CSEET – Economics Basics: Multiple Choice Questions

CSEET – Economics Basics: Multiple Choice Questions

1. Economics is primarily concerned with:

A. Production and distribution of wealth

B. Money and banking

C. Choice under scarcity

D. Only consumption

Answer: C. Choice under scarcity

Explanation: Economics studies how limited resources are allocated to satisfy unlimited human wants.

2. The central problem of an economy is:

A. What to produce

B. How to produce

C. For whom to produce

D. All of the above

Answer: D. All of the above

Explanation: Every economy faces these three basic problems due to limited resources.

3. Microeconomics deals with:

A. The entire economy

B. Aggregate demand

C. Individual units like households and firms

D. National income

Answer: C. Individual units like households and firms

 Explanation: Microeconomics focuses on individual decision-making and price determination.

4. Law of Demand shows:

A. Direct relationship between price and demand

B. Inverse relationship between price and demand

C. No relationship

D. Constant relationship

Answer: B. Inverse relationship between price and demand

Explanation: When price rises, quantity demanded falls, other factors remaining constant.

5. The market where new securities are issued for the first time is called:

A. Secondary Market

B. Money Market

C. Primary Market

D. Derivatives Market

Answer: C. Primary Market

Explanation: In the primary market, companies issue new shares or bonds to investors directly.

6. Which of the following is a capital good?

A. Bread

B. Car used by a family

C. Machine used in a factory

D. Furniture in a house

Answer: C. Machine used in a factory

Explanation: Capital goods are used in the production of other goods and services.

7. GDP stands for:

A. Gross Domestic Product

B. Gross Development Product

C. Global Domestic Production

D. Gross Demand Product

Answer: A. Gross Domestic Product

Explanation: GDP is the total value of all final goods and services produced within a country’s borders in a year.

8. Opportunity cost refers to:

A. Cost of producing goods

B. Cost of all alternatives

C. Value of the next best alternative foregone

D. Accounting cost

Answer: C. Value of the next best alternative foregone

Explanation: It measures the benefit you give up when choosing one option over another.

9. Demand curve normally slopes:

A. Upward

B. Downward

C. Horizontal

D. Vertical

Answer: B. Downward

 Explanation: Because as price falls, demand increases, showing an inverse relationship.

10. The elasticity of demand measures:

A. The slope of demand curve

B. Responsiveness of demand to change in price

C. Quantity demanded

D. Cost of production

Answer: B. Responsiveness of demand to change in price

Explanation: Price elasticity of demand shows how much demand changes with a change in price.

11. Perfect competition is a market structure where:

A. Few sellers exist

B. One seller dominates

C. Many buyers and sellers exist

D. Sellers control prices

Answer: C. Many buyers and sellers exist

 Explanation: Perfect competition has many small firms selling identical products.

12. Inflation means:

A. Decrease in prices

B. Increase in prices over a period of time

C. Stability of prices

D. None of these

Answer: B. Increase in prices over a period of time

Explanation: Inflation refers to a sustained rise in the general price level of goods and services.

13. Fiscal policy refers to:

A. Control of money supply

B. Government spending and taxation decisions

C. Foreign trade

D. Price control measures

Answer: B. Government spending and taxation decisions

Explanation: Fiscal policy is used by the government to influence economic activity through expenditure and taxes.

14. Which of the following is NOT a factor of production?

A. Land

B. Labour

C. Capital

D. Bank loan

Answer: D. Bank loan

 Explanation: The main factors of production are land, labour, capital, and entrepreneurship.

15. The branch of economics dealing with aggregates like national income and employment is:

A. Microeconomics

B. Macroeconomics

C. Public economics

D. Business economics

Answer: B. Macroeconomics

 Explanation: Macroeconomics studies the behavior of the economy as a whole — growth, inflation, and employment.