Economics – True/False – GK Questions

Udyam Registration was specifically designed to eliminate bureaucratic friction. It is a completely free, paperless, and self-declaration-based platform. It integrates seamlessly with the Income Tax and GSTN databases to automatically verify investment and turnover details, providing MSMEs with a permanent, dynamic identity without requiring them to visit any government office or submit physical proofs.

Green Bonds are identical to standard corporate or sovereign bonds in terms of their financial structure, but they carry a 'use of proceeds' covenant. Issuers must undergo rigorous third-party verification to ensure the raised capital is exclusively funding sustainable, eco-friendly projects, allowing environmentally conscious institutional investors to align their portfolios with global ESG (Environmental, Social, and Governance) goals.

Sweezy's model posits that if an oligopolist raises prices, rivals will keep their prices low to steal market share (highly elastic demand above the kink). If the firm cuts prices, rivals will immediately match the cut to avoid losing customers (inelastic demand below the kink). This creates a 'kink' at the prevailing price, making the marginal revenue curve discontinuous and rendering small cost shocks incapable of changing the market price.

Arthur Lewis theorized that developing economies have an unlimited supply of surplus labor in subsistence farming, allowing the industrial sector to keep wages artificially low and reap massive profits for reinvestment. The 'Lewis Turning Point' is the critical milestone where this labor surplus dries up. Beyond this point, wages must rise across the entire economy, marking the transition to a mature, developed economic structure.

Safeguard duties are not punitive measures against unfair trade practices like dumping or IP theft. Instead, they are emergency 'escape valves' applied on a Most-Favoured-Nation (MFN) basis against all importing countries when there is a sudden, massive, and unforeseen surge in imports that threatens to cause serious injury to the domestic industry, allowing them time to adjust.

The WTO strictly prohibits export subsidies because they are explicitly designed to distort global trade by artificially lowering the price of a country's goods in foreign markets, harming competitors in other nations. If a country is found guilty of providing a prohibited Red Light subsidy, it must withdraw it immediately, or the affected countries can impose retaliatory countervailing duties.

Tax buoyancy measures the automatic responsiveness of the tax system to economic expansion. A buoyancy of 1 means the tax-to-GDP ratio remains perfectly constant over time. A buoyancy greater than 1 indicates a highly progressive and efficient tax system where revenues grow faster than the economy, providing the government with increasing fiscal space without needing to hike tax rates.

Named after Russian economist Nikolai Kondratiev, these super-cycles suggest that capitalist economies experience prolonged periods of sectoral expansion followed by equally long periods of stagnation and correction. Each wave is fundamentally anchored to a paradigm-shifting technological revolution that completely restructures global production, infrastructure, and labor markets.

Because large NBFCs are deeply interconnected with commercial banks (borrowing heavily from them) and retail investors, the failure of a massive NBFC could collapse the credit market. Consequently, the RBI subjects these Systemically Important NBFCs to much stricter prudential norms, capital adequacy requirements, and liquidity coverage ratios, similar to those applied to commercial banks.

The GDP Deflator is actually a Paasche index because it uses the quantities of the current year as its weights, reflecting the actual basket of goods and services produced in that specific period. In contrast, the CPI is typically a Laspeyres index, which uses a fixed, historical base-year basket, which can lead to an overestimation of inflation due to the substitution bias.

Tier 2 capital is supplementary capital. In the event of a bank failure, Tier 1 capital absorbs losses first to keep the bank running (going-concern). If the bank is inevitably winding down (gone-concern), Tier 2 instruments are then written down or converted to equity to protect depositors and senior creditors from taking total losses.

Just as a Pigouvian tax corrects the overproduction of harmful goods (negative externalities), a Pigouvian subsidy corrects the underproduction of beneficial goods. Because the free market ignores the broader societal benefits of things like education or solar panels, the subsidy lowers the effective price, aligning private incentives with the socially optimal level of consumption.

The scheme recognizes the logistical challenges and higher cost of transporting construction materials to remote, difficult terrains. Therefore, the unit assistance is deliberately higher for beneficiaries in hilly states, difficult areas, and IAP districts (e.g., Rs. 1.30 lakh) compared to those in the plains (e.g., Rs. 1.20 lakh) to ensure the subsidy is practically sufficient to build a quality house.

The Doha Round was explicitly designed to prioritize the needs of developing countries, particularly regarding agricultural market access and the reduction of Western farm subsidies. However, it repeatedly stalled due to irreconcilable differences between developed nations (US/EU) and emerging economies (India/China) over the 'Special Safeguard Mechanism' and domestic support limits, effectively leaving the round in an indefinite deadlock.

Tax Buoyancy is a broader macroeconomic metric; if buoyancy is > 1, tax revenues are growing faster than the economy without any explicit policy changes (due to better compliance or progressive brackets). Tax Elasticity isolates the pure impact of a specific policy shift (like cutting the corporate tax rate) on revenue collection, holding GDP constant.

The SARFAESI Act strictly applies only to secured loans where a tangible asset has been pledged as collateral. It explicitly excludes unsecured loans (like credit card debt or personal loans) and, crucially, agricultural land. This exclusion protects the agrarian sector from predatory corporate lending practices and ensures that farmers' primary means of livelihood cannot be summarily seized by banks.

Indian agriculture has historically suffered from the imbalanced and excessive use of Urea (Nitrogen), degrading soil health. The Soil Health Card scheme tests soil samples every two years to map nutrient deficiencies (like Zinc, Boron, Potassium) and advises farmers on precise, site-specific nutrient applications, promoting sustainable farming and reducing the massive fertilizer subsidy burden.

The inclusion of the Chinese Yuan in 2016 was a landmark event, marking the first time a new currency was added to the SDR basket since the Euro's creation. It signaled the IMF's recognition of China's growing integration into the global financial system and its efforts to internationalize the Yuan, joining the USD, Euro, Yen, and Pound Sterling.

Unlike incremental budgeting, which assumes past expenditures are necessary, ZBB requires a rigorous cost-benefit analysis of all proposed programs, regardless of their historical funding. While theoretically highly efficient for eliminating wasteful, obsolete schemes, it is extremely resource-intensive and time-consuming, which is why it is rarely implemented in its purest form across entire national governments.

The Balanced Budget Multiplier is actually equal to 1. This means that if the government raises taxes by $100 and spends exactly $100, the national income will still increase by $100. This happens because the full $100 of government spending enters the economy directly, whereas the $100 tax hike only reduces consumption by a fraction of that amount (since part of the tax would have been saved anyway).