Indian Economy MCQ for CAT Exam with Solutions 2025

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Indian Economy MCQ for CAT Exam with Solutions. We covered all the Indian Economy MCQ for CAT Exam with Solutions in this post for free so that you can practice well for the exam.

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Indian Economy MCQ for CAT Exam with Solutions

Quick Quiz

Expenditure on advertisement and public relations by an enterprise is a part of its –

(a) Fixed capital

(b) Intermediate consumption

(d) Final consumption expenditure

Option b – Intermediate consumption

If the supply curve is a straight line passing through the origin, the price elasticity of supply will be –

(a) Equal to unity

(b) Greater than unity

(d) Infinitely large

Option a – Equal to unity

Which of the following is not an economic problem?

(a) Deciding between paid work and leisure

(b) Deciding between different ways of spending leisure time

(d) Deciding between alternative methods of personal savings

Option b – Deciding between different ways of spending leisure time

The decimal system of Indian currency was started in –

(a) 1950

(b) 1955

(d) 1960

Option c – 1957

In Economics, the terms ‘Utility’ and ‘Usefulness’ have –

(a) The same meaning

(b) Different meanings

(d) None of these

Option b – Different meanings

The Purchasing Power Parity theory is related to –

(a) Wage rate

(b) Bank rate

(d) Exchange rate

Option d – Exchange rate

“Economics is what it ought to be.” This statement refers to –

(a) Positive economics

(b) Monetary economics

(d) Fiscal economics

Option c – Normative economics

The economic problem arises mainly due to –

(a) Lack of industries

(b) Unemployment

(d) Overpopulation

Option c – Scarcity of resources

Who propounded the Innovation Theory of Profits?

(a) Alfred Marshall

(b) David Ricardo

(d) J. A. Schumpeter

Option d – J. A. Schumpeter

Demand in Economics means –

(a) Market demand

(b) Aggregate demand

(d) Demand backed by purchasing power

Option d – Demand backed by purchasing power

Demand for complementary goods is known as –

(a) Cross demand

(b) Direct demand

(d) Derived demand

Option c – Joint demand

Which of the following cost curves is never ‘U’ shaped?

(a) Average cost curve

(b) Marginal cost curve

(d) Average variable cost curve

Option c – Average fixed cost curve

The basic objective of production is to –

(a) Satisfy human wants

(b) Increase physical output

(d) Provide employment

Option a – Satisfy human wants

Microeconomics is also called –

(a) Income theory

(b) Expenditure theory

(d) Investment theory

Option c – Price theory

The demand for labor is called –

(a) Market demand

(b) Factory demand

(d) Derived demand

Option d – Derived demand

Funds that flow into a country to take advantage of favorable interest rates are called –

(a) Cold money

(b) Black money

(d) White money

Option c – Hot money

Who among the following has suggested a tax on expenditure?

(a) Kaldor

(b) Musgrave

(d) Gautam Mathur

Option a – Kaldor

The food stocks built up during a year of bumper harvest are called –

(a) Capital stock

(b) Grain stock

(d) Production stock

Option c – Buffer stock

The duties levied on alcoholic liquors, narcotic drugs, and opium come under –

(a) Land revenue

(b) Central excise duty

(d) State excise duty

Option b – Central excise duty

What was the objective of the Command Area Development Programme?

(a) To develop the areas under the command of the army

(b) To ensure better utilization of irrigation potential

(d) To ensure that land is given to the tillers

Option b – To ensure better utilization of irrigation potential

Which of the following is a part of the tertiary sector?

(a) Cultivation of crops

(b) Animal husbandry

(d) Cotton manufacturing

Option c – Power and transportation

On the administered price of which of the following articles no subsidy is given?

(a) Kerosene oil

(b) LPG

(d) ATF

Option d – ATF

Dumping is a form of price discrimination at –

(a) National level

(b) International level

(d) Within an industry

Option b – International level

A closed economy is one which –

(a) Does not have a coastal line

(b) Does not possess any means of international transport

(d) Does not trade with other countries

Option d – Does not trade with other countries

The CACP (Commission for Agricultural Costs and Prices) recommends the minimum support price for –

(a) Agricultural products

(b) Industrial products

(d) None of these

Option a – Agricultural products

Who is authorized to issue coins in India?

(a) Indian Overseas Bank

(b) State Bank of India

(d) Reserve Bank of India

Option c – Ministry of Finance

The ISI mark is not given to which of the following products?

(a) Biscuit

(b) Cloth

(d) Hosiery goods

Option a – Biscuit

Pegging up of a currency means fixing its value –

(a) At a constant level

(b) At a higher level

(d) Leaving it to market forces

Option a – At a constant level

Which of the following is an example of optional money?

(a) Bond

(b) Cheque

(d) Currency note

Option b – Cheque

Who among the following is not a classical economist?

(a) J. M. Keynes

(b) Thomas Malthus

(d) David Ricardo

Option a – J. M. Keynes

National Income Estimates in India are prepared by –

(a) Central Statistical Organisation

(b) National Income Committee

(d) National Productivity Council

Option a – Central Statistical Organisation

At present, India is following –

(a) Fixed exchange rate

(b) Pegged down exchange rate

(d) Floating exchange rate

Option d – Floating exchange rate

The Wage Fund Theory was propounded by –

(a) J. S. Mill

(b) J. M. Keynes

(d) Marshall

Option a – J. S. Mill

The third stage of the Law of Variable Proportion is called –

(a) Negative returns

(b) Positive returns

(d) Increasing returns

Option a – Negative returns

Which of the following is a better measurement of economic development?

(a) Disposable income

(b) GDP

(d) Per capita income

Option d – Per capita income

Price mechanism is a feature of –

(a) Barter economy

(b) Mixed economy

(d) Socialist economy

Option c – Capitalist economy

If a good has negative income elasticity and positive price elasticity of demand, it is a –

(a) Normal good

(b) Superior good

(d) Giffen good

Option d – Giffen good

Who propounded the Dynamic Theory of Profit?

(a) Hawley

(b) Knight

(d) Clark

Option d – Clark

Subsidies are payments by the government to –

(a) Banking units

(b) Producing units

(d) Consuming units

Option b – Producing units

In calculating national income, which of the following is included?

(a) Income of watchmen

(b) Pensions

(d) Income of smugglers

Option a – Income of watchmen

In a business, raw materials, components, work-in-progress, and finished goods are jointly regarded as –

(a) Net worth

(b) Inventory

(d) Capital stock

Option b – Inventory

According to the classical system, saving is a function of –

(a) The real wages

(b) Income

(d) The interest rate

Option b – Income

National income accounting is the study of the income and expenditure of the entire –

(a) State

(b) Organisation

(d) Economy

Option d – Economy

J. B. Say’s law of market was not accepted by –

(a) David Ricardo

(b) Marshall

(d) Malthus

Option b – Marshall

Which of the following is not related to the agriculture price policy?

(a) Imports

(b) Licensing

(d) Support price

Option b – Licensing

The Minimum Wages Act was first passed in the year –

(a) 1950

(b) 1951

(d) 1948

Option d – 1948

Coal mines were nationalized in the year –

(a) 1970

(b) 1971

(d) 1976

Option c – 1972

Which of the following groups suffer the most from inflation?

(a) Business class

(b) Debtors

(d) Holders of real assets

Option c – Creditors

Gresham’s law is related to –

(a) Supply and demand

(b) Deficit financing

(d) Consumption and demand

Option c – Circulation of money

The theory of Maximum Social Advantage in Public Finance was given by –

(a) Dalton

(b) Findley

(d) Robbins

Option a – Dalton

If the tax rate increases with a higher level of income, it is called –

(a) Regressive tax

(b) Lump sum tax

(d) Proportional tax

Option c – Progressive tax

Foreign currency that has a tendency of quick migration is called –

(a) Scarce currency

(b) Hot currency

(d) Soft currency

Option b – Hot currency

When too much money is chasing too few goods, the situation is –

(a) Stagflation

(b) Inflation

(d) Recession

Option b – Inflation

Which of the following most closely approximates an oligopoly?

(a) Barber shops

(b) The gasoline industry

(d) Wheat farmers

Option c – The cigarette industry

The excess of the price a person is willing to pay rather than consume is called –

(a) Consumer’s surplus

(b) Profits

(d) Producer’s surplus

Option d – Producer’s surplus

Production function relates –

(a) Cost to output

(b) Wages to profit

(d) Cost to input

Option c – Inputs to output

The demand curve shows that price and quantity demanded are –

(a) Inversely related

(b) Directly related only

(d) Inversely proportional and also inversely related

Option d – Inversely proportional and also inversely related

Under full cost pricing, the price is determined –

(a) By comparing marginal cost and marginal revenue

(b) By the total cost of production

(d) By adding a margin to the average cost

Option d – By adding a margin to the average cost

Which of the following is not considered as national debt?

(a) National saving certificates

(b) Provident fund

(d) Long-term government bonds

Option c – Insurance policies

Who among the following has suggested tax on expenditure?

(a) Musgrave

(b) Gautam Mathur

(d) Kaldor

Option d – Kaldor

Deficit financing is an instrument of –

(a) Fiscal policy

(b) Tax policy

(d) Monetary policy

Option a – Fiscal policy

Taxes are as certain as death because –

(a) Government has no other source of revenue

(b) Government has its own budget constraints

(d) They constitute the major source of government revenue

Option a – Government has no other source of revenue

The question of full capital account convertibility of India’s money was examined by the committee known as –

(a) Hashim Committee

(b) Rangarajan Committee

(d) Vagul Committee

Option c – Tarapore Committee – II

Parallel economy emerges due to –

(a) Tax compliance

(b) Tax estimation

(d) Tax avoidance

Option c – Tax evasion

Beyond a certain point, deficit financing will certainly lead to –

(a) Recession

(b) Inflation

(d) Economic stagnation

Option b – Inflation

Which of the following is an indirect tax?

(a) Estate duty

(b) Wealth tax

(d) Capital gains tax

Option c – Excise duty

Value added means –

(a) Goods and services less depreciation

(b) Output at factor cost

(d) Goods and services less cost of intermediate goods and services

Option d – Goods and services less cost of intermediate goods and services

Disinvestment in the public sector is called –

(a) Globalization

(b) Liberalization

(d) Industrialization

Option c – Privatization

In an economy, the sectors are classified into public and private on the basis of –

(a) Use of raw materials

(b) Nature of economic activities

(d) Ownership of enterprises

Option d – Ownership of enterprises

The tax levied on gross sales revenue from a business transaction is called –

(a) Sales tax

(b) Corporation tax

(d) Capital gains tax

Option c – Turnover tax

A black market is a situation where –

(a) Goods are sold secretly

(b) Goods are hoarded by producers

(d) Goods are sold at prices higher than those fixed by the government

Option a – Goods are sold secretly

In the context of the stock market, IPO stands for –

(a) Initial Public Officer

(b) Internal Policy Obligation

(d) Initial Public Offering

Option a – Initial Public Officer

Which of the following are not fixed costs?

(a) Wages paid to workers

(b) Insurance charges

(d) Municipal taxes

Option a – Wages paid to workers

The demand for which of the following commodities will not rise in spite of a fall in its price?

(a) Meat

(b) Salt

(d) Television

Option b – Salt

Why is rent earned by land even in the long run?

(a) Land is a man-made factor

(b) Its supply is inelastic in the short run

(d) Land has original and indestructible properties

Option c – Its supply is inelastic in the long run

In calculating National Income, which of the following is included?

(a) Pension

(b) Services of housewives

(d) Income of smugglers

Option c – Income of watchmen

The difference between GNP and NNP is equal to –

(a) Direct tax revenue

(b) Capital depreciation

(d) Consumer expenditure on durable goods

Option b – Capital depreciation

Marginal efficiency of capital is –

(a) Expected rate of return on new investment

(b) Value of output per unit of capital invested

(d) Expected rate of return on existing investment

Option a – Expected rate of return on new investment

Rate of interest is determined by –

(a) Central government

(b) Liquidity preference

(d) The rate of return on capital invested

Option b – Liquidity preference

Which one of the following is not a method of estimating National Income?

(a) Matrix method

(b) Income method

(d) Expenditure method

Option a – Matrix method

According to the classical system, saving is a function of –

(a) The real wage

(b) The interest rate

(d) Income

Option d – Income

Which of the following is a better measurement of Economic Development?

(a) GDP

(b) NNP

(d) Disposable income

Option c – Per capita income

National income is also called –

(a) NNP at factor cost

(b) GNP at factor cost

(d) NNP at market price

Option b – GNP at factor cost

Collective consumption means –

(a) Individual consumption

(b) Self-consumption

(d) Consumption by citizens of the country

Option d – Consumption by citizens of the country

Production of a commodity mostly through the natural process is an activity of –

(a) Technology sector

(b) Primary sector

(d) Secondary sector

Option b – Primary sector

Investment multiplier shows the effect of investment on –

(a) Consumption

(b) Saving

(d) Employment

Option c – Income

Returns to scale is a –

(a) Short-run phenomenon

(b) Long-run phenomenon

(d) Directionless phenomenon

Option b – Long-run phenomenon

The father of Economics is –

(a) Karl Marx

(b) Marshall

(d) J. M. Keynes

Option c – Adam Smith

Minimum payment to a factor of production is called –

(a) Rent

(b) Wages

(d) Quasi rent

Option c – Transfer payment

Production refers to –

(a) Exchange value

(b) Creation of utilities

(d) Destruction of utility

Option b – Creation of utilities

The law of demand is based on –

(a) Seller’s preference

(b) Consumer’s preference

(d) Manufacturer’s preference

Option b – Consumer’s preference

Demand for complementary goods is known as –

(a) Direct demand

(b) Cross demand

(d) Derived demand

Option c – Joint demand

The value of a commodity expressed in terms of money is known as –

(a) Wealth

(b) Value

(d) Utility

Option c – Price

A situation where a large number of firms produce similar goods is termed as –

(a) Pure competition

(b) Perfect competition

(d) Monopolistic competition

Option b – Perfect competition

The result of division of labour is –

(a) Excessive pressure

(b) Complicated work

(d) Excess supply of labour

Option c – Specialisation

Bank money refers to –

(a) Cheques

(b) Coins

(d) Gold bullion

Option a – Cheques

Who benefits the most during an inflationary period?

(a) Government servants

(b) Corporate employees

(d) Creditors

Option c – Entrepreneurs

Debenture holders of a company are its –

(a) Debtors

(b) Creditors

(d) Shareholders

Option b – Creditors

The Cash Reserve Ratio is a tool of –

(a) Fiscal policy

(b) Tax policy

(d) Agriculture policy

Option d – Agriculture policy

Money is an example of –

(a) Social capital

(b) Floating capital

(d) Concrete capital

Option b – Floating capital

Dear money means –

(a) Depression

(b) Inflation

(d) High rate of interest

Option d – High rate of interest

Which of the following groups suffer the most from inflation?

(a) Business class

(b) Debtors

(d) Holders of real assets

Option c – Creditors

Which one of the following has elastic demand?

(a) Rice

(b) Medicines

(d) Matchboxes

Option c – Electricity

Monopoly means –

(a) Single seller

(b) Single buyer

(d) Many buyers

Option a – Single seller

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