True/False – GK Questions

Even if the receiving state uses the funds to build a highway, from the perspective of the Central Government's accounting, Grants-in-Aid are classified as 'Revenue Expenditure.' This is because these grants do not result in the creation of any physical or financial assets for the Centre, nor do they reduce any of the Centre's liabilities; they are simply unconditional or conditional transfers of current income.

The Base Effect is a purely mathematical and statistical phenomenon related to the year-on-year comparison of price indices. If the price index in the corresponding month of the previous year (the base) was unusually low due to a temporary shock, the current year's inflation rate will mathematically appear exceptionally high, even if current prices are rising at a normal, steady pace. It has nothing to do with current repo rate actions.

Fractional reserve banking is the exact opposite; banks are only required to hold a small 'fraction' of their total deposits as reserves (dictated by the CRR and SLR). They are legally permitted to lend out the remaining vast majority of the deposits to borrowers. This lending process creates new money in the economy through the 'money multiplier' effect, which is the foundational mechanism of modern credit creation and economic expansion.

Conventional GDP treats the extraction and sale of natural resources as pure income, ignoring the destruction of natural capital. Green GDP accounts for the 'bads' alongside the 'goods' by deducting the monetary value of pollution, deforestation, and loss of biodiversity. While conceptually superior for measuring sustainable development, it remains difficult to implement globally due to the complexities of accurately pricing ecological damage.

NSAP represents a significant commitment to social security for the most vulnerable demographics who lack any other means of subsistence. It comprises schemes like the Indira Gandhi National Old Age Pension Scheme (IGNOAPS) and the National Family Benefit Scheme. Eligibility is strictly tied to the deprivation criteria defined by the government (historically BPL, now aligned with SECC parameters), ensuring the safety net reaches the absolute poorest.

High logistics costs (driven by fragmented transport networks, complex regulatory check-posts, and poor warehousing) make Indian exports uncompetitive globally. The NLP, complemented by the PM Gati Shakti National Master Plan, seeks to create a trusted, seamless, and cost-efficient logistics ecosystem through digitization (like the Unified Logistics Interface Platform) and multi-modal connectivity, targeting a reduction in costs to match developed nations.

PM-KMY is a co-contributory pension scheme. While the Central Government matches the farmer's contribution to the pension fund, the farmer is still required to make a nominal monthly contribution (ranging from Rs. 55 to Rs. 200 depending on their age of entry) until they reach the age of 60. This shared responsibility ensures active participation and financial discipline among the beneficiaries.

Dr. Kalam envisioned PURA as a strategic solution to curb distress migration from villages to overcrowded cities. By establishing high-quality healthcare, education, and digital infrastructure in rural hubs, the model aimed to create local economic opportunities and transform rural landscapes into self-sustaining growth centers, a vision that later influenced schemes like the Shyama Prasad Mukherji Rurban Mission.

The Rolling Plan was designed to provide flexibility and adapt to changing economic realities, avoiding the rigidities of a fixed five-year horizon. It involved three parallel plans: an annual plan, a fixed five-year plan, and a perspective 15-year plan. However, it was short-lived and was discarded when the Congress party returned to power in 1980, reverting to the traditional Five-Year Plan model.

Automatic stabilizers are built-in, non-discretionary features of the tax and welfare system that operate automatically without any new legislative action. For example, during a recession, corporate profits and incomes fall, causing tax revenues to automatically drop, while unemployment claims rise, causing welfare spending to automatically increase. This naturally injects demand into the economy, softening the blow of the recession.

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.