Mock Test Paper 1 Business Economics Series II (January 2025)

 Page 1


1 
Mock Test Paper - Series II: January, 2025 
Date of Paper: 4
th
 January 2025 
Time of Paper: 10.30 A.M. to 12.30 P.M. 
 
FOUNDATION COURSE 
PAPER – 4: BUSINESS ECONOMICS 
Time: 2 hours       Marks: 100  
1.  Which of the following is NOT a function of public finance? 
(A)  Allocation of resources for public goods 
(B)  Income redistribution to achieve social equity 
(C)  Providing tax relief to corporates to boost economic growth 
(D)  Stabilization of the economy through fiscal measures 
2. Which of the following is NOT a part of the money supply in an economy? 
(A)  Currency held by the central bank 
(B)  Demand deposits in commercial banks 
(C)  Saving accounts in commercial banks 
(D)  Time deposits in commercial banks 
3. Which of the following is NOT a typical tool of monetary policy used by a 
central bank? 
(A)  Open market operations 
(B)  Changing the reserve requirements of commercial banks 
(C)  Adjusting the tax rates in the economy 
(D)  Changing the discount rate 
4.  Which of the following is the most effective monetary policy tool for managing 
short-term fluctuations in the economy? 
(A)  Open market operations 
(B)  Changing tax rates 
(C)  Changing government expenditure 
(D)  Price control measures 
5.  According to the Heckscher-Ohlin theory, a country will have a comparative 
advantage in the production of goods that: 
(A)  Require labour-intensive techniques if the country has a surplus of 
capital. 
Page 2


1 
Mock Test Paper - Series II: January, 2025 
Date of Paper: 4
th
 January 2025 
Time of Paper: 10.30 A.M. to 12.30 P.M. 
 
FOUNDATION COURSE 
PAPER – 4: BUSINESS ECONOMICS 
Time: 2 hours       Marks: 100  
1.  Which of the following is NOT a function of public finance? 
(A)  Allocation of resources for public goods 
(B)  Income redistribution to achieve social equity 
(C)  Providing tax relief to corporates to boost economic growth 
(D)  Stabilization of the economy through fiscal measures 
2. Which of the following is NOT a part of the money supply in an economy? 
(A)  Currency held by the central bank 
(B)  Demand deposits in commercial banks 
(C)  Saving accounts in commercial banks 
(D)  Time deposits in commercial banks 
3. Which of the following is NOT a typical tool of monetary policy used by a 
central bank? 
(A)  Open market operations 
(B)  Changing the reserve requirements of commercial banks 
(C)  Adjusting the tax rates in the economy 
(D)  Changing the discount rate 
4.  Which of the following is the most effective monetary policy tool for managing 
short-term fluctuations in the economy? 
(A)  Open market operations 
(B)  Changing tax rates 
(C)  Changing government expenditure 
(D)  Price control measures 
5.  According to the Heckscher-Ohlin theory, a country will have a comparative 
advantage in the production of goods that: 
(A)  Require labour-intensive techniques if the country has a surplus of 
capital. 
2 
(B)  Utilize abundant factors of production that the country has in large 
supply. 
(C)  Require advanced technology in which the country is technologically 
superior. 
(D)  Require high labour costs in a country with low wages. 
6.  Which of the following is the main motivation for companies to engage in 
Foreign Direct Investment (FDI)? 
(A)  To reduce foreign competition in domestic markets 
(B)  To gain access to new markets and resources 
(C)  To avoid taxes in the home country 
(D)  To lower labour costs by outsourcing to developing countries 
7.  Which of the following would be an effect of a revaluation of a country’s 
currency? 
(A)  Increased demand for the country’s exports 
(B)  A decrease in the cost of imports for consumers 
(C)  Increased competitiveness of the country’s exports in the global market 
(D)  A higher cost of living for consumers due to decreased purchasing power 
8. In the context of trade negotiations, the term “Most-Favoured-Nation (MFN)” 
status refers to: 
(A)  A preferential treatment granted to one country over others in trade 
agreements. 
(B)  The obligation to trade exclusively with a particular country. 
(C)  A policy that allows countries to impose tariffs on imports from specific 
nations. 
(D)  A requirement to offer the same trade terms to all trading partners. 
9. Which of the following is a primary objective of India’s Five-Year Plans? 
(A)  To regulate and control foreign trade 
(B)  To promote balanced economic growth across all regions 
(C)  To discourage the private sector in favour of public enterprises 
(D)  To ensure foreign aid and capital inflows into the country 
10.  The Green Revolution in India focused primarily on increasing the production 
of: 
(A)  Oilseeds 
(B)  Food grains, especially wheat and rice 
(C)  Fruits and vegetables 
Page 3


1 
Mock Test Paper - Series II: January, 2025 
Date of Paper: 4
th
 January 2025 
Time of Paper: 10.30 A.M. to 12.30 P.M. 
 
FOUNDATION COURSE 
PAPER – 4: BUSINESS ECONOMICS 
Time: 2 hours       Marks: 100  
1.  Which of the following is NOT a function of public finance? 
(A)  Allocation of resources for public goods 
(B)  Income redistribution to achieve social equity 
(C)  Providing tax relief to corporates to boost economic growth 
(D)  Stabilization of the economy through fiscal measures 
2. Which of the following is NOT a part of the money supply in an economy? 
(A)  Currency held by the central bank 
(B)  Demand deposits in commercial banks 
(C)  Saving accounts in commercial banks 
(D)  Time deposits in commercial banks 
3. Which of the following is NOT a typical tool of monetary policy used by a 
central bank? 
(A)  Open market operations 
(B)  Changing the reserve requirements of commercial banks 
(C)  Adjusting the tax rates in the economy 
(D)  Changing the discount rate 
4.  Which of the following is the most effective monetary policy tool for managing 
short-term fluctuations in the economy? 
(A)  Open market operations 
(B)  Changing tax rates 
(C)  Changing government expenditure 
(D)  Price control measures 
5.  According to the Heckscher-Ohlin theory, a country will have a comparative 
advantage in the production of goods that: 
(A)  Require labour-intensive techniques if the country has a surplus of 
capital. 
2 
(B)  Utilize abundant factors of production that the country has in large 
supply. 
(C)  Require advanced technology in which the country is technologically 
superior. 
(D)  Require high labour costs in a country with low wages. 
6.  Which of the following is the main motivation for companies to engage in 
Foreign Direct Investment (FDI)? 
(A)  To reduce foreign competition in domestic markets 
(B)  To gain access to new markets and resources 
(C)  To avoid taxes in the home country 
(D)  To lower labour costs by outsourcing to developing countries 
7.  Which of the following would be an effect of a revaluation of a country’s 
currency? 
(A)  Increased demand for the country’s exports 
(B)  A decrease in the cost of imports for consumers 
(C)  Increased competitiveness of the country’s exports in the global market 
(D)  A higher cost of living for consumers due to decreased purchasing power 
8. In the context of trade negotiations, the term “Most-Favoured-Nation (MFN)” 
status refers to: 
(A)  A preferential treatment granted to one country over others in trade 
agreements. 
(B)  The obligation to trade exclusively with a particular country. 
(C)  A policy that allows countries to impose tariffs on imports from specific 
nations. 
(D)  A requirement to offer the same trade terms to all trading partners. 
9. Which of the following is a primary objective of India’s Five-Year Plans? 
(A)  To regulate and control foreign trade 
(B)  To promote balanced economic growth across all regions 
(C)  To discourage the private sector in favour of public enterprises 
(D)  To ensure foreign aid and capital inflows into the country 
10.  The Green Revolution in India focused primarily on increasing the production 
of: 
(A)  Oilseeds 
(B)  Food grains, especially wheat and rice 
(C)  Fruits and vegetables 
3 
(D)  Cash crops like cotton and sugarcane 
11.  Which of the following policies has the Indian government adopted to promote 
small-scale industries? 
(A)  Granting subsidies to large multinational corporations 
(B)  Providing financial and technical assistance to small businesses 
(C)  Encouraging imports of capital goods for industrial use 
(D)  Abolishing labour laws to increase industrial output 
12. Which of the following is the most important source of India’s foreign 
exchange earnings? 
(A)  Industrial exports 
(B)  Remittances from Indians working abroad 
(C)  Tourism 
(D)  Services exports, especially IT and software 
13.  The current account deficit (CAD) in India refers to the excess of: 
(A)  Imports over exports 
(B)  Exports over imports 
(C)  Total investment over savings 
(D)  Government expenditure over revenue 
14. Which of the following is a correct measure of unemployment in India? 
(A)  Labour force participation rate 
(B)  Gross Domestic Product per capita 
(C)  Inflation rate 
(D)  Poverty headcount ratio 
15.  Which of the following is the primary objective of India’s fiscal policy? 
(A)  To regulate foreign exchange rates 
(B)  To control inflation through market mechanisms 
(C)  To manage government expenditure and tax collection to influence the 
economy 
(D)  To encourage high savings rates among citizens 
16.  Which of the following is a major issue associated with the fiscal deficit in 
India? 
(A)  Increased foreign exchange reserves 
(B)  Higher government borrowing leading to inflation 
Page 4


1 
Mock Test Paper - Series II: January, 2025 
Date of Paper: 4
th
 January 2025 
Time of Paper: 10.30 A.M. to 12.30 P.M. 
 
FOUNDATION COURSE 
PAPER – 4: BUSINESS ECONOMICS 
Time: 2 hours       Marks: 100  
1.  Which of the following is NOT a function of public finance? 
(A)  Allocation of resources for public goods 
(B)  Income redistribution to achieve social equity 
(C)  Providing tax relief to corporates to boost economic growth 
(D)  Stabilization of the economy through fiscal measures 
2. Which of the following is NOT a part of the money supply in an economy? 
(A)  Currency held by the central bank 
(B)  Demand deposits in commercial banks 
(C)  Saving accounts in commercial banks 
(D)  Time deposits in commercial banks 
3. Which of the following is NOT a typical tool of monetary policy used by a 
central bank? 
(A)  Open market operations 
(B)  Changing the reserve requirements of commercial banks 
(C)  Adjusting the tax rates in the economy 
(D)  Changing the discount rate 
4.  Which of the following is the most effective monetary policy tool for managing 
short-term fluctuations in the economy? 
(A)  Open market operations 
(B)  Changing tax rates 
(C)  Changing government expenditure 
(D)  Price control measures 
5.  According to the Heckscher-Ohlin theory, a country will have a comparative 
advantage in the production of goods that: 
(A)  Require labour-intensive techniques if the country has a surplus of 
capital. 
2 
(B)  Utilize abundant factors of production that the country has in large 
supply. 
(C)  Require advanced technology in which the country is technologically 
superior. 
(D)  Require high labour costs in a country with low wages. 
6.  Which of the following is the main motivation for companies to engage in 
Foreign Direct Investment (FDI)? 
(A)  To reduce foreign competition in domestic markets 
(B)  To gain access to new markets and resources 
(C)  To avoid taxes in the home country 
(D)  To lower labour costs by outsourcing to developing countries 
7.  Which of the following would be an effect of a revaluation of a country’s 
currency? 
(A)  Increased demand for the country’s exports 
(B)  A decrease in the cost of imports for consumers 
(C)  Increased competitiveness of the country’s exports in the global market 
(D)  A higher cost of living for consumers due to decreased purchasing power 
8. In the context of trade negotiations, the term “Most-Favoured-Nation (MFN)” 
status refers to: 
(A)  A preferential treatment granted to one country over others in trade 
agreements. 
(B)  The obligation to trade exclusively with a particular country. 
(C)  A policy that allows countries to impose tariffs on imports from specific 
nations. 
(D)  A requirement to offer the same trade terms to all trading partners. 
9. Which of the following is a primary objective of India’s Five-Year Plans? 
(A)  To regulate and control foreign trade 
(B)  To promote balanced economic growth across all regions 
(C)  To discourage the private sector in favour of public enterprises 
(D)  To ensure foreign aid and capital inflows into the country 
10.  The Green Revolution in India focused primarily on increasing the production 
of: 
(A)  Oilseeds 
(B)  Food grains, especially wheat and rice 
(C)  Fruits and vegetables 
3 
(D)  Cash crops like cotton and sugarcane 
11.  Which of the following policies has the Indian government adopted to promote 
small-scale industries? 
(A)  Granting subsidies to large multinational corporations 
(B)  Providing financial and technical assistance to small businesses 
(C)  Encouraging imports of capital goods for industrial use 
(D)  Abolishing labour laws to increase industrial output 
12. Which of the following is the most important source of India’s foreign 
exchange earnings? 
(A)  Industrial exports 
(B)  Remittances from Indians working abroad 
(C)  Tourism 
(D)  Services exports, especially IT and software 
13.  The current account deficit (CAD) in India refers to the excess of: 
(A)  Imports over exports 
(B)  Exports over imports 
(C)  Total investment over savings 
(D)  Government expenditure over revenue 
14. Which of the following is a correct measure of unemployment in India? 
(A)  Labour force participation rate 
(B)  Gross Domestic Product per capita 
(C)  Inflation rate 
(D)  Poverty headcount ratio 
15.  Which of the following is the primary objective of India’s fiscal policy? 
(A)  To regulate foreign exchange rates 
(B)  To control inflation through market mechanisms 
(C)  To manage government expenditure and tax collection to influence the 
economy 
(D)  To encourage high savings rates among citizens 
16.  Which of the following is a major issue associated with the fiscal deficit in 
India? 
(A)  Increased foreign exchange reserves 
(B)  Higher government borrowing leading to inflation 
4 
(C)  Reduced taxation leading to a decrease in government revenue 
(D)  Increase in foreign direct investments 
17.  Which of the economists below most likely advocated activist government 
policies? 
(A)  Milton Friedman  
(B)  John Maynard Keynes 
(C)  Robert Lucas  
(D)  Thomas Sargent  
18.   Which of the following refers to the study of the total or aggregate level of 
output, income, employment, consumption, investment, and prices for the 
economy viewed as a whole? 
(A)  Managerial economics  
(B)  Microeconomics 
(C)  Macroeconomics 
(D)  Econometrics 
19.  Implicit cost is equal to: 
(A) business profit minus economic profit. 
(B)  business profit plus economic profit. 
(C)  economic profit minus business profit.  
(D)  economic profit minus explicit cost.  
20. If the demand curve for a firm's output is perfectly elastic, then the firm is: 
(A)  a monopolist. 
(B)  perfectly competitive.  
(C)  an oligopolist.  
(D)  monopolistically competitive.  
21. The type of industry organization that is characterized by recognized 
interdependence and nonprice competition among firms is called: 
(A)  monopoly 
(B)  perfect competition. 
(C)  oligopoly.  
(D)  monopolistic competition.  
22.  Short-run average variable cost is equal to: 
(A)  total variable cost divided by output. 
Page 5


1 
Mock Test Paper - Series II: January, 2025 
Date of Paper: 4
th
 January 2025 
Time of Paper: 10.30 A.M. to 12.30 P.M. 
 
FOUNDATION COURSE 
PAPER – 4: BUSINESS ECONOMICS 
Time: 2 hours       Marks: 100  
1.  Which of the following is NOT a function of public finance? 
(A)  Allocation of resources for public goods 
(B)  Income redistribution to achieve social equity 
(C)  Providing tax relief to corporates to boost economic growth 
(D)  Stabilization of the economy through fiscal measures 
2. Which of the following is NOT a part of the money supply in an economy? 
(A)  Currency held by the central bank 
(B)  Demand deposits in commercial banks 
(C)  Saving accounts in commercial banks 
(D)  Time deposits in commercial banks 
3. Which of the following is NOT a typical tool of monetary policy used by a 
central bank? 
(A)  Open market operations 
(B)  Changing the reserve requirements of commercial banks 
(C)  Adjusting the tax rates in the economy 
(D)  Changing the discount rate 
4.  Which of the following is the most effective monetary policy tool for managing 
short-term fluctuations in the economy? 
(A)  Open market operations 
(B)  Changing tax rates 
(C)  Changing government expenditure 
(D)  Price control measures 
5.  According to the Heckscher-Ohlin theory, a country will have a comparative 
advantage in the production of goods that: 
(A)  Require labour-intensive techniques if the country has a surplus of 
capital. 
2 
(B)  Utilize abundant factors of production that the country has in large 
supply. 
(C)  Require advanced technology in which the country is technologically 
superior. 
(D)  Require high labour costs in a country with low wages. 
6.  Which of the following is the main motivation for companies to engage in 
Foreign Direct Investment (FDI)? 
(A)  To reduce foreign competition in domestic markets 
(B)  To gain access to new markets and resources 
(C)  To avoid taxes in the home country 
(D)  To lower labour costs by outsourcing to developing countries 
7.  Which of the following would be an effect of a revaluation of a country’s 
currency? 
(A)  Increased demand for the country’s exports 
(B)  A decrease in the cost of imports for consumers 
(C)  Increased competitiveness of the country’s exports in the global market 
(D)  A higher cost of living for consumers due to decreased purchasing power 
8. In the context of trade negotiations, the term “Most-Favoured-Nation (MFN)” 
status refers to: 
(A)  A preferential treatment granted to one country over others in trade 
agreements. 
(B)  The obligation to trade exclusively with a particular country. 
(C)  A policy that allows countries to impose tariffs on imports from specific 
nations. 
(D)  A requirement to offer the same trade terms to all trading partners. 
9. Which of the following is a primary objective of India’s Five-Year Plans? 
(A)  To regulate and control foreign trade 
(B)  To promote balanced economic growth across all regions 
(C)  To discourage the private sector in favour of public enterprises 
(D)  To ensure foreign aid and capital inflows into the country 
10.  The Green Revolution in India focused primarily on increasing the production 
of: 
(A)  Oilseeds 
(B)  Food grains, especially wheat and rice 
(C)  Fruits and vegetables 
3 
(D)  Cash crops like cotton and sugarcane 
11.  Which of the following policies has the Indian government adopted to promote 
small-scale industries? 
(A)  Granting subsidies to large multinational corporations 
(B)  Providing financial and technical assistance to small businesses 
(C)  Encouraging imports of capital goods for industrial use 
(D)  Abolishing labour laws to increase industrial output 
12. Which of the following is the most important source of India’s foreign 
exchange earnings? 
(A)  Industrial exports 
(B)  Remittances from Indians working abroad 
(C)  Tourism 
(D)  Services exports, especially IT and software 
13.  The current account deficit (CAD) in India refers to the excess of: 
(A)  Imports over exports 
(B)  Exports over imports 
(C)  Total investment over savings 
(D)  Government expenditure over revenue 
14. Which of the following is a correct measure of unemployment in India? 
(A)  Labour force participation rate 
(B)  Gross Domestic Product per capita 
(C)  Inflation rate 
(D)  Poverty headcount ratio 
15.  Which of the following is the primary objective of India’s fiscal policy? 
(A)  To regulate foreign exchange rates 
(B)  To control inflation through market mechanisms 
(C)  To manage government expenditure and tax collection to influence the 
economy 
(D)  To encourage high savings rates among citizens 
16.  Which of the following is a major issue associated with the fiscal deficit in 
India? 
(A)  Increased foreign exchange reserves 
(B)  Higher government borrowing leading to inflation 
4 
(C)  Reduced taxation leading to a decrease in government revenue 
(D)  Increase in foreign direct investments 
17.  Which of the economists below most likely advocated activist government 
policies? 
(A)  Milton Friedman  
(B)  John Maynard Keynes 
(C)  Robert Lucas  
(D)  Thomas Sargent  
18.   Which of the following refers to the study of the total or aggregate level of 
output, income, employment, consumption, investment, and prices for the 
economy viewed as a whole? 
(A)  Managerial economics  
(B)  Microeconomics 
(C)  Macroeconomics 
(D)  Econometrics 
19.  Implicit cost is equal to: 
(A) business profit minus economic profit. 
(B)  business profit plus economic profit. 
(C)  economic profit minus business profit.  
(D)  economic profit minus explicit cost.  
20. If the demand curve for a firm's output is perfectly elastic, then the firm is: 
(A)  a monopolist. 
(B)  perfectly competitive.  
(C)  an oligopolist.  
(D)  monopolistically competitive.  
21. The type of industry organization that is characterized by recognized 
interdependence and nonprice competition among firms is called: 
(A)  monopoly 
(B)  perfect competition. 
(C)  oligopoly.  
(D)  monopolistic competition.  
22.  Short-run average variable cost is equal to: 
(A)  total variable cost divided by output. 
5 
(B)  average total cost minus average fixed cost. 
(C)  the cost per unit of the variable input divided by the average product of 
the variable input. 
(D)  All of the above are correct. 
23.  The restaurant industry has a market structure that comes closest to: 
(A)  monopolistic competition.  
(B)  oligopoly 
(C)  perfect competition.  
(D)  monopoly.  
24.  Which of the following statements is true?  
(A)  NDP is greater than GDP if prices are falling  
(B)  NDP is greater than GDP if prices are rising 
(C)  NDP can be greater than GDP but only if the economy is growing 
(D)  NDP cannot be greater than GDP 
25.  The difference between gross domestic investment and net domestic 
investment is equal to: 
(A)  unwanted inventory changes  
(B)  the difference between NDP and national income 
(C)  the addition to the capital stock 
(D)  the difference between GDP and NDP  
26.  Which of the following marks the beginning of a contraction in the business 
cycle:  
(A)  Peak 
(B)  Expansion  
(C)  Recession 
(D)  Trough  
27.  A recession can manifest itself with:  
(A)  a decrease in industrial production.  
(B)  a decrease in consumer spending. 
(C)  a lengthy period of falling GDP.  
(D)  all the above.  
28.  Economic globalization has seen:  
(A)  business cycles in the rest of the world synchronize with those of India.