# TNPSC - Economics Important Questions with Answers - 1

1.Income consumption line of the ‘Consumer Theory’ is analogous in ‘Production Theory’ to which one of the following?
(a) Expansion path
(b) Isoquant line
(c) Ridge line
(d) Isocost line
Answer: A

2. Which one of the following is the correct sequence of magnitude of minimal in ascending order in marginal cost (MC) curve, average cost (AC) curve and average variable cost (AVC) curve?
(a) MC, AVC, AC
(b) AVC, AC, MC
(c) MC, AC, AVC
(d) AC, MC, AVC
Answer: A

3. Given What is the approximate percentage in real capital GNP?
% change in nominal GNP = 1.8
% change in population = 0.5
% change in price level = 1.3
(a) Zero
(b) 0.5
(c) 1.0
(d) 1.3
Answer: C

4. Who developed the Time Preference Theory of Interest?
(a) Irving Fisher
(b) N. Senior
(c) J. R. Hicks
(d) J.M. Keynes
Answer: A

5. Which one of the following is the most important determinant of speculative demand for money?
(a) Income
(b) Interest rate
(c) Profits
(d) Prices
Answer: B

6. Which one of the following equations was used by Fischer to explain the Quantity Theory of Money? (Symbols have their usual meanings)
(a) MV = PT
(b) MP = VT
(c) MP = PT
(d) PV = MT
Answer: A

7. If Y is the total money income of the community, M is the money supply and P is the price level, then how is Vy (the income velocity of money) defined as?
(a) Vy = M/Y
(b) Vy = Y/M
(c) Vy = Y (MP)
(d) Yy = PY/M
Answer: D

8. When shall an increase in money supply have a small effect on nominal Gross Domestic Product?
(a) If the velocity is decreasing
(b) If the velocity is unchanged
(c) If the velocity is increasing
(d) If the Government’s spending is also increasing
Answer: A

9. What is the theory that opening a country to world markets gives an opportunity to utilze unemployed and underemployed resources known as?
(a) Ricardian theory
(b) Heckscher – Ohlin theory
(c) Vent-for-surplus theory
(d) Strategic trade Theory
Answer: C

10. Which one of the following is a qualitative credit control method?
(a) Open market operations
(b) Bank rate
(c) Variable cash reserve ratio
(d) Moral suasion
Answer: D

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