Question 1

Demand for a commodity refers to:

Accepted Answer

Demand for a commodity in economic terms specifically refers to the quantity of the commodity that consumers are willing and able to purchase at a particular price and at a particular time. This definition encompasses not just the desire or need for the commodity, but also the buyer's ability to purchase it at a specific price point and time, making option C the correct answer.

Question 2

If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to:

Accepted Answer

When demand is inelastic, it means that the quantity demanded does not decrease significantly as the price increases. Therefore, if the price of such a good increases, consumers will continue to buy it, albeit in slightly smaller quantities, leading to an increase in total expenditure.

Question 3

The supply of a good refers to:

Accepted Answer

The supply of a good refers to the quantity of the good that sellers are willing and able to offer for sale at a particular price per unit of time. It's not just about the stock available or in the warehouse, but specifically about the amount offered for sale at a specific price.

Question 4

In the short run, when the output of a firm increases, its average fixed cost:

Accepted Answer

Average fixed cost decreases as output increases because the total fixed costs are spread over a larger number of units, reducing the cost per unit.

Question 5

The cost of one thing in terms of the alternative given up is called:

Accepted Answer

Opportunity cost refers to the value of the next best alternative that is foregone when a decision is made to choose one option over another. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Question 6

In which of the following market structure is the degree of control over the price of its product by a firm very large?

Accepted Answer

In a monopoly market structure, a single firm controls the entire market, giving it significant power over the price of its product. Unlike in perfect competition, where firms are price takers due to the presence of many competitors, a monopoly faces no competition and can set prices with considerable freedom.

Question 7

Demand for factors of production is:

Accepted Answer

Demand for factors of production is considered derived demand because it is dependent on the demand for the goods and services they produce.

Question 8

The producer's demand for a factor of production is governed by the ___ of that factor.

Accepted Answer

The producer's demand for a factor of production is primarily governed by its marginal productivity, which refers to the additional output generated by employing one more unit of that factor.

Question 9

Who is the 'lender of the last resort' in the banking structure of India?

Accepted Answer

The Reserve Bank of India (RBI) acts as the lender of the last resort in the banking structure of India, providing financial assistance to banks facing liquidity crises.

Question 10

____ is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by the commercial banks.

Accepted Answer

The Bank rate is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by commercial banks. This rate is a tool used by central banks to control liquidity and inflation in the economy.

Question 11

Which among the following is a function of the Reserve Bank of India?

Accepted Answer

The Reserve Bank of India (RBI) is responsible for collecting, compiling, and disseminating statistical information related to banking and other financial sectors of the economy. This helps in policy formulation and monitoring financial markets.

Question 12

The following is the direct tax among:

Accepted Answer

House tax is a direct tax because it is levied directly on the property owner who is responsible for paying the tax to the government. Direct taxes are those that are paid directly to the government by the individual or organization on whom it is imposed.

Question 13

Which among the following is a cause of inflation?

Accepted Answer

Deficit financing increases the money supply in the economy, leading to higher demand for goods and services, which can cause inflation.

Question 14

The capital that is consumed by an economy or a firm in the production process is known as:

Accepted Answer

Depreciation refers to the reduction in the value of capital assets over time as they are used in the production process. This concept captures the wear and tear, or consumption, of capital goods as they contribute to production activities.

Question 15

Which of the following is also known as International Bank for Reconstruction and Development?

Accepted Answer

The International Bank for Reconstruction and Development (IBRD) is one of the five member institutions that compose the World Bank Group, commonly referred to as the World Bank.

Question 16

A change in fiscal policy affects the balance of payments through:

Accepted Answer

Fiscal policy changes can affect both the current account and the capital account. For example, an expansionary fiscal policy can increase domestic income, leading to more imports and affecting the current account, while also potentially influencing interest rates and thus capital flows, impacting the capital account.

Question 17

Fiscal Policy means:

Accepted Answer

Fiscal policy refers to the use of government spending, taxation, and borrowing to influence the economy. It is a means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

Question 18

Which one of the following is NOT the objective of fiscal policy of government of India?

Accepted Answer

The main objectives of the fiscal policy of the Government of India include promoting economic growth, achieving full employment, and maintaining price stability. Regulation of inter-state trade is not a direct objective of fiscal policy; it is more related to commerce and trade policies.

Question 19

Monetary policy is implemented by in India.

Accepted Answer

Monetary policy in India is formulated and executed by the Reserve Bank of India (RBI) to manage the supply of money and achieve macroeconomic goals.

Question 20

The most simple and popular method of measuring economic development is to calculate the trend of gross national product (GNP) at __________

Accepted Answer

Measuring economic development through the trend of gross national product (GNP) at constant prices is considered the most simple and popular method because it allows for the comparison of economic performance over time by removing the effects of inflation.

Quiz 1: Economic Essentials: Demand, Supply, Taxation, and Monetary Policy