Economics · General Awareness

Economics Concepts and Theories

1,657 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 economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

The central problems of an economy is ___________.

  1. what to produce

  2. how to produce

  3. for whom to produce

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

The central problems of an economy deals with the allocation of its scarce uses, having alternative uses, for production of goods. The central problems are outlined as:

  • What to produce? Consumer goods or capital goods?
  • How to produce? Using labour or capital intensive techniques?
  • For whom to produce? Rich people or poor people

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

In addition to three central problems of an economy, the additional problem(s) raised by the modern economists is/are _______.

  1. the resources are fully utilized or not

  2. how efficient is the production and distribution system

  3. whether the capacity to produce or grow is increasing or is static

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

The central problems of an economy is of high importance but while solving those problems there are many problems which come as derivative problems like whether resources are fully utilized or not on using the present techniques, whether goods are produced and evenly distributed which does not create economic divide, whether the economy is growing in terms of new resources and technology that increases production. 

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Due to scarcity of resources one must _______.

  1. take rational economic decisions

  2. trade off between different alternative use of resources

  3. use resources efficiently

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

‘Scarce means’ is the fundamental problem of economics. It means that the resources in the world are limited whereas the wants of a man are unlimited and never-ending. Due to this, the resources are always insufficient to satisfy all human wants and needs. Apart from being scarce, the resources have alternative uses as well. Thus, it becomes extremely important to use the resources in the most effective and efficient manner. 

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

_______ is the root of all economic problems.

  1. Diversity

  2. Unlimited wants

  3. Scarcity

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

The basic root of economic problems arises from the fact that resources are limited and wants are unlimited thus the resources are scarce. Society must now choose what to produce, how to produce and for whom to produce. 

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Who defined mixed economy as "Mixed economy is that economy in which both public and private institutions exercise economic control".

  1. Samuelson

  2. Anatol Murad

  3. Adam Smith

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

Paul Samuelson is widely credited with defining a mixed economy as one where both public and private sectors coexist and exercise control.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Central problem for every economy includes ________.

  1. Market

  2. What to produce?

  3. Competition

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

Central problem for every economy includes: What to produce?

Production, distribution and disposition of goods and services are the basic economic activities of life. In the course of these activities, every society has to face scarcity of resources. Because of this scarcity, every society has to decide how to allocate the scarce resources.

It leads to following Central Problems that are faced by every economy:

1. What to produce?

2. How to produce?

3. for whom to produce?

These problems are called central problems because these are the most basic problems of an economy and all other problems revolve around them.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Which of the following is not one of the central questions that the study of economics is supposed to answer?

  1. Who produces what?

  2. When are goods produced?

  3. Who consumes what?

  4. How are goods produced?
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The central problem of an economy does not deal with the time of production as it is assumed that human wants are unlimited and goods are required throughout the year. Therefore, the the problem of 'When to produce?' is not regarded as a central problem of the economy.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Which of the following is a cause of economic problem?

  1. Scarcity of Resources

  2. Unlimited Wants

  3. Alternatives Uses

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

Causes of Economic Problem:

(i) Unlimited Wants

Human wants are unlimited in numbers. There is no end of human wants; whenever one want is satisfied, automatically the other wants crop up and this goes on and on. There are several wants which are recurring in nature like, food, clothes, shoes, etc. Moreover, human wants are increasing day by day with the development of education, knowledge and civilisation.

(ii) Limited Resources:

In economics, scarcity means that commodities and resources to produce goods and services are less in relation to their demand. Goods and services that satisfy human wants are produced with the help of resources such as land, labour, capital and enterprise. These resources are scarce while wants are unlimited. Due to scarcity of these resources, an economy cannot produce all that goods and services as required by its citizens. Consequently, some wants remain unsatisfied.

(iii) Alternative Uses of Resources:

Means are not only limited but also have alternative uses. Hence, choice has to be made for different alternative uses. For example, electricity can be used for lighting lamps or for cooking food or for operating TV, Fridge, music system etc. Similarly, there are many resources which have got their alternative uses. This characteristic makes resources scarce. Thus, every economy has to choose better alternative uses of resources to which they can be put.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

In the decision of "how to produce", what must the economy decide on?

  1. Types of goods to be produced.

  2. Quality of goods to be produced.

  3. Consumer goods and capital goods.

  4. Method of production.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The question for "How to produce?" is faced by the economy. Here they should consider both labour intensive techniques as well as capital intensive techniques depending upon the available resources in the economy.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

The central problem in economics is that of:

  1. Comparing the success of command versus market economies.

  2. Guaranteeing that production occurs in the most efficient manner.

  3. Guaranteeing a minimum level of income for every citizen.

  4. Allocating scarce resources in such a manner that society's unlimited needs or wants are satisfied, so as to maximise utility.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Economics is the study that establishes an effective relationship between unlimited wants and the availability of scarce resources to overcome the economic problem of limited resources so that all the unlimited wants are satisfied, so as to achieve maximum utility by the use of scarce resources. 

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

In Economics, the 'central economic problem' means __________.

  1. consumers do not have as much money as they would wish

  2. there will always be a certain level of unemployment

  3. resources are not always allocated in an optimum way

  4. output is restricted to the limited availability of resources
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The central problems of an economy deals in the production of goods as resources are scarce so there is need to answer some questions where it is decide that :

  • ·         What to produce? Consumer goods or capital goods?
  • ·         How to produce? Using labour or capital?
  • ·         For whom to produce? Rich people or poor people?

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
The problem of 'what to produce' relates to ______________.

  1. the choice of technique

  2. distribution of income

  3. market value of the goods and services

  4. the choice of goods and services
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The central problem of "what to produce?" which is faced by the economy where the economy decides the goods that need to be produced in the economy whether consumer or capital goods to satisfy human wants to keep in mind the available resources and state of technology in the economy.
Hence, D is the correct option.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
In a free market economy, decision relating to 'for whom to produce' enhances the gap between the rich and the poor.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a free economy, the producers will produce goods for those who can afford to pay high price. Poorer sections of the society are often, thus, ignored. As a result, the gap between the rich and the poor enhances.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
Central problems of an economy are found only in those economies which are not governed or regulated by the government.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The central economic problems rise for the basic fact that the resources in the economy is scarce whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy and regulations/intervention of the government can do little about central economic problems.