Practice Set on Economics & Trade: Targeted for NRB Officers and Competitive Exams

 This comprehensive practice set is designed for aspirants of the Nepal Rastra Bank (NRB) Officer level and other competitive examinations (such as ADBL, NBL, and RBB). The questions cover fundamental concepts of microeconomics, macroeconomics, fiscal policy, and industrial regulations specific to the Nepalese context. This set helps candidates test their knowledge of market structures, consumer behavior, and national economic policies.

1) The current vice-chairman of the Nepal National Planning Commission is:

a) Shiva Raj Adhikari

b) Dipendra Bahadur

c) Chandramani Adhikari

d) Madan Kumar Dahal

2) 'DEURALI JANATA' is a firm that produces:

a) Paper

b) Medicine

d) Food

c) Cloth

3) In price-taker markets, individual firms have no control over price. Therefore, the firm's marginal revenue curve is:

a) Indeterminate

b) A downward-sloping curve

c) Constant at the market price of the product

d) Precisely the same as the firm's total revenue curve

4) The earnings of all employees in a competitive economy would be equal if:

a) All individuals were homogeneous

b) All jobs were equally attractive

c) Workers were perfectly mobile among jobs

d) All of the above would be necessary for equality of earnings

5) Which of the following would provide a check that limits the power of a union?

a) Union shop provisions

b) Foreign competition in the product market

c) A highly inelastic demand for the product

d) All of the above

6) Assuming steak and potatoes are complements, a decrease in the price of steak will:

a) Decrease the demand for steak

b) Increase the demand for steak

c) Increase the demand for potatoes

d) Decrease the demand for potatoes

7) The marginal revenue curve for a monopolist is:

a) Flat

b) Down-sloping

c) Upward-sloping

d) Vertical

8) The income effect of an inferior good is:

a) Positive

b) Negative

c) Zero

d) Infinity

9) Fixed cost is:

a) Cost associated with zero output

b) Cost associated with positive output

c) Cost associated with both a and b

 d) None of these

10) External economics:

a) Shift in LAC curve downwards

b) Shift the LAC curve upwards

c) Shift LAC curve leftwards

d) Do not shift the LAC curve

11) A lump-sum tax on a monopoly will:

a) Leave the profit unaltered

b) Decrease the profit

c) Increase the profit

d) Any of the above is possible

12) Which of the following is not a U-shaped curve?

a) Average variable cost

b) Average total cost

c) Average fixed cost

d) Marginal cost

13) The central problem of an economy consists of:

a) What and how much to produce?

b) How to produce?

c) For whom to produce?

d) All of the above

14) The slope of an indifference curve shows

a) The price ratio

b) Factor substitution

c) The diminishing MRS

d) Level of indifference

15) Within the relevant economic range, isoquants:

a) Are negatively sloped

b) Cannot cross

c) Are convex to the origin

d) All of the above

16) William's son has formulated the following model:

a) Managerial utility maximization model

b) Sales maximization model

c) Profit maximization model

d) Cost minimization model

17) The input-output analysis is also known as:

a) Analysis of inter-industry demand

b) Inter-sector flows

c) Inter-industry relations

d) All of the above

18) Which of the following theories is related to welfare economics?

a) Externalities

b) Theory of second best

c) Social welfare function

d) All of the above

19) Wages Fund Theory was formulated by:

a) J.S Mill

b) Walker

c) Marshall

d) Physiocrats

20) Which is the effective instrument of fiscal policy?

a) Taxation and expenditure policy of the government

b) Bank rate policy

c) Policy of the open market operations

d) All of the above

21) The major difficulty in measuring the national income is:

a) Double counting

b) Exclusive consumption goods

c) Investment goods

d) Subsidies

22) Classical theory never furnishes a supply without furnishing:

a) Demand

b) Production

c) Distribution

d) Consumption

23) The concept of multiplier was first developed by:

a) Keynes

b) Marshall

c) Milton Friedman

d) R.F Khan

24) Keynes defines the rate of interest as the reward for:

a) Hoarding

b) Abstinence

c) Productivity

d) Parting with liquidity

25) According to Classical interest is the reward for:

a) Savings

b) Investment

c) Production

d) Supply

26) In the macroeconomic long run:

a) All prices are flexible

b) Wage rates are fixed

c) Some factor costs are constant

d) Some wages change, but some don't

27) Disinflation is:

a) A reduced rate of inflation

b) Deflation

c) Negative inflation

d) A rate of inflation between normal inflation and hyperinflation

28) In a fractional banking system, if people increase their holdings of currency (i.e., cash), what is likely to go up?

a) The price levels

b) The rate of interest

c) Disposable income

d) Employment

29) Industrial policy 2067 has categorized the industry into.... types:

a) 2

b) 3

c) 4

d) 5

30) The government's balanced budget multiplier is:

a) -1                   b) 0

c) 0.5                 d) 1

Answer Key:

Q.No	Correct Option	Explanation/Hint
1	a) Shiva Raj Adhikari	Prof. Dr. Shiva Raj Adhikari was appointed as Vice-Chairman in 2024.
2	b) Medicine	Deurali-Janta Pharmaceuticals is a leading drug manufacturer in Nepal.
3	c) Constant at the market price	In perfect competition, $P = AR = MR$.
4	d) All of the above	Homogeneity, mobility, and attractiveness ensure no wage differentials.
5	b) Foreign competition	External competition forces unions to moderate demands to keep firms viable.
6	c) Increase demand for potatoes	If the price of a complement (steak) falls, the demand for the other (potatoes) rises.
7	b) Down-sloping	A monopolist must lower price to sell more, making $MR$ downward sloping.
8	b) Negative	As income rises, the demand for inferior goods falls.
9	a) Cost associated with zero output	Fixed costs (like rent) exist even if production is zero.
10	a) Shift in LAC curve downwards	External economies reduce costs for the whole industry.
11	b) Decrease the profit	A lump-sum tax acts like a fixed cost; it reduces profit but not output.
12	c) Average fixed cost	AFC is a rectangular hyperbola (it never curves back up).
13	d) All of the above	These are the three fundamental economic problems.
14	c) The diminishing MRS	The slope of the IC is the Marginal Rate of Substitution ($MRS$).
15	d) All of the above	Standard properties of isoquants in the economic region.
16	a) Managerial utility maximization	Known as Williamson’s Discretionary Model.
17	d) All of the above	Developed by Wassily Leontief to show inter-industry links.
18	d) All of the above	All these topics deal with maximizing social well-being.
19	a) J.S Mill	The theory suggests wages are paid out of a fixed fund of capital.
20	a) Taxation and expenditure	Fiscal policy is governed by the government's budget.
21	a) Double counting	The risk of counting raw materials and final goods simultaneously.
22	a) Demand	Referencing Say’s Law: "Supply creates its own demand."
23	d) R.F Khan	Khan developed the "Employment Multiplier" before Keynes' Investment Multiplier.
24	d) Parting with liquidity	Keynes' Liquidity Preference Theory.
25	a) Savings	Classicals viewed interest as a reward for waiting/thrift/saving.
26	a) All prices are flexible	The long-run classical view assumes full price/wage flexibility.
27	a) A reduced rate of inflation	Disinflation is a slowdown in the rate of price increases.
28	b) The rate of interest	Less cash in banks reduces loanable funds, pushing interest rates up.
29	d) 5	(Note: The 2067 policy categorized industries into 5 types based on scale/nature).
30	d) 1	The Balanced Budget Multiplier theorem states $BBM = 1$.