Economics Topics
Undergraduate level — Economics
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Microeconomics
Macroeconomics
Indian Economy
Bihar Economy
Budget & Fiscal Policy
quiz Questions
Q211
According to the permanent income hypothesis, what is the numerical value of the long-run Average Propensity to Consume (APC) as permanent income expands continuously over generational cycles?
It declines toward zero linearly
It remains stable and equal to the long-run Marginal Propensity to Consume ($APC = MPC$)
It fluctuates erratically tracking transitory asset spikes
It matches the interest elasticity of investment exactly
Explanation
Friedman's model shows that because long-run consumption is proportional to permanent income, the long-run APC equals the long-run Marginal Propensity to Consume ($APC = MPC$), remaining remarkably stable over time.
Q212
Which type of investment mechanism maps the corporate choice to adjust physical capital stock layout based on the gap between the optimal desired capital level and current actual capital levels?
The Pigovian wealth model
The flexible accelerator model
The liquidity trap loop index
The autonomous transfer spending path
Explanation
The Flexible Accelerator Model of investment suggests that firms adjust their capital assets over time to close a specific portion of the gap between their actual capital stock and their target capital stock.
Q213
Under the terms of the Hotelling rule for non-renewable natural resources, what economic path must the net price (marginal profit) of a scarce mineral resource track over time?
It must decline at the rate of global currency inflation
It must appreciate at a rate exactly equal to the market interest rate
It must equal the exact average cost of digital distribution
It must drop to zero under technological substitution loops
Explanation
The Hotelling rule states that the net price of an exhaustible resource must grow at a rate equal to the market interest rate to leave the resource owner indifferent between extracting it today or preserving it for tomorrow.
Q214
What form of government budgeting model explicitly requires that every government program or expenditure item justify its entire funding request from a base of zero each fiscal cycle?
Traditional incremental budgeting
Zero-Based Budgeting (ZBB)
Performance budgeting matching previous targets
Capital account consolidation allocation
Explanation
Zero-Based Budgeting (ZBB) requires that every program justify its entire budget from scratch each year, rather than simply modifying the previous year's allocation baseline.
Q215
Which microeconomic concept describes an indifference curve map that exhibits a strict L-shape configuration, tracking specific consumer behavioral constraints?
Perfect substitutes options
Perfect complements or Leontief preference maps
Giffen necessity alignments
Insatiable Veblen commodities
Explanation
An L-shaped indifference curve represents perfect complements (Leontief preferences), meaning the items must be consumed in fixed structural ratios, driving the elasticity of substitution to zero.
Q216
In expected utility theory, what mathematical measurement calculates an individual's absolute degree of risk aversion at a specific wealth coordinate point?
The Gini inequality matrix quotient
The Arrow-Pratt measure of absolute risk aversion, formulated as $-U''(W)/U'(W)$
The elasticity of intertemporal transformation loop
The Cobb-Douglas alpha parameter ratio
Explanation
The Arrow-Pratt measure of absolute risk aversion is defined mathematically as $-U''(W) / U'(W)$, tracking preference adjustments over risky assets relative to total wealth.
Q217
Which pricing index serves as the primary gauge for corporate and bulk-level commercial inflation, tracking commodity changes without matching service sector costs in India?
Consumer Price Index (CPI)
Wholesale Price Index (WPI)
GDP Deflator
Index of Industrial Production
Explanation
The Wholesale Price Index (WPI) tracks changes in the price of goods sold in bulk at the wholesale level, entirely excluding services from its basket, unlike the CPI.
Q218
Under the rules of business and federal accounting in India, what constitutional article authorizes the central government to levy and collect Integrated GST (IGST) for interstate trade?
Article 246A
Article 269A
Article 279A
Article 280
Explanation
Article 269A of the Constitution mandates that the Goods and Services Tax on supplies in the course of inter-state trade or commerce shall be levied and collected by the Government of India.
Q219
Which type of financial policy lag represents the time window required for an economy to react to a newly executed tax change once it has been legally implemented by the state?
Inside lag
Outside lag
Recognition lag
Legislative response lag
Explanation
The outside lag (or impact lag) represents the time it takes for a newly implemented policy measure to filter through the economy and alter real output or employment indicators.
Q220
What represents the fundamental wealth accumulation constraint inside a closed economy macro model, connecting national saving ($S$) and private domestic investment ($I$)?
$S + I \equiv Total Income$
$S = I$
$S imes I \equiv Consumption$
$I - S \equiv Depreciation$
Explanation
In a simple closed economy without government spending, macroeconomic equilibrium identically requires that planned national saving equals planned private investment ($S = I$).