<–2/”>a >Specially designed mock Quiz for Indian economy for the systematic coverage of PSC Exam prelims syllabus and practice.
History Free Mock Quiz has 30 questions. If any issue is observed with answer students may comment below
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The Economic Problem
The economic problem is the fundamental problem of scarcity. People have unlimited wants, but Resources are limited. This means that people must make choices about how to use their resources to satisfy their wants.
There are three basic economic questions that must be answered in order to solve the economic problem:
- What goods and Services should be produced?
- How should these goods and services be produced?
- Who should receive these goods and services?
The answers to these questions depend on the economic system in place.
An economic system is a set of institutions and rules that govern the production, distribution, and consumption of goods and services in a Society. There are four main types of economic systems:
- Traditional economy: A traditional economy is an economic system in which the production and distribution of goods and services are based on custom and tradition.
- Market economy: A market economy is an economic system in which the production and distribution of goods and services are determined by the interaction of supply and demand.
- Command economy: A command economy is an economic system in which the government controls the production, distribution, and consumption of goods and services.
- Mixed Economy: A mixed economy is an economic system in which the government and the private sector both play a role in the production, distribution, and consumption of goods and services.
Economic Growth
Economic growth is the increase in the amount of goods and services produced by an economy over time. Economic growth is measured by the gross domestic product (GDP), which is the total market value of all Final Goods and services produced in a country in a given year.
There are two main types of economic growth:
- Exogenous growth: Exogenous growth is economic growth that is caused by factors outside of the economy, such as Technological Progress or natural resource discoveries.
- Endogenous growth: Endogenous growth is economic growth that is caused by factors within the economy, such as Investment in Human Capital or research and development.
Economic development is the process of improving the economic well-being of a country’s people. Economic development is often measured by the Human Development index (HDI), which is a composite index of life expectancy, Education, and income.
There are two main approaches to economic development:
- The neoclassical approach: The neoclassical approach to economic development emphasizes the importance of free markets and private sector investment.
- The structuralist approach: The structuralist approach to economic development emphasizes the importance of government intervention in the economy to promote industrialization and economic growth.
Globalization/”>Globalization-3/”>Globalization
Globalization is the process of increasing economic, political, and cultural integration between countries. Globalization has been driven by the spread of technology, the reduction of trade barriers, and the rise of multinational corporations.
Globalization has both positive and negative effects. On the positive side, globalization has led to increased trade and investment, which has helped to raise living standards around the world. On the negative side, globalization has led to increased inequality, as some countries and people have benefited more than others.
International Trade
International trade is the exchange of goods and services between countries. International trade is important because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.
A comparative advantage is a country’s ability to produce a good or service at a lower opportunity cost than another country. For example, if a country can produce wheat at a lower opportunity cost than it can produce corn, then it has a comparative advantage in wheat production.
Monetary policy is the use of Money and credit to influence the economy. The goal of monetary policy is to promote economic growth and stability.
The Federal Reserve is the central bank of the United States. The Federal Reserve conducts monetary policy by setting interest rates and buying and selling Government Securities.
Fiscal policy is the use of government spending and Taxation to influence the economy. The goal of fiscal policy is to promote economic growth and stability.
The President and Congress are responsible for fiscal policy. The President proposes a budget each year, and Congress must approve the budget.
Economic Inequality
Economic inequality is the unequal distribution of income and wealth in a society. Economic inequality can be caused by a number of factors, including differences in education, skills, and opportunity.
Economic inequality can have a number of negative effects on society, including crime, POVERTY, and social unrest.
Economic Policy
Economic policy is the use of government intervention to influence the economy. Economic policy can be used to promote economic growth, stability, and Equality.
There are a number of different types of economic policy, including monetary policy, fiscal policy, and Trade Policy.
1. What is the difference between a Recession and a depression?
A recession is a period of time when the economy contracts, meaning that there is a decline in economic activity. This can be measured by a decrease in gross domestic product (GDP), which is the total value of all goods and services produced in a country. A depression is a severe recession that lasts for a long period of time. It is characterized by high Unemployment, low levels of economic activity, and a decline in asset prices.
2. What are the causes of recessions?
There are many factors that can contribute to a recession, including:
- Financial crises: A financial crisis can occur when there is a loss of confidence in the financial system, leading to a decline in lending and investment. This can lead to a decrease in economic activity and a recession.
- Asset bubbles: An asset bubble is a situation where the prices of assets, such as stocks or real estate, rise to unsustainable levels. When the bubble bursts, asset prices fall sharply, leading to a decline in economic activity and a recession.
- Economic shocks: An economic shock is an unexpected event that can have a negative impact on the economy. Examples of economic shocks include natural disasters, wars, and terrorist attacks.
3. What are the effects of recessions?
Recessions can have a number of negative effects on the economy, including:
- Increased unemployment: When the economy contracts, businesses often lay off workers in order to reduce costs. This can lead to increased unemployment, which can have a negative impact on consumer spending and economic growth.
- Decreased investment: When businesses are uncertain about the future, they are less likely to invest in new projects. This can lead to a decline in investment, which can also have a negative impact on economic growth.
- Decline in asset prices: When the economy contracts, asset prices, such as stocks and real estate, often fall. This can lead to a decline in household wealth, which can reduce consumer spending and economic growth.
4. What are the policies that governments can use to address recessions?
There are a number of policies that governments can use to address recessions, including:
- Monetary policy: The central bank can use monetary policy to increase the Money Supply and lower interest rates. This can help to stimulate economic activity and promote growth.
- Fiscal policy: The government can use fiscal policy to increase spending or reduce taxes. This can also help to stimulate economic activity and promote growth.
- Structural reforms: The government can also implement structural reforms to improve the efficiency of the economy. This can help to boost long-term growth and make the economy more resilient to shocks.
5. What are the lessons that we can learn from past recessions?
There are a number of lessons that we can learn from past recessions, including:
- The importance of early action: Governments should take action to address recessions as soon as possible. This can help to limit the severity of the recession and speed up the recovery.
- The importance of Fiscal Stimulus: Fiscal stimulus, such as tax cuts or spending increases, can be an effective way to stimulate economic activity and promote growth.
- The importance of monetary policy: Monetary policy, such as interest rate cuts, can also be an effective way to stimulate economic activity and promote growth.
- The importance of structural reforms: Structural reforms, such as reducing regulations or improving education, can help to boost long-term growth and make the economy more resilient to shocks.
Economy Free Mock Quiz 2
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Which of the following is not a factor of production?
(A) Land
(B) Labor
(C) Capital
(D) Entrepreneurship -
Which of the following is a characteristic of a market economy?
(A) Private ownership of property
(B) Central planning
(C) Government regulation of prices
(D) Government ownership of all businesses -
Which of the following is a characteristic of a command economy?
(A) Private ownership of property
(B) Central planning
(C) Government regulation of prices
(D) Government ownership of all businesses -
Which of the following is a characteristic of a mixed economy?
(A) Private ownership of property
(B) Central planning
(C) Government regulation of prices
(D) Government ownership of some businesses -
Which of the following is a type of economic system in which the means of production are owned and controlled by the people?
(A) Capitalism
(B) Socialism
(C) Communism
(D) Feudalism -
Which of the following is a type of economic system in which the means of production are owned and controlled by private individuals?
(A) Capitalism
(B) Socialism
(C) Communism
(D) Feudalism -
Which of the following is a type of economic system in which the means of production are owned and controlled by the government?
(A) Capitalism
(B) Socialism
(C) Communism
(D) Feudalism -
Which of the following is a characteristic of a Capitalist Economy?
(A) Private ownership of property
(B) Central planning
(C) Government regulation of prices
(D) Government ownership of all businesses -
Which of the following is a characteristic of a Socialist Economy?
(A) Private ownership of property
(B) Central planning
(C) Government regulation of prices
(D) Government ownership of some businesses -
Which of the following is a characteristic of a communist economy?
(A) Private ownership of property
(B) Central planning
(C) Government regulation of prices
(D) Government ownership of all businesses -
Which of the following is a type of market structure in which there are many sellers of a product?
(A) Perfect competition
(B) Monopoly
(C) Oligopoly
(D) Monopolistic competition -
Which of the following is a type of market structure in which there is only one seller of a product?
(A) Perfect competition
(B) Monopoly
(C) Oligopoly
(D) Monopolistic competition -
Which of the following is a type of market structure in which there are a few large sellers of a product?
(A) Perfect competition
(B) Monopoly
(C) Oligopoly
(D) Monopolistic competition -
Which of the following is a type of market structure in which there are many sellers of a product, but each seller has a slightly different product?
(A) Perfect competition
(B) Monopoly
(C) Oligopoly
(D) Monopolistic competition -
Which of the following is a characteristic of perfect competition?
(A) There are many sellers of a product.
(B) There are no barriers to entry into the market.
(C) The products sold by the sellers are identical.
(D) All of the above. -
Which of the following is a characteristic of a monopoly?
(A) There is only one seller of a product.
(B) There are barriers to entry into the market.
(C) The product sold by the seller is unique.
(D) All of the above. -
Which of the following is a characteristic of an oligopoly?
(A) There are a few large sellers of a product.
(B) There are barriers to entry into the market.
(C) The products sold by the sellers are similar.
(D) All of the above. -
Which of the following is a characteristic of monopolistic competition?
(A) There are many sellers of a product.
(B) There are no barriers to entry into the market.
(C) The products sold by the sellers are similar, but not identical.
(D) All of the above. -
Which of the following is a type of economic inequality?
(A) Income inequality
(B) Wealth inequality
(C) Poverty
(D) All of the above. -
Which of the following is a measure of the distribution of income in a country?
(A) Gini coefficient
(B) Lorenz