🧩 Chapter 18: Economic Analysis — Mock Questions

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Q1. Economic analysis in equity research helps in understanding:

A. Individual stock PE
B. Macro factors affecting industries & companies
C. Dividend payout
D. Promoter shareholding

Answer: B

Q2. GDP growth indicates:

A. Stock market return
B. Overall economic activity & output
C. Fiscal deficit
D. Money supply only

Answer: B

Q3. High inflation generally leads to:

A. Lower interest rates
B. Higher interest rates
C. Better bond prices
D. Higher cash flow valuation

Answer: B
✔ Central banks raise rates to control inflation.

Q4. Fiscal policy deals with:

A. Taxation & government spending
B. Money supply
C. Interest rates
D. Exchange rates

Answer: A

Q5. Monetary policy is controlled by:

A. Finance Ministry
B. RBI (Central Bank)
C. Banks
D. Stock exchanges

Answer: B

Q6. Expansionary monetary policy includes:

A. Increasing repo rate
B. Reducing repo rate
C. Increasing CRR
D. Increasing taxes

Answer: B

Q7. A decrease in interest rates usually:

A. Increases borrowing & investment
B. Increases cost of loans
C. Reduces economic activity
D. Lowers equity valuations

Answer: A

Q8. The business cycle phase with highest unemployment is:

A. Expansion
B. Peak
C. Recession
D. Recovery

Answer: C

Q9. A strengthening domestic currency makes exports:

A. More expensive
B. Cheaper
C. Unchanged
D. Risk-free

Answer: A

Q10. Current Account Deficit (CAD) widens when:

A. Exports > imports
B. Imports > exports
C. FDI increases
D. Gold prices fall

Answer: B

Q11. High fiscal deficit may lead to:

A. Lower interest rates
B. Higher government borrowing
C. Lower inflation
D. Stronger currency

Answer: B

Q12. Purchasing Power Parity (PPP) relates:

A. Stock price to intrinsic value
B. Exchange rates to relative inflation
C. Bond yield to maturity
D. GDP to GNP

Answer: B

Q13. Leading indicators predict:

A. Past economic trends
B. Future economic movements
C. Only inflation
D. Only stock market returns

Answer: B

Q14. An increase in crude oil prices generally:

A. Reduces input cost for oil-importing nations
B. Increases inflation
C. Strengthens currency
D. Reduces fiscal deficit

Answer: B

Q15. The yield curve becomes inverted when:

A. Long-term rates > short-term rates
B. Short-term rates > long-term rates
C. All rates remain constant
D. Bond prices fall

Answer: B
✔ Often a recession indicator.

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