Mastering Economics & Mathematics for NRB (30 MCQs) : NRB Officers and Other Competitive Exams

Preparing for the Nepal Rastra Bank (NRB) Officer level or other competitive exams like ADBL or NBL requires a sharp understanding of both macroeconomic theories and the specific economic history of Nepal. This set of 30 practice questions is designed to test your knowledge of market structures, monetary policy, and national accounting. By working through these, you will identify your strengths and pinpoint areas that need more focus.

1) Nepal Aid Group was later transformed into Nepal Development Forum in:

a) 1995 AD              

b) 2000 AD

c) 2002 AD              

d) 2005 AD

 

2) The total expenditure proposed during the first five-year plan in Nepal was:

a) NRs. 23 crores           

b) NRs. 33 crores

c) NRs. 43 crores          

d) NRs. 53 crores

 

3) When was the Industrial Council (Udhyog Parishad) established in Nepal?

a) 1992 BS               

b) 1993 BS

c) 1994 BS              

d) 1995 BS

 

4) The demand for chicken increases as a result of higher pork prices. This indicates that:

a) Chicken and pork are substitutes

b) Chicken and pork are complementary

c) The market demand for pork is inelastic

d) The market demand for chicken is elastic

 

5) If the price of apples rises from Rs. 50 to Rs. 150 and quantity demanded falls from 1000 to 900 kg, then we can conclude that the price elasticity for apples is:

a) -20               

b) Inelastic

c) Elastic         

d) Both (a) and (c) are correct

6) When costs that do not change with the level of output are divided by the output level, you have calculated.

a) Total cost                   

b) Average total cost

c) Average fixed cost    

d) Marginal cost

 

7) The notion that the demand for inputs depends on the demand for outputs in termed:

a) Inverse demand

b) Derived demand

c) Proportional demand

d) Notational demand

 

8) In duopoly, there are:

a) Many firms

b) Two firms controlling the market

c) Large corporations

d) None of these

 

9) An increase in the equilibrium price of a product can occur if there is:

a) A decrease in demand

b) An increase in supply

c) An increase in demand

d) None of these           

 

10) Firms can demand capital through:

a) Business loans

b) Retained earnings

c) The sale of stocks

d) All of the above

 

11) The revealed preference theory assumes:

a) Strong ordering

b) Constant ordering

c) Multiple ordering

d) Weak ordering

 

12) The income effect of an inferior good is:

a) Positive

b) Negative

c) Zero

d) Infinity

 

13) If MR=0, then the price elasticity of demand will be:

a) Equal to one

b) Greater than one

c) Less than one

d) Equal to zero

 

14) In the short run, the competitive firm will continue its production when:

a) Profit is positive

b) Profit is zero

c) Profit is negative

d) All of these

 

15) A rich person's APC will be:

a) Less

b) High

c) Neutral

d) None of these

 

16) Capital and investment are related to each other through:

a) Gross investment

b) Net investment

c) Existing capital stock

d) None of these

 

17) The accelerator principle was first introduced into economics by:

a) J.R Hicks

b) Samuelson

c) J.M Clark

d) J.M Keynes

 

18) The demand for Loanable funds comes from:

a) Government

b) Businesses

c) Consumers

d) All of these

 

19) Give the MPC=1 and the MPS=0, then multiplier will be:

a) 0

b) Infinity

c) 1

d) 4

 

20) Liquidity trap refers to:

a) Perfectly inelastic liquidity curve

b) Liquidity trapped in rich houses

c) Perfectly elastic liquidity preference curve

d) Liquidity trapped in banks

 

21) Suppose the extra Rs. 10000 value of a plant's output causes waste in the nearby river at a loss value of Rs. 3000. What is the additional to GDP?

a) A decrease of Rs. 3000

b) An increase of Rs. 10000

c) An increase of Rs. 7000

d) A decrease of Rs. 7000

 

22) If the legal reserve requirement equals 20%, what is the money multiplier?

a) 4

b) 5

c) 1.25

d) 10

 

23) Transaction demand for money increases when:

a) GDP goes down

b) GDP goes up

c) Interest rates fall

d) Interest rates rise

 

24) Who benefits from a tariff on a good?

a) Domestic consumers

b) Domestic producers

c) Foreign consumers

d) Foreign producers

 

25) If the nominal interest rate is 15% and the inflation rate is 5%, the real interest rate is:

a) 5%

b) 10%

c) 15%

d) 20%

 

26) What kind of policy rules do modern central banks follow:

a) Discretionary

b) Unanticipated

c) Transparent

d) Random

 

27) If nominal GDP grew by 16% and real GDP grew by 5% in the same year, inflation would be:

a) 21%

b) -21%

c) 11%

d) -11%

c) Prices

 

28) Which of the following does not cause a shift in aggregate demand?

a) Consumption

b) Imports

c) Prices

d) Exports

 

29) Assume that the required reserve ratio is 10% and a single bank (with no excess reserves) receives a Rs. 1,000 deposit from a customer. What is the value of the bank's excess reserves?

a) Rs. 100

b) Rs. 900

c) Rs. 1,000

d) Rs. 9,000

 

30) Suppose that a Nepali citizen crosses the border each day to work in India. His/Her income from this job would be counted in:

a) Indian GNP and Nepali GNP

b) Indian GNP and Nepali GDP

c) Indian GDP and Nepali GNP

d) Indian GDP and Nepali GDP

 

Answer Key & Explanations:

Q.N.	Correct Answer	Description/Explanation
1	b) 2000 AD	The Nepal Aid Group (formed in 1976) was renamed and restructured into the Nepal Development Forum (NDF) in 2000 to improve aid effectiveness.
2	b) NRs. 33 crores	The First Five-Year Plan (1956–1961) had an initial total outlay of 330 million (33 crores) Nepalese Rupees.
3	a) 1992 BS	The Udhyog Parishad was established in 1992 BS (under the Rana regime) to promote and oversee industrial development in Nepal.
4	a) Substitutes	When the price of one good (pork) rises, and the demand for another (chicken) increases, they are substitutes. Consumers switch to the relatively cheaper option.
5	b) Inelastic	Elasticity (e) = Change in Q / Change in P. Here, price tripled (200% increase) while demand only fell by 10%. Since the change in quantity is much smaller than the change in price, it is inelastic.
6	c) Average fixed cost	AFC is calculated as Total Fixed Cost (costs that don't change with output) divided by the level of output (AFC = TFC/Q).
7	b) Derived demand	Derived demand occurs when the demand for a factor of production (like labor or capital) depends on the demand for the final goods it helps produce.
8	b) Two firms	Etymologically, "duo" means two. A duopoly is a market structure dominated by exactly two producers.
9	c) Increase in demand	In a supply-demand graph, a rightward shift in the demand curve (increase in demand) leads to a higher equilibrium price.
10	d) All of the above	Firms can raise capital through debt (loans), internal savings (retained earnings), or equity (selling stocks).
11	a) Strong ordering	Paul Samuelson's Revealed Preference Theory assumes that if a consumer chooses A over B, they will always prefer A; this is known as "Strong Ordering."
12	b) Negative	For inferior goods, as income increases, the quantity demanded decreases. This inverse relationship creates a negative income effect.
13	a) Equal to one	When Marginal Revenue (MR) is zero, Total Revenue is at its maximum, and the Price Elasticity of Demand is unitary.
14	d) All of these	A competitive firm continues in the short run if it covers its Variable Costs. It can continue even with a loss (negative profit) as long as the loss is less than its fixed costs.
15	a) Less	The Average Propensity to Consume (APC) decreases as income rises. Richer people save a larger portion of their income compared to poor people.
16	b) Net investment	Net Investment is the actual addition to the capital stock (Net Investment = Gross Investment - Depreciation).
17	c) J.M Clark	While popularized by others, the concept of the Accelerator Principle was first introduced by J.M. Clark in 1917.
18	d) All of these	Demand for loanable funds comes from individuals (for consumption), businesses (for investment), and the government (to fund deficits).
19	b) Infinity	Multiplier (K) = {1} ÷ {1 - MPC} or {1} ÷ {MPS}. If MPS = 0, then K = infinity
20	c) Perfectly elastic...	A liquidity trap occurs when interest rates are so low that people prefer to hold cash rather than invest, making the liquidity preference curve horizontal (perfectly elastic).
21	b) Increase of Rs. 10000	GDP measures the market value of final goods produced. While environmental damage is a "negative externality," GDP does not subtract for pollution unless a "Green GDP" metric is used.
22	b) 5	Money Multiplier = {1} ÷ {Reserve Requirement} So, {1} ÷ {0.20} = 5.
23	b) GDP goes up	As national income (GDP) increases, people conduct more transactions and thus require more cash on hand.
24	b) Domestic producers	A tariff makes imported goods more expensive, allowing domestic producers to sell more at higher prices with less foreign competition.
25	b) 10%	The Fisher Equation states: Real Interest Rate = Nominal Rate - Inflation Rate. (15% - 5% = 10%).
26	c) Transparent	Modern central banking (like the NRB or the Fed) emphasizes transparency and "inflation targeting" to manage market expectations.
27	c) 11%	A rough calculation for inflation is: Nominal GDP - Real GDP (16% - 5% = 11%).
28	c) Prices	A change in Price causes a movement along the AD curve. Changes in Consumption, Investment, Govt Spending, or Net Exports cause a shift.
29	b) Rs. 900	Required Reserve = 10% of 1000 = 100. Excess Reserve = Total Deposit - Required Reserve (1000 - 100 = 900).
30	c) Indian GDP and...	GDP is based on location (work done in India), while GNP is based on citizenship (income earned by a Nepali).

Disclaimer: These questions and answers are provided for educational and practice purposes only. While every effort has been made to ensure accuracy, candidates are encouraged to cross-reference with the latest NRB directives and economic surveys of Nepal for the most current data.