Economics · General Awareness

Economics Concepts and Theories

1,710 Questions

Review fundamental and advanced economics concepts through this structured question bank. The topics include macroeconomics, fiscal policy, international trade theories, and economic regulation. These questions are ideal for candidates preparing for civil services and other administrative competitive examinations.

Macroeconomics fundamentalsInternational trade theoriesFiscal policy debatesEconomic regulationLabor theory of value

Economics Concepts and Theories Questions

Multiple choice

Capital formation in an economy depends upon which of the following?

  1. Total income

  2. Total demand

  3. Total production

  4. Total supply

  5. Total population
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Total Income is the sum of all money received by an individual or organisation, including income from employment or providing services, revenue from sales, payments from pension plans, income from dividends, or other sources. Thus, capital formation in an economy depends upon its total income generation.

Multiple choice

'Open market operation' is a part of

  1. income policy

  2. credit policy

  3. labour policy

  4. fiscal policy

  5. medical policy
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

'Open market operation' is a part of credit policy. Open market operation includes any of the purchases and sales of government securities and sometimes commercial paper by the central banking authority for the purpose of regulating the money supply and credit conditions on a continuous basis.

Multiple choice

Which of the following is best suited to define the term MARKET?

  1. A place of exchange

  2. A place where exchange of goods takes place

  3. It is an arrangement that provides an opportunity of exchanging goods and services for money or money's worth.

  4. a and b

  5. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A market is defined broadly as an arrangement or mechanism that facilitates the exchange of goods and services between buyers and sellers, not just a physical location.

Multiple choice

Who propounded the 'market law'?

  1. Adam Smith

  2. J.B. Say

  3. T.R. Malthus

  4. David Ricardo
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Say's Law, or the law of markets, states that supply creates its own demand, propounded by the French economist Jean-Baptiste Say.

Multiple choice

Who propounded the 'market law'?

  1. Adam Smith

  2. J.B. Say

  3. T.R. Malthus

  4. David Ricardo
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Say's Law, or the law of markets, was propounded by the French economist Jean-Baptiste Say. It states that aggregate supply creates its own aggregate demand.

Multiple choice

Which among the following is not a trait of free market?

  1. Government control is minimal

  2. Prices are decided by market forces

  3. Always works in equilibrium

  4. Shortages and surpluses are rare.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A free market does not guarantee equilibrium; it is subject to fluctuations, cycles, and imbalances. The other options are generally considered characteristics of free-market systems.

Multiple choice

The economic environment around us consists of which basic entities

  1. Households (the consumers),

  2. Firms (the producers)

  3. Government (the co-coordinator)

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

The economic environment around us consists of three basic entities – Households (the consumers), Firms (the producers) and Government (the co-coordinator).

Multiple choice

The three groups of decision makers in the economy are _______.

  1. households, business firms and banks

  2. households, business firms and government

  3. business firms, government, and banks

  4. business firms, banks, and foreign traders

  5. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

These three are very essential in an economy for decision making, based on the economic cycle.

Multiple choice

Which aspect of economic policy did Thomas Jefferson and Alexander Hamilton agree upon?

  1. The U.S. government should pass a protective tariff.

  2. The U.S. gov't should use liquor taxes to raise revenue.

  3. The U.S.gov't should pay off war debt to foreign countries.

  4. The U.S.gov't should insure deposits in the Bank of the U.S.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Despite their deep disagreements on the role of government, both Jefferson and Hamilton agreed that the new nation needed to establish financial credibility by paying off the debts incurred during the Revolutionary War.

Multiple choice

President Ronald Reagan used the concept ofsupply-side economics when he proposed

  1. reducing income taxes to stimulate growth

  2. providing direct payments to people living inpoverty

  3. creating government jobs to keep peopleworking

  4. increasing regulations on business to promotecompetition
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Supply-side economics, or Reaganomics, focuses on reducing taxes and deregulation to stimulate investment and economic growth.

Multiple choice

President Ronald Reagan used the concept of supply-side economics when he proposed

  1. reducing income taxes to stimulate growth

  2. providing direct payments to people living in poverty

  3. creating government jobs to keep people working

  4. increasing regulations on business to promote competition
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Supply-side economics, often called Reaganomics, relies on the theory that reducing taxes on corporations and high-income earners will stimulate investment and economic growth. This is the opposite of demand-side or Keynesian policies.