Economics MCQs For Lectureship CSS PMS And NTS Part II

Below are some of the important MCQs of Economics that we have collected from different sources. We hope that you will find these MCQs useful and it will help you in your preparation. Please let us know if you find any mistake in the given below MCQs.


1 Wages-fund Theory was developed by

John Stuart Mill

2 Under monopoly in the labour market, the supply curve of labour facing the firm will be

Upward-sloping to the right

3 Economic rent can accrue to

Any of the factors of production

4 In the context of the firm as a whole, quasi-rent is defined as the excess of total receipts over the total

Variable Cost

5 A factor of production, whose supply is fixed in the short run, may get additional earnings. These earnings are generally referred to as


6 Savings normally does not give rise to the demand for

Loanable funds

7 The demand for money for speculative motives mainly depend on

Rate of interest

8 The Neo-classical Theory of the rate of interest is also called as

Loanable Funds Theory

9 The Classical Theory explained interest as a reward for


10 According to Joseph Schumpeter, profit is the reward for


11 The term ‘‘Normal Profit’’ as used in the analysis of equilibrium of the firm under perfect competition, refers to

Earnings of management

12 Who argued that pure profit can arise only in a dynamic economy?

  1. B. Clark

13  Fiat money refer to

Legal Money

14 When the commodity value of money and its value as money are equal, it is called

Full-bodied Money

15 The limited legal tender money stands for that component of money which

Is legal tender for payments up to a certain maximum amount

16 As compared to the Classical Theory, which function of money was stressed more in the Keynesian theory?

Store of value

17 Bad money drives good money out of circulation. With whose name is this law associated?

Thomas Gresham

18 Identify the country which was the first to adopt the gold standard.


19 During which decades of the nineteenth century did most of the European countries adopted the gold standard?


20 When did the UK finally abandon the gold standard?


21 Who is generally regarded as the founder of the Modern Quantity Theory of Money?

Milton Friedman

22 The Quantity Theory of Money establishes the relationship between the quantity of money in an economy and the level of

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23 What is Pigou’s cash balance equation?

M = KR/P

24 In the Fisher’s equation of exchange, MV = PT, what does T denotes?

Volume of trade

25 Cost push inflation is caused by

Increases in the prices of inputs

26 Who introduced the concept of the real balance effect?

  1. C. Pigou

27 The cash transaction approach to the quantity theory of money is usually associated with the name of

Irving Fisher

28 The relationship between the market rate of interest and the market price of a bond is


29 The degree of elasticity in respect of speculative demand for money, under the liquidity trape conditions is


30 A retail price index is a good measure of changes in

Consumer’s cost of living

31 Which of the following is not an instrument of monetary policy?


32 Taxation is not an instrument of

Monetary policy

33 At a very low rate of interest, the interest elasticity of the speculative demand for money becomes


34 The liquidity trap condition occurs at a

Very low rate of interest

35 In which capacity does a person stand to gain from deflation?

As a pensioner

36 According to the classical approach the demand for money primarily depends upon

Economic transactions

37 Stagflation refer to a situation which is characterised by

Sustained price rise and rising unemployment

38 The first explanation of stagflation was offered originally in 1931 by

Friedrich A. Von Hayek

39 The reduction or elimination of inflation is known as


40 Which is not a function of the central bank of a country?

Supervisor of nation’s fiscal policy

41 The banking system was developed in


42 The chain banking system was developed in the mid of nineteenth century in


43 In which country was the instrument of minimum legal cash reserve ratio for banks first introduced?


44 If there is significant decrease in the demand for loans, banks will be forced to

Adjust their portfolios         

45 Open market operations refer to the buying and selling of

Government securities

46 Bank rate refer to the interest rate at which

Central bank gives loans to commercial banks

47 The immediate effect of credit creation by banks is

Increase in money supply

48 Credit rationing is one of the instruments of

Qualitative credit control

49 Variable reserve ratio is one of the instruments of

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Quantitative credit control

50 Commercial banks have always to face a conflict between

Liquidity and profitability


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51 The country that first employed credit rationing as an instrument of credit control is


52 The ‘Terms of Trade’ refer to

Ratio of the index of export prices to the index of import prices

53 The market for very short term loans is known as

Money market

54 If the increase in exports exceeds the increase in imports and other things remain the same, then the level of income will


55 Free trade was not favoured by the


56 Foreign travel is invisible in the

Balance of payments

57 If the elasticity of foreign demand for the country’s export is unity, the supply curve of foreign exchange will be


58 The multiple exchange rates were first employed by


59 The elasticity of demand for foreign exchange for financing capital outflow is


60 The law of Comparative Costs is based on

Labour Theory of Value

61 Adam Smith’s views on world’s trade can be best understood if one considers them as a reaction to

Ricardo’s views on trade

62 Business can be define as

Trade, commerce and industry

63 What can be the maximum number of partners in a partnership firm?

Twenty (20)

64 Which form of business organization would be most suitable for a capital intensive business?
Joint-stock company

65 According to the systems approach, a system is the

Orderly arrangements of its components in a coordinated manner

66 A business has constant and invisible interaction with its

External environment

67 Vertical combination implies

Integration of enterprises engaged in different stages of production of a particular product

68 An indirect tax is one where

Points of impact and incidence are different

69 Sale tax is an example of

Indirect tax

70 Who is generally regarded as the father of modern management?

Henry Fayol

71 Objectives in the context of management may be defined as

The end result, which an organization tries to attain

72 The two key factors in ‘management by objectives are

Democratic goal-setting and verifiable objectives

73 An informal organization is one where

The structure is not prescribed by the formal authority

74 Planning and control are related in such a way that

Both go hand-in-hand with each other in a cyclical manner

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75 A private company must have at least

Two (2) members

76 A Special Resolution is one which is passed in a general meeting by

Three-fourth majority of votes

77 A share warrant can be issued by

Public companies only

78 What is the minimum number of shareholders necessary for  a public company?

Seven (7)

79 The share capital of a company refers to

Equity and preference share capital

80 Any agreement by a minor which is beneficial to him is a

Valid contract

81 The liability of partners in a partnership firm is

Joint and several

82 What is the maximum number of partners necessary in a partnership firm carrying on banking business?

Five (5)

83 The suit for specific performance in case of breach of contract may be filed only where the subject matter relates to

Immovable property

84 Crossing a cheque ‘Not Negotiable’ affords security against

Theft of cheque

85 Non-registration of partnership does not affect the

Suit by third parties against the firm

86 Organization theory is concerned with the

Study to explain the nature and composition of organization as a social or human group

87 Job-enrichment means

Change or variation of job after a time period

88 An organization structure refers to the

Flow of authority and responsibility

89 Current Ratio is the ratio

Current assets to current liabilities

90 Debt Equity Ratio refers to the ratio of

Long term debt to shareholders’ equity

91 Trading on equity means

Use of fixed-interest borrowed funds for getting a higher return on equity

92 Cost of goods sold refers to

Sales minus gross profits

93 In the pay-back period method of capital budgeting, investment is divided by

Constant annual cash flow

94 Break-even-point is a situation where

There is no profit no loss

95 Under-capitalisation refers to a situation where

The capital base does not justify the amount of earnings made and needs to be enhanced

96 A scheduled of balances drawn from the ledger is called

A trial balance

97 Goodwill of a firm represents

Intangible assets

98 A bank account is a

Personal account

99 Prepaid expenses appearing in a trial balance will figure in the

Balance sheet

100 The excess of current assets over current liabilities is called

Working capital




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