1. Father of political economy

  • Adam Smith

  • Malthus

  • Marshall

  • Samuelson


2. In economics, assumptions:

  • make economic theory useless

  • mean other things equal

  • enable economists to simplify reality

  • used in micro and not in macroeconomist

CORRECT ANSWER: enable economists to simplify reality

3. Economics

  • is more important than mathematics

  • is a social science

  • should be made compulsory for every student

  • none of them

CORRECT ANSWER: is a social science

4. Market system means

  • socialism

  • capitalism

  • a place where goods are traded

  • all of them

CORRECT ANSWER: capitalism

5. "Everyone should study economics"

  • is a positive statement

  • is a normative statement

  • is a true statement

  • is nonsense

CORRECT ANSWER: is a normative statement

6. Who described economics as a science of material welfare?

  • Robbins

  • Marshall

  • Ricardo

  • Keynes


7. A positive statement

  • concerns 'what is'

  • is always accurate

  • deals with values and opinions

  • cannot be tested in the real world

CORRECT ANSWER: concerns 'what is'

8. Economic law

  • must be followed

  • is hated by people

  • show economic behavior of people

  • is unscientific

CORRECT ANSWER: show economic behavior of people

9. One or more persons living together and having a common budget is called

  • a family

  • organisation

  • household

  • all commodities in house


10. Utility and usefulness are

  • equal

  • different

  • similar

  • unrelated


11. Which is not part of institutional arguments that characterize an economic system?

  • poverty is owned by individual

  • at what level economic decisions are made

  • how governments officials are selected

  • what incentives are used to motivate economic behavior

CORRECT ANSWER: how governments officials are selected

12. As nearly as we cab estimate it, Soviet productivity growth

  • was subject to sever cycles

  • accelerated in 1980s

  • had nothing to do with the decline of socialism

  • was stagnant after 1965

CORRECT ANSWER: was stagnant after 1965

13. An apparently irreversible trend in China in the 1990s is

  • reliance on moral incentives

  • state-run banks to print own money

  • shift from public to private production

  • to allow Japan to operate major industries

CORRECT ANSWER: shift from public to private production

14. If business managers are rewarded on the basis of how much output they create

  • consumers will get what they want

  • profit will be large

  • productivity will increase

  • potential for quality to suffer

CORRECT ANSWER: potential for quality to suffer

15. Microeconomics is also known as

  • price theory

  • positive economics

  • normative economics

  • none of them

CORRECT ANSWER: price theory

16. When resources are allocated by government planning

  • capitalism is usually the result

  • economy is more efficient

  • decision making is decentralized

  • both a and c

CORRECT ANSWER: decision making is decentralized

17. Under the Soviet system supply-demand balance was

  • maintained effectively

  • unsatisfactorily attempted by planners

  • not a major consideration of planners

  • left to market price movements

CORRECT ANSWER: unsatisfactorily attempted by planners

18. Market allocation fundamentally relies upon

  • a system of relative prices

  • a belief that employees work for good of society

  • government interference

  • moral incentives

CORRECT ANSWER: a system of relative prices

19. There is an early belief that Socialist economy would fail because they underutilized

  • scarce information

  • labor resources

  • plants and factories

  • natural resources

CORRECT ANSWER: scarce information

20. Macroeconomics is study of

  • large firms and consumers

  • industries as a whole rather than individual firms

  • economy as whole

  • individual firms

CORRECT ANSWER: economy as whole

21. When inflation is positive

  • prices rise

  • prices fall

  • more prices rise than fall

  • average price rise

CORRECT ANSWER: average price rise

22. Which of the following decades was characterized by stagflation?

  • 1930s

  • 1940s

  • 1970s

  • 1960s


23. During a recession the government

  • collects more taxes

  • spends more on unemployment insurance

  • spends less overall

  • adjust spending

CORRECT ANSWER: spends more on unemployment insurance

24. The four phases of the business cycle include the

  • expansion period

  • leverage period

  • acceleration phase

  • plateau

CORRECT ANSWER: expansion period

25. Which is least important in study of macroeconomics?

  • general price level

  • relative prices of goods

  • interest rate

  • total output

CORRECT ANSWER: relative prices of goods

26. If a given market basket of goods and services that cost $40 in the base period now costs $120 then the current value of the price index is

  • 120

  • 300

  • 33.3

  • 3


27. In the course of a business cycle, a recession is followed by

  • trough

  • recovery

  • depression

  • expansion


28. The potential affects of inflation include all of the following except

  • income redistribution from borrowers to lenders

  • scarce resources devoted to anticipating

  • investment in inflation

  • possible changes in real output

CORRECT ANSWER: income redistribution from borrowers to lenders

29. The redistribution of income that inflation entails depends fundamentally on

  • current rate of unemployment

  • correct anticipation of inflation

  • government programs to increase productivity to lower inflation

  • current stage of business cycle

CORRECT ANSWER: correct anticipation of inflation

30. Economic problems arise because

  • wants are unlimited

  • resources are scarce

  • scarce resources have alternative uses

  • all of them

CORRECT ANSWER: all of them

31. The Law of Demand, assuming other things to remain constant, establishes the relationship between

  • income of the consumer and the quantity of a commodity demanded by them

  • price of a commodity and the quantity demanded

  • price of a commodity and the demand for its substitute

  • quantity demanded of a commodity and the relative prices of its complementary goods

CORRECT ANSWER: price of a commodity and the quantity demanded

32. Production is a function of

  • profits

  • costs

  • inputs

  • price


33. Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its

  • demand

  • price

  • costs of production

  • state of technology


34. Discriminating monopoly implies that the monopolist charges different prices for his commodity

  • from different groups of consumers

  • for different uses

  • at different places

  • any of the above

CORRECT ANSWER: any of the above

35. Which is not essential condition for an economic problem to arise?

  • unlimited wants

  • use of money

  • scarcity of resources

  • alternative uses of scarce resources

CORRECT ANSWER: use of money

36. Identify the factor, which generally keeps the price-elasticity of demand for a commodity low:

  • variety of uses for that commodity

  • its low price

  • close substitutes for that commodity

  • high proportion of the consumer's income spent on it

CORRECT ANSWER: its low price

37. An Is-product curve slopes

  • downward to the left

  • downward to the right

  • upward to the left

  • upward to the right

CORRECT ANSWER: downward to the right

38. The cost of one thing in terms of the alternative given up is known as

  • production cost

  • physical cost

  • real cost

  • opportunity cost

CORRECT ANSWER: opportunity cost

39. Price discrimination will be profitable only if the elasticity of demand in different markets into which the total market has been divided is

  • uniform

  • different

  • less

  • zero