SSC CGL Finance – Mock Test M2 – Part B: Economics & Governance

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SSC CGL Finance – Mock Test M2 – Part B: Economics & Governance – 25 questions, subject: Finance & Economics (Tier II Paper III). Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.

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1.  
When the price of a good falls from ₹ 20 to ₹ 16, the quantity demanded rises from 100 to 130 units. Price elasticity of demand (percentage method, original values) is:

Correct Answer: C [1.5]

Explanation:

%ΔQ = 30%, %ΔP = 20% → 30 ÷ 20 = 1.5 (elastic).

2.  
The price of a good falls and the total expenditure on it stays exactly the same. By the total outlay method its demand is:

Correct Answer: B [Unitary elastic]

Explanation:

Equal total outlay at both prices means e = 1 (elasticity methods).

3.  
Total fixed cost ₹ 600; total variable cost of 20 units ₹ 1,400. Average total cost at 20 units is:

Correct Answer: A [₹ 100]

Explanation:

TC = 2,000; ATC = 2,000 ÷ 20 = 100 (AFC 30 + AVC 70).

4.  
Total cost of 10 units ₹ 2,500; of 11 units ₹ 2,620. Marginal cost of the 11th unit is:

Correct Answer: D [₹ 120]

Explanation:

Answer: ₹ 120. MC = 2,620 − 2,500 = 120.

5.  
A firm's average revenue is ₹ 60 and the price elasticity of demand is 3. Its marginal revenue is:

Correct Answer: C [₹ 40]

Explanation:

MR = AR(1 − 1/e) = 60 × 2/3 = 40.

6.  
A monopolist sells at ₹ 75 and its marginal cost is ₹ 45. The Lerner index of market power is:

Correct Answer: B [0.4]

Explanation:

Answer: 0.4. (P − MC) ÷ P = 30 ÷ 75 = 0.4.

7.  
An industry has only four firms. One holds half the market, the next a quarter, and the other two hold 15% and 10%. The Herfindahl–Hirschman Index of this industry is:

Correct Answer: D [3,450]

Explanation:

50² + 25² + 15² + 10² = 2,500 + 625 + 225 + 100 = 3,450.

8.  
GDP at market price ₹ 500 crore; depreciation ₹ 40 crore; net factor income from abroad −₹ 10 crore; net indirect taxes ₹ 30 crore. National income (NNP at factor cost) is:

Correct Answer: A [₹ 420 crore]

Explanation:

NNPfc = GDPmp − depreciation + NFIA − NIT = 500 − 40 − 10 − 30 = 420.

9.  
Reverse questionGDP is ₹ 4,600 crore, product taxes are ₹ 520 crore and product subsidies ₹ 120 crore. GVA at basic prices is:

Correct Answer: B [₹ 4,200 crore]

Explanation:

GDP = GVA at basic prices + product taxes − product subsidies, so GVA = 4,600 − 520 + 120.

10.  
A bank receives a fresh deposit of ₹ 10,000. If the reserve ratio is 25% and banks lend all excess reserves, the total deposits finally created in the system are:

Correct Answer: D [₹ 40,000]

Explanation:

Money multiplier = 1 ÷ 0.25 = 4; 10,000 × 4 = 40,000.

11.  
Two-quantity comparisonRevenue receipts ₹ 300 crore; non-debt capital receipts ₹ 20 crore; revenue expenditure ₹ 340 crore; total expenditure ₹ 420 crore; interest payments ₹ 60 crore.
Quantity I: revenue deficit Quantity II: primary deficit

Correct Answer: C [Quantity I = Quantity II]

Explanation:

RD = 340 − 300 = 40; FD = 420 − 320 = 100; PD = 100 − 60 = 40 → equal.

12.  
Supplementary, additional or excess grants are provided for under Article:

Correct Answer: A [115]

Explanation:

Article 115; Article 116 covers votes on account, votes of credit and exceptional grants.

13.  
A 'vote on account' under Article 116 is:

Correct Answer: C [An advance grant for part of the year until the full Budget is passed]

Explanation:

Article 116 – vote on account; a grant for a new service is a supplementary grant (Art.

14.  
Fill in the blankUnder the DPC Act, 1971 the CAG holds office for ______ from taking charge, or until the age of 65, whichever is earlier.

Correct Answer: D [six years]

Explanation:

Answer: six years. Section 4 of the DPC Act.

15.  
Fill in the blankThe President constitutes a Finance Commission within two years of the commencement of the Constitution and thereafter at the expiry of every ______ year or earlier.

Correct Answer: C [fifth]

Explanation:

Answer: fifth. Article 280(1).

16.  
The Fifteenth Finance Commission recommended a vertical share of the divisible pool for States, for 2021-26, of:

Correct Answer: A [41%]

Explanation:

15th FC: 41% for 2021-26; 42% was the 14th FC's share for 2015-20.

17.  
For horizontal devolution, the Sixteenth Finance Commission (award period 2026–31) uses the population of:

Correct Answer: B [Census 2011, throughout]

Explanation:

Report Vol. I: the 2011 population is used throughout; 1971 appears only in the measure of population growth 1971–2011.

18.  
Match the followingMatch the economist with the work:
P. Lionel Robbins Q. Alfred Marshall R. J. M. Keynes
1. Principles of Economics (1890) 2. The General Theory of Employment, Interest and Money (1936) 3. An Essay on the Nature and Significance of Economic Science (1932)

Correct Answer: D [P-3, Q-1, R-2]

Explanation:

Robbins 1932; Marshall 1890; Keynes 1936.

19.  
Chronological orderArrange in chronological order:
1. Sweezy's kinked demand curve 2. Cournot's duopoly model 3. Chamberlin's The Theory of Monopolistic Competition

Correct Answer: C [2, 3, 1]

Explanation:

Cournot 1838; Chamberlin 1933; Sweezy 1939.

20.  
The Competition Act, 2002 replaced the:

Correct Answer: B [Monopolies and Restrictive Trade Practices Act, 1969]

Explanation:

The Competition Act, 2002 replaced the MRTP Act, 1969 (Ch 17).

21.  
Under the flexible inflation-targeting framework, the inflation target set for the RBI is:

Correct Answer: A [4% CPI inflation with a band of 2–6%]

Explanation:

4% CPI ± 2%, kept for April 2026 – March 2031 (notified 25-03-2026) (as on 20-10-2026, RBI).

22.  
Statement-basedWhich is/are correct?
I. The Chelliah Committee recommended reforms of the tax system.
II. The second Narasimham Committee (1998) dealt with banking sector reforms.

Correct Answer: A [Both I and II]

Explanation:

Chelliah – tax reforms; Narasimham I (1991) – financial system; Narasimham II (1998) – banking sector.

23.  
From 22 September 2025, besides the two main GST rates of 5% and 18%, a special (de-merit) rate applies to specified goods. That rate is:

Correct Answer: D [40%]

Explanation:

The 12% and 28% slabs were removed (as on 20-10-2026, GST Council / PIB).

24.  
The 2018 amendment of the FRBM Act set a ceiling for general government debt (by 2024-25) of:

Correct Answer: B [60% of GDP]

Explanation:

Central Government 40%, general government 60%.

25.  
True/false countHow many statements are true?
I. Digital India was launched on 1 July 2015.
II. The DPDP Act was enacted on 11 August 2023.
III. The Census 2011 sex ratio was 943.
IV. NIC was set up in 1996.

Correct Answer: C [Three]

Explanation:

I , II and III are true; NIC dates from 1976 .

➤ Full notes, shortcuts and every answer explained – SSC CGL 2026 Finance & Economics (Tier II Paper III) book (₹149): www.shanmugamiasacademy.in/study-materials/ssc-cgl-finance-economics

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