SAMPLE QUESTIONS ECONOMICS NCET EXAM PART 3
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. An increase in money supply causes inflation.
Answer: C (Rationale: Normative economics deals with value judgments and "what ought to be.")
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 a special type of inferior good where:
A. The substitution effect is stronger than the income effect.
B. The income effect is stronger than the substitution effect.
C. There is no substitution effect.
D. Law of demand holds perfectly.
Answer: B (Rationale: For Giffen goods, the negative income effect outweighs the substitution effect, leading to an upward-sloping demand curve.)
A Vertical Supply Curve parallel to the Y-axis implies that price elasticity of supply is:
A. Perfectly Elastic ($\infty$)
B. Perfectly Inelastic ( This is a sample LearnCBSE-style layout. The content section is in the center,
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Example Question:
C. Unitary Elastic (
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Example Question:
D. Highly Elastic ($>1$)
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 scale of production.)
Average Cost (AC) is at its 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, such as soaps or toothpastes.)
The "Kinked Demand Curve" model explains:
A. Price leadership
B. Price rigidity in Oligopoly
C. Collusion between firms
D. Perfect competition
Answer: B (Rationale: It suggests that firms are reluctant to change prices because of how competitors might react.)
Consumer Surplus is defined as:
A. Total Utility minus Marginal Utility
B. Price minus Cost of Production
C. Potential Price minus Actual Price
D. Demand minus Supply
Answer: C (Rationale: It is the difference between what a consumer is willing to pay and what they actually pay.)
Section 2: Macroeconomics
"Net Factor Income from Abroad" (NFIA) is the difference needed 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. Annual Income
B. National Wealth
C. Monthly Consumption
D. Annual Investment
Answer: B (Rationale: Wealth is measured at a specific point in time, whereas income and consumption are flows over a period.)
The "Investment Multiplier" ($k$) is calculated as:
A.
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Example Question:
B.
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Example Question:
C. $MPC / MPS$
D.
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Answer: B (Rationale: $k = 1 / (1 - MPC)$, which is the same as
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Example Question:
In an "Inflationary Gap" situation:
A. AD > AS at full employment
B. AD < AS at full employment
C. AD = AS at full employment
D. Exports > Imports
Answer: A (Rationale: Excess demand beyond full employment capacity pulls prices upward.)
$M1$ (Narrow Money) in India includes:
A. Currency + Demand Deposits + Other deposits with RBI
B. Currency + Time Deposits
C. Demand Deposits + Post Office Savings
D. Total Liquidity
Answer: A (Rationale: $M1$ represents the most liquid forms of money.)
"Open Market Operations" (OMO) refer to:
A. Direct lending to the public
B. Purchase and sale of government securities by the Central Bank
C. Setting the interest rates for commercial banks
D. Managing the stock exchange
Answer: B (Rationale: It is a quantitative tool used to regulate the volume of money in circulation.)
Which of the following is a "Capital Receipt" for the government?
A. Income Tax
B. Goods and Services Tax
C. Disinvestment of PSUs
D. Fines and Penalties
Answer: C (Rationale: Capital receipts either create a liability or reduce an existing financial asset.)
The "Balance of Payments" (
BoP
) is a record of:
A. Only visible trade
B. Only invisible trade
C. All economic transactions between a country and the rest of the world
D. Only government loans
Answer: C (Rationale: It includes the current account, capital account, and financial account.)
"Stagflation" is
a
economic phenomenon characterized by:
A. High inflation and high growth
B. Low inflation and low unemployment
C. High inflation and high unemployment
D. Deflation and zero growth
Answer: C (Rationale: It is a period of stagnant growth combined with rising prices.)
Which of the following is NOT a primary function of money?
A. Medium of exchange
B. Measure of value
C. Standard for deferred payments
D. Tool for poverty eradication
Answer: D (Rationale: Poverty eradication is a policy objective, not an inherent function of money.)
Section 3: Indian Economic Development
The "Zamindari System" was characterized by:
A. Direct relationship between state and tiller
B. Intermediaries who collected land revenue
C. Government-owned farms
D. Cooperative farming
Answer: B (Rationale: Zamindars acted as intermediaries during the colonial period, leading to exploitation.)
The "
Karve
Committee" (1955) was specifically concerned with:
A. Heavy Industries
B. Village and Small Scale Industries
C. Foreign Trade
D. Education Reform
Answer: B (Rationale: It advocated for small-scale industries to promote rural employment.)
Which of the following describes "Import Substitution"?
A. Encouraging exports to earn forex
B. Replacing foreign imports with domestic production
C. Removing all tariffs on imports
D. Selling domestic goods at lower prices abroad
Answer: B (Rationale: This was a key strategy in India's early planning to achieve self-reliance.)
The main trigger for the 1991 Economic Reforms was:
A. High agricultural productivity
B. A severe Balance of Payments crisis
C. A surplus in the government budget
D. Low inflation rates
Answer: B (Rationale: India had only enough forex reserves to last two weeks of imports.)
"Outsourcing" became a major trend in India due to:
A. Globalization
B. Nationalization
C. High tariff barriers
D. De-urbanization
Answer: A (Rationale: Globalization allowed companies to hire specialized services from low-cost destinations like India.)
"Human Capital Formation" involves investment in:
A. Building roads and bridges
,B. Education, Health, and Training
C. Printing more currency
D. Buying foreign stocks
Answer: B (Rationale: It refers to the process of increasing the productive capacity of the population.)
"Operation Flood" is famously associated with:
A. Rice production
B. Water management
C. The White Revolution (Milk)
D. Wheat production
Answer: C (Rationale: It transformed India from a milk-deficient nation into the world's largest producer.)
Sustainable Development requires:
A. Maximum exploitation of resources
B. Balancing economic growth with environmental conservation
C. Focusing only on industrial growth
D. Ignoring the needs of future generations
Answer: B (Rationale: It emphasizes growth that is ecologically and socially responsible.)
Which institution is the apex body for rural credit in India?
A. SBI
B. RBI
C. NABARD
D. SIDBI
Answer: C (Rationale: National Bank for Agriculture and Rural Development coordinates the rural financing system.)
In India, "Disguised Unemployment" is most common in:
A. IT Sector
B. Manufacturing Sector
C. Agriculture Sector
D. Banking Sector
Answer: C (Rationale: It occurs when more people are working on a piece of land than are actually required.)
Section 4: Statistics & Methods
The "Arithmetic Mean" of the first five natural numbers (1, 2, 3, 4, 5) is:
A. 2
B. 3
C. 4
D. 5
Answer: B (Rationale: $(1+2+3+4+5)/5 = 15/5 = 3$.)
If the Correlation Coefficient ($r$) is $-1$, it indicates:
A. Perfect positive correlation
B. Perfect negative correlation
C. No correlation
D. Partial correlation
Answer: B (Rationale: Variables move in perfectly opposite directions.)
Which measure of central tendency is affected most by "Extreme Values" (Outliers)?
A. Median
B. Mode
C. Arithmetic Mean
D. Range
Answer: C (Rationale: The mean takes the actual value of every observation into account.)
"Opportunity Cost" is best defined as:
A. The cost of the chosen option
B. The value of the next best alternative given up
C. Fixed cost + Variable cost
D. Sunk cost
Answer: B (Rationale: It represents the sacrifice made when making an economic choice.)
The "Law of Variable Proportions" is a:
A. Long-run production law
B. Short-run production law
C. Consumption law
D. Market law
Answer: B (Rationale: it describes how output changes when one factor is varied while others are fixed.)
Which of the following is used to measure the degree of income inequality?
A. Laffer Curve
B. Gini Coefficient
C. Phillips Curve
D. Engel Curve
Answer: B (Rationale: Derived from the Lorenz Curve, it ranges from 0 (perfect equality) to 1 (perfect inequality).)
A "Mixed Economy" is characterized by:
A. Complete government control
B. Complete private ownership
C. Co-existence of public and private sectors
D. Absence of markets
Answer: C (Rationale: India is a prime example of a mixed economy.)
"Transfer Payments" include:
A. Salaries of government employees
B. Old-age pensions and scholarships
C. Profits of private companies
D. Payments for raw materials
Answer: B (Rationale: These are receipts for which no productive service is rendered in return.)
The "Base Year" is used in index numbers to:
A. Predict future prices
B. Act as a point of comparison
C. Calculate total population
D. Fix the current year's budget
Answer: B (Rationale: It serves as the benchmark (0$) for measuring changes over time.)
"Microeconomics" deals with:
A. National Income
,B. Behavior of individual economic units
C. Aggregate Demand
D. General Price Level
Answer: B (Rationale: It focuses on individual consumers, firms, and markets.)
Section 5: Global Trends & Policies
The headquarters of the World Trade Organization (WTO) is in:
A. Washington D.C.
B. New York
C. Geneva
D. Paris
Answer: C (Rationale: WTO manages global trade rules from its base in Switzerland.)
An "Externality" occurs when:
A. A firm makes a profit
B. A transaction affects a third party who is not involved
C. The government raises taxes
D. A consumer buys a foreign product
Answer: B (Rationale: Pollution is a classic example of a negative externality.)
"Direct Benefit Transfer" (DBT) aims to:
A. Increase the number of banks
B. Transfer subsidies directly to the bank accounts of beneficiaries
C. Stop all government subsidies
D. Promote cash-only transactions
Answer: B (Rationale: It reduces leakages and ensures benefits reach the intended person.)
The "Phillips Curve" shows the relationship between:
A. Price and Demand
B. Tax rate and Revenue
C. Inflation and Unemployment
D. Income and Consumption
Answer: C (Rationale: Traditionally, it suggests an inverse relationship between inflation and unemployment.)
"Quaternary Sector" of the economy involves:
A. Mining and Fishing
B. Knowledge-based services like R&D and IT
C. Manufacturing of textiles
D. Retail and Transport
Answer: B (Rationale: It is the intellectual aspect of the economy.)
"Devaluation" of a currency means:
A. Market-driven fall in value
B. Deliberate reduction in the value of domestic currency by the government
C. Increase in the value of currency
D. Printing more paper money
Answer: B (Rationale: It is often done to make exports cheaper and more competitive.)
"Economic Development" is a broader concept than "Economic Growth" because it includes:
A. Only GDP increase
B. Qualitative changes like literacy and health
C. Only population growth
D. Increase in military spending
Answer: B (Rationale: Development encompasses both structural changes and standard of living.)
"GST" is an example of:
A. Direct Tax
B. Progressive Tax
C. Indirect Tax
D. Wealth Tax
Answer: C (Rationale: It is levied on the supply of goods and services.)
The "Great Depression" of the 1930s began in:
A. United Kingdom
B. Germany
C. USA
D. India
Answer: C (Rationale: It started with the 1929 stock market crash in the United States.)
"Laissez-faire" philosophy advocates for:
A. Strong government intervention
B. Minimum government interference in the economy
C. Complete nationalization of industries
D. High import duties
Answer: B (Rationale: It translates to "let it be," promoting free-market capitalism.)
