You have already completed the quiz before. Hence you can not start it again.
Quiz is loading...
You must sign in or sign up to start the quiz.
You have to finish following quiz, to start this quiz:
Results
0 of 10 questions answered correctly
Your time:
Time has elapsed
You have reached 0 of 0 points, (0)
Average score
Your score
Categories
Not categorized0%
Your result has been entered into leaderboard
Loading
1
2
3
4
5
6
7
8
9
10
Answered
Review
Question 1 of 10
1. Question
2 points
Public goods are those goods that are;
Correct
Solution: B
A public good is a product that one individual can consume without reducing its availability to another individual and from which no one is excluded. For e.g. clean air, national defence, law and order, flood control system, lighthouses etc.
Even LPG is subsidized, but it is not a public good. So, (a) is incorrect.
PSEs produce steel, defence equipment and weapons too, but none of them are public goods. So, (c) is also incorrect.
Many public goods may at times be subject to excessive use resulting in negative externalities affecting all users; for example air pollution and traffic congestion. Public goods problems are often closely related to the “free-rider” problem, in which people not paying for the good may continue to access it.
These may also be called social goods as they look essential from the social justice and well-being perspective for the people. Education, healthcare, sanitation, drinking water, nutrition, caring for the handicapped and old etc., come under this category.
Incorrect
Question 2 of 10
2. Question
2 points
In Market socialism;
Correct
Solution: C
Market Socialism is an economic system in which the means of production are owned either by the state or by the workers in each company (meaning in general that “profits” in each company are distributed between them: profit sharing) and the production is not centrally planned but mediated through the market.
Its central idea is that the market is not a mechanism exclusive to capitalism and that it is fully compatible with collective worker ownership over the means of production — which is one of the fundamental principles of socialism. Proponents of market socialism argue that it combines the advantages of a market economy with those of socialist economics. The theory is fundamentally contradictory to orthodox Marxism.
Incorrect
Question 3 of 10
3. Question
2 points
The main concern(s) of Socialism is/are
1. Minimize existing inequality and distribute resources justly
2. Prevent market based distribution of goods and services
3. Cut down government regulation and planning to the least
Select the correct answer using the codes below.
Correct
Solution: A
Here we talk about the Indian version of socialism and why is it the way it is.
Although advocates of socialism are not entirely opposed to the market, they favour some kind of government regulation, planning and control over certain key areas such as education and health care. In India, the eminent socialist thinker Rammanohar Lohia, identified five kinds of inequalities that need to be fought against simultaneously: inequality between man and woman, inequality based on skin colour, caste-based inequality, colonial rule of some countries over others, and, of course, economic inequality. This might appear a self-evident idea today. But during Lohia’s time it was common for the socialists to argue that class inequality was the only form of inequality worth struggling against. Other inequalities did not matter or would end automatically if economic inequality could be ended.
Incorrect
Question 4 of 10
4. Question
2 points
With reference to the term Consumer surplus, consider the following statements.
1. Consumer surplus explains the situation of a buyers’ market where supply exceeds the demand.
2. Economies with a consumer surplus are developed economies.
Which of the above is/are correct?
Correct
Solution: D
Both statements are wrong. The benefits enjoyed by consumers as a result of being able to purchase a product for a price that is less than the most that they would be willing to pay is what is termed as consumer surplus. It is one of basic concepts to measure consumer wellness or welfare in economics. Total social surplus is composed of consumer surplus and producer surplus. It is a measure of consumer satisfaction in terms of utility.
Incorrect
Question 5 of 10
5. Question
2 points
If an economy predominantly keeps producing consumption goods at the expense of capital goods it will lead to
1. Short term as well as long term inflation
2. A roadblock in the long-term growth
Which of the above is/are correct?
Correct
Solution: C
Capital goods are tools, implements and machines etc. that make production of consumption goods
like furniture possible. Since resources are limited in an economy, they can either be channelized for immediate
consumption or immediate investment to feed long-term consumption. If they are channelized for immediate consumption (i.e. say we are producing more aerated drinks but not drink making machines), a time would come when demand would overshoot supply and economic stagnation would follow. If however, a balance is maintained by sacrificing some consumption goods to produce more capital goods, we can have more aerated drinks in the future as there will be more machines to fulfil demand.
Statement 1: As production expands it leads to an increase in the income of the workers and thus more demand for goods and services. But this increased demand can be fulfilled only when there are capital goods to produce the additionally required consumption goods. Otherwise this leads to inflation.
Statement 2: If this trend keeps going there will be very few capital goods left in the economy as the leftovers will start depreciating. It will become increasingly difficult to produce consumption goods leading to a halt in economic growth. This is why the RBI Governor has prescribed moving from consumption spending to investment spending for the Indian economy.
Incorrect
Question 6 of 10
6. Question
2 points
A country’s money multiplier depends on which of these factors?
1. Fraction of cash held by individuals and businesses
2. Fraction of cash banks hold as reserves
Which of the above is/are correct?
Correct
Solution: C
Everyone rupee of central bank money in India is able to generate around 6 rupees of money supply in the economy. This ratio is called money multiplier. A higher money multiplier indicates that the banking system generates a higher money supply out of money given by central bank. In India, the recent push to financial inclusion has led to people holding less cash in hand (relative to deposits) leading to an increase in the money multiplier. The more individuals hold cash in hand, the less the banking system will be able to create money and hence a lower value for the multiplier. In other words, cash in hand acts as a leakage for the banking system. Similarly, reserves that banks hold with the central bank also amount to a leakage, which again reduces the money multiplier. It should be noted that central banks generally tell the banks to maintain a part of their deposits as reserves, called the cash reserve ratio. So in essence, it is only the excess reserves (that banks maintain over and above the central bank’s requirement) that constitute leakages. Indians have a tendency to hold more cash (as a percentage of banking deposits) compared with people in the US or Europe, which depresses India’s multiplier value.
Incorrect
Question 7 of 10
7. Question
2 points
A high savings rate in the economy can lead to
1. Lower interest rate for investments
2. Lower consumption demand leading to a moderation of inflation
3. Reduced revenue deficit in the public budget
Select the correct answer using the codes below.
Correct
Solution: A
Statement 1: Investments in the economy are financed either through private savings, public savings or government investments; all of which require savings by some economic agent. More the saving, more are the funds in the market, and thus based on the supply-demand principle, lower will be the interest rate.
Statement 2: Higher savings mean lower consumption and thus lower inflation.
Statement 3: This has nothing to do with the revenue deficit. However, this might have a relation with the capital side of the budget where government borrowing cost might be reduced due to higher savings.
Incorrect
Question 8 of 10
8. Question
2 points
Aggregate Demand in an economy usually increases with an increase in
1. National Income
2. Investment
3. Government spending
Select the correct answer using the codes below.
Correct
Solution: D
Under the effective demand principle, the equilibrium output of the final goods is equal to ex ante aggregate demand.
Thus, a basic equation used for determining aggregate demand is AD = Y = C I G, where C is usually an increasing function of national income. Y is total output. Based on the above, if any of the factors are increased, it increases the AD.
Incorrect
Question 9 of 10
9. Question
2 points
Which of these is/are examples of Fixed capital formation?
1) Accumulation of foreign exchange reserve
2) Road and bridge construction
3) Energy infrastructure
4) Office equipment, such as computers
Select the correct answer using the codes below.
Correct
Solution: A
Statement 1: Currency is not considered as fixed capital, it is liquid capital. Fixed capital are the assets used in the productive process. Others examples include Building or expanding existing factory, Purchase of transport equipment and all other machineries used in the productive process. Generally, the higher the capital formation of an economy, the faster an economy can grow its aggregate income. Increasing an economy’s capital stock also increases its capacity for production, which means an economy can produce more. Producing more goods and services can lead to an increase in national income levels.
Incorrect
Question 10 of 10
10. Question
2 points
Often public goods cannot be provided through market mechanism. This is because
1) It is difficult to separate individual users of the service.
2) The good does not decrease in value even after being consumed by additional users.
Which of the above is/are correct?
Correct
Solution: C
Statement 1: A good can be priced only when you know who is using and how much is being used, for e.g. a soap is used by one person and it is quite easy to make them pay for it. But, there are some goods where doing this is not possible. For e.g. if providing clean air is a public good, then it is not possible to separate users who consumer a fixed quantity of clean air, and it is also not possible to exclude someone from using them. In such a case, a central authority or body must provide the good at either a constant price to all, or make it free of cost for
users. However, it should be noted that, in either of these cases, the body cannot use the market principles of pricing.
