Banking and Economics MCQ Part 2

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45 questions related to Banking and Economics. No negative marking.

Category: Tough

Median score: 11 out of 45

Average score: 15 out of 45

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Which best describes the notion of "Tragedy of Commons"?

1 point

The internet speed decreases as number of users increases

The success catch of Tuna decreases as fishing increases

All of above

The traffic jam increases with a increase in number of vehicles

Clear selection

Heavy fishing in the river by one fisherman reduces the probability of fish catches by other fishermen. This statement best describes

1 point

Free riding problem

Scarcity of fish

Tragedy of common

None of the above

Clear selection

While adopting pegged exchange rate, Nepal lost control over one of the three components of impossible trinities. Which is that component?

1 point

Current account

Capital account

Independent monetary policy

None of above

Clear selection

The Law of increasing cost defines which stage of the Law of diminishing returns?

1 point

Stage I

Stage II

Stage III

None of the above

Clear selection

Which is not the component of the current account under Balance of Payment?

1 point

Merchandise trade

Remittance

Interest repatriation

Greenfield investment

Clear selection

Which statement is true in case of currency union?

1 point

Need for flexible exchange rates within a currency union.

Fixed exchange rates are essential for the success of a currency union.

Currency union is always beneficial for member countries.

Currency union is optimal when member countries have similar economic structures and conditions.

Clear selection

"The total of all economic activity in a country" What is being defined?

1 point

Nominal GDP

Real GDP

GDP PC

GDP PPP

Clear selection

What are the fundamental features of the club good?

1 point

Rival and Excludable

Non-Rival and Excludable

Rival and Non-Excludable

Non-Rival and Non-Excludable

Clear selection

Which of the following is an example of an automatic stabilizer in fiscal policy?

1 point

Expansionary monetary policy

Discretionary spending

Progressive income taxes

Budget deficits

Clear selection

The discount rate that equals the discounted present value of future income streams to its cost of capital is called

1 point

Internal Rate of Return

Marginal Efficiency of Investment

Internal Rate of Capital

Accounting Rate of Return

Clear selection

Laffer curve suggests

1 point

Rising tax rates may decrease tax revenue

Rising tax rates may increase tax revenue

Rising tax rates may decrease or increase tax revenue

All of above

Clear selection

The argument that macroeconomic policies fail due to the prevalence of rational expectation is popularly known as

1 point

Nash hypothesis

Rational Critique

Leontief Critique

Lucas Critique

Clear selection

Which of the following statement is true?

1 point

Tax buoyancy measures the responsiveness of tax revenue to changes in tax rates, while tax elasticity measures the responsiveness to changes in economic activity.

Tax buoyancy and tax elasticity are synonymous terms.

Tax buoyancy measures the overall progressivity of the tax system, while tax elasticity measures the stability of tax rates.

Tax buoyancy measures the responsiveness to changes in economic activity, while tax elasticity measures the responsiveness to changes in tax rates.

Clear selection

Which of the following statement is not true?

1 point

The slope of total fixed cost curve is zero.

The average fixed cost becomes asymptotic to quantity axis as quantity increases

The Short run Average cost is always U shaped.

The total cost is a non-decreasing function of output

Clear selection

Which of the following is considered a leading economic indicator?

1 point

Consumer Price Index (CPI)

Stock prices

Unemployment rate

Crude oil prices

Clear selection

Which of the following is the nominal anchor of Nepal's monetary policy?

1 point

Policy rate

Exchange rate

Real GDP

Nominal GDP

Clear selection

The demand curve slopes upward in case of

1 point

Inferior goods

Consumer goods

Veblen goods

Necessity goods

Clear selection

Remittance that enters to Nepalese economy is captured under

1 point

Net Personal income

Net Disposable income

Net Factor Income

Net Transfers

Clear selection

Which is not the feature of the policy rate?

1 point

Policy rate directly influences the intermediate target of monetary policy.

Monetary instruments is closely tied with the policy rate.

Policy rate is influenced by availability of liquidity in the economy.

The impact of policy rate is free of effect of lag.

Clear selection

In a perfectly competitive market, which of the following factor gives power to the buyer?

1 point

Perfect competition

Perfect knowledge

Perfect cognition

None of above

Clear selection

The poverty reduction strategy paper was introduced in which periodic plan?

1 point

6th

7th

8th

9th

Clear selection

Which of the following statements are true?

1 point

The market demand curve of public good is the horizontal summation of individual demand curves.

The market demand curve of private good is the horizontal summation of individual demand curve.

The demand curve of public good is vertical in shape while demand curve of private good is download sloping.

In case of common good, people not paying for the good but may continue to access it.

What is the Hotelling's Law in economics?

1 point

It states that prices will always rise due to increasing demand.

It explains the optimal location of firms in a spatial competition.

It is a theory of inflation dynamics.

It describes the tendency for products to become outdated quickly.

Clear selection

Coase theorem is related to

1 point

Private solution to externality

Public solution to externality

Solution to free rider problem

Solution to double taxation problem

Clear selection

Which of the following statements are correct?

0 points

Nepal Rastra Bank periodically carries out foreign exchange intervention to curb fluctuations in foriegn exchange rate.

The price mechanism formed in India is easily carried to Nepalese market only because of heavy reliance on Indian Import.

The endogeneity of money supply is one of the fundamental problems in successful implementation of interest rate corridor.

Fully convertible capital account bring out huge investment in secondary market but may not prosper growth in economies like Nepal.

In which condition, Seller can shift the entire burden of tax to buyer

1 point

If supply curve is perfectly elastic assuming demand constant

If demand curve is perfectly elastic assuming supply constant

If both demand and supply curve are relatively elastic

None of above

Clear selection

Which is not the component of the high-powered money?

1 point

Foreign assets holding

Loan to public enterprises

Net lending to government

Loan to employees

Clear selection

The Philips curve confirms the traditional behavior in the short-run but violates the traditional behavior in the long-run is explained following *

1 point

Rational Expectation Hypothesis

Permanent Income Hypothesis

Keynesian Hypothesis

Adaptive Expectation Hypothesis

The first five-year plan of Nepal started in which of the following fiscal year (AD)?

1 point

1957/58

1956/57

1955/56

1959/60

Clear selection

The average remittance to GDP ratio of Nepal from 2011 to 2020 stands at

1 point

28.3 percent

29.8 percent

27.6 percent

27.3 percent

Clear selection

Which of the following is true about MR curve?

1 point

MR = AR

MR < AR

MR = Price

All of above

Clear selection

Coase Theorem is associated with

1 point

Externality Problem

Free Rider Problem

Double taxation

None of the above

Clear selection

What role does the Solow model play in understanding long-term economic growth?

1 point

It focuses on the role of technological progress in driving economic development.

It introduces the concept of diminishing returns to capital in the growth process.

It highlights the importance of monetary policy in stimulating economic growth.

It emphasizes the significance of fiscal policy in reducing income inequality.

Clear selection

In a perfectly competitive market, state a factor that supports the existence of perfect competition?

1 point

Free entry and exit

No government intervention

Perfect knowledge

All of above

Clear selection

Developed countries converge slowly while developing countries converge faster to equilibrium growth is explained by

1 point

Kardor Model

Harrod Model

Solow Model

Domar Model

Clear selection

What percent of firms are not registered as per Economic Census 2018?

1 point

59 percent

49 percent

39 percent

45 percent

Clear selection

Stagflation is best explained by which of the following statement?

1 point

The employment rate and money worth plummeted with a significant lag in time

The employment rate and money worth surged with a signigicant time lag

The employment rate and money worth plummeted simultaneously

The employment rate and money worth surged simultaneously

Clear selection

High tax buoyancy is generally associated with

1 point

Progressive tax systems.

Volatile economic conditions.

A stable and predictable economy.

Regressive tax systems.

Clear selection

Which of the following is not the criteria suggest by "Mundell's Optimal Currency Area" for pegged exchange rate?

1 point

Trade concentration

Easy transmission of shocks

Free mobility of factors of production

Size of population

Clear selection

Paid Online Classes by ABC Institute is the best example of

1 point

Common good

Public good

Club good

Private good

Clear selection

Fiscal policy is the set of a government's policies relating to its ...

1 point

money supply

spending and taxation rates

money supply and control of interest rates

control of interest rates and taxation rates

Clear selection

Laffer curve supports which of the following statement

1 point

Deadweight loss represents the inefficiencies introduced by taxation, emphasizing the need for policymakers to minimize tax rates to eliminate such losses.

Deadweight loss refers to the reduction in economic output resulting from excessively low tax rates, requiring policymakers to strike a balance between revenue maximization and economic efficiency.

Deadweight loss underscores the necessity of higher tax rates to compensate for economic inefficiencies caused by taxation.

Deadweight loss is irrelevant in the context of the Laffer Curve, as it primarily focuses on maximizing government revenue without considering economic inefficiencies.

Clear selection

Internet services provided by ISP is the best example of

1 point

Club good

Common good

Public good

Private good

Clear selection

Unholy trinity is the theory associated with

1 point

Environmental economics

Monetary economics

Public economics

International economics

Clear selection

In a perfectly competitive market, if a firm lowers its price, what happens to its total revenue?

1 point

Total revenue increases.

Total revenue decreases.

Total revenue remains unchanged.

Total revenue may increase or decrease, depending on other factors.

Clear selection

Which of the following statement is not true?

1 point

The inside lag of fiscal policy is longer than that of monetary policy

The outside lag of fiscal policy is shorter than that of monetary policy

The monetary policy has significantly faster impact on economic variables

Fiscal policy takes longer time to formulate

Clear selection

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