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Generate QuizEconomics – Fill in the Blank – GK Questions
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The Tarapore Committee was constituted by the RBI to lay down a roadmap for fuller ___ account convertibility in India.
- milk
- capital
- government spending (or autonomous expenditure)
- rivalrous (or unregulated common)
Answer: capital
The S.S. Tarapore Committee (1997 and 2006) outlined the prerequisites and timeline for moving towards fuller capital account convertibility (FCAC). It recommended building adequate forex reserves, lowering the fiscal deficit, and reducing inflation before fully opening the capital account to global markets.
When a country's currency depreciates, its exports become ___ expensive for foreign buyers, theoretically improving the trade balance.
- less
- rivalrous (or unregulated common)
- 40
- public
Answer: less
Currency depreciation means it takes fewer units of foreign currency to buy the domestic currency. Consequently, domestic goods become cheaper in international markets, boosting export volumes. However, this relies on the Marshall-Lerner condition, which requires the sum of export and import elasticities to be greater than one.
The International Bank for Reconstruction and Development (IBRD), the original institution of the World Bank Group, primarily lends to ___ countries.
- middle-income (and creditworthy low-income)
- Population
- employment elasticity (or labor market)
- government spending (or autonomous expenditure)
Answer: middle-income (and creditworthy low-income)
The IBRD raises funds on international capital markets by issuing AAA-rated bonds and lends to middle-income and creditworthy poorer countries for specific development projects. The poorest nations, who cannot afford IBRD rates, rely on the concessional loans from the International Development Association (IDA).
The Urjit Patel Committee, constituted by the RBI in 2013, is best known for recommending the adoption of the ___ as the key anchor for monetary policy formulation.
- below
- Outcome
- first
- Consumer Price Index (CPI)
Answer: Consumer Price Index (CPI)
Prior to this, the RBI used the Wholesale Price Index (WPI) to gauge inflation. The Urjit Patel Committee argued that CPI better reflects the actual cost of living for consumers and recommended shifting the monetary policy focus entirely to CPI, leading to the formalization of the inflation-targeting framework.
The Lead Bank Scheme was introduced in 1969 based on the recommendations of the ___ Study Group to coordinate credit deployment in rural districts.
- product
- long
- Gadgil
- public
Answer: Gadgil
The Gadgil Study Group, along with the Nariman Committee, recommended the Lead Bank Scheme. Under this, a specific bank (usually with a large branch network) is assigned the role of a consortium leader for each district to coordinate the efforts of all credit institutions and identify local investment potential.
Under the Priority Sector Lending (PSL) guidelines, domestic commercial banks are required to lend ___% of their Adjusted Net Bank Credit (ANBC) to specified priority sectors.
- trust (or confidence / faith)
- two
- 40
- 75
Answer: 40
The 40% target ensures that credit flows to vital but often neglected sectors like agriculture, micro, small and medium enterprises (MSMEs), education, and housing. It is a key instrument for promoting financial inclusion and balanced regional development in India.
When commercial banks face severe liquidity shortages and cannot borrow from the inter-bank market, they approach the RBI as the ___.
- lender of last resort
- Washington
- substitutes
- arbitrage (or resale)
Answer: lender of last resort
This critical function ensures the stability of the financial system. By providing emergency liquidity assistance to solvent but illiquid banks, the RBI prevents bank runs and systemic contagion that could otherwise trigger a broader financial crisis.
Irving Fisher's equation of exchange, which forms the basis of the Quantity Theory of Money, is expressed as MV = ___.
- PT
- Coase
- 1992
- Paper Gold
Answer: PT
In Fisher's equation, M is the money supply, V is the velocity of money, P is the general price level, and T is the volume of transactions (or real output). It posits that assuming V and T are constant in the short run, any increase in the money supply (M) directly leads to a proportional increase in inflation (P).
The narrowest measure of money supply in India, M1, includes Currency with the public, Demand Deposits, and ___ Deposits with the RBI.
- two
- Other
- TRIMs (or Trade-Related Investment Measures)
- Net Factor Income from Abroad (NFIA)
Answer: Other
M1 is the most liquid measure of money supply, comprising coins and currency notes held by the public, net demand deposits held by commercial banks, and 'Other Deposits' (like foreign central bank or IMF deposits) held with the RBI. It represents the money immediately available for transactions.
The ___ Curve hypothesizes an inverted-U shaped relationship between income inequality and economic development.
- Lewis
- trust (or confidence / faith)
- Engel's
- Kuznets
Answer: Kuznets
Simon Kuznets theorized that as an economy develops from agrarian to industrial, inequality initially rises as people move to higher-paying urban jobs. However, as the economy matures and welfare mechanisms, education, and democratization spread, inequality eventually decreases.
The ___ model of economic development describes the transition of an economy from a traditional, agrarian sector with surplus labor to a modern, industrial capitalist sector.
- Lewis
- C2 (or Comprehensive)
- frictional
- isoquant
Answer: Lewis
W. Arthur Lewis proposed the dual-sector model, explaining how developing economies can grow by transferring 'surplus' or disguisedly unemployed labor from the subsistence agricultural sector to the higher-productivity industrial sector, keeping wages low and profits high for reinvestment.
In national income accounting, GFCF stands for Gross Fixed ___ Formation, which is a key measure of investment in an economy.
- Green
- 2011-12
- Capital
- Current
Answer: Capital
GFCF represents the net increase in physical assets (like machinery, buildings, and infrastructure) within the economy during a specific period, minus depreciation. It is a crucial component of GDP and a primary indicator of a nation's investment climate and future productive capacity.
Among the eight core industries, ___ holds the highest weightage in the Index of Industrial Production (IIP).
- Refinery Products
- social
- 1998
- substitutes
Answer: Refinery Products
Petroleum refinery products hold the highest weight (approximately 28%) among the core industries, followed by electricity and steel. This reflects the critical dependence of the Indian economy and transportation sector on refined petroleum products.
When a monopolist charges a different price for every single unit sold to every individual consumer based on their exact willingness to pay, it is called ___ degree price discrimination.
- InvITs (or Infrastructure Investment Trusts)
- quantitative
- first
- balance (or sum to zero)
Answer: first
First-degree (or perfect) price discrimination allows the monopolist to capture the entire consumer surplus, converting it into producer surplus. While theoretically efficient, it is practically impossible to implement because it requires perfect knowledge of every consumer's reservation price.
The ___ Theorem states that if property rights are well-defined and transaction costs are low, private parties can bargain to solve the problem of externalities without government intervention.
- Coase
- NaBFID (or National Bank for Financing Infrastructure and Development)
- IDRCL (or India Debt Resolution Company Ltd)
- technological
Answer: Coase
Ronald Coase argued that the initial allocation of property rights doesn't matter for efficiency, as long as rights are clear and parties can negotiate costlessly. They will naturally trade rights until the externality is internalized at the socially optimal level.
A tax imposed by the government to correct a negative externality, such as pollution from a factory, is called a ___ tax.
- Pigouvian
- health and education
- notice
- interest
Answer: Pigouvian
Named after economist Arthur Pigou, a Pigouvian tax is levied on any market activity that generates negative externalities (costs borne by third parties). The tax aims to internalize the externality, aligning the private cost of production with the true social cost.
Goods that are both non-rivalrous in consumption and non-excludable are classified as ___ goods.
- public
- Refinery Products
- Okun's
- short
Answer: public
Public goods, like national defense or street lighting, can be consumed by one person without reducing availability to others (non-rival), and no one can be effectively excluded from using them (non-excludable). Because private markets cannot easily charge users, these goods are typically provided by the government.
Under the WTO Agreement on Agriculture, subsidies that cause no or minimal trade distortion and are kept in the '___ Box' are permitted without any limits.
- Okun's
- Green
- inflation
- employment elasticity (or labor market)
Answer: Green
The WTO categorizes agricultural subsidies into Amber (trade-distorting, subject to limits), Blue (production-limiting programs), and Green boxes. Green Box subsidies include government funding for research, pest control, and direct income support decoupled from production, which are fully permitted.
The largest component of India's Foreign Exchange Reserves is ___.
- quantitative
- health and education
- inflation
- Foreign Currency Assets (FCA)
Answer: Foreign Currency Assets (FCA)
India's forex reserves comprise Foreign Currency Assets, Gold, Special Drawing Rights (SDRs), and the Reserve Tranche Position (RTP) with the IMF. The FCA, which includes investments in US Treasuries and other sovereign bonds, constitutes the vast majority (over 85%) of the total reserves.
The ___ Curve illustrates the theoretical relationship between rates of taxation and the resulting levels of the government's tax revenue, suggesting an optimal tax rate.
- Laffer
- TRIMs (or Trade-Related Investment Measures)
- John Maynard Keynes
- Nominal
Answer: Laffer
The Laffer Curve posits that increasing tax rates beyond a certain point will actually decrease total tax revenue due to disincentives to work, tax evasion, and capital flight. It is frequently cited in debates regarding supply-side economics and tax cuts.