APPSC Paper I · Assistant Statistical Officer Paper II · Topic 1
1 APPSC Paper I Economic Concepts questions with answers
37 questions from APPSC ASO 2025 Paper II question paper with answers and APPSC ASO Paper II Mock 1 with answers. Try each one, then tap Show answer.
Previous-paper questions are as in the original paper. Medha AI wrote the answers and explanations.
1.3Money, banking & inflation
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A statement has been given below followed by two conclusions. Assuming given statement to be true which of the following options will be correct for given conclusions.
Statement: The Reserve Bank of India (RBI) increases the Cash Reserve Ratio (CRR) to reduce excess liquidity in the economy.
Conclusions:
I. An increase in CRR leads to a decrease in the lending capacity of banks.
II. An increase in CRR results in higher money supply in the economy.
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Answer A. Only Conclusion 1 follows
A higher CRR locks more of the banks' deposits with the RBI, so banks can lend less; this contracts, not expands, the money supply.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q1, final key
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Match the List – I with List – II and select the correct answer from the options given below:
List-I List-II A. cash reserve ratio i. Buying and selling of government securities B. Expansionary monetary policy ii. Mandatory Percentage of reserves to be maintained by commercial banks C. Open market operations iii. Increasing money supply in the economy D. Central bank of a country iv. manages the monetary policy of a country Show answerHide answer
Answer B. A-ii, B-iii, C-i, D-iv
CRR is the mandatory reserve percentage, expansionary policy raises money supply, OMO is buying and selling government securities, and the central bank manages monetary policy.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q3, final key
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With reference to inflation, which of the following statements is/are correct?
Statement A: Contractionary monetary policy is used by the central bank in order to keep a check on inflation.
Statement B: Inflation can be measured by comparing the price of a single good with its price in the previous period.
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Answer A. Only Statement A is correct
Central banks tighten monetary policy to curb inflation; inflation is a rise in the general price level measured by a price index of many goods, not one good's price.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q26, final key
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Which of the following statements is NOT true for Inflation rate?
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Answer D. Inflation = nominal interest rate/real interest rate
By the Fisher relation, inflation is approximately nominal minus real interest rate, not their ratio; the percentage change in the price level and the monetarist view are both valid.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q33, final key
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According to quantity theory of money (MV = PY), if money supply increases, keeping velocity constant, then it implies which of the following?
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Answer A. Nominal output or GDP will increase
With V fixed, a rise in M must raise PY, which is nominal GDP.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q34, final key
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If person A has taken a loan of $10,000 from bank XYZ and will be paying back in instalments in 25 years, then here which function of money is being performed?
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Answer D. Standard of deferred payments
Money used to settle a debt in future instalments serves as a standard of deferred payments.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q47, final key
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Consider the following statements about the CPI (Combined) series with base year 2012:
I. Food and beverages carry the largest weight.
II. Housing carries a larger weight than the miscellaneous group.
III. Fuel and light carry a weight of less than 10%.
Which of the statements given above is/are correct?
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Answer C. I and III only
I and III are correct. Housing (about 10%) carries much less weight than the miscellaneous group (about 28%).
Source: PW Indian Economy, ch.2 National Income Accounting (CPI, WPI, PPI, IIP) (Components of CPI)
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Consider the following statements about the Liquidity Adjustment Facility (LAF) corridor:
I. The SDF rate is the floor of the LAF corridor.
II. The MSF rate is the ceiling of the LAF corridor.
III. After April 2022 the fixed-rate reverse repo continued to be the floor of the corridor.
Which of the statements given above is/are correct?
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Answer B. I and II only
I and II are correct. From April 2022 the SDF rate replaced the fixed-rate reverse repo as the floor.
Source: PW Indian Economy, ch.4 Monetary Policy and Inflation (LAF corridor)
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Match the measures of money supply with their components:
List I
a. M1
b. M2
c. M3
d. M4
List II
I. M1 + net time deposits of commercial banks
II. M3 + total post office deposits (excluding NSCs)
III. Currency with the public + demand deposits + other deposits with RBI
IV. M1 + savings deposits with post office savings banks
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Answer D. a-III, b-IV, c-I, d-II
M1 = currency with the public + demand deposits + other deposits with RBI; M2 = M1 + post office savings deposits; M3 = M1 + net time deposits of banks; M4 = M3 + total post office deposits excluding NSCs.
Source: NCERT Class 12 Introductory Macroeconomics ch.3 Money and Banking (p.58); PW Indian Economy, ch.3 Money and Banking
1.1Production, costs & market structuresNotes
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Which of the given statements is/are correct?
Statement A: Market demand and supply determine the equilibrium in the perfect competitive industry, and all firms act as a price taker.
Statement B: A firm decides what price to be charged in the perfect competitive market.
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Answer A. Only statement A is true
Under perfect competition the industry's demand and supply set the price, and each firm simply accepts it; no single firm sets price.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q8, final key
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Given below are two statements, one is labelled as Assertion (A) and the other is labelled as Reason (R):
Assertion (A): In a perfectly competitive market, equilibrium is reached when market supply equals market demand at a specific price and quantity.
Reason (R): The equilibrium price is determined by the interaction of supply and demand forces.
In the context of above two statements, which one of the following is correct?
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Answer A. Both A and R are true, and R is the correct explanation of A.
Equilibrium occurs where market demand equals market supply, and that point is found precisely through the interaction of demand and supply, so R explains A.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q37, final key
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In a perfectly competitive market, firms are considered:
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Answer B. Price takers, as they accept the market-determined price
Each firm is too small to affect the market price, so it accepts the price set by industry demand and supply.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q38, final key
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Consider the following statements about the kinked demand curve model of oligopoly:
1. It assumes that rivals follow a price cut but do not follow a price rise.
2. The marginal revenue curve has a discontinuous (vertical) gap at the kink.
3. It explains how the initial price at the kink is determined.
Which of the statements given above is/are correct?
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Answer C. 1 and 2 only
Demand is elastic above the kink (rivals do not follow a rise) and inelastic below it (rivals match a cut), giving a gap in MR. MC can shift within the gap without changing price, explaining price rigidity. The model does not explain how the kink price is reached.
Source: Koutsoyiannis, Modern Microeconomics; Telugu Akademi B.A. Economics, Market Structures and Price Determination
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A monopolist faces the demand curve P = 100 − Q and has a constant marginal and average cost of ₹20. What is its maximum profit?
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Answer C. ₹1,600
Profit is maximised where MR = MC: 100 − 2Q = 20, so Q = 40 and P = 100 − 40 = 60. Profit = (P − AC) × Q = 40 × 40 = ₹1,600.
Source: Standard method; answer and every option computed and checked in Python
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At a certain output the average revenue of a firm is ₹60 and the price elasticity of demand is 3. What is the marginal revenue?
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Answer A. ₹40
The relation between AR, MR and elasticity is MR = AR × (e − 1)/e = 60 × 2/3 = ₹40.
Source: Standard method; answer and every option computed and checked in Python
1.4Public finance: budgets, taxes & deficits
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If budget account of government is in the surplus, what does it mean?
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Answer A. Government tax revenue collection is more than government spending and government transfer payments
A budget surplus means revenue exceeds total spending including transfers, so the government need not borrow.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q12, final key
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Out of the following course of actions, which one comes under the fiscal policy?
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Answer C. Income tax rates have been decreased
Fiscal policy uses government taxes and spending; changing income tax rates is fiscal, while CRR, open market operations and the discount rate are monetary tools.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q21, final key
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Which of the following taxes were NOT subsumed in GST?
I. Basic Customs Duty
II. Stamp duty
III. Entry tax (all forms)
IV. Electricity duty
Select the correct answer using the codes given below.
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Answer B. I, II and IV only
Basic Customs Duty, stamp duty and electricity duty remain outside GST. Entry tax in all forms was subsumed in GST.
Source: Indian Economy reference ch.5 (Government Budgeting and Fiscal Policy) (p.57-58); NCERT Class 12 Introductory Macroeconomics ch.5 (p.93)
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Consider the following statements about taxes in India:
I. Personal income tax is progressive: the tax rate rises as income rises.
II. Excise duties are levied on goods produced within the country, while customs duties are levied on goods imported into or exported out of India.
Which of the statements given above is/are correct?
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Answer C. Both I and II
Both statements are correct. Personal income tax is progressive, and excise duty falls on domestic production while customs duty falls on imports and exports.
Source: NCERT Class 12 Introductory Macroeconomics ch.5 (p.78)
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Consider the following statements:
I. Tax evasion is the illegal non-payment of tax by concealing or misreporting income.
II. Tax avoidance is the legal use of exemptions and loopholes in the law to reduce tax liability.
Which of the statements given above is/are correct?
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Answer C. Both I and II
Both statements are correct. Evasion is illegal and punishable; avoidance is legal, though anti-avoidance rules such as GAAR target aggressive cases.
Source: Indian Economy reference ch.5 (Government Budgeting and Fiscal Policy) (p.59)
1.2National income, employment & investment
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In income method of national income accounting, which of the following is NOT included while calculating the national income of India?
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Answer D. Salaries paid to Australian citizen working in Indian embassy in Australia
An Indian embassy abroad is part of India's economic territory, so this salary counts in India's domestic product; but an Australian citizen working there in Australia is a resident of Australia, so the salary is factor income paid to a non-resident and is excluded from India's national income.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q13, final key
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The natural rate of unemployment is equal to:
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Answer B. Frictional unemployment + structural unemployment
The natural rate is the unemployment that remains when the economy is at full employment, i.e. frictional plus structural; cyclical unemployment is excluded.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q35, final key
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Which of the following is NOT part of consumption in national income accounting?
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Answer A. Consumption of fixed capital
Consumption of fixed capital is depreciation, which is deducted to move from gross to net product; household consumption covers durables, non-durables and services.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q48, final key
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If an engineer is earning $5,000 and has to pay income tax of 10%, after which decides to save $400, how much he must be spending on purchase of goods and services?
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Answer B. $4,100
Tax = 10% of 5,000 = 500, so disposable income = 4,500; consumption = 4,500 − 400 saving = $4,100.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q49, final key
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Consider the following statements:
I. Real GDP values the output of a year at constant (base-year) prices.
II. GDP deflator is the ratio of real GDP to nominal GDP.
III. A GDP deflator of 150 means the price level is 50% higher than in the base year.
Which of the statements given above is/are correct?
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Answer D. I and III only
I and III are correct. The GDP deflator is nominal GDP divided by real GDP, not the other way round.
Source: NCERT Class 12 Introductory Macroeconomics ch.2 (p.39); PW Indian Economy (ref) ch.2 (p.20)
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From the following (₹ crore), find domestic income (NDP at factor cost) by the income method: compensation of employees 4,200; rent 600; interest 500; profits 1,300; mixed income of the self-employed 900; old-age pensions paid by government 250; sale of a second-hand car 80.
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Answer A. ₹7,500 crore
Only factor incomes count: 4,200 + 600 + 500 + 1,300 + 900 = 7,500. Pensions are transfers; a second-hand sale is not current production.
Source: Medha AI, based on BRAOU/APSCHE degree textbooks (ASO Paper II)
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Consider the following statements:
I. Gross value added of a firm is the value of its output minus the value of intermediate goods used.
II. Net value added is gross value added plus depreciation.
III. GDP is the sum of gross value added of all producing units in the economy.
Which of the statements given above is/are correct?
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Answer C. I and III only
I and III are correct. Net value added is gross value added minus (not plus) depreciation.
Source: NCERT Class 12 Introductory Macroeconomics ch.2 (p.30)
1.1Demand, consumption & elasticityNotes
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Demand of good or service is said to be elastic if its elasticity satisfies which of the following conditions?
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Answer C. Ed>1
Demand is elastic when the percentage change in quantity demanded exceeds the percentage change in price, i.e. Ed > 1.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q15, final key
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Given below are two statements, one is labelled as Assertion (A) and the other is labelled as Reason (R).
Assertion (A): The demand of a tea is directly related to price of coffee.
Reason (R): The cross price elasticity of demand between two substitute goods is always positive.
In the context of the above two statements, which of the following is correct?
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Answer A. Both (A) and (R) are true and (R) is the correct explanation of (A)
Tea and coffee are substitutes, so a rise in coffee's price raises tea demand; that direct relation is exactly what a positive cross price elasticity between substitutes means.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q28, final key
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Consider the following statements about arc elasticity of demand:
1. It measures elasticity between two points on a demand curve and is suited to large changes in price.
2. When the averages of the old and new prices and quantities are used as the base, it gives the same value whether price rises or falls.
Which of the statements given above is/are correct?
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Answer C. Both 1 and 2
Arc elasticity is the average elasticity over a segment of the curve, used for discrete or large price changes. Using mid-point bases makes the formula symmetric, so the direction of the change does not matter.
Source: Telugu Akademi B.A. Economics, Micro Economics (Elasticity of Demand); Ahuja, Advanced Economic Theory
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Consider the following statements about the budget line of a consumer buying goods X and Y:
1. Its slope equals −Px/Py.
2. A rise in money income, with prices unchanged, shifts it outward parallel to itself.
3. A fall in the price of X alone makes it pivot outward along the X-axis, with its Y-intercept unchanged.
4. Doubling both prices and money income shifts it outward.
Which of the statements given above are correct?
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Answer D. 1, 2 and 3 only
The budget line PxX + PyY = M has slope −Px/Py and intercepts M/Px and M/Py. A higher M with fixed prices gives a parallel outward shift; a lower Px raises only M/Px. Doubling M, Px and Py leaves both intercepts unchanged, so the line does not move.
Source: Telugu Akademi B.A. Economics, Micro Economics (Theory of Consumer Behaviour); Koutsoyiannis, Modern Microeconomics
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A consumer is willing to pay ₹50, ₹40, ₹30, ₹20 and ₹10 for the 1st, 2nd, 3rd, 4th and 5th units of a good. If the market price is ₹20 per unit, what is the Marshallian consumer's surplus?
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Answer B. ₹60
At ₹20 the consumer buys 4 units (willingness to pay ≥ price). Consumer's surplus = total willingness to pay − actual payment = 140 − 80 = ₹60, i.e. 30 + 20 + 10 + 0.
Source: Marshall's consumer's surplus; answer and every option computed and checked in Python
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The demand function for a good is Q = 100 − 4P. What is the (numerical) point price elasticity of demand at P = 10?
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Answer B. 0.67
At P = 10, Q = 60. Point elasticity = (dQ/dP) × (P/Q) = 4 × 10/60 = 0.67.
Source: Standard method; answer and every option computed and checked in Python
1.1Factor pricing: rent, interest & profitNotes
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Match the List – I with List – II and select the correct answer from the options given below:
List-I List-II A. Nominal Rate of interest is i. Entrepreneur B. Inflation adjusted rate of interest ii. Profit is one of the component C. Profit is the factor of payment to iii. Promised rate of interest written on bond papers D. In income method of GDP calculation iv. Real rate of interest Show answerHide answer
Answer C. A-iii, B-iv, C-i, D-ii
The nominal rate is the stated rate on a bond, the inflation-adjusted rate is the real rate, profit is the reward of the entrepreneur, and profit is one component of income-method GDP.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q42, final key
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Consider the following statements:
1. Hicks and Hansen criticised the classical, loanable funds and Keynesian theories of interest as indeterminate.
2. The criticism arises because saving (and liquidity preference) depend on the level of income, which itself depends on the rate of interest.
Which of the statements given above is/are correct?
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Answer C. Both 1 and 2
Hicks and Hansen showed that none of these theories can fix the interest rate unless income is known, while income depends on the rate of interest; the IS-LM model resolves this by determining both together.
Source: Jhingan, Macro Economic Theory (Theories of Interest)
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Under perfect competition, the marginal physical product of the last worker hired is 6 units and the product sells at ₹25 per unit. According to the marginal productivity theory, the wage paid to each worker is:
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Answer D. ₹150
Wage = VMP = MPP × price = 6 × 25 = ₹150.
Source: Standard method; answer and every option computed and checked in Python
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According to J.B. Clark's dynamic theory of profit, which of the following are dynamic changes that give rise to profit?
1. Increase in population
2. Increase in capital
3. Improvement in methods of production
4. Multiplication of consumers' wants
Select the correct answer using the code given below:
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Answer D. 1, 2, 3 and 4
Clark listed five dynamic changes: growth of population, growth of capital, improved methods of production, changes in the forms of industrial organisation and multiplication of consumers' wants. In a static economy profit disappears.
Source: Jhingan, Micro Economic Theory (Theories of Profit)
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