# Objective Economics Questions

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## MCQ Objective Economics Papers

1. Suppose in the short run MC = b. Then
(a) AC = MC
(b) AC > MC
(c) AC approaches MC as quantity rises MC = AVC
(A) only b is true
(B) only b and c are true
(C) d, b and c are true
(D) only d is true

2. In the context of cost minimisation by a competitive producer, which one of the following is not correct?
(A) Marginal rate of technical substitution of the factors equals factor price ratio.
(B) Ratio of marginal physical productivities of the factors equals the ratio of factor prices.
(C) Slope of the isoquant in question equals slope of the iso cost line.
(D) MRTS of factors of production divided by factor price ratio is greater than one.

3. Which of the following statements is incorrect?
The fundamental properties of demand function includes
(a) the demand function is homogenous of degree zero in all prices and income.
(b) the consumer is free from money illusion.
(c) if the utility function follows a monotonic increasing transformation, then the equilibrium quantity demanded remains unchanged.
(d) under monotonic transformation of utility function, the marginal utility of money remains unchanged.

4. What should be the mark-up fora firm to maximise its total profits if the price elasticity of demand for the commodity sold by the firm is C = 5?
(A) 25%
(B) 33%
(C) 50%
(D) 20%

5. Two regression equations between Y and X are given as Y = -12 + 0.5X and X = 30 + 0.8Y. For what value of X the predicted value of Y is 20?
(A) 46
(B) 40
(C) 64
(D) 60

6. The overall significance of an estimated multiple regression model is tested by using
(A) The t-test
(B) The chi-square test
(C) The Wald test
(D) The F test

7. Choose the correct option
(A) The most important requirement for an efficient management of public debt is that interest rates on government obligations should be kept as low as possible.
(B) The most important requirement for an efficient management of public debt is that interest rates on government obligations should be kept as high as possible.
(C) For efficient management of public debt, NABARD interest rate should be raised.
(D) Pattern of interest rate on different maturities of securities need not conform to preference pattern of individuals.

8. Suppose that observations are available on the monthly bond prices of 100 companies for 5 years. What type of data are those?
(A) Cross-sectional
(B) Time Series
(C) Panel
(D) Qualitative

9. Industrial Reconstructions Corporations of India (IRCI) is a
(A) Company
(B) Non-statutory Corporation
(C) Statutory Corporation
(D) Non-Corporate entity

10. The latter curve explains the relationship between which of the following?
(A) Tax rate and tax revenue
(B) Tax rate and employment
(C) Tax rate and income
(D) Tax rates and government expenditure

11. Prof Pigou believed that the divergence between social costs and private costs can be reduced
(A) Automatically in a free enterprise economy
(B) By the market mechanism that comes into play
(C) By appropriately assigned property rights
(D) By state interference

12. If the fiscal deﬁcit of the union government is Rs. 75,000 crores, relending to states is Rs. 25,000 crores, interest payments are Rs. 25,000 crores, what is the amount of the primary deficit?
(A) Rs. 50,000 crores
(B) Rs. 25,000 crores
(C) Rs. 1,00,000 crores
(D) Rs. 1,25,000 crores

13. A Revenue neutral unit commodity tax will be equivalent in its incidences to an ad valorem tax under:
(A) perfect competition
(B) monopoly
(C) oligopoly
(D) monopolistic competition

14. The majority voting ensures efficient provision of a public good if there are odd number of voters each having single peaked preference and they are:
(A) uniformly distributed over the alternatives
(B) normally distributed over the alternatives
(C) distributed as pareto distribution over the alternatives
(D) distributed as gamma distribution over the alternatives

15. Which one of the following is a source of non-tax revenue for governments?
(A) Import duty on cars
(B) Octroi at check points on roads
(C) Entrance fee to museums
(D) Excise duty on beverages

16. Consider the following Assertion and Reason
Assertion (A) : The revealed preference hypothesis excludes the study of Giffen paradox.
Reason (R) : Revealed preference hypothesis considers only negative income elasticity of demand while Giffen paradox relates to positive price elasticity of demand.
(A) Both A and R are individually true and R is the correct explanation of A.
(B) Both A and R are individually true 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.

17. Returns to scale and returns to variable inputs have the following relation:
(A) Decreasing returns to all variable inputs is not compatible with constant returns to scale.
(B) Decreasing returns to all variable inputs is compatible even with increasing returns to scale.
(C) Returns to scale has no relation with returns to variable inputs.
(D) Increasing returns to all variable inputs necessarily lead to increasing returns to scale.

18. The elasticity of output with respect to labour is equal to one when average product of labour is
(A) equal to wage rate.
(B) equal to average product of capital.
(C) equal to its marginal product.
(D) greater than marginal product of labour.

19. According to Roy‘s identity
(A) optimal commodity demands are related to the derivatives of the indirect utility function and the optimal value of the lagrange multiplier.
(B) optimal commodity demands are related to the derivative of the direct utility function and the optimal value of the lagrange multiplier.
(C) optimal commodity demands are related to the derivatives of the indirect utility function and the market price.
(D) optimal commodity demands are related to the derivatives of the inverse demand function and the market price.

20. The profit function of a firm is:
(A) Convex in both output and input prices;
(B) Convex in output prices, but concave in input prices;
(C) Concave in output prices, but convex in input prices;
(D) Concave in both output and input prices.

21. Non Banking financial Intermediaries?
(A) Raise fund from the public and lend them to ultimate spenders.
(B) Take loans from commercial banks and lend them to Business firms.
(C) Receive funds form the RBI and spends then for rural Development.
(D) Receive fund from foreign banks and lend them to ultimate spenders.

22. Which of the following is applicable to co-operative banks?
(A) Co-operative banks are governed by banking regulation Act.
(B) Co-operative banks are subject to control by RBI.
(C) Co-operative banks are both public sector and private sector banks.
(D) Co-operative banks are governed by co-operative societies Act 1904.

23. In classical economic models, the full-employment is ensured by
(A) A vertical AD curve but rising AS curve
(B) A vertical AD curve but falling AS curve
(C) A falling AD curve but vertical AS curve
(D) A falling AD curve but rising AS curve

24. In IS-LM model, government expenditure multiplier is
(A) Smaller than simple Keynesian model.
(B) Equal to simple Keynesian model.
(C) Larger than simple Keynesian model.
(D) Always infinite

25. In the keynesian IS-LM model in the short run, a decrease in the money supply will cause
(A) a decrease in output and an increase in the real interest rate.
(B) an increase in the real interest rate but no change in output.
(C) a decrease in the real interest rate and a decrease in output.
(D) no change in either the real interest rate or output.

26. Real Balance effect operates through
(A) Investment
(B) Consumption
(C) Taxes
(D) Government Spending

27. Samuelson-Hicks type of trade cycle models will show stability and cyclical fluctuations only if
(A) the income expansion path shows complex roots whose magnitudes are less than one.
(B) the income expansion path shows real roots whose magnitudes are less than one.
(C) the income expansion path shows real roots whose magnitudes are more than one.
(D) the income expansion path shows complex roots whose magnitudes are more than one.

28. In Tobin‘s portfolio balance approach to demand for money, the indifference curves of plungers are necessarily
(A) Negatively sloped and concave
(B) Positively sloped and convex
(C) Positively sloped and concave
(D) Negatively sloped and convex

29. In permanent income hypothesis, transitional income has
(A) Positive and high correlation with permanent income
(B) Zero correlation with permanent income
(C) Positive and low correlation with permanent income
(D) Negative correlation with permanent income

30. The principle that investment depends on the change in consumption is called
(A) Multiplier Principle
(B) Accelerator Principle
(C) Super Multiplier
(D) Investment Multiplier

31. Friedmen’ s demand for money theory shows that the demand for money increases as the ratio of human to non-human wealth increases because
(A) It is easier to sell or purchase human wealth than non-human wealth.
(B) It is easier to sell or purchase non-human wealth than human wealth.
(C) It is easier to sell non-human wealth than human wealth but not to purchase.
(D) It is easier to sell human wealth than non-human wealth but not to purchase.

32. Ratchet effect relates to
(A) Life-cycle hypothesis
(B) Permanent income hypothesis
(C) Relative income hypothesis
(D) Absolute income hypothesis

33. If investment function becomes unresponsive to interest rate, then
(A) Fiscal Policy becomes ineffective
(B) Fiscal Policy becomes effective
(C) Monetary Policy becomes effective
(D) Both Fiscal and Monetary policy are effective

34. In IS-LM model, government expenditure multiplier does not depend on
(A) Slope of savings function
(B) Slope of investment function
(C) Slope of speculative demand function
(D) Slope of autonomous consumption

35. The basic endogenous growth model requires
(A) Marginal product to declive for capital
(B) Marginal product to increase for capital
(C) Marginal product to be constant for capital
(D) Marginal product should be unequal to average product for capital

36. Dual effect of investment on income and productive capacity is proposed by growth model of
(A) Harrod
(B) Solow
(C) Domar
(D) Samuelson

37. Which is common in the clean floating and dirty floating exchange rates?
(A) The Central bank does not intervene in the foreign exchange market.
(B) The Central bank does not buy and sell foreign exchange.
(C) Exchange rate is solely determined by the market forces.
(D) Commercial banks buy and sell foreign exchanges.

38. What was not the consequence of the Debt crises?
(A) Oil exporters made huge profits.
(B) Oil importing countries suffered huge Current Account Deficit.
(C) Foreign currency reserves of the oil importing Countries dwindled.
(D) Fiscal deficit of the oil importing countries was brought under control.

39. Which of the following is not the function of the IME?
(A) to provide short term loans to support the central banks facing difficulties to maintain fixed exchange rates.
(B) surveillance of the economic activities of the member countries.
(C) provide long term loans for development projects.
(D) to give financial and technical assistance to the member countires.

40. Under Fixed exchange rate, Mundell—Flemming model shows
(A) Fiscal policy is a failure but monetary policy a success.
(B) Fiscal policy and monetary policy, both are ineffective.
(C) Fiscal policy is effective but monetary policy is a failure.
(D) Fiscal policy and monetary policy, both are effective.

41. Which of the following denotes an increasing order of economic integration? (PTA : preferential trade Agreement, FTA : Free Trade Area, CU : Customs Union, EU : European Union)
(A) PTA—FTA—CU—EU
(B) PTA—CU—PTA—EU
(C) FTA—PTA—CU—EU
(D) FTA—CU—PTA—EU

42. Which of the following is not associated with proposed GST?
(A) If will replace CENVAT and SERVICES tax.
(B) The centre and states should have concurrent power to levy GST.
(C) It requires constitutional amendment to introduce GST.
(D) There will be revenue gains of the states from the very beginning.

43. Which of the following proposition is not compatible with Malthusian theory of population?
(A) Population is necessarily limited by the means of subsistence.
(B) Population grows in geometric progression.
(C) Population growth is checked through family planning.
(D) Population growth can be checked through moral restraint.

44. Population explosion is associated with
(A) Second stage of demographic transition
(B) First stage of demographic transition
(C) Third stage of demographic transition
(D) Fourth stage of demographic transition

45. Which of the following best describes economic growth in the context of a country?
(A) An improvement in technology.
(B) An improvement in gender related development index.
(C) A sustained increase in the per-capita income.
(D) A sustained rise in agricultural output.

46. Human development index is a composite of three basic indicators of human development
(A) Longevity, knowledge and standard of living
(B) Longevity, standard of living and standard of income
(C) Knowledge, standard of living and gender equality
(D) Standard of living, gender development and political empowerment

47. Which of the following is not the primary source of economic growth?
(A) Capital
(B) Population
(C) Technology
(D) Gender

48. What is the last stage of W.W.Rostow’s stage theory of growth?
(B) Take off
(C) High mass consumption
(D) Maturity

49. In his theory of development, schumpeter stressed
(A) the need for infrastructure.
(B) the need for balanced growth.
(C) the role of innovation.
(D) The productive use of indigenous knowledge.

50. The term “missing women” has been coined by
(A) Indira Gandhi
(B) Rajiv Gandhi
(C) Manmohan Singh
(D) Amartya Sen