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CUET PG Economics Mock Test- 7 - CUET PG MCQ


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30 Questions MCQ Test - CUET PG Economics Mock Test- 7

CUET PG Economics Mock Test- 7 for CUET PG 2025 is part of CUET PG preparation. The CUET PG Economics Mock Test- 7 questions and answers have been prepared according to the CUET PG exam syllabus.The CUET PG Economics Mock Test- 7 MCQs are made for CUET PG 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for CUET PG Economics Mock Test- 7 below.
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CUET PG Economics Mock Test- 7 - Question 1
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The demand and supply functions for cobweb model are given as:  

Choose the right answer related to intertemporal equilibrium price and the nature of the equilibrium.

Detailed Solution for CUET PG Economics Mock Test- 7 - Question 1
Option 2
Option (b) is correct here, Solution, Let us find the slopes of the above-mentioned equations,

Since the absolute value of the slope of the supply curve is greater than the absolute value of the slope of the demand curve at the equilibrium price, the oscillation is uniform. Thus Option (b) is correct
CUET PG Economics Mock Test- 7 - Question 2
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The vegetable Potato is a very good example of?

Detailed Solution for CUET PG Economics Mock Test- 7 - Question 2
Here in our analysis although we can broadly classify goods as final goods and intermediate goods, it can sometimes happen that the same goods can be treated as both final goods as well as intermediate goods. Here Potato can be considered is that type of good, if it is consumed by households then it can be classified as a final good but if it is purchased by a firm to make a processed good for example chips then the potato is an intermediate commodity for the firm or industry.
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CUET PG Economics Mock Test- 7 - Question 3
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According to which article of the Indian Constitution, the Finance Commission was established?

Detailed Solution for CUET PG Economics Mock Test- 7 - Question 3
For allocation of certain sources of revenue, between the Union and the State Governments, the Constitution provides for the establishment of a Finance Commission under Article 280. In accordance with Article 280 of the Constitution, the President of India does, in fact, create the Finance Commission. Giving suggestions on how tax income should be divided between the Union (Central Government) and the States, as well as among the States, is its main duty. These suggestions are meant to make sure that financial resources are distributed fairly and equally in order to support balanced development throughout the nation.
CUET PG Economics Mock Test- 7 - Question 4
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The condition for a firm to shut down its production is?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 4
Let us derive the condition with the help of a diagram,

Here E is the equilibrium point of the firm because at this point the P = AR = MR and SMC curve cuts the MR curve from below, the area of APEB shows the loss incurred by the firm because we can see at point E firm can achieve only the variable cost and all the fixed cost is loss born by the firm thus the firm is shutting down the production at point E because all the fixed cost are turned into losses now, and we can also spot that at point E, the minimum point of AC is greater than the minimum point of AVC which is equal to price. Thus E is the shut-down point. Now let us check the incorrect options,
Option (a) is incorrect, if P > min AC > min AVC that happens then the firm enjoys the super-normal profit.
Option (b) is incorrect because Min AC > min AVC > price means the firm is going through the shutdown zone.
Option (c) is incorrect as, if Min AC > Price > min AVC happens then the firm is having a loss.
CUET PG Economics Mock Test- 7 - Question 5
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The level of autonomous investment is dependent upon?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 5
By the term autonomous investment, we mean to say that it is part of the total investment made by a government or other financial institution independent of economic considerations. These include investments like government investments, funds allocated to public goods or infrastructure, and any other type of investment that is not dependent on changes in GDP. Now the autonomous investment is independent of changes in interest rate, price level, and income of the consumer. However, it is dependent on several other factors like the level of technology, financial awareness, expectations, government policies, economic situation, population, innovations, etc.
CUET PG Economics Mock Test- 7 - Question 6
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Let H = eQ where Q = Axαyβ Consider the following statements.
A. Q is a homogeneous function for all values of α and β
B. H is a homothetic function for all values of α and β
C. Q is a homogeneous function only if α + β = 1
D. H is not a homogeneous function
E. Q is not a homogeneous function
Choose the correct answer from the options given below:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 6
Let us analyze the statements individually to fetch the correct answer for our question,
Statement (A) Q is a homogeneous function for all values of α and β is correct, If a function Q meets the following criteria, which is Q(tx, ty) = tk Q(x, y) for all t > 0 it is homogeneous of degree k. In this scenario Q = Axα yβ and it is homogenous of degree k = α + β regardless of the specific values of α, β
Statement (B) H is a homothetic function for all values of α and β. is correct,
An operation If H is a monotonic transformation of a homogeneous function, then it is homothetic. Since H = eQ where Q is a homogenous of degree k = α + β, regardless the specific values of α, β
Statement (C) Q is a homogeneous function only if α + β =1 is incorrect.
Q is a homogeneous function for any values of α and β. The degree of homogeneity is determined by k = α + β, but it is not restricted to k = 1
Statement (D) H is not a homogeneous function is correct as it is a homothetic function.
Statement (E) Q is not a homogeneous function is incorrect.
As discussed earlier, Q is a homogeneous function for all values of α and β, with the degree of homogeneity given by k = α + β.
Thus Statement (a), (b) and (d) is correct 
CUET PG Economics Mock Test- 7 - Question 7
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Arrange the following economic committees in India in the order they were established, starting with the earliest:
A. Narasimham Committee on Banking Sector Reforms
B. Rangarajan Committee on Financial Inclusion
C. Kelkar Committee on Tax Reforms
D. Vijay Kelkar Committee on Fiscal Responsibility and Budget Management (FRBM)
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 7
  • Narasimhan Committee on Banking Sector Reforms - 1991: The Narasimhan Committee was constituted to suggest reforms to the Indian banking sector to improve efficiency and competitiveness. This committee laid the foundation for significant changes in the Indian banking industry.
  • Kelkar Committee on Tax Reforms - 2002: The Kelkar Committee was set up to recommend measures to improve the tax structure, make it more efficient, and increase revenue collection.
  • Rangarajan Committee on Financial Inclusion - 2008: The Rangarajan Committee focused on financial inclusion and recommended measures to extend financial services to the unbanked and underbanked population in India.
  • Vijay Kelkar Committee on Fiscal Responsibility and Budget Management (FRBM) - 2016: The Vijay Kelkar Committee was formed to review the Fiscal Responsibility and Budget Management Act and suggest ways to achieve fiscal discipline and consolidate fiscal gains.
CUET PG Economics Mock Test- 7 - Question 8
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According to the SRS report 2019, which state has a minimum Crude Death rate?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 8
According to the SRS Report 2019, a state which has a minimum Crude Death rate is Delhi (3.2)
CUET PG Economics Mock Test- 7 - Question 9
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Who developed the law of demand?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 9
The Development of the law of demand was for the first time stated by Charles Davenant in 1699. There are sufficient instances that indicate that George King during the 17th century also demonstrated the law of demand.
CUET PG Economics Mock Test- 7 - Question 10
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Which of the following statement about price leadership is false?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 10
  • Price leadership is a form of tacit collusion. This can be true. In tacit collusion, firms follow the price set by a leader without explicit agreement.
  • With dominant price leadership, the leader in an industry is the biggest firm. This is not always true. The leader could be a firm with a strong brand reputation, efficient production processes, or a strategic cost advantage, even if it's not the largest.
  • With barometric price leadership, the leader may change even if the relative size of each firm stays the same. This is true. Barometric leadership can shift based on which firm is most sensitive to changes in the market.
  • Price leadership breaks down if input prices or demand conditions change. This is true. When costs or demand significantly fluctuate, firms may deviate from the leader's price to maintain profitability.
CUET PG Economics Mock Test- 7 - Question 11
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Match List-I with List-II.
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 11
Rat Race Problem - George Akerlof.
Displacement effect - A. Peacock and J. Wiseman.
Optimal Taxation - Diamond P.A and Mirrless J.A.
Local Public Good - C. M Tiebout.
CUET PG Economics Mock Test- 7 - Question 12
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How many banks were nationalized in India in 1980?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 12
Six Indian banks were nationalized in India on 15th April 1980.
CUET PG Economics Mock Test- 7 - Question 13
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If byx = -0.8 and bxy = -0.2, then ryx is equal to:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 13
The geometric mean between the two regression coefficients is equal to the correlation coefficient.

Therefore, If the two regression coefficients are -0.8 and -0.2, then the value of the coefficient of correlation is 0.4.
CUET PG Economics Mock Test- 7 - Question 14
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Kurtosis and Skewness of a frequency distribution
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 14
Skewness and kurtosis of a frequency distribution can exist individually. Skewness measures the asymmetry of the distribution, indicating how symmetrical the data set is, while kurtosis measures how heavy the data set is about its mean compared to its tails. They are not always positive or negative, as they can take on positive, negative, or zero values depending on the distribution's characteristics
CUET PG Economics Mock Test- 7 - Question 15
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Does a monopoly have a supply function?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 15
In a monopoly, there is no supply function in the traditional sense because the monopolist's output decision is based on the intersection of marginal cost and marginal revenue, not on a price taken from the market.
CUET PG Economics Mock Test- 7 - Question 16
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The Banking Regulation Act was passed in
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 16

The Banking Regulation Act was enacted in 1949. This Act is crucial for regulating and supervising the banking sector in India.

  • It provides a framework for the operation of banks.
  • Ensures the stability and soundness of the financial system.
  • Empowers the Reserve Bank of India to manage banks effectively.
CUET PG Economics Mock Test- 7 - Question 17
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Which of the following is not an assumption of the Heckscher-Ohlin thesis?
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 17
The Heckscher-Ohlin model typically assumes trade is costless to focus on the effects of factor endowments on trade patterns.
CUET PG Economics Mock Test- 7 - Question 18
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Theories of money demand that emphasize the role of money as a medium of exchange are called
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 18
Theories of money demand that emphasize the role of money as a medium of exchange are called Transaction theories. These theories focus on the use of money for purchasing goods and services, highlighting its importance in facilitating transactions in the economy. Transaction theories often analyze how the demand for money is related to the level of income or the volume of transactions in the economy.
CUET PG Economics Mock Test- 7 - Question 19
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Under perfect competition, the shut-down condition holds, when,
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 19
Under perfect competition, the shut-down condition for a firm occurs when the market price is below the firm's average variable cost (AVC) in the short run. At prices below AVC, the firm cannot cover its variable costs, and it would minimize its losses by ceasing production. Continuing to produce would result in losses greater than its fixed costs.
CUET PG Economics Mock Test- 7 - Question 20
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Relation between elasticity of demand, average revenue and marginal revenue is shown by the following formula:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 20

Relation between elasticity of demand, average revenue, and marginal revenue is shown by 

CUET PG Economics Mock Test- 7 - Question 21
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Stagflation is a period of
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 21
Stagflation is an economic condition characterized by both high inflation and high unemployment, occurring simultaneously. This phenomenon challenges traditional economic theories that suggest a trade-off between inflation and unemployment (the Phillips curve).
CUET PG Economics Mock Test- 7 - Question 22
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Given the following data: Number of observations = 100 Coefficient of variation = 20% Arithmetic Mean = 450 The variance will be
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 22
The variance will be calculated using the formula for the coefficient of variation CV = 
CUET PG Economics Mock Test- 7 - Question 23
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The Garran Tribunal was constituted during the colonial times to:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 23
The correct Option is 2
The Garran Tribunal, established in 1932, was constituted to discuss and decide about the division of financial responsibilities between India and Britain on military expenditure.
Here's why the other options are incorrect:
(a) Discuss about the division of taxes between the provinces and centre in colonial India:
  • This was a separate issue handled by the Schuster Committee, not the Garran Tribunal.

(c) Decide on the pricing of railway tariffs in colonial India:

  • This was typically handled by the Railway Board or other administrative bodies, not a specific tribunal.

(d) Decide about the famine relief strategy in the background of the Great Bengal Famine:

  • While the Garran Tribunal did consider the broader context of India's financial state, its primary focus was on military expenditure, not famine relief.
CUET PG Economics Mock Test- 7 - Question 24
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Which of the following are correct in presence of negative externalities?
A. Negative externalities lead to an inefficient allocation of resources.
B. Marginal external cost curve is added vertically to the private marginal cost curve to yield the social marginal cost curve.
C. The efficient level of output attained is more than the market equilibrium output.
D. The intersection of the marginal social cost curve with the demand curve gives the efficient level of output.
Choose the correct answer from the options given below:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 24
The correct answer is A, B, and D only
A. Negative externalities lead to an inefficient allocation of resources.
  • True. When negative externalities exist, the private costs borne by the producer do not reflect the full social costs of production.
  • This leads to overproduction and inefficient allocation of resources, as producers make decisions based on private costs without considering external costs imposed on others.

B. Marginal external cost curve is added vertically to the private marginal cost curve to yield the social marginal cost curve.

  • True. The marginal external cost curve represents the additional cost that the producer’s activity imposes on society for each unit of output produced.
  • Adding this vertically to the private marginal cost curve gives the social marginal cost curve, which reflects the true total cost of production to society.

C. The efficient level of output attained is more than the market equilibrium output.

  • False. In the presence of negative externalities, the market equilibrium output is higher than the efficient level of output.
  • This is because producers only consider private costs, leading them to produce more than the socially optimal quantity.

D. The intersection of the marginal social cost curve with the demand curve gives the efficient level of output.

  • True. The efficient level of output is achieved when the marginal social cost (MSC) equals the marginal benefit (MB) to society.
  • This intersection point represents the optimal production level, where social benefits and costs are balanced.
CUET PG Economics Mock Test- 7 - Question 25
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Choose the correct statements) for an open economy:
A. Sterilisation implies nullifying the impact of foreign exchange transactions on domestic money supply.
B. In a sterilized intervention in the foreign exchange market by the central bank, a purchase of foreign assets should be matched by a sale of domestic assets.
C. In an open economy with fixed exchange rates and perfect capital mobility, the central bank can pursue independent monetary policy.
D. Sterilised intervention with perfect asset substitutability under fixed exchange rate allows the exchange rate to depreciate.
E. Real exchange rate can change only due to changes in nominal exchange rate.
Choose the correct answer from the options given below:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 25
The correct answer is A and B only.
A. True:
  • Sterilization offsets foreign exchange transactions' impact on the domestic money supply via open market operations or reserve requirement changes.

B. True:

  • In sterilized intervention, the central bank buys foreign assets and sells domestic assets to keep the money supply unchanged.

C. False:

  • Under fixed exchange rates, the central bank lacks monetary policy independence due to capital flows.

D. False:

  • Sterilized intervention under fixed exchange rates does not cause depreciation due to offsetting capital flows.

E. False:

  • Real exchange rate changes due to both nominal exchange rate shifts and inflation differences.
CUET PG Economics Mock Test- 7 - Question 26
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Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R.
  • Assertion (A): General equilibrium is attained in an economy when demand equals supply in all markets simultaneously.
  • Reason (R): In a general equilibrium model, relative prices cannot be determined.
In the light of the above statements, choose the most appropriate answer from the options given below:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 26
Correct Option is 3
Assertion A is correct:
  • General equilibrium is a state where all markets in an economy are in simultaneous equilibrium.
  • This means that quantity demanded equals quantity supplied in every market.

Reason R is not correct:

  • In general equilibrium models, relative prices can be determined.
  • General equilibrium theory analyzes market interdependence, leading to relative price determination that balances demand and supply across all markets.
CUET PG Economics Mock Test- 7 - Question 27
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Which of the following statements are correct?
A. Life cycle hypothesis was propounded by Francois Modigliani
B. Absolute Income Hypothesis was propounded by Milton Friedman
C. Relative Income Hypothesis was propounded by James Duesenberry.
D. Permanent Income Hypothesis was propounded by John Maynard Keynes
Choose the correct answer from the options given below:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 27
The correct answer is (a) A & C only.
(A) Life Cycle Hypothesis (LCH):
  • Proposes that consumption patterns are shaped by an individual's life-cycle stage and income expectations over their lifetime.
  • Developed by Franco Modigliani and A. Ando in 1963.

(B) Absolute Income Hypothesis (AIH):

  • Suggests that consumption is directly linked to an individual's current income level, irrespective of future income.
  • Introduced by John Maynard Keynes in 1936.

(C) Relative Income Hypothesis (RIH):

  • Argues that consumption depends on both absolute income and income relative to others in society.
  • Proposed by James Duesenberry in 1949.

(D) Permanent Income Hypothesis (PIH):

  • States that consumption is based on long-term (permanent) income, rather than just current income.
  • Formulated by Milton Friedman in 1957.
CUET PG Economics Mock Test- 7 - Question 28
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For the per capita production function y = k⁰.⁵; what is the level of savings rate at which the consumption per capita is maximised at steady state? Assume depreciation (δ) = 0.1 and no population growth.
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 28
Correct Option is 4
The production function is y = k⁰.⁵ representing output per capita.
In the Solow growth model, steady state occurs when savings (s) equals depreciation (δ).
The savings rate (s) is determined by the capital-output ratio, which for this function is k⁻⁰.⁵.
To maximize consumption per capita, we find the savings rate that maximizes (1 - s)·y.
Substituting s = k⁻⁰.⁵, we get (1 - k⁻⁰.⁵)·k⁰.⁵.
By setting the derivative of this expression to zero, we find s = k⁻⁰.⁵ = 0.5.
Therefore, at a savings rate of 50%, consumption per capita is maximized in the steady state for the given production function.
CUET PG Economics Mock Test- 7 - Question 29
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In the expression Y₁ = β̂₁ + β̂₂ Xᵢ + ûᵢ, ûᵢ gives the difference between:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 29
Correct Option is 1
In the expression Y₁ = β̂₁ + β̂₂ Xᵢ + ûᵢ, ûᵢ gives the difference between the actual and estimated Y values.
CUET PG Economics Mock Test- 7 - Question 30
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The following data of an economy is given:
  • Consumption function C = 300 + 0.8 (1-t) Y;
  • Investment Function I = 900 - 50i;
  • Government expenditure G = 800;
  • Marginal tax rate t = 0.25
The IS equation corresponding to the above is:
Detailed Solution for CUET PG Economics Mock Test- 7 - Question 30
Correct Option is 2
Y = C + I + G
Y = [300 + 0.8 (1 - 0.25)Y] + (900 - 50i) + 800
Y = 300 + 0.8 × 0.75Y + 1700 - 50i
Y = 2000 + 0.6Y - 50i
Y - 0.76Y = 2000 - 50i
0.4Y = 2000 - 50i
Y = (2000 / 0.4) - (50i / 0.4)
Y = 5000 - 125i
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