ECONOMICS TEST – BEGINNER – Transform IAS Academy

ECONOMICS TEST – BEGINNER

1. Which of the following best explains the concept of “Crowding Out Effect” in macroeconomics? A. Increase in private investment due to government borrowing B. Reduction in private investment due to increase in government borrowing C. Fall in exports due to rise in interest rates D. Surge in FDI inflow due to expansionary fiscal policy

2. Which of the following would directly lead to an appreciation of the Indian Rupee in the forex market? A. RBI increases CRR B. FPI inflows increase sharply C. Government increases fiscal deficit D. Repo rate is reduced by RBI

3. The base year of the GDP calculation in India (as of 2024-25) is: A. 2004–05 B. 2010–11 C. 2011–12 D. 2020–21

4. Which of the following is not included in the calculation of India’s fiscal deficit? A. Interest payments on public debt B. Disinvestment receipts C. Capital expenditure D. Revenue expenditure

5. The term “Hysteresis” in labour economics refers to: A. A temporary increase in inflation B. Persistent unemployment due to loss of skills C. Wage growth outpacing productivity D. Government’s inability to implement reforms

6. Which one of the following is not a component of India’s forex reserves? A. Foreign Currency Assets B. Gold Reserves C. SDR holdings with IMF D. FDI inflows

7. The concept of "Effective Revenue Deficit" excludes: A. Interest payments B. Grants given to States for capital creation C. Subsidies D. Defence revenue expenditure

8. Which one of the following is a non-tax revenue receipt for the Government of India? A. GST B. Excise Duty C. Dividends from PSUs D. Custom Duties

9. “Tobin Tax” is primarily associated with: A. Tax on luxury goods B. Tax on wealth and property C. Tax on international capital flows D. Tax on carbon emissions

10. Which of the following statements about the Monetary Policy Committee (MPC) is incorrect? A. It consists of six members B. RBI Governor is the Chairperson C. It decides on both Repo and Reverse Repo rate D. Its decisions are binding on the RBI

11. Which of the following correctly describes the “Stagflation” scenario? A. High inflation and high growth B. High unemployment and low inflation C. High inflation and low growth D. Low inflation and high employment

12. Which of the following is not a part of the Consolidated Fund of India? A. Tax revenues B. Loans raised by the government C. Salaries of judges of High Courts D. Disbursements from Contingency Fund

13. “Twin Balance Sheet Problem” refers to: A. Fiscal deficit and revenue deficit B. NPAs of banks and debt-ridden corporates C. RBI and government policy mismatch D. CAD and fiscal deficit

14. Which of the following instruments is not used by the RBI for quantitative monetary control? A. Open Market Operations (OMO) B. Repo Rate C. Moral Suasion D. Cash Reserve Ratio (CRR)

15. The "Phillips Curve" shows the relationship between: A. Money supply and inflation B. Inflation and unemployment C. Interest rate and investment D. Fiscal deficit and GDP

16. Which of the following is an example of a ‘capital receipt’ in the Union Budget? A. Income tax B. Dividends from PSUs C. Loan recovery from states D. Interest receipts

17. The “Current Account” in Balance of Payments includes which of the following? 1. Exports and Imports of goods 2. Net income from abroad 3. FDI inflows Select the correct code: A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3

18. Which of the following will lead to “imported inflation” in India? A. Fall in crude oil prices globally B. Appreciation of Indian Rupee C. Increase in global commodity prices D. Decrease in import duty on electronics

19. Which of the following best describes “Yield Curve Inversion”? A. Long-term interest rates rise above short-term B. Short-term interest rates fall below long-term C. Short-term interest rates rise above long-term D. Repo rate is higher than reverse repo

20. Which of the following organizations publishes the Index of Industrial Production (IIP) in India? A. Ministry of Commerce and Industry B. NITI Aayog C. Central Statistics Office (CSO) D. Ministry of Heavy Industries

21. Which of the following best describes the “Laffer Curve”? A. Relationship between tax rates and inflation B. Relationship between government spending and inflation C. Relationship between tax rates and tax revenue D. Relationship between fiscal deficit and interest rates

22. The term “Reversal of Capital Flows” is most accurately associated with: A. Increase in exports B. Depreciation of domestic currency C. Outflow of FPI due to external shocks D. Disinvestment in public sector enterprises

23. If the Reserve Bank of India conducts a 'Sterilization Operation', what is it trying to achieve? A. Raise agricultural production B. Reduce external debt C. Neutralize the effect of foreign capital inflows on money supply D. Control fiscal deficit

24. Which one of the following measures does not help in controlling inflation in the short run? A. Increasing CRR B. Cutting fiscal expenditure C. Increasing direct taxes D. Building food buffer stock

25. In India, which of the following is NOT a function of the Financial Stability and Development Council (FSDC)? A. Coordinating among financial regulators B. Supervising Public Sector Banks directly C. Promoting financial literacy D. Addressing macroprudential concerns

26. Which of the following is not true about the “Ways and Means Advances (WMA)” provided by RBI? A. It is a temporary loan to state governments B. It helps governments bridge cash mismatches C. It carries zero interest rate D. It is governed by limits set jointly by RBI and Centre

27. Consider the following statements regarding Fiscal Responsibility and Budget Management (FRBM) Act: 1. It aims to eliminate revenue deficit.2. It allows the central government to borrow beyond limits in case of national security. 3. The Act is implemented by the Ministry of Finance. Which of the above are correct? A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3

28. “Capital Adequacy Ratio” (CAR) is important to: A. Ensure credit expansion B. Control inflation C. Maintain financial stability of banks D. Prevent NPAs

29. The "GDP Deflator" is: A. Difference between GDP at constant and current prices B. A measure of inflation using WPI C. A price index to measure GNP D. A method to calculate fiscal deficit

30. The “Operation Twist” conducted by RBI is aimed at: A. Strengthening rupee against dollar B. Reducing food inflation C. Managing long-term interest rates D. Boosting agricultural productivity

31. Which of the following statements is correct about the “Effective Revenue Deficit”? A. It is the fiscal deficit minus interest payments B. It excludes all capital expenditures C. It is the revenue deficit minus grants for capital creation D. It includes subsidies and capital receipts

32. In the context of Indian economy, “crowding out effect” refers to: A. Displacement of foreign capital by domestic capital B. Displacement of private investment due to rising government borrowing C. Fall in exports due to import liberalization D. Overdependence on FDI

33. Which of the following is NOT included while calculating Gross Value Added (GVA) at basic prices? A. Production subsidies B. Product subsidies C. Intermediate consumption D. Output at basic prices

34. The concept of “Terms of Trade” refers to: A. Ratio of exports to imports in terms of quantity B. Ratio of price index of exports to price index of imports C. Ratio of visible to invisible trade D. Ratio of capital inflows to capital outflows

35. The National Income Accounting identity for a closed economy is: A. GDP = C + I + G + NX B. GDP = C + I + G C. GNP = C + I + G + (X – M) D. GDP = C + I + NX

36. Which of the following statements best explains 'Seigniorage'? A. Interest paid on government securities B. Income earned by commercial banks on government bonds C. Revenue generated by a government by printing currency D. Loss due to currency depreciation

37. The Velocity of Money increases when: A. People hoard more money B. Credit creation decreases C. Economic activity slows down D. Frequency of money usage in transactions rises

38. What is the significance of “Net National Income at Factor Cost”? A. It includes indirect taxes B. It excludes depreciation C. It is the most accurate measure of national income available to citizens D. It includes non-factor income from abroad

39. Which of the following measures is NOT recommended during deflationary trends? A. Increase in government spending B. Increase in interest rates C. Reduction in taxes D. Increase in public investment

40. A rising “Incremental Capital Output Ratio (ICOR)” in India implies: A. Increasing productivity of capital B. Decreasing capital requirement C. Falling efficiency of capital usage D. Increase in marginal propensity to consume

41. The “Ricardian Equivalence” proposition implies that: A. Government spending does not affect GDP B. Fiscal deficit has no effect on aggregate demand C. Tax cuts and government borrowing are equivalent in impact D. Public debt is always inflationary

42. Which of the following would lead to an appreciation of the Indian Rupee in the forex market? A. Increase in crude oil imports B. FPI outflows C. Increase in RBI’s repo rate D. Increase in gold imports

43. In India, which of the following is included under "Capital Receipts" in the Union Budget? A. Corporation Tax B. Disinvestment proceeds C. Interest receipts D. Dividends from PSUs

44. The Phillips Curve illustrates the relationship between: A. Money supply and GDP B. Inflation and unemployment C. Deficit financing and inflation D. Direct taxes and public spending

45. The term "Real Effective Exchange Rate (REER)" refers to: A. Nominal exchange rate adjusted for capital flows B. Nominal exchange rate adjusted for inflation differentials C. Spot market rate D. Bilateral exchange rate with the US dollar

46. "Open Market Operations" are primarily conducted to: A. Control inflation directly B. Manage foreign exchange reserves C. Regulate liquidity in the banking system D. Fund government expenditure

47. The concept of “Balance of Payments” includes: A. Only trade in goods B. Only visible exports and imports C. All transactions of goods, services, and capital D. Only the current account

48. The base year for calculating India's GDP was recently updated to: A. 2004–05 B. 2010–11 C. 2011–12 D. 2020–21

49. The “Liquidity Adjustment Facility (LAF)” of the RBI helps to: A. Maintain cash reserve ratio B. Inject or absorb liquidity from the banking system C. Decide the base rate of banks D. Finance the fiscal deficit

50. Which of the following best describes “Core Inflation”? A. Inflation in primary articles B. Inflation excluding food and fuel prices C. Inflation based on CPI (Agricultural Labourers) D. WPI-based inflation only

ECONOMICS TEST – BEGINNER

Get In Touch!

FOLLOW US ON:

Resources

Free Downloads

Our Location