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 economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

By increasing repo rate, the economy may observe the following effect(s) ____________________.

  1. Rate of interest on loans and advances will be costlier.

  2. Industrial output would be affected to an extent.

  3. Banks will increase rate of interest on deposits.

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

An increase in the repo rate makes borrowing more expensive for banks, which leads to higher interest rates for consumers and businesses, potentially slowing industrial output and increasing deposit rates.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

According to Keynes, the speculative demand for money is due to __________.

  1. money is better store of value than any other long term financial assets

  2. higher returns on speculative activities

  3. general tendency to speculate to make quick return

  4. all the three
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to J.M. Keynes, Money has speculative demand due to its function as a better store of value than any other long tern financial asset because of the following two reasons: 

(i) Money in not perishable as it does not have any age, its is not time bounded and does not gets old which makes it a better store of value. 
(ii) The rate of money does not change with time as in case of securities and bonds. The value of the currency remains intact even if there is fluctuations in the money market which makes it the best store of value. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

When the liquidity trap occurs the demand for money.

  1. Is perfectly interest elastic

  2. Is perfectly interest inelastic

  3. Means that an increase in money supply leads to a fall in the interest rate

  4. Means that an increase in the money supply leads to an increase in the interest rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A liquidity trap is an economic situation where people hoard financial capital instead of investing or spending it as the interest rates are low and savings rates are high which renders monetary policy ineffective. So, people believe that the interest rates will soon rise, which might decrease the prices of the bonds. Therefore, the demand for money depends on the rate of interest in the economy which hence makes the demand for money perfectly interest elastic. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

When the liquidity trap occurs the demand for money ________________.

  1. becomes perfectly interest elastic

  2. becomes perfectly interest inelastic

  3. means that an increase in money supply leads fall in the interest rate

  4. means that an increase in the money supply to an increase in the interest rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A liquidity trap is an economic situation where people hoard financial capital instead of investing or consuming it as the interest rates are low and savings rates are high which renders the monetary policy ineffective. So, people believe that the interest rates will soon rise which might decrease the prices of the bonds. Therefore, the demand for money depends on the rate of interest in the economy which hence makes the demand for money perfectly interest elastic. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

In dynamic sense, money serves the following purposes:

  1. Gives direction to economic trends.

  2. Encourages specialisation and division of labour.

  3. Ensures transformation of savings into investments.

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

In a dynamic sense, money facilitates economic growth by allowing for specialization, enabling investment through savings, and signaling economic trends through price changes.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Money is said to be neutral when ______________.

  1. changes in money supply do not have any effect on real sector

  2. changes in money supply leads to increase in national income

  3. changes in money supply lead to decrease in national income

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

The neutrality of money theory suggests that changes in the money supply only affect nominal variables like prices, not real variables like output or employment.

Multiple choice organisation of commerce and management economics of development and planning fundamental of economic development economics of development economic mechanism

Which of the following is not true about the pre-reforms period (i.e. before 1991)?

  1. Shortage of Foreign Exchange

  2. Heavy Government Borrowings

  3. Huge Losses of Public Sector Enterprises

  4. Surplus Budget in each financial year
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In pre-reform period, that is, before the year of 1991, Surplus Budget in each financial year. Surplus Budget in each financial year introduced after the year of 1991. Budget can be defined as a statement of receipts and expenditure of an economy.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

What is that one effect which Marshall ignored but Hicks took into account?

  1. Income effect

  2. Substitution effect

  3. Price effect

  4. Output effect
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Marshall focused primarily on the substitution effect in his analysis of demand, while Hicks explicitly incorporated the income effect to provide a more complete decomposition of the price effect.

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

During deflation_____.

  1. the purchasing power of money increases

  2. the purchasing power of money decreases

  3. the purchasing power of money remains constant

  4. the purchasing power of money fluctuates
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

During deflation the purchasing power of money will increase. 

Deflation impacts consumers positively in the short term but negatively in the long term. In the short term, deflation essentially increases the purchasing power of consumers as prices fall. Consumers can save more money as their income increases relative to their expenses. This also alleviates debt burdens as consumers are able to deleverage.

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

The signs of crisis which created the need for Economic Reforms in 1991 were ________________.

  1. Low Forex Reserves

  2. Huge National Debt

  3. Inflation

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The signs of crisis which created the need for Economic Reforms in 1991 were:
a) Low Forex Reserves
b) Huge National Debt
c) InflationDuring 1991, Indian Government adopted New Economic Policy which emphasized liberalization, privatization and globalization. During 1991, the economic crisis arose due to many economic problems as the government was facing high fiscal deficit due to rising current account deficit which acted as two spiral rate which lead to heavy inflation in the economy. 
Multiple choice social science food security in india need for nregs rural development and employment guarantee scheme food security and nutrition

Identify the economic as well as social affects of hoarding.

  1. Creation of panic in the minds of the people.

  2. Exploitation of consumers.

  3. Rising inflation.

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

Hoarding in economics refers to maintaining unaccounted stocks of many commodities to save guard oneself from rise in general price level i.e. inflation or to take advantage of future rise in prices. This creates artificial scarcity of commodities in the market which further increase the prices of the commodities, leading to inflation. This is a clear case of exploitation of the consumers and such a situation may create panic in the society.

Multiple choice social science food security in india need for nregs rural development and employment guarantee scheme food security and nutrition

Environmental deterioration has caused heavy economic losses, all of which can be expressed in monetary terms.

  1. True

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

In the process of production and consumption, natural resources are exploited as a result of various activities that causes many types of pollution which includes air, water and land pollution. These losses cannot be measured in terms of money as it includes loss of life and society, and impairs physical and mental growth of the people.

Multiple choice economics unemployment in india types of unemployment unemployment and measures to remove employment and unemployment in india - problems and policies

During the recessionary phase of Trade Cycle____.

  1. aggregate demand falls

  2. there is disinvestment, decline in production

  3. there is unemployment

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

During a recession, aggregate demand falls, which leads to reduced production, disinvestment, and consequently, higher levels of unemployment.

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

If Willingness to Save is higher, the level of ________ will be higher.

  1. Voluntary Savings

  2. Compulsory Savings

  3. Forced Savings

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

Voluntary savings are funds that individuals or organizations may willingly deposit or Withdraw. For your clients, the condition of an intended savings product means that: They can save money in a safe place to meet emergency and consumption. Required savings are those that individuals and institution are forced to make as per government rules. 

Thus, the correct option is A.