1. Cost of living increases when business cycle is
Correct : C. At peak
2. All but one are the endogenous factors of business cycle
Correct : A. War
3. Fall in the interest rate is a typical feature of
Correct : C. Depression
4. During depression __________industry suffer from excess production capacity
Correct : D. Both (a) and (b
5. The lowest level of economic activity is called
Correct : B. Trough
6. Which of the following is notthe feature of business cycle?
Correct : A. Business cycle follow perfectly timed cycle
7. At the time of Great Depression of 1930s, the global GDP fell by around
Correct : C. 15 %
8. Which of the following describes best a typical trade cycle?
Correct : A. Economic expansions are followed by economic contractions
9. During upswing, the unemployment rate and output
Correct : A. Rises; falls
10. If any unemployment exists during expansion phase of business cycle, it is
Correct : C. Frictional and structural
11. The most probable outcome of increase in aggregate demand is
Correct : A. Expansion of economic activity
12. Economic recession is characterized by all of the following except
Correct : B. Increase in the price of inputs due to increased demand for inputs
13. Understanding business cycle is important for business managers because
Correct : D. All of the above
14. Which indicators change before the economy itself changes
Correct : C. Leading
15. Which indicators change after the economy as a whole changes
Correct : A. Lagging
16. A variable that occur simultaneously with the business cycle movements is
Correct : C. Coincidentindicator
17. The principle of accelerator explains the process by which
Correct : A. An increase (or decrease) in the demand for consumption goods leads to an increase (or decrease) in the investment on capital goods
18. Inflation is a situation when
Correct : B. General price level rises continuously
19. An inflation caused by an enhanced wages of labour is
Correct : B. Cost-push inflation
20. Inflation in under-developed country is basically caused by
Correct : D. Market imperfection
21. According to Keynes, inflationary gap is caused by
Correct : B. excess demand
22. Stagflation implies a situation of
Correct : A. High inflation and high unemployment
23. Demand- Pull inflation is caused by an
Correct : A. Increase in the aggregate effective demand for goods and services
24. Which of the following is a monetary measure to control inflation in an economy?
Correct : B. Demonetization of currency
25. In Keynesian view, inflation is
Correct : A. The rise in the price level after the point of full employment
26. “Inflation is a state in which the value of money is falling i.e., prices are rising”.Who said this?
Correct : C. Crowther
27. If inflation is allowed to continue without any check, it is known as
Correct : C. Open inflation
28. When both prices and money income fall, the situation is called
Correct : C. Deflation
29. Inflation in a developed country usually sets in
Correct : B. After the point of full employment
30. During inflation, who suffers the most?
Correct : A. Wage and salary earners
31. When government interrupts price rise, there is
Correct : A. Suppressed inflation
32. The phenomenal rise in prices accompanied by increased real income is known as
Correct : C. reflation
33. Which of the following measure proves effective in reducing the rate of inflation?
Correct : C. Increased taxation
34. Inflation can be controlled by applying:
Correct : A. Monetary and fiscal policies
35. During inflation
Correct : A. Lenders lose, borrowers gain
36. Which people are most likely to gain during inflation?
Correct : C. Those who are repaying borrowed money
37. Inflation leads to
Correct : B. Distribution of income unequal
38. Inflation in an under-developed economy generally sets in
Correct : A. Before the point of full employment
39. Which of the following measure is adopted to reduce inflation?
Correct : D. Cuts in government spending
40. According to the monetarists, inflation is caused by
Correct : C. Expansionary monetary policies
41. Theoretically, one can distinguish a demand- pull inflation from a cost-push inflation by comparing
Correct : B. The unemployment rate with its natural rate level
42. Demand-pull inflation arises when
Correct : B. A persistent budget deficit is financed by money creation
43. Government may pursue inflationary monetary policies
Correct : D. All of the above
44. Governments may end up with a high money growth rate and high inflation as a result of policies designed to
Correct : D. Both ( a) and (b
45. Which of the following is an effect of inflation?
Correct : D. All of the above
46. Which of the following can be undertaken to control inflation?
Correct : D. All of the above
47. Which of the following is phenomenon that leads to Hyperinflation?
Correct : D. It is a situation when a nation experiences very high and accelerating inflation
48. Inflationary gap said to exist when
Correct : A. Real GDP >Potential GDP
49. Phillip’s curve shows the relationship between the rate of
Correct : B. unemploymentand increase in money wages
50. According to Phillips curve unemployment will return to the natural rate when:
Correct : B. Real wages are back at equilibrium level
51. An increase in aggregate is more likely to lead to demand pull inflation if:
Correct : B. Aggregate supply is perfectly inelastic
52. In short-run, unemployment may fall below the natural rate of unemployment if:
Correct : A. Nominal wages have risen less than inflation
53. The effects of inflation on the price competitiveness of a country’s products may be offset by
Correct : C. A depreciation of the currency
54. Countries with the highest inflation rates are likely to have
Correct : D. Both (a) and (b
55. A one-time increase in the price level is
Correct : B. regularly reported by the news media as inflation, but is not considered to be inflation by economist.
56. Which economist proposed that “ Inflation is always and everywhere a monetary phenomenon”
Correct : C. Milton Friedman
57. According to monetarists, inflation is caused by
Correct : C. Expansionary monetary policies
58. Which of the following is generally regarded as the true index of economic growth?
Correct : B. A sustained increase in real per capita income
59. The concept of economic growth is
Correct : B. Narrower than the concept of economic development
60. Economic growth is measured as a percentage change in
Correct : C. Both (a) and (b
61. The concept of economic growth is more relevant for
Correct : A. Developed countries
62. Which of the following is not an indicator of economic development?
Correct : C. Low proportion of labour force in the primary section
63. The rate of growth of the economy mainly depends upon
Correct : D. All of the above
64. Among the following determinants of growth, which is a non-economic factor?
Correct : C. Favourablelegislation
65. Besides increase in output, economic development is concerned with
Correct : D. All of the above
66. The most simple and popular method of measuring economic development is to
calculate the trend of Gross National Product (GNP) at
Correct : B. Constant prices
67. The most important factor in economic development is
Correct : A. Quality of human resources
68. When economic development takes place
Correct : D. Both (a) and (c
69. Which of the following is acting as an obstacle to economic development
Correct : C. Political instability
70. The Solow’s growth model assumes that the two factors of production labour and
capital are paid according to
Correct : A. their marginal physical productivities
71. Neo-classical growth model considered two-factor production function with
Correct : B. Capital and labour
72. Technological progress helps in
Correct : C. Both of the above
73. The technique of production in which the amount of capital used per unit of labour is
larger than that of labour is known as
Correct : A. Capital-intensive technique
74. Economic growth can be measured in terms of changes in
Correct : C. Real national income per head
75. Assuming that 3 units of capital are required to produce 1 unit of output, then capitaloutput ratio would be
Correct : B. 3 ∶ 1
76. With economic growth, the proportion of labour-force engaged in agriculture
Correct : B. Decreases
77. A strategy of heavy industry is sometimes preferred for a developing economy because
it can
Correct : D. both (a) and (b
78. The incremental capital-output ration (ICOR) refers to the
Correct : A. Ratio of investment to change in output
79. Capital-output ratio is determined by
Correct : D. All of the above
80. Which of the following is the indicators of economics growth
Correct : D. All of the above
81. According to the neo-classical theory, economic development is
Correct : D. All of the above
82. Which growth model inspired the use of capital-output ratio for development planning?
Correct : A. Harrod-Domar model
83. Harrod-Domar model of economic growth is based on
Correct : B. Advanced capitalist economy
84. Harrod-Domar model operates in a
Correct : A. Closed economy
85. Harrod- Domar model is based on
Correct : B. Three distinct rates of growth
86. Solow’s model of long-run growth is an improvement over that of
Correct : B. Harrod-Domar
87. The major difference between Harrod-Domar and Solow models of growth lies in
Correct : C. Substitutability between labour and capital
88. Which growth model analyses the contribution of technological progress to the overall growth rate
Correct : A. Solow model
89. The saving ratio in Solow’s model is
Correct : A. Constant
90. Which of the following models formed the basis of India’s First Five Year Plan
Correct : C. Harrod-Domar model
91. Which of the following models uses three distinct concepts of growth?
Correct : B. Harrod-Domar model
92. The sequence of the three growth rates in Harod-Domar model is
Correct : A. actual, warranted and natural growth rates
93. Which of the following models makes the assumption of constantsaving-income ratio?
Correct : C. Hoarrod-Domar model
94. For neo-classical theorists, economic under- development is the product of which of the following
Correct : D. Both (a) and (b
95. In Harrod-Domar model, the actual growth rate represented by G, is determined by
Correct : B. Saving ratio and the capital-output ratio
96. According to Harrod-Domar model, once the steady growth is interrupted and the economy falls into disequilibrium, cumulative forces tend to perpetuate divergence thereby leading to
Correct : B. either secular deflation or secular inflation
97. In Solow’s model of economic growth, production takes places under