JAIIB Crash Course May 2025 IE and IFS Quiz-2

03/05/2025

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JAIIB Crash Course May 2025 IE and IFS Quiz-2

JAIIB CAIIB Course Quiz – May 2025: The JAIIB exam for May 2025, conducted by IIBF, is fast approaching. To support your preparation, we are providing regular MCQ-based quizzes specifically designed for the JAIIB CAIIB syllabus. These quizzes are structured module-wise and unit-wise to help you cover the entire syllabus systematically. Practicing these quizzes consistently will strengthen your concepts, improve accuracy, and increase your chances of clearing the exam on your first attempt.

Q.1. The relationship between market price and quantity demanded is:
(a) Positive (Directly related)
(b) Negative (Inversely related)
(c) Neutral (No relationship)
(d) Variable (Sometimes positive, sometimes negative)

Q.2. Who defined economics as the study of wealth in the book An Enquiry into the Nature and Cause of the Wealth of Nations (1776)?
(a) Alfred Marshall
(b) Lionel Robbins
(c) Adam Smith
(d) John Maynard Keynes

Q.3. Which of the following scenarios BEST exemplifies the Law of Demand?
(a) A popular smartphone brand releases a new model with advanced features, causing a surge in demand despite a higher price.
(b) Due to a sudden heatwave, the demand for air conditioners increases, leading to retailers raising prices.
(c) After a significant price reduction on a particular brand of coffee, consumers purchase more of that brand, while sales of other coffee brands remain relatively stable.
(d) A government subsidy lowers the price of electric vehicles, but consumer demand remains unchanged due to concerns about charging infrastructure.

Q.4. Which of the following describes a shift in the demand curve when the price of the good remains constant?
(a) Movement along the demand curve
(b) A rightward shift for a decrease in demand
(c) A leftward shift for an increase in demand
(d) A rightward shift for an increase in demand

Q.5. Who defined economics as “a study of mankind in the ordinary business of life” and emphasized both wealth and human welfare?
(a) Adam Smith
(b) Alfred Marshall
(c) Lionel Robbins
(d) David Ricardo

Q.6. According to the concept of Veblen goods, what happens to the demand for a commodity when its price increases?
(a) Demand decreases, as per the law of demand.
(b) Demand remains constant.
(c) Demand increases due to the perception of higher value.
(d) Demand fluctuates erratically.

Q.7. Who defined economics as “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”?
(a) Adam Smith
(b) Alfred Marshall
(c) Lionel Robbins
(d) John Maynard Keynes

Q.8. Which of the following best describes a market economy or capitalistic economy?
(a) The government makes all major decisions about production and consumption.
(b) Individuals and private firms make key decisions about production and consumption, with minimal government interference.
(c) Production and consumption are based on traditional customs and habits.
(d) The government and private firms share equal control over economic decisions.

Q.9. What is the key characteristic of Giffen goods that distinguishes them from other types of goods?
(a) Their demand decreases when their price increases.
(b) They are considered luxury items.
(c) Their demand increases when their price increases.
(d) Their demand remains constant regardless of price changes.

Q.10. What does it mean when a business cycle is described as “synchronic”?
(a) It affects only one industry at a time
(b) The upward and downward movements occur almost simultaneously across industries
(c) It occurs randomly without any pattern
(d) It is controlled entirely by government policies

Q.11. Which of the following correctly represents the formula for Net Tax Revenue of the Government of India?
(a) Net Tax Revenue = Gross Tax Revenue – Non-Tax Revenue – Fiscal Deficit
(b) Net Tax Revenue = Gross Tax Revenue – NCCD transferred to NDRF – States’ share
(c) Net Tax Revenue = Gross Tax Revenue – NCCD transferred to National Calamity Contingency Fund – States’ share
(d) Net Tax Revenue = Gross Tax Revenue – Total Expenditure – Grants-in-Aid

Q.12. Which of the following is NOT categorized as a Non-Debt Receipt for the Government of India?
(a) Recoveries of Loans & Advances
(b) Market Borrowings (G-Sec + T-Bills)
(c) Disinvestment Receipts
(d) None of the above

Q.13. Which of the following is a component of Debt Receipts for the Government of India?
(a) External Debt
(b) Dividend and Profits
(c) Recoveries of Loans & Advances
(d) Disinvestment Receipts

Q.14. How is Fiscal Deficit primarily financed by the Government of India?
(a) Revenue Receipts + Disinvestment Receipts
(b) Debt Receipts + Drawdown of Cash Balance
(c) Tax Revenue + Non-Tax Revenue + Capital Expenditure
(d) Market Borrowings + External Grants

Q.15. Revenue Deficit occurs when:
(a) Revenue receipts exceed revenue expenditure
(b) Revenue expenditure exceeds revenue receipts
(c) Total expenditure exceeds total revenue, excluding borrowings
(d) Fiscal deficit minus interest payments is negative

Q.16 Which of the following correctly represents the formula for Primary Deficit?
(a) Fiscal Deficit – Revenue Deficit
(b) Revenue Deficit – Interest Payments
(c) Fiscal Deficit – Interest Payments
(d) Total Expenditure – Total Revenue (excluding borrowings)

Q.17 Which of the following is a key characteristic of the boom phase in a business cycle?
(a) Products are sold at above-normal prices, leading to higher profits
(b) Production capacity is underutilized
(c) Wages and production costs decrease
(d) Businesses reduce investments in new machines

Q.18 Which of the following correctly represents the Fiscal Deficit formula?
(a) Total Expenditure – Total Revenue (excluding borrowings)
(b) Revenue Expenditure – Revenue Receipts
(c) Gross Tax Revenue – State Share – NCCD
(d) Total Expenditure – Non-Tax Revenue – Market Borrowings

Q.19 Which of the following statements correctly differentiates between Real GDP and Nominal GDP?
(a) Real GDP measures total output using base year prices, while Nominal GDP measures total output using current year prices.
(b) Nominal GDP removes the effects of inflation, whereas Real GDP includes inflationary effects.
(c) Real GDP is always higher than Nominal GDP in an economy experiencing inflation.
(d) Nominal GDP is calculated using the Product Method, while Real GDP is calculated using the Expenditure Method.

Q.20 Which of the following correctly represents the relationship between Gross Value Added (GVA) and Gross Domestic Product (GDP)?
(a) GDP at Market Prices = GVA at Factor Cost + Product Taxes – Product Subsidies
(b) GVA at Basic Prices = GVA at Factor Cost + Product Taxes – Product Subsidies
(c) GDP at Market Prices = GVA at Basic Prices + Product Taxes – Product Subsidies
(d) GDP at Market Prices = GVA at Factor Cost + Production Taxes – Production Subsidies

Q.21 Which of the following correctly represents the formula for Primary Deficit?
(a) Fiscal Deficit – Revenue Deficit
(b) Revenue Deficit – Interest Payments
(c) Fiscal Deficit – Interest Payments
(d) Total Expenditure – Total Revenue (excluding borrowings)

Q.22 Which of the following statements correctly differentiates between Gross Value Added (GVA) and Gross Domestic Product (GDP)?
(a) GVA measures economic activity from the demand side, while GDP measures it from the supply side.
(b) GDP measures from demand side, while GVA reflects the income generated by all economic actors before accounting for taxes and subsidies.
(c) GVA is always greater than GDP in an economy due to the inclusion of indirect taxes.
(d) GDP excludes net exports, while GVA includes them.

Q.23 What does Green GDP primarily aim to measure?
(a) The total economic output of a country, including environmental restoration costs.
(b) The economic growth of a country after adjusting for environmental degradation and resource depletion.
(c) The contribution of the renewable energy sector to a nation’s GDP.
(d) The GDP growth rate of environmentally sustainable industries.

Q.24 Which of the following statements about Expansionary Monetary Policy is correct?
(a) It increases the total money supply.
(b) It helps combat unemployment during a recession by lowering interest rates.
(c) It is used when the economy is facing high inflation.
(d) Both A and B

Q.25 Which of the following statements about the Bank Rate, as per Section 49 of the RBI Act, 1934, is incorrect?
(a) It is the rate at which RBI is ready to buy or rediscount bills of exchange or other commercial papers.
(b) It is the rate of interest paid by banks to RBI on their long-term borrowings.
(c) Changes in the Bank Rate are used by government to control the money supply.
(d) All of the Above.

Q.26 Which of the following statements about Contractionary Monetary Policy is correct?
(a) It decreases the total money supply.
(b) It involves raising interest rates to combat inflation.
(c) It is used to stimulate economic growth during a recession.
(d) Both A and B

Q.27 Which of the following statements about the Marginal Standing Facility (MSF) is incorrect?
(a) It allows banks to borrow overnight from the RBI in case of emergency.
(b) The borrowing under MSF requires banks to pledge government securities.
(c) The MSF rate is always lower than the repo rate.
(d) It helps in managing short-term liquidity mismatches in the banking system.

Q.28 Which of the following correctly represents the formula for GDP using the Expenditure Method?
(a) GDP = Private Consumption + Private Investment + Government Consumption + Changes in Stock + (Exports – Imports)
(b) GDP = Wages + Rent + Interest + Profit
(c) GDP = Total Output – Depreciation
(d) GDP = Money Supply × Velocity of Money

Q.29 Which of the following statements about Standing Deposit Facility (SDF) is correct?
(a) Deposits under SDF are not considered as balances eligible for the maintenance of CRR under Section 42 of the RBI Act, 1934.
(b) Deposits under SDF are considered as an eligible asset for the maintenance of SLR under Section 24 of the Banking Regulation Act, 1949.
(c) The SDF is an instrument introduced by the RBI to absorb excess liquidity from the banking system without requiring collateral.
(d) All of the above.

Q.30 Which of the following is the correct formula for calculating the Marginal Cost of Funds based Lending Rate (MCLR)?
(a) MCLR = Marginal cost of funds + Operating costs + Tenor premium
(b) MCLR = Marginal cost of funds + Negative carry on CRR + Operating costs + Tenor premium
(c) MCLR = Operating costs + Negative carry on CRR + Tenor premium
(d) MCLR = Marginal cost of funds + Negative carry on CRR

Q.31 What is a key characteristic of the recession phase in a business cycle?
(a) Demand continues to grow rapidly
(b) Supply exceeds demand, leading to stock accumulation
(c) Producers continue investing in new equipment and expansion
(d) Unemployment decreases as businesses hire more workers

Q.32 Which of the following is NOT a recommended external benchmark for floating rate loans under the External Benchmark based Lending Rate (EBLR) system as per RBI guidelines?
(a) Repo rate
(b) 3-Months Treasury Bill yield, published by the FBIL
(c) 6-Months Treasury Bill yield, published by the FBIL
(d) Base Rate

Q.33 Which of the following statements about the System of National Accounts (SNA) is correct?
(a) The SNA is an independent national framework developed separately by each country.
(b) The SNA provides a standardized accounting framework for economic data collection and presentation.
(c) The SNA discourages periodic revisions of the base year for macroeconomic indicators.
(d) The latest edition of the SNA followed by all UN member nations is the 1993 SNA

Q.34 Which of the following is NOT a feature of the Variable Rate Reverse Repo (VRRR) auctions introduced by the RBI?
(a) The rate at which banks park their money with the RBI in a VRRR auction is variable and decided based on market conditions.
(b) VRRR provides a higher return to banks than the Fixed Reverse Repo Rate.
(c) The RBI determines the exact amount of liquidity to be absorbed in a VRRR auction, but the maturity period is fixed.
(d) VRRR auctions help the RBI regulate money supply and manage inflation risk in the economy.

Q.35 Which of the following is the primary function of the Monetary Policy Committee (MPC) as constituted under Section 45ZB of the Reserve Bank of India Act, 1934?
(a) To determine the policy interest rate to meet the inflation target in the economy.
(b) To set the national fiscal policies related to taxation and government spending.
(c) To regulate the stock market by deciding interest rates on corporate bonds.
(d) To provide government subsidies for specific sectors to boost growth.

Q.36 What happens to demand during the depression phase?
(a) Demand rises faster than production
(b) Demand remains stable, but production slows down
(c) Demand falls faster than production, leading to economic slowdown
(d) Demand and production increase together

Q.37 What triggers the recovery phase of the business cycle?
(a) A continued decline in consumer demand
(b) Rising pessimism among entrepreneurs
(c) Consumers start purchasing as prices reach their lowest
(d) Increased unemployment leading to lower production

Q.38 Which of the following components are included in the definition of Narrow Money (M1) in India?
(a) Currency with the public, Demand deposits with banks, and Time deposits with banks
(b) Currency with the public, Demand deposits with banks, and ‘Other’ deposits with the RBI
(c) Currency with the public, Fixed deposits, and Savings deposits
(d) Currency with the public, Call money market funds, and Treasury bonds

Q.39 Which of the following correctly represents Reserve Money (M₀) in India?
(a) Currency in circulation + Bankers’ Deposits with the RBI + ‘Other’ Deposits with the RBI
(b) Currency in circulation + Demand Deposits with Banks + Time Deposits with Banks
(c) M1 + Time Deposits with Banks
(d) Currency in circulation + Government Bonds + Foreign Exchange Reserve

Q.40 The velocity of money is the frequency with which one unit of currency is used to purchase domestically produced goods and services in a specific time period. Which of the following would most likely result in an increase in the velocity of money?
(a) A decrease in consumer confidence
(b) An increase in the money supply
(c) A rise in interest rates
(d) A decrease in transaction costs and an increase in consumer spending

Q.41 What happens to employment and investment during the recovery phase?
(a) Both remain stagnant due to uncertainty
(b) Employment opportunities rise as production increases
(c) Investment declines as businesses fear another downturn
(d) Wages decrease despite rising economic activity

Q.42 Demand-pull inflation occurs when there is an increase in aggregate demand for goods and services, causing a rise in general prices. Which of the following is most likely to trigger demand-pull inflation?
(a) A decrease in consumer spending
(b) A reduction in the money supply
(c) An increase in government spending or investment
(d) A decrease in wages across the economy

Q.43 The GDP deflator is calculated as the ratio of Nominal GDP to Real GDP, multiplied by 100. Which of the following statements best describes the GDP deflator?
(a) It measures the overall price level in an economy by comparing the total output to the value of output at constant prices.
(b) It measures the total production of an economy, adjusted for inflation, without considering changes in prices.
(c) It is used to calculate the unemployment rate in an economy by assessing the cost of living.
(d) It compares the value of imports to the value of exports in an economy

Q.44 In the IS-LM model, an expansionary monetary policy (increase in money supply) causes the LM curve to shift:
(a) Leftward, causing a rise in interest rates and a decrease in income
(b) Rightward, causing a fall in interest rates and an increase in income
(c) Leftward, causing a fall in interest rates and an increase in income
(d) Rightward, causing a rise in interest rates and a decrease in income

Q.45 According to the Classical Theory of Interest, the rate of interest is determined by:
(a) The government’s monetary policy
(b) The equilibrium between demand and supply of savings
(c) The central bank’s lending rate
(d) The profitability of commercial banks

Q.46 What does a supply schedule represent?
(a) The various quantities of a commodity that consumers are willing to buy at different price levels.
(b) The various quantities of a commodity that are supplied by a supplier at different price levels over a period of time.
(c) The relationship between the price of a commodity and the demand for it.
(d) The total market demand for a commodity.

Q.47 According to Keynes’ Liquidity Preference Theory, the rate of interest is determined by:
(a) The equilibrium of savings and investment
(b) The demand for and supply of money
(c) The marginal efficiency of capital
(d) The inflation rate

Q.48 In the IS-LM model, the IS curve slopes downward (Classical Theory) and the LM curve slopes upward (Keynesian Theory). The point of intersection of these two curves represents:
(a) The equilibrium level of income
(b) The equilibrium level of investment
(c) The equilibrium rate of interest
(d) The equilibrium savings rate

Q.49 In a 2-asset economy, Keynes assumed that individuals can hold their wealth in:
(a) Gold and real estate
(b) Money (currency & current deposits) and long-term bonds
(c) Stocks and commodities
(d) Savings accounts and mutual funds

Q.50 Which of the following is not a factor behind supply?
(a) Price inputs and technology advancement
(b) Government policy
(c) Taste & preference
(d) Price of related goods

Q.51 According to Keynes’ theory, as the level of income increases in a two-asset economy, the demand for money will:
(a) Increase, as people need more money for daily transactions
(b) Decrease, because people prefer bonds
(c) Remain constant, regardless of income changes
(d) Fluctuate based on interest rates

Answer:

Q1: B
Q2: C
Q3: C
Q4: D
Q5: B
Q6: C
Q7: C
Q8: B
Q9: C
Q10: B
Q11: C
Q12: B
Q13: A
Q14: B
Q15: B
Q16: C
Q17: A
Q18: A
Q19: A
Q20: C
Q21: C
Q22: B
Q23: B
Q24: D
Q25: C
Q26: D
Q27: C
Q28: A
Q29: D
Q30: B
Q31: B
Q32: D
Q33: B
Q34: C
Q35: A
Q36: C
Q37: C
Q38: B
Q39: A
Q40: D
Q41: B
Q42: C
Q43: A
Q44: B
Q45: B
Q46: B
Q47: A
Q48: C
Q49: B
Q50: C
Q51: A