# Economics Mcqs

This set of Mechanical Engineering Multiple Choice Questions & Answers (MCQs) focuses on “ Economics ”. These Mcqs are chosen from a collection of most authoritative and best reference books on Chemical Engineering. Our aim is to prepare an individual for competitive exams like NTS, GAT, ECAT, University and College entrance exams, Jobs and interviews. One should practice our MCQS to assimilate Economics comprehensively.

## 2. If P represents the principal n the number of interest periods and i the interest rate based on the length of one interest period the amount of compounded interest during n interest periods is

P (1 + in)

P(1 + i)n

P i n

P [(1 + i)n-1]

## Answer & Solution

**D . P [(1 + i)n-1]**

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## 3. The nominal and effective interest rates are equal when the interest is compounded

Monthly

Continuously

Semi-annually

Annually

## Answer & Solution

**D . Annually**

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## 4. If the interest rate is 5 per cent per period and the interest is compounded at half-year periods the actual annual return on the principal would be

Exactly 5 per cent

Exactly 10 per cent

Somewhat larger than 10 per cent

Greater than 5 per cent but less than 10 per cent

## Answer & Solution

**C . Somewhat larger than 10 per cent**

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## 5. Someone desires to borrow Rs. 2000 to meet his financial obligation. This money can be borrowed from a loan agency at a monthly interest rate of 3 per cent. What is the total amount of principal plus simple interest due after 3 years if no intermediate payments are made?

Rs. 2180

Rs. 2160

Rs. 4160

Rs 20000

## Answer & Solution

**C . Rs. 4160**

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## 6. A bound has a maturity value of Rs. 2420 and is paying discrete compound interest at an effective annual rate of 10 per cent. Determine the discount if the bond reaches maturity value in two years time.

Rs. 242

Rs. 420

Rs. 2000

Rs 508

## 7. If S represents the amount available after n interest periods for an initial pincipal P with the discrete compound interest rate i the present worth can be determined by

Present worth = S/(1 + i)n

Present worth = S/ein

Present worth = S/(1 + in)

Present worth = S/(1 + n)

## Answer & Solution

**A . Present worth = S/(1 + i)n**

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## 8. What will be the total amount available 10 years from now if Re. 1 is deposited at the present time wih nominal interest at the rate of 11 per cent compounded continuously?

E110

10 e0.11

10 In 11

E1.1

## 9. The effective annual interest rate ieff is expressed in terms of the nominal interest rate r compounded continuously as

Ieff = In (r + 1)

Ieff = er - 1

Ieff = In r - 1

Ieff = er

## Answer & Solution

**B . Ieff = er - 1**

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## 10. For a nominal interest rate of 20 per cent compounded continuously the effective annual interest rate will be

Equal to 20 per cent

More than 20 per cent

Less than 20 per cent

Equal to or less than 20 per cent

## Answer & Solution

**B . More than 20 per cent**

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## 11. The decision by a company management to implement a project is based entirely on

Obligation

Commitments

Economic evaluations

None of the above

## Answer & Solution

**C . Economic evaluations**

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## 12. Which of the following is a component of working capital investment?

Process equipment

Maintenance and repair inventory

Utilities plants

Depreciation

## Answer & Solution

**B . Maintenance and repair inventory**

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## 13. If the cost of an equipment of the desired capacity is not available it may be estimated from the cost of another equipment using the formula

(cost)1 = (cost)2 [(capacity)2/(capacity)1]

(cost)1 = (cost)2 [(capacity)1/(capacity)2]

(cost)1 = (cost)2 [(capacity)1/(capacity)2]0.6

(cost)1 = (cost)2 [(capacity)2/(capacity)1]0.6

## Answer & Solution

**C . (cost)1 = (cost)2 [(capacity)1/(capacity)2]0.6**

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## 14. The economic life of a small chemical plant is

Usually more than a large chemical plant

Usually much more than a large chemical plant

Usually much less than a large chemical plant

Always equal to a large chemical plant

## Answer & Solution

**C . Usually much less than a large chemical plant**

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## 15. Select the correct expression

Profit = revenue - operating cost

Profit = revenue - fixed cost

Profit = revenue - total cost

Profit = revenue - book value

## Answer & Solution

**C . Profit = revenue - total cost**

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