Sheet 1: Problem-Solving Questions – Economics
🔷 Topic 1: National Income and Related Aggregates
Q. Type Question Options Answer Explanation
No
1 Fact-based Which of the A) Pocket money to D Transfer payments are
following is a children B) Payment unilateral payments
transfer payment? made to housewife where no goods or
C) Provident fund services are exchanged.
D) All of the above
2 Fact-based Real national income A) National income at C Real national income is
refers to: current prices measured at constant
B) National income at prices to account for
factor cost inflation.
C) National income at
constant prices
D) National income at
average prices of the
past ten years
3 Assertion Assertion (A): Non- A) Both A and R are A Non-monetary
& Reason monetary exchanges true, and R is the exchanges lack market
are not included in correct explanation of valuation, hence
GDP. A excluded from GDP.
Reason (R): They do B) Both A and R are
not involve market true, but R is not the
transactions. correct explanation of
A
C) A is true, R is false
D) Both A and R are
false
4 Statement Statement I: GDP A) Both statements are C GDP includes only final
Based includes the value of correct goods to avoid double
intermediate goods. B) Statement I is counting.
Statement II: correct, Statement II is
Including incorrect
intermediate goods C) Statement I is
leads to double incorrect, Statement II
counting. is correct D) Both
statements are
incorrect
5 Match the Match the following A) Factor incomes 1–A, 2– All listed items are
Following components with B) Transfer incomes A, 3–A, factor incomes as they
their categories: C) Capital gains 4–A
1. Salaries D) Non-factor are payments for factor
2. Rent incomes services.
3. Interest
4. Profits
🔷 Topic 2: Money and Banking
Q. Type Question Options Answer Explanation
No
6 Fact-based Which of the following A) Issuing currency B Accepting deposits from
is not a function of the B) Accepting the public is a function
Reserve Bank of India? deposits from the of commercial banks,
public not the RBI.
C) Controlling
credit
D) Acting as a
banker to the
government
7 Assertion & Assertion (A): An A) Both A and R C Higher CRR reduces the
Reason increase in the Cash are true, and R is funds available for
Reserve Ratio (CRR) the correct banks to lend, thus
reduces the money explanation of A reducing money supply.
supply. B) Both A and R
Reason (R): Higher are true, but R is
CRR means banks have not the correct
more funds to lend. explanation of A
C) A is true, R is
false
D) Both A and R
are false
8 Statement Statement I: A) Both statements A Both statements
Based Commercial banks are correct correctly describe the
create money through B) Statement I is process and effect of
credit creation. correct, Statement credit creation.
Statement II: Credit II is incorrect
creation increases the C) Statement I is
money supply in the incorrect, Statement
economy. II is correct
D) Both statements
are incorrect
9 Match the Match the monetary A) Reserve ratios 1–A, 2– CRR and SLR are
Following tools with their B) Interest rates A, 3–B, reserve requirements;
descriptions: C) Open market 4–B Repo Rate and Bank
1. CRR operations Rate are interest rates.
2. SLR D) Moral suasion
3. Repo Rate
4. Bank Rate
10 Arrange the Arrange the following A) (i) → (ii) → (iii) C The process starts with
Following steps in the process of → (iv) deposit, followed by re-
credit creation: B) (i) → (ii) → (iv) deposit, lending, and
(i) Deposit of money → (iii) then credit creation.
(ii) Lending by banks C) (i) → (iv) → (ii)
(iii) Creation of credit → (iii)
(iv) Re-deposit of D) (i) → (iii) → (ii)
money → (iv)
🔷 Topic 3: Government Budget and the Economy
Q. Type Question Options Answer Explanation
No
11 Fact-based Which of the following A) Income tax B Sale of PSUs is a capital
is a capital receipt in the B) Sale of public receipt as it leads to a
government budget? sector undertakings reduction in assets.
C) Interest receipts
D) Dividends from
PSUs
12 Assertion Assertion (A): Fiscal A) Both A and R are A Government borrowing
& Reason deficit leads to an true, and R is the to finance fiscal deficit
increase in public debt. correct explanation increases public debt.
Reason (R): of A
Government borrows to B) Both A and R are
finance the fiscal deficit. true, but R is not the
correct explanation
of A
C) A is true, R is
false
D) Both A and R are
false
13 Statement Statement I: Revenue A) Both statements B Revenue deficit
Based deficit indicates the are correct indicates a shortfall in
excess of revenue B) Statement I is revenue receipts, not an
expenditure over revenue correct, Statement II increase in assets.
receipts. is incorrect
Statement II: Revenue C) Statement I is
deficit leads to an incorrect, Statement
increase in government II is correct
assets. D) Both statements
are incorrect
14 Fact-based Which of the following A) Tax revenue C Capital receipts are part
is not a component of the B) Non-tax revenue of the capital budget, not
revenue budget? C) Capital receipts the revenue budget.
D) Revenue
expenditure
15 Fact-based The difference between A) Fiscal deficit A Fiscal deficit is the gap
total expenditure and B) Revenue deficit between total
total receipts excluding C) Budget deficit expenditure and total
borrowings is known as: D) Primary deficit receipts excluding
borrowings.
🔷 Topic 4: Balance of Payments and Foreign Exchange
Q. Type Question Options Answer Explanation
No
16 Fact-based A devaluation by the A) Rise in the supply A Devaluation makes
government leads to: of foreign currency exports cheaper,
B) Fall in the supply increasing foreign
of foreign currency currency inflow.
C) No change in
foreign currency
supply
D) None of the above
17 Statement Statement I: Current A) Both statements A Both statements
Based account records all are correct B) correctly define the
transactions related to Statement I is correct, components of the
goods and services. Statement II is Balance of Payments.
Statement II: Capital incorrect
account records C) Statement I is
transactions related to incorrect, Statement II
assets and liabilities. is correct
D) Both statements
are incorrect
18 Assertion Assertion (A): A) Both A and R are A Appreciation increases
& Reason Appreciation of domestic true, and R is the purchasing power,
currency makes imports correct explanation of making imports
cheaper. A cheaper.
Reason (R): Domestic B) Both A and R are
currency gains value true, but R is not the
against foreign currency. correct explanation of
A
C) A is true, R is false
D) Both A and R are
false
19 Fact-based Which of the following A) Export of goods D FDI is recorded in the
is not included in the B) Import of services capital account, not the
current account of the C) Unilateral transfers current account.
Balance of Payments? D) Foreign direct
investment
20 Fact-based The balance of payments A) Current account
always balances because: equals capital account
B) Errors and
omissions are adjusted
C) Official reserves
adjust the balance
D) All of the above
