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Generate QuizEconomics – GK Questions
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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 'Tragedy of the Commons' describes a situation where individuals acting in their own self-interest deplete a shared, ___ resource.
- long
- rivalrous (or unregulated common)
- six
- Pigouvian
Answer: rivalrous (or unregulated common)
Coined by Garrett Hardin, this concept applies to common-pool resources like fisheries or grazing land, which are rivalrous (one's use reduces another's) but non-excludable. Without property rights or regulation, individuals overconsume, leading to the eventual destruction of the resource for everyone.
A 'Natural Monopoly' arises when high fixed costs and significant economies of scale make it most efficient for a single firm to supply the entire market.
- True
- False
Answer: True
Industries like water supply, electricity grids, and railways are natural monopolies because duplicating the massive infrastructure network for multiple competing firms would be wildly inefficient and costly. Therefore, they are typically either state-owned or heavily regulated by the government.
The 'Paradox of Thrift' states that if everyone tries to increase their savings simultaneously during a recession, the ultimate result will be:
- A massive increase in total national wealth
- A decrease in aggregate demand and total savings
- High economic growth
- Zero inflation
Answer: A decrease in aggregate demand and total savings
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 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.
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.
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 Office of the Economic Adviser (OEA), Ministry of Commerce and Industry, is responsible for compiling the Consumer Price Index (CPI).
- True
- False
Answer: False
The OEA compiles and publishes the Wholesale Price Index (WPI). The Consumer Price Index (CPI) is compiled by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI), while the Labour Bureau compiles CPI for specific industrial and agricultural workers.
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 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 Narasimham Committee (1998) is primarily associated with the comprehensive reform of the Indian banking sector, including prudential norms and asset classification.
- True
- False
Answer: True
The second Narasimham Committee laid the blueprint for strengthening the Indian banking system. It recommended tighter income recognition and provisioning norms, the reduction of the SLR and CRR, and the deregulation of interest rates to make Indian banks globally competitive.
Regional Rural Banks (RRBs) in India were established primarily on the recommendations of which committee?
- Narasimham Committee
- Rangarajan Committee
- Shivaraman Committee
- Urjit Patel Committee
Answer: Narasimham Committee
The Narasimham Working Group (1975) recommended the creation of RRBs to bridge the credit gap in rural areas. They operate with a local orientation and lower cost structure, with their equity jointly held by the Government of India (50%), the concerned State Government (15%), and the Sponsor Bank (35%).
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.
What is the specific sub-target for lending to the Agriculture sector under the Priority Sector Lending (PSL) guidelines for domestic banks?
- 10%
- 18%
- 25%
- 32%
Answer: 18%
Within the overall 40% PSL target, banks must allocate at least 18% of ANBC specifically to agriculture. Furthermore, 10% of ANBC must be directed towards small and marginal farmers, ensuring that the most vulnerable agrarian sections receive adequate institutional credit.
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.
Operation Twist is a monetary policy tool where the RBI simultaneously sells short-term securities and buys long-term securities to flatten the yield curve.
- True
- False
Answer: True
By buying long-term bonds, the RBI increases their price and lowers their yield (interest rate), making long-term borrowing cheaper for infrastructure and housing. Simultaneously selling short-term paper prevents excess overall liquidity from building up in the system.