Indian Economy- Part 2

Indian Economy

1. Which of the following best describes the concept of 'Crowding Out' in economics?

a) Government spending leading to increased private investment b) Government borrowing leading to reduced private sector borrowing c) Government policies encouraging foreign direct investment (FDI) d) Increase in private investment due to lower taxes

b) 'Crowding out' occurs when increased government borrowing leads to higher interest rates, which reduces private sector borrowing and investment. This happens because government borrowing can lead to higher demand for funds, pushing up interest rates.

2. In the context of the Indian economy, what is the 'Disinvestment Policy'?

a) Investment by the government in public sector enterprises b) Reducing the fiscal deficit by increasing taxes c) Selling or liquidating the shares of public sector enterprises d) Investing in foreign companies to boost foreign exchange reserves

c) The disinvestment policy involves the sale or liquidation of shares of public sector enterprises (PSEs) by the government, aiming to reduce the fiscal burden, increase efficiency, and promote private ownership.

3. What is 'Quantitative Easing' (QE) in the context of monetary policy?

a) Increasing interest rates to control inflation b) The central bank purchasing long-term securities to increase money supply c) Tightening the money supply to curb inflation d) A policy to reduce the fiscal deficit

b) Quantitative Easing (QE) is a monetary policy wherein a central bank buys long-term securities from the open market to increase the money supply and encourage lending and investment when conventional monetary policy is ineffective.

4. The 'Poverty Line' in India is primarily determined based on which criteria?

a) Income level relative to the national average b) Minimum level of consumption expenditure required to meet basic needs c) The average income of the bottom 50% of the population d) Income level required to purchase a specific bundle of luxury goods

b) The poverty line in India is determined by the minimum level of consumption expenditure needed to meet basic food and non-food requirements, including health, education, clothing, and housing.

5. Which of the following is an example of a 'Transfer Payment' in economics?

a) Salaries paid to government employees b) Taxes collected by the government c) Profits earned by private firms d) Unemployment benefits provided to citizens

d)Transfer payments are payments made by the government to individuals without any expectation of goods or services in return. Examples include unemployment benefits, social security, and pensions.

6. What is the primary purpose of implementing 'Anti-Dumping Duties'?

a) To promote exports by subsidizing local products b) To prevent dumping of foreign products at unfairly low prices c) To generate revenue for the government d) To support the currency exchange rate

b) Anti-dumping duties are tariffs imposed on foreign imports believed to be priced below fair market value. This protects domestic industries from unfair competition by foreign firms.

7. Which of the following indicators is used to measure 'Core Inflation'?

a) Consumer Price Index (CPI) including food and fuel prices b) Producer Price Index (PPI) c) Consumer Price Index (CPI) excluding food and fuel prices d) Wholesale Price Index (WPI) including all commodities

c) Core inflation measures the changes in the price level of goods and services, excluding food and energy prices, which are subject to volatile movements. It provides a clearer picture of long-term inflation trends.

8. What does the term 'Recessionary Gap' refer to in economics?

a) The difference between actual output and full employment output, when the economy is overheated b) The excess of aggregate demand over aggregate supply c) The difference between actual output and full employment output, when actual output is less d) The gap between private and public sector investment

c) The difference between actual output and full employment output, when actual output is less Explanation: A recessionary gap occurs when an economy's actual output is less than its potential output at full employment. This gap indicates underutilized resources, such as labor and capital, resulting in unemployment and lost economic output.

9. In the context of economic policies, what is 'Trickle-Down Economics'?

a) A policy that focuses on wealth redistribution to reduce inequality b) An economic theory that favors providing tax cuts to the wealthy and corporations, assuming that benefits will 'trickle down' to the poorer segments of society c) A strategy that focuses on increasing direct welfare benefits to the poor d) An approach that targets reducing government spending to control inflation

b) Trickle-Down Economics suggests that tax cuts for the wealthy and businesses stimulate investment in the economy, which ultimately benefits the broader population through job creation, higher wages, and increased economic activity.

10. What is 'Monetary Policy Transmission Mechanism'?

a) The process by which changes in the fiscal policy affect the economy b) The process by which monetary policy decisions are transmitted into changes in real economic variables like inflation and output c) The method used by central banks to print money d) he mechanism to control foreign exchange rates

b) The monetary policy transmission mechanism describes how policy actions by a central bank (such as altering the interest rates or changing reserve requirements) affect the real economy, including variables like inflation, consumption, investment, and output.

If any answer found wrong, Please comment.

---

© 2025 UnIQ Coaching. All rights reserved.