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Economics: CUET Mock Test - 3 - CUET MCQ


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30 Questions MCQ Test - Economics: CUET Mock Test - 3

Economics: CUET Mock Test - 3 for CUET 2025 is part of CUET preparation. The Economics: CUET Mock Test - 3 questions and answers have been prepared according to the CUET exam syllabus.The Economics: CUET Mock Test - 3 MCQs are made for CUET 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Economics: CUET Mock Test - 3 below.
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Economics: CUET Mock Test - 3 - Question 1
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The term foreign exchange means

Detailed Solution for Economics: CUET Mock Test - 3 - Question 1

The correct answer is D: Stock of foreign currency with domestic country.

Explanation: Foreign exchange refers to the reserves or stock of foreign currencies held by a country, which is used for international trade and transactions. It is not about the exchange of goods or services directly. Therefore, Option D is the correct definition of foreign exchange.

Option A is incorrect because foreign exchange does not involve trading goods directly for goods from another country. Option B is incorrect because it involves trading goods for services, which is not the definition of foreign exchange. Option C is incorrect as foreign exchange deals with the stock of currency rather than the exchange of goods for currency.

Economics: CUET Mock Test - 3 - Question 2
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Categorize the following as induced investment and autonomous investment.

Government has set up public health centres in rural areas.

Detailed Solution for Economics: CUET Mock Test - 3 - Question 2

The correct answer is Option 2.

Key Points

  • Autonomous Investment means an investment that remains unaffected by the changes in the level of income, rate of interest, and rate of profit. On the contrary, induced investment is one that is positively related to the level of income, output, and profit.
  • The establishment of public health centres and governments' investment in saving Sunder-ban forests are investments done without a profit motive.
  • Autonomous Investments can include government investments, funds allocated to public goods or infrastructure, and any other type of investment that is not dependent on changes in GDP.
  • Suppose the total capacity of the firm is that it can produce 500 units of output from 100 machines. Now, if the firm makes an investment to change the existing machinery, with more advanced machinery that can produce 500 units of output from 10 machines. It is said to be autonomous investment, as there is no increase in capacity.
  • The government has set up public health centres in rural areas without any rate of interest and any rate of profit under the social schemes. Hence, Public Health Centres are autonomous investments.
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Economics: CUET Mock Test - 3 - Question 3
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Current Account components of trade in services include:

(A) Gifts, Remittances

(B) Grants

(C) Net Investment Income

Choose the correct answer from the options given below:

Detailed Solution for Economics: CUET Mock Test - 3 - Question 3

  • (A) Gifts, Remittances: These are current transfers, not part of trade in services.

  • (B) Grants: Grants are also current transfers, not trade in services.

  • (C) Net Investment Income: This falls under income account (factor income), not trade in services.

Therefore, none of these options are components of trade in services in the current account.

Economics: CUET Mock Test - 3 - Question 4
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Repo-Rate is the rate at which RBI lends money to commercial Banks for ______.
Detailed Solution for Economics: CUET Mock Test - 3 - Question 4

Repo-Rate is the rate at which RBI lends money to commercial Banks for a short period.

Key Points

  • Short period:
    • The Repo Rate, or Repurchase Rate, is a key monetary policy tool used by the Reserve Bank of India (RBI) to control liquidity and inflation in the economy.
    • It is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds. This is done by purchasing government bonds from commercial banks with an agreement to sell them back at a predetermined rate.
    • This tool is primarily used for short-term purposes, making it a critical component in managing the country's monetary policy.

Additional Information

  • Long period:
    • The term "long period" typically refers to the lending or borrowing of funds over an extended duration. The Repo Rate, however, is not used for such long-term transactions.
    • Long-term interest rates, such as the Marginal Standing Facility Rate or the Bank Rate, are different tools that the RBI uses for managing liquidity over longer durations.
  • Very long period:
    • Similar to the "long period" option, a "very long period" is not applicable to the Repo Rate since it is specifically designed for short-term financial management.
  • Market period:
    • While the Repo Rate does influence market periods by affecting the cost of borrowing for banks, the term "market period" itself does not directly describe the duration for which the RBI lends money to commercial banks through the Repo Rate mechanism.
Economics: CUET Mock Test - 3 - Question 5
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Value Added Method of calculating aggregate annual value of goods and services is also called :
Detailed Solution for Economics: CUET Mock Test - 3 - Question 5

The correct answer is 'Product Method'

Key Points

  • Product Method:
    • The Product Method, also known as the Value Added Method, is a technique for calculating the aggregate value of goods and services produced within an economy over a specific period.
    • This method sums up the value added at each stage of production to avoid double counting, providing a clear measure of the economy's total output.
    • It focuses on the final products and services generated, making it a direct approach to calculate the Gross Domestic Product (GDP).

Additional Information

  • Income Method:
    • This method calculates GDP by summing up all incomes earned in the economy, including wages, profits, rent, and taxes, minus subsidies.
    • It reflects the income side of the economy's performance but does not directly measure the output of goods and services.
  • Expenditure Method:
    • It sums up total spending on the nation's final goods and services over a specific period.
    • The formula includes consumption, investment, government spending, and net exports (exports minus imports).
    • This approach reflects the demand side of the economy.
  • Cost and Revenue Method:
    • This is not a standard approach for calculating the aggregate value of goods and services in macroeconomics.
    • Typically, the focus is on product, income, and expenditure methods for GDP calculation.
Economics: CUET Mock Test - 3 - Question 6
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Which of the following instrument of trade protection directly raises the price of the commodity in the domestic economy ?
Detailed Solution for Economics: CUET Mock Test - 3 - Question 6

Import tariff directly raises the price of the commodity in the domestic economy.

Key Points

  • Import tariff:
    • An import tariff is a tax imposed by a government on goods imported into the country.
    • The primary effect of an import tariff is to increase the cost of the imported goods in the domestic market, making them less competitive compared to locally produced goods.
    • This increase in price can reduce the quantity of imports, protect domestic industries from foreign competition, and generate revenue for the government.

Additional Information

  • Import substitution:
    • Import substitution is a strategy aimed at reducing dependency on imported goods by encouraging the production of these goods domestically.
    • While it focuses on boosting local industries, it does not directly raise the price of commodities in the domestic economy.
  • Export subsidy:
    • Export subsidies are financial support from the government to firms or industries to boost their exports.
    • These subsidies make domestic goods more competitive in foreign markets but do not directly affect the price of commodities in the domestic economy.
  • Import liberalisation:
    • Import liberalisation involves reducing or eliminating trade barriers, such as tariffs and quotas, to allow for a freer flow of goods into a country.
    • Rather than increasing prices, it tends to lower them by increasing competition and availability of foreign goods.
Economics: CUET Mock Test - 3 - Question 7
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Match List-I with List-II :

Choose the correct answer from the options given below :
Detailed Solution for Economics: CUET Mock Test - 3 - Question 7

(A) Market Demand: The total demand in a market, calculated as the sum of individual demands. Matches with (I).
(B) Law of Demand: States that as the price of a good falls, quantity demanded rises (inverse relationship). Matches with (II).
(C) Price Elasticity of Demand: Measures how sensitive demand is to price changes. Matches with (III).
(D) Giffen Goods: Rare goods where demand rises as price increases, defying the law of demand (e.g., staple foods for the poor). Matches with (IV).
The correct pairing is (A) - (I), (B) - (II), (C) - (III), (D) - (IV), which corresponds to option (b).

Economics: CUET Mock Test - 3 - Question 8
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Match List-I with List-II :

Choose the correct answer from the options given below :
Detailed Solution for Economics: CUET Mock Test - 3 - Question 8

(A) Total Fixed Cost (TFC): Costs that remain constant regardless of output (e.g., rent). Matches with (I).
(B) Total Variable Cost (TVC): Costs that vary with output (e.g., raw materials). Matches with (II).
(C) Total Cost (TC): The sum of TFC and TVC (TC = TFC + TVC). Matches with (III).
(D) Marginal Cost (MC): The extra cost of producing one additional unit of output. Matches with (IV).
The correct pairing is (A) - (I), (B) - (II), (C) - (III), (D) - (IV), which corresponds to option (a).

Economics: CUET Mock Test - 3 - Question 9
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Match List-I with List-II :

Choose the correct answer from the options given below :
Detailed Solution for Economics: CUET Mock Test - 3 - Question 9

(A) Constant Returns to Scale (CRS): Output grows proportionally with inputs (e.g., double inputs, double output). Matches with (I).
(B) Increasing Returns to Scale (IRS): Output grows more than proportionally with inputs (e.g., double inputs, triple output). Matches with (II).
(C) Decreasing Returns to Scale (DRS): Output grows less than proportionally with inputs (e.g., double inputs, output less than doubles). Matches with (III).
(D) Law of Variable Proportions: A short-run concept where one input is fixed, and output varies with changes in variable inputs. Matches with (IV).
The correct pairing is (A) - (I), (B) - (II), (C) - (III), (D) - (IV), which corresponds to option (b).

Economics: CUET Mock Test - 3 - Question 10
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Match List-I with List-II :

Choose the correct answer from the options given below :
Detailed Solution for Economics: CUET Mock Test - 3 - Question 10

(A) Short Run: A time period where at least one factor (e.g., capital) is fixed. Matches with (I).
(B) Long Run: A time period where all factors (e.g., labor, capital) are variable. Matches with (II).
(C) Fixed Factor: A resource that cannot be adjusted in the short run (e.g., factory size). Matches with (III).
(D) Variable Factor: A resource that can be adjusted to change output (e.g., labor). Matches with (IV).
The correct pairing is (A) - (I), (B) - (II), (C) - (III), (D) - (IV), which corresponds to option (a).

Economics: CUET Mock Test - 3 - Question 11
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In a centrally planned economy, the central problems are solved by
Detailed Solution for Economics: CUET Mock Test - 3 - Question 11

Method which can be employed to solve the central problems is the adoption of economic planning. In this method, the solution of the various basic problems is not achieved through the free working of demand for and supply of goods and factors. But to solve these problems, Government sets up a central planning authority which has been called by several names, such as planning commission, planning ministry or planning board.

Economics: CUET Mock Test - 3 - Question 12
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A movement along a PPC implies
Detailed Solution for Economics: CUET Mock Test - 3 - Question 12

The movement along the PPC from left to right shows that in order to produce more units of capital goods, the economy must sacrifice some amount of consumer goods.

Economics: CUET Mock Test - 3 - Question 13
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____________ shows various combinations of two goods that give same amount of satisfaction to the consumer?
Detailed Solution for Economics: CUET Mock Test - 3 - Question 13

An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility, thereby making the consumer indifferent. Indifference curves are heuristic devices used in contemporary microeconomics to demonstrate consumer preference and the limitations of a budget. Recent economists have adopted the principles of indifference curves in the study of welfare economics.

Economics: CUET Mock Test - 3 - Question 14
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The want satisfying power of a commodity is known as:
Detailed Solution for Economics: CUET Mock Test - 3 - Question 14

The want satisfying power of a commodity is called utility. It is a quality possessed by a commodity or service to satisfy human wants. Utility can also be defined as value-in-use of a commodity because the satisfaction which we get from the consumption of a commodity is its value-in-use.

Economics: CUET Mock Test - 3 - Question 15
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Consumer’s equilibrium means?
Detailed Solution for Economics: CUET Mock Test - 3 - Question 15
Consumer's equilibrium means:
Consumer's equilibrium refers to the position of rest or maximum satisfaction that a consumer achieves when consuming a combination of goods and services. It is the point at which the consumer allocates their income in a way that maximizes their utility or satisfaction.
Explanation:
Consumer's equilibrium is determined by the following factors:
1. Income: The consumer's income determines the amount of goods and services they can afford to consume. It is important to note that consumer's equilibrium is not dependent on the absolute level of income, but rather on the allocation of income among different goods and services.
2. Prices: The prices of goods and services also play a crucial role in determining consumer's equilibrium. The consumer will allocate their income in such a way that the marginal utility per unit of money spent on each good or service is equal. This is known as the principle of equimarginal utility.
3. Tastes and preferences: The consumer's tastes and preferences influence their choices and determine the utility they derive from consuming different goods and services. Consumer's equilibrium is achieved when the consumer allocates their income in a way that maximizes their overall satisfaction, based on their individual preferences.
4. Diminishing marginal utility: The concept of diminishing marginal utility states that as a consumer consumes more of a particular good or service, the marginal utility derived from each additional unit decreases. Therefore, the consumer will allocate their income in such a way that the marginal utility per unit of money spent is equal across different goods and services.
In conclusion, consumer's equilibrium is the position of maximum satisfaction that a consumer achieves when allocating their income among different goods and services. It is determined by the consumer's income, prices of goods and services, tastes and preferences, and the principle of equimarginal utility.
Economics: CUET Mock Test - 3 - Question 16
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How is TPP derived from MPP
Detailed Solution for Economics: CUET Mock Test - 3 - Question 16

Marginal physical product (MPP) is the change in the level of output due to a change in the level of variable input; restated, the MPP is the change in TPP for each unit of change in quantity of variable input.
Total physical product (TPP) -- Quantity of output that is produced from a firm's fixed inputs and a specified level of variable inputs.
So, by adding all the MPP, TPP can be derived.
 

Economics: CUET Mock Test - 3 - Question 17
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The elasticity of supply measures
Detailed Solution for Economics: CUET Mock Test - 3 - Question 17
The elasticity of supply measures:
The degree of responsiveness of quantity supplied at a particular price. This means that it measures how sensitive the quantity supplied is to changes in price. It is important in determining how producers will react to changes in market conditions and price fluctuations.
Key Points:
- Elasticity of supply is a measure of how much the quantity supplied changes in response to a change in price.
- It indicates the flexibility of producers to adjust their output levels in response to changes in price.
- The elasticity of supply can be influenced by various factors such as production costs, availability of inputs, and the time period under consideration.
- A high elasticity of supply means that producers can easily increase or decrease their output in response to price changes, indicating a more flexible supply curve.
- On the other hand, a low elasticity of supply suggests that producers have limited ability to adjust their output levels, resulting in a less flexible supply curve.
- The elasticity of supply is typically positive, as an increase in price usually leads to an increase in quantity supplied, and vice versa.
- However, the extent of the increase or decrease in quantity supplied will depend on the magnitude of the elasticity coefficient.
- Elasticity of supply is an important concept in economics as it helps to understand the responsiveness of producers to changes in market conditions and price signals.
- It is also crucial in determining the incidence of taxes or subsidies on producers and the overall market equilibrium.
Economics: CUET Mock Test - 3 - Question 18
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Marginal revenue in any competitive situation is?
Detailed Solution for Economics: CUET Mock Test - 3 - Question 18

Marginal revenue (MR) can be defined as additional revenue gained from the additional unit of output. Marginal revenue is the change in total revenue which results from the sale of one more or one less unit of output.
Formula:
Total revenue = TR
Total Unit = n
Total Unit less one unit = n-1
MR = TRn -TRn-1.

Economics: CUET Mock Test - 3 - Question 19
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In perfect competition, since the firm is a price taker, the ________ curve is straight line
Detailed Solution for Economics: CUET Mock Test - 3 - Question 19

Marginal revenue is the extra revenue generated when a perfectly competitive firm sells one more unit of output. The marginal revenue received by a firm is the change in total revenue divided by the change in quantity.

Perfect competition is a market structure with a large number of small firms, each identical selling goods. Perfectly competitive firms have perfect knowledge and perfect mobility into and out of the market. These conditions mean perfectly competitive firms are price takers, they have no market control and receive the going market price for all output sold.

Since they are the price takers and have no control over price but just the production, so even if they increase their quantity of production, still the price will remain constant and so does the marginal revenue.

Economics: CUET Mock Test - 3 - Question 20
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Which of the statements given above is/are correct?

i. The economic problem arises due to the scarcity of resources and unlimited wants.

ii. The decision of what to produce is solely based on consumer preferences without considering resource limitations.

iii. The distribution of goods in an economy does not address the inequality of income among individuals.

iv. Alternative uses of resources require an economy to make choices about production.
Detailed Solution for Economics: CUET Mock Test - 3 - Question 20
  • Statement i is correct as the economic problem stems from the conflict between limited resources and unlimited wants.
  • Statement ii is incorrect because the decision of what to produce must consider the limitations of resources.
  • Statement iii is incorrect because the distribution of goods does address income inequality.
  • Statement iv is correct as alternative uses of resources necessitate choices in production.

Therefore, the correct statements are i and iv and the correct answer is Option A. 

Economics: CUET Mock Test - 3 - Question 21
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What is the other name for opportunity cost in economics
Detailed Solution for Economics: CUET Mock Test - 3 - Question 21

Economic cost refers to the total value of all resources used in production, including both explicit and implicit costs. It is important for comparing different choices in economics. Here are some key points about economic cost:

  • Definition: Economic cost includes the value of all resources that are sacrificed when choosing one option over another.
  • Opportunity cost: This is a crucial aspect of economic cost, representing what is forgone when selecting one alternative instead of another.
  • Application: The concept applies to both individuals and societies, helping to make informed decisions about resource allocation.
  • Importance: Understanding economic cost aids in evaluating the efficiency and prudence of various courses of action.
Economics: CUET Mock Test - 3 - Question 22
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The general shape of TPP in the short run is
Detailed Solution for Economics: CUET Mock Test - 3 - Question 22

Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped.

Economics: CUET Mock Test - 3 - Question 23
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While a seller under perfect competition equates price and MC to maximize profits a monopolist should equate?
Detailed Solution for Economics: CUET Mock Test - 3 - Question 23

In a monopolistic market, there is only one firm that produces a product. There is absolute product differentiation because there is no substitute.

  • The marginal cost of production is the change in the total cost that arises when there is a change in the quantity produced.
  • The marginal revenue is the change in the total revenue that arises when there is a change in the quantity produced a firm maximizes its total profit by equating marginal cost to marginal revenue and solving for the price of one product and the quantity it must produce.
Economics: CUET Mock Test - 3 - Question 24
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What is a significant difference between macroeconomics and microeconomics?
Detailed Solution for Economics: CUET Mock Test - 3 - Question 24

Macroeconomics and microeconomics are two branches of economics that focus on different aspects of the economy:

  • Macroeconomics looks at the economy as a whole, studying overall economic factors such as national income, inflation, and unemployment.

  • Microeconomics examines individual sectors and the decision-making processes of consumers and firms, focusing on supply and demand in particular markets.

Thus, the significant difference lies in their scope: macroeconomics considers aggregate economic indicators, while microeconomics focuses on specific elements within the economy.

Economics: CUET Mock Test - 3 - Question 25
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Money flow is the flow of
Detailed Solution for Economics: CUET Mock Test - 3 - Question 25

The correct answer is A: Factor payments.

Explanation:

  • Money flow refers to the flow of payments made in exchange for the services of factors of production, expenditures on goods and services, taxes, and transfers
  • In the circular flow model of income, money flows from households to firms as factor payments (wages, rent, interest, and profit) and flows back to households as payment for goods and services
  • Therefore, money flow is specifically related to the flow of factor payments, making option A the correct answer
Economics: CUET Mock Test - 3 - Question 26
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One of the measures of money supply is
Detailed Solution for Economics: CUET Mock Test - 3 - Question 26

There are several standard measures of the money supply, including the monetary base, M1, and M2. The monetary base is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve).

Economics: CUET Mock Test - 3 - Question 27
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APC= 1-APS.

It is
Detailed Solution for Economics: CUET Mock Test - 3 - Question 27

The sum of the Average Propensity to Consume (APC) and Average Propensity to save (APS) is always equal to unity, i.e., APC + APS = 1. It is so because the money income can either be spent on consumption or it can be saved.

Economics: CUET Mock Test - 3 - Question 28
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Balance of payment Accounts is a
Detailed Solution for Economics: CUET Mock Test - 3 - Question 28

The balance of payments (BOP) is the method by which countries measure all of the international monetary transactions within a certain period.

Economics: CUET Mock Test - 3 - Question 29
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In a centrally planned economy, the central problems are solved by
Detailed Solution for Economics: CUET Mock Test - 3 - Question 29

In a centrally planned economy, the central authority, typically the government, is responsible for addressing key economic issues. This involves:

  • The government makes all significant decisions regarding the production, exchange, and consumption of goods and services.
  • It aims to allocate resources effectively to meet societal needs, ensuring that essential services, like education and healthcare, are adequately provided.
  • If certain goods or services are underproduced, the government may encourage production or directly supply these goods.
  • In cases of extreme inequality, the central authority may intervene to promote a fair distribution of resources.

Thus, the central authority plays a crucial role in solving the fundamental economic problems of 'what, how, and for whom to produce' through comprehensive planning.

Economics: CUET Mock Test - 3 - Question 30
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Cost of production is
Detailed Solution for Economics: CUET Mock Test - 3 - Question 30

Cost of production is the total price paid for resources used to manufacture a product or create a service to sell to consumers including raw materials, labor, and overhead.

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