True/False – GK Questions

Tier 1 capital represents the highest quality of capital because it is fully available to absorb losses without the bank being required to cease operations. It includes common equity, retained earnings, and certain disclosed reserves. In contrast, Tier 2 capital (supplementary capital like subordinated debt) is less secure and only absorbs losses on a 'gone-concern' (liquidation) basis.

Unlike the UN General Assembly, the IMF operates on a weighted voting system based on a country's financial quota, which reflects its relative size in the global economy. Consequently, advanced economies like the US and EU nations hold disproportionate voting power, while the US effectively holds veto power over major structural decisions that require an 85% supermajority.

Launched in July 2020, Udyam Registration replaced the older Udyog Aadhaar system. It is completely free, requires no document uploads (relying instead on PAN and GSTIN integration for automatic data fetching), and provides MSMEs with a permanent, verifiable identity that allows them to easily access priority sector credit, government subsidies, and delayed payment protections.

This problem is rooted in asymmetric information and misaligned incentives. Because shareholders (principals) cannot perfectly monitor the daily actions of the CEO (agent), the CEO might pursue empire-building, excessive perks, or short-term stock bumps that harm long-term company value. Corporate governance mechanisms, stock options, and audits are designed to mitigate this agency cost.

Unlike standard external commercial borrowings (ECBs) where an Indian company borrows in USD and bears the risk of Rupee depreciation, Masala Bonds are issued and redeemed strictly in Indian Rupees. If the Rupee depreciates against the dollar, the foreign investor absorbs the loss, making it a highly effective hedging tool for Indian corporate borrowers.

The National Treatment principle mandates the exact opposite: once foreign goods have cleared customs and entered the domestic market, they must be treated no less favorably than identical domestically produced goods. This means the government cannot impose internal taxes, regulations, or standards on imports that discriminate against them in favor of local products.

Automatic stabilizers are built-in features of the tax and transfer system that operate without any new legislative action. During a recession, tax revenues automatically fall (due to lower incomes) and welfare spending automatically rises (due to higher unemployment claims), naturally injecting demand into the economy. Conversely, they cool down an overheating economy without requiring active government intervention.

The National MPI, modeled after the Global MPI, deliberately moves away from purely income-based metrics. Instead, it assesses deprivations across three equally weighted dimensions: Health (nutrition, child mortality), Education (years of schooling, attendance), and Standard of Living (cooking fuel, sanitation, drinking water, electricity, housing, and assets).

CBAM is a landmark climate policy that forces importers to buy certificates corresponding to the carbon price they would have paid if the goods were produced under EU carbon pricing rules. It aims to prevent 'carbon leakage'—where EU companies move production to countries with lax climate laws—and forces global trading partners like India to decarbonize their export sectors.

The NIP is a massive, multi-year investment plan aimed at boosting economic growth and creating jobs. It comprehensively includes traditional economic assets like highways, railways, and power plants, but crucially also integrates social infrastructure like affordable housing, urban water supply, and healthcare facilities, recognizing their equal importance for holistic development.

The proliferation of private cryptocurrencies poses risks to monetary policy transmission, financial stability, and capital flight. By offering a safe, sovereign-backed digital alternative that leverages modern payment technologies, the central bank can satisfy public demand for digital assets while retaining control over the money supply and the domestic payment ecosystem.

Coined in the mid-2010s, the Twin Balance Sheet problem severely stalled private investment and credit growth in India. Corporates were burdened with heavy debt from past infrastructure booms and could not invest further, while banks, choked by bad loans from these same corporates, became risk-averse and stopped lending, creating a severe macroeconomic bottleneck.

The Velocity of Money is a macroeconomic metric that measures the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a specific time period. A high velocity indicates a booming, active economy where money changes hands rapidly, while a low velocity suggests hoarding and economic stagnation.

The Income Distance criterion is designed to promote equity and reduce regional disparities. It measures the distance of a state's per capita income from the state with the highest per capita income. Therefore, poorer states with a larger 'distance' receive a higher weightage and a larger share of funds to help them catch up with the richer states.

SFBs were conceptualized specifically to further financial inclusion by supplying credit to small business units, small and marginal farmers, micro and small industries, and unorganized sector entities. To ensure they stay true to this mandate, the RBI imposes a stringent 75% Priority Sector Lending target, which is significantly higher than the 40% mandated for universal commercial banks.

The Mahalanobis strategy actually prioritized the rapid development of the capital goods and heavy industries (like steel, machinery, and power). The logic was that building a strong domestic capital goods base would eventually enable the mass production of consumer goods, ensuring long-term self-reliance and industrialization, albeit at the cost of short-term consumer shortages.

Total Revenue is calculated as Price multiplied by Quantity. When demand is unitary elastic, a 10% increase in price causes exactly a 10% drop in quantity demanded. The mathematical effects perfectly cancel each other out, meaning the total revenue generated by the seller remains at its maximum, constant level regardless of price movements.

ICOR measures the additional unit of capital required to produce one additional unit of output. Therefore, a low ICOR signifies high efficiency, advanced technology, and good infrastructure. Conversely, a high ICOR indicates inefficiency, structural bottlenecks, and poor capital utilization, meaning massive investments yield relatively little economic growth.

The WTO categorizes agricultural subsidies into colored boxes. 'Amber Box' subsidies (like Minimum Support Price linked to production) are considered highly trade-distorting and are subject to strict reduction commitments and limits (the 'de minimis' ceiling). It is the 'Green Box' subsidies (like general research or decoupled income support) that are permitted without limits.

The reverse is true. NEER is simply an unadjusted, weighted average of a country's currency relative to a basket of its major trading partners' currencies. REER adjusts the NEER for the inflation differentials between the home country and its trading partners, making REER the true measure of a nation's export competitiveness in global markets.