Economics MCQs
Economics MCQs for CSS, PMS, and competitive exams covering microeconomics, macroeconomics, market structures, fiscal and monetary policy, development, and trade. Test conceptual clarity, analytical skills, and real-world application of economic principles.
Q: Substitute goods are identified by
A) Joint consumption
B) Complementary pricing
C) Similar function and price sensitivity
D) Fixed supply
✅ Correct Answer: C
Explanation: Substitute goods serve similar purposes; a price rise in one increases demand for the other.
Q: A country experiences stagflation when
A) Growth is high and inflation is low
B) Growth is high and unemployment is low
C) Inflation and unemployment are both high
D) Interest rates are negative
✅ Correct Answer: C
Explanation: Stagflation involves a stagnating economy along with rising inflation and unemployment.
Q: Commercial banks create money through
A) Taxation
B) Government spending
C) Issuing bonds
D) Lending activity
✅ Correct Answer: D
Explanation: Banks increase money supply by making loans, thereby generating new deposits.
Q: Human capital refers to
A) Natural resources
B) Government labor force
C) Skills and knowledge of the workforce
D) Physical infrastructure
✅ Correct Answer: C
Explanation: Human capital consists of the education, training, and experience possessed by workers.
Q: Consumer surplus arises when
A) Price equals marginal utility
B) Consumer pays more than expected
C) Willingness to pay exceeds actual price
D) Supply exceeds demand
✅ Correct Answer: C
Explanation: Consumer surplus is the difference between the maximum price a consumer is willing to pay and the market price.