Economics – MCQ – GK Questions

Normally, long-term bonds offer higher yields than short-term bonds to compensate for time and inflation risk (a normal upward-sloping curve). An inverted yield curve occurs when short-term interest rates exceed long-term rates, indicating that investors expect future economic weakness, leading central banks to cut rates aggressively. It is a highly reliable historical predictor of recessions.

Commercial Papers are unsecured promissory notes issued by large, creditworthy corporations and primary dealers to meet their short-term working capital requirements. Because they are unsecured, only entities with high credit ratings can issue them, and they are always issued at a discount to their face value, maturing within 7 days to 1 year.

Priority Sector Lending mandates banks to direct 40% of their credit to sectors vital for inclusive growth but which might otherwise struggle to secure formal finance. This includes agriculture, MSMEs, education, housing (up to specific affordable limits), and renewable energy. Luxury real estate is a commercial, profit-driven venture and is strictly excluded from PSL.

Operation Twist involves the central bank buying long-term bonds (pushing their prices up and yields/interest rates down) while simultaneously selling short-term paper to absorb the excess liquidity created. This softens long-term borrowing rates for infrastructure and housing without increasing the overall money supply in the economy.

The Royal Commission on Indian Currency and Finance, appointed in 1925 and chaired by Sir Hilton Young, recommended the creation of a central bank to separate the control of currency and credit from the government. This led to the RBI Act of 1934, and the bank commenced operations on April 1, 1935, before being nationalized in 1949.

The FRBM Act mandates the government to lay out a roadmap for reducing fiscal and revenue deficits, ensuring inter-generational equity in debt management. It aims to bring transparency and accountability to the fiscal management process, though its rigid targets have occasionally been relaxed during severe macroeconomic shocks or pandemics.

Capital receipts are those government receipts that either create a liability (like fresh borrowings) or cause a reduction in the government's assets (like the recovery of past loans or disinvestment of PSUs). Tax revenues and dividends are 'Revenue Receipts' because they neither create liabilities nor reduce core assets.

Disinflation occurs when the inflation rate decreases over time (e.g., dropping from 8% to 4%); prices are still rising, just at a slower pace. Deflation, however, occurs when the general price level actually falls below zero (e.g., -2%), meaning money gains purchasing power, which is often a symptom of a severe economic recession.

In 2019, the Government of India merged the Central Statistics Office (CSO) and the National Sample Survey Office (NSSO) to form the unified National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI). This was done to streamline data collection, eliminate discrepancies, and improve the overall quality of national statistics.

Net National Product (NNP) at Factor Cost is universally recognized as 'National Income'. It represents the total net income earned by the residents of a country from the production of goods and services, excluding indirect taxes and including subsidies, and after accounting for the depreciation of capital assets.

The eight core industries are Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity. Textiles, despite being a major employment-generating sector, is not classified as a 'core' infrastructure industry for the purpose of the IIP's leading indicator metrics.

The 2020 revision eliminated the distinction between manufacturing and service sectors and significantly hiked the investment and turnover limits. A Micro enterprise is now defined as one where the investment in plant and machinery or equipment does not exceed Rs. 1 Crore, and the annual turnover does not exceed Rs. 5 Crore.

The Blue Revolution (Neel Kranti Mission) was launched to promote the sustainable and intensive development of the fisheries sector. It focuses on enhancing fish production, modernizing aquaculture technologies, and improving the livelihoods of fisherfolk, transforming India into one of the leading fish-producing nations globally.

e-NAM is a pan-India electronic trading portal that networks the existing Agricultural Produce Market Committee (APMC) mandis. By enabling online bidding and transparent price discovery, it aims to break down interstate trade barriers, ensure farmers get better remunerative prices, and reduce the influence of middlemen.

NABARD was set up on July 12, 1982, to replace the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of the RBI, along with the Agricultural Refinance and Development Corporation (ARDC). The Shivaraman Committee recommended a single, dedicated apex institution to oversee and refinance rural credit delivery in India.

Stand-Up India facilitates bank loans between Rs. 10 lakh and Rs. 1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch. The goal is to foster inclusive economic growth by supporting greenfield enterprises in the non-farm sector.

Proposed by Keynes, the paradox illustrates that while saving is virtuous for an individual, a collective increase in savings reduces consumption. This drops aggregate demand, leading to lower production, job losses, and ultimately a lower total income, meaning the economy's actual total savings end up falling.

The Twin Deficit hypothesis suggests a strong link between a government's budget deficit (fiscal deficit) and the country's external trade deficit (CAD). High government borrowing increases domestic demand, which spills over into higher imports, thereby widening the Current Account Deficit.

The IMF uses a quota system based on a country's GDP, openness, economic variability, and international reserves. This quota determines how much the country must contribute to the IMF, its voting weight on the Executive Board, and the maximum financing it can access.

The NSO (under MoSPI) releases the IIP data with a lag of six weeks from the reference month. It measures the short-term growth of a basket of industrial products, with manufacturing accounting for the vast majority (over 77%) of its total weight.