Economics – MCQ – GK Questions

Answer: Directorate General of Trade Remedies (DGTR)

The DGTR, operating under the Ministry of Commerce and Industry, is the apex national authority for trade defense. It conducts rigorous, quasi-judicial investigations to determine if domestic industries are suffering 'material injury' due to dumped imports or sudden surges. While DGTR recommends the duties, the actual legal imposition and collection are executed by the Ministry of Finance (CBIC).

Answer: Mode 2: Consumption abroad

Mode 2 (Consumption Abroad) covers scenarios where the buyer moves to the seller's territory to receive the service, such as an Indian patient traveling to the US for surgery, or a student studying at a foreign university. Mode 1 is remote delivery (telemedicine), Mode 3 is setting up a foreign branch (FDI in hospitals), and Mode 4 is the professional traveling to the client (IT consultants flying abroad).

Answer: Corporation Tax on the net profits of a company

A direct tax is levied directly on the income or wealth of the person or entity that ultimately bears the burden of the tax; it cannot be passed on to someone else. Corporation tax is paid directly by the company out of its profits. GST, Customs, and Excise are indirect taxes, where the initial payer (the business) shifts the tax burden to the final consumer via higher prices.

Answer: Exogenous real shocks, such as changes in technology, productivity, or commodity prices, rather than monetary factors

Unlike Keynesian models that blame recessions on drops in demand or sticky wages, RBC theory assumes markets are always perfectly competitive and clear. It posits that booms and busts are simply the efficient, rational responses of workers and firms to real external shocks (like a massive oil price spike or a breakthrough in AI technology) altering the economy's productive capacity.

Answer: To accumulate resources over time specifically for the redemption of the state's outstanding open market borrowings

The CSF acts as a mandatory sinking reserve. States are required to contribute a small percentage of their outstanding debt to this fund annually, which is then invested in safe government securities. When a state's bond matures, it uses the accumulated corpus in the CSF to repay the principal, preventing sudden, massive spikes in the state's fiscal deficit in a single year.

Answer: CPI includes services and tracks retail inflation affecting consumers, while WPI tracks only physical goods at the wholesale level

The most critical structural difference is that the WPI completely ignores the services sector, which constitutes over 50% of India's GDP. The CPI captures retail price changes for both goods and services (like healthcare, education, and housing). Furthermore, since 2014, the RBI uses CPI (Combined), not WPI, as the official anchor for its inflation-targeting mandate.

Answer: Basel, Switzerland

The BCBS was founded in 1974 by central bank governors of the G10 countries. Operating from Basel, Switzerland, it serves as the primary global standard-setter for the prudential regulation of banks, aiming to enhance financial stability worldwide by ensuring that banks maintain adequate capital buffers to absorb unexpected shocks.

Answer: Property rights are clearly defined and transaction costs are negligible or zero

Ronald Coase argued that if people can negotiate cheaply and it is legally clear who owns the right to the resource (e.g., the right to clean air vs. the right to pollute), the affected parties will naturally strike a mutually beneficial deal to internalize the externality. However, in reality, high transaction costs (lawyers, organizing millions of citizens) usually make this impossible, necessitating state regulation.

Answer: Mobilizing rural women into Self-Help Groups (SHGs) and linking them to formal credit and skill development

DAY-NRLM operates on the philosophy that the poor have a strong innate capability to lift themselves out of poverty if organized into robust, participatory institutions. By federating millions of rural women into SHGs, the scheme builds social capital, promotes financial literacy, facilitates access to bank credit, and eventually supports them in setting up micro-enterprises.

Answer: The 'evergreening' of patents by pharmaceutical companies through minor, trivial modifications to existing drugs

Section 3(d) is a critical public health safeguard in Indian law. It mandates that a new form of a known substance (like a new salt or polymorph) is only patentable if it demonstrates a significant enhancement in known 'efficacy'. This prevents big pharma from making tiny, ineffective changes to a drug whose patent is expiring just to secure a new 20-year monopoly and keep generic, affordable versions off the market.

Answer: As an economy industrializes and per capita income rises, the share of public expenditure in the Gross Domestic Product (GDP) tends to increase secularly

Formulated by Adolph Wagner in the late 19th century, this law observes that economic development brings about complex social and economic relationships (like urbanization, monopolies, and externalities) that the free market cannot handle alone. Consequently, the state must expand its role to provide infrastructure, regulate markets, and offer social welfare, causing government spending to grow faster than the economy.

Answer: Decrease, even if absolute expenditure on food rises

Engel's Law is a fundamental observation in development economics. Because human caloric needs are biologically capped, wealthier families quickly satisfy their basic food requirements. As their income grows further, the marginal propensity to consume food drops, and they allocate a progressively larger share of their budget to luxuries, services, healthcare, and education.

Answer: Price Support Scheme (PSS) where NAFED procures pulses and oilseeds

While MSP is announced for 22 crops, procurement is heavily skewed towards wheat and rice by the FCI. PM-AASHA was designed to operationalize MSP for pulses, oilseeds, and copra. Under the Price Support Scheme (PSS), NAFED acts as the central nodal agency to physically procure these crops when market prices fall below the MSP, protecting farmers from distress sales.

Answer: Statement 13

Gender Budgeting is not a separate accounting exercise but a dissection of the existing budget to assess its impact on gender equality. It typically categorizes schemes into two parts: those with 100% allocation for women, and those with at least 30% allocation. In recent budget documents, this critical analytical data is presented in Statement 13.

Answer: Total volume of digital transactions processed

The PCA framework is strictly focused on the financial health and solvency of the bank. The three core trigger parameters are CRAR (capital adequacy), Net NPA (asset quality), and ROA (profitability). A low volume of digital transactions might indicate poor market penetration or technological lag, but it does not threaten the bank's survival or trigger regulatory intervention under PCA.

Answer: Consumers are forward-looking and will increase their savings to pay for future taxes if the government finances current spending through debt instead of taxes

Proposed by David Ricardo, this theory argues that the method of financing government spending (taxes vs. debt) is irrelevant to aggregate demand. Rational consumers know that government borrowing today must be repaid with interest via higher taxes tomorrow. Therefore, they will save the extra income from a tax cut or debt issuance to pay those future taxes, neutralizing any fiscal stimulus.

Answer: Alfred Marshall

Alfred Marshall introduced the concept of consumer surplus in his seminal work 'Principles of Economics' (1890). It is a crucial tool in welfare economics used to quantify the net benefit or utility consumers derive from market transactions, and it helps policymakers evaluate the welfare impacts of taxes, subsidies, and price controls.

Answer: An FTA eliminates internal tariffs but members retain individual external tariffs, whereas a Customs Union adopts a common external tariff

In an FTA (like NAFTA/USMCA), members trade freely among themselves but set their own tariffs against non-members. In a Customs Union (like the early EU or Mercosur), members not only eliminate internal tariffs but also agree on a unified, common external tariff policy applied to all non-member nations, requiring a higher degree of political and economic integration.

Answer: To identify and target beneficiaries for various welfare schemes like PMAY and NFSA based on multidimensional deprivations

Unlike the decadal Census which provides broad demographic data, the SECC 2011 is a comprehensive door-to-door survey capturing specific deprivation indicators (e.g., lack of a pucca house, no adult earning member, landlessness). Ministries use this granular data to ensure that welfare benefits accurately reach the most vulnerable households, bypassing the flawed BPL card system.

Answer: Sharing the financial risk by having the government fund 40% of the project cost upfront and the developer arranging the remaining 60%

The HAM was introduced to revive the stalled PPP sector. Under previous models like BOT-Toll, developers bore all traffic risks, leading to massive defaults. Under HAM, the government provides 40% of the capital as milestone payments, reducing the developer's debt burden, while the developer collects fixed annuity payments from the government post-construction, entirely removing traffic revenue risk.