Unit 12: Fundamentals of Economics, Microeconomics, Macroeconomics and types of Economics (JAIIB-MODULE B)
1. What is the primary concern of economics?
A. International trade only
B. Allocation of scarce resources to satisfy unlimited wants
C. Development of advanced technology
D. Maximizing profits of industries
Economics deals with scarcity and choice—how to use limited resources to fulfill unlimited human wants.
2. Microeconomics is primarily concerned with:
A. National income and employment
B. Inflation and monetary policy
C. Balance of payments and fiscal deficit
D. Individual consumers, firms, and market mechanisms
Microeconomics focuses on individual units like households, firms, and how they interact in specific markets.
3. Which of the following is NOT a feature of a command economy?
A. Centralized planning
B. Government ownership of resources
C. Prices determined by supply and demand forces
D. Production targets fixed by the state
In a command economy, prices are controlled by the government, not determined by supply and demand.
4. Macroeconomics differs from microeconomics because it studies:
A. Aggregates like national income, unemployment, and inflation
B. Consumer demand for a single product
C. Cost and revenue of an individual firm
D. Price of one specific commodity
Macroeconomics looks at the economy as a whole, focusing on broad aggregates rather than individual markets.
5. In a mixed economy, decision-making is done by:
A. Only private sector firms
B. Only government planning authorities
C. Both market forces and government intervention
D. Foreign institutions only
A mixed economy combines features of capitalism and socialism, where both government and private sector play roles in resource allocation.
6. Which of the following best represents a microeconomic issue?
A. Inflation in the entire economy
B. Unemployment rate of a country
C. National income measurement
D. Pricing decision of an individual firm
Microeconomics studies individual units like a firm or consumer, such as price determination in one market.
7. The study of overall price level, GDP, and employment levels falls under:
A. Microeconomics
B. Macroeconomics
C. Managerial economics
D. Welfare economics
Macroeconomics focuses on the economy as a whole, studying aggregates like GDP, inflation, and unemployment.
8. Which of the following is an example of a macroeconomic policy tool?
A. Price determination in a single market
B. Cost calculation of a factory
C. Monetary policy implemented by the central bank
D. Consumer’s choice of goods
Monetary and fiscal policies are macroeconomic tools used to stabilize and guide the overall economy.
9. In microeconomics, the equilibrium price is determined at the point where:
A. Demand equals supply
B. National savings equal investment
C. Exports equal imports
D. Government expenditure equals tax revenue
In microeconomics, price is determined by the intersection of demand and supply in a particular market.
10. When the economy faces rising unemployment along with falling GDP, it is an issue studied under:
A. Microeconomics
B. Consumer choice theory
C. Firm’s cost analysis
D. Macroeconomics
Unemployment and GDP are aggregate indicators, hence studied in macroeconomics.
11. In a capitalist economy, the allocation of resources is primarily determined by:
A. Central government planning
B. Social welfare objectives
C. Market forces of demand and supply
D. Voluntary organizations
In capitalism, decisions on production and pricing are driven by market forces without direct government control.
12. Which of the following is a characteristic of a socialist economy?
A. Government ownership of major resources
B. Profit maximization as the sole objective
C. Free pricing of goods and services
D. Minimal government role in production
Socialist economies emphasize state control and ownership of resources to ensure equitable distribution.
13. India is classified as a mixed economy because:
A. It relies only on government planning
B. It follows only capitalist principles
C. It allows only private ownership of property
D. It combines government control with private sector participation
A mixed economy blends features of socialism and capitalism, with both government and private sectors active.
14. Which type of economy is primarily based on customs, traditions, and barter system?
A. Socialist economy
B. Traditional economy
C. Mixed economy
D. Capitalist economy
Traditional economies rely on old customs and barter, often found in tribal or rural societies.
15. A major disadvantage of a command (planned) economy is:
A. Excessive role of private firms
B. High competition and inequality
C. Inefficiency and lack of innovation due to absence of competition
D. Dependence on market fluctuations
Command economies often face inefficiency and low productivity because firms lack profit incentives and competition.
16. In a pure market economy, the fundamental economic questions of what, how, and for whom to produce are decided by:
A. Interaction of demand and supply forces
B. Central government authorities
C. Non-profit organizations
D. International agencies
In a market economy, all decisions are guided by price signals generated from demand and supply interaction.
17. Which of the following is the main feature of a command economy?
A. Profit maximization by private enterprises
B. Competition in free markets
C. Centralized planning and control of resources
D. Minimal government interference
Command economies rely on central planning where the government decides production, pricing, and distribution.
18. In a mixed economy like India, which of the following statements is TRUE?
A. All industries are owned by private individuals
B. Market forces alone decide resource allocation
C. The government has no role in production
D. Both government and private sector participate in resource allocation
Mixed economies combine private enterprise with government control, allowing both to contribute to economic development.
19. Case Study: A country’s government owns all large industries and sets production targets. However, small farmers are allowed to sell their produce in local markets. This type of system is closest to:
A. Pure market economy
B. Mixed economy leaning towards command
C. Socialist economy with no private ownership
D. Traditional economy
The presence of both government control (industries) and private freedom (farmers) makes it a mixed economy leaning toward command.
20. A key advantage of a mixed economy compared to market and command economies is:
A. Complete elimination of income inequality
B. Absence of government role in the economy
C. Balance between efficiency of markets and social welfare provided by government
D. No influence of demand and supply on prices
Mixed economies attempt to take the strengths of both systems—market efficiency with government support for welfare and equity.
