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AKASH AGARWAL CLASSES
CMA FOUNDATION-
SANJEEVANI BOOTI
PAPER 1 – FUNDAMENTALS OF
ECONOMICS
SR.NO CHAPTER NAME PAGE
NO
1 BASIC CONCEPTS OF 1-10
ECONOMICS
2 DEMAND AND SUPPLY 11-24
3 THEORY OF 25-28
PRODUCTION
4 THEORY OF COST 29-31
5 MARKET 32-48
6 MONEY 49-56
7 BANK 57-67
8 MONEY MARKET 68-74

CONTACT NO :8390693138
 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

CHAPTER 1 BASIC CONCEPTS OF

ECONOMICS

DEFINITION OF
ECONOMICS

1.Who was the father of Economics

(a)Marshall
(b)Adam smith
(c)Robbins
(d)Keynes

2.Human wants are

(a)Limited
(b)unlimited
(c)undefined
(d)none

3.According to __________ Economics is the study of science of wealth.

(a)Marshall
(b)JB. Say
(c)Robbins
(d)Keynes

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 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

4.According to _______ definition economic is a social science.

(a)wealth
(b)welfare
(c)scarcity
(d)growth

5.Growth definition is mostly associated with _____

(a)Marshall
(b)Adam smith
(c)Robbins
(d)Paul Sameulson

6.____ definition includes welfare definition and scarcity definition.

(a)wealth
(b)welfare
(c)scarcity
(d)growth

7.--------defined economics is the science which deals with wealth

(a)J.B.Say
(b)Adam smith
(c)Robbins
(d) Paul Sameulson

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

8.According to Adam Smith man is an economic man

(a)Marshall
(b)Adam smith
(c)Robbins
(d)Paul Sameulson

9. Human wants are -------

(a)limited
(b)scarce
(c)unlimited
(d)none

10.Old wine in new bottle is related with------definition

(a)wealth
(b)welfare
(c)scarcity
(d)growth

11.who introduced two aspects of economy

(a)Marshall
(b)Ragnar Frisch
(c)Robbins
(d)Paul Sameulson

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

12.--------Derived from Greek word “mikros”

(a)Macro economics
(b)micro economics
(c)consumption theory
(d)none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

POSITIVE AND
NORMATIVE SCIENCE

13.Positive science related with

(a)Marshall
(b)Ragnar Frisch
(c)Robbins
(d)Paul Sameulson

14. Normative science related with

(a)Marshall
(b)Ragnar Frisch
(c)Robbins
(d)Paul Sameulson

15.Positive science does not related to value judgments

(a)true
(b)false
(c)partly correct
(d)none

16.Science is practical, but Art is theoretical

(a)true
(b)false
(c)partly correct
(d)none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

INDUCTIVE AND
DEDUCTIVE METHOD

17.In deductive method the logic proceed from ___ to ____.

(a)particular to general
(b)general to particular
(c)either a or b
(d)none

18.In inductive method the logic proceed form ____ to ____.

(a)particular to general
(b)general to particular
(c)either a or b
(d)none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

LAW OF DIMINISHING
MARGINAL UTILITY

19.Want satisfying power of a commodity is called as

(a)satisfaction
(b)usefulness
(c)utility
(d)none

20.------is the additional utility derived by a consumer on consumption of an

additional unit of commodity
(a)Marginal utility
(b)total utility
(c)usefulness
(d)none

21.At the point of statiety marginal utility is-------

(a)one
(b)zero
(c)decreases
(d)none

22.Value paradox was depicted by -------

(a)Law of demand
(b)law of diminishing marginal utility
(c)law of supply
(d)none

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 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

PRODUCTION
POSSIBILITY CURVE

23.Nature of PPF curve is ….

(a)convex to the origin
(b)concave to the origin
(c)both
(d)none

24.If PPF is linear it implies …

(a)constant opportunity cost
(b)diminishing apart cost
(c)Increasing opportunity cost
(d)None

25.Any point beyond PPF is ….

(a)attainable
(b)unattainable
(c)both
(d)none

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 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

26.If an economy is working at the point left to PPF curve that shows…
(a)Full employment
(b)unemployment
(c)excess production
(d)none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION- BASIC
CA AKASH AGARWAL SANJEEVANI BOOTI
CONCEPTS OF ECONOMICS

SUBJECT MATTER
OF ECONOMICS

27.Gross investment = net investment --------

(a)Add depreciation
(b)less depreciation
(c)ignore depreciation
(d)none

28.Exchange of goods for goods is called as----

(a)market
(b)barter system
(c)money exchange
(d)none

29.Income less expenditure is called as------

(a)consumption
(b)savings
(c)investments
(d)none

AKASH AGARWAL CLASSES CONT:8390693138

 KNOWING IS NOT ENOUGH;
WE MUST APPLY
WILLING IS NOT
ENOUGH; WE MUST DO.
……………………………………………………………………………..................
 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

CHAPTER 2 demand and supply

LAW OF DEMAND

1.Quantity demand is a:
A) Stock concept
B) Flow concept
C) Both (a) & (b)
D) None of the above

2.---------means desire backed by necessary purchasing power

A) Demand
B) Supply
C) Production
D) Consumption

3.------demand is known as direct demand

A) Derived
B) Autonomous
C) Individual
D) Consumption

4.According to law of demand there is -----relationship between price and

quantity demanded
A) Direct
B) Inverse
C) No
D) Positive

5.Who propounded law of demand

A) Alfred Marshall
B) Robinns
C) Keynes
D) none

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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

6.Goods that exhibit direct price-demand relationship are called:

A) Giffen goods
B) Complementary goods
C) Substitute goods
D) None of the above

7.In case of inferior goods if income rises demand -------

A) Increases
B) Doesn’t change
C)Decreases
D) none

8.The exception of law of demand are:

A) Veblen goods
B) Giffen goods
C) Both (a) & (b)
D) None

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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

TYPES OF DEMAND

9.demand curve in case of inferior goods is-------

A) Upward sloping
B) Positively related
C) both
D) None

10.Normal goods have:

A) Zero income elasticity
B) Negative income elasticity
C) Fluctuating income elasticity
D) Positive income elasticity

11.If the price of orange juice increases, the demand for apple juice will .
A) Increase
B) Decrease
C) Remain the same
D) Become negative

12.When price of complementary product falls the demand for other product
will-
A) Fall
B) Increase
C) Remain stable
D) none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

VARIATION IN
DEMAND
13.Upward movement along the demand curve takes place due to-----
A)contraction in demand
B) expansion in demand
C) changes other than price
D) none

14.Downward movement along the same demand curve takes place due to-----
A) contraction in demand
B) expansion in demand
C) changes other than price
D) none

15.When demand increases due to fall in price is called as

A) contraction in demand
B) expansion in demand
C) changes other than price
D) none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

CHANGE IN DEMAND
16.Increase in demand due to change in other things is called -----in demand
curve
A) shift
B) upward movement
C) downward movement
D) none

17.Shift in demand curve to right takes place due to-------

A) unfavourable conditions
B) favourable conditions
C) increase in taxes
D) None

18.In taxes results into --------

A) upward movement
B) shift in the demand curve to right
C) shift in the demand curve to left
D) none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

ELASTICITY OF
DEMAND
19.Cross Elasticity Of Unrelated Products Will Be
A)infinite
B) zero
C) Greater than one
D) Less than one

20.-------Tells Us The Rate Of Change In Demand

A)Elasticity Of Demand
B) Consumption Analysis
C) Demand Analysis
D) Consumer Surplus

21.If the price of burger rises for ` 12 per piece to ` 20 per piece as a result of
which the daily sales decrease from 300 to 200 pieces per day. The price
elasticity of demand can be estimated as
A)0.5
B) 1.0
C) 1.5
D)0.8

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

TYPES OF ELASTICITY
OF DEMAND
22.Demand curve in unitary elastic demand is called as -----
A) Steeper curve
B) Flatter curve
C) Rectangular hyperbola
D) None

23.Perfectly elastic demand curve is------

A)Parallel to x axis
B)Parallel to y axis
C)Rectangular hyperbola
D)none

24.Luxury goods have ____ degree of elasticity

A) High
B) low
C) Moderate
D) none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

METHODS TO
MEASURE ELASTICITY
25.Point elasticity was propounded by
A) Adam smith
B) Alfred Marshall
C) Robins
D) Keynes

26.Elasticity between two points:

A) Point elasticity
B) Arc elasticity
C) Cross elasticity
D) None

27.By -----method elasticity can be measured at a particular point on the

demand curve
A) Percentage method
B) Arc method
C) Point method
D) None

28.Total outlay method is also called as-----

A) Total revenue method
B) Price method
C) Both
D) None

29.An increase in price will result in an increase in total revenue if

A) percentage change in quantity demanded in greater than the percentage
change in price
B) percentage change in quantity demanded is less than the percentage
change in price
C) percentage change in quantity demanded is equal to the percentage change
in price
D) none

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

DETERMINANTS OF
PRICE ELASTICITY

30.The demand for salt is inelastic, because

A) of low price
B) absence of it makes food tasteless
C)no substitutes
D)All the three

31.Monopoly fixes the fewer prices if the demand is -------elastic

A)Less
B)More
C)Either (a) or (b)
D)None

32.If there is no possibility of postponement of consumption of good then the

elasticity is -----
A)Less
B)More
C)Either (a) or (b)
D)None

33.Printer and cartridge will have ----- elasticity

A)Less
B)More
C)Either (a) or (b)
D)None

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

SUPPLY

34.The supply of a good refers to:

A)Stock available for sale
B)total stock in the warehouse
C)Actual production of the good
D)Quantity of the good offered for sale at A particular price per unit of time

35.The supply curve slopes------

A)Upward from left to right
B)Downward from left to right
C)Negative slope
D)None

36.When two or more goods are produced together by a single firm it is called--
--supply
A)Joint
B)Composite
C)Excess
D)Short

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

DETERMINANTS OF
SUPPLY

37.Following is not a factor affecting supply

A)Cost of production
B)Number of buyers
C)Price of good
D)Price of related good

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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

VARIATION AND
CHANGES IN SUPPLY

38.The supply curve slopes------

A)Upward from left to right
B)Downward from left to right
C)Negative slope
D)None

39.Increase in supply due to increase in price is called as-------in supply

A)Increase
B)Decrease
C)Expansion
D)Contraction

40.Fall in quantity supplied due to unfavorable factors is called as ------in

supply
A)Increase
B)Decrease
C)Expansion
D)Contraction

41.Upward movement along the supply curve is called as----- in supply

A)Increase
B)Decrease
C)Expansion
D)Contraction

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

ELASTICITY OF
SUPPLY

42.If proportionate change in supply is equal to the proportionate change in

price it is called
A)Unitary elastic supply
B)Perfectly elastic supply
C)Perfectly inelastic supply
D)None

43.A horizontal supply curve parallel to the quantity axis implies that the
elasticity of supply is:
A)Zero
B)Infinite
C)One
D)None

44.Which of the following have highly inelastic supply

A)Perishable goods
B)Durable goods
C)Elite class consumption
D)All of the above

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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
DEMAND AND SUPPLY

EQULIBRIUM

45.When demand increases and supply remains constant equilibrium price will-
A)Increase
B)Decrease
C)Remain same
D)None

46.When increase in demand equals increase in supply equilibrium price will--

A)Increase
B)Decrease
C)Remain same
D)None

47.Equilibrium price is the price at which ----

A)Quantity demanded equals quantity supplied
B)Quantity demanded is more than quantity supplied
C)Quantity demanded is less than quantity supplied
D)none

AKASH AGARWAL CLASSES CONT:8390693138

 PERSEVERANCE
IS NOT A LONG RACE;
IT IS MANY SHORT RACES
ONE AFTER THE OTHER.
……………………………………………xxxxxxxxxxxxxxxxxxxxxxx…………………………………....................
 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF PRODUCTION

CHAPTER 3 THEORY OF
PRODUCTION
1. ........ is the functional relationship between physical inputs (i.e. factors of production),
and physical outputs (i.e. quantity of good / service produced)
(a) Input- Output Function
(b) Demand – Supply Function
(c) Production Function
(d) Cost Function

2. Variable factor means those factors of production-

(a) Which can be only charged in the long run?
(b) Which can be changed in the short run?
(c) Which can be never be changed
(d) All of the above

3. All Factor of production become variable in –

(a) Medium – run
(b) Short- run
(c) Long –run
(d) none of the above

4. What is the maximum point of TP?

(a) When AP become zero
(b) When MP become zero
(c) At the intersecting point of AP& MP
(d) None of these

5. At the point of Inflexion, TP will generally-

(a) Show increases trend
(b) Show decreasing trend
(c) Equal to Zero
(d) be negative

6. Why does the Law of Increasing Returns operate?

(a) Full use of Fixed Indivisible Factors.
(b) Efficiency of Variable Factors.
(c) Need to reach the right combination
(d) All of the above

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF PRODUCTION

7. A Rational Producer will operate in –

(a) Stage I
(b) Stage II
(c) Stage III
(d) all of the above

8. If the Marginal product of labour is below the Average product of Labour, it must be
true that
(a) The Marginal product of Labour is negative
(b) The Marginal product of Labour is Zero
(c) The Marginal product of Labour is falling
(d) The average product of labour is negative

9. Identify the correct statement.

(a) Average product is at its maximum when Marginal Product is equal to Average
Product.
(b) Law of Increasing Returns to Scale relates to the effect of changes in factor
proportions.
(c) Economies of Scale arise only because of invisibilities of factor proportion
(d) Internal Economies of scale can accrue only to the exporting sector.

10. The factor which are available in the short period are called ----- factors
(a) Fixed
(b) Variable
(c) Either a or b
(d) None

11. When the ---- product is divided with number of unity labour then AP can be
obtained
(a) Marginal
(b) Total
(c) Either a or b
(d) None

12. -------is a free gift of nature

(a) Land
(b) Labour
(c) Capital
(d) Entrepreneur

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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF PRODUCTION

13. There are -----stages of law of proportions

(a) 4
(b) 5
(c) 3
(d) 2

14. --------factor is considered as produced means of production

(a) Land
(b) Labour
(c) Capital
(d) Entrepreneur

15. ------is the primary factor of production

(a) Land
(b) Labour
(c) Capital
(d) Entrepreneur

16. ------means transformation of physical inputs into output

(a) Consumption
(b) Production
(c) Demand
(d) Supply

17. One who brings all the factors together and produces output
(a) Land
(b) Labour
(c) Capital
(d) Entrepreneur

18. Law of variable proportions was developed by

(a) Alfred marshall
(b) Adam smith
(c) Robinns
(d) None of the above

19. Law of variable proportion relates to----

(a) Lond run
(b) Short run
(c) Very long run
(d) None

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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF PRODUCTION

20. There are -----factors of production

(a) 3
(b) 5
(c) 4
(d) 6

21. Production creates which utility

(a) Place
(b) Form
(c) Time
(d) None

22. The change in the total product resulting from a change in a variable input is
(a) Average cost
(b) Average product
(c) Marginal cost
(d) Marginal product

AKASH AGARWAL CLASSES CONT:8390693138

 THE WILL
TO SUCCEED
IS IMPORTANT,
BUT WHAT IS MORE
IMPORTANT IS THE WILL
TO PREPARE
………………………………………………………………………………………………………………..........
 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF COST

CHAPTER 4 THEORY OF COST

1. ------cost is also known as alternative cost
(a) Explicit
(b) Implicit
(c) Opportunity
(d) b and c

2. The additional cost incurred to produce additional unit of output

(a) Fixed cost
(b) Variable cost
(c) Both
(d) None

3. Economies of scale is divided into----parts

(a) 3
(b) 4
(c) 5
(d) 2

4. Average -----cost and output has inverse relationship

(a) Variable
(b) Fixed
(c) Total
(d) None

5. The ----- curve will be a horizontal line

(a) Total cost
(b) Variable cost
(c) Fixed cost
(d) None

6. --------remains constant even if production is stopped

(a) Variable cost
(b) Fixed cost
(c) Marginal cost
(d) None

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF COST

7. Direct cost is also called as----

(a) Indirect cost
(b) Traceable cost
(c) Opportunity cost
(d) Accounting cost

8. Identify the fixed cost from the following:

(a) Labour cost
(b) Electricity bill
(c) Salary of watchman
(d) Cost of raw material

9. Internal Economies and Diseconomies arise due to –

(a) Overall industry-level changes
(b) Changes at the Firm Level
(c) Both (a) and (b)
(d) Neither (a) nor (b)

10. _________ curve never touch the ox-axis

(a) Variable cost
(b) Average fixed cost
(c) Both
(d) None

11. Costs which do not involve any cash payment to outsides are called _______
(a) Explicit cost
(b) Accounting cost
(c) Implicit cost
(d) None

12. Accounting costs equal to _______ costs

(a) Explicit cost
(b) Private cost
(c) Implicit cost
(d) None

13. _________ cost must be paid even if the firm’s level of output is zero.
(a) Variable
(b) Fixed
(c) Both
(d) None

AKASH AGARWAL CLASSES CONT:8390693138

 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
THEORY OF COST

14. When the total revenue equal to economic costs then the firm will earn ________
(a) No profit
(b) No loss
(c) Normal profit
(d) Depends

15. Tcn - Tcn-1 is equal to ______ cost

(a) Average cost
(b) Total cost
(c) Marginal cost
(d) None

16. ATC curve will be in ________ shaped.

(a) U shaped
(b) L shaped
(c) ∩ shaped
(d) None

17. When the Ac=mc then the average cost is _______

(a) Maximum
(b) Reducing
(c) Increasing
(d) Minimum

18. As a reason of external economics the LAC curve shifts

(a) Upward
(b) Downward
(c) Right
(d) Left

19. In perfect competition which applies

(a) AR>MR
(b) AR=MR
(c) AR<MR
(d) AR=MR=PRICE

20. The main cause for the ‘U’ shape of LAC curve is internal economics and
internal diseconomies
(a) True
(b) False
(c) Partly true
(d) Partly false

AKASH AGARWAL CLASSES CONT:8390693138

 ALWAYS MAKE
TOTAL EFFORTS
EVEN WHEN THE
ODDS ARE AGAINST
YOU.
…………………………………………………………………………………………………………………………………
 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
MARKET

CHAPTER 5 MARKET

CLASSIFICATION
OF MARKET
1. Which of the following is /are an essential feature of the market
(A) Buyers
(B) Sellers
(C) Price
(D) All the three

2. The goods which are perishable will have……… market.

(A) Huge
(B) Very long period
(C) Long period
(D) Very short period

3. On the basis of time element, markets can be classified into ………. types.
(A) 2
(B) 3
(C) 4
(D) 5

AKASH
32
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 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
MARKET

4. On the basis of competition, markets are classified into types.

(A) 2
(B) 3
(C) 4
(D) 5

5.On the basis of time element, markets are classified into two types.
SOULTION: FALSE

AKASH
33
AGARWAL CLASSES CONT:8390693138
 CMA FOUNDATION -
CA AKASH AGARWAL SANJEEVANI BOOTI
MARKET

FEATURES PERFECT
COMPETITION
6.Which of the following is one of the assumptions of perfect competition?
(A) Few buyers and few sellers
(B ) Many buyers and few sellers
(C) Many buyers and many sellers
(D) All sellers and buyers are honest

7. Perfect competitive firm are-

(A) Price searchers
(B) Price makers
(C) Price discriminators
(D) Price taker

8. Under perfect competition a firm is the

(A) Price maker and not Price taker
(B) Price taker and not Price maker
(C) Neither price maker nor price taker
(D) None of the above

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9. Agricultural goods markets depict characteristics close to

(A) Perfect competition
(B) Oligopoly
(C) Monopoly
(D) Monopolistic competition

10. Which one of the following is a feature of a perfect competition?

(A) Selling Cost
(B) Group Behavior
(C) Homogenous Product
(D) Differentiated Product

11……..competition exists when the basic features of Perfect Competition are not
present.
(A) Pure
(B) Perfect
(C) Imperfect
(D) All of the above

12. In a competitive market,…… is the price – maker.

(A) Firm
(B) Industry
(C) Consumer
(D) trade association

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13. Sugar cane is an example of monopolistic completion.

SOULTION: FALSE

14. The firm under perfect market earns normal profits in short.
SOULTION: FALSE

15. In perfect competition, there is large number of firms producing

heterogeneous goods.
SOULTION: FALSE

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NORMAL PROFIT, SUPER

NORMAL PROFIT AND LOSS IN
SHORT RUN

16. Which of the following curves resembles the supply curve in a perfect
competition?
(A) Average cost curve
(B) Marginal utility curve
(C) Marginal cost curve
(D) Average utility curve

17.In a perfectly competitive market, the demand curve is-

(A) Relatively inelastic
(B) Unitary elastic
(C) Relatively elastic
(D) Infinitely elastic

18. The AR curve and industry demand curve are identical

(A) in case of monopoly
(B) in case of oligopoly
(C) in case of monopolistic competition
(D) in case of perfect competition

19. In perfect market AR=MR curve is parallel to X-axis.

SOULTIUON: TRUE

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20. When MC=MR the firm will get maximum profits.

SOULTION: TRUE

21. In perfect market AR>MR

SOULTION: FALSE

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LONG PERIOD
EQULIBRIUM –NORMAL
PROFIT
22. In the long run a firm in perfect competition earns
(A) Normal profit only
(B) Abnormal profit
(C) Average profit
(D) 8.33% of capital employed

23. A firm earns normal profit when:

(A) When AR=AC
(B) When MR=MC
(C) When MR=AR=AC=MC
(D) None of the above.

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FEATURES OF
MONOPOLY
24. There is no difference between firm and industry in case of:
(A) Pure monopoly
(B) Pure oligopoly
(C) Perfect competition
(D) Duopoly

25. In which of the following market structure is the degree of control over the
price of its product by a firm very large?
(A) Imperfect competition
(B) Perfect competition
(C) Monopoly
(D) In A and B both

26. A monopolist can increase his sale only by…… the price of his product and
thereby maximize his profit
(A) Increasing
(B) Reducing
(C) Both (a) and (b)
(D) None of the above

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27. Price leadership is a form of -

(A) Monopolistic competition
(B) Monopoly
(C) Non-collusive oligopoly
(D) Perfect competition

28. Under monopoly, the degree of control over price is:

(A) None
(B) Some
(C) Very considerable
(D) None of the above

29. ……..refers to the market situations whether there is one seller and there is
not close substitute to the commodity sold by the seller.
(A) Perfect Competition
(B) Monopoly
(C) Oligopoly
(D) Monopolistic Competition

30 …… means absence of competition.

(A) Monopoly
(B) Perfect
(C) Imperfect
(D) Oligopoly

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31. Railways is an example of perfect market.

SOULTION: FALSE

32. Indian Railways is an example of oligopoly.

SOULTION: FALSE

33. The demand for monopoly product is less elastic.

SOULTION: TRUE

34. There exists no clear distinction between Firm and Industry in Monopoly.
SOULTION: TRUE

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PRICE AND OUTPUT

DETERMINATION UNDER
MONOPOLY

35. In monopoly, the relationship between average and marginal revenue

curves is as follows:
(A) AR curve lies above the MR curve
(B) AR curve coincides with the MR curve
(C) AR curve lies below the MR curve
(D) AR curve is parallel to the MR curve

36. In imperfect market MR curve is a below the AR curve.

SOULTION: FALSE

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PRICE DISCRIMINATION
UNDER MONOPOLY

37. Pricing for selling the same commodity at different selling prices is known as
(A) Skimming Pricing
(B) Differential Pricing
(C) Penetration Pricing
(D) Cost – Plus Pricing

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FEATURES OF MONOPOLISTIC
COMPETITION

38. Which of these is/are associated with monopolistic competitive market

(A) Product differentiation
(B) Homogeneous product
(C) Normal in short run
(D) Single buyer

39. Dynamic Pricing is mostly followed by

(A) Automobile Manufacturing Companies
(B) Cooking Gas Supplying Companies
(C) On-line Companies
(D) Brand Name Food Companies

40.The market state that satisfy all the essential features of a perfect
competitive market except identity of product is known as
(a) Oligopoly (b) Duopoly (c) Monopoly (d) Monopolistic competition

41. Which of the following does not characterize monopolistic competition?

(A) product differentiation
(B) many producers
(C) absence of advertising
(D) partial control over price

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OLIGOPOLY

42. Pure oligopoly is based on the ….. products.

(A) Differentiated
(B) Homogeneous
(C)Unrelated
(D) None of the above

43. Cartel is one form of

(A) Monopoly
(B) Duopoly
(C) Collusive oligopoly
(D) Non-collusive oligopoly

44. OPEC is an example of

(A) Perfect competition
(B) Monopolistic competition
(C) Monopoly
(D) Cartel

45. Oligopoly means

(A) Single seller
(B) few sellers
(C) large number of sellers
(D) no buyers

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46. Pure oligopoly is one where there are few sellers producing homogeneous
product.
SOULTION: FALSE

47.Oligopoly means …….

A)Single seller
B)Few seller
C)Large number of seller
D)No buyers

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PRICING STRATEGY

48. Penetration Pricing is adopted by following a

(A) low price
(B) high price
(C) dual price
(D) support price

49. Target Pricing is used by the Gas Companies.

SOULTION: TRUE

AKASH
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“Study while others are sleeping;
Work while others are loafing;
Prepare while others are playing;
and
Dream while others are wishing.”
………………………………………………………………………………………………………………………………………………………………….
 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

CHAPTER 6 mONEY

DEFINITION OF
MONEY

1.According to walker, money is what money does

SOLUTION: FALSE

2.Money is what money does. This definition was given by

(a)Adam Smith
(b)Walker
(c)Robertson
(d) Keynes

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

FUNCTIONS OF
MONEY
3.Which of the following function does money serve when used to measure the
prices of different goods and services?
(a) Store of value
( b) Medium of exchange
(c) Standard of value
(d) Display of power

4.Money is treated as means of trade and commerce .

SOLUTION: TRUE
5.Primary function of money are of…………types
(a)3
(b)2
(c)4
(d)1

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

MONEY SUPPLY

6.Supply of money refers to

(a) Total money held by the public
(b) Total money held by RBI
(c) Total money with all the commercial banks and RBI
(d) Total money in Government account

7.M1 is considered as the most important measure of money

SOLUTION: FALSE

8.There is a direct relationship between price level and value of money

SOLUTION : FALSE.

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

FORMS OF MONEY
9.Which of the following is near money?
(a) Bill of exchange
(b) Saving bonds
(c) Gilt edged securities
d) All the three

10.Optional money is a
(a) Legal tender money
(b) Non-legal tender money
(c) Limited legal tender money
(d) Full bodied money

11. Examples of NBFI are cash money and credit money.

SOLUTION: FALSE

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

QUANTITY THEORY
OF MONEY

12.The relationship between money supply and price level is

a) Inverse
b) Proportional
c) Non-Proportional
d) Neutral

13.When price level increases value of money will also increase.

SOLUTION : FALSE

14.According to Cambridge equation if ‘K’ is more the value of money should

increase
SOLUTION : TRUE
15. Cash Balance Approach was given by
a) I.Fisher
b) J.M, Keynes
c) G.Crowther
d) Cambridge University Producer

16. Which of these affects the demand for money?

(a) Real income (b) Price level (c) Rate of interest (d) All the three

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

17.Which of these would lead to fall in demand for money?

(a) Inflation
(b) Increase in real income
(c) Increase in real rate of interest
(d) Increase in wealth

18. According to Keynes the rate of interest cannot decide the value of money.
SOLUTION : FALSE

19. Money supply affects the rate of interest; when the money supply increases
rate of interest Will be decreased. It is explained by
a)Walker
b) Keynes
c)Robbins
d)Crowther

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

INFLATION

20.During the inflation period borrowers will gain

SOLUTION :TRUE

21. Tax policy come under Fiscal policy

SOLUTION :FALSE

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -MONEY

GRESHAM’S LAW
22. The _____________ states that bad money drives good money out of
circulation
(a) Law of Demand
(b) Law of Supply
(c) Greshham’s Law
(d) Demand Schedule

AKASH AGARWAL CLASSES CONT:8390693138

DON’T LIMIT YOUR
CHALLENGES.
CHALLENGE YOUR
LIMITS.
 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

CHAPTER 7 BANK

COMMERCIAL BANK

1.Which of the following is commercial bank in India?

a)SEBI
b)AXIS
c)IRDB
d)IFCI

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

FUNCTIONS
COMMERCIAL BANK

2. Which of the following function of commercial bank include collection of

cheques, drafts, bill of exchange, etc. of their customers from other banks?
a) Agency Function
b) Creation of Credit
c) Payment of loan and advances
d) General Utility Functions.

3. Traditional Function of Commercial Bank is

a) Issuing gift cheque
b) Accepting deposits
c) Creation of credit
d)Providing locker facility

4. All the following functions are associated with commercial bank except that
a) Commercial Bank cannot issue Paper Notes
b) Commercial Bank acts as a Banker to the Government
c) Commercial Banks are mostly privately – owned and privately – managed
d) To accept Deposit from the Public is the most important function of a
commercial bank

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

5. Which one of the following is not a function of the commercial bank?

a) Acceptance of deposits
b) Advancing of loans
c) Issuing of notes
d) Creating credit

6. __________ account can be opened by business persons only.

a) Current Deposit
b) Savings Deposit
c) Fixed Deposit
d) Recurring Deposit

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

CREDIT CONTROL

7.The rate at which the commercial bank borrow from the Reserve Bank of
India is called as
a)REPO
b)PLR
c)BPLR
d) Bank Rate
8.Repo transaction means
a) Sale of securities by the holder to the investor with the agreement to
purchase them at a predetermined rate and date.
b) Sale of securities by the holder to the investor with the agreement to resell
them at a predetermined rate and date.
c) Sale and purchase of securities by the holder to the investor with the
agreement to purchase them at the prevailing rate and date
d) Sale of securities by the holder to the investor with the agreement to
purchase them at market driven rate.

9. Reverse Repo transaction means

a) Sale of securities by the holder to the investor with the agreement to
purchase them at a predetermined rate and date
b) Sale or purchase of securities by the holder to the investor with the
commitment to sell or purchase them at a predetermined rate and date
c) Sale and purchase of securities by the holder to the investor with the
agreement to purchase them at the prevailing rate and date
d) Sale of securities by the holder to the investor with the agreement to
purchase them at market driven rate

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

10.………. Is one among the quantitative methods of credit control.

a) Bank Rate Policy
b) Moral Suasion
c) Direct Action
d) Rationing of Credit
e)
11.………. Is one among the qualitative methods of credit control.
a) Moral Suasion
b) Bank Rate Policy
c) Open Market Operations
d) Cash Reserve Ratio

12.The credit instruments are issued on the basis of -

(a) Capital reserve
(b) Cash reserve
(c) General reserve
(d) Capital redemption reserve

13.If the country is passing through recession, the RBI would

(a) Buy bonds
(b) Reduce CRR
(c) Ease out bank rate
(d) All or any of the above three

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

14.If the cash reserve ratio is increased from 10% to 20%, how the credit
creating power of the commercial banking system will be affected?
a) Halved
b) Doubled
c) Increased by 10%
d) Decreased by 10%

14. If the commercial banks get fresh deposits of Rs. 10 crores, assuming cash
reserve ratio of 20%, they would be able to multiply deposits through loans and
advances to the extent
a) Rs.20 crores
b) Rs.200crores
c) Rs. 50 crores
d) Rs.500 crores

15.Which one of the following is not an instrument of monetary policy?

(a) Cash reserve ratio
(b) Open market operation
(c) Selective credit control
(d) Indirect tax

16.Cash Reserve Ratio is defined as

(a) Cash which the commercial banks have to keep with themselves.
(b) Cash which a bank has to transfer to its branches.
(c) Percentage of time and demand liabilities which a commercial bank has to
keep in cash with the Central Bank
(d) Ratio of credit to currency

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

CENTRAL BANK

17.Which is the apex bank for agricultural credit in India?

a) RBI
b) SIDBI
c) NABARD
d) IDBI

18. RBI check inflation by

(a) Increasing bank rate (b) Increasing CRR (c) Both (d) None

19.If the country is passing through recession, the RBI would

(a) Buy bonds
(b) Reduce CRR
(c) Ease out bank rate
(d) All or any of the above three

20.Manipulation in CRR enables the RBI to …….

(a) Influence the lending ability of the commercial banks
(b) Check unemployment growth
(c) Check poverty
(d) Increase GDP

21. RBI was nationalized in

(a) June 1947 (b) Jan. 1949 (c) March 1954 (d) April 1936

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

22. RBI issues the one rupee notes and coins

SOLUTION : False

23. In India, Central Bank was established in _________

a) 1945
b) 1955
c) 1935
d) 1965

24. Which one of the following is not the function of the Central Bank?
a) Credit control
b) Note issue
c) Act as banker’s bank
d) Money creation

25. The basis of cash money issued by the RBI is

(a) Gold and foreign exchange reserve
(b) The guarantee of the President of India
(c) The guarantee of the Governor of the RBI
(d) None of the above

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

FINANCIAL
INSTITUTION
26.EXIM Bank is authorized to raise loan from
(a) RBI (b) Government of India (c) International market (d) Trading activities

27.FERA has been replaced by

(a) FINA (b) FEMA (c) FENA (d) MRTP

28.IMF secure the stability of foreign exchange rate

SOLUTION : True

29.Which one of the following is the apex bank for agricultural credit in India?
a) RBI
b) IDBI
c) SIDBI
d) NABARD

30.Securities market in India is regulated by the ___________

a) Government
b) RBI
c) SEBI
d) SBI

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

31. The main purpose of the SEBI is regulating business in stock markets and
other securities market.
SOLUTION :True

32. International Development Association (IDA) is affiliated to IMF.

SOLUTION : False

33. EXIM Bank of India also provides business advisory technical assistance.
SOLUTION : True

34.LIC was established in 1956 by nationalizing 100 private insurance

companies
SOLUTION : False

35.IFCI was established to extend short term credit to the industrial units
SOLUTION : False

36.SDR’s are used in place of

a)Shares
b) Commercial Paper
c) Gold
d) Company Deposits

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 CA AKASH AGARWAL SANJEEVANI BOOTI CMA FOUNDATION -BANK

37. __________ was established as the apex bank for industrial credit.
(A) IDBI
(B) ICICI
(C) EXIM bank
(D) NABARD

AKASH AGARWAL CLASSES CONT:8390693138

THERE IS NO ELEVATOR
TO SUCCESS
YOU HAVE TO

TAKE STAIRS
 CMA FOUNDATION -MONEY
CA AKASH AGARWAL SANJEEVANI BOOTI
MARKET

CHAPTER 8 MONEY MARKET

MEANING OF
MONEY MARKET
1.Money market deals with the ………
(a) Short term credit (b) Long term credit (c) both A & B (d) None

2.Money market is controlled by …..

(a) Government (b) R.B.I (c) S.B.I (d) all the above

3.Capital market deals with

(a) Short term credit
(b) Liquid assets
(c) Long term credit
(d) Bills of exchange

5.Money market is purely a market for short term funds or financial assets.
SOLUTION : False

6.Money market is controlled and regulated by IDBI.

SOLUTION : False

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 CMA FOUNDATION -MONEY
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MARKET

7.On the basis of functions, financial markets are classified into _________
types.
(A) 5
(B) 4
(C) 3
(D) 2

8. ___________ market is the nerve centre of the financial system.

(A) Money
(B) Capital
(C) Local
(D) National

9.The unorganised Indian money market includes

(a) SBI
(b) IDBI
(c) Money lenders
(d) LIC

10.In Indian money market, who are the main borrowers of short term funds
(a) central government (b) State government (c) local bodies (d) All the above

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 CMA FOUNDATION -MONEY
CA AKASH AGARWAL SANJEEVANI BOOTI
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SUB MARKET OF
ORGANIZED MONEY
MARKET
11. Money market includes ………
(a) Government securities
(b) Treasury bill
(c) Bills of exchange
(d) All the above

12.In April 1992 the government of India introduced the bills for the period of …..
(a) 91 days
(b) 182 days
(c) 364 days
(d) None

13.In call money market funds are borrowed of rent without any security for the
period of…
(a) one day
(b) 14 days
(c) a & b
(d) NONE

14.If buyer of the goods is called ……

(a) Drawer (b) drawee (c) payee (d) none

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 CMA FOUNDATION -MONEY
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MARKET

15.Certificate of deposits are issued by the banks to …..

(a) individual
(b) companies
(c) P.S.U.S
(d) All the above

16.Which are unsecured promissory notes

(a) Commercial paper
(b) Certificate of deposits
(c) Treasury bills
(d) all the above

17.Commercial banks provide collateral loans against …..

(a) bonds
(b) govt. security
(c) both A & B
(d) None

18.The instrument commercial paper has risen out of the changing industrial
scenario
SOLUTION : True

19.R.B.I introduced the certificates of deposits in June 1998

SOLUTION : False

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MARKET

20.Collateral loans are given by commercial banks without security

SOLUTION : False

21.The rate at which funds are borrowed and lent in the call and notice money
market is called
(a) Repo rate
(b) Call money rate
(c) Bank rate
(d) Discount rate

22.Commercial papers, as money market instruments, are issued by

(a) RBI
(b) SBI
(c) Highly rated corporate bodies
(d) None of the above

23.Non-resident Indian can also subscribe to Certificate of Deposit but only on a

(a) Non-repatriation basis
(b) Non-profit basis
(c) Non-negotiable basis
(d) None of the above

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MARKET

24.Treasury bills are

(a) Long term promissory notes
(b) Medium term promissory notes
(c) Short term promissory notes
(d) None of the above

25.In the Inter-bank Term Money Market, the participants are

(a) Commercial banks
(b) Co-operative banks
(c) Both A and B
(d) Indigenous banks

26.Commercial paper was introduced in the Indian money market on the

recommendation of
(a) Milton Friedman
(b) Lord John Maynerd Keynes
(c) Marshall
(d) Vaghul working group

27.In call money market, funds are borrowed and lent for 14 days without any
collateral security.
SOLUTION : True

28.Commercial Paper represents a promise by the borrowing company to repay

loan at a specified date.
SOLUTION : True

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29.In Inter-Bank Term Money Market, lenders can call back loan with a short
notice.
SOLUTION : False

30.Commercial Bank provides collateral loans against

a)Government Security
b)Shares
c)Bills of Exchange
d)Commercial Paper

31.Commercial Paper was introduced in Indian money market in January

a)1990
b)1980
c)1970
d)1960

AKASH AGARWAL CLASSES CONT:8390693138

A lIttle progress
each day
adds up to

bIg results.