Basic Economic Concepts & National Income

Question No. 1 Marks +1 -0 Time

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Which of the following best describes the fundamental economic problem that all societies face?

A. How to maximize profits for businesses.
B. How to allocate scarce resources to satisfy unlimited wants.
C. How to ensure equitable distribution of wealth.
D. How to achieve full employment without inflation.

Question No. 2 Marks +1 -0 Time

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Opportunity cost is defined as:

A. The monetary cost of a good or service.
B. The value of the next best alternative that must be foregone to obtain something else.
C. The total cost of production, including fixed and variable costs.
D. The additional cost incurred from producing one more unit of a good.

Question No. 3 Marks +1 -0 Time

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In a purely market economy, the primary decisions about what, how, and for whom to produce are made by:

A. The central government.
B. Private individuals and firms.
C. A combination of government and private entities.
D. International organizations.

Question No. 4 Marks +1 -0 Time

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Which of the following is NOT considered a factor of production?

A. Land
B. Labor
C. Money
D. Capital

Question No. 5 Marks +1 -0 Time

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The Law of Demand states that, other things being equal, as the price of a good or service increases, its quantity demanded will:

A. Increase.
B. Decrease.
C. Remain unchanged.
D. Fluctuate unpredictably.

Question No. 6 Marks +1 -0 Time

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Gross Domestic Product (GDP) measures the total monetary value of all final goods and services produced within a country's borders in a specific time period. Which of the following is typically excluded from GDP calculation?

A. Government spending on infrastructure.
B. The value of intermediate goods.
C. Exports of domestically produced goods.
D. Investment in new factories.

Question No. 7 Marks +1 -0 Time

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Which method of calculating National Income sums up the income received by all factors of production?

A. Expenditure Method
B. Product Method
C. Income Method
D. Value Added Method

Question No. 8 Marks +1 -0 Time

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Consider the following statements regarding Real GDP and Nominal GDP:

1. Nominal GDP is measured in current prices, while Real GDP is measured in constant prices.
2. Real GDP accounts for inflation, while Nominal GDP does not.
3. An increase in Nominal GDP always implies an increase in the actual volume of goods and services produced.

Which of the statements given above are correct?

A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3

Question No. 9 Marks +1 -0 Time

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What is 'Disposable Personal Income'?

A. The total income earned by individuals before taxes.
B. Income available to households for consumption or saving after paying direct taxes.
C. The income earned by individuals after deducting all expenses.
D. The income earned by individuals from their primary employment only.

Question No. 10 Marks +1 -0 Time

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Inflation refers to a general and sustained increase in the overall price level of goods and services in an economy. Which of the following is a common measure of inflation?

A. Unemployment Rate
B. Balance of Payments
C. Consumer Price Index (CPI)
D. Interest Rate

Question No. 11 Marks +1 -0 Time

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Match the following economic concepts with their definitions:

List I (Concept)	List II (Definition)
A. Microeconomics	1. The study of the economy as a whole, including topics like inflation, unemployment, and economic growth.
B. Macroeconomics	2. The study of individual economic agents, such as households, firms, and markets.
C. Public Good	3. A good that is non-rivalrous and non-excludable.
D. Merit Good	4. A good that society believes people will under-consume, and which has positive externalities.

Choose the correct matching:

A. A-2, B-1, C-3, D-4
B. A-1, B-2, C-4, D-3
C. A-2, B-1, C-4, D-3
D. A-1, B-2, C-3, D-4

Question No. 12 Marks +1 -0 Time

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Which of the following is an example of 'transfer payment' in national income accounting?

A. Wages paid to government employees.
B. Payment for government bonds.
C. Unemployment benefits.
D. Spending on public infrastructure projects.

Question No. 13 Marks +1 -0 Time

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The term 'Green GDP' refers to:

A. GDP calculated using environmentally friendly production methods.
B. GDP adjusted for environmental costs and natural resource depletion.
C. GDP contributed by the agricultural sector.
D. GDP of countries that have adopted green energy policies.

Question No. 14 Marks +1 -0 Time

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Which of the following scenarios would lead to an increase in the 'Supply' of a product?

A. An increase in consumer income.
B. A decrease in the cost of production.
C. An increase in the price of the product.
D. A decrease in the number of consumers.

Question No. 15 Marks +1 -0 Time

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The concept of 'utility' in economics refers to:

A. The usefulness of a product.
B. The satisfaction or benefit derived from consuming a good or service.
C. The monetary value of a product.
D. The efficiency of a production process.

Question No. 16 Marks +1 -0 Time

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Consider the following pairs:

1. Mixed Economy : Coexistence of private and public sectors
2. Command Economy : Decisions made by market forces
3. Market Economy : Central planning by government

How many of the pairs given above are correctly matched?

A. Only one pair
B. Only two pairs
C. All three pairs
D. None of the pairs

Question No. 17 Marks +1 -0 Time

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Which of the following is a characteristic of a 'normal good'?

A. Its demand decreases as consumer income increases.
B. Its demand increases as consumer income increases.
C. Its demand is unaffected by changes in consumer income.
D. It is typically a low-quality product.

Question No. 18 Marks +1 -0 Time

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The 'expenditure method' of calculating national income sums up:

A. All incomes earned by factors of production.
B. The value added at each stage of production.
C. Consumption, investment, government spending, and net exports.
D. Total sales revenue of all firms in the economy.

Question No. 19 Marks +1 -0 Time

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If the Price Elasticity of Demand for a product is greater than 1, it means the demand is:

A. Inelastic
B. Unitary elastic
C. Elastic
D. Perfectly inelastic

Question No. 20 Marks +1 -0 Time

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The concept of 'Gross National Product (GNP)' differs from 'Gross Domestic Product (GDP)' primarily because GNP includes:

A. The value of intermediate goods and services.
B. Income earned by domestic residents from overseas investments.
C. Government transfer payments.
D. Depreciation of capital goods.

Question No. 21 Marks +1 -0 Time

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Arrange the following stages of economic activity in their typical chronological order:

1. Distribution
2. Production
3. Consumption
4. Exchange

Choose the correct sequence:

A. 2 - 4 - 1 - 3
B. 2 - 1 - 4 - 3
C. 1 - 2 - 4 - 3
D. 2 - 3 - 4 - 1

Question No. 22 Marks +1 -0 Time

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What does 'Per Capita Income' represent?

A. The total national income of a country.
B. The average income earned per person in a given area in a specified year.
C. The income earned by the richest 1% of the population.
D. The income available to a household after all taxes.

Question No. 23 Marks +1 -0 Time

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A situation where the quantity demanded equals the quantity supplied at a certain price is known as:

A. Shortage
B. Surplus
C. Market equilibrium
D. Price floor

Question No. 24 Marks +1 -0 Time

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Which of the following statements is true regarding 'Depreciation' in national income accounting?

A. It is added to GDP to get NNP.
B. It is the value of capital goods used up in the production process.
C. It represents the increase in the value of assets over time.
D. It is only relevant for government-owned capital.

Question No. 25 Marks +1 -0 Time

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The 'circular flow of income' model illustrates:

A. How government debt accumulates over time.
B. The movement of money, goods, and services between households and firms in an economy.
C. The process of international trade and capital flows.
D. How inflation and unemployment are related.

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