12th Standard Economics March 2020: Online Practice Test

Explanation. J.M. Keynes, through his General Theory (1936), laid the foundation of modern macro economics and is regarded as its father.

Explanation. Macro economics studies the economy as a whole through aggregates such as national income, total employment and the general price level.

Explanation. The primary sector uses natural resources directly: agriculture, forestry, fishing and mining. Construction and industry are secondary; trade is tertiary.

Explanation. J.B. Say, the French economist who gave Say's Law of Markets (supply creates its own demand), belongs to the classical school.

Explanation. A lower interest rate reduces the cost of borrowing, so people and firms borrow more and spend more on consumption and investment.

Explanation. k = 1/(1 − MPC). Since MPC + MPS = 1, 1 − MPC = MPS, so k = 1/MPS as well; both (a) and (b) are correct.

Explanation. J.R. Hicks combined the multiplier and the accelerator and first used the term 'super multiplier'. Kahn gave the employment multiplier and Keynes the investment multiplier.

Explanation. The Reserve Bank of India, set up in 1935, has had its central office in Mumbai since 1937.

Explanation. The primary functions of money are medium of exchange and measure of value. Store of value and standard of deferred payments are secondary functions; basis of credit is a contingent function.

Explanation. The National Bank for Agriculture and Rural Development (NABARD) was established on 12 July 1982.

Explanation. RRBs are Regional Rural Banks, set up from 1975 to provide credit to small farmers, artisans and rural poor.

Explanation. The exchange rate is the price of one currency in terms of another, and it is determined by demand and supply of currencies in the foreign exchange market.

Explanation. The balance of payments records all transactions with the rest of the world: visible items (goods) and invisible items (services, transfers) as well as capital flows.

Explanation. Surcharge, income tax and cess are all taxes. Fees are paid in return for a specific service, so they are non-tax revenue.

Explanation. The modern state goes beyond maintaining law and order (police/laissez-faire state) and undertakes activities for the welfare of the people, so it is a welfare state.

Explanation. Global warming is the rise in the earth's average temperature caused by greenhouse gases; among the given options only 'increasing temperature' relates to it (strictly it is the effect, but it is the intended answer).

Explanation. NITI Aayog, which replaced the Planning Commission on 1 January 2015, stands for National Institution for Transforming India.

Explanation. The Planning Commission of India was set up in March 1950; the First Five Year Plan began in 1951.

Explanation. Data collected first-hand by the investigator, e.g. through a questionnaire, is primary data; secondary data is taken from already published sources.

Explanation. In the classification of plans by time, short-term (annual) plans are used to control and adjust the economy within the long-term framework, so they are called controlling plans.