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Generate QuizEconomics – Medium Level – GK Questions
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The Model APMC Act, 2003, was drafted by the central government to mandate that all agricultural produce must be sold exclusively through government-regulated physical mandis.
- True
- False
Answer: False
The Model APMC Act of 2003 was actually drafted to *liberalize* the agricultural marketing sector. It encouraged states to allow private markets, direct purchase centers, and contract farming, aiming to break the monopoly of traditional APMC mandis and provide farmers with more avenues to sell their produce competitively.
What is the primary objective of the e-NAM (National Agriculture Market) portal launched by the Government of India?
- To provide direct subsidies to farmers' bank accounts
- To create a unified national market for agricultural commodities by networking existing APMC mandis
- To export Indian agricultural produce to foreign markets exclusively
- To regulate the prices of fertilizers and seeds
Answer: To create a unified national market for agricultural commodities by networking existing APMC mandis
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 provides direct retail loans to individual farmers for purchasing tractors and agricultural equipment.
- True
- False
Answer: False
NABARD is primarily an apex refinancing agency and a development bank. It does not provide direct retail loans to individual farmers. Instead, it refinances State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative Banks (StCBs), and Regional Rural Banks (RRBs), which in turn lend directly to the rural populace.
The National Bank for Agriculture and Rural Development (NABARD) was established in 1982 based on the recommendations of which committee?
- Narasimham Committee
- Shivaraman Committee
- Rangarajan Committee
- Gadgil Study Group
Answer: Shivaraman Committee
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.
The 'Stand-Up India' scheme was launched to specifically promote entrepreneurship among:
- Only rural youth
- SC/ST and Women entrepreneurs
- Only tech startups
- Large corporate houses
Answer: SC/ST and Women entrepreneurs
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.
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.
Full Capital Account Convertibility allows residents to freely convert local financial assets into foreign financial assets without any regulatory restrictions.
- True
- False
Answer: True
Capital account convertibility pertains to the freedom to move capital across borders for investments (like buying foreign stocks or real estate). While India has full Current Account convertibility (for trade in goods/services), it maintains partial restrictions on the Capital Account to prevent volatile hot money flows from destabilizing the economy.
What does the term 'Twin Deficit' refer to in the context of the Indian economy?
- High inflation and high unemployment
- Simultaneous Fiscal Deficit and Current Account Deficit
- Trade Deficit and Budget Deficit
- Revenue Deficit and Capital Deficit
Answer: Simultaneous Fiscal Deficit and Current Account Deficit
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.
Special Drawing Rights (SDRs) can be used directly by private corporations to settle international trade invoices.
- True
- False
Answer: False
SDRs are strictly an international reserve asset used by the IMF and member countries' central banks to settle balance of payments deficits or supplement official reserves. Private entities and individuals cannot hold or transact in SDRs; they must be exchanged for hard currencies first.
A country's voting power and financial contribution quota in the International Monetary Fund (IMF) are primarily determined by its:
- Population size
- Geographical area
- Relative size in the global economy
- Military expenditure
Answer: Relative size in the global economy
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 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 Index of Industrial Production (IIP) is compiled and published monthly by which organization?
- Central Statistics Office (now NSO)
- Office of the Economic Adviser (OEA)
- NITI Aayog
- Department of Industrial Policy and Promotion
Answer: Central Statistics Office (now NSO)
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.
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.
What is the primary objective of Open Market Operations (OMOs) conducted by the RBI?
- To regulate the stock market
- To manage durable liquidity in the banking system
- To fix the exchange rate of the Rupee
- To distribute government subsidies
Answer: To manage durable liquidity in the banking system
OMOs involve the outright sale or purchase of government securities by the RBI. Selling securities absorbs permanent (durable) liquidity from the market, while buying them injects liquidity. It is a primary tool for signaling the monetary policy stance over the medium term.
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.
The RBI acts as the 'Banker to the Government' by maintaining the current accounts of the Central and State Governments and managing their public debt.
- True
- False
Answer: True
As the government's banker, the RBI receives and makes payments on behalf of the government, facilitates the transfer of funds, and crucially, manages the issuance of new government bonds and treasury bills to finance the fiscal deficit.
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 money multiplier in an economy is directly proportional to the Cash Reserve Ratio (CRR) maintained by commercial banks.
- True
- False
Answer: False
The money multiplier is inversely related to the reserve ratio (including CRR). When banks are required to hold a higher percentage of deposits as reserves, they have less money available to lend out. This reduces the credit creation capacity of the banking system, thereby shrinking the overall money multiplier.
Which component is added to M1 to derive the broad money measure, M3?
- Savings deposits with post offices
- Time deposits (fixed deposits) with banks
- Currency held in bank vaults
- Inter-bank call money
Answer: Time deposits (fixed deposits) with banks
M3, widely used for monetary policy analysis, is calculated as M1 plus time deposits held by the public with banks. While time deposits are less liquid than demand deposits because they have a fixed maturity period, they still represent a significant store of purchasing power in the economy.