Economics · General Awareness

Economic Principles

1,097 Questions

Economic principles form the foundation of how societies allocate resources and produce goods. This topic covers factors of production, types of capital, and demand classifications. It is a vital component of the economics syllabus in many civil services and banking exams.

Factors of productionCapital typesDemand classificationsEconomic activities

Economic Principles Questions

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

What are 'raw materials and money in hand' called?

  1. Working capital

  2. Fixed capital

  3. Physical capital

  4. Human capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Working capital  is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital equals to current assets. Working capital is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Those hidden qualities in a person which earn him an income and cannot be transferred from one place to another are called ________.

  1. trade capital

  2. social capital

  3. human or personal capital

  4. fixed capital
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Human capital belongs to that person itself, it cannot be delegated or transferred from one person to another. It is an individual's effort and potential talent coinciding with the availability of proper opportunity which helps them to earn income.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Capital includes all those goods (items or commodities) which are used for further production of more goods, e.g. _______________.

  1. machines and tools

  2. factory buildings

  3. transport equipments

  4. all the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital goods are generally a long term investment as it is used to produce many different products. 

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

What is remunerative capital?

  1. Capital provided to the government

  2. Capital provided to private companies

  3. Capital provided to workers in the form of wages

  4. Capital provided to the society
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Remunerative capital refers to the payment made to the workers for their contribution to production. It is a capital provided to workers in the form of wages. E.g. salaries, wages, allowance for food etc.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Give an example of a sunk capital.

  1. A textile weaving machine

  2. Photographic films

  3. Railways

  4. Wool
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Sunk capital refers to assets that are specific to a particular use and cannot be easily repurposed or recovered. A textile weaving machine is designed for a specific production process, making it a classic example of sunk capital.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

The functions of capital include provision for subsistence, provision for appliances, _______.

  1. provision for raw material

  2. provision for marketing and sales promotion

  3. economic development

  4. all the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital has a large set of effects and is generally used for multiple purposes. 

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Those producer goods having a long life which can be used again and again in production processes are called ___________.

  1. trade capital

  2. fixed capital

  3. social capital

  4. human capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fixed capital refers to durable producer goods, such as machinery or buildings, that are used repeatedly in the production process over a long period. Unlike circulating capital, they do not change their form during production.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

The process of capital formation occurs in three stages.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
The 3 stages of capital formation are as follows;
1)creation of savings;increase in the volume of savings
2)mobilization of saving;credit and financial mechanism so that available savings are utilized by private and public sectors
3)investment of savings:the act of investment by which resources are used for production of capital goods.
Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Capital-output ratio of a commodity measures ________. 

  1. its per unit cost of production

  2. the amount of capital invested per unit of output

  3. the ratio of capital depreciation to quantity of output

  4. the ratio of working capital employed to quantity of output
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Capital-output ratio is measured by calculating the proportion of capital investment needed to produce one unit of output. Capital-output ratio helps to determine the productivity of the economy.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

In the short run which of the following is fixed?

  1. Labor

  2. Capital

  3. Raw material

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In short run period(which generally means period within 1 year)capital remains fixed as capital formation needs high investment and moreover in short run even when the output is zero some fixed cost is incurred by the firm due to capital .

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Labour intensive technique would get chosen in a _______.

  1. Labour surplus economy

  2. Capital surplus economy

  3. Developed economy

  4. Developing economy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The economy has to decide about technique of production on the basis of cost of labour and capital. A labour surplus economy choose labour intensive techniques and a capital surplus economy choose capital - intensive technique.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Find the odd option out.

  1. Capital is man-made

  2. All capital is wealth

  3. Capital is durable

  4. Mobilisation of savings
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital is that wealth which is used in the production of goods and services in an economy: capital and human resource have an integrated  relationship:capital has to withstand wear ,pressure, damage etc.MOBILISATION OF SAVINGS is the odd one as it is not a feature of capital