ and ‘Marginal Revenue’ are indicated by :
a) A common horizontal straight line
b) A common vertical straight line
c) A common rectangular hyperbola
d) Different lines sloping downward
Answer : A common horizontal straight line
Question : In the context of monopolistic competition one of the following statements is correct?
a) Firm has full control over price
b) Horizontal straight line in demand curve of the firm
c) Freedom of entry and exit
d) Selling costs do not exist
Answer : Freedom of entry and exit
Question : Which characteristic of monopolistic competition is compatible with monopoly?

a) One seller and large number of buyers
b) Full control over price
c) Demand curve slopes downward
d) Freedom of entry and exit
Answer : Demand curve slopes downward
Question : Which market induces trusts and cartels?

a) Perfect competition
b) Monopoly
c) Oligopoly
d) None of them
Answer : Oligopoly
Question : If the demand curve of a firm is a horizontal straight line :

a) A firm can sell any amount at the existing price
b) A firm can sell only a specified amount at the existing price
c) All firms will sell equal amount of a commodity
d) Firms can differentiate their product
Answer : A firm can sell any amount at the existing price
P a g e | 40
Question : Compared with monopolistic competition, a firm’s demand curve under monopoly is :
a) Equally elastic
b) Less elastic
c) More elastic
d) Infinitely elastic
Answer : Less elastic
Question : A market situation in which there are only two producers is called :
a) Monopoly
b) Duopoly
c) Oligopoly
d) None of these
Answer : Oligopoly
Question : If the demand curve of a firm is a horizontal straight line :

a) A firm can sell any amount at the existing price
b) A firm can sell only a specified amount at the existing price
c) All firms will sell equal amount of a commodity
d) Firms can differentiate their product
Answer : A firm can sell any amount at the existing price
Question : Compared with monopolistic competition, a firm’s demand curve under monopoly is :
a) Equally elastic
b) Less elastic
c) More elastic
d) Infinitely elastic
Answer : Less elastic
Question : A market situation in which there are only two producers is called :
a) Monopoly
b) Duopoly
c) Oligopoly
d) None of these
Answer : Duopoly
Question : In monopolistic competition the products are:

a) Homogeneous only
b) Homogeneous supported with advertisement
c) Differentiated only
d) Differentiated supported with advertisement
Answer : Differentiated supported with advertisement
Question : Under perfect competition, equilibrium price of the commodity is determined by:
a) Demand for the commodity alone
b) Supply of commodity alone
c) Both demand and supply
d) The government
Answer : Both demand and supply
Question : Supply being perfectly inelastic, what will be the effect of increase or decrease in demand on price and
equilibrium quantity?
P a g e | 41
a) Price increases or decreases respectively

b) No effect on equilibrium quantity
c) Both (a) and (b)
d) None of these
Question : When will increase in supply bring down the price, leaving the quantity demanded unchanged?
a) When demand for the commodity is perfectly elastic
b) When demand for the commodity is perfectly inelastic
c) When demand for the commodity is less elastic
d) When demand for the commodity is more elastic
Answer : When demand for the commodity is perfectly inelastic
Question : What will be the effect on equilibrium price if supply is decreased without any change in demand?
a) No change in price
b) Price will fall
c) Price will rise
d) None of these
Answer : Price will rise
Question : The period of time, when supply is fully adjusted to change in demand is called:
a) Short – period
b) Very short- period
c) Mid-period
d) long- period
Answer : long- period
Question : Market supply curve of perishable goods is a vertical straight line parallel to Y- axis. It happens in
which of the following periods?
a) Long- period
b) Short – period
c) Very short- period
d) Market- period
Answer : Very short- period
Question : What would price ceiling lead to when the maximum price is fixed lower than the equal price?
a) Excess demand
b) Excess supply
c) Deficient demand
d) Deficient supply
Answer : Excess demand
Question : If demand for a product falls, equilibrium price will :

a) Fall
b) Rise
c) Either of the two
d) Neither of the two
Answer : Fall
Question : The market price is related to:

a) Short period
P a g e | 42
b) Very short period

c) Long period
d) Very long period
Answer : Very short period
Q1. Foreign exchange transactions which are independent of other transactions in the Balance of Payments
Account are called:
(a) Current transactions
(b) Capital transactions
(c) Autonomous transactions
(d) Accommodating transactions
Show Answer
Q2. What is the cause of the devaluation of any country’s currency?

(a) Increase in the domestic inflation rate
(b) Domestic real interest rates are less than foreign interest rates
(c) Much increase in the income
(d) All of these
Show Answer
(d) All of these
Q3. The operation of daily nature in the foreign exchange market is known as
(a) Spot market
(b) Forward market
(c) Domestic market
(d) International market
Show Answer
(a) Spot market
Q4. The operation of future delivery in the foreign exchange market is known as
(a) Spot market
(b) Current market
(c) Forward market
(d) Domestic market
Show Answer
(c) Forward market
Q5. Trade of visible items between the countries is known as

(a) Balance of Payment
(b) Balance of Trade
(c) Deficit Balance
(d) All of these
Show Answer
Q6. When the import and export of visible items are equal, the situation is known as
(a) Balance of Trade
(b) Balance of Payment
(c) Trade Surplus
(d) Trade Deficit
Show Answer
P a g e | 43
Q7. When there is a favourable balance of trade?

(a) X > M
(b) X = M
(c) X < M
(d) None of these
Show Answer
(a) X > M
Q8. The trade of visible and invisible items is known as ………………..

(a) Balance of Payments
(c) Deficit of interest
(d) Profit
Show Answer
(a) Balance of Payments
Q9. Other things remaining unchanged, when in a country the price of foreign currency rises, national
income is:
(a) Likely to rise
(b) Likely to fall
(c) Likely to rise and fall both
(d) Not affected
Show Answer
(A) Likely to rise
Q10. Other things remaining the same, when in a country the market price of foreign currency falls,
national income is likely:
(a) To rise
(b) To fall
(c) To rise or to fall
(d) To remain affected
Show Answer
(b) To fall
Q11. Which one is the king of the exchange rate?

(a) Fixed Exchange Rate
(b) Flexible Exchange Rate
Show Answer
Q12. Which of the following is true?

(a) Fixed exchange rate is determined by the government
(b) Flexible exchange rate is determined by market forces (demand and supply of foreign exchange)
Show Answer
P a g e | 44
Q13. Which one is a kind of fixed exchange rate?

(a) Gold Standard System of Exchange Rate
(b) Bretton Woods System of Exchange Rate
Show Answer
Q14. Which one is a merit of the fixed exchange rate?

(a) Promotes Foreign Trade
(b) Induces Foreign Capital
(c) Increases Capital Formation
(d) All the above
Show Answer
(d) All the above
Q15. Which one is a demerit of the fixed exchange rate?

(a) Ignores National Interests
(b) Restricted Movement of Capital
(c) Sudden Fluctuations in Exchange Rates
(d) All the above
Show Answer
(d) All the above
Q16. Which one is a merit of the flexible exchange rate?

(a) Simple System
(b) Continuous Adjustments
(c) Improves Balance of Payments
(d) All the above
Show Answer
(d) All the above
Q17. Which one is a demerit of the flexible exchange rate?

(a) Bad Results of Low Rate
(b) Uncertainty
(c) Instability in Foreign Exchange
(d) All the above
Show Answer
(d) All the above
Q18. Which one is a source of the demand for foreign exchange?

(a) Imports of Goods and Services from Abroad
(b) Investment in Foreign Nations
(c) Gift Scheme to Foreign Nations
(d) All the above
Show Answer
(d) All the above
Q19. Foreign exchange is determined by:

P a g e | 45
(a) Demand for foreign currency

(b) Supply of foreign currency
(c) Demand and supply in the foreign exchange market
Show Answer
Q20. The forms of foreign exchange market is/are:

(a) Spot market
(b) Forward market
(d) None of these
Show Answer
Q21. The foreign exchange rate is determined by:

(a) Government
(b) Bargaining
(c) World Bank
(d) Demand and Supply forces
Show Answer
Q22. By exchange rate we mean:

(a) How much local currency we have to pay for a foreign currency
(b) How much of a foreign currency we have to pay for another foreign currency
(c) The rate at which foreign currency is bought and sold
(d) All of these
Show Answer
(d) All of these
Non Competitive Markets MCQ Questions Class 12 Economics with Answers
Question : Measures to improve the adverse balance of payment includes:
(a) Currency devaluation
(b) Import substitution
(c) Exchange control
(d) All of the above
Answer : D
Question : Monopolistic competition differs from perfect competition primarily becaus—

(a) in monopolistic competition firms can differentiate their products.
(b) in perfect competition firms can differentiate their products.
(c) in monopolistic competition entry into the industry is blocked.
(d) in monopolistic competition there are relatively few barriers to entry.
Answer : A
Question : When there is unfavourable balance of trade?

(a) X > M
(b) X = M
P a g e | 46
(c) X < M
(d) None of these
Answer : C
Question : The firm and the industry are one and the same in:
(a) Monopolistic competition
(b) Monopoly
(c) Duopoly
(d) Oligopoly
Answer : B
Question : Which items are included in the Balance of Payments?

(a) Visible Items
(b) Invisible Items
(c) Capital Transfers
(d) All the above
Answer : D
Question : The demand curve of Oligopoly is?

(a) Kinked
(b) Vertical
(c) Horizontal
(d) Rising left to Right
Answer : A
Question : Under monopoly form of market, TR is maximum when

(a) MR is maximum
(b) MR < 0
(c) MR > 0
(d) MR is zero
Answer : D
Question : Market which has two firms is known as

(a) Duopoly
(b) Monopolistic Competition
(c) Oligopoly
(d) None of These
Answer : A
Question : One characteristic not typical of Oligopolistic industry is its:

(a) Horizontal demand curve.
(b) Too much importance to non-price competition.
(c) Price leadership.
(d) A small number of firms in the industry.
Answer : A
P a g e | 47
Question : In perfect competition, a company earns an abnormal profit when average revenue exceeds the?
(a) Total revenue
(b) Average cost
(c) Total fixed cost
(d) Marginal revenue
Answer : B
Question : Which one is a merit of the flexible exchange rate?

(a) Simple System
(b) Continuous Adjustments
(c) Improves Balance of Payments
(d) All the above
Answer : D
Question : In perfect competition, when the marginal revenue and marginal cost are equal, profit it?
(a) Zero
(b) Average
(c) Maximum
(d) Negative
Answer : C
Question : Other things remaining unchanged, when in a country the price of foreign currency rises,
national income is:
(a) Likely to rise
(b) Likely to fall
(d) Not affected
Answer : A
Question : Which market have characteristic of product differentiation

(b) Oligopoly
(c) Monopoly
(d) Perfect competition
Answer : A
Question : The market where the national currencies are traded for one another is known as ________
(a) Domestic exchange market
(b) Foreign exchange market
(c) Bazaar
(d) Shop
Answer : B
P a g e | 48
Question : Which one is the item of the Current Account?

(a) Import of Visible Items
(b) Expenses of Tourists
(c) Exports of Visible Items
(d) All the above
Answer : D
Question : In the monopolistic market, which curves lie below the demand curve and slopes downward?
(a) Marginal cost
(b) Average cost
(c) Average revenue
(d) Marginal revenue
Answer : A
Question : In monopolistic competition the goods are.

(a) Durable
(b) Differentiated
(c) Heterogeneous
(d) Homogeneous
Answer : B
Question : What is the cause of the devaluation of any country’s currency?

(a) Increase in the domestic inflation rate
(b) Domestic real interest rates are less than foreign interest rates
(c) Much increase in the income
(d) All of these
Answer : D
Question : Which market has characteristics of product differentiation

(b) Oligopoly
(c) Monopoly
(d) Perfect competition
Answer : A
Question : Hybrid in management of fixed and flexible exchange rate is known as ________
(a) Managed to float
(b) Crawling Peg
(c) Wider Bands
(d) None of these
Answer : A
Question : A monopolist is a price

(a) Acceptor
(b) Taker
P a g e | 49
(c) Giver
(d) Maker
Answer : D
Question : When was the gold standard abandoned?

(a) 1930’s
(b) 1920’s
(c) 1940’s
(d) 1950’s
Answer : B
Question : The demand curve of a monopoly firm will be——————

(a) upward sloping
(b) downward sloping
(c) horizontal
(d) vertical
Answer : B
Question : Cartels exist in.Oligopoly

(a) Duopoly
(b) Monopoly
(c) Perfect competition
(d) None of these
Answer : B
Question : Price discrimination can take place only in

(a) Perfect competition
(b) Oligopoly
(c) Monopolistic competition
(d) Monopoly
Answer : D
Question : Oligopoly having identical products is known as

(a) Pure oligopoly
(b) Collusive oligopoly
(c) Independent oligopoly
(d) None of above
Answer : A
Question : Which of the following is not a characteristic feature of imperfect competition?

(a) Prices vary from seller to seller
(b) All the products are homogeneous
(c) Profits of the seller is included in the price
(d) None of above
Answer : B
P a g e | 50
Question : Under which of the following forms of market structure a firm has no control over the price of
its product?
(a) Monopoly
(b) Perfect competition
(c) Oligopoly
(d) Monopolistic competition
Answer : B
Question : The concept of the supply curve is relevant only for?

(a) Oligopoly
(b) Monopoly
(c) Monopolistic Competition
(d) Perfect Competition
Answer : D
Macroeconomics MCQ Questions Class 12 Economics with Answers

Question : Interest rates and bond prices are;
a) positively related
b) negatively related
c) not related
d) Either A or B
Answer : B
Question : (“Economics is a science of logic)’’ Who said it ?

a) Hicks
b) Keynes
c) Robbins
d) Marshall
Answer : C
Question : The deficiency of aggregate demand during depression period leads to

a) Seasonal unemployment
b) Voluntary unemployment
c) Involuntary unemployment
d) Frictional unemployment
Answer : C
Question : An increase in planned investment spending causes aggregate output to;

a) increase by an amount equal to the change in investment spending.
b) increase by an amount less than the change in investment spending.
c) increase by an amount greater than the change in investment spending.
d) decrease by an amount less than the change in investment
Answer : A
P a g e | 51
Question : Which among the following does not have the application of multiplier
a) Determination of income
b) Fiscal policy
c) Monetary policy
d) Foreign direct investment
Answer : C
Question : Broker's commission on sale and purchase of second hand goods is included in national income
because:
a) It is a part of compensation of employees
b) It is a part of GRoss Domestic Capital Formation
c) it is an income earned for rendering productive services
d) None of these
Answer : C
Question : Study of aggregates is known as _________

a) Macroeconomics
b) Microeconomics
c) Price theory
d) Factor price determination
Answer : A
Question : Economy may be classified as:

a) Capitalist
b) Socialist
c) Mixed
d) All of these
Answer : D
Question : The reason for downward shape of production possibility curve is:
a) Increasing opportunity cost
b) Decreasing opportunity cost
c) Same opportunity cost
d) Negative opportunity cost
Answer : B
Question : The central problem of an economy is:

a) What to produce ?
b) How to produce ?
c) How to distribute produced goods ?
d) All of these
Answer : D
Question : Mr. Skund Kumar wants to study the national income. Which branch of economics will he have
to study?
P a g e | 52
a) Microeconomics
b) Price theory
c) Factor price determination
d) Macroeconomics
Answer : D
Question : The basic factors of production are land, labour, capital, and _____.
a) Enterprise
b) Investment
c) Machinery
d) Resources
Answer : A
Question : Multiplayer is the ratio of

a) change in income to change in investment
b) change in investment to change in income
c) change in income to change in interest
Answer : A
Question : Which one is inclded in National Income?

a) winning from lottery
b) milk purchase by a dairy shop
c) national debt interest
d) none of these.
Answer : D
Question : LM curve represents the combination of ;

a) price and out put
b) Demand for money and supply of money
c) income and investment
d) Money supply and nvestment
Answer : B
Question : Who is known as the father of modern macroeconomics?

a) Adam Smith
b) J.M.Keynes
c) Samuelson
d) Hicks
Answer : B
Question : Which of the following is studied under Micro Economics ?

a) Individual unit
b) Economic Aggregate
P a g e | 53
c) National Income
d) None of these
Answer : D
Question : Mr. Skund Kumar wants to study the national income. Which branch of economics will he have
to study?
a) Microeconomics
b) Price theory
c) Factor price determination
d) Macroeconomics
Answer : D
Question : Macro-static equilibrium implies:

a) A complete absence of change
b) A change at an unchanged rate
c) A change in only absolute values
d) None of these
Answer : A
Question : What is the name of the book written by J.M. Keynes?

a) The Wealth of Nation
b) The General Theory of Employment, Interest, and Money
c) Political Economy
d) None of these
Answer : B
Question : Which of the following is studied under Macro Economics ?

a) National Income
b) Full. Employment
c) Total Production
d) All of these
Answer : D
Question : What is known as the study of individual units?

a) Macroeconomics
b) Microeconomics
c) Income and Employment Theory
d) Development economics
Answer : B
Question : Which of the following is not an economic activity and hence not included while estimating
national income in india?
a) medical services rendered by a dispensary
b) a housewife doing household work
P a g e | 54
c) a lawyer doing his practice

d) a maid working full time with a family
Answer : B
Question : When was the famous book of Prof. Keynes published?

a) 1930
b) 1931
c) 1936
d) 1940
Answer : C
Question : Under which type of activity would you categorise the sale of shares of another firm whilst
preparing the cash flow statement?
a) Financing activity
b) Investing and financing
c) Operating activity
d) Investing activity
Answer : D
Question : Who used the word ‘micro’ for the first time:
a) Marshall
b) Boulding
c) Keynes
d) Ragnar Frisch
Answer : D
Question : Which of the following is the salient feature of factors (or resources) ?
a) These are limited as compared to wants
b) These have alternative uses
c) Both a) and b)
Answer : C
Question : Which of the following is NOT a flow variable?

a) Income
b) Wealth
c) Saving
d) Investment
Answer : B
Question : When did the great depression occur?

a) 1929-30
b) 1934-35
c) 1938-39
d) 1941-42
P a g e | 55
Answer : A
Question : What is a good in economics

a) It is a service.
b) It can be a service.
c) It is something that appears appealing.
d) It is something that satisfies wants and needs.
Answer : D
Question : Cotton yarns purchased by handloom worker is

a) An intermediate good
b) A consumer good
c) A capital good
d) None of these
Answer : A
Question : Defects in SNA include

a) Neglects depletion of natural capital
b) Neglects environmental pollution
c) Expenditure to defend the effects of pollution
d) All of the above
Answer : D
Question. Which among the following is not a feature of Keynesian theory?

a) Short run
b) Wage price flexibility
c) Fiscal policy
d) Underemployment equilibrium
Answer : B
Question : Under classical theory, rate of interest is determined by

a) Demand for money and supply of money
b) Demand for capital and supply of savings
c) Demand for investment and price level
d) Demand for investment and supply of money
Answer : B
Question : In the classical view, the price level is determined by

a) aggregate supply
b) aggregate demand and supply
c) supply of money
d) aggregate demand
Answer : C
P a g e | 56
Question : Under Keynesian theory of income determination, investment

a) Depends on income
b) Endogenous
c) Exogenous
d) Depends on money supply
Answer : C
Question : A laptop purchased by consumer is an example of

a) An intermediate good
b) A consumer good
c) Intermediate consumption
Answer : B
Question : Under Keynesian model aggregate expenditure is measures along

a) Vertical axis
b) Horizontal axis
c) Vertical intercept
d) 450 line
Answer : A
Question : The value of MPC in Keynesian model is:

a) greater than zero and less than one
b) MPC=1
c) MPC greater than one
Answer : A
Question : Two sector economy consists of:

a) Households, firms
b) Households, Government
c) Firms, Foreign sector
d) Firms, Government.
Answer : A
Question : If factor cost is greater than Market price, then it means that:
a) Indirect taxes > subsidies
b) Indirect taxes = subsidies
c) Indirect Taxes < Subsidies
d) Indirect taxes = and > subsidies
Answer : C
Question : Market price ad factor cost would be equal when there is:
a) no direct tax
b) no indirect tax
P a g e | 57
c) no subsidy
d) no indirect tax and no subsidy
Answer : D
Question : In which type of economy, domestic income is equal to national income?

a) Open economy
b) Closed Economy
c) Both a and b
d) Neither a nor b
Answer : B
Question : National income is equal to:

a) Domestic product plus factor income earned from abroad
b) domestic product plus net factor income earned from abroad
c) Domestic product mins factor income earned from abroad
d) Domestic product plus export minus imports
Answer : B
Q1. At the time of independence, most of the land was owned by ……………..
(a) farmers
(b) zamindars
(c) labour
(d) all of these
Show Answer
(b) zamindars
Q2. What was the life expectancy in India during the British rule?
(a) 65
(b) 38
(c) 32
(d) 44
Show Answer
(d) 44
Q3. During colonial period India’s demographic profile showed ……………….

(a) high birth rate
(b) low death rate
(c) low infant mortality rate
(d) high literacy rate
Show Answer
(a) high birth rate
Q4. Indian economy on the eve of Independence was ……………..

(a) underdeveloped
(b) developing
(c) stagnant
(d) semi-feudal
Show Answer
(a) underdeveloped
P a g e | 58
Q5. Suez Canal was opened for transport in ………………

(a) 1850
(b) 1853
(c) 1869
(d) 1901
Show Answer
(c) 1869
Q6. Who made significant estimates about calculating national income in India during the British period?
(a) V.K.R.V. Rao
(b) Dadabhai Naoroji
(c) Findlay Shirras
(d) William Digby
Show Answer
(a) V.K.R.V. Rao
Q7. In which of the following sectors is manufacturing activity included?

(a) Primary
(b) Tertiary
(c) Secondary
(d) All of these
Show Answer
(c) Secondary
Q8. Where was the first iron and steel company established?
(a) Kolkata
(b) Jamshedpur
(c) Patna
(d) Ranchi
Show Answer
(b) Jamshedpur
Q9. What is the tax or duty on imports called?

(a) Tariff
(b) Quota
(c) Export
(d) None of these
Show Answer
(a) Tariff
Q10. Which of the following was the major occupation on the eve of independence?
(a) Industry
(b) Services
(c) Agriculture
(d) None of these
Show Answer
(c) Agriculture
Q11. The Tata Iron and Steel Company was incorporated in the year:
P a g e | 59
(a) 1907
(b) 1947
(c) 1908
(d) 1950
Show Answer
(a) 1907
Q12. The road which was built by British in India was to

(a) Mobilizing the army within India
(b) Drawing out of raw materials from the countryside
(c) To overcome the problem of frequent famines in India
(d) Only A and B
Show Answer
(d) Only A and B
Q13. The exports surplus during the British rule was used:
(a) To make payments for expenses incurred by an office set up by the colonial government in Britain
(b) To meet expenses on war fought by the British government
(c) To import invisible items
(d) All of these
Show Answer
(d) All of these
Q14. During the British rule, high mortality rate was due to
(a) Inadequate public health facilities
(b) Occurrence of frequent natural calamities
(d) Neither (a) nor (b)
Show Answer
Q15. At the time of Independence, the infant mortality rate was:

(a) 220 per thousand
(b) 250 per thousand
(c) 218 per thousand
(d) 280 per thousand
Show Answer
(c) 218 per thousand
Q16. If Britain was the ruling Imperial power, India, was it’s ……………..
(a) Colony
(b) Territory
(c) Neighbor
(d) Superpower
Show Answer
(a) Colony
Q17. The person who made the most notable attempt to calculate India’s national income during the British
rule in India, on the eve of Indian independence was ……………..
(a) O Hume
P a g e | 60
(c) Surendra Nath Bonnerji

(d) Mahatma Gandhi
Show Answer
Q18. The most predominant sector of the Indian Economy, prior to independence was
(a) Agriculture
(b) Industry
(c) Service sector
(d) Trade sector
Show Answer
(a) Agriculture
Q19. Production of large amount of cash crops for the purpose of export, is termed as —
(a) Commercialization of Agriculture
(b) Commencement of Agriculture
(c) Commercialization of Industries
(d) The great Indian Diaspora
Show Answer
(a) Commercialization of Agriculture
Q20. Prior to the Independence, which of the following countries, was India’s largest trading partner ?
(a) Britain
(b) China
(c) Brazil
(d) America
Show Answer
(a) Britain
National Income Accounting Environmental Issues MCQ Questions Class 12 Economics with Answers
Question : Net investment is equal to
a) Gross investment + depreciation
b) Gross investment – depreciation
c) Gross investment × depreciation
d) Gross investment ÷ depreciation
Answer : B
Question : Capital goods are those goods

a) Which are used in the production process for several years
b) Which are used in the production process for few years
c) Which Involve depreciation losses
d) Both (a) and (c)
Answer : D
Question : Net capital formation causes

a) Increase in production capacity
b) Increase in depreciation
c) Increase in profits
d) Increase in cost
Answer : A
Question : In the production of sugar, sugarcane is

P a g e | 61
a) A final good
b) A capital good
c) An Intermediate good
d) None of these
Answer : C
Question : Those goods which satisfy human wants directly are called
a) Intermediate goods
b) Consumer goods
c) Capital goods
d) None of these
Answer : B
Question : Increase in the stock of capital is known as

a) Capital loss
b) Capital gain
c) Capital formation
d) None of these
Answer : C
Question : Which of the following leads to unexpected obsolescence?

a) Change in demand
b) Natural calamities
c) Change in technology
d) None of these
Answer : B
Question : Income of the family is the example of which variable?

a) Stock
b) Flow
c) Both stock and flow
d) Neither stock nor flow
Answer : B
Question : 9 Which of the following leads to depreciation?

a) Normal wear and tear
b) Damages due to floods
c) Damages due to market – crash
d) None of these
Answer : A
Question : Which of the following is a semi-durable goods?

a) Radio
b) Clothes
c) Milk
d) Petrol
Answer : B
Question : Which one refers to Net Indirect Taxes?

P a g e | 62
a) Indirect taxes + subsidies

b) Indirect taxes - subsidies
c) Direct taxes - subsidies
Answer : B
Question : Basis of the difference between the concepts of market Price and Factor Cost is:
a) Direct taxes
b) Indirect taxes
c) Subsidies
d) Net indirect taxes
Answer : D
Question : Which of the following is not correct?

a) NNP at Market Price : GNP at Market Price + Depreciation
b) NDP at Market Price : NNP at Market Price - Net Factor Income from Abroad
c) NDP at Factor Cost : NDP at Market Price - Indirect taxes + Subsidies
d) GDP at Factor Cost : NDP at Factor Cost + Depreciation
Answer : A
Question : Which one leads to Factor Cost?

a) Marker Price - indirect Taxes
b) Marker Price - Net Indirect Taxes
c) Marker Price + Indirect Taxes
d) Marker Price + Net Indirect Taxes
Answer : B
Question : Domestic product is equal to:

a) National product + net factor income from abroad
b) National product - net factor income from abroad
c) National product ÷ net factor income from abroad
d) National product × net factor income from abroad
Answer : B
Question : Which of the following is a flow variable

a) Consumption
b) Wealth
c) Quantity of money
d) None of these
Answer : A
Question : Market price of the final goods and services (Including depreciation) produced within the
domestic territory of a country during an accounting year is called:
a) GDP at Market Price
b) GNP at Factor Cost
c) NNP at Factor cost
d) GDP at Factor Cost
Answer : A
Question : Which one includes depreciation?

a) GNP at Market Price
P a g e | 63
b) NNP at Market Price

c) NNP at Factor Cost
d) None of these
Answer : A
Question : A quantity measured per unit of time period is known as

a) Stock variable
b) Flow variable
c) Inventory
d) None of these
Answer : B
Question : Which one is correct?

a) National Income : NDP at Factor Cost - Net Factor Income from Abroad
b) GNP at Factor Cost : GNP at Market Price + Net Indirect Tax
c) Personal Income : Private Income - Corporate Tax - Corporate Saving
d) Disposable Income : Saving of Household Sector - Consumption of Household Sector
Answer : C
Question : Which of the following is not transfer payment?

a) Interest on national debt
b) Retirement pensions
c) Old- age pensions
d) Donations
Answer : B
Question : GNP at market price is measured as:

a) GDP at market price – Depreciation
b) GDP at market price + Net factor Income from abroad
c) GNP at market price + subsidies
d) NDP at factor cost + Net factor income from abroad
Answer : B
Question : Which of the following items is not included while estimating GNP of a country at market
prices?
a) Salaries and wages before taxes
b) Indirect taxes
c) Remittances by NRIs
d) Subsidy
Answer : C
Question : Which of these is a limitation in the measurement of social welfare using GDP at constant prices
as an index?
a) Increase in population size
b) Change in working conditions
c) Composition of production
d) All of these
Answer : D
Question : Value added method measured the contribution of which of the following within the domestic
territory of a country?
P a g e | 64
a) One producing enterprise only

b) All producing enterprises
c) A few producing enterprises
d) None of these
Answer : B
Question : Which of the following items is not included while estimating national Income by Income
method?
a) Rent
b) Mixed income
c) Fixed investment
d) Undistributed profits
Answer : C
Question : In India, suppliers of money are:

a) Government of the country
b) Banking system of the country
c) Both (a) and (b)
d) None of these
Answer : C
Question : As a result of double counting, national incomes is:

a) Over- estimated
b) Under- estimated
c) Correctly - estimated
d) Not estimated for the entire year of accounting
Answer : A
Question : Real national income means:

a) National income at current prices
b) National income at factor prices
c) National income at constant prices
d) National income at average prices of the past 10 years
Answer : C
Question : Which of the following is not included in final consumption expenditure?

a) Household expenditure on food
b) Government final consumption expenditure
c) Household expenditure on education
d) Expenditure on raw material
Answer : D
National Income and Related Aggregates MCQ Questions Class 12 Economics with Answers
Question : Those goods which satisfy human wants directly are called
a) Intermediate goods
b) Consumer goods
c) Capital goods
d) None of these
Answer : Consumer goods
Question : In the production of sugar, sugarcane is

P a g e | 65
a) A final good
b) A capital good
c) An Intermediate good
d) None of these
Answer : An Intermediate good
Question : Which of the following is a semi-durable goods?

a) Radio
b) Clothes
c) Milk
d) Petrol
Answer : Clothes
Question : Capital goods are those goods

a) Which are used in the production process for several years
b) Which are used in the production process for few years
c) Which Involve depreciation losses
d) Both (a) and (c)
Answer : Both (a) and (c)
Question : Increase in the stock of capital is known as

a) Capital loss
b) Capital gain
c) Capital formation
d) None of these
Answer : Capital formation
Question : Net investment is equal to

a) Gross investment + depreciation
b) Gross investment – depreciation
c) Gross investment ×depreciation
d) Gross investment ÷ depreciation
Answer : Gross investment – depreciation
Question : Net capital formation causes

a) Increase in production capacity
b) Increase in depreciation
c) Increase in profits
d) Increase in cost
Answer : Increase in production capacity
Question : Which of the following leads to depreciation?

a) Normal wear and tear
b) Damages due to floods
c) Damages due to market – crash
d) None of these
Answer : Normal wear and tear
Question : Which of the following leads to unexpected obsolescence?

a) Change in demand
b) Natural calamities
P a g e | 66
c) Change in technology
d) None of these
Answer : Natural calamities
Question : Income of the family is the example of which variable?

a) Stock
b) Flow
c) Both stock and flow
d) Neither stock nor flow
Answer : Flow
Question : A quantity measured per unit of time period is known as

a) Stock variable
b) Flow variable
c) Inventory
d) None of these
Answer : Flow variable
Question : Which of the following is a flow variable

a) Consumption
b) Wealth
c) Quantity of money
d) None of these
Answer : Consumption
Question : Domestic product is equal to:

a) National product + net factor income from abroad
b) National product - net factor income from abroad
c) National product ÷ net factor income from abroad
d) National product × net factor income from abroad
Answer : National product - net factor income from abroad
Question : Which of the following is not correct?

a) NNP at Market Price = GNP at Market Price + Depreciation
b) NDP at Market Price = NNP at Market Price - Net Factor Income from Abroad
c) NDP at Factor Cost = NDP at Market Price - Indirect taxes + Subsidies
d) GDP at Factor Cost = NDP at Factor Cost + Depreciation
Answer : NNP at Market Price = GNP at Market Price + Depreciation
Question : Which one is correct?

a) National Income = NDP at Factor Cost - Net Factor Income from Abroad
b) GNP at Factor Cost = GNP at Market Price + Net Indirect Tax
c) Personal Income = Private Income - Corporate Tax - Corporate Saving
d) Disposable Income = Saving of Household Sector - Consumption of Household Sector
Answer : Personal Income = Private Income - Corporate Tax - Corporate Saving
Question : Basis of the difference between the concepts of market Price and Factor Cost is:
a) Direct taxes
b) Indirect taxes
c) Subsidies
d) Net indirect taxes
P a g e | 67
Answer : Net indirect taxes
Question : Which one refers to Net Indirect Taxes?

a) Indirect taxes + subsidies
b) Indirect taxes - subsidies
c) Direct taxes - subsidies
Answer : Indirect taxes - subsidies
Question : Which one leads to Factor Cost ?

a) Marker Price - indirect Taxes
b) Marker Price - Net Indirect Taxes
c) Marker Price + Indirect Taxes
d) Marker Price + Net Indirect Taxes
Answer : Marker Price - Net Indirect Taxes
Question : Which one includes depreciation?

a) GNP at Market Price
b) NNP at Market Price
c) NNP at Factor Cost
d) None of these
Answer : GNP at Market Price
Question : Market price of the final goods and services (Including depreciation) produced within the domestic
territory of a country during an accounting year is called:
a) GDP at Market Price
b) GNP at Factor Cost
c) NNP at Factor cost
d) GDP at Factor Cost
Answer : GDP at Market Price
Question : GNP at market price is measured as:

a) GDP at market price – Depreciation
b) GDP at market price + Net factor Income from abroad
c) GNP at market price + subsidies
d) NDP at factor cost + Net factor income from abroad
Answer : GDP at market price + Net factor Income from abroad
Question : Value added method measured the contribution of which of the following within the domestic territory
of a country?
a) One producing enterprise only
b) All producing enterprises
c) A few producing enterprises
d) None of these
Answer : All producing enterprises
Question : Which of the following is not included in final consumption expenditure?

a) Household expenditure on food
b) Government final consumption expenditure
c) Household expenditure on education
d) Expenditure on raw material
P a g e | 68
Answer : Expenditure on raw material
Question : As a result of double counting, national incomes is:

a) Over- estimated
b) Under- estimated
c) Correctly - estimated
d) Not estimated for the entire year of accounting
Answer : Over- estimated
Question : Which of these is a limitation in the measurement of social welfare using GDP at constant prices as an
index?
a) Increase in population size
b) Change in working conditions
c) Composition of production
d) All of these
Answer : All of these
Question : Which of the following is not transfer payment?

a) Interest on national debt
b) Retirement pensions
c) Old- age pensions
d) Donations
Answer : Retirement pensions
Question : Which of the following items is not included while estimating GNP of a country at market prices?
a) Salaries and wages before taxes
b) Indirect taxes
c) Remittances by NRIs
d) Subsidy
Answer : Remittances by NRIs
Question : Which of the following items is not included while estimating national Income by Income method?
a) Rent
b) Mixed income
c) Fixed investment
d) Undistributed profits
Answer : Fixed investment
Question : Real national income means:

a) National income at current prices
b) National income at factor prices
c) National income at constant prices
d) National income at average prices of the past 10 years
Answer : National income at constant prices
Question : In India, suppliers of money are:

a) Government of the country
b) Banking system of the country
c) Both (a) and (b)
d) None of these
P a g e | 69
Q1. MUDRA Bank was set up to meet the credit needs of the …………………
(a) farmers
(b) small enterprises
(c) large enterprises
(d) exporters
Show Answer
(b) small enterprises
Q2. Which of the following replaced MRTP Act?

(a) Competition Act
(b) Foreign Exchange Management Act
(c) New Companies Act
(d) None of these
Show Answer
(a) Competition Act
Q3. To provide refinance facilities to micro-units, an agency named MUDRA was established by the
government. In which year this agency was set up?
(a) 1991
(b) 1999
(c) 2005
(d) 2015
Show Answer
(d) 2015
Q4. At present how many industries are exclusively reserved for the public sector in India?
(a) Two
(b) Three
(c) Four
(d) Five
Show Answer
(b) Three
Q5. At present the number of industries requiring company licensing is ……………….

(a) Eight
(b) Six
(c) Four
(d) Five
Show Answer
(d) Five
Q6. For how many industries, licensing is still necessary?

(a) 7
(b) 6
(c) 9
(d) 10
Show Answer
(b) 6
Q7. How many industries are entirely reserved for the public sector?
P a g e | 70
(a) 6
(b) 10
(c) 2
(d) 4
Show Answer
(c) 2
Q8. What is the investment limit in small scale industries?

(a) 50 lakh
(b) 1 crore
(c) 25 lakh
(d) 75 crore
Show Answer
(b) 1 crore
Q9. When was VAT introduced in most of the States of India?

(a) 1995
(b) 2001
(c) 2005
(d) 2006
Show Answer
(c) 2005
Q10. How many countries are the members of WTO?

(a) 164
(b) 120
(c) 96
(d) 48
Show Answer
(a) 164
Q11. When was WTO established?

(a) 1996
(b) 1998
(c) 2000
(d) 1995
Show Answer
(d) 1995
Q12. Where is the headquarters of WTO located?

(a) Italy
(b) Geneva
(c) New York
(d) Washington
Show Answer
(b) Geneva
Q13. Disinvestment means selling of public investment to a ……………..:

(a) Private enterprises
(b) Public enterprises
P a g e | 71
(c) Capital market

(d) Departmental enterprises
Show Answer
(a) Private enterprises
Q14. 100 percent privatization in India has taken place of:

(a) CMC limited
(b) Maruti Udyog limited
(c) Centaur Hotel
(d) VSNL
Show Answer
(c) Centaur Hotel
Q15. Cross Holding is a method of ……………….:

(a) Privatisation
(b) Globalisation
(c) Disinvestment
(d) Liberalisation
Show Answer
(c) Disinvestment
Q16. CIF stands for :

(a) Cost, insurance, freight
(b) Cost inclusive of freight
(c) Cost in freight
(d) Cost, interest, freight
Show Answer
(a) Cost, insurance, freight
Q17. Privatization can be achieved by :

(a) Leasing
(b) Franchising
(c) Contracting
(d) All of these
Show Answer
(d) All of these
Q18. …………….. refers to the relaxation of produce government restriction usually in areas of social and
economic policies:
(a) Privatisation
(b) Globalisation
(c) Disinvestment
(d) Liberalisation
Show Answer
(d) Liberalisation
Q19. “FDI” means:

(a) Forex direct investment
(b) Foreign deregulated investment
(c) Foreign direct investment
(d) Forex deregulated investment
P a g e | 72
Show Answer
(c) Foreign direct investment
Q20. “EFCG” stands for ………………..:

(a) Export Promotion capital goods
(b) Export Programmer for Credit Generation
(c) Exchange programmer for Consumer goods
(d) Export Promotion Consumer Goods
Show Answer
(a) Export Promotion capital goods
Money and Banking MCQ Questions Class 12 Economics with Answers
Question : Barter system refers to that system where in:
a) Goods are exchanged for goods
b) Goods are not exchanged at all
c) Goods are exchanged for domestic currency
d) Goods are exchanged for foreign currency
Answer : Goods are exchanged for goods
Question : Which of the following is related to barter system of exchange ?

a) Double coincidence of wants
b) Common unit of value
c) Limited exchange
d) Both (a) and (c)
Question : Out of the following , which is the primary function of money supply?
a) Store of value
b) Transfer of value
c) Measure of value
d) Bases of credit
Answer : Measure of value
Question : Which of the following is the adequate definition of money?

a) Any goods which is commonly used as a store of value
b) Any goods which is exchanged for gold at a fixed rate
c) Any goods which is acceptable to a bank
d) Any goods which is commonly accepted as a medium of exchange
Answer : Any goods which is commonly accepted as a medium of exchange
Question : Which of the following is the component of M1 measure of money supply?

a) Time deposit
b) Bill of exchange
c) Treasury bill
d) None of these
Answer : None of these
Question : Full- bodied money is that money, whose money value and commodity value are:
a) Equal
b) Proportionately equal
c) Different
d) None of these
P a g e | 73
Answer : Equal
Question : Bank money is that money which is:

a) Printed by RBI
b) Printed by the government
c) Generated in the form of credit creation
d) None of these
Answer : Generated in the form of credit creation
Question : Which of the following system governs note issuing in India

a) Proportionate system
b) Minimum reserve system
c) Fixed fiduciary issue system
d) Simple deposit system
Answer : Minimum reserve system
Question : In India there are four alternative measures of money supply M1, M2, M3 and M4 of these M1 =
a) Currency with people
b) Currency with people + demand deposits
c) Currency with people +demand deposits + other deposits with the reserve bank
d) None of these
Answer : Currency with people +demand deposits + other deposits with the reserve bank
Question : Which of the following is not the function of commercial bank?

a) To accept deposits
b) To offer loans
c) To provide overdraft facility
d) To fix CRR
Answer : To fix CRR
Question : A commercial bank is a bank that:

a) Gives long-term loans
b) Creates credit
c) Gives short-term loans
d) All of these
Question : Which of the following is not concerned with banking organization?

a) Bank rate
b) Fiscal deficit
c) Credit creation
d) Cash reserve ratio
Answer : Fiscal deficit
Question : Non- chequeable deposits are those:

a) Against which no cheque can be drawn at any time
b) Against which no money can be withdrawn
c) Which are called fixed deposit
d) All of these
P a g e | 74
Question : Credit cards issued by the banks:

a) Encourage Consumer Spending
b) Increase Aggregate Demand In the Economy
c) Both (a) and (b)
d) None of these
Question : Central bank is an apex bank of the country that:

a) Controls the entire banking system of the country
b) Issues currency
c) Acts as a banker to the government
d) All of these
Question : Credit control means:

a) Contraction of credit only
b) Extension of credit only
c) Extension and contraction of money supply
d) None of these
Answer : Extension and contraction of money supply
Question : Which of the following is not the instrument of credit control?

a) CRR
b) SLR
c) Repo rate
d) Managed floating
Answer : Managed floating
Question : The minimum percentage of a bank’s total deposits which is required to be kept with the RBI is called:
a) CRR
b) Repo rate
c) SLR
d) Reverse Repo Rate
Answer : CRR
Question : Which of the following leads to increase in AD ?

a) Fall in imports
b) Increase in investment expenditure
c) Increase in government expenditure
d) All of these
Question : Deficient or excess demand can be corrected through

a) Fiscal Policy
b) Monetary Policy
c) Both (a) and (b)
d) None of these
Q1. When was NITI Aayog established?

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(a) 1991
(b) 2001
(c) 2011
(d) 2015
Show Answer
(d) 2015
Q2. Land ceiling refers to ……………….

(a) fixing rural landholding at the existing level
(b) fixing the quantum of land held by an individual
(c) fixing urban landholdings at the existing level
(d) fixing land area for irrigation purposes
Show Answer
(b) fixing the quantum of land held by an individual
Q3. In which of the following types of economy are resources owned privately and the main objective
behind economic activities is profit-making?
(a) Capitalist
(b) Socialist
(c) Mixed
(d) Global
Show Answer
(a) Capitalist
Q4. Which of the following is the main objective of carrying out various economic activities?
(a) Profit
(b) Public welfare
(c) Competition
(d) Equality
Show Answer
(b) Public welfare
Q5. When was the National Development Council (NDC) set up as an adjunct to the Planning Commission?
(a) 1950
(b) 1969
(c) 1952
(d) 1979
Show Answer
(c) 1952
Q6. What is needed to provide protection against natural calamities like floods, drought, locusts,
thunderstorms, etc.?
(a) Multiple cropping
(b) Green Revolution
(c) Crop insurance
(d) HYV
Show Answer
(c) Crop insurance
Q7. Which of the following steps promoted the growth of the economy as a whole by stimulating the
development of industrial and tertiary sectors?
P a g e | 76
(a) Independence
(b) Planning
(c) Colonial rule
(d) Green revolution
Show Answer
(b) Planning
Q8. How many industries have been reserved for the public sector under Industrial Policy Resolution,
1956?
(a) 17
(b) 21
(c) 15
(d) 2
Show Answer
(a) 17
Q9. It is a conscious design to shape the socio-economic processes in order to achieve an objective
(a) Economic infrastructure
(b) Economic development
(c) Economic planning
(d) Economic growth
Show Answer
(c) Economic planning
Q10. When was Twelfth five year plan started

(a) 2007-2012
(b) 1997-2002
(c) 2012-2017
(d) 2002-2007
Show Answer
(c) 2012-2017
Q11. Agriculture education ,health and infrastructure were the priority areas in the
(a) 12th
(b) 9th
(c) 11th
(d) 10th
Show Answer
(c) 11th
Q12. Initially HYVP was implemented in about

(a) 76 million hectares area
(b) 75 million hectares area
(c) 3 million hectares area
(d) 2 million hectares area
Show Answer
(d) 2 million hectares area
Q13. Legally stipulated maximum size beyond which no individual farmer can hold any land
(a) Tenancy reforms
(b) Abolition of intermediaries
P a g e | 77
(c) Land consolidation

(d) Land Ceiling
Show Answer
(d) Land Ceiling
Q14. Who is the architect of Indian planning?

(a) K.N. Raj
(b) PC. Mahalanobis
(c) R.C. Desai
(d) Dadabhai Navoroji
Show Answer
(b) PC. Mahalanobis
Q15. SEBI stands fo

(a) Science and Engineering Board of India
(b) Securities and Exchange Board of India
(c) Social Equity Bureau of India
(d) Science and Educational Board of India
Show Answer
(b) Securities and Exchange Board of India
Q16. IADP stands for

(a) Integrated Agriculture Development Product
(b) Intensive Area Development Programme
(c) Integrated Area Development Product
(d) Intensive Area Development Product
Show Answer
(b) Intensive Area Development Programme
Q17. Which of the following statements are not true?

(a) SSI were given protection from big industries
(b) Concessions were given to SSI
(c) Govt. allowed SSI & large industries to produce any type of goods
(d) None
Show Answer
(c) Govt. allowed SSI & large industries to produce any type of goods
Q18. Agriculture education, health and infrastructure were the priority areas in which five year plan.
(a) 11th
(b) 12th
(c) 9th
(d) 10th
Show Answer
(a) 11th
Q19. What prevented firms from becoming efficient?

(a) Tarrifs
(b) Quotas
(c) Permit License Raj
(d) New Economic Policy
Show Answer
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(c) Permit License Raj
Q20. Following are the external factors responsible for industrial sickness except
(a) Diversion of funds
(b) Government policies related with production, distribution and prices
(c) Shortage of power and raw materials
(d) Change in investment pattern
Show Answer
(a) Diversion of funds
Q1. Which organization collects data on poverty in India?
(a) Planning Commission
(b) NSSO
(c) CSO
(d) Election Commission
Show Answer
(b) NSSO
Q2. Which of the following statements about absolute poverty is not correct?
(a) It focuses on biological needs.
(b) Levels of absolute poverty are very low in developed countries.
(c) Government policies can help in the elevation of absolute poverty.
(d) It compares the living standard of people.
Show Answer
(d) It compares the living standard of people.
Q3. Which of the following people are classified as churning poor?

(a) Who are always below the poverty line
(b) Who regularly move in and out of poverty
(c) Who generally remain above the poverty line but sometimes below it
Show Answer
(b) Who regularly move in and out of poverty
Q4. When was the Task Force on Projections of Minimum Needs and Effective Consumption Demand was
formed?
(a) 1969
(b) 1979
(c) 1989
(d) 1999
Show Answer
(b) 1979
Q5. Those who regularly move in and out of poverty are called
(a) Chronically poor
(b) Churning poor
(c) Occasionally poor
(d) Transient poor
Show Answer
(b) Churning poor
Q6. Poverty is a state in which a person is : –

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(a) Poor
(b) Does not has proper home
(c) Inability to fulfil basic requirements
(d) None of these
Show Answer
(c) Inability to fulfil basic requirements
Q7. Which of the following is an action adopted under the provision of minimum basic amenities to the
people?
(a) Prime Minister’s RozgarYojna
(b) Swarna Jayanti Shahari RozgarYojna
(c) Pradhan Mantri Gramodaya Yojna
(d) National Rural Livelihood Mission
Show Answer
(d) Pradhan Mantri Gramodaya Yojna
Q8. In 2011-12, which state had the highest poverty rate in India?
(a) Odisha
(b) Bihar
(c) Madhya Pradesh
(d) West Bengal
Show Answer
(a) Odisha
Q9. NFWP was launched in:

(a) November 2004
(b) December 2003
(c) November 2002
(d) December 2005
Show Answer
(a) November 2004
Q10. Which of the following programmes provide assistance to elderly people are given under?
(a) VAMBAY
(b) NSAP
(c) PMGY
(d) PMRY
Show Answer
(b) NSAP
Q11. People who are always below poverty line are termed as
(a) Chronic poor
(b) Seasonal poor
(c) Always Poor
(d) None of these
Show Answer
(c) Always Poor
Q12. Which category of poor includes both ‘Always’ and ‘Usually’ poor.
(a) Churning poor
(b) Transient poor
P a g e | 80
(c) Seasonal poor

(d) Chronically poor
Show Answer
(d) Chronically poor
Q13. Which category of poor people keep moving up and down the poverty line : –
(a) Occasionally poor
(b) Transient poor
(c) Churning poor
(d) Always poor
Show Answer
(c) Churning poor
Q14. The poverty across other people, regions or countries is known as

(a) Urban poverty
(b) Rural poverty
(c) Relative poverty
(d) Absolute poverty
Show Answer
(c) Relative poverty
Q15. What is the cause of poverty ?

(a) Low Rate of Growth
(b) Increasing Population
(c) Underemployment
(d) All of these
Show Answer
(d) All of these
Q16. Prime Minister’s Rozgar Yojana was started in

(a) 1995
(b) 1993
(c) 1991
(d) 1998
Show Answer
(b) 1993
Q17. Which programme was merged in Swarna Jayanti Shahri Rozgar Yojana
(a) Nehru Rozgar Yojana
(b) Prime Minister’s Rozgar Yojana
(c) Prime Minister’s Integrated Urban Poverty Eradication
(d) Both a and c
Show Answer
(d) Both a and c
Q18. MNREGA offered employment for a minimum period of

(a) 150 days
(b) 200 days
(c) 100 days
(d) 120 days
Show Answer
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(c) 100 days
Q19. Absolute poverty in India is measured through : –

(a) Poverty line
(b) Education
(c) Health
(d) None of these
Show Answer
(a) Poverty line
Q20. Percentage of people below poverty line is called : –

(a) Head Count Ratio
(b) Poverty incidence ratio
(c) Both a and b
(d) None of these
Show Answer
(c) Both a and b
Determination of Income and Employment MCQ Questions Class 12 Economics with Answers
Question : Which of the following indicates AD in an open economy?
a) Private (household) Consumption Expenditure
b) Household Investment Expenditure
c) Government expenditure + private consumption expenditure
d) Household consumption expenditure+ investment expenditure + government expenditure + net exports
Answer : Household consumption expenditure+ investment expenditure + government expenditure + net
exports
Question : Consumption function is a functional relationship between:

a) Income and saving
b) Price and consumption
c) Income and consumption
d) Income, consumption and saving
Answer : Income and consumption
Question : Propensity to consume means:

a) Tendency of the consumer towards higher consumption
b) Ratio of consumption to income
c) Level of income at which consumption expenditure is equal to income
d) Additional income to be spent on consumption
Answer : Ratio of consumption to income
Question : Average propensity to consume (APC) equal to :

a)
b)
c)
d)
P a g e | 82
Answer :
Question : MPC being equal to 0.5, what will be , if income increases by Rs.100?
a) Rs. 60
b) Rs. 50
c) Rs. 40
d) Rs. 70
Answer : Rs. 50
Question : Propensity to save means:

a) Ratio of saving to income
b) level of income at which saving is equal to income
c) Additional income that is not to be saved
d) None of these
Answer : Ratio of saving to income
Question : If MPS is 0.6,what will be ∆S when income increases by Rs.100 ?

a) Rs. 60
b) Rs. 50
c) Rs. 40
d) Rs.70
Answer : Rs. 60
Question : Average propensity (APS) is equal to:

a)
b)
c)
d)
Answer :
Question : Which of the following is correct ?

a) MPC÷MPS=1
b) 1-MPC=MPS
c) 1-MPS= MPC
d) All of these
Question : If MPC is 40 per cent, MPS will be

P a g e | 83
a) 70 percent
b) 60 percent
c) 50 percent
d) 40 percent
Answer : 60 percent
Question : Since As= C+S and AD=C+I the equilibrium will be established where C+S= C+I, or where:
a) S=I
b) S>I
c) S<I
d) All the above
Answer : S=I
Question : Equilibrium level of income/ output and employment is viewed from which of the following
approaches ?
a) AS=AD approach
b) S=I approach
c) Both (a) and (b)
d) None of these
Question : On account of injections and withdrawals, equilibrium level of income undergoes :

a) A shift
b) No shift
c) A dispersal
d) No change
Answer : A shift
Question : According to Keynes, equality (equilibrium) between AD and AS can take place in a situation
a) Less than full employment
b) Full employment
c) Beyond full employment
d) All of these
Question : If MPC = 0.9, than value of multiplier will be:

a) 6
b) 9
c) 10
d) 12
Answer : 10
Question : Multiplier=
a) ∆Y/∆S
b) ∆Y/∆I
c) ∆I/∆Y
d) ∆Y/∆C
Answer : ∆Y/∆I
Question : Multiplier is estimated as:

a) 1/MPC
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b) 1/1-MPC
c) 1/1+MPC
d) 1/1+MPS
Answer : 1/1-MPC
Question : If MPS =1/4, the value of multiplier will be :

a) 4
b) 2
c) 8
d) 6
Answer : 4
Question : If MPC = 0, the multiplier will be:

a) 1
b) 0
c) 2
d) X
Answer : 1
Question : If an investment of Rs. 10 crore results in an increase in income by Rs 50 crore, then the multiplier
will be:
a) 5
b) 4
c) 2
d) None of these
Answer : 5
Question : Deficient demand leads to :

a) Deflationary Gap
b) Inflationary Gap
c) Both and (a) and (b)
d) None of these
Answer : Deflationary Gap
Question : Deflationary gap is measured as :

a) ADF + ADU
b) ADF÷ ADU
c) ADF - ADU
d) None of these
Answer : ADF- ADU
Question : Which of the following does not lead to fall in AD ?

a) Fall in private consumption expenditure
b) Fall in export
c) Fall in Import
d) Fall in Government Expenditure
Answer : Fall in Import
Question : Deficient or excess demand can be corrected through

a) Fiscal Policy
b) Monetary Policy
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c) Both (a) and (b)

d) None of these
Question : With a view to correcting deflationary gap or deficient demand, which of the following fiscal policy
measures should be adopted ?
a) Reduction in taxes
b) Increase in public expenditure
c) Reduction in public debt
d) All of these
Question : Which of the following leads to increase in AD ?

a) Fall in imports
b) Increase in investment expenditure
c) Increase in government expenditure
d) All of these
Question : Of the following, what are the quantitative measures of monetary policy ?
a) Repo rate
b) Open market operations
c) SLR
d) All of these
Question : A tax the burden of which can be shifted on to others, is called :

a) Indirect Tax
b) Direct Tax
c) Ad Valorem
d) Specific Tax
Answer : Indirect Tax
Question : The difference between fiscal and interest payment is called :

a) Revenue Deficit
b) Primary Deficit
c) Bbudget Deficit
d) Capital Deficit
Answer : Primary Deficit
Question : If the value exports exceeds the value of visible imports, the current account deficit will be:
a) Positive
b) Negative
c) Positive or Negative
d) None of these
Answer : Positive or Negative
Q1. Which one of the following is a reason for poor human capital formation in India?
(a) Brain drain
(b) Insufficient resources
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(c) High growth of population

(d) All of these
Show Answer
(d) All of these
Q2. How much educational cess has been imposed by the government on all Union taxes?
(a) 1 %
(b) 2%
(c) 4%
(d) 5%
Show Answer
(b) 2%
Q3. Which one of the following is a major source of human capital formation in the country?
(a) Expenditure on education
(b) Expenditure on infrastructure
(c) Expenditure on defense
(d) Expenditure on energy
Show Answer
(a) Expenditure on education
Q4. The objective of midday meal scheme is ……………..

(a) to boost universalisation of primary education
(b) to boost the nutritional status of children in schools
(c) to increase enrolment attendance and retention, and also improving the nutritional status of children in school
(d) to boost universalisation of upper primary level of education
Show Answer
Q5. Which level of education takes a major share of total education expenditure in India?
(a) Elementary
(b) Secondary
(c) Higher
(d) Tertiary
Show Answer
(a) Elementary
Q6. What was the share of education in total government expenditure in 2014?
(a) 7.92 percent
(b) 15.7 percent
(c) 0.64 percent
(d) 3.31 percent
Show Answer
(b) 15.7 percent
Q7. What percent of GDP was invested in education in the year 1952?
(a) 7.92 percent
(b) 11.7 percent
(c) 0.64 percent
(d) 3.31 percent
Show Answer
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(c) 0.64 percent
Q8. When was Right to Education Act enacted?

(a) 2008
(b) 2009
(c) 2010
(d) 2012
Show Answer
(b) 2009
Q9. What was the average youth literacy rate in 2015?

(a) 89.5 percent
(b) 74 percent
(c) 88 percent
(d) 95.5 percent
Show Answer
(a) 89.5 percent
Q10. Which of the following is not the role of on-the-job training?

(a) Eradicates inequality
(b) Encourages innovation
(c) Promotes modern methods
(d) Enhances productivity
Show Answer
(d) Enhances productivity
Q11. Human capital consists of

(a) Enterpreneurs
(b) Both workers and entrepreneurs
(c) Workers
(d) Entire population
Show Answer
(d) Entire population
Q12. The most important indicator of the status of education of a country is the
(a) Death rate
(b) Population rate
(c) Birth rate
(d) Literacy rate
Show Answer
(d) Literacy rate
Q13. Human capital is similar to physical capital because

(a) Both
(b) none
(c) They are factors of production
(d) Raise nation’s ability to produce goods and services
Show Answer
(a) Both
Q14. The objective of midday meal scheme is ………………..

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(a) to boost universalisation of primary education

(b) to boost the nutritional status of children in schools
(d) to boost universalisation of upper primary level of education
Show Answer
Q15. Which of the following is not an indicator of education level?

(a) Years of schooling
(b) Life expectancy
(c) Teacher-pupil ratio
(d) Enrollment rate
Show Answer
(b) Life expectancy
Q16. The most important indicator of education status of a country is the

(a) Literacy rate
(b) Death rate
(c) Population rate
(d) Birth rate
Show Answer
(a) Literacy rate
Q17. GER stands for

(a) General Enrolment Ratio
(b) Gross Enrolment Ratio
(c) General Estimated Ratio
(d) Gross Education Ratio
Show Answer
(b) Gross Enrolment Ratio
Q18. Human capital can be increased by incurring expenditure on

(a) All of these
(b) Improvement in technology
(c) Increase in GDP
(d) Improvement of health
Show Answer
(d) Improvement of health
Q19. In which state the per capita expenditure on elementary education is highest?
(a) Maharashtra
(b) Kerala
(c) Karnataka
(d) Himachal Pradesh
Show Answer
(d) Himachal Pradesh
Q20. Which of the following is not the feature of India Vision 2020 Report
(a) 90% of literacy in India
(b) If we double the investments in education it will increase the country’s GDP per capita by four times
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(c) 100 % enrolment of all children of age group 6-14 years

(d) Importance of technical education
Show Answer
(a) 90% of literacy in India
Government Budget and The Economy MCQ Questions Class 12 Economics with Answers
Question : In the context of government budget, which of the following statements is correct ?
a) Budget is a statement of expected annual receipts and expenditure is correct?
b) It is a detail of actual receipts and expenditures of the government in a financial year
c) It offers a detailed description of achievements of the government during the 5 year plans
d) It indicates BoP status of the economy
Answer : Budget is a statement of expected annual receipts and expenditure is correct?
Question : Which of the following are the objectives of government budget ?
a) Redistribution of income and wealth
b) Economy stability
c) Both (a) and (b)
d) None of these
Question : Which of the following is a non- tax receipt ?
a) Gift tax
b) Sales tax
c) Gift and grants
d) Excise duty
Answer : Gift and grants
Question : Regressive tax is that which is :
a) Charged at an increasing rate when income of the individual increases
b) Charged at a decreasing rate when income of the individual increases
c) Relatively a low percentage of an individual’s income
d) A fixed percentage of an individual’s income
Answer : Charged at a decreasing rate when income of the individual increases
Question : Which one of the following is indirect tax ?
a) Wealth tax
b) Excise duty
c) Income tax
d) None of these
Answer : Excise duty
Question : Which of the following are capital receipts of the government ?
a) Recovery of loans
b) Borrowings
c) Disinvestment
d) All of these
Question : Capital expenditure is that estimated expenditure of the government which?
a) Assets are increased
b) liability is decreased
c) Both (a) and (b)
d) Assets and liabilities do not change
Question : Deficit budget refers to that situation in which government’s budget expenditure is :
a) less than its budget receipts
b) More than its budget receipts
c) Equal to its budget receipts
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d) None of these
Answer : More than its budget receipts
Question : Fiscal deficit=
a) Total expenditure – total receipt other than borrowing
b) Revenue expenditure- revenue receipts
c) Capital expenditure – capital receipts
d) Revenue expenditure + Capital expenditure - revenue receipts
Answer : Total expenditure – total receipt other than borrowing
Question : Surplus budget is that budget where in :
a) Estimated revenue of the government < estimated expenditure of the government
b) Estimated revenue of the government > estimated expenditure of the government
c) Estimated revenue of the government = estimated expenditure of the government
d) None of these
Answer : Estimated revenue of the government > estimated expenditure of the government
Question : Which of the following is the capital expenditure of the government?
(a) Interest Payment
(b) Purchase of House
(c) Expenses on Machinery
(d) All of the above
Answer: (a) Interest Payment
Question : When government spends more than it collects by way of revenue, it incurs ______
(A) Budget surplus
(B) Budget deficit
(C) Capital expenditure
(D) Revenue expenditure
Answer: (B) Budget deficit
Question : Which of the following statement is true?
(a) Fiscal deficit is the difference between total expenditure and total receipts
(b) Primary deficit is the difference between total receipt and interest payments
(c) Fiscal deficit is the sum of primary deficit and interest payment
(d) All of these
Answer: (c) Fiscal deficit is the sum of primary deficit and interest payment
Question : Which is included in the Direct Tax?
(a) Income Tax
(b) Gift Tax
(d) Excise Duty
Answer: (c) Both (a) and (b)
Question : The fiscal deficit is the difference between the government’s total expenditure and its total
receipts excluding ______
(A) Interest
(B) Taxes
(C) Spending
(D) Borrowings
Answer: (D) Borrowings
Question : Which is included in Indirect Tax?
(a) Excise Duty
(b) Sales Tax
(d) Wealth Tax
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Question : What is the annual statement of the government’s fiscal revenue and fiscal expenditure known?
(A) Budget
(B) Fiscal Budget
(C) Capital Budget
(D) All of these
Answer: (B) Fiscal Budget
Question : An annual statement of the estimated receipts and expenditure of the government over the fiscal
year is known as
(A) Budget
(B) Income estimates
(C) Account
(D) Expenditure
Answer: (A) Budget
Question : How many types of revenue receipts are there?
(A) 2
(B) 3
(C) 4
(D) 6
Answer: (A) 2
Question : Who issues 1 rupee note in India:
(b) Finance Ministry of India
(d) None of these
Answer: (b) Finance Ministry of India
Question : The amount collected by the government as taxes and duties is known as _______
(A) Capital receipts
(B) Tax revenue receipts
(C) Non-tax revenue receipts
(D) All of these
Answer: (B) Tax revenue receipts
Question : Which is included in indirect tax?
(a) Income tax
(b) Wealth tax
(c) Excise Duty
(d) Gift tax
Answer: (c) Excise Duty
Question : The amount collected by the government in the form of interest, fees, and dividends is known
as…….
(A) Tax-revenue receipts
(B) Capital receipts
(C) Non-tax revenue receipts
(D) None of these
Answer: (C) Non-tax revenue receipts
Question : Direct tax is called direct because it is collected directly from:
(A) The producers on goods produced
(B) The sellers on goods sold
(C) The buyers of goods
(D) The income earners
Answer: (D) The income earners
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Question : Which objectives government attempts to obtain by Budget

(a) To Promote Economic Development
(b) Balanced Regional Development
(c) Redistribution of Income and Wealth
(d) All the above
Answer: (d) All the above
Question : Which of the following is an example of direct tax?
(A) VAT
(B) Excise duty
(C) Entertainment tax
(D) Wealth tax
Answer: (D) Wealth tax
Question : Which is a component of the Budget Receipt?
(a) Revenue Receipt
(b) Capital Receipt
Question : Which of the following is the component of a budget?
(A) Fiscal budget
(B) Capital budget
(C) Both of these
(D) None of these
Answer: (C) Both of these
Question : Tax revenue of the Government includes :
(a) Income Tax
(b) Corporate Tax
(c) Excise Duty
(d) All of these
Answer: (d) All of these
Question : Budget speech in Lok Sabha is given by:
(a) President
(b) Prime Minister
(c) Finance Minister
(d) Home Minister
Answer: (c) Finance Minister
Question : The expenditures which do not create assets for the government is called :
(b) Capital Expenditure
Answer: (a) Revenue Expenditure
Question : What is the period of a fiscal year?
(A) 1 April to 31 March
(B) 1 January to 31 December
(C) 1 March to 28 February
(D) None of these
Answer: (A) 1 April to 31 March
Question : Direct tax is :
(a) Income Tax
(b) Gift Tax
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(d) None of these
Question : Which of the following is not a revenue receipt?
(a) Recovery of Loans
(b) Foreign Grants
(c) Profits of Public Enterprise
(d) Wealth Tax
Answer: (a) Recovery of Loans
Question : From the following which is included in the direct tax:
(a) Income Tax
(b) Gift Tax
(d) Excise Tax
Question : In India, one rupee note is issued by:
(d) None of these
Answer: (b) Finance Ministry of Government of India
Question : The non-tax revenue in the following is:
(A) Export duty
(B) Import duty
(C) Dividends
(D) Excise
Answer: (C) Dividends
Question : Capital budget consist of:
(a) Revenue Receipts and Revenue Expenditure
(b) Capital Receipts and Capital Expenditure
(c) Direct and Indirect Tax
(d) None of these
Answer: (b) Capital Receipts and Capital Expenditure
Question : Financial Year in India is:
(b) January 1 to December 31
(c) October 1 to September 30
Answer: (a) April I to March 31
Question : Which of the following is an indirect tax?
(a) Excise Duty
(b) Sales Tax
(c) Custom Duty
(d) All of these
Question : Borrowing in the government budget is:
(A) Revenue deficit
(B) Fiscal deficit
(C) Primary deficit
(D) Deficit in taxes
Answer: (B) Fiscal deficit
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Question : What is the duration of a Budget?

(a) Annual
(b) Two Years
(c) Five Years
(d) Ten Years
Answer: (a) Annual
Question : Which of the following is included in fiscal policy?
(a) Public Expenditure
(b) Tax
(c) Public Debt
(d) All of these
Question : The budget may include:
(a) Revenue Deficit
(b) Fiscal Deficit
(c) Primary Deficit
(d) All of these
Question : Budget:
(a) is a description of income-expenditure of government
(b) is a document of the economic policy of the government
(c) is a description of non-programs of the government
(d) All of these
Question : In an unbalanced budget:
(a) Income is greater than expenditure
(b) Expenditure is higher relative to income
(c) Deficit is covered by loans or printing of notes
(d) Only (b) and (c)
Answer: (d) Only (b) and (c)
Question : Which one of the following is a pair of direct tax?
(a) Excise duty and Wealth Tax
(b) Service Tax and Income Tax
(c) Excise Duty and Service Tax
(d) Wealth Tax and Income Tax
Answer: (d) Wealth Tax and Income Tax
Question : Which of the following is a correct measure of the primary deficit?
(a) Fiscal deficit minus revenue deficit
(b) Revenue deficit minus interest payments
(c) Fiscal deficit minus interest payments
(d) Capital expenditure minus revenue expenditure
Answer: (c) Fiscal deficit minus interest payments
Question : The primary deficit in a government budget will be zero, when _______
(A) Revenue deficit is zero
(B) Net interest payments are zero
(C) Fiscal deficit is zero
(D) Fiscal deficit is equal to interest payment
Answer: (D) Fiscal deficit is equal to interest payment
Question : The duration of the Government budget is:
(a) 5 years
(b) 2 years
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(c) 1 year
(d) 10 years
Answer: (c) 1 year
Question : Budget is presented in the Parliament by:
(a) Prime Minister
(b) Home Minister
(c) Finance Minister
(d) Defence Minister
Answer: (c) Finance Minister
Question : Which of the following budget is suitable for developing economies?
(a) Deficit Budget
(b) Balanced Budget
(c) Surplus Budget
(d) None of these
Answer: (a) Deficit Budget
Question : Professional tax is imposed by:
(a) Central Government
(b) State Government
(c) Municipal Corporation
(d) Gram Panchayat
Answer: (b) State Government
Question : Which type of expenditure is made in bridge construction?
(a) Capital Expenditure
(b) Revenue Expenditure
Answer: (a) Capital Expenditure
Fill in the blanks:

Question : __________ is a document containing income and expenditure of the government.
Answer: Budget
Question : _______ tax is that in which the final burden of the tax fall on the person who pays it.
Answer: Direct
Question : Service tax is levied by the ________
Answer: Central
Question : Tax is a legally compulsory payment imposed by the _______ on income and property of persons
and companies.
Answer: Government
Question : Finance bill contains _________ proposals.
Answer: Tax
Question : Primary Deficit = Fiscal Deficit minus __________
Answer: Interest on Debt
Question : The government can influence the allocation of resources through the implementation of
appropriate _________
Answer: fiscal policy
Question : Recovery of loan is treated as capital receipt because it leads to __________
Answer: reduction of assets
Question : Income tax is _________ tax.
Answer: Direct
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Question : A deficit budget is that in which total expenditure is ________ total receipts.
Answer: greater than
Question : _________ tax is levied on the value of the goods.
Answer: Advalorem
Question : _________ budget is considered good for the country.
Answer: Deficit
Question : ________ are levied on goods and services.
Answer: Indirect taxes
Question : Government budget is presented on the last day of _________
Answer: February
Question : Revenue deficit is that in which revenue receipts are ________ revenue expenditure.
Answer: less than
Question : _________ does not have any impact on the asset-liability status of the government.
Answer: Revenue budget
State true or false :

Question : Grants by the government are treated as revenue expenditure.
Answer: True
Question : The three functions of allocation, redistribution, and stabilization are operated through the
expenditure and receipts of the government.
Answer: True
Question : During deflation surplus budget is made.
Answer: True
Question : The deficit decreases in a recession and increases in a boom, even without any change in fiscal
policy.
Answer: False
Question : Electricity tax is levied by the State Government.
Answer: True
Question : Payment of salaries to the government employees is a capital payment.
Answer: False
Question : The rail budget is generally not included in the annual budget.
Answer: True
Question : Public borrowing is a capital receipt.
Answer: True
Question : There is a feasible way of excluding anyone from enjoying the benefits of public goods.
Answer: False
Question : Recovery of loan is a revenue receipt.
Answer: False
Question : Service tax is a direct tax.
Answer: False
Question : Public goods are collectively consumed.
Answer: True
Question : Indirect taxes are not convenient to realise.
Answer: False
Question : A deficit budget is not considered a good budget.
Answer: False
Question : Expenditure made on the establishment of the metro rail line in Delhi is a capital expenditure.
Answer: True
Question : The budget speech is given by the Finance Minister.
Answer: True
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Question : Excess of capital expenditure over capital receipt is called revenue deficit.
Answer: False
Question : Central excise duty is a direct tax.
Answer: False
Question : The interest payment is a planned item.
Answer: False
Q1. The scheme of microfinance is extended through ………………

(a) Self-help Groups
(b) Land Development Banks
(c) NABARD
(d) Regional Rural Banks
Show Answer
(a) Self-help Groups
Q2. Name the state which is held as a success story in the efficient implementation of milk cooperative.
(a) Maharashtra
(b) Jammu and Kashmir
(c) Gujarat
(d) Andhra Pradesh
Show Answer
(c) Gujarat
Q3. Which one of the following is not a non-institutional source of credit?

(a) Moneylenders
(b) Relatives
(c) Traders and commission agents
(d) Land Development Bank
Show Answer
(d) Land Development Bank
Q4. Why is the minimum support price fixed by the government?

(a) For the government’s own benefit
(b) To safeguard the interest of farmers
(c) To save the interest of consumers
(d) None of these
Show Answer
(b) To safeguard the interest of farmers
Q5. Blue revolution is associated with

(a) Indigo cultivation
(b) Poultry farming
(c) Fisheries
(d) Availability of drinking water
Show Answer
(c) Fisheries
Q6. Which of the following falls under unorganized sector?

(a) Gramin Bank
(b) Cooperative banks
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(c) Moneylenders and traders

(d) Land development Banks
Show Answer
(c) Moneylenders and traders
Q7. Which Indian state has been held as a success story in the efficient implementation of milk
cooperatives?
(a) Punjab
(b) Gujarat
(c) Uttar Pradesh
(d) West Bengal
Show Answer
(b) Gujarat
Q8. What is the name of the vegetable and fruit market in Andhra Pradesh?
(a) Apni Mandi
(b) Hadaspar Mandi
(c) Rythu Bazars
(d) Uzhavar Sandies
Show Answer
(c) Rythu Bazars
Q9. How much do the “inland sources” contribute to the total fish production in India?
(a) 64 percent
(b) 39 percent
(c) 50 percent
(d) 75 percent
Show Answer
(a) 64 percent
Q10. Which status has been accorded to the retail chains and supermarkets for selling organic food?
(a) Eco Status
(b) Sustainable Status
(c) Nutritional Status
(d) Green Status
Show Answer
(d) Green Status
Q11. Growth in rural marketing relates to

(a) Provision of physical infrastructure
(b) Regulation of markets
(c) Cooperative farming
(d) All of these
Show Answer
(d) All of these
Q12. From the following which is not a non-institutional source of credit in India.
(a) Money lenders
(b) Traders
(c) Commission agents
(d) Commercial banks
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Show Answer
(d) Commercial banks
Q13. The ‘Golden Revolution’ was a period of very high productivity in:
(a) Foodgrain production
(b) Horticulture
(c) Organic farming
(d) Piscicultre
Show Answer
(b) Horticulture
Q14. AMUL stands for :

(a) Anand Multiple Union Ltd.
(b) Agriculture and Milk Union Ltd.
(c) Anand Mil Union Ltd.
(d) Anand Manufacturing Union Ltd.
Show Answer
(c) Anand Mil Union Ltd.
Q15. Organic farming uses

(a) Organic manure
(b) Bio-fertilisers
(c) Organic pesticides
(d) All of these
Show Answer
(d) All of these
Q16. Diversification in agriculture activities means finding alternate employment in

(a) Non-farm sectors
(b) Urban sectors
(c) Rural sectors
(d) None of these
Show Answer
(a) Non-farm sectors
Q17. The farming which relies on naturally occurring ecological process and biodiversity:
(a) Organic farming
(b) Conventional agriculture
(c) (a) and (b)
Show Answer
(a) Organic farming
Q18. The sector providing alternate livelihood options to 70 million small and marginal farmers is:
(a) Livestock
(b) Agro-processing
(c) Apni Mandi
(d) Fisheries
Show Answer
(a) Livestock
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Q19. Production of a diverse variety of crops rather than one specialised crop is called:
(a) Diversification of production activity
(b) Diversification of crop production
(c) Diversification of employment
(d) All the above
Show Answer
(b) Diversification of crop production
Q20. The institutional source of credit whose area of operation is the one where banking facilities and
cooperatives are absent and which operate at the district level is:
(a) Regional rural bank
(b) Commercial bank
(c) Self-help group
(d) NABARD
Show Answer
(a) Regional rural bank
Exchange Rate and Balance Of Payments Class 12 Economics MCQ
Class 12 Economics students should refer to the following multiple-choice questions with answers for Exchange
Rate and Balance Of Payments in standard 12. These MCQ questions with answers for Grade 12 Economics will
come in exams and help you to score good marks
Exchange Rate and Balance Of Payments MCQ Questions Class 12 Economics with Answers
Question : The exchange rate at which demand for foreign currency becomes equal to its supply called
a) Equal rate of exchange
b) Unequal rate of exchange
c) Equilibrium rate
d) All of these
Answer : Equilibrium rate
Question : According to adjustable peg system (or Bretton Woods System ) of Exchange Rate :
a) Different currencies were pegged to one currency (US dollar)
b) US dollar was assigned gold value at a fixed price
c) Parity between two currencies was determined by the quantity of gold contained in them
d) All of these
Question : What is the relationship between demand for foreign exchange and exchange rate ?
a) Inverse
b) Direct
c) One to one
d) No to relationship
Answer : Inverse
Question : What is the relationship between supply of foreign exchange and exchange rate?
a) Inverse
b) Direct
c) One to one
d) No to relationship
Answer : Direct
Question : Spot market is that market where in :

a) Only spot or current transactions are handled
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b) Foreign exchange transactions are meant for future delivery

c) Exchange rate is determined instantly
d) Both (a) and (c)
Question : Forward market is that market which :

a) Handled transactions of foreign exchange meant for future delivery
b) Handled current transactions
c) Handled current as well as future transactions
d) None of these
Answer : Handled transactions of foreign exchange meant for future delivery
Question : If Rs. 150 ate required to buy $ 2, instead of Rs.100 earlier, then :
a) Domestic currency has depreciated
b) Domestic currency has appreciated
c) Rupee value of import bill will increase
d) Both (a) and (c)
Question : BoP is measured as :

a) Difference between visible items of exports and imports
b) Difference between invisible items of exports and imports
c) Difference between external and internal flow of gold
d) Difference between all receipts of foreign exchange and payments of foreign exchange
Answer : Difference between all receipts of foreign exchange and payments of foreign exchange
Question : Balance of trade is measured as :

a) Difference between import and export goods
b) Difference between import and export services
c) Difference between import and export of capital
d) Difference between all export and all imports
Answer : Difference between import and export goods
Question : In which of the following categories are economic transactions of balance of trade recorded ?
a) Visible items
b) Invisible items
c) Capital transfers
d) All the above
Answer : Visible items
Question : Which of the following transactions are recorded in the current account of the balance of
payments ?
a) Import and export of goods and services
b) Transfers from one country to the other
c) Both (a) and (b)
d) None of these
Question : Which of the following items relate to BoP which :

a) Foreign investment
b) Loans
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c) NRI remittance
d) All of these
Question : Autonomous items are related to those transactions which :

a) Are determined by motive of profit
b) Are not concerned with the equilibrium status of BoP
c) Both (a) and (b)
d) None of these
Question : Accommodating items are those items of Bop which :

a) Are not determined by profit motive
b) Are conditioned by the positive or negative BoP status
c) Deal with capital transfers only
d) Both (a) and (b)
Question : Disequilibrium in balance of payments means:

a) Surplus balance of payments
b) Deficit balance of payments
c) Both (a) and (b)
d) None of these
Question : If balance of trade is (-) Rs.600 crore and value of exports is rs.500 crore then the value of
imports will be :
a) Rs.1,300 crore
b) Rs. 300 crore
c) Rs.1,100 crore
d) Rs. 1,200 crore
Answer : Rs.1,100 crore
Q1. An arrangement in which a worker uses his own resources to make a living is known ……………..
(a) Wage employment
(b) regular employment
(c) casual employment
(d) self-employment
Show Answer
(d) self-employment
Q2. Out of these which of the following is a worker?

(a) Beggar
(b) Gambler
(c) Cobbler
(d) Smuggler
Show Answer
(c) Cobbler
Q3. Unemployed people is calculated as

(a) Labour Force – Workforce
(b) Labour Force + Workforce
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(c) Workforce – Labour Force

(d) None of these
Show Answer
(a) Labour Force – Workforce
Q4. Which of the following statements is not true for a worker?

(a) A worker contributes to the GDP.
(b) Workers may temporarily abstain from work due to illness.
(c) Self-employed are not workers.
(b) Those who help the main workers are also workers.
Show Answer
(c) Self-employed are not workers.
Q5. What percent of urban workers are casual labourers?

(a) 54 percent
(b) 47 percent
(c) 38 percent
(d) 15 percent
Show Answer
(d) 15 percent
Q6. Which of the following workers is a regular salaried employee?

(a) Owner of a saloon
(b) Rickshaw puller
(c) Cashier in State Bank of India
(d) Vegetable vendor
Show Answer
(c) Cashier in State Bank of India
Q7. What proportion of the urban workforce is engaged in the secondary sector?
(a) Half
(b) One-third
(c) One-fourth
(d) One-fifth
Show Answer
(b) One-third
Q8. What was the average rate of growth of employment during 1950-2010?
(a) 1 percent
(b) 2 percent
(c) 5 percent
(d) 10 percent
Show Answer
(b) 2 percent
Q9. Which of the following is not a feature of organised sector?

(a) Job Security
(b) Social security benefits
(c) Irregular payment
(d) Fixed working hours
Show Answer
P a g e | 104
(c) Irregular payment
Q10. Which of the following is not an employment generation programme?

(a) Rural Employment Generation Programme (REGP)
(b) Prime Minister’s Rozgar Yojana (PMRY)
(c) National Food for Work Programme (NFWP)
(d) Valmiki Ambedkar Awas Yojana
Show Answer
(d) Valmiki Ambedkar Awas Yojana
Q11. Work force refers to that part of

(a) Labour force which is employed
(b) Population which is unemployed
(c) Population which is forced to work
(d) Labour force which is when employed
Show Answer
(a) Labour force which is employed
Q12. Due to the recent efforts of which international body the Indian government, initiated the
modernization of informal sector?
(a) World Bank
(b) WTO
(c) International Labour Organisation
(d) G-20
Show Answer
(c) International Labour Organisation
Q13. Find the odd one out.

(a) A private school teacher in a school with only 25 teachers
(b) A nurse in a government hospital
(c) Cycle-rickshaw puller
(d) A civil engineer working in a construction company which has 10 workers
Show Answer
(c) Cycle-rickshaw puller
Q14. Unemployment common in urban areas

(a) Seasonal unemployment
(b) Disguised unemployment
(c) Open unemployment
(d) None of these
Show Answer
(c) Open unemployment
Q15. Electricity, gas and water supply belong to ……………… sector.

(a) Primary sector
(b) Secondary sector
(c) Tertiary sector
(d) All the above
Show Answer
(b) Secondary sector
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Q16. After the workers lost their jobs in 1980’s, which city experienced an economy recession and
communal riots?
(a) Ahmedabad
(b) Bombay
(c) Allahabad
(d) Bangalore
Show Answer
(a) Ahmedabad
Q17. An establishment with four hired workers is known as ………………. sector establishment.
(a) Formal
(b) Informal
(c) (a) and (b)
Show Answer
(b) Informal
Q18. The newly emerging jobs are found mostly in …………….. sector.
(a) Manufacturing
(b) Primary
(c) Service
(d) None of these
Show Answer
(c) Service
Q19. When due to introduction of new machinery, some workers tend to be replaced by machines, their
unemployment is termed as
(a) Structural
(b) Technological
(c) Mechanical
(d) Seasonal
Show Answer
(b) Technological
Q20. Measure of reduce unemployment in very short period of time

(a) Reducing growth rate of population
(b) Reducing inequalities in the distribution of income and wealth
(c) Increasing investment in private and public sectors
(d) None of these
Show Answer
(c) Increasing investment in private and public sectors
Q1. Which of the following is a commercial source of energy?
(a) Coal
(b) Agricultural waste
(c) Animal dung
(d) Firewood
Show Answer
(a) Coal
Q2. The power generated from water is called

P a g e | 106
(a) Thermal Power

(b) Hydroelectric Power
(c) Atomic Power
(d) Tidal Power
Show Answer
Q3. From which of the following sources of generation we get the largest amount of power?
(a) Thermal Power
(c) Atomic Power
(d) Tidal Power
Show Answer
(a) Thermal Power
Q4. Which of the following statements is not correct with regards to infrastructure?
(a) Infrastructure contributes to economic development.
(b) Infrastructure provides support services.
(c) All infrastructural facilities have a direct impact on the production of goods and services.
(d) Inadequate infrastructure can have multiple adverse effects on health.
Show Answer
(c) All infrastructural facilities have a direct impact on the production of goods and services.
Q5. Which of the following facilities is included in social infrastructure?

(a) Roads and highways
(b) Housing
(c) Internet
(d) Electricity
Show Answer
(b) Housing
Q6. What is morbidity?

(a) Proneness to fall ill
(b) High infant mortality rate
(c) High maternal mortality rate
(d) Low life expectancy
Show Answer
(a) Proneness to fall ill
Q7. What percent of rural households use bio-fuels for cooking?

(a) 50 percent
(b) 75 percent
(c) 80 percent
(d) 90 percent
Show Answer
(d) 90 percent
Q8. Which of the following sector was the largest consumer of commercial energy in 1953-54?
(a) Households
(b) Transport
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(c) Industries
(d) Agriculture
Show Answer
(b) Transport
Q9. Which of the following is not a function of primary health care?

(a) Spreading education concerning prevailing health problems
(b) Promoting food supply and proper nutrition
(c) Conducting research
(d) Providing essential drugs
Show Answer
(c) Conducting research
Q10. Which of the following systems is not included in the Indian System of Medicines?
(a) Allopathy
(b) Homeopathy
(c) Naturopathy
(d) Ayurveda
Show Answer
(a) Allopathy
Q11. From the following which is not a commercial source of energy

(a) Petroleum
(b) Coal
(c) Electricity
(d) Dried dung
Show Answer
(d) Dried dung
Q12. Indian system of medicine:

(a) Unani
(b) Yoga
(c) Siddha
(d) All of these
Show Answer
(d) All of these
Q13. Electricity generated from radioactive elements is called:

(a) Thermal electricity
(b) Atomic energy
(c) Hydel electricity
(d) Tidal energy
Show Answer
(b) Atomic energy
Q14. The state known as ‘God’s own country

(a) Karnataka
(b) Gujarat
(c) Kerala
(d) Goa
Show Answer
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(c) Kerala
Q15. Energy generated by sun is known as ………………

(a) Natural gas
(b) Solar energy
(c) Wind energy
(d) Electricity
Show Answer
(b) Solar energy
Q16. Some states in India are performing much better than others in certain areas due to
(a) Better irrigation facilities
(b) Better transportation facilities
(c) Better health care and sanitation faculties
(d) All the above
Show Answer
(b) Better transportation facilities
Q17. LPG is an example of ………………

(a) Bio-energy
(b) Solar energy
(c) Wind energy
(d) Natural gas
Show Answer
(d) Natural gas
Q18. Essential indicator of good health in a country is increase in ………………
(a) Death rate
(b) Infant mortality rate
(c) Expectancy of life
(d) Incidence of deadly diseases
Show Answer
(c) Expectancy of life
Q19. ISM stands for:

(a) Indian systems of medicine
(b) International system of medicine
(c) Indian standard of medicine
Show Answer
(a) Indian systems of medicine
Q20. Sources of electricity are ………………

(a) Water
(b) Oil,Coal
(c) Gas
(d) All of these
Show Answer
(d) All of these
Q1. The government set up the Central Pollution Control Board to control …………………
(a) noise pollution
(b) air pollution
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(c) deforestation
(d) land pollution
Show Answer
(b) air pollution
Q2. Sustainable development can be achieved by ……………….

(a) controlling pollution
(b) controlling the growth of population
(c) restricting use of renewable resources
(d) all of these
Show Answer
(d) all of these
Q3. Which of the following is an impact of global warming?

(a) Deforestation
(b) Rise in sea level
(c) Waste generation
(d) Rapid increase in population
Show Answer
(b) Rise in sea level
Q4. In which of the following layers of the atmosphere is ozone shield found?
(a) Troposphere
(b) Exosphere
(c) Stratosphere
(d) Mesosphere
Show Answer
(c) Stratosphere
Q5. Which of the following is a consequence of ozone layer depletion?

(a) Skin cancer in humans
(b) Lower production of phytoplankton
(c) Hampers growth of terrestrial plants
(d) All of these
Show Answer
(d) All of these
Q6. When was the Central Pollution Control Board (CPCB) set up?
(a) 1964
(b) 1974
(c) 1984
(d) 1994
Show Answer
(b) 1974
Q7. How many industrial categories have been identified as significantly polluting by the CPCB?
(a) 17
(b) 25
(c) 27
(d) 31
Show Answer
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(a) 17
Q8. Which of the following is the modern concept of development?

(a) Economic development
(b) Economic growth
(c) Sustainable development
(d) Human development
Show Answer
(c) Sustainable development
Q9. Use of which of the following has resulted in a significant reduction in Delhi’s pollution?
(a) LPG at homes
(b) Solar cells for electricity
(c) Thermal power plants
(d) CNG in public transport
Show Answer
(d) CNG in public transport
Q10. Which of the following is a conventional source of energy?

(a) Sun
(b) Wind
(c) Dried dung
(d) Tides
Show Answer
(c) Dried dung
Q11. From the following which s a cleaner and greener energy souce:
(a) Thermal power
(b) Hydro power
(c) Wind power
Show Answer
(c) Wind power
Q12. For sustainable development, environment damage rate ……………. environment recovery rate.
(a) should be greater than the
(b) should be exponentially greater than the
(c) should be same as the
(d) should be lesser than the
Show Answer
(d) should be lesser than the
Q13. Which of the option is not incorporated as sustainable development parameters?

(a) Gender disparity and diversity
(b) Inter and Intra-generation equity
(c) Carrying capacity
Show Answer
Q14. South Africa is leading exporter of which mineral?

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(a) Copper
(b) Diamond
(c) Silver
(d) Gold
Show Answer
(d) Gold
Q15. The first airport powered by solar energy was

(a) Bangalore
(b) Cochin
(c) London
(d) Frankfurt
Show Answer
(b) Cochin
Q16. The ‘Agenda 21’ of Rio Summit 1992 is related to:

(a) Sustainable Development
(b) Polluter-Pays Principle
(c) Environmental Education
(d) Preservation of Ozone Layer
Show Answer
(a) Sustainable Development
Q17. One of the conventional sources of energy is

(a) wind energy
(b) tidal energy
(c) hydroelectric energy
Show Answer
Q18. Which of the following is a Conventional source of energy?

(a) Wind
(b) Sunlight
(c) LPG
(d) Tide
Show Answer
(c) LPG
Q19. Environmental includes:

(a) Biotic factors
(b) Abiotic factors
Show Answer
Q20. What can be the preventive measure for climate change:

(a) Plantation
(b) Using cycle instead of cars and bikes
P a g e | 112
(c) Using organic product

(d) All of them
Show Answer
(d) All of them
Open Economy Macroeconomics MCQ Questions Class 12 Economics with Answers
Question : Increase in the value of foreign commodities is known as _________
(a) Revaluation
(b) Devaluation
(c) Inflation
(d) None of these
Answer : B
Question : Measures to improve adverse balance of payment includes :

(a) Currency devaluation
(b) Import substitution
(c) Exchange control
(d) All of the above.
Answer : D
Question : When the import and export of visible items are equal, the situation is known as
(b) Balance of Payment
(c) Trade Surplus
(d) Trade Deficit
Answer : A
Question : Types of Foreign Exchange Market are:

(a) Spot market
(b) Forward market
(d) None of these
Answer : C
Question : Foreign exchange is determined by:

(a) Demand for foreign currency
(b) Supply of foreign currency
Answer : C
Question : Hybrid in management of fixed and flexible exchange rate is known as ________
(a) Managed to float
(b) Crawling Peg
(c) Wider Bands
(d) None of these
Answer : A
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Question : Balance of Trade means :

(a) Capital Transaction
(b) Import and export of goods
(c) Total debit and credit
(d) All the above
Answer : B
Question : Which one is the visible item of Balance of Payments?

(a) Machine
(b) Cloth
(c) Cement
(d) All of these
Answer : D
Question : Which among the following is a source of supply of foreign exchange?

(a) Donations given
(b) Imports
(c) Exports
(d) Gifts
Answer : C
Question : When there is a favourable balance of trade?

(a) X > M
(b) X = M
(c) X < M
(d) None of these
Answer : A
Question : Which one is the king of the exchange rate?

(a) Fixed Exchange Rate
Answer : C
Question : The records of exports and imports in goods and services and transfer payments is known as
(a) Current account
(b) Budget surplus
(c) Economic leakage
(d) degree of openness
Answer : A
P a g e | 114
Question : Which one is a merit of the fixed exchange rate?

(d) All the above
Answer : D
Question : If Rs 150 are required to buy $ 2, instead of Rs100 earlier, then:

(a) Domestic currency has depreciated;
(b) Domestic currency has appreciated;
(c) Rupee value of import bill will increase;
(d) Both (a) and (c) (d)
Answer : D
Question : Which one is a demerit of the flexible exchange rate?

(a) Bad Results of Low Rate
(b) Uncertainty
(c) Instability in Foreign Exchange
(d) All the above
Answer : D
Question : Which of the following is a merit of the fixed exchange rate?

(a) Ensures the supply of the fixed exchange rate
(b) Ensures the demand for the fixed exchange rate
(c) Ensures the stability for the fixed exchange rate
(d) None
Answer : C
Question : Which one is the item of Capital Account?

(a) Government Transaction
(b) Priva Transactions
(c) Foreign Direct Investment
(d) All the above
Answer : D
Question : The foreign exchange rate is determined by:

(a) Government
(b) Bargaining
(c) World Bank
Answer : D
Question : The Gold Standard was prevalent in the world from:

(a) 15th century to 18th century
(b) 9th century to 18th century
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(c) From 1870 till First World War

(d) From 1670 till First World War
Answer : C
Question : Which one is a merit of fixed exchange rate ?

(d) All the above
Answer : D
Question : Foreign exchange transactions dependent on other foreign exchange transactions are called:
(a) Current account transactions
(b) Capital account transactions
(d) Accommodating transactions
Answer : D
Question : The operation of future delivery in the foreign exchange market is known as __
(a) Spot market
(b) Current market
(c) Forward market
(d) Domestic market
Answer : C
Question : Structure of balance of payment includes which account:

(a) Current account
(b) Capital account
(d) None of these.
Answer : C
Question : Which account is included in the composition of Balance of Payments ?

(a) Current Account
(b) Capital Account
Answer : C
Question : The operation of daily nature in the foreign exchange market is known as
(a) Spot market
(b) Forward market
(c) Domestic market
(d) International market
Answer : A
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Question : Other things remaining unchanged, when in a country the price of foreign currency rises,
national income is:
(a) Likely to rise
(b) Likely to fall
(d) Not affected
Answer : A
Question : The forms of foreign exchange market is/are :

(a) Spot market
(b) Forward market
(d) None of these
Answer : C
Question : The exchange rate at which demand for foreign currency becomes equal to its supply,is called:
(a) Equal rate of exchange;
(b) Unequal rate of exchange;
(c) Equilibrium rate;
(d) All of these
Answer : C
Question : Which one is a kind of fixed exchange rate?

(a) Gold Standard System of Exchange Rate
(b) Bretton Woods System of Exchange Rate
Answer : C

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Microeconomics MCQ Questions Class 12 Economics with Answers

Question : Example of micro economic variable is:

Question : Who controls economic activities under centrally planned economics ?

Question : Slope of production curve is:

Question : The problem of 'what to produce' relates to:

Question : Increase (growth) of resources implies that production possibility curve :

Question : What satisfying power of commodity is called :

Question : Consuming two goods, consumer attains equilibrium when :

Question : When marginal utility is negative, total utility is :

Q2. What is the main cause of all economic problems?

Q3. Study of aggregates is known as ……………..

Q4. What is the name of the book written by J.M. Keynes?

(C) The General Theory of Employment, Interest and Money

Q5. When did the great depression occur?

Q6. Who is known as the father of modern macroeconomics?

Q8. Which one is a demerit of the flexible exchange rate?

Q9. Which of the following is a merit of the fixed exchange rate?

Q10. Which one is the item of Capital Account?

Q11. The foreign exchange rate is determined by:

Q12. The Gold Standard was prevalent in the world from:

Q13. Which one is a merit of fixed exchange rate ?

Q15. Which one is a merit of the fixed exchange rate?

Q17. Structure of balance of payment includes which account:

Q18. Which account is included in the composition of Balance of Payments ?

Q19. Balance of Trade means :

Question : When total utility is maximum, marginal utility becomes :

Question : When TU is increasing at a diminishing rate, MU must be :

Question : Marginal utility of a particular commodity at the point of saturation is :

Question : Which of the following equations is incorrect ?

Question : Diagrammatic presentation of consumer’s indifference set is called ?

Question : Budget line indicates :

Question : According to IC analysis , a consumer attains equilibrium when :

Question : An indifference curve is related to

Question : The slope of indifference curves is measured by

Question : In case of normal goods, demand curve shows :

Answer : A negative slope

Question : Law of demand must fall in case of :

Question : Inferior goods are those whose income effect is :

Question : Shift in demand curve means :

Question : Which of the following pairs represents substitute goods ?

Question : In case of Giffen’s Paradox the slope of demand curve is

Question : Ed> 1 represents

Question : On all points of rectangular hyperbola demand curve, elasticity of demand is

Question : When demand curve is parallel to X-axis, elasticity of demand is

Question : Per unit production of the variable factor is called

Question : Which of the following equations is correct ?

Question : Which of the following equations is correct ?

Question : Variable proportions type production function exists:

Question : When average product (output) increase, marginal product is :

Question : In case of diminishing returns :

b) Total product increases at increasing rate

Question : What does break- even point indicate?

Question : Difference between TR and TC is maximum when

Question : Under perfect competition, for the producer to be in equilibrium :

Question : In the context of producer’s equilibrium which one is wrong

Q1. Macro Economics Studies:

(A) Prof. D.R.Gadgill

Q3. When did the great depression occur?

Q4. Who is known as the father of modern macroeconomics?