Daily Economics Quiz 15-08-2025

#1. The concept of “Opportunity Cost” is best described as:

A. The cost paid to produce an additional unit

B. The value of the next best alternative foregone

C. The difference between marginal cost and average cost

D. The total cost of production

Answer: B
Explanation: Opportunity cost measures the value of the best alternative not chosen.

#2. In international trade, the term “Most Favoured Nation” (MFN) is associated with:

A. WTO Agreements

B. IMF Lending

C. World Bank Projects

D. OECD Trade Rules

Answer: A
Explanation: MFN under WTO means equal trade treatment for all member countries.

#3. Which of the following is NOT a component of GDP calculated by the expenditure method?

A. Government Spending

B. Net Exports

C. Interest Payments on Government Debt

D. Private Consumption

Answer: C
Explanation: GDP = C I G (X − M). Interest payments are transfer payments, excluded from GDP.

#4. Which among the following is a counter-cyclical fiscal policy measure?

A. Increasing taxes during a recession

B. Reducing government spending during high unemployment

C. Increasing infrastructure spending during a slowdown

D. Cutting interest rates during inflation

Answer: C
Explanation: Counter-cyclical policy boosts demand during slowdowns and restrains it in booms.

#5. Which index is used to measure core inflation in India?

A. Wholesale Price Index (WPI)

B. Consumer Price Index (CPI) excluding food & fuel

C. GDP Deflator

D. Producer Price Index

Answer: B
Explanation: Core inflation removes volatile items like food and fuel to show underlying price trends.

#6. In the IS-LM model, a rightward shift of the LM curve is caused by:

A. Increase in government spending

B. Decrease in money supply

C. Increase in money supply

D. Increase in taxes

Answer: C
Explanation: More money supply lowers interest rates and shifts the LM curve rightward.

#7. Which of the following is a leading economic indicator?

A. Unemployment Rate

B. Stock Market Returns

C. GDP Growth Rate

D. Inflation Rate

Answer: B
Explanation: Leading indicators move ahead of the economy; stock prices often signal future trends.

#8. Which of the following is TRUE for a Giffen good?

A. It violates the Law of Demand

B. It has close substitutes

C. Its demand increases with a fall in price

D. It is always a luxury good

Answer: A
Explanation: Giffen goods are inferior goods whose demand rises when their price increases due to strong income effects.

#9. If the Reserve Bank of India increases the CRR (Cash Reserve Ratio), it will most likely:

A. Increase bank lending

B. Reduce money supply

C. Lower interest rates

D. Increase aggregate demand

Answer: B
Explanation: Higher CRR requires banks to keep more reserves, reducing lending and money supply.

#10. In the Phillips Curve, the trade-off is traditionally between:

A. Inflation and Economic Growth

B. Inflation and Unemployment

C. Unemployment and GDP

D. Inflation and Fiscal Deficit

Answer: B
Explanation: Short-run Phillips Curve shows an inverse relation between inflation and unemployment.

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