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Monday, January 9, 2012

Economics Quiz - 14

1. Development means economic growth plus
[A] inflation
[B] deflation
[C] price stability
[D] social change



2. A Multinational is ?
[A] a company operating in several countries
[B] a company having share holders from more than one country
[C] a company which does charitable work in poor countries
[D] a company that operates only in those countries that do not have import restrictions



3. Which of the following is true if prices of all the goods and services in an economy increase in a year?
[A]Real GDP will increase
[B]Nominal GDP will increase
[C]Real GDP will increase more than nominal GDP
[D]Real GDP will fall in proportion to the increase in prices



4. Inflation accompanied by a slowing of economic activity is
[A]Known as deflation
[B]A result of a stagnant aggregate supply
[C]A result of fiscal stimulus
[D]Known as stagflation



5. In India, which of the following taxes is an example of a proportional tax?
[A]Local sales tax
[B]Excise duty
[C]Personal income tax
[D]Corporate profit tax.



6. In a deflationary period, the appropriate policy for the RBI would be to
[A]Buy government securities in the open market
[B]Discourage commercial banks to increase their loans
[C]Increase Cash Reserve Ratio
[D]Increase bank rate



7. The current market rate of interest is 8 percent. Which of the following is true, if equilibrium rate of interest in the economy is 7 percent?
[A]There is a surplus of loanable funds, and the market rate of interest would increase
[B]There is a surplus of loanable funds, and the market rate of interest would decrease
[C]There is a shortage of loanable funds, and the market rate of interest would increase
[D]There is a shortage of loanable funds, and the market rate of interest would decrease



8. Banks can create money
[A]By printing currency notes
[B]By paying interest to their depositors
[C]By making loans that result in additional deposits
[D]By offering financial services, such as money market accounts



9. ‘Liquidity trap’ refers to a situation wherein
[A]There is too much liquidity in the economy
[B]The firms in the economy are facing credit crunch
[C]Interest rates does not decrease, no matter how much the money supply is expanded
[D]The country faces severe shortage of foreign exchange



10. The value-added approach to GDP measurement
[A]Adds up the difference between the value of output and costs of intermediate goods
[B]Adds up all income received by the household sector in the economy
[C]Removes the effect of inflation from the nominal GDP
[D]Adds up all the expenditures incurred on the goods and services produced by the domestic sector



11. The slope of the consumption function represents
[A]Average Propensity to Save
[B]Marginal Propensity to Consume
[C]Marginal Propensity to Save
[D]Average Propensity to Consume



12. Which of the following is not a transfer payment?
[A]Invalidity benefit
[B]Flood relief
[C]Government pensions
[D]Salaries paid to Members of Parliament



13. ‘Take off stage’ in an economy means
[A] steady growth begins
[B] economy is stagnant
[C] economy is about to collapse
[D] all controls are removed



14. ‘A formal evaluation of an individual’s or company’s credit history and capability of repaying obligations’ is known as
[A] Amortization
[B] Net Asset Value
[C] Credit rating
[D] Cash Credit



15. The balance of payment comprises
[A] official settlement account
[B] a current account of goods and services
[C] a capital account of financial assets
[D] All the above



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