Economics · Banking Financial Awareness

Macroeconomics and Policy

2,833 Questions

Macroeconomics and policy questions assess the understanding of broad economic indicators, government fiscal strategies, and banking regulations. Topics include inflation causes, currency exchange rates, monetary policy tools, and historical economic systems. These are highly tested in banking and civil services examinations.

Inflation FactorsMonetary PolicyExchange RatesFiscal PolicyEconomic IndicatorsBretton Woods System

Macroeconomics and Policy Questions

Multiple choice

Although the coordination of monetary policy can help facilitate the orderly financing of existing imbalances, it is unlikely that its effect on their size is significant in the absence of an appropriate fiscal adjustment.

  1. it is unlikely that its effect on their size is significant

  2. it is unlikely that the size of their effect would be significant

  3. affecting their sizes are not likely to be significant

  4. the significance of their effect on its size is unlikely

  5. its effect on their size is not likely to be significant
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Option E is the most direct and grammatically correct phrasing. It avoids the wordiness of the original and maintains clear subject-verb agreement.

Multiple choice

Inflation means

  1. rise in budget deficit

  2. rise in general price index

  3. rise in price of consumer goods

  4. rise in money supply
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Inflation is defined as a sustained increase in the general price level of goods and services in an economy over a period of time, often measured by a price index.

Multiple choice

Which of the following is a political cause involved in business risk?

  1. Changes in technology

  2. Fluctuations in demand and price

  3. Changes in import-export policy

  4. Heavy loss of property in business due to earthquake

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Right answer Because Changes in import-export policy is a political cause of business risk. For instance the government is changed and it imposes an import duty on gold 20 % , which was previously 15 % is a political cause of business risks. Changes in licensing and taxation are all the policies of the government and so it is also a political cause.

Multiple choice

An effective short term measure to check inflation is to

  1. keep budgetary deficit under check

  2. streamline public distribution system

  3. enhance production of all consumer goods

  4. enhance production of essential goods
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Controlling the budgetary deficit is a primary fiscal policy tool to reduce money supply and curb inflation in the short term. While supply-side measures like streamlining distribution or increasing production are important, they are generally considered medium to long term strategies.

Multiple choice

Devaluation means

  1. reduction in the value of home currency in terms of other currencies

  2. reduction in interest rates on export loans

  3. Subsidy on imports to make them cheaper in India

  4. subsidy on exports to make them cheaper in other countries
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Devaluation is the deliberate downward adjustment of a country's currency value relative to a foreign currency or standard. This makes exports cheaper and imports more expensive.

Multiple choice

Deflation is

  1. deficit budget

  2. reduction in taxation

  3. contraction in volume of money or credit that results in a decline of price level

  4. increase in public expenditure
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money or credit in the economy.

Multiple choice

What does devaluation of a currency mean?

  1. Decrease in the internal value of money.

  2. Decrease in the external value of money.

  3. Decrease in both external and internal values of money

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

Devaluation is the deliberate downward adjustment of a country's currency value relative to a foreign currency or standard, which decreases its external purchasing power.

Multiple choice

Inflation is

  1. a decrease in the overall price level

  2. a decrease in the overall level of economic activity

  3. an increase in the overall level of economic activity

  4. an increase in the overall price level
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Inflation means a period of rapid rise in prices.

Multiple choice

The cause of inflation is?

  1. Increase in money supply and fall in production

  2. Decrease in money supply and fall in production

  3. Increase in money supply and increase in production

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

Inflation is generally defined as a situation where there is too much money chasing too few goods. An increase in money supply combined with a decrease in production leads to rising price levels.

Multiple choice

Inflation implies?

  1. Rise in prices of consumer goods

  2. Rise in money supply

  3. Rise in general price index

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

Inflation is defined as a sustained increase in the general price level of goods and services in an economy over a period of time, measured by a price index.

Multiple choice

Developing economies usually have

  1. Low GDP per capita

  2. Low CPI

  3. Large balance of payments surpluses

  4. Large budget surpluses
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right answer because the income per person is usually low.

Multiple choice

Monetary policy is regulated by

  1. the Central Bank

  2. Government policy

  3. money lenders

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Monetary policy is regulated by the Central Bank.