macroeconomics · 2020. 12. 17. · macroeconomics objective ias unit-1: introduction to economics...

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Macroeconomics Objective Question Bank

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Macroeconomics OBJECTIVE IAS

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Contents

1. Introduction to Economics 03

2. National Income Accounting 06

3. Money and Banking 09

4. Foreign Trade 12

5. Public Finance 15

6. Inflation 18

N.B.: This Question Bank is a supplementary Booklet must be used

along with the Macroeconomics Booklet of OBJECTIVE IAS.

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Unit-1: Introduction to Economics

1. Which branches of economics examines the behaviours of

Individual actors such as consumers, businessman, households in

the face of scarcity and what effects they have?

a) Macro economics

b) Micro economics

c) Behavioural economics

d) Demographics economics

2. Which branch of economics studies the stuff of news stories and

government policy debates?

a) Macroeconomics

b) Microeconomics

c) Developed economics

d) Information economics

3. In which type of economy, there is very little government

involvement and allocation of resources here are based on rituals,

habits and customs?

a) Traditional economy

b) Free Market economy

c) Open economy

d) Capitalist economy

4. In a Type of economy where there is very little governmental

interference or control and all the economic decisions are made

based on the market princilples, we termed this type of economy as:

a) Traditional economy

b) Mixed economy

c) Open economy

d) Free Market economy

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5. With reference to the type of economy and their features which

one of the following pairs is not correctly matched?

a) Command economy- run based on central planning

b) Mixed economy- combination of public sector and private

sector units

c) Open economy- rivalry in supplying or getting an economic

service or goods

d) Socialist economy- state in charge of economic planning,

production and distribution of goods

6. Who was/were published the book “General Theory of

Employment, Interest and Money” in 1936?

a) John Maynard Jeynes

b) Adam Smith

c) Both (a) and (b)

d) None of the above

7. Which sector of economy is involved in the production of finished

goods?

a) Primary Sector

b) Secondary Sector

c) Tertiary Sector

d) Service Sector

8. Financial Planning Activities comes under, particularly which

sector of economy?

a) Primary Sector

b) Secondary Sector

c) Service Sector

d) Quaternary Sector

9. A country’s degree of development evaluated on the basis of:

a) Per Capita GDP

b) Level of Industrialization

c) The amount of widespread infrastructure

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d) all of these

10. Which branch of economics studies foreign exchange, balance

of Payments, Balance of Trade particularly?

a) Macroeconomics

b) Development economics

c) International economics

d) Open economics

Answers

1. B

2. A

3. A

4. D

5. C

6. A

7. B

8. D

9. D

10. C

Difference between Macroeconomics and Microeconomics

Microeconomics focuses on how individual consumers and producers make their

decisions. This includes a single person, a household, a business or a governmental

organization. Microeconomics ranges from how these individuals trade with one another

to how prices are affected by the supply and demand of goods. Also studied are the

efficiency and costs associated with producing goods and services, how labor is divided

and allocated, uncertainty, risk, and strategic game theory.

Macroeconomics studies the overall economy. This can include a distinct geographical

region, a country, a continent or even the whole world. Topics studied include government

fiscal and monetary policy, unemployment rates, growth as reflected by changes in the

Gross Domestic Product (GDP) and business cycles that result in expansion, booms,

recessions and depressions.

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Unit-2: National Income Accounting

1. National Income in India is estimated by

a) NITI Aayog

b) Finance Commission

c) Indian Statistical Institute

d) Central Statistical Organization

2. Which of the following is known as “National Income”?

a) Gross Domestic Product at market Prices

b) Gross National Product at Constant Prices

c) Net National Product at Factor Cost

d) Net National Product at Current Prices

3. Which of the following is known as “Per Capita Income”?

a) NNP at Factor coast divided by Total Population

b) GDP divided by National Income

c) NNP divided by Population

d) GNP divided by NNP

4.The difference between GNP at Market Prices and GDP at Market

Prices is equal to:

a) Net indirect tax

b) Subsidies

c) Net factor income from abroad

d) Depreciation

5. Which of the following is used for measurement of distribution of

Income?

a) Laffer Curve

b) Engel’s Law

c) Lorenz Curve

d) Phillip Curve

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6. Gross National Product is less than Gross Domestic Product

when:

a) Indirect taxes are more than subsidies

b) Depreciation is included

c) Net factor Income from Abroad is Negative

d) Indirect taxes are less than subsidies

7. National Income at current Prices is higher than that of constant

prices because:

a) Price increase is equal to increase in production

b) Price increase is higher to increase in production

c) Price increase is lower to increase in production

d) Only decrease in production

8.One of the problems in calculating the National Income in India

correctly is:

a) Inflation

b) Low Savings

c) Under-employment

d) Non-monetized consumption

9.The difference between GNP and NNP is

a) Government revenue

b) Net Indirect Tax

c) Consumption of Fixed Capital

d) Net Capital Formation

10.Which one of the following will directly increase the GNP?

a) An increase in investment

b) A surplus in budget

c) A fall in National debt

d) A rise in interest rate

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Answers:

1. D

2. C

3. A

4. C

5. C

6. C

7. B

8. D

9. C

10. A

National Income = Net National Product at Factor Cost

National Income= NNP at market

prices- (Indirect taxes- subsidies)

National Income= NNP at market

prices- net indirect taxes

Net Indirect Taxes= Indirect taxes

– subsidies

Note- Net factor income from

abroad is zero then GDP=GNP

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Unit-3: Money and Banking

1. If the Cash Reserve Ratio is lowered by the RBI, what will be its

effect on credit creations?

a) Increase Credit creation

b) Decrease Credit creation

c) Not affect credit creation

d) Not decrease credit creation

2. If RBI buy securities, what will be its effect on liquidity?

a) Decrease in liquidity

b) Increase in liquidity

c) No change in liquidity position

d) None of these

3. what is “Hard currency”?

a) Whose exchange rate has tendency to fluctuate

b) Which is used in time of war

c) which is traded in foreign exchange market and for which

demand is persistently high related to supply

d) which loses its value very fast

4. What is call money market?

a) Market for Inter-Bank loans on day-to-day basis

b) Market arrangement for going loans to people

c) Market in which Black money is exchanged for white money

d) Market for Hawala

5. Broad Money (M3) measures of Money supply does not include:

a) Currency with Public

b) Demand deposits of Public in Banks

c) Post office savings deposits

d) Time deposits of the Public with Banks

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6. Which Indian Commercial bank became the first in providing

mobile ATM service?

a) IDBI

b) SBI

c) PNB

d) ICICI

7. Which one of the following instruments for quantitative control

of credit is not used by RBI?

a) Cash Reserve Ratio

b) Bank Rate

c) Open Market Operations

d) Moral Suasion

8. What is high powered Money?

a) Money circulating as parallel economy

b) Money consisting of foreign exchange reserves of a country

c) Money issued by Central Bank of the country

d) Money used to fund elections

9. In India, the first bank of limited liability managed by Indians and

founded in 1881 was: (UPSC- 2003)

a) Hindustan Commercial Bank

b) Oudh Commercial bank

c) Punjab National Bank

d) Punjab and Sindh Bank

10. The banks are required to maintain a certain ratio between the

Cash in hand and Total assets. This is called: (UPSC-1998)

a) Statutory Liquidity Ratio

b) Statutory Bank Ratio

c) Central Bank Reserve

d) Central Liquidity Ratio

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Answers:

1. a

2. b

3. c

4. a

5. c

6. d

7. d

8. c

9. a

10. a

Money Supply: The total stock of money in circulation among the

public at a particular point of time is called money supply. RBI

published figures for four alternative measures of money supply,

viz. M1, M2, M3 and M4. They are defined as follows:

M1 = CU + DD, where CU is currency (Notes and coins) held by public

and DD is net demand deposits held by commercial banks.

M2 = M1 + Savings deposits with Post Offices Savings Banks

M3 = M1 + Net time deposits of commercial banks (the word net

implies that only deposits of the public held by the banks are to be

included in money supply, the interbank deposits are not to be

regarded as part of money supply)

M4 = M3 + total deposits with Post Office Savings Organization

excluding National Savings certificates

M1 and M2: Narrow Money || M3 and M4: Broad Money

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Unit-4: Foreign Trade

1. With reference to transfer payments, which one of the following

statements is/are correct?

1. Transfer payments are receipts which the residents of a

country receive without having to make any payments in

return

2. The official remittances, gifts and grants are not part of

transfer payments

Codes:

a) 1 only

b) 2 only

c) both 1 and 2

d) Neither 1 nor 2

2. With reference to Trade-in-services, which one of the following

statements is/are not correct?

1. Trade-in-services are also called invisibles because they are

not seen to cross borders

2. Net income from software exports is a part of trade-in-

services

Codes:

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

3. What is current account deficit on Current account balance?

a) negative on account of trade

b) negative on account of invisibles

c) negative on account of net transfer

d) negative on account of trade, invisibles and net transfers

4. What is balance of payment deficit?

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a) Deficit on account of trade plus invisibles

b) Deficit on account of trade plus capital account

c) Decrease in official reserves

d) Increase in official reserves

5. When do an economy generally adopt cheap money policy?

a) Inflation

b) Recession

c) Deflation

d) Market failure

6. What do you understand by ‘Hot money’?

a) Currency whose value fluctuate frequently

b) Currency whose value falls frequently

c) Currency which commands high value in International

market

d) Currency which has tendency to fly out of the country

7. Which of the following components ia/are included in a

country’s foreign exchange reserve?

1. Gold stock of RBI

2. Foreign Exchange Assets of RBI

3. SDR holding of the country at IMF

Codes:

a) 1 and 2

b) 2 and 3

c) 1 and 3

d) All of these

8. The balance of payment of a country is a systematic record of:

(UPSC- 2013)

a) All import and export transactions of a country during a

given period of time, normally a year

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b) Goods exported from a country during a year

c) Economic transactions between the government of one

country to another

d) Capital movements from one country to another

9. What is a paper gold? (UP Civil Services Exam-2002)

a) Special accommodation facility of IMF

b) Currencies still on gold standard

c) SDR of IMF

d) Deficit financing

10. Which of the following items is not included in the Current

Account of India’s Balance of Payments?

a) Transfer Payments

b) Investment Income

c) Non-monetary gold movements

d) Short term commercial borrowings

Answers:

1. a

2. d

3. d

4. c

5. b

6. d

7. d

8. a

9. c

10. d

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Unit-5: Public Finance

1. A progressive tax is a tax:

a) Whose burden on tax payers rises as income falls

b) Whose burden on tax payers rises as income rises

c) Whose burden on the falls as income rises

d) None of these

2. Which one of the following is not an Indirect tax?

a) Excise duty

b) Custom duty

c) Service tax

d) Wealth tax

3. Which among the following is/are the main items of non-plan

revenue expenditure?

1. Interest payments

2. Defenses services

3. Subsidies

4. Salaries and Pensions

Codes:

a) 1 and 2 only

b) 2 and 3 only

c) 2, 3, and 4 only

d) All of the above

4. What do you understand by Primary Deficit?

a) Excess of total expenditure over total receipts

b) Excess of revenue expenditure over revenue receipts

c) Excess of total expenditure over total receipts less

borrowing

d) Excess of total expenditure over total receipts less

borrowing and interest payments

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5. Which one of the following is not levied as well as collected by

the Union, but assigned to the states within which they leviable?

a) Taxes on railways fares and freights

b) Taxes on lands and buildings, mineral rights

c) taxes on stock exchange other than stamp duties

d) terminal taxes on passengers carried by railways

6. Which article of the Indian constitution deals with the Finance

Commission?

a) Art-263

b) Art-270

c) Art-280

d) Art-290

7. Who is the chairman of the first Finance Commission

constituted in 1951?

a) K.C. Neogi

b) K. Santhanam

c) A.C. Chanda

d) P.V. Rajamannar

8. The difference between the government’s total expenditure and

its total receipts, excluding borrowing is termed as:

a) Budget deficit

b) Revenue deficit

c) Fiscal deficit

d) Primary deficit

9. A kind of Indirect tax which is expressed as proportion of the

price of a commodity is called:

a) Indirect tax

b) Multiple tax

c) Direct tax

d) Ad valorem tax

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10. In which year the government of India introduced the Minimum

Alternate Tax?

a) 1972

b) 1983

c) 1991

d) 1999

Answers:

1. b

2. d

3. d

4. d

5. b

6. c

7. a

8. c

9. d

10. b

Fiscal Deficit

Fiscal deficit is the difference between the government’s total

expenditure and its total receipts (excluding borrowing).

Gross Fiscal Deficit = Total Expenditure – (Revenue receipts + Non-

debt creating Capital receipts)

Non-debt Creating Capital Receipts are those receipts which are not

borrowings and therefore do not give rise to debt. Examples:

Recovering of loans and the proceeds from the sale of PSUs, etc.

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Unit-6: Inflation

1. The cause of Inflation is/are:

1. Increase in money supply

2. Fall in production

Codes:

a) 1 only

b) 2 only

c) Both 1 and 2


2. Who among the following is most benefited from the Inflation?

a) Government Pensioners

b) Creditors

c) Savings Bank Account Holders

d) Debtors

3. Inflation implies:

a) Rise in Budget Deficit

b) Rise in money supply

c) Rise in General Price Level

d) Rise in prices of consumer goods

4. The situation with increasing unemployment and inflation is

termed as:

a) Hyperinflation

b) Galloping Inflation

c) Stagflation

d) Reflation

5. Which of the following can be used for checking inflation

temporarily?

a) Increase in wages

b) Decrease in money supply

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c) Decrease in Taxes


6. Who among the following are not protected against inflation?

a) Salaried Class

b) Industrial workers

c) Pensioners

d) Agricultural Farmers

7. The best means of savings during inflation is to keep:

a) Money

b) Government bonds

c) Equity

d) Time deposits with Banks

8. Among the remedies of inflation we cannot include:

a) Better capacity utilization

b) Lowering bank rate

c) Reducing Budgetary deficit

d) A efficient Public distribution system

9. A very rapid growth in prices in which money loses its value to

the point where even barter system may be preferable is known as:

a) Inflation

b) Hyper-inflation

c) Deflation

d) Disinflation

10. A high rate of inflation tends to worsen balance of payments

because:

a) Prices of imported goods rise

b) Prices of exported goods rise making exports less

competitive

c) Prices of imported goods fall and hence less amount

d) Prices of exported goods fall and hence less amount is

obtained in terms of foreign exchange

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Answers:

1. C

2. D

3. C

4. C

5. B

6. D

7. A

8. B

9. B

10. A

Why CPI differ from GDP Deflator?

The goods purchased by consumers do not represent all the goods

which are produced in a country. GDP deflator takes into account

all such goods and services.

CPI includes prices of goods consumed by the representative

consumer; hence it includes prices of imported goods. GDP deflator

does not include prices of imported goods.

The weights are constant in CPI – but they differ according to

production level of each good in GDP deflator.

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macroeconomics · 2020. 12. 17. · macroeconomics objective ias unit-1: introduction to economics...

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