APPSC ECONOMICS QUESTIONS

APPSC ECONOMICS QUESTIONS


1. Which one of the following is correct

under perfect competition?

a. AR curve is a straight line and parallel

to X-axis

b. AR curve is a straight line and parallel

to Y-axis

c. AR curve is a convex to origin

d. AR curve is a concave to origin

2. the effectiveness of monetary policy in a

recession will be reduced if

a. The level of borrowing is highly

responsive to small changes in the

level of interest rate

b. The security prices start to go up as

soon as the cheap money policy is

initiated.

c. Money holders prefer to retain money

rather then buy securities at any lower

rate.

d. The "asset demand" or "liquidity

demand" for money is very low

3. The essential difference between money

and non-money assets is that

a. Money is a means of payments

whereas non-money assets are stores

of value

b. Money is a measure of value whereas

non – money assets are stores of value,

money is a generally accepted means

of payment.

c. Money yields non-pecuniary income

whereas non-money assets yield

pecuniary income

4. Which one of the following functions of

money helps it to become a link between

the present and the future?

a. measure of value

b. Store of value

c. medium of exchange

d. Transfer of value

5. Which one of the following functions of

money can be categorised as its contingent

functions?

a. To act as a medium of exchange

b. To work as a measure of value

c. To work as a standard of deferred

payment

d. To help in equalising the marginal

utility and marginal productivity

6. Friend man asserts that the Quantity.

Theory of Money is basically a theory of

a. the demand for money

b. The price level

c. Money income

d. the value of money

7. 'V' in MV = PT and 'K' in M= KT P are

a. The same'

b. not related

c. interdependent

d. The reciprocals of each other

8. Monopolistic exploitation of labour occurs

when

a. wage is less than marginal revenue

product

b. both wage and marginal revenue

product are equal

c. wage is more than the marginal

revenue product

d. Wage is equal to marginal physical

product.

9. Under the Keynesian Liquidity trap

conditions, an increase in money supply

will

a. reduce the rate of interest

b. both wage and marginal revenue

product are equal

c. wage is more than the marginal

revenue product

d. Wage is equal to marginal physical

product.

10. Under the Keynesian Liquidity trap

conditions, an increase in money supply

will

a. deposit mobilization in India

b. branch expansion in various parts of

the world

c. financing India's foreign trade

d. lending to weaker sections in India

11. Excess reserves of member banks equal

a. a total reserves minus required reserves

minus bank borrowing from the

Central Bank.

b. required reserves minus member bank

borrowing at the Central Bank

c. Total reserves minus free reserves

d. total reserve minus required reserves

12. Which one of the following statements

correctly defines the Balance Sheet of a

commercial bank?

a. It is index of its financial position

b. It is an account of its profit and loss

c. It is a statement of the volume of

business done by the bank

d. It is a statement of the foreign

exchange business of the bank

13. The following is a list of banks other than

the Central Bank. Which one of them can

create money?

a. Commercial banks

b. Industrial development banks

c. Agricultural banks

d. Exchange banks

14. Which one of the following is not a

function of commercial banks?

a. Advancing loans

b. Accepting deposits

c. Issuing notes

d. Discounting bills of exchange

15. During inflation, a family with an

unchanged real disposable income and an

unchanged stock of fixed-rupee financial

assets

a. is likely to increase its real

consumption expenditures

b. finds the real value of its financial

assets rising

c. is likely to reduce its real consumption

expenditures

d. is in no way affected by inflation.

16. In which one of the following situations
should a country pursue a cheap money
policy?
a. Balance of payments is unfavorable
b. Price-are rising
c. Gold is likely to flow out of the
country
d. Level of employment is low
17. Normally, a country exports the
commodity which is intensive in the use of
its relatively abundant factor and imports
the commodity which is intensive in the
use of its relatively scarce factor. this has
reference to.
a. Harberler's theory of opportunity cost
in international trade
b. J.S. Mill's theory of reciprocal demand
c. Heckscher – Ohlin's theorem
d. None of the above

18. Match List 1 with List 2 and select the
correct answer using the codes given
below the lists.
List I
A. Absolute advantage
B. The doctrine of comparative cost
C. Investment multiplier
List II
1. J.S. Mill
2. J.M Keynes
3. David Ricardo
4. Adam Smith
Codes: A B C
a. 4 3 2
b. 3 1 2
c. 4 2 3
d. 2 3 4
19. Trade as an 'engine of growth" has in the
past operated in the
a. world as a whole
b. nineteenth century
c. developing countries
d. twentieth century
20. Trade in invisibles refers to
a. unrecorded trade'
b. smuggling'
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c. trade in military goods
d. trade in services
21. the following figures are based on the
balance of payments accounts:
Imports....................... Rs.400 crores
Exports....................... Rs.340 crores
Shipping..................... Rs.3 crores
Travel, tourism etc..... Rs. 5 crores
Interest, dividends, profits... Rs.50 crores
Migrants' funds................Rs. 1 crores
Government..................... Rs 40 crores
The balance of trade is
a. + Rs. 740 crores
b. –Rs. 740 crores
c. + Rs. 60 crores
d. –Rs. 60 croes
22. With perfectly elastic supply of exports
and imports, an essential condition for an
improvement in the balance of payments
through devaluation is that the sum of
price elasticity's of demand for export (nx)
should be.
a. greater than one
b. equal to one
c. less than one
d. equal to zero
23. Consider the following statements
Given the domestic price level and
exchange rate, an improvement in the
balance of trade deficit can be effected
through
1. a contraction in domestic income
2. an expansion in domestic income
3. A contraction in income in foreign
countries
4. an expansion in income in foreign
countries
Of these statements
a. 1 and 3 are correct
b. 2 and 3 are correct
c. 2 and 4 are correct
d. 1 and 4 are correct
24. match List I with List II and select the
correct answer from the codes given below
the Lists:
List I (Name of the author)
A. F.Y. Edgeworth
B. Prebisch – Singer
C. Jacob Viner
List II (Important concept in
International Trade)
1. Box diagram
2. Trade diversion and Trade creation
effects of customs union
3. Secular deterioration of terms of trade
of developing countries
Codes: A B C
a. 1 3 2
b. 2 3 1
c. 3 1 2
d. 1 2 3
25. Which one of the following institutions
offers loans from a "Soft Loan Window"?
a. International Finance Corporation
b. International Monetary Fund
c. International Bank for Reconstruction
and Development
d. International Development Agency
26. The scope for trade- creation effect is the
largest if production structures in the
countries forming the customs union are
production structures in the countries
forming the customs union are
a. Primarily complementary
b. Primarily competitive'
c. Both complementary and competitive
d. Reffect each other
27. In a two country model, factors of
production viz, labour and capital, are
more efficient in one country than the
other, factor proportions are the same in
both the countries. the production
possibilities curves of the two countries
will resemble those set in the following
figure
One can easily infer from the above figure
that there is no possibility of trade between
the two countries, because
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a. relative costs are identical
b. relative costs are different
c. real costs are different
d. real costs are identical
28.
In the Above diagram country A's offer
curve is α and the of B's is α β which is a
straight line originating from O. Under
free trade, equilibrium will be at P and α
terms of trade are given by OP. A tariff
imposed by A will change A's offer curve
to α1 thereby reducing volume of trade
without changing the terms of trade. In
such a situation the optimum tariff for
country A should be
a. zero
b. unity
c. infinity
d. 200%
29. The mechanism of the gold standard
implies within the framework of its rules
a. symmetric adjustment of both surplus
and deficit countries
b. neutralization of gold flows
c. the adjustment burden put wholly on
the deficit country
d. the adjustment burden put wholly on
the surplus country
30. Currently, the value of SDR is fixed in
terms of
a. gold
b. dollar
c. a basket of 16 currencies
d. a basket of 5 currencies

31. Devaluation works better if

a. it is accompanied by a decline in short

term interest rates

b. foreign demand for the devaluing

country's exports is price elastic

c. the devaluing country's demand for

imports is inelastic

d. devaluation raised the price of exports

32. In the initial stages of development,

population explosion occurs primarily due

to

a. a sharp increase in birth rate

b. a sharp decrease in death rate

c. a fall in both birth and death rates

d. increases rate of immigration

33. The empirical evidence testifies that as an

economy develops the percentage share of

the primary sector in the national income.

a. increases

b. remains constant

c. decreases

d. decrease initially and then increases

34. Dualism in development economics refers

to

a. dual price policy

b. co-existence of modern and traditional

sectors

c. co-existence of private and public

sectors

d. Co-existence of institutional and noninstitutional

agencies

35. Prebisch-Singer thesis enunciates that an

important factor inhibiting the growth of

developing countries has been

a. the secular deterioration in terms of

trade experienced by them in

commodity trade

b. high population growth rate

c. lack of effective demand in the

domestic economy

d. low rate of domestic saving and

investment

36. Calculating the size of gaps as per

Chenery's two gap model, what will be the

" savings gap" if the target growth rate of

national real income in 6 percent, the

capital out put ratio is 3: 1, the marginal

saving rate is 13 percent and the initial

savings ratio is also 13 percent?

a. 7 %

b. 6%

c. 5%

d. 4%

37. In the keynesian system, all fall in money

wage rate will lead to:

a. an increase in employment

b. a decrease in the price level

c. an increase in the interest rate

d. a decrease in the quantity of money

38. Phillips curve shows the relation between

the

a. percentage of wage increase and the

percentage of unemployment of

economy's labour force

b. percentage of wage' increase and the

percentage of increased employment of

economy's labour force

c. percentage of price change and the

percentage of change in income

d. percentage of price change and the

percentage of change in demand.

39. In the Ricardian model, a higher growth

rate of accumulation will.

a. postpone the stationary state

b. hasten the stationary state

c. reduce the population growth rate

d. cause increasing returns to emerge

40. If a tax system collects Rs 100 from

individuals with income of Rs. 1000 and

Rs. 150 from individuals with income of

Rs. 2000, the tax system is said to be

a. regressive

b. progressive

c. proportional

d. none of the above

41. The real value of tax on a given level of

real income under progressive income

taxation

a. rises under inflation

b. decreases under inflation

c. remains unchanged under inflation

d. rises under depression

42. Mahalanobis plan model adopted in India

in the fifties aimed at.

a. building a strong defence industry base

b. setting up heavy industries which

were capital intensive

c. curbing inflation in the economy

d. removing unemployment without short

43. The selective regional planning approach

aim at

a. selecting specific regions in a country

for optimum development

b. providing equal investment in selected

regions

c. equal development rates for all regions

in selected sectors

d. deliberate unequal development rates

for the different regions of the

economy

44. Of the following states, per capita net state

domestic product in India during 1988-89

(current prices) was the highest in

45. Liquidity trap refers to

a. Punjab

b. Kerala

c. Haryana

d. Nagaland

46. Of the following states, per capita net state

domestic product in India during 1988-90

works out to 5.2 percent at 1980-81 prices.

Given a capital output ratio of 4.1, what is

the estimated saving rate, assuming not

foreign aid?

a. 9.3 percent

b. 20 percent

c. 21.3 percent

d. 24.4 percent

47. Indian's GDP at factor cost, measured in

1980-81 prices, had grown during 1988-89

at around

a. 5%

b. 10%

c. 15%

d. 3%


48. Population growth rate in India was

negative in

a. 1901-11

b. 1911-21

c. 1921-31

d. 1931-41

49. Which one of the following makes up the

common aim of economic planning during

successive Five Year plan of India?

a. Reduction of disparities in income and

wealth

b. Expansion of employment

c. Prevention of concentration of

economic power

d. prevention of concentration of

economic power

50. Of all the additional rural programmes,

which one of the following was stressed

during the Sixth plan?

a. Integrated rural development

b. Rural literacy development

c. Rural railways

d. Advanced communication link for

rural people

51. Which one of the following is true in

respect of the balance of payment at the

end of the first half of the Second five

Year Plan of India?

a. A surplus resulted from an excess of

exports over imports

b. A deficit on trade was covered by

surplus on invisible account

c. balance of payment was undisturbed

and not new problem arose here

d. A foreign exchange problem appeared

52. Which one of the following was a feature

of India's third Five year Plan?

a. Integrated Rural DEvelopment Project

b. Rural works Programme

c. Special Jute Development Project

d. Special Oilseeds Development Project

53. Which one of the following is the main

cause for the relisation of modest

agricultural targets of India's first Five

year Plan?

a. Abolition of intermediaries

b. The markets set up for selling new

reproducible capital to farmers.

c. 'Co-operative commonwealth' in the

rural sector

d. Good monsoons

54. Reviewing the over-all achievements of

planning in all the Five Year Plan, the

Government daft of the sixth Plan

mentions: "It is a cause of legitimate

national pride that over this period no

stagnant and dependent economy has been

modernized and made more self-reliant".

Then which model of development are

these achievements ascribed?

a. Gandhian Model

b. Mahalanobis model

c. Marxian model

d. Agricultural Fundamentalists' model

55. Which one of the following resources is

the most crucial input in India's new

agriculture, technology, responsible for the

Green Revolution?

a. Fertilizers

b. HYV seeds

c. Agricultural Machinery

d. Irrigation

56. Which one of the following states has

made the least progress in respect of

consolidation of holdings?

a. Bihar

b. Uttar Pradesh

c. West Bengal

d. Orissa

57. Which one of the following is the

approximate figure of consumption of

chemical fertilizers in lakh tones during

1990-91?

58. Since 1982 which one of the following

financial institutions has been play the

greatest role in supplying and overseeing

rural credit in India?

a. Co-operative credit societies

b. Regional rural banks

c. NABARD

d. Public Sector Banks

59. Irrigation potential and untilisation in large

and medium scale irrigation projects,

1950-85.

Years Prudential

irrigated area

(lakh ha)

Area utilised

(lakh ha)

1950-51

1960-61

1968-69

1979-80

1984-85

97

143

181

266

305

97

131

170

226

253

The above table shows that the ratio of

utilisation area to potential area irrigated is

a. fluctuating

b. decreasing with one exceptional year

c. nearly constant

d. increasing with one or two exceptional

years

60. Match List I with List II and select the

correct answer using the codes given

below the lists

List I (Crops)

A. Tea

B. Coffee

C. Tobacco

D. Milk from HYV cows

List II (Dominant system so marketing

of output)

1. Government marketing Board or

Agency

2. Auction market

3. marketing Co-operatives

4. Private marketing agencies

Codes: A B C D

a. 1 2 3 4

b. 2 4 1 3

c. 2 1 4 3

d. 4 2 1 3


91. Assertion (A): It is difficult to replicate the

development process of the developed

countries in the less developed countries.

Reason (R): Presently less developed

countries are to start from much lower

economic levels than was true for the

presently developed countries.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

92. Assertion (A): There has been a steady

decline in relative poverty in India.

Reason (R): New economic reforms

(1991) are anti-poverty oriented.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

93. Assertion (A): Indian development

planning is oriented towards growth with

social justice

Reason (R): India inherited a colonial

economy.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

94. Assertion (A): According to national

Sample Survey, the proportion of poor is

higher in rural India than in urban.

Reason (R): After independence, the

growth rate of industry has been lower

than that of agriculture.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

95. Assertion (A): From the point of view of

technique of planning, there was little

difference between India's 2nd and 3rd plan.

Reason (R): Despite sticking to

Mahalanobis model both followed a

balanced development approach.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

96. Assertion (A): One of the impediments in

the industrialisation of backward areas in

the lack of adequate infrastructural

facilities.

Reason (R): The growth centre approach

announced in 1988 is government of

India's answer to the problem of poor

industrialisation in backward areas.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

97. Assertion (A): Guaranteeing right to work

is a full employment policy.

Reason (R): This is a necessary condition

for solving unemployment in India.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

98. Assertion (A): In November 1990, the

government tried to curb imports.

Reason (R): This was done through credit

policy.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

99. Assertion (A): 1991-92 budget attempted

to restore international confidence in

Indian economy.

Reason (R): In 1991 economic reforms

there was a drive towards self-reliance.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

100. Assertion (A): The GNP is the value of all

goods and services produced annually in

the nation.

Reason (R): The most comprehensive

measure of nation output is the GNP.

a. Both A and R are true and R is the

correct explanation

b. Both A and R are true but R is not a

correct explanation

c. A is true but R is false

d. A is false R is true

101. national Income denotes

a. revenue of the Government in one year

b. revenue of nationalised enterprises and

banks.

c. budgetary surplus of the government

d. sum total of all factor earnings in the

country

102. In calculating a country's NNP at factor

costs, which on of the following elements

is not included?

a. Rent, interest, wages and profits

b. Supplements to wages paid by

employers under social security

arrangements.

c. Factor payments from abroad

d. Indirect taxes.

103. The size of the gap between actual and

potential GNP is a measure of

a. inflationary gap

b. deflationary gap

c. savings-investment gap

d. natural rate of unemployment

104. In Keynesian economics, given the total

investment expenditure, an increase in the

propensity to save will lead to a

a. fall in the quantity of saving

b. fall in income

c. rise in interest rate

d. rise in income.

105. The intermediate goods are exclude from

GNP because

a. they create the problem of duplication'

b. their value cannot e assessed

c. it is difficult to define such goods

d. such goods do not directly enter into

consumption

106. Disposable income is
a. National Income
b. National Income less direct taxes
c. national Income less direct taxes less
undistributed profits
d. National Income less direct taxes less
undistributed profits plus transfer
payments.
107. Net National Income at market prices is
equal to
a. Gross national product at market prices
minus depreciation
b. Net Domestic Product at market prices
plus or minus earnings from abroad
c. Gross Domestic product minus indirect
taxes and subsidies
d. Gross National Product plus or minus
depreciation.
108. Assume that in a country's national
accounts, the corporate sector's savings
equal its investment. Also, the
government's budget is exactly balanced.
An excess of household savings over its
own investment will be reported as
a. government sector's excess of
investment over savings
b. excess of imports over exports in the
external account.
c. excess of exports over imports in the
external account
d. no change in the external account.
109. In the case of a Cobb-Douglas production
function, output elasticity of an input is
a. a constant
b. unity
c. a function of all the inputs
d. indeterminate
110. A consumer will generally obtain the
greatest total utility from expenditure of a
given income when.
a. the marginal utility of each commodity
purchased is unity
b. the marginal utility of each commodity
purchased is in the same ratio to its
price.
c. the marginal utility of each commodity
purchased is in the same ratio to its
cost of production.
d. the prices of the commodities
purchased are equal to one another.
111. If the price consumption curve is negative,
it is because of one or more of the
following reason.
1. Negative Income effect is stronger than
the substitution effect.
2. Substitution effect is negative.
3. The commodity is Giffengood
Of the reason given above
a. 1 alone is correct
b. 1 and 2 are correct
c. 2 and 3 are correct
d. I and 3 are correct
112. Which one of the following assumptions is
not necessary for the cardinal utility
theory?
a. Rationality of the consumer
b. Constant marginal utility of money
c. Perfectly competitive market
d. Additively of utility
113. If two goods are complements then a rise
in the price of one commodity will induce.
a. an upward shift in the demand for the
other commodity
b. a rise in the price of the other
commodity
c. a downward shift in the demand for the
other commodity
d. no shift in the demand of the other
commodity
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114. the relation between average revenue (AR)
marginal revenue (MR) and price elasticity
of demand (Ep) is such that
a. the sum of AR and MR equals the Ep
b. the difference between AR and MR
depends inversely on Ep.
c. the difference between AR and Ep
depends on the value of MR.
d. when AR = MR. Ep = 0
115. Which one of the following statements is
correct?
a. Diminishing and independent marginal
utilities imply convexity of the
indifference curves.
b. Independent utilities and convex
indifference curves imply diminishing
marginal utility of each good.
c. Diminishing marginal utilities and
convex indifference curves imply that
the marginal utility of each commodity
is independent of the quantity of the
other.
d. Thee is no relation between utility and
indifference curve
116. if sales tax on a commodity is raised, but
the revenue earned through its sale
decreases sharply, which one of the
following statements about the nature of
this commodity would be correct?
a. Price elasticity of demand for it is low
b. It must be an essential good
c. Price elasticity of demand for it is high
d. Price elasticity of demand for it is
unity
117. If the price elasticity of demand for a
commodity is less than unity, a decrease in
price would result in.
a. a less than proportionate change in the
quantity purchased
b. a more than proportionate change in
the quantity purchased
c. an increase in the total expenditure on
the product
d. a shift in the demand curve
118. Income elasticity of demand equals
a. Proportionate change in income of the
consumer
Proportionate change in quantity
demanded of a commodity
b. Proportionate change in quantity
demanded of a commodity
Proportionate change in income of the
consumer
c. Proportionate change in price of the
commodity
Proportionate change in income of the
consumer
d. Proportionate change in income of the
consumer
Proportionate change in price of the
commodity
119. Dumping involves
a. selling at lower prices in the market'
b. price discrimination between the two
markets.
c. surplus production at lower cost
d. price discrimination between the home
market and foreign market.
120. Which one of the following views about
profit could be associated with the name of
frank Knight?
a. Profit is an implicit return to owned
factors
b. profit is a reward for innovation.
c. profit is closely tied with risk and
uncertainty.
d. profit is merely the earnings of
monopoly