Indian Economy MCQs: Nature of Indian Economy | Indian Economy for UPSC CSE PDF Download

Q1: Statement 1: Economics as a discipline is often considered a science.
Statement 2: As a science, it primarily deals with quantitative data and statistical models.
(a) Both statements are true.
(b) Both statements are false.
(c) Statement 1 is true, but Statement 2 is false.
(d) Statement 1 is false, but Statement 2 is true.
Ans: (c)
Economics is considered a science because it systematically studies human behavior and economic phenomena. However, it also incorporates qualitative aspects and theoretical models.

Q2: In microeconomics, the focus is on individual markets and players, whereas macroeconomics looks at the economy as a whole.
(a) True.
(b) False.
(c) True only for microeconomics.
(d) True only for macroeconomics.
Ans: (a)
Microeconomics deals with individual entities and their interactions, while macroeconomics studies the aggregate behavior and performance of the entire economy.

Q3: Statement 1: A capitalist economy is characterized by private ownership and market forces.
Statement 2: A socialist economy relies heavily on government control and public ownership of resources.
(a) Both statements are true.
(b) Both statements are false.
(c) Statement 1 is true, but Statement 2 is false.
(d) Statement 1 is false, but Statement 2 is true.
Ans: (a)
A capitalist economy is driven by private stakeholders and market dynamics, while a socialist economy is more controlled by the state with an emphasis on social welfare.

Q4: Statement 1: The Production Possibilities Frontier (PPF) represents various combinations of two goods that an economy can produce.
Statement 2: Points inside the PPF indicate efficient use of resources.
(a) Both statements are true.
(b) Both statements are false.
(c) Statement 1 is true, but Statement 2 is false.
(d) Statement 1 is false, but Statement 2 is true.
Ans: (c)
The PPF shows potential production levels of two commodities, but points inside the PPF represent inefficient use of resources.

Q5: The law of increasing opportunity cost states that as production of a good increases, the opportunity cost of producing an additional unit rises.
(a) True.
(b) False.
Ans: (a)
This principle highlights the trade-offs in resource allocation as production shifts from one product to another.

Q6: Statement 1: In a mixed economy, the economic decisions are made by both the government and private sectors.
Statement 2: Mixed economies combine elements of capitalist and socialist systems.
(a) Both statements are true.
(b) Both statements are false.
(c) Statement 1 is true, but Statement 2 is false.
(d) Statement 1 is false, but Statement 2 is true.
Ans: (a)
Mixed economies incorporate features of both capitalism and socialism, with decision-making shared between state and private entities.

Q7: Deductive reasoning in economics starts with a general hypothesis or theory and then moves to specific observations.
(a) True.
(b) False.
Ans: (a)
Deductive reasoning works from the more general to the more specific, starting with theorized principles and testing them through observations.

Q8: The central economic problems of any society revolve around what to produce, how to produce, and for whom to produce.
(a) True.
(b) False.
Ans: (a)
These questions address the core issues of resource allocation, production methods, and distribution in any economy.

Q9: Statement 1: Capital-intensive techniques are more likely to be chosen in developed economies.
Statement 2: Labor-intensive techniques are preferred in developing economies with labor surplus.
(a) Both statements are true.
(b) Both statements are false.
(c) Statement 1 is true, but Statement 2 is false.
(d) Statement 1 is false, but Statement 2 is true.
Ans: (a)
Developed economies with more capital tend to use capital-intensive methods, whereas labor-abundant developing economies often rely on labor-intensive techniques.

Q10: The opportunity cost is the cost of the next best alternative foregone.
(a) True.
(b) False.
Ans: (a)
Opportunity cost represents the benefits that could have been gained from an alternative option when another is chosen.

Q11: The concept of elasticity in economics measures the responsiveness of one variable to changes in another variable.
(a) True
(b) False
Ans: (a)
Elasticity is a key concept in economics that measures how one variable responds to changes in another, such as price or income.

Q12: Statement 1: Inflation is the rate at which the general level of prices for goods and services is rising.
Statement 2: Deflation is the decrease in the general price level of goods and services.
(a) Both statements are true
(b) Both statements are false
(c) Statement 1 is true, but Statement 2 is false
(d) Statement 1 is false, but Statement 2 is true
Ans: (a)
Inflation and deflation are opposite economic phenomena, with inflation indicating rising prices and deflation indicating falling prices.

Q13: Gross Domestic Product (GDP) measures the total income earned by a nation's factors of production within a given time period.
(a) True
(b) False
Ans: (a)
GDP is a broad measure of a nation's overall economic activity and includes the total income earned within a country.

Q14: Statement 1: A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity.
Statement 2: Monopolistic competition involves many firms selling products that are similar but not identical.
(a) Both statements are true
(b) Both statements are false
(c) Statement 1 is true, but Statement 2 is false
(d) Statement 1 is false, but Statement 2 is true
Ans: (a)
A monopoly is characterized by a single supplier, while monopolistic competition involves many competitors with differentiated products.

Q15: Fiscal policy is the use of government spending and taxation to influence the economy.
(a) True
(b) False
Ans: (a)
Fiscal policy involves government decisions about spending and taxation to manage the economy.

Q16: The Lorenz Curve is a graphical representation of income or wealth distribution in a society.
(a) True
(b) False
Ans: (a)
The Lorenz Curve is a widely used tool to depict income or wealth distribution, showing the proportion of total income earned by various segments of a population.

Q17: Statement 1: Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply.
Statement 2: Cost-push inflation is caused by a drop in aggregate supply due to increased prices of inputs.
(a) Both statements are true
(b) Both statements are false
(c) Statement 1 is true, but Statement 2 is false
(d) Statement 1 is false, but Statement 2 is true
Ans: (a)
Demand-pull inflation arises from high demand, while cost-push inflation results from increased costs of production.

Q18: Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service.
(a) True
(b) False
Ans: (a)
Marginal utility is a key concept in microeconomics, indicating the additional benefit gained from consuming an additional unit of a product.

Q19: Comparative advantage is the ability of a country to produce a particular good at a lower marginal and opportunity cost than another country.
(a) True
(b) False
Ans: (a)
Comparative advantage is a fundamental concept in international trade theory, describing the efficiency and cost benefits of different countries in producing specific goods.

Q20: The Phillips Curve represents the relationship between the rate of inflation and the unemployment rate.
(a) True
(b) False
Ans: (a)
The Phillips Curve is an economic concept that describes an inverse relationship between the rate of unemployment and the rate of inflation.