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

Capital that can be used for several purposes or by several industries is ___________.

  1. working capital

  2. social capital

  3. floating capital

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

Floating capital can be used for many purposes or by several industries. It is a part of capital that is invested in current assets of the organization, like raw materials.

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

Leather in a shoe factory is _______.

  1. fixed capital

  2. sunk capital

  3. floating capital

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

Floating capital refers to the raw material part of the capital also known as working capital which can be used in many ways in the factory. Therefore, leather in a shoe factory is a floating capital.

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

Consider the following groups of items:
(i)Factory buildings
(ii)Plant and Machinery
(iii) Stocks of raw materials
(iv)Wage bills
Which of these are known as working capital?

  1. i and ii

  2. iii and iv

  3. i, ii and iii

  4. ii, iii and iv
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Working capital refers to those goods which are used to run the day-to-day activities in an organization. Thus stocks of raw materials and wage bills comprise the working capital.

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

In economics, the term 'capital' means-
I. Money introduced in business.
II. Things like tools, machines & equipment.
Select the correct answer from the options given below-

  1. I only

  2. II only

  3. Both I and II

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

Capital is the overall investment that is done in the business which is used either in the form of money or converted into assets, like tools, machines and equipment which are used productively to yield output.

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

If a Resource is lying idle, it will constitute ______________.

  1. Wealth

  2. Capital

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Wealth is defined as anything that has value and can be owned. Even if a resource is lying idle, it still possesses value and constitutes wealth, though it is not currently functioning as capital.

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

All Capital is Wealth, but all Wealth is not Capital. This statement is ____________.

  1. True

  2. False

  3. Partially True

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

Capital is a specific type of wealth used to produce more goods or services. Since all capital must be wealth, but not all wealth (like consumer goods) is used for production, the statement is true.

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

As a Factor of Production, "Capital" can be used for _______________.

  1. Further production of wealth

  2. Yielding further income

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital is defined as a factor of production that is used to create more wealth or generate income. Both options (a) and (b) describe the functional purpose of capital.

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

The process of increase in the stock of real capital in a country is called ______________.

  1. Stock Increase

  2. Capital Formation

  3. Increase in GDP

  4. Resource Allocation
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Capital formation is the process of increasing the stock of real capital, such as machinery, equipment, and infrastructure, within an economy.

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

"Capital" is considered as a "produced means of production". This statement is _________________.

  1. True

  2. False

  3. Partially True

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

Capital is not a natural resource; it is created by human effort to be used in further production, which is why it is called a produced means of production.

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

If a Resource is being used for generating further revenue, it will constitute _______________.

  1. Wealth

  2. Capital

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A resource used for generating revenue is both wealth (because it has value) and capital (because it is used in production).

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

As a Factor of Production, "Capital" is _________________.

  1. A free gift of nature

  2. Produced by man alone

  3. Produced by the man working with nature

  4. Not relevant at all.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital is created by human labor acting upon natural resources. It is neither a free gift of nature nor produced by man alone without raw materials.

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

As a Factor of Production, "Capital" is a ________ means of Production.

  1. Original

  2. Primary

  3. Produced

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

Capital is classified as a produced means of production because it is created by humans to facilitate further production, unlike land which is an original or primary factor.

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

Capital Formation is required for _____________________.

  1. Replacement and renovation of existing machinery and equipments

  2. Creating additional productive capacity

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital formation is essential for both maintaining existing productive capacity (replacement/renovation) and expanding it (additional capacity).