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Generate QuizEconomics – Hard Level – GK Questions
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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.
In Game Theory, a situation where no player has an incentive to change their strategy, given the strategy chosen by the other player, is called a:
- Zero-sum game
- Prisoner's Dilemma
- Nash Equilibrium
- Dominant Strategy
Answer: Nash Equilibrium
Named after mathematician John Nash, this equilibrium concept describes a stable state in a strategic interaction. Each player is making the best possible decision they can, taking into account the decisions of the other players, meaning no unilateral deviation is profitable.
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.
Moral hazard occurs before a transaction takes place, whereas adverse selection occurs after the transaction is completed.
- True
- False
Answer: False
The reverse is true. Adverse selection happens before the transaction (e.g., high-risk individuals are more likely to buy insurance). Moral hazard occurs after the transaction, when one party changes their behavior and takes more risks because they are protected from the consequences (e.g., driving recklessly after buying full-coverage insurance).
The 'Market for Lemons' theory, which won George Akerlof a Nobel Prize, illustrates the concept of:
- Moral Hazard
- Adverse Selection
- Principal-Agent Problem
- Tragedy of the Commons
Answer: Adverse Selection
Akerlof used the used-car market to show how asymmetric information (sellers knowing more than buyers) leads to adverse selection. Buyers, fearing they will get a 'lemon' (bad car), offer low prices, which drives sellers of good cars out of the market, potentially causing market collapse.
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 Real Effective Exchange Rate (REER) adjusts the Nominal Effective Exchange Rate (NEER) for inflation differentials between the home country and its trading partners.
- True
- False
Answer: True
While NEER measures the weighted average of a currency relative to a basket of others, REER adjusts this for relative inflation rates. REER is a superior indicator of a country's actual trade competitiveness, as high domestic inflation can erode the benefits of a nominally depreciated currency.
The economic condition characterized by stagnant economic growth, high unemployment, and simultaneously high inflation is known as ___.
- stagflation
- drives out
- National Income
- rivalrous (or unregulated common)
Answer: stagflation
Stagflation is a portmanteau of stagnation and inflation. It presents a severe dilemma for policymakers because traditional monetary tools used to curb inflation (like raising interest rates) will further depress growth and worsen unemployment.
What does the term 'Skewflation' refer to in economics?
- Continuous hyperinflation across all sectors
- Simultaneous inflation in some sectors and deflation in others
- Deflation accompanied by high unemployment
- Inflation caused solely by currency printing
Answer: Simultaneous inflation in some sectors and deflation in others
Skewflation describes a scenario where prices rise persistently in specific sectors (like food or energy) while remaining stable or even falling in others. This makes monetary policy challenging, as raising interest rates to curb sector-specific inflation might hurt the broader, non-inflating economy.
The phenomenon where the current year's inflation rate appears artificially high or low simply due to the unusually high or low base prices of the previous year is known as the ___ effect.
- open market borrowings (or debt / bonds)
- multiplier
- OPHI
- base
Answer: base
The base effect is a statistical artifact that occurs when comparing year-on-year inflation data. If prices spiked abnormally in the previous year, the current year's inflation will mathematically look lower even if absolute prices are still rising steadily.
The concept of 'Effective Revenue Deficit' was introduced in the Union Budget of which year to highlight the quality of government borrowing?
- 2008-09
- 2011-12
- 2015-16
- 2018-19
Answer: 2011-12
Introduced in 2011-12, the Effective Revenue Deficit excludes the revenue expenditure that goes towards the creation of durable assets (like rural roads or housing). It provides a more accurate picture of the government's unproductive borrowing, which is used merely to finance current consumption.
Which of the following expenditures is 'charged' on the Consolidated Fund of India and is not subject to a vote by Parliament?
- Subsidies on food and fertilizers
- Salary and allowances of the President of India
- Defense procurement
- Funding for MGNREGA
Answer: Salary and allowances of the President of India
Charged expenditures, which include the salaries of the President, Supreme Court/High Court judges, and the CAG, as well as debt servicing, are automatically met from the Consolidated Fund. They can be discussed by Parliament but cannot be voted upon to ensure the independence of constitutional authorities.
The Insolvency and Bankruptcy Code (IBC), which provides a time-bound process for resolving insolvency, was enacted in which year?
- 2014
- 2015
- 2016
- 2018
Answer: 2016
The IBC was passed in 2016 to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals. It shifted the legal framework from a 'debtor-in-possession' to a 'creditor-in-control' regime.
The Standing Deposit Facility (SDF) rate serves as the floor of the RBI's liquidity adjustment corridor and is set ___ the Repo Rate.
- below
- Leverage
- Skewflation
- gig
Answer: below
Introduced to manage excess liquidity, the SDF allows banks to park surplus funds with the RBI without providing collateral. It is usually set 25 basis points below the Repo Rate, establishing the lower bound of the monetary policy operating corridor.
The Periodic Labour Force Survey (PLFS), which replaced the quinquennial employment surveys, is conducted by which organization?
- NITI Aayog
- National Statistical Office (NSO)
- Reserve Bank of India
- Ministry of Labour and Employment
Answer: National Statistical Office (NSO)
The NSO, operating under the Ministry of Statistics and Programme Implementation (MoSPI), launched the PLFS in 2017. It was designed to provide more frequent and reliable estimates of labor force indicators like unemployment and labor force participation rates in both rural and urban areas.
Dumping means selling abroad at?
- High price
- Lower than domestic price
- Cost price
- Premium
Answer: Lower than domestic price
Considered an unfair trade practice under WTO rules.
Devaluation of currency helps?
- Imports
- Exports
- Both
- Neither
Answer: Exports
Makes domestic goods cheaper and more competitive abroad.
Poverty line in India is estimated by?
- NITI Aayog / Tendulkar
- RBI
- World Bank
- NSSO only
Answer: NITI Aayog / Tendulkar
Historically estimated by Planning Commission using Tendulkar/Rangarajan methods.
Revenue deficit relates to?
- Capital account
- Current account
- Both
- Neither
Answer: Current account
Occurs when revenue expenditure exceeds revenue receipts.
Disinflation means?
- Negative inflation
- Fall in rate of inflation
- Rising prices
- Deflation
Answer: Fall in rate of inflation
Prices are still rising, but at a slower pace than before.