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 civics consumers' awareness consumer protection act of 1986 need for consumer awareness consumer : satisfaction and protection

In an economy, people have the freedom to buy or not to buy the goods offered in the market place, and this freedom to choose what they buy dictates what producers will ultimately produce. This condition is called.

  1. Economic Power of Choice

  2. Consumer Sovereignty

  3. Positive Economy

  4. Producer Sovereignty
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Consumer sovereignty is the economic theory that consumer preferences determine the production of goods and services in an economy.

Multiple choice business organisation and correspondence meaning and factors of business environment dimensions of business environment business environment and its dimensions business environment

Which of the following is an example of social environment?

  1. Money supply in the economy

  2. Consumer protection Act

  3. The Constitution of the country

  4. Composition of family
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Composition of family is an example of social environment. Social environment consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preference and education level of people living in the society where business exists.

Multiple choice business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

"Determination of wage rate, distribution of national income" was the theory given by?

  1. Adam smith

  2. A. marshall

  3. Ricardo

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

Alfred Marshall is widely recognized for his work in neoclassical economics, including the theory of distribution and the determination of factor prices.

Multiple choice business economics and quantitative methods foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

In economics, a state of balance is called ________________.

  1. saturation point

  2. stability point

  3. profit maximising point

  4. equilibrium point
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In economics, equilibrium is the state where market forces, such as supply and demand, are balanced, and there is no tendency for the price or quantity to change.

Multiple choice business economics and quantitative methods foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

Aggregate demand consists of consumption and investment demand. 

  1. True

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

True. Aggregate demand consists of consumption and investment demand. Aggregate demand is the demand of total goods and services in the economy as it is impossible to count all the physical quantities the total expenditure on all goods and services are taken into account. Aggregate demand consists of expenditure on household consumption, Private investment, Government expenditure on consumption and investment and imports and exports.  

Multiple choice business economics and quantitative methods foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

According to Keynesian theory of income determination, at full employment, a fall in aggregate demand lead to a ___________.

  1. fall in prices of output and resources

  2. fall in real gross national product and employment

  3. rise in real gross national product and investment

  4. rise in prices of output and resources
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the Keynesian model, if aggregate demand falls at full employment, the resulting surplus of goods and labor exerts downward pressure on prices and wages.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Price mechanism operates in a ___________ economy

  1. socialist

  2. free-enterprise

  3. mixed

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

In a free-market economy, the services of ___________ are available only at some price.

  1. government

  2. factors of production

  3. housewives

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

In a free market economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads to optimum allocation and utilization of resources because the prices of the factor of production depends upon the demand and supply of the commodities produced by it. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Forces of demand and supply operate within the framework of a/an __________.

  1. economy

  2. market

  3. nation

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa which generates within the framework of a market.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Price helps in determining the allocation of scarce resources in the economy.

  1. True

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

In a market economy, prices of commodities in the market are determined by the forces of demand and supply that generates open competition in the market which leads to optimum utilization of scarce resources as the resources are utilized keeping in mind the demand by the consumer sector and profit made by it.  

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Identify the functions of price mechanism in a market economy.

  1. Coordination of economic decisions.

  2. Allocation of resources in the economy.

  3. Determination of factor incomes.

  4. All of the above.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Functions of price mechanism in a market economy are :-
a) Coordination of economic decisions.b) Allocation of resources in the economy.
c) Determination of factor incomes.
Price mechanism can be defined as a process of determining the price of goods and services in the market using demand and supply forces.
Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

___________ helps consumers to determine the level as well as the composition of consumption expenditure.

  1. Market supply

  2. Price mechanism

  3. Income level

  4. Both A & C
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In price mechanism, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads distribution of goods and services according to the purchasing power of an individual where the consumers have freedom of choice between how much they will spend on consumption of goods and services. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

____________ is fundamental to the operation of a free-enterprise economy.

  1. Price legislation

  2. Government intervention

  3. Price mechanism

  4. Both B & C
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Which among the following is a function of price mechanism?

  1. Determination of savings in the economy.

  2. Determination of the level of economic activities.

  3. Guiding force for producers and consumers.

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa which determines the level of economic activity i.e. profitable activities in the economy with the accurate savings in the economy. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Which of the following conditions are required for price mechanism to operate in an economy?

  1. Existence of competition

  2. No government intervention

  3. Mobility of resources

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate smoothly, government intervention needs to be avoided with free flow of all the resources required for the production of the demanded commodities.