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

Directions: In the given question, select the option that expresses the central idea in the most clear, concise and correct manner.

  1. Even if only provisional, the rate of inflation has dropped sharply this week.

  2. The rate of inflation has dropped sharply this week, even though this figure might have been only provisional.

  3. The rate of inflation has dropped sharply this week, even though the figure may be only provisional.

  4. The rate of inflation has dropped sharply this week, even if it might be only provisional.

  5. The rate of inflation has dropped sharply this week even though the figure may be only provisionally so.

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

Option 3 is correct as it is most clear and concise. It indicates that the rate of inflation figures obtained may be provisional, but the drop in inflation has been sharp. Option 1 is incorrect as it is meaningless because the subject is not clear. The use of 'might' suggests remote possibility, which as per the context, becomes wrong. The figure may be provisional, but the drop is surely there. So, use of 'might' is incorrect. 

Multiple choice

'Closed economy' is that economy in which

  1. only export takes place

  2. money supply is fully controlled

  3. deficit financing takes place

  4. neither export nor import takes place
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A closed economy is self-sufficient, meaning that no imports are brought in and no exports are sent out. The goal is to provide consumers with everything that they need from within the economy's borders.

Multiple choice

The effect of increases CRR will be reduced or nullified if

  1. bank rate is reduced

  2. securities are sold in the open market

  3. SLR is increased

  4. people do not borrow from non-banking institutions

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

When CRR is increased, banks must keep more reserves with RBI, reducing their lending capacity. However, if the bank rate is reduced simultaneously, borrowing from RBI becomes cheaper, which can offset the restrictive effect of higher CRR. Banks can borrow from RBI at lower rates to meet both reserve requirements and lending needs. Selling securities in open market or increasing SLR would further tighten credit, not offset CRR.

Multiple choice

Government may control price level by

  1. increasing bank rate

  2. lowering bank rate

  3. keeping bank rates unchanged

  4. bank rate cannot be used as a tool

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

 Government may control price level by increasing bank rate

Multiple choice

During depression, it is advisable to

  1. lower bank rate and purchase securities in the market

  2. increase bank rate and purchase securities in open market

  3. decrease bank rate and sell securities in the open market

  4. increase bank rate and sell securities in the open market
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

During a depression, the central bank should stimulate the economy by lowering the bank rate (cheaper borrowing encourages investment and spending) and purchasing securities in the open market (injects money into the banking system, increasing lendable reserves). This is expansionary monetary policy to combat recession.

Multiple choice

Which of the following were the external causes for limited success of planning?

  1. Natural calamities

  2. Inadequacy of foreign exchange

  3. External aggression

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

Natural calamities, inadequacy of foreign exchange, and external aggression are all factors outside a developing country's control that can constrain economic planning effectiveness. These external shocks disrupt planned resource allocation and development timelines, making them genuine limitations rather than implementation failures.

Multiple choice

Until just a while ago, BRIC Nations believed that the growth rate being nine percent, there is a healthy balance between inflation and liquidity.

  1. the growth rate being nine percent, there is a healthy balance between inflation and liquidity

  2. should the growth rate be nine percent, there should be a healthy balance between inflation and liquidity

  3. were the growth rate be nine percent, there would be a healthy balance between inflation and liquidity

  4. if the growth rate is nine percent, there is a healthy balance between inflation and liquidity

  5. there is a healthy balance between inflation and liquidity when there is a growth rate that is nine percent
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Correct. The option removes ambiguity in the original sentence.

Multiple choice

Either Foreign Institutional Investors buying in or Mutual Fund Houses selling out can, along with the degree of Federal Reserve intervention, be the reasons contributing to the performance of the Capital Market.

  1. can, along with the degree of Central Bank intervention, be the reasons contributing to

  2. along with the degree of Federal Reserve intervention, can be the contributing reasons in

  3. can, along with the degree of Federal reserve intervention, contribute as reasons to

  4. can be the contributing reason to, along with the degree of Federal Reserve intervention

  5. can contribute, along with the degree of Federal Reserve intervention, to
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Correct. The option removes the error of subject-verb agreement by referring to 'reason' rather than 'reasons'.

Multiple choice

Increase in CRR helps in sucking the excess liquidity in the economy.

  1. True

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

CRR (Cash Reserve Ratio) is a monetary policy tool. When RBI increases CRR, banks must keep more funds with RBI as reserves, reducing their lending capacity. This effectively sucks out excess liquidity from the economy and helps control inflation.

Multiple choice

An increase in bank rate in theory leads to

  1. rise in interest rate in general

  2. fall in interest rate in general

  3. unchanged interest rate

  4. Cannot say

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

An increase in bank rate in theory leads to rise in interest rate in general.

Multiple choice

A depreciation in the rupee will cause

  1. exports to be cheaper

  2. imports to be cheaper

  3. fall in domestic money supply

  4. rise in domestic interest rates

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

A depreciation in the rupee will cause exports to be cheaper.

Multiple choice

The biggest disadvantage of investment in real estate is

  1. less potential appreciation

  2. high purchase price

  3. depreciation in value as time passes

  4. value gets eroded due to inflation for capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The biggest disadvantage of real estate investment is indeed the high purchase price or entry barrier - buying property requires significant capital, making it inaccessible to many investors. While real estate can appreciate, the high initial cost is the primary constraint. Options A, C, and D are incorrect - real estate has good appreciation potential, generally doesn't depreciate in value over time (unlier some assets), and often acts as an inflation hedge.