CA Foundation Business Economics MTP May 2026: Question Paper and Solutions

How to Prepare for CA Foundation Business Economics

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Question directory and available solutions

200 indexed questions. Open a question to read its full statement and available answer.

1. The role of price mechanism is weakest in which economy?
2. In capitalism, the decision on how to produce is based on:
3. Market structure and pricing analysis is part of:
4. Business Economics assists in decisions under risk and uncertainty by using:
5. Consumer sovereignty in a socialist economy is generally:
6. Why is Business Economics considered normative in nature?
7. Which of the following elements is not essential to economic demand?
8. An increase in demand due to a fall in price is called:
9. For inferior goods, income elasticity of demand is generally:
10. If the cross elasticity of demand between goods X and Y is positive, what does this imply?
11. Advertisement elasticity of demand measures:
12. Which assumption is not necessary for the Law of Diminishing MU?
13. Who originally introduced the concept of consumer surplus?
14. Which elasticity concept helps governments decide how the tax burden will be shared?
15. The term "effective demand" means:
16. A rightward shift of the supply curve accompanied by a leftward shift of the demand curve will definitely:
17. Which of the following is the most comprehensive measure of a nation's income?
18. India mainly uses which approach for national income estimation?
19. Real GDP is preferred over Nominal GDP for welfare comparison because it:
20. The Keynesian theory of national income was developed primarily to explain:
21. When autonomous consumption rises, the Keynesian consumption function shifts:
22. The introduction of government spending in the three-sector model causes:
23. Balanced budget multiplier equals:
24. Which of the following is a leakage in the Keynesian circular flow?
25. A large underground economy will:
26. Which of the following fiscal functions primarily deals with correcting inefficiencies caused by market failure?
27. Externalities are best described as:
28. Public debt management focuses on:
29. A government mandate requiring accurate product labelling primarily corrects which type of failure?
30. Automatic stabilizers include:
31. Which of the following are the stages of budget making?
32. Which of the following is a non-tax source of government revenue?
33. Public goods are underprovided by markets because they are:
34. According to the Classical Quantity Theory, demand for money primarily depends on:
35. Which model of money demand minimises the cost of converting non-money assets into money?
36. Which component forms high-powered money?
37. Which factor reduces the size of the money multiplier?
38. All else equal, if people hold a greater proportion of cash instead of bank deposits, the:
39. An open market sale of government securities by the central bank will:
40. Quantitative easing (QE) as a monetary policy tool aims to:
41. Which policy tool directly affects bank lending capacity?
42. Which objective of monetary policy focuses on employment and growth?
43. The major economic crisis that triggered reforms in 1991 was:
44. The main role of NITI Aayog is:
45. One structural challenge still facing India's economy is:
46. Despite rapid GDP growth, India's per capita GDP remains:
47. Which reform measure aimed to reduce inefficiency in public sector enterprises?
48. The term “Hindu rate of growth" refers to:
49. India's economic growth in recent decades has been driven significantly by:
50. One recent structural reform that impacts GDP measurement is revision of:
51. Why does a monopolist's marginal revenue (MR) curve always lie below its average revenue (AR) curve?
52. Which market type has infinite price elasticity of demand?
53. Which factor is not an internal cause of business cycles?
54. Which type of industry tends to have more volatile output during cyclical fluctuations?
55. Which internal factor of the business cycle reflects fluctuations in consumer spending, business investment, and government policy?
56. Monetary and fiscal policy changes can cause business cycles by:
57. Calculate National Income: Particulars ₹ Crores Consumption 1000 Investment 500 Government Purchases 200 Exports 200 Imports 400
58. A rational person does not act unless___
59. The substitution effect works to encourage a consumer to purchase more of a product when the price of that product is falling because-
60. Production function: Q = 4L 1/2 k 2/3 exhibits-
61. A firm realizes internal and external economies of scale
62. Given TC = 2000 + 15Q – 6Q 2 + Q 3 , how much is TFC at Q = 2000?
63. Different business cycles _________ in duration and intensity.
64. In order to influence spending on the goods and services in the short run, _________ is directed at directly influencing interest rate.
65. Coincident economic indicators are also called _________.
66. In an economy dominated by private enterprises, demand for electric vehicles (EVs) rises sharply due to rising fuel prices. Battery prices increase,…
67. If labour continues to be used intensively despite high battery prices, the most logical explanation is:
68. The decision regarding “what to produce” is mainly influenced by:
69. Which of the following is the strategy to promote globalization of the Indian Economy?
70. A contractionary monetary policy is least effective in influencing output when:
71. An increase in the Real Effective Exchange Rate (REER), holding nominal exchange rate constant, necessarily implies that:
72. Which of the following transactions will improve the capital account balance but worsen the Net International Investment Position (NIIP)?
73. Which of the following limits the effectiveness of fiscal policy?
74. CASE: In an economy, aggregate demand is lower than aggregate supply at the current level of income for Question No. 74 and 75. This situation will…
75. The adjustment process will continue until:
76. Which of the following expenditures is not subject to voting by Parliament?
77. If governments make it compulsory to avail insurance protection, it is because:
78. Suppose that at a price of ₹300 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its…
79. Which of the following statement is false?
80. Which of the following is considered a characteristic of Foreign Direct Investment (FDI)?
81. According to Keynes, what can cause involuntary unemployment in an economy?
82. The concept of "animal spirits" in Keynesian theory refers to:
83. In modern fiat money systems, the value of money is primarily based on:
84. When the market quantity of a good is greater than the socially optimal quantity, it is a case of:
85. Which of the following is a common solution to the problem of common resources being overused?
86. Which of the following is an example of an automatic stabilizer in the budget?
87. Which of the following is a limitation of using GDP as a measure of economic well-being?
88. Which of the following will not be a consequence of an import tariff?
89. Implicit cost is equal to:
90. Which of the following marks the beginning of a contraction in the business cycle:
91. ONGC Videsh Limited has been incorporated by its parent entity ONGC for oil and gas acreages, involving exploration, development and production of…
92. If real exchange rate is high, it might lead to:
93. The parameters of economic reforms undertaken in an economy are:
94. The Price in Collusive Oligopoly is decided by:
95. In the Cobb Douglas functions the change in Output due to increase in one additional unit of an input is called?
96. Demonstration effect, a term coined by_________
97. What is a Global Depository Receipt?
98. E - NAM is
99. Macro-Prudential Policy Measures can help to overcome:
100. Which of the following short-run cost curves declines continuously?
101. Which aspect of taxation involves normative economics?
102. What are functions of Government in economy?
103. The effect of increase CRR will be reduced or nullified if:
104. Point elasticity is useful for which of the following situations?
105. Which one of the following could explain a shift to the right of the supply curve for a good?
106. Which of the following is an economic activity?
107. The FRBM Act, 2003 emphasises on:
108. Stagflation:
109. The Law of Scarcity:
110. Which of the following is not a part of Fiscal policy?
111. Administered Prices refer to:
112. If the quantity demanded by mutton increases by 5 % when the price of chicken increases by 20% the cross elasticity of demand between mutton and…
113. With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? 1. Défense -expenditure 2. Interest payments 3.…
114. To obtain full benefits of demographic dividend, what should India do?
115. If the interest rate is decreased in an economy, it will:
116. The "Communist Manifesto” was published in:
117. Price discrimination will be profitable only if the elasticity of demand in different markets in which the total market has been divided is:
118. In the case of a Giffen good, the demand curve will be.
119. Firms cooperate with each other in determining price or output or both. It is a feature of:
120. Which market sells both homogeneous as well as differentiated goods?
121. Which of the following measures of meeting deficit in a budget, leads to an increase in money supply in the economy?
122. If the income elasticity of demand is greater than 1, the commodity is:
123. Within the relevant range, isoquants:
124. The MC curve reaches its minimum point before the AVC curve and the AC curve. In addition, the MC curve inter-sects the AVC curve and the AC curve…
125. At the shut-down point:
126. If the monopolist incurs losses in the short run, then in the long run:
127. In both the Chamberlin and the kinked demand curve models, the oligopolists:
128. Opportunity cost is ________.
129. For substitutes, cross elasticity of demand is ________.
130. Law of diminishing returns to scale is relevant to-
131. The immediate effect on the budget line will be:
132. At the new equilibrium, the consumer is most likely to:
133. The backward bending supply curve of labour occurs because:
134. The concept of vertical equity in fiscal federalism refers to:
135. Time element in market was conceived by:
136. Modern business activities are based on the anticipations of business community and are affected by waves of optimism or pessimism is opined by_
137. Taxation involves which aspects of normative economics:
138. Full Capacity is utilized in the which market condition:
139. The difference between AR and MR in monopoly arises due to:
140. Which feature of business cycles explains why the duration and intensity of cycles vary across time?
141. Which factors most influences when a company should strategically plan to launch a new product?
142. The immediate cause for the 1991 reforms was:
143. A major difference between pre- and post-independence economy is:
144. A country deciding to export goods that utilize its most abundant production factor reflects which theoretical proposition?
145. A key limitation of mercantilist trade theory is its focus on:
146. The Doha Development Round primarily aims to:
147. Which factor represents central bank policy influence?
148. A liquidity trap in money demand occurs when:
149. According to the simple money multiplier formula, if the reserve ratio is 0.2, the money multiplier equals:
150. Which policy instrument is commonly used to correct negative externalities?
151. Government intervention through subsidies and taxes is an example of:
152. The "free-rider problem” is most associated with:
153. The cost which is never zero even when production is stopped is known as:
154. Which of the following is true with respect to relationship between AC and MC?
155. Cost function is a ________ concept:
156. The theory of monopolistic competition has been formulated in the United States of America by:
157. Unlimited ends and limited means together present the problem of:
158. A vertical supply curve parallel to Y axis implies that the elasticity of supply is :
159. Which of the following is an external economy of scale in Long Run?
160. Combination of Monopoly Market and Monopsony market is called as:
161. Find nominal GDP if real GDP = 450 and price index = 120
162. Mixed Income of the self-employed means:
163. Which of the following is concerned with division of economic responsibilities between the central and state government of India?
164. Short term credit from the Reserve bank of India to state government to bridge temporary mismatches in cash flows is known as:
165. What does the fiscal deficit relate to under the government budget?
166. According to Cambridge equation, the value of money depends upon:
167. High-powered money is also known as:
168. Equation of exchange is converted into the quantity theory of money by assuming the following variables as constants:
169. Which of the following is not a function of Central Bank?
170. According to Keynes, inflationary gap is caused by:
171. Which theory considers bullion as a part of the international trade:
172. Foreign Exchange and Foreign currencies in India are governed by:
173. ________ promotes the development friendly integration of developing Countries into the world economy:
174. Quantitative restrictions refer to limit set by countries to curb:
175. Industrial sector reforms under the New Economic Policy (NEP) comprised which of the following?
176. Assertion (A): NITI Aayog is a policy think-tank of Government of India that aims to involve the states in economic policy making in India. Reason…
177. Keynesian analysis is:
178. What is the function of the GDP deflator?
179. As a part of WTO guidelines the Agreement on Agriculture (AOA) doesn’t consider:
180. When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________.
181. Education is an example of:
182. Which of the following is not a criterion for determining distribution of central taxes among the states for 2021-26:
183. An increase in marginal propensity to consume will:
184. A recession is a decline in:
185. Which of the following industries is most likely to be monopolistically competitive?
186. Countervailing duty shall not be levied unless it is determined that:
187. What is a Global Depository Receipt?
188. Some economists have suggested that oligopolists tend to maintain stable prices when there are changes in the demand for their products or in their…
189. Money Supply is directly proportional to:
190. Redemption of public debt means:
191. Pump Priming is related with:
192. Fiscal Federalism refers to:
193. Third degree Price discrimination can be explained through example of:
194. Which of the following assumptions is commonly used in classical trade theory?
195. The General Agreement on Tariffs and Trade (GATT) aimed to:
196. Modes of FDI include:
197. Which policy tool directly affects bank lending capacity?
198. Primary deficit equals:
199. The "free-rider problem” is most associated with:
200. If a government increases spending and cuts taxes to fight recession, this is: