Economics Practice Questions for Term 1 CBSE

Economics Practice Questions for Term 1 CBSE

Qus 1. Money can be used to transfer purchasing power from the present to the future. Which specific function of money is this called?
A. store of value
B. unit of account
C. medium of exchange
D. double coincidence of wants

Qus 2. There are two statements given below, about the effect of a rise in the general price level of an economy.
P: It will lead to a rise in the value of money.
Q: It will lead to a rise in the demand for money.
Which of these is/are true?
A. only P
B. only Q
C. both P and Q
D. neither P nor Q

Qus 3. Which of the following formulae is INCORRECT?
A. M1 = currency + net demand deposits
B. M2 = M1 + savings with post office savings banks
C. M3 = M2 + net time deposits of commercial banks
D. M4 = M3 + total deposits with post office savings banks

4. Which of the following is TRUE about revenue receipts?
A. non-recurring in nature
B. may create corresponding liability
C. do not lead to an increase in liability
D. include loans taken by the government

Qus 5. In 2021, the government said that despite the current resource crunch, it has decided to hike its capital expenditure by 34.5%.
Which of the following could be a reason for this hike?
A. increasing salaries of government employees
B. repayment of mounting interests on international loans
C. paying pending pensions to the government employees
D. rapid employment generation through infrastructural projects

Qus 6. Which of the following can help reduce the fiscal deficit?
A. increasing subsidies
B. increasing the PSU profits
C. investing in improving public goods
D. decreasing the burden and incidence of tax

Qus 7. Which of the following will be debited on the Capital Account of India’s Balance of Payments Account?
A. an Indian woman buying a Chinese company
B. an Indian woman sending remittances home from the UK
C. an American company buying shares of an Indian company
D. an American company selling mobile phones to Indian customers

Qus 8. In 2020, India’s purchasing power parity was 22 national currency units (rupees) per US dollar. (Source: OECD)
What does this mean?
A. Goods that can be bought for 1 dollar in the US would require 22 rupees in India.
B. Goods in India that can be bought for 1 dollar would require 22 dollars in the US.
C. Goods that can be bought for 1 dollar in the US would require 22 dollars in India.
D. Goods in India that can be bought for 1 rupee would require 22 dollars in the US.

Qus 9. In the 20th century, under British rule, India had an export surplus. Where was this surplus used?
A. to invest in capital goods industries in India
B. to invest in capital goods industries in Britain
C. to meet the official and war expenses of the British
D. to pay the salaries of Indian government employees

Qus 10. The colonial government made no sincere attempts to estimate India’s national and per capita income, but most studies found that India’s national income growth in the pre-Independence era was __________ and per capita income growth was _____________.
Choose the correct option that can fill in the blanks.
A. close to 5 per cent, more than 2 per cent
B. less than 3 per cent, more than 1 per cent
C. close to half per cent, almost 0 per cent
D. less than 2 per cent, close to half per cent

Qus 11. Under the British system of land settlement, the zamindar’s dues to the state were fixed. What did this mean for the cultivators?
A. They received investment support to increase production.
B. They were exploited and forced to pay rent regardless of the produce.
C. They had the support of the landlords against the oppressive policies of the British.
D. They were forced to shift from food crops to commercial crops, leading to food scarcity.

Qus 12. There are two statements given below, about the changes in India’s structural composition in the period 1950-1990.
P: At the beginning of this period, the share of agriculture in the GDP was the highest.
Q: Increase in agricultural productivity during this period led to a further increase in the share of agriculture in the GDP by the end of this period.
Which of these statements is/are true?
A. only P
B. only Q
C. both P and Q
D. neither P nor Q

Qus 13. Which of the following statements about the land ceiling policy is TRUE?
A. It led to equity in the agricultural sector.
B. Many landlords were able to escape the legislation.
C. The implementation of the legislation was challenged by small tenants.
D. It was successful in Kerala and West Bengal because it met no resistance.

Qus 14. There are two statements given below, marked as Assertion (A) and Reason (R). Read the statements and choose the correct option.
Assertion (A): India’s Green Revolution is an example of how the productivity of scarce land
resources can be increased with improved production technology.
Reason (R): Because of the Green Revolution, farmers produced far larger quantities of food grains than was possible earlier, on the same piece of land.
A. A is true but R is false.
B. A is false but R is true.
C. Both A and R are true and R explains A.
D. Both A and R are true but R does not explain A.

Qus 15. What kind of tariff policy was needed to protect domestic producers from foreign competition, after independence?
A. low import tariffs, reduced import quota
B. low import tariffs, increased import quota
C. high import tariffs, reduced import quota
D. high import tariffs, increased import quota

Qus 16. Manu is a construction worker who travels between his village and the nearby city in search of work. When he is hired, he gets 10-15 days of work, after which he is unemployed again.
Which category of poor does he come under?
A. chronic poor
B. churning poor
C. transient poor
D. occasionally poor

Qus 17. In which of the following ways did the British Raj impact the Indian economy the most?
A. The British made India an exporter of cotton from an exporter of cloth that led to large-scale unemployment.
B. The establishment of railways by the British provided short-term employment for many Indians.
C. The British expanded their army with Indian sepoys and fought in wars overseas.
D. The British provided tax concessions to rural farmers and landless labourers.

Qus 18. There are two statements given below, marked as Assertion (A) and Reason (R). Read the statements and choose the correct option.
Assertion (A): Land redistribution efforts have failed in reducing levels of poverty in rural India.
Reason (R): The capita per head availability of agricultural land has steadily declined in rural
India due to population growth.

A. A is true but R is false.
B. A is false but R is true.
C. Both A and R are true and R explains A.
D. Both A and R are true but R does not explain A.

Qus 19. Who amongst the following, has received the greatest investment in human capital formation?
A. a nurse in a clinic who is frequently absent because of his ill health
B. a 12-year-old who helps her mother with construction work
C. a 10th-pass girl who works as a store manager in a mall
D. a computer science graduate who works at a call centre

Qus 20. Which of the following is the CORRECT difference between physical and human capital?
A. Physical capital can be sold but human capital cannot be sold.
B. Physical capital cannot be separated from its owner while human capital can.
C. Physical capital provides both private and social benefits while human capital provides only social benefits.
D. The depreciation of physical capital can be arrested with more investment while human capital will continue to deplete.

Qus 21. India faces ‘educated unemployment’. Even though the number of educated individuals ready for jobs has increased, they are unemployed.
Which of the following is MOST LIKELY the reason for this?
A. The supply of labour is much higher than demand.
B. Investments in health have not taken place proportionally.
C. Although more students are enrolled in schools, there is a high dropout rate.
D. Reverse migration has not been accompanied by alternative employment opportunities.

Qus 22. Which of the following statements correctly represents actions taken by the government towards liberalisation?

P: levying high tariffs to discourage import and promoting the consumption of domestic goods and services
Q: devaluation of the rupees to encourage inflow of foreign exchange
R: allowing for private banks to make decisions independent of the RBI restrictions
S: fixing prices of certain industrial goods in order to support increased consumption of these goods to boost the manufacturing industry
A. P and Q only
B. P and R only
C. Q and R only
D. Q and S only

Qus 23. Which of the following policies was adopted to increase the competitive position of Indian goods in the international markets?
A. export duties were removed
B. import licensing was abolished
C. the rate of corporation tax was reduced
D. Foreign Institutional Investors (FII) were allowed to invest in India

Qus 24. Which of the following falls under the role of the World Trade Organisation?
A. setting the limit for domestic and foreign investments in a country
B. mandating the level of tax levied on foreign firms in developing countries
C. aiding the development of poor countries by providing infrastructural investment
D. providing a platform for member countries to decide future tariff-related strategies

Qus 25. Assuming all other variables remain constant, what will be the effect of an increase in the velocity of money?
A. increase in transactional demand for money
B. decrease in transactional demand for money
C. increase in speculative demand for money
D. decrease in speculative demand for money

Qus 26. Which of the following actions by the Central Bank will INCREASE the money supply in the country?
A. decreasing the repo rate
B. decreasing the bank rate
C. increasing the reverse repo rate
D. selling bonds issues by the government in the open market

Qus 27. If the reserve ratio is 20%, what will be the amount of total reserves after an initial deposit of
₹ 200?
A. ₹ 4000
B. ₹ 2000
C. ₹ 1000
D. ₹ 400

Qus 28. Credit cards are excluded from all measures of the quantity of money, because they are not really a method of payment, but a method of deferring payment. When you buy a meal with a credit card, the bank that issued the card pays the restaurant the amount that is due. At a later date, you will have to repay the bank, perhaps with interest. For this, you might use the money in your demand deposits, and that money is included in the economy’s stock of money.
Which of the following can happen with an increased use of credit cards in an economy?
A. increase in money supply
B. decrease in money supply
C. increase in money demand
D. decrease in money demand

Qus 29. A bank ‘run’ occurs when a large number of customers of a bank withdraw their deposits simultaneously. This can cause a bank to become insolvent if they cannot pay back all the depositors.
Which of the following facts about a bank make a bank run possible?
A. Banks hold only about 15 percent of their deposits as cash. The rest of the deposits are given out as loans.
B. Banks have to pay a specific amount to the person in whose name a cheque has been issued.
C. Banks charge a higher interest rate on loans than what they offer on deposits.
D. Banks pay an amount to account holders as interest on deposits.

Qus 30. Which of the following is an example of a public good?
A. medicines and injections
B. books and stationary
C. houses and furniture
D. law and order