Class 12 Economics | ICSE Board Board | Mixed Level Practice Test - 40 Questions (2026)

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📋 Questions in This Test

Q1 MCQ

Which of the following is NOT a function of money?

A Medium of exchange

B Store of value

C Measure of inequality

D Unit of account

Q2 MCQ

If the Marginal Propensity to Consume (MPC) is 0.8, what is the value of the multiplier (k)?

A 2

B 5

C 1.25

D 4

Q3 MCQ

Which of the following is an example of a 'merit good'?

A Cigarettes

B Alcohol

C Basic education

D Soft drinks

Q4 MCQ

A decrease in the supply of a commodity, all other factors remaining constant, will lead to:

A A decrease in both equilibrium price and quantity

B An increase in both equilibrium price and quantity

C An increase in equilibrium price and a decrease in equilibrium quantity

D A decrease in equilibrium price and an increase in equilibrium quantity

Q5 MCQ

Which of the following is a characteristic of monopolistic competition?

A Homogeneous products

B Few sellers

C Product differentiation

D Perfect information

Q6 MCQ

The Gini coefficient measures:

A The rate of inflation

B The level of unemployment

C The degree of income inequality

D The growth rate of GDP

Q7 MCQ

Which of the following is a fiscal policy tool used by the government?

A Open market operations

B Changes in the reserve ratio

C Government spending

D Interest rate adjustments

Q8 MCQ

If the Consumer Price Index (CPI) increases from 100 to 110, the rate of inflation is:

A 1%

B 5%

C 10%

D 20%

Q9 MCQ

The law of diminishing marginal utility states that as a consumer consumes more units of a good, the:

A Total utility decreases

B Marginal utility increases

C Marginal utility decreases

D Total utility remains constant

Q10 MCQ

What is the primary objective of a central bank?

A Maximizing profits for the government

B Controlling the money supply and credit

C Financing government deficits

D Promoting exports at all costs

Q11 MCQ

Which of the following is a direct tax?

A Goods and Services Tax (GST)

B Excise Duty

C Income Tax

D Customs Duty

Q12 MCQ

What is the primary objective of monetary policy?

A To maximize government revenue

B To control the money supply and credit conditions to influence economic activity

C To regulate international trade

D To redistribute income equally

Q13 MCQ

Which of the following is an example of a public good?

A A private car

B A movie ticket

C National Defense

D A slice of pizza

Q14 MCQ

What is meant by 'ad valorem' tax?

A A fixed amount tax per unit

B A tax based on the value of a good or service

C A tax only on imported goods

D A tax only on exported goods

Q15 MCQ

If the price elasticity of demand for a good is -2, and the price increases by 10%, what will be the percentage change in quantity demanded?

A 5%

B -5%

C 20%

D -20%

Q16 MCQ

What is meant by 'Opportunity Cost'?

A The cost of producing a good

B The accounting cost of a decision

C The value of the next best alternative forgone

D The total cost of a project

Q17 MCQ

In the context of balance of payments, what does a 'current account deficit' indicate?

A Exports exceed imports

B Imports exceed exports

C Capital inflows exceed capital outflows

D Capital outflows exceed capital inflows

Q18 MCQ

Which of the following is a measure of dispersion?

A Mean

B Median

C Mode

D Standard Deviation

Q19 MCQ

If the price elasticity of demand for a good is -2, and the price increases by 5%, what will be the percentage change in quantity demanded?

A 10% increase

B 10% decrease

C 2.5% increase

D 2.5% decrease

Q20 MCQ

What is the primary goal of fiscal policy?

A Controlling the money supply

B Managing interest rates

C Influencing aggregate demand

D Regulating the stock market

Q21 MCQ

Which of the following is an example of a normative statement?

A The unemployment rate is 5%.

B An increase in taxes will reduce consumer spending.

C The government should increase the minimum wage.

D Higher interest rates lead to lower investment.

Q22 MCQ

If the marginal propensity to consume (MPC) is 0.8, what is the value of the multiplier?

A 0.2

B 1.25

C 4

D 5

Q23 MCQ

Which of the following is NOT a component of aggregate supply?

A Wages

B Raw material costs

C Technology

D Government spending

Q24 MCQ

What is meant by 'derived demand'?

A Demand for luxury goods

B Demand for a good that arises from the demand for another good

C Demand that is artificially created

D Demand for essential goods

Q25 MCQ

Which of the following is a function of the Central Bank?

A Accepting deposits from the public

B Lending money to individuals

C Acting as the banker to the government

D Issuing shares in the stock market

Q26 MCQ

What does 'Giffen good' imply?

A A good for which demand increases as income increases.

B A good for which demand decreases as price increases.

C A good for which demand increases as price increases.

D A good with perfectly elastic demand.

Q27 MCQ

Which of the following is an example of a normative economic statement?

A The unemployment rate is 5%.

B The government should increase taxes to reduce the budget deficit.

C An increase in the minimum wage leads to job losses.

D The inflation rate is 2%.

Q28 MCQ

What is the shape of the Average Fixed Cost (AFC) curve?

A U-shaped

B Downward sloping

C Upward sloping

D Horizontal

Q29 MCQ

Which of the following is a characteristic of a perfectly competitive market?

A Few sellers

B Differentiated products

C Barriers to entry

D Homogeneous products

Q30 MCQ

If the Marginal Propensity to Consume (MPC) is 0.8, what is the value of the Keynesian multiplier?

A 1.25

B 5

C 0.2

D 4

Q31 MCQ

Which of the following is NOT a component of Aggregate Demand?

A Consumption

B Investment

C Government Spending

D Transfer Payments

Q32 MCQ

What is the effect of an increase in the supply of a commodity, when demand remains constant?

A Price decreases and quantity increases

B Price increases and quantity decreases

C Price and quantity both increase

D Price and quantity both decrease

Q33 MCQ

What is meant by 'Deflation'?

A A sustained increase in the general price level.

B A sustained decrease in the general price level.

C A period of high economic growth.

D A decrease in unemployment.

Q34 MCQ

If the nominal GDP is $1000 and the real GDP is $800, what is the GDP deflator?

A 0.8

B 1.25

C 80

D 125

Q35 MCQ

Which of the following is NOT a function of the central bank?

A Acting as banker to the government

B Accepting deposits from the general public

C Controlling credit

D Issuing currency

Q36 MCQ

If the Marginal Propensity to Consume (MPC) is 0.75, what is the value of the multiplier ($k$)?

A 1

B 2

C 4

D 0.25

Q37 MCQ

A situation where a few firms dominate the market is known as:

A Perfect competition

B Monopolistic competition

C Oligopoly

D Monopoly

Q38 MCQ

What is the effect on aggregate demand if the government increases taxes and decreases government spending?

A Aggregate demand increases

B Aggregate demand decreases

C Aggregate demand remains unchanged

D The effect is indeterminate

Q39 MCQ

Which of the following is a cause of 'demand-pull' inflation?

A Rising wage costs

B Increased raw material prices

C Increased aggregate demand

D Supply shock

Q40 MCQ

The concept of 'opportunity cost' refers to:

A The direct monetary cost of a decision

B The next best alternative forgone when making a choice

C The total cost of all possible choices

D The sum of all explicit and implicit costs

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