Economics – True/False – GK Questions

The PLI scheme is specifically designed to incentivize incremental sales from goods manufactured in domestic units over a defined base year. This output-oriented approach ensures that government funds reward actual production and market success, encouraging companies to scale up manufacturing and integrate into global value chains.

While the FDI limit in the defense sector was raised to 100%, the automatic route is only permitted up to 74%. Any FDI beyond 74% (up to 100%) requires prior approval from the Government of India through the Department for Promotion of Industry and Internal Trade (DPIIT), primarily on national security grounds.

The Yellow Revolution was initiated in the late 1980s, spearheaded by Sam Pitroda, to achieve self-sufficiency in edible oils. Through the Technology Mission on Oilseeds (TMO), it successfully introduced high-yielding varieties and improved farming practices, significantly boosting the domestic production of oilseeds like mustard, groundnut, and sunflower.

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.

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.

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.

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.

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.

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 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.

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.

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.

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.

Fiat money, such as modern paper currency, has zero intrinsic value and is not backed by any physical commodity like gold or silver. Its value derives entirely from government decree (fiat) and the public's trust that it will be accepted as a medium of exchange for goods and taxes.

The reverse is true. The Harrod-Domar model posits that economic growth depends heavily on the national savings rate and the capital-output ratio, assuming fixed technology. The Solow-Swan model introduced exogenous technological progress as the critical factor for sustaining long-term per capita growth beyond mere capital accumulation.

The PLI scheme is specifically designed to reward incremental sales from goods manufactured within domestic borders over a defined base year. It aims to boost domestic manufacturing, attract foreign direct investment, and integrate Indian firms into global supply chains by making them globally competitive.

The reverse is true. Adverse selection happens before the transaction (e.g., high-risk individuals are more likely to buy insurance). Moral hazard occurs after the transaction, when one party changes their behavior and takes more risks because they are protected from the consequences (e.g., driving recklessly after buying full-coverage insurance).

The free-rider problem occurs with public goods, where individuals have no incentive to pay for the good because they can consume it without paying, relying on others to foot the bill. This leads to the under-provision of the good by the free market, necessitating government intervention and taxation.

The MFN principle actually requires non-discrimination; if a WTO member grants a special trade favor (like a lower tariff) to one country, it must immediately extend the exact same favor to all other WTO members. Exceptions exist only for Free Trade Agreements or special concessions for developing nations.

While NEER measures the weighted average of a currency relative to a basket of others, REER adjusts this for relative inflation rates. REER is a superior indicator of a country's actual trade competitiveness, as high domestic inflation can erode the benefits of a nominally depreciated currency.