MCQ on Some Economic and Financial Terms
Q1. What does the term GDP stand for?
a) Gross Domestic Product
b) Gross Domestic Price
c) General Domestic Product
d) General Domestic Price
Show Answer
Correct Answer: a) Gross Domestic Product
Explanation: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced within a country’s borders during a specific period, usually a year. GDP is a key indicator of a country’s economic health and is used to compare the economic performance of different countries.
Q2. What is the primary function of the Reserve Bank of India (RBI)?
a) To regulate the issue of banknotes
b) To maintain price stability
c) To supervise the financial system
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The primary functions of the Reserve Bank of India (RBI) include regulating the issue of banknotes, maintaining price stability, and supervising the financial system. As the central bank of India, the RBI plays a crucial role in the country’s monetary policy and financial stability.
Q3. What is the term used to describe a situation where the general price level of goods and services is rising?
a) Inflation
b) Deflation
c) Stagflation
d) Hyperinflation
Show Answer
Correct Answer: a) Inflation
Explanation: Inflation is a situation where the general price level of goods and services is rising. It is typically measured by the Consumer Price Index (CPI) or the Wholesale Price Index (WPI). Inflation can erode the purchasing power of money and affect the overall economy.
Q4. What is the term used to describe a situation where the general price level of goods and services is falling?
a) Inflation
b) Deflation
c) Stagflation
d) Hyperinflation
Show Answer
Correct Answer: b) Deflation
Explanation: Deflation is a situation where the general price level of goods and services is falling. It is the opposite of inflation and can lead to decreased consumer spending, lower production, and an overall economic slowdown.
Q5. What is the term used to describe a situation where there is high inflation and high unemployment?
a) Inflation
b) Deflation
c) Stagflation
d) Hyperinflation
Show Answer
Correct Answer: c) Stagflation
Explanation: Stagflation is a situation where there is high inflation and high unemployment. It is a challenging economic condition, as it combines the negative aspects of both inflation and unemployment, making it difficult for policymakers to address both issues simultaneously.
Q6. What is the term used to describe a rapid and uncontrolled increase in the general price level of goods and services?
a) Inflation
b) Deflation
c) Stagflation
d) Hyperinflation
Show Answer
Correct Answer: d) Hyperinflation
Explanation: Hyperinflation is a rapid and uncontrolled increase in the general price level of goods and services. It is an extreme form of inflation that can lead to the collapse of a country’s currency and economic instability.
Q7. What is the term used to describe the total value of all goods and services produced by a country’s residents, regardless of their location?
a) Gross Domestic Product (GDP)
b) Gross National Product (GNP)
c) Net Domestic Product (NDP)
d) Net National Product (NNP)
Show Answer
Correct Answer: b) Gross National Product (GNP)
Explanation: Gross National Product (GNP) is the total value of all goods and services produced by a country’s residents, regardless of their location. It includes the income earned by residents from investments and work abroad, as well as the value of goods and services produced within the country’s borders.
Q8. What is the term used to describe the total value of all goods and services produced within a country’s borders, adjusted for depreciation?
a) Gross Domestic Product (GDP)
b) Gross National Product (GNP)
c) Net Domestic Product (NDP)
d) Net National Product (NNP)
Show Answer
Correct Answer: c) Net Domestic Product (NDP)
Explanation: Net Domestic Product (NDP) is the total value of all goods and services produced within a country’s borders, adjusted for depreciation. It is calculated by subtracting the depreciation of capital assets from the Gross Domestic Product (GDP).
Q9. What is the term used to describe the total value of all goods and services produced by a country’s residents, adjusted for depreciation?
a) Gross Domestic Product (GDP)
b) Gross National Product (GNP)
c) Net Domestic Product (NDP)
d) Net National Product (NNP)
Show Answer
Correct Answer: d) Net National Product (NNP)
Explanation: Net National Product (NNP) is the total value of all goods and services produced by a country’s residents, adjusted for depreciation. It is calculated by subtracting the depreciation of capital assets from the Gross National Product (GNP).
Q10. What is the term used to describe the difference between a country’s total exports and total imports?
a) Balance of trade
b) Balance of payments
c) Current account balance
d) Trade deficit
Show Answer
Correct Answer: a) Balance of trade
Explanation: The balance of trade is the difference between a country’s total exports and total imports. A positive balance of trade indicates a trade surplus, while a negative balance indicates a trade deficit. The balance of trade is an important indicator of a country’s economic health and its competitiveness in international trade.
Q11. What is the term used to describe the rate at which one currency can be exchanged for another?
a) Exchange rate
b) Interest rate
c) Inflation rate
d) Discount rate
Show Answer
Correct Answer: a) Exchange rate
Explanation: The exchange rate is the rate at which one currency can be exchanged for another. It is determined by various factors, including supply and demand, economic conditions, and government policies. Exchange rates play a crucial role in international trade and investment.
Q12. What is the term used to describe the rate at which banks lend money to each other for short-term purposes?
a) Prime rate
b) Interbank rate
c) Repo rate
d) Discount rate
Show Answer
Correct Answer: b) Interbank rate
Explanation: The interbank rate is the rate at which banks lend money to each other for short-term purposes. It is an important benchmark for short-term interest rates and is used to determine the cost of borrowing for banks and other financial institutions.
Q13. What is the term used to describe the rate at which the central bank lends money to commercial banks?
a) Prime rate
b) Interbank rate
c) Repo rate
d) Discount rate
Show Answer
Correct Answer: c) Repo rate
Explanation: The repo rate is the rate at which the central bank lends money to commercial banks. It is an important monetary policy tool used by central banks to control inflation and manage the money supply in the economy.
Q14. What is the term used to describe the rate at which the central bank discounts bills of exchange and government securities?
a) Prime rate
b) Interbank rate
c) Repo rate
d) Discount rate
Show Answer
Correct Answer: d) Discount rate
Explanation: The discount rate is the rate at which the central bank discounts bills of exchange and government securities. It is another important monetary policy tool used by central banks to control inflation and manage the money supply in the economy.
Q15. What is the term used to describe the rate at which banks lend money to their most creditworthy customers?
a) Prime rate
b) Interbank rate
c) Repo rate
d) Discount rate
Show Answer
Correct Answer: a) Prime rate
Explanation: The prime rate is the rate at which banks lend money to their most creditworthy customers. It is a benchmark for various consumer and business loan products, such as mortgages, credit cards, and personal loans.
Q16. What is the term used to describe a situation where the demand for goods and services exceeds the supply?
a) Inflation
b) Deflation
c) Stagflation
d) Demand-pull inflation
Show Answer
Correct Answer: d) Demand-pull inflation
Explanation: Demand-pull inflation is a situation where the demand for goods and services exceeds the supply. It occurs when there is strong consumer demand, leading to higher prices for goods and services. Demand-pull inflation can be caused by factors such as increased government spending, a growing economy, or a rise in consumer confidence.
Q17. What is the term used to describe a situation where the cost of production for goods and services increases, leading to higher prices?
a) Inflation
b) Deflation
c) Stagflation
d) Cost-push inflation
Show Answer
Correct Answer: d) Cost-push inflation
Explanation: Cost-push inflation is a situation where the cost of production for goods and services increases, leading to higher prices. It occurs when there are increases in the cost of raw materials, labor, or other production inputs. Cost-push inflation can be caused by factors such as supply chain disruptions, wage increases, or rising commodity prices.
Q18. What is the term used to describe a tax levied on the income of individuals and businesses?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: a) Income tax
Explanation: Income tax is a tax levied on the income of individuals and businesses. It is collected by the government and is used to finance various government programs and initiatives. Income tax rates can be progressive, regressive, or proportional, depending on the tax system in place.
Q19. What is the term used to describe a tax levied on the sale of goods and services?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: c) Goods and Services Tax (GST)
Explanation: The Goods and Services Tax (GST) is a tax levied on the sale of goods and services. It is an indirect tax that is collected by the government and is used to finance various government programs and initiatives. GST is typically charged at each stage of the production and distribution process, with the final consumer bearing the tax burden.
Q20. What is the term used to describe a tax levied on the import and export of goods?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: d) Customs duty
Explanation: Customs duty is a tax levied on the import and export of goods. It is collected by the government and is used to finance various government programs and initiatives. Customs duties can be used to protect domestic industries from foreign competition, raise revenue, or regulate international trade.
Q21. What is the term used to describe the total market value of all final goods and services produced in a country in a given year, divided by the average (or mid-year) population for the same year?
a) Gross Domestic Product (GDP)
b) Gross National Product (GNP)
c) Gross Domestic Product (GDP) per capita
d) Gross National Product (GNP) per capita
Show Answer
Correct Answer: c) Gross Domestic Product (GDP) per capita
Explanation: Gross Domestic Product (GDP) per capita is the total market value of all final goods and services produced in a country in a given year, divided by the average (or mid-year) population for the same year. It is a measure of the average economic output per person and is often used as an indicator of a country’s standard of living.
Q22. What is the term used to describe a tax levied on the profits of companies?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: b) Corporate tax
Explanation: Corporate tax is a tax levied on the profits of companies. It is collected by the government and is used to finance various government programs and initiatives. Corporate tax rates can vary depending on the tax system in place and the size and structure of the company.
Q23. What is the term used to describe a tax levied on the value added to a product at each stage of production and distribution?
a) Income tax
b) Corporate tax
c) Value Added Tax (VAT)
d) Customs duty
Show Answer
Correct Answer: c) Value Added Tax (VAT)
Explanation: Value Added Tax (VAT) is a tax levied on the value added to a product at each stage of production and distribution. It is an indirect tax that is collected by the government and is used to finance various government programs and initiatives. VAT is typically charged at each stage of the production and distribution process, with the final consumer bearing the tax burden.
Q24. What is the term used to describe a tax levied on the sale of goods within a state?
a) Income tax
b) Corporate tax
c) State Goods and Services Tax (SGST)
d) Customs duty
Show Answer
Correct Answer: c) State Goods and Services Tax (SGST)
Explanation: State Goods and Services Tax (SGST) is a tax levied on the sale of goods within a state. It is a component of the Goods and Services Tax (GST) system and is levied on intra-state transactions.
Q25. What is the term used to describe a tax levied on the sale of goods and services across state borders?
a) Income tax
b) Corporate tax
c) Integrated Goods and Services Tax (IGST)
d) Customs duty
Show Answer
Correct Answer: c) Integrated Goods and Services Tax (IGST)
Explanation: Integrated Goods and Services Tax (IGST) is a tax levied on the sale of goods and services across state borders. It is a component of the Goods and Services Tax (GST) system and is levied on inter-state transactions.
Q26. What is the term used to describe a tax levied on the income of individuals and businesses?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: a) Income tax
Explanation: Income tax is a tax levied on the income of individuals and businesses. It is collected by the government and is used to finance various government programs and initiatives. Income tax rates can be progressive, regressive, or proportional, depending on the tax system in place.
Q27. What is the term used to describe a tax levied on the sale of goods and services?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: c) Goods and Services Tax (GST)
Explanation: The Goods and Services Tax (GST) is a tax levied on the sale of goods and services. It is an indirect tax that is collected by the government and is used to finance various government programs and initiatives. GST is typically charged at each stage of the production and distribution process, with the final consumer bearing the tax burden.
Q28. What is the term used to describe a tax levied on the import and export of goods?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: d) Customs duty
Explanation: Customs duty is a tax levied on the import and export of goods. It is collected by the government and is used to finance various government programs and initiatives. Customs duties can be used to protect domestic industries from foreign competition, raise revenue, or regulate international trade.
Q29. What is the term used to describe a tax levied on the income of firms in India?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Customs duty
Show Answer
Correct Answer: b) Corporate tax
Explanation: Corporate tax is a tax levied on the income of firms in India. It is collected by the central government and is used to finance various government programs and initiatives.
Q30. What is the term used to describe a tax levied on the capital gains arising from the sale of assets in India?
a) Income tax
b) Corporate tax
c) Goods and Services Tax (GST)
d) Capital gains tax
Show Answer
Correct Answer: d) Capital gains tax
Explanation: Capital gains tax is a tax levied on the capital gains arising from the sale of assets in India, such as stocks, bonds, and real estate. It is collected by the central government and is used to finance various government programs and initiatives.