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: Inflation targeting is a policy tool used by
A) Ministry of Finance
B) Stock exchanges
C) Central banks
D) Political parties
✅ Correct Answer: C
Explanation: Central banks set inflation targets to guide expectations and monetary policy decisions.
Q: Specialization in economics means
A) Owning multiple businesses
B) Focusing on a specific task
C) Import substitution
D) Saving money
✅ Correct Answer: B
Explanation: Specialization allows individuals or nations to concentrate on producing goods they are most efficient at.
Q: The law of diminishing returns applies when
A) Output increases at an increasing rate
B) Input cost falls
C) Additional input yields less additional output
D) Prices rise continuously
✅ Correct Answer: C
Explanation: Diminishing returns occur when increasing input yields progressively smaller increases in output.
Q: A fixed cost is incurred
A) Only when production is high
B) Regardless of output level
C) When output exceeds demand
D) During profit maximization
✅ Correct Answer: B
Explanation: Fixed costs, such as rent or salaries, remain constant regardless of output.
Q: Central banks use interest rates to
A) Print money
B) Determine taxes
C) Control inflation
D) Fix wages
✅ Correct Answer: C
Explanation: Adjusting interest rates influences borrowing, spending, and ultimately inflation control.