CAIIB ABM- Economics – 30 Questions

Q.1 Which economist defined the Economics as “Enquiry into Nature and Causes of Wealth of Nations”
Ans Adam Smith – father of Economics

Q.2 “Economics is study of mankind in the ordinary business of life”. Who defined like this?
Ans Alfred Marshal

Q.3 Which economist called Economics as “Science of Human Welfare”?

Ans Alfred Marshal

Q.4 Economics is a science which studies human behavior as a relationship between ends and scarce
means which have alternative uses. Therefore economics is study of means and ends. Which economist
gave this definition of Economics? Ans Lionel Robbins.

Q.5 Study of behavior of Individual, Household, Firm or Company is ___________ Economics as defined
by Robbins. Ans Micro

Q.6 Study of behavior of Industry, Economy of entire country, whole world like inflation, deflation,
Income, Saving, Investment, GDP and Employment is called _________Economics Ans Macro

Q.7 Economy in which Private firms make major decisions is called _________ Ans Capitalist Economy or
Market Economy

Q.8 Economy in which Govt plays major role is called ________________ Ans Socialist Economy or
Command Economy

Q.9 Which type of economy India is? Ans Mixed economy in which both Pvt. sector and Govt. sector play
important role.

Q.10 How will you define Laisez-Fair economy? Ans It is extreme case of market economy in which Govt.
does not interfere in economic decisions.

Q.11 What is the slope of Demand curve? Ans It is negative because of the fact that price and quantity
demanded have inverse relationship. Price rises and Quantity demanded falls and vice-versa. We can
also say that Demand Curve falls downward from left to right.

Q.12 With rise in Income, demand rises and Demand curve shifts upward. This is called ___________in
demand. (Increase/Extension) Ans Increase

Q.13 With fall in price, demand rises on the same demand curve. This is called ___________in demand.
(Increase/Extension) Ans Extension

Q.14 In case of Giffen goods, Demand curve is positive because of the fact that______________ Ans
Demand falls even if there is fall in price.

Q.15 Demand of Coffee rises with rise in the price and the curve is negative because of inverse
relationship. Tea and Coffee are _____________ goods (Substitute/Supplementary). Ans Substitute
Q.16 Pen and Ink, Car and Petrol are supplementary goods. The rise in price of one item results in fall of
quantity demanded of other. In this case, the slope of demand curve is ___________
(Positive/Negative). Ans Negative

Q.17 Equilibrium price is the point where___________________ Ans Demand Curve and Supply curve
intersect each other.

Q.18 The slope of supply curve is _____________(Positive/Negative). Ans Positive

Q.19 Demand Schedule is relationship between ___________and _____________. i) Demand and

Quantity bought ii) Price and Quantity bought Ans Price and Quantity bought

Q.20 How will you define Narrow money? Ans Narrow money i.e. M1 = Currency with Public + Demand
Deposits with Banks + Other deposits with RBI.

Q.21 What is M3 Ans M3 is a concept of Wide money which includes M1 + Saving Deposits of Post
offices + Time deposits with banking system.

Q.22 Increase in cost of production leads to inflation. Which type of Inflation is it (Demand Pull/Cost
Push). Ans Cost Push Inflation.

Q.23 DA of public sector employees is determined/guided by which index? Ans Consumer Price Index for
Industrial workers. (CPI-IW).

Q.24 What do you mean by GDP deflator? Ans It is a measure of level of prices of all new domestically
produced, final goods and services in an economy.

Q.25 JM Keynes explained that Rate of Interest is determined by Demand and Supply of money. Which
are 3 motives as explained by Keynes for Which people hold money? Ans 1) Transaction Motive 2)
Speculative Motive 3) Precautionary Motive

Q.26 If Current rate is higher than expected rate in future. People will hold more
___________(Money/Bonds) Ans Bonds

Q.27 Keynes believes in Two Asset Economy. Which are these? Ans Money and Bonds

Q.28 In two asset economy, the demand for money by the people depends how they decide to balance
their portfolio between ________and __________. Ans Money and Bonds

Q.29 Keynes explains that Rate of Interest is determined by Demand and Supply. Demand is affected by
Liquidity Preference. This is why, Keynes theory is called _______________ Ans Liquidity Preference
Theory.

Q.30 This theory also explains that Higher Nominal Rate of Interest and Lower will be _____________
Ans Demand for Speculative purpose