SAMPLE QUESTIONS ECONOMICS NCET EXAM PART 2
Section 1: Microeconomics
Which of the following is an example of a "Normative Statement"?
A. The unemployment rate in India is 7%.
B. A rise in price leads to a fall in demand.
C. The government should provide free healthcare to all.
D. Increase in money supply causes inflation.
Answer: C (Rationale: Normative economics deals with "what ought to be" or value judgments.)
If the price of Coffee rises, the demand for Tea will:
A. Decrease
B. Increase
C. Remain constant
D. Become zero
Answer: B (Rationale: Tea and Coffee are substitute goods; a price rise in one increases the demand for the other.)
The "Giffen Good" is an exception to:
A. Law of Supply
B. Law of Demand
C. Law of Diminishing Returns
D. Law of Variable Proportions
Answer: B (Rationale: For Giffen goods, demand increases as price increases, defying the Law of Demand.)
A Vertical Supply Curve parallel to the Y-axis implies that supply is:
A. Perfectly Elastic
B. Perfectly Inelastic
C. Unitary Elastic
D. Highly Elastic
Answer: B (Rationale: It indicates that quantity supplied remains the same regardless of price changes.)
The "Marginal Rate of Substitution" (MRS) is the slope of:
A. Production Possibility Curve
B. Budget Line
C. Indifference Curve
D. Demand Curve
Answer: C (Rationale: MRS shows the rate at which a consumer is willing to trade one good for another while maintaining the same utility.)
In the Long Run, all factors of production are:
A. Fixed
B. Variable
C. Constant
D. Marginal
Answer: B (Rationale: The long run is a period where a firm can change all its inputs, including capital and land.)
Average Cost (AC) is minimum when it is equal to:
A. Total Cost
B. Fixed Cost
C. Marginal Cost
D. Variable Cost
Answer: C (Rationale: The MC curve always intersects the AC curve at its lowest point.)
Under Monopolistic Competition, products are:
A. Homogeneous
B. Differentiated
C. Perfect Substitutes
D. Unique with no substitutes
Answer: B (Rationale: Firms sell products that are similar but branded differently (e.g., soaps or shampoos).)
The "Kinked Demand Curve" is a characteristic of:
A. Perfect Competition
B. Monopoly
C. Oligopoly
D. Duopoly
Answer: C (Rationale: It explains price rigidity in an oligopoly market.)
Consumer Surplus is the difference between:
A. Total Utility and Price
B. Price and Marginal Utility
C. What a consumer is willing to pay and what they actually pay
D. Demand and Supply
Answer: C (Rationale: It is the extra benefit or satisfaction gained by consumers.)
Section 2: Macroeconomics
"Net Factor Income from Abroad" (NFIA) is used to convert:
A. GDP to GNP
B. NDP to GDP
C. Market Price to Factor Cost
D. Nominal GDP to Real GDP
Answer: A (Rationale: GNP=GDP+NFIA.)
Which of the following is a "Stock" variable?
A. Income
B. Wealth
C. Consumption
D. Investment
Answer: B (Rationale: Wealth is measured at a specific point in time, whereas income is a flow over a period.)
The "Multiplier" effect is higher when:
A. MPC is low
B. MPS is high
C. MPC is high
D. MPS is 1
Answer: C (Rationale: A higher Marginal Propensity to Consume means more money is re-spent in the economy.)
In a "Deflationary Gap" situation:
A. AD > AS at full employment
B. AD < AS at full employment
C. AD = AS at full employment
D. Exports > Imports
Answer: B (Rationale: This occurs when aggregate demand is insufficient to reach full employment levels.)
High Powered Money consists of:
A. Currency + Demand Deposits
B. Currency + Cash Reserves of Banks with RBI
C. Demand Deposits + Time Deposits
D. Total Gold Reserves
Answer: B (Rationale: Also known as 'Reserve Money' or M0.)
"Open Market Operations" refer to:
A. Buying and selling of shares by public
B. Buying and selling of government securities by RBI
C. Regulating the stock exchange
D. Granting loans to farmers
Answer: B (Rationale: It is a quantitative tool used by the RBI to control the money supply.)
Which of the following is a "Capital Receipt" for the government?
A. Tax Revenue
B. Interest received on loans
C. Recovery of Loans
D. Profits of PSUs
Answer: C (Rationale: Capital receipts either create a liability or reduce an asset.)
The "Balance of Payments" is always balanced in the:
A. Economic sense
B. Accounting sense
C. Political sense
D. Real sense
Answer: B (Rationale: Due to the double-entry bookkeeping system, total debits must equal total credits.)
"Stagflation" is a condition characterized by:
A. High inflation and high growth
B. Low inflation and low unemployment
C. High inflation and high unemployment
D. Deflation and high growth
Answer: C (Rationale: It is a rare combination of stagnant economic growth and rising prices.)
Which of the following is NOT a function of money?
A. Medium of exchange
B. Store of value
C. Measure of value
D. Tool for income equality
Answer: D (Rationale: Income equality is a policy goal, not a direct function of money itself.)
Section 3: Indian Economic Development
The "Zamindari System" was abolished in India soon after independence to promote:
A. Industrialization
B. Land Reforms
C. Foreign Investment
D. Urbanization
Answer: B (Rationale: It aimed to eliminate intermediaries and give "land to the tiller.")
The "Karve Committee" (1955) was related to:
A. Large Scale Industries
B. Village and Small Scale Industries
C. Banking Reforms
D. Taxation
Answer: B (Rationale: It emphasized the role of small industries in rural development.)
Which of the following was a "Navratna" PSU in the 1990s?
A. Reliance Industries
B. Indian Oil Corporation (IOC)
C. Tata Motors
D. Infosys
Answer: B (Rationale: Navratnas are high-performing Public Sector Undertakings.)
The main reason for the 1991 Economic Crisis was:
A. High Foreign Exchange Reserves
B. Low Fiscal Deficit
C. Balance of Payments Crisis
D. Low Inflation
Answer: C (Rationale: India faced a severe shortage of forex to pay for essential imports.)
"Outsourcing" is a major outcome of which process?
A. Privatization
B. Globalization
C. Liberalization
D. Nationalization
Answer: B (Rationale: Globalization allowed companies to hire services from other countries (like BPOs in India).)
Which of the following is an indicator of "Human Capital"?
A. Number of machines
B. Life Expectancy
C. Stock of buildings
D. Foreign Exchange Reserves
Answer: B (Rationale: Human capital refers to the skills, health, and knowledge of the population.)
"Operation Flood" was aimed at increasing the production of:
A. Fish
B. Milk
C. Fertilizers
D. Oilseeds
Answer: B (Rationale: Led by Verghese Kurien, it made India the world's largest milk producer.)
Sustainable development focuses on the "Three Pillars":
A. Money, Power, Status
B. Economy, Society, Environment
C. Agriculture, Industry, Services
D. Imports, Exports, Taxes
Answer: B (Rationale: It balances economic growth with social equity and environmental protection.)
What is the main source of institutional credit in rural India?
A. Money lenders
B. Commercial Banks
C. Self-Help Groups
D. Relatives
Answer: B (Rationale: Commercial banks, including RRBs, provide the bulk of formal rural credit.)
In India, the "Absolute Poverty" line is primarily based on:
A. Health standards
B. Minimum calorie intake
C. Education level
D. House size
Answer: B (Rationale: 2400 calories for rural and 2100 calories for urban areas was the traditional benchmark.)
Section 4: Statistics & Advanced Topics
The "Mean" of 10, 20, 30, 40, 50 is:
A. 20
B. 30
C. 40
D. 25
Answer: B (Rationale: (10+20+30+40+50)/5=150/5=30.)
If the correlation coefficient (r) is +1, it means:
A. Perfect positive correlation
B. Perfect negative correlation
C. No correlation
D. Partial correlation
Answer: A (Rationale: Both variables move in the same direction in a perfect linear relationship.)
The "Law of Diminishing Marginal Utility" states that as consumption increases, MU:
A. Increases
B. Decreases
C. Remains constant
D. Becomes infinite
Answer: B (Rationale: The additional satisfaction from each extra unit declines.)
"Opportunity Cost" is defined as:
A. Total cost of production
B. The value of the next best alternative foregone
C. Variable cost
D. Sunk cost
Answer: B (Rationale: It represents what you give up to choose something else.)
The "Engel's Law" deals with the relationship between:
A. Price and Demand
B. Income and Food Expenditure
C. Supply and Profit
D. Interest and Investment
Answer: B (Rationale: As income rises, the proportion of income spent on food falls.)
Which index is used to measure Inflation in India for policy making?
A. WPI (Wholesale Price Index)
B. CPI (Consumer Price Index)
C. GDP Deflator
D. Sensex
Answer: B (Rationale: The RBI primarily uses CPI (Combined) to target inflation.)
A "Capitalist Economy" is also known as:
A. Command Economy
B. Planned Economy
C. Market Economy
D. Mixed Economy
Answer: C (Rationale: Prices and production are determined by market forces of supply and demand.)
"Transfer Payments" are:
A. Payments made for productive services
,B. Unilateral payments like old-age pensions or scholarships
C. Wages paid to laborers
D. Interest on bank loans
Answer: B (Rationale: They are "one-way" payments for which no service is rendered in return.)
The "Base Year" for the current GDP series in India is:
A. 2004-05
B. 2011-12
C. 2020-21
D. 1999-00
Answer: B (Rationale: 2011-12 is the current base year used by the MOSPI.)
"Microeconomics" is also known as:
A. Income Theory
B. Price Theory
C. Employment Theory
D. Growth Theory
Answer: B (Rationale: It focuses on how prices are determined in individual markets.)
Section 5: International & General Awareness
The World Trade Organization (WTO) replaced which agreement?
A. IMF
,B. GATT (General Agreement on Tariffs and Trade)
C. World Bank
D. NAFTA
Answer: B (Rationale: WTO was established in 1995 replacing GATT.)
"Global Warming" is an example of an "Externality" that is:
A. Positive
B. Negative
C. Neutral
D. Financial
Answer: B (Rationale: It is a harmful side effect of production/consumption that affects third parties.)
What is the "Cess" in the Indian tax system?
A. A tax on luxury goods only
B. A tax on tax for a specific purpose (e.g., Education Cess)
C. A discount on tax
D. A tax paid by foreigners
Answer: B (Rationale: It is an additional tax levied for a specific objective.)
Which curve shows the relationship between Tax Rates and Tax Revenue?
A. Lorenz Curve
B. Phillips Curve
C. Laffer Curve
D. Engel Curve
Answer: C (Rationale: It suggests that there is an optimal tax rate that maximizes revenue.)
"Primary Sector" includes which of the following?
A. Banking
B. Manufacturing
C. Agriculture and Forestry
D. Transport
Answer: C (Rationale: It involves the extraction and harvesting of natural resources.)
The "Law of Supply" assumes that:
A. Price and Quantity move in opposite directions
B. Price and Quantity move in the same direction
C. Supply is independent of price
D. Technology is always changing
Answer: B (Rationale: Producers are willing to sell more at higher prices to increase profit.)
"Economic Growth" is usually measured by an increase in:
A. Population
B. Real GDP
C. Nominal Money Supply
D. Number of Banks
Answer: B (Rationale: It refers to the physical increase in the output of goods and services.)
The "Planning Commission" of India was a:
A. Constitutional Body
B. Statutory Body
C. Non-Constitutional/Extra-Constitutional Body
D. Judicial Body
Answer: C (Rationale: It was created by an executive resolution of the Government.)
In a "Mixed Economy" like India:
A. Only the government produces goods
B. Only private individuals produce goods
C. Both Public and Private sectors coexist
D. There are no taxes
Answer: C (Rationale: It combines elements of both socialism and capitalism.)
"Macroeconomics" studies:
A. Individual households
B. Price of a single commodity
C. The economy as a whole (Aggregate levels)
D. A single firm's profit
Answer: C (Rationale: It looks at aggregates like national income, total employment, and general price levels.)
