Chapter Wise Economy MCQ’s With Explanation

Today’s Topic:Balance of Trade

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Today’s Topic:Balance of Trade

Q1. An economy is said to be overheated as:

1.Aggregate demand exceeds aggregate supply.          2. Inflationary pressures build up.

3.Aggregate supply exceeds aggregate demand.          4. Stock market crash down.

Which of the statements given above are correct?

a) Only 1           b) 1, 2 and 3          c) 1 and 4             d) 1 and 2

Ans:     D

Explanation:    Overheating of an economy occurs, when its productive capacity is unable to keep pace with growing aggregate demand. It is generally characterized by an upward trend rate of economic growth, where growth is occurring at an unascertainable rate. High levels of aggregate tend to be the cause of overheating.

Q2. Consider the following statements related to IMF:

  1. Every IMF member is required to subscribe to the IMF an amount equal to its quota.
  2. The quota of a member is largely determined by its economic conditions relative to other members.
  3. An amount, not exceeding 25% of the quota is to be paid in reserve assets, the balance in member’s own currency.
  4. IMF’s main function is to stabilize exchange.

Select the correct answer above the statements.

a) 1 and 2          b) 2 and 3             c) 3 and 4           d) 1, 2, 3 and 4

Ans:     D

Explanation:    The capital resource of the IMF comprise special drawing rights (SDRs) and currencies that members pay under quotas calculated for them. Member countries are given borrowing (or) drawing rights with the fund which they can use, international reserves, to finance the balance of payment deficits.

Q3. The securities and Exchange Board of India (SEBI) is the regulator for the securities market in India.

Consider the following statements in relation to this:

  1. SEBI is a quasi-legislative, quasi-judicial and quasi-executive body.
  2. The appeal against SEBI decision can be made to securities appellate tribunal.
  3. The second appeal can be made to High court.

Which of the given statements are correct?

a) Only 1           b) Only 2             c) 1 and 2           d) None of these

Ans:     C

Explanation: SEBI has three functions rolled into one body quasi- legislative, quasi-judicial and quasi-executive capacity, it conducts investigation and enforcement action in its executive function and it oases rulings and orders in its judicial capacity

Q4. In India rural incomes are generally lower than the urban income. Which of the following reasons account for this:

  1. Mostly farmers are illiterate and have little knowledge about scientific agriculture.
  2. Prices of primary products are lower than that of manufactured products.
  3. Investment in agriculture has been low when compared to investment in industry.

Select the correct answer by using the codes given below:

a) 1 and 2          b) 3 only              c) All of the above           d) 1 and 3

Ans:     C

Explanation:    Prevailing illiteracy in rural Ares, low prices of primary products compared to the manufactured products and to investment in the agricultural sector compared to the industry are major factors which account for low incomes in rural economy than urban economy.

Q5. Which one of the following is correct regarding stabilization and structural adjustment as two components of the new economic policy adopted in India?

a) Stabilization is a gradual, multi step process while structural adjustment is a quick adoption process.

b) Stabilization is a quick adoption process and structural adjustment is a gradual multi step process.

c) Both are similar and complimentary process. It is difficult to separate to one from other.

d) Stabilization is a policy implemented by state government and structural adjustment is implemented by central government.

Ans:     A

Explanation:    Stabilization and structural adjustment in Indian Economy was the prime objective of new economic policy 1991 because India economy was going through a serious crisis.

Stabilization is a gradual multi step process while structural adjustment is a quick adoption process.

Q6. Assertion (A): Balance of payments represents a better picture of a country economy transactions with the rest of the world than the Balance of Trade.

Reason (R): Balance of payments takes into account the exchange of both visible and invisible items whereas Balance of Trade doesn’t


a) Both A and R are individually true and R the correct explanations to A

b) A and R is correct, but R is not the correct Explanation of A

c) A is true but R is false.

d) A is false but R is true.

Ans:     A

Explanation:    Balance of payment takes into account the exchange of both visible and invisible items whereas Balance of trade does not.

It represents a better picture of country’s economic transactions with the rest of the world than the Balance of trade.

Q7. Consider the following statements:

  1. Industrial finance corporation of India.
  2. Industrial credit and investment corporation of India.
  3. Industrial development bank of India.
  4. Unit trust of India.

The correct sequence in which the above were established is:

a) 1,2,3,4         b) 1,3,2,4            c) 4,3,2,1          d) 1,4,3,2

Ans:     A


Industrial finance and investment corporation             – 5 jan 1955

Industrial finance corporation                                      – 1 july 1948

UTI                                                                              – 26 Nov, 1963

IDBI                                                                            – 1 july 1964

Q8. Consider the following statements regarding India:

  1. The Wholesale price Index (WPI) is available on a weekly basis,
  2. As compared to consumer price index for industrial workers, the WPI gives less weight to food articles.

Which of the statements is/are correct?

a) 1 only        b) 2 only          c) None of these          d) Both 1 and 2

Ans:     D

Explanation:    Earlier WPI was available on monthly basis but this time it is based on weekly based.

Inflation mainly depends on WPI Consumer price index for industrial workers.

Q9. Consider the following statements regarding ‘bear’ in financial investment:

a) Any leader whether by making a loan or buying band.

b) A share holder on a bondholder who has an interest in a company, financial or otherwise.

c) An Investor who expects the price of particular shares to rise.

d) None of these

Ans:     C

Explanation:    Bears are the investors who expect the prices of securities to fall and they sell the securities and buy again when the prices actually fall.

Bulls are the investors who expect the prices of shares to rise and they buy the shares and sell to rise they buy the shares and sell when the price of share actually rise.

Q10. Consider the following statements:

  1. Infant mortality rate is the number of infant deaths in a particular year per 100 live births during last year
  2. Infant mortality rate is defines as the number of deaths of infant per 1000 under a year of age.
  3. Infant mortality rate takes into account the death of infants within a month after birth

Which of the following statements are correct?

a) Only 1          b) Only 2           c) All of the above            d) None of these

Ans:     B

Explanation:    Infant mortality rate = (Total no. of deaths) / (total no. of births of living child in that year) X 1/100


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