Basic Economics and Banking - Question Bank

1. What is the 'stagflation' phenomenon?
A) High economic growth with low inflation.
B) High unemployment with high inflation.
C) Low economic growth with low inflation.
D) High unemployment with low inflation.
2. Which of the following is a non-performing asset (NPA) for a bank?
A) A loan on which interest is paid regularly.
B) A loan where the principal or interest payment is overdue for a specified period.
C) A deposit account.
D) A government bond held by the bank.
3. What is the term for the amount of money that producers are willing and able to offer for sale at a given price?
A) Demand
B) Scarcity
C) Supply
D) Equilibrium
4. Which economic indicator measures the cost of a basket of goods and services purchased by a typical urban household?
A) GDP Deflator
B) Wholesale Price Index (WPI)
C) Consumer Price Index (CPI)
D) Index of Industrial Production (IIP)
5. What does the 'liquidity trap' refer to in monetary economics?
A) A situation where interest rates are so low that monetary policy becomes ineffective.
B) A situation where there is a shortage of cash in the economy.
C) A period of high inflation and low economic growth.
D) A situation where banks hoard excess reserves.
6. What is the primary role of the International Monetary Fund (IMF)?
A) To fund infrastructure projects.
B) To promote global monetary cooperation, financial stability, and international trade.
C) To provide direct loans to individuals.
D) To regulate stock exchanges.
7. Which of the following is a form of indirect tax?
A) Corporate Tax
B) Property Tax
C) Customs Duty
D) Income Tax
8. What is the 'multiplier effect' in economics?
A) A decrease in government spending leads to a larger decrease in aggregate demand.
B) An increase in investment leads to a larger increase in aggregate income.
C) An increase in savings leads to a decrease in consumption.
D) A decrease in taxes leads to a proportional decrease in government revenue.
9. Which economic concept represents the total value of goods and services produced per person in a country?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) GDP per capita
D) National Income
10. What is the term for the decrease in the value of an asset over time due to wear and tear or obsolescence?
A) Amortization
B) Depreciation
C) Appreciation
D) Inflation
11. Which of the following is a feature of a mixed economy?
A) Complete government control over the economy.
B) Private ownership of all resources.
C) Coexistence of public and private sectors.
D) Absence of any market regulation.
12. What is the primary function of the World Trade Organization (WTO)?
A) To provide loans to developing countries.
B) To regulate international trade and resolve disputes.
C) To manage global currency exchange rates.
D) To set international interest rates.
13. What does the 'Balance of Payments' account track?
A) Only visible exports and imports.
B) All economic transactions between a country and the rest of the world.
C) Only the flow of capital into a country.
D) Only the country's foreign debt.
14. Which of the following is a type of financial asset?
A) Real Estate
B) Machinery
C) Stocks
D) Gold
15. What is the 'marginal propensity to consume'?
A) The proportion of income spent on goods and services.
B) The proportion of additional income that is spent on consumption.
C) The proportion of income that is saved.
D) The total consumption expenditure.
16. Which type of bank focuses on providing loans and financial services to agricultural and rural sectors?
A) Commercial Bank
B) Investment Bank
C) Regional Rural Bank (RRB)
D) Co-operative Bank
17. What is the term for the amount of money that consumers are willing and able to buy at a given price?
A) Supply
B) Demand
C) Equilibrium
D) Scarcity
18. Which economic system emphasizes collective ownership and control of the means of production?
A) Capitalism
B) Socialism
C) Feudalism
D) Mercantilism
19. What is the 'reverse repo rate'?
A) The rate at which commercial banks lend to the RBI.
B) The rate at which the RBI lends to commercial banks.
C) The rate at which banks lend to each other.
D) The rate at which the government borrows money.
20. Which of the following is a tool of fiscal policy?
A) Bank Rate
B) Open Market Operations
C) Government Expenditure
D) Cash Reserve Ratio
21. What does the term 'monopoly' signify in economics?
A) A market with many sellers and many buyers.
B) A market with a single seller dominating the market.
C) A market with few sellers and many buyers.
D) A market where goods are freely exchanged without government intervention.
22. What is the primary role of the Securities and Exchange Board of India (SEBI)?
A) To regulate the banking sector.
B) To regulate the stock market and protect investors.
C) To manage foreign exchange reserves.
D) To control inflation.
23. Which of the following is a direct tax?
A) Sales Tax
B) Value Added Tax (VAT)
C) Income Tax
D) Excise Duty
24. What is 'disguised unemployment'?
A) Unemployment due to economic recession.
B) Unemployment where more people are employed than actually needed.
C) Unemployment where skills do not match job requirements.
D) Temporary unemployment between jobs.
25. Which economic concept describes the total value of all goods and services produced within a country in a specific period?
A) Gross National Product (GNP)
B) Gross Domestic Product (GDP)
C) Net National Product (NNP)
D) National Income
26. What is the 'repo rate'?
A) The rate at which the RBI borrows money from commercial banks.
B) The rate at which commercial banks borrow money from the RBI.
C) The rate at which banks lend to each other.
D) The rate at which the government borrows money.
27. Which institution is responsible for issuing India's currency?
A) State Bank of India
B) Ministry of Finance
C) Reserve Bank of India
D) National Payments Corporation of India (NPCI)
28. What is the term for the difference between a country's total exports and total imports?
A) Current Account Balance
B) Capital Account Balance
C) Balance of Trade
D) Fiscal Deficit
29. Which of the following is a type of financial market where short-term debt instruments are traded?
A) Capital Market
B) Primary Market
C) Money Market
D) Secondary Market
30. What is the main goal of monetary policy?
A) To control government spending.
B) To manage inflation and promote economic growth.
C) To directly regulate wages and prices.
D) To increase the national debt.
31. Which economic indicator measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services?
A) Wholesale Price Index (WPI)
B) Producer Price Index (PPI)
C) Consumer Price Index (CPI)
D) Index of Industrial Production (IIP)
32. What does the term 'liquidity' refer to in economics?
A) The rate of inflation.
B) The ease with which an asset can be converted into cash without affecting its market price.
C) The total amount of money in circulation.
D) The difference between exports and imports.
33. Which of the following is NOT a function of a commercial bank?
A) Accepting deposits
B) Granting loans
C) Issuing currency
D) Providing agency services
34. What is the primary purpose of the Goods and Services Tax (GST) in India?
A) To increase the number of indirect taxes.
B) To simplify the indirect tax structure and create a common national market.
C) To exclusively tax luxury goods.
D) To replace all direct taxes.
35. Which banking term refers to the interest rate at which the RBI lends money to commercial banks?
A) Reverse Repo Rate
B) Bank Rate
C) Cash Reserve Ratio (CRR)
D) Statutory Liquidity Ratio (SLR)
36. What is the main objective of a public sector bank?
A) Maximizing profits for shareholders
B) Providing financial services to the public, often with social objectives
C) Focusing solely on investment banking
D) Operating with minimal government intervention
37. Which type of unemployment occurs when workers' skills do not match the available jobs?
A) Frictional Unemployment
B) Structural Unemployment
C) Cyclical Unemployment
D) Seasonal Unemployment
38. What does GDP stand for?
A) Gross Domestic Production
B) Gross Domestic Product
C) General Development Plan
D) Government Domestic Policy
39. Which of the following is a tool of monetary policy used by the RBI?
A) Income Tax Rate
B) Corporate Tax Rate
C) Repo Rate
D) Customs Duty
40. What is fiscal policy primarily concerned with?
A) Government spending and taxation
B) Interest rates and money supply
C) Exchange rates and international trade
D) Unemployment benefits and social welfare
41. Which term describes the situation where demand for goods and services exceeds the supply?
A) Recession
B) Deflation
C) Shortage
D) Surplus
42. What is the role of the Reserve Bank of India (RBI)?
A) Regulating the issue of bank notes.
B) Acting as a banker to the Government.
C) Managing the country's foreign exchange.
D) All of the above
43. Which of the following is a measure of national income?
A) Consumer Price Index (CPI)
B) Gross Domestic Product (GDP)
C) Wholesale Price Index (WPI)
D) Repo Rate
44. What is inflation?
A) A general decrease in the price level of goods and services.
B) A general increase in the price level of goods and services.
C) A decrease in the money supply.
D) An increase in unemployment.
45. Which economic concept measures the value of the next best alternative forgone when a choice is made?
A) Opportunity Cost
B) Sunk Cost
C) Marginal Cost
D) Average Cost
46. What is the primary function of money?
A) Store of Value
B) Unit of Account
C) Medium of Exchange
D) All of the above
47. Which type of economy is characterized by private ownership of resources and market-driven decisions?
A) Command Economy
B) Socialist Economy
C) Capitalist Economy
D) Mixed Economy
48. What does the Law of Demand state?
A) As price increases, quantity demanded increases.
B) As price decreases, quantity demanded decreases.
C) As price increases, quantity demanded decreases.
D) As price decreases, quantity demanded remains constant.
49. Which of the following is a factor of production in economics?
A) Demand
B) Consumption
C) Land
D) Profit
50. What is the fundamental economic problem that arises due to limited resources and unlimited wants?
A) Inflation
B) Scarcity
C) Unemployment
D) Deflation
All Question Banks
E-Book Basic Economics and Banking One Line Questions Basic Economics and Banking Online Test Basic Economics and Banking