Business Environment MCQ with Answers

1. A firm aims towards ___ allocation of resources limited in supply with alternative
uses.
Ans. Optimum

2. Managers face situations requiring ___ making skills.

Ans. Decision

3. Select the right option:

Consumption, production, distribution and exchange are all ___ activities. (economic/
support)
Ans. Economic

4. An economic unit transforms ___ into output.

a) inputs
b) raw materials
c) money
Ans. a) inputs

5. The ___ environment refers to the factors that affect the consumers‟ purchasing
power.
a) economic
b) political
c) cultural
Ans. a) economic

6. The most difficult forces to control are socio/cultural forces.

Ans. True

7. The demographic environment is part of the ___ environment. (Micro/ macro)

Ans. Macro

8. SWOT analysis is an acronym for ___, ___, ___ and ___.

Ans. Strengths, weaknesses, opportunities, threats

9. Over time, intangible resources become more important than tangible resources.
Ans. True

10. The current or emerging trends in lifestyle and fashions refer to ___ analysis.
Ans. Socio-cultural
11. Inflation is a ___ in the general level of ___ of goods and services in an economy
over a period of time.
Ans. rise, prices

12. Aggregate demand (AD) is the total ___ for final ___ and ___ in the economy at a
given time and ___.
Ans. demand, goods, services, price level

13. Money supply consists of ___ with the public, and ___ ___ with the public.
Ans. Currency, Demand deposits

14. Select the right option:

A country’s balance of payments is a record of its ___ with the rest of the world.
(economic transactions, non-economic transactions, both of these)
Ans. economic transactions

15. Rostow produced a ___ stage model of economic ___.

Ans. five, takeoff

16. World Bank has divided economies into ___, ___, ___ and ___ Economies according
to the country’s ___.
Ans. Low-income economies, Lower middle income, Upper middle income, High
income, GNI per capita.

17. Fiscal Policy is a tool, used by the Government, to influence the level of GDP in
the short run by using ___ and ___.
Ans. Taxes, Government Spending

18. The direct buying and selling of government securities and bills in the money
market by the Reserve Bank with the objective of expansion or contraction of credit
and economic activity are known as ___.
Ans. open market operations

19. Select the right option:

This fiscal policy is used to cure the recession. (contractionary, expansionary, Both of
these)
Ans. expansionary

20. The ___ rate is charged by the Reserve Bank for giving loans to the commercial
banks.
Ans. Bank/Discount

21. Select the right option:

Expansionary policies involve:
i) Tax cuts
ii) Increased spending
iii) Increases in money supply to raise the level of GDP and
iv) Reduce unemployment
v) All of the above
Ans. All of the above

22. A policy mix that consists of a ___ in government spending and an___in money
supply would favour investment spending over government spending.
Ans. Decrease, increase

23. International factors such as ___ and ___ affect the business environment.
Ans. exchange rate, foreign income

24. An expansionary monetary policy will cause interest rates to ___.

Ans. fall

25. Fill in the blanks:

The different elements of culture are language, ideals, values, religions and beliefs,
___, status and roles, ___ and preferences.
Ans. Social collectives, cultural integration

26. Differentiation based on criteria as age, sex, caste, occupation, education is called
___.
Ans. Stratification

27. The energy crisis has led us to think in terms of modifying our energy policy and
more research in alternative energy resources. This is a form of
a) Cultural adaptation
b) Cultural transmission
c) Cultural shock
d) Organisation of culture
Ans. a) cultural adaptation

28. All proposals which are not eligible for the RBI’s automatic approval are required
to get the Government’s approval through the ___ and Foreign Investment Promotion
Board (FIPB).
Ans. Secretariat for Industrial Approval (SIA)

29. In Indian business culture, business development largely depends upon

relationship building.
Ans. True
30. Indians do not say “no” directly, as it is often considered rude.
Ans. True

31. Which of the following statements are true regarding Indian culture?
a) Indians are known for their hospitality
b) people usually respond with an outright “yes”
c) in general in India people take criticism well
Ans. a, b

32. When decision making is done by the top managers, it is centralized decision
making.
Ans. True

33. Rewards to employees may be given individually or as a group.

Ans. True

34. Market share and technological developments are long term goals.
Ans. True

35. Technology is an important determinant of change.

Ans. True

36. In the modern outlook, profit maximization is a primary motive of business.

Ans. False

37. Select the right option.

What people think of an organization‟s actions are called:
a) Public image
b) Public visibility
c) Viability
d) Values
Ans. a) Public image

38. The three main elements of a society that have a direct impact on business are: 1.
___, 2. ___ and 3. ___
Ans. 1. Family, 2. Educational institutions, 3. Religion

39. ___ developed the code of ethics which uses four questions for any ethical issue a
business faces.
Ans. Rotary International

40. Business environment refers to the external forces operating on an organization.

Ans. False
41. In a capitalistic system, the consumer is regarded as ___.
Ans. Sovereign

42. The two most powerful institutions in society today are business and government.
Ans. True

43. India started moving towards Liberalism in 1988.

Ans. Falseideology

44. Apolitical system is based on the ___ of the ruling government.

Ans. Sovereign, territory.

45. A State is a ___ entity, which occupies a well-defined ___.

Ans. sovereignty, political

46. A State exercises its ___ through a ___ system that governs its people.
Ans. False

47. The fundamental Right to Property was granted under Article 19(1) (f).
Ans. True

48. The ___ of State Policy are directions to the Legislature and Executive that they
should exercise their authority in accordance with these principles.
Ans. Directive principles

49. By the amendment of 1976, India became ___.

Ans. A socialist economy

50. India faced a balance of payments crisis in ___.

Ans. 1990

51. India embarked on a series of economic reforms in ___.

Ans. 1991

52. India has a ___ political system.

Ans. Plural

53. India offers a safe business scenario to entrepreneurs.

Ans. False

54. Doing business in India is a time-friendly proposition.

Ans. False
55. Inadequate infrastructure is a major obstacle that business faces in India.
Ans. True

56. Allocation of productive resources is done under socialism by the ___.

Ans. Planning authority

57. Income ___ which mostly arises from private property does not exist under
socialism.
Ans. Inequality

58. Economic ___ has replaced the price mechanism under a socialist economy.
Ans. Planning

59. A mixed economy combines the elements of both the ___ and the ___ economies.
Ans. Capitalist, socialist

60. Instead of competing, the private sector ___ the public sector in a mixed
economy.
Ans. Supplements

61. In a mixed economy the ___ sector regulates the ___ sector.
Ans. Public, private

62. The ___ is the chairman of the Planning Commission in India.

Ans. Prime Minister

63. The ___ motive which is an integral part of the capitalist economy motivates the
producers to undertake production.
Ans. Profit

64. In a capitalist economy, there is ___ interference by the government in the

Ans. Minimum/least

65. Extreme form of socialism is called ___.

Ans. Communism

66. The process through which the prices of goods and services are determined by
the market forces of demand and supply in a capitalist economy is called ___.
Ans. Price mechanism

67. Financial markets are of three types.

Ans. False
68. Financial instruments are legal documents that represent monetary value.
Ans. True

69. Match the following group A with group B:

Group A Group B

i) Financial system works i) by the financial laws of a government authority.

ii) The financial institutions are generally regulated ii) primarily to individual consumers.

iii) A building society is a financial institution iii) manage various securities and assets

iv) Retail banking service caters iv) with the help of financial institutions.

v) The asset management firms v) owned by its members rather than by shareholde

Ans.

Group A Group B

i) Financial system works iv) With the help of financial institutions.

ii) The financial institutions are generally regulated i) By the financial laws of a government authority.

iii) A building society is a financial institution v) owned by its members rather than by shareholde

iv) Retail banking service caters ii) Primarily to individual consumers.

v) The asset management firms iii) Manage various securities and assets.

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70. The Reserve Bank of India was established in the year ___.
Ans. 1935

71. The commercial banks in India are categorized into ___, private banks and public
sector banks.
Ans. Foreign banks

72. The two most important credit rating agencies in India are ___ and ICRA.
Ans. CRISIL

73. SEBI was founded in 1992 to protect the interest of ___.

Ans. Investor