- The concept of ‘Trickle-down theory’ is associated with –
(A) Welfare economics
(B) Keynesian economics
(C) Classical economics
(D) Supply-side economics
Answer: (D)
Explanation: Trickle-down theory, part of supply-side economics, posits that tax cuts for the wealthy or businesses stimulate investment, benefiting the broader economy. In India, corporate tax reductions aim to boost growth, though critics question their impact on inequality. - In India, the largest source of non-tax revenue is –
(A) Interest receipts
(B) Dividends and profits
(C) External grants
(D) Fees and penalties
Answer: (B)
Explanation: Dividends and profits from public sector enterprises, like ONGC, are India’s largest non-tax revenue source, contributing significantly to government funds, unlike interest or grants, which are smaller. - Which of the following is not a qualitative tool of credit control by RBI?
(A) Marginal requirements
(B) Moral suasion
(C) Credit rationing
(D) Repo rate
Answer: (D)
Explanation: Qualitative tools, like marginal requirements or moral suasion, target specific credit sectors in India. Repo rate, a quantitative tool, affects overall money supply, not specific lending. - When marginal propensity to consume (MPC) is 0.8, the multiplier is –
(A) 2
(B) 4
(C) 5
(D) 8
Answer: (C)
Explanation: The multiplier is calculated as 1/(1-MPC) = 1/(1-0.8) = 1/0.2 = 5. In India, a high MPC like 0.8 amplifies government spending’s impact on GDP, boosting demand. - National Rural Employment Guarantee Scheme was renamed after –
(A) Mahatma Gandhi
(B) Jawaharlal Nehru
(C) Sardar Patel
(D) Indira Gandhi
Answer: (A)
Explanation: The National Rural Employment Guarantee Scheme, enacted in 2005, was renamed MGNREGA after Mahatma Gandhi, emphasizing rural job creation for 100 days annually. - The term ‘liquidity trap’ is associated with –
(A) High inflation and low growth
(B) Very low interest rate and ineffective monetary policy
(C) Excess liquidity in banking system
(D) None of the above
Answer: (B)
Explanation: A liquidity trap occurs when low interest rates fail to stimulate demand, as people hoard cash. In India, post-2008 low rates showed limited impact, rendering RBI’s policy less effective. - Which of the following would not be included in India’s national income?
(A) Commission earned by a broker
(B) Rent received by landlord
(C) Sale of old car
(D) Salary of government employee
Answer: (C)
Explanation: National income includes new production, like broker commissions or salaries. Selling an old car is a transfer of existing assets, excluded from India’s GDP calculations. - The investment multiplier is zero when –
(A) MPC = 0
(B) MPC = 1
(C) MPS = 0
(D) None of these
Answer: (A)
Explanation: The multiplier is 1/(1-MPC). If MPC = 0, no additional consumption occurs, making the multiplier 1/(1-0) = 1, but effectively zero in impact, as no further spending is induced in India. - The currency notes are issued in India under –
(A) Minimum Reserve System
(B) Maximum Reserve System
(C) Proportional Reserve System
(D) Fixed Fiduciary System
Answer: (A)
Explanation: India’s currency notes are issued under the Minimum Reserve System, requiring RBI to hold minimal gold and forex reserves, ensuring flexibility in money supply management. - The ‘Law of Diminishing Returns’ applies in the field of –
(A) Consumption
(B) Production
(C) Exchange
(D) Distribution
Answer: (B)
Explanation: The Law of Diminishing Returns states that adding more of one input (e.g., labor) in production, like Indian farming, reduces marginal output after a point, unlike consumption or exchange. - ‘Poverty Gap’ refers to –
(A) Difference between rural and urban poverty
(B) Difference between actual income and poverty line
(C) Unemployment difference
(D) Economic disparity among rich and poor
Answer: (B)
Explanation: Poverty gap measures the shortfall between actual income and the poverty line, showing poverty depth. In India, it quantifies the income needed to lift the poor above the threshold. - Who determines the methodology for measuring poverty in India?
(A) Ministry of Rural Development
(B) NITI Aayog
(C) Reserve Bank of India
(D) Planning Commission / Expert Committee
Answer: (D)
Explanation: Expert committees, historically under the Planning Commission (now via NITI Aayog), set poverty measurement methods, like Tendulkar or Rangarajan norms, not RBI or ministries. - HDI was first introduced by –
(A) Amartya Sen
(B) Adam Smith
(C) Mahbub ul Haq
(D) J. M. Keynes
Answer: (C)
Explanation: Mahbub ul Haq introduced the Human Development Index in 1990, measuring education, health, and income. India’s HDI improvements reflect better schooling and life expectancy. - Which Five-Year Plan was called a “Gadgil Yojana”?
(A) Third
(B) Fourth
(C) Fifth
(D) Second
Answer: (B)
Explanation: The Fourth Five-Year Plan (1969–74), named Gadgil Yojana after D.R. Gadgil, emphasized growth with social justice, focusing on poverty alleviation in India. - In the budget, the deficit which includes revenue deficit and capital expenditure is called –
(A) Fiscal Deficit
(B) Budgetary Deficit
(C) Revenue Deficit
(D) Monetized Deficit
Answer: (A)
Explanation: Fiscal deficit, total expenditure minus non-borrowed receipts, includes revenue and capital deficits. In India, it reflects borrowing needs for schemes like infrastructure. - Which of the following is a non-debt capital receipt?
(A) Disinvestment
(B) Market borrowing
(C) Treasury bills
(D) Ways and Means Advances
Answer: (A)
Explanation: Disinvestment, like selling PSU stakes in India, is a non-debt capital receipt, raising funds without borrowing, unlike market loans or treasury bills. - The term “Twin Balance Sheet Problem” refers to –
(A) NPAs and twin budget deficits
(B) Public and private sector loss
(C) Bank and corporate sector stress
(D) Fiscal deficit and current account deficit
Answer: (C)
Explanation: The Twin Balance Sheet Problem describes stressed corporate debts and bank NPAs in India, as seen post-2014, impacting lending, unlike fiscal or current account issues. - The concept of ‘Demographic Dividend’ is related to –
(A) Aging population
(B) Growing population
(C) Working-age population
(D) Child labor
Answer: (C)
Explanation: Demographic dividend refers to a rising working-age population boosting growth. India’s young workforce drives economic potential, unlike aging or child labor scenarios. - Which of the following is not included in ‘Make in India’ priority sectors?
(A) Automobiles
(B) Defence
(C) Tourism
(D) Education
Answer: (D)
Explanation: Make in India promotes sectors like automobiles and defence for manufacturing growth. Education, while critical, is not a priority sector under this initiative. - Which of the following is an indirect tax?
(A) Income tax
(B) Wealth tax
(C) Corporate tax
(D) Excise duty
Answer: (D)
Explanation: Excise duty, levied on goods’ production in India, is an indirect tax passed to consumers, unlike direct taxes like income or corporate tax. - The ‘Operation Green’ was launched to address the price volatility of –
(A) Fruits
(B) Milk
(C) Tomato, Onion, Potato
(D) Cereals
Answer: (C)
Explanation: Operation Green stabilizes prices of tomatoes, onions, and potatoes in India, ensuring farmer incomes and consumer affordability, unlike fruits or cereals broadly. - India’s first integrated goods and services tax was implemented on –
(A) July 1, 2015
(B) January 1, 2016
(C) July 1, 2017
(D) August 15, 2018
Answer: (C)
Explanation: GST, unifying India’s indirect taxes, was implemented on July 1, 2017, streamlining taxation across goods and services, replacing earlier systems. - What is meant by ‘crowding out’ effect?
(A) Public investment reducing private sector spending
(B) Private investment reducing government spending
(C) Public borrowing reducing private investment
(D) Public subsidies reducing private profits
Answer: (C)
Explanation: Crowding out occurs when government borrowing raises interest rates, reducing private investment. In India, heavy public borrowing can limit corporate access to funds. - The unemployment type when people are willing to work but are not getting jobs is –
(A) Frictional
(B) Structural
(C) Voluntary
(D) Involuntary
Answer: (D)
Explanation: Involuntary unemployment occurs when willing workers can’t find jobs at prevailing wages, common in India during economic slowdowns, unlike frictional or voluntary types. - In economics, “devaluation” refers to –
(A) Rise in currency value
(B) Reduction in value of currency by government
(C) Appreciation in exchange rate
(D) None of the above
Answer: (B)
Explanation: Devaluation is a government-led reduction in currency value, as India did in 1991, boosting exports by making them cheaper, unlike market-driven appreciation. - Which of the following index is used to measure consumer price inflation in India?
(A) WPI
(B) CPI-IW
(C) CPI Combined
(D) GDP Deflator
Answer: (C)
Explanation: CPI Combined measures consumer price inflation in India, guiding RBI’s 4% inflation target, covering urban and rural baskets, unlike WPI or CPI-IW (industrial workers). - Which of the following promotes gender budgeting in India?
(A) Ministry of Finance
(B) NITI Aayog
(C) Ministry of Women and Child Development
(D) RBI
Answer: (C)
Explanation: The Ministry of Women and Child Development promotes gender budgeting in India, ensuring policies address women’s needs, unlike finance or RBI’s broader roles. - A rise in interest rate leads to –
(A) Increase in investment
(B) Decrease in savings
(C) Decrease in investment
(D) Rise in consumption
Answer: (C)
Explanation: Higher interest rates raise borrowing costs, reducing investment in India, as firms cut back on projects, unlike effects on savings or consumption. - Kisan Credit Card scheme was launched in –
(A) 1990
(B) 1998
(C) 2001
(D) 2005
Answer: (B)
Explanation: The Kisan Credit Card scheme, launched in 1998, provides farmers with affordable credit for agricultural needs, enhancing productivity in rural India. - When GDP is adjusted for inflation, it is known as –
(A) Nominal GDP
(B) Real GDP
(C) GDP at market prices
(D) GDP deflator
Answer: (B)
Explanation: Real GDP adjusts nominal GDP for inflation, using a base year (e.g., 2011–12 in India), reflecting true output growth, unlike market prices or deflator. - The unemployment seen during off-season in agriculture is –
(A) Disguised
(B) Frictional
(C) Seasonal
(D) Structural
Answer: (C)
Explanation: Seasonal unemployment occurs in Indian agriculture during off-seasons, like post-harvest periods, when labor demand drops, unlike disguised or structural types. - Which index ranks countries by ease of starting business?
(A) Global Competitiveness Index
(B) Ease of Doing Business Index
(C) Human Capital Index
(D) Business Climate Index
Answer: (B)
Explanation: The World Bank’s Ease of Doing Business Index ranks countries, including India, on starting a business, guiding reforms to attract investment, unlike other indices. - Who prepares India’s balance of payments data?
(A) Ministry of Commerce
(B) RBI
(C) NITI Aayog
(D) Ministry of Finance
Answer: (B)
Explanation: RBI compiles India’s balance of payments data, tracking trade, FDI, and remittances, ensuring external sector stability, unlike commerce or finance roles. - The term ‘Hot Money’ refers to –
(A) Tax haven deposits
(B) FDI in infrastructure
(C) FII inflows and outflows
(D) Investment in bullion
Answer: (C)
Explanation: Hot money refers to short-term FII flows, like stock market investments in India, which can exit quickly, affecting rupee stability, unlike FDI or bullion. - A reduction in tax rates to boost demand is part of –
(A) Supply-side policy
(B) Fiscal contraction
(C) Expansionary fiscal policy
(D) Deflationary monetary policy
Answer: (C)
Explanation: Tax rate cuts, as seen in India’s budget, are expansionary fiscal policy, boosting demand by increasing disposable income, unlike supply-side or monetary policies. - Pradhan Mantri Awas Yojana focuses on –
(A) Rural electrification
(B) Affordable housing
(C) Urban employment
(D) Financial inclusion
Answer: (B)
Explanation: PMAY, launched in 2015, aims to provide affordable housing in India, targeting urban and rural poor, unlike electrification or financial inclusion schemes. - The base year for CPI inflation is –
(A) 2004–05
(B) 2011–12
(C) 2012
(D) 2015
Answer: (C)
Explanation: The base year for CPI inflation in India is 2012, used to measure consumer price changes, guiding RBI’s inflation targeting, unlike other base years. - A budget is said to be balanced when –
(A) Total expenditure = total receipts
(B) Revenue receipts = capital expenditure
(C) Total tax = total subsidy
(D) None of these
Answer: (A)
Explanation: A balanced budget occurs when total expenditure equals total receipts, rare in India due to borrowing needs, unlike mismatched revenue or subsidy equations. - India is called a mixed economy because –
(A) Both agriculture and industry are developed
(B) Public and private sectors coexist
(C) It promotes exports and imports
(D) It has rural and urban sectors
Answer: (B)
Explanation: India’s mixed economy features coexisting public (e.g., SAIL) and private (e.g., Reliance) sectors, balancing market and state roles, unlike trade or sectoral divides. - A fall in price of substitute good leads to –
(A) Increase in demand
(B) Decrease in demand
(C) Increase in supply
(D) No change in demand
Answer: (B)
Explanation: A cheaper substitute, like tea over coffee in India, reduces demand for the original good, shifting its demand curve left, unlike supply or unchanged demand. - Gini coefficient measures –
(A) Population growth
(B) Employment
(C) Income inequality
(D) Poverty gap
Answer: (C)
Explanation: The Gini coefficient quantifies income inequality, with higher values indicating greater disparity. In India, it highlights urban-rural income gaps, unlike poverty gap measures. - The law of demand shows –
(A) Inverse relation between price and demand
(B) Positive relation between price and supply
(C) Constant demand with price change
(D) Positive relation between demand and income
Answer: (A)
Explanation: The law of demand states that higher prices reduce quantity demanded, as seen in India’s markets for goods like vegetables, unlike supply or income effects. - What does the Engel curve show?
(A) Relationship between demand and price
(B) Relationship between income and demand
(C) Relation between saving and income
(D) Relation between tax and GDP
Answer: (B)
Explanation: The Engel curve shows how demand for goods changes with income. In India, higher income increases demand for cars, reflecting positive income elasticity. - When marginal utility becomes zero, total utility is –
(A) Maximum
(B) Minimum
(C) Zero
(D) Constant
Answer: (A)
Explanation: When marginal utility is zero, total utility peaks, as additional consumption adds no satisfaction. In India, eating more food beyond satisfaction illustrates this. - Which of the following is not a function of RBI?
(A) Issuer of currency
(B) Banker to government
(C) Controller of credit
(D) Collection of taxes
Answer: (D)
Explanation: RBI issues currency, acts as government banker, and controls credit, but tax collection is handled by the Income Tax Department in India, not RBI. - Budget is presented in Parliament by –
(A) Prime Minister
(B) Finance Minister
(C) RBI Governor
(D) President
Answer: (B)
Explanation: The Finance Minister presents India’s Union Budget in Parliament, outlining fiscal plans, unlike the Prime Minister or RBI Governor’s roles. - The Finance Commission is constituted every –
(A) 3 years
(B) 5 years
(C) 10 years
(D) Annually
Answer: (B)
Explanation: The Finance Commission, formed every five years, recommends tax-sharing between Centre and states in India, ensuring fiscal federalism, unlike annual or decadal cycles. - The concept of zero-based budgeting was first adopted in India during –
(A) 6th Five-Year Plan
(B) 5th Five-Year Plan
(C) 7th Five-Year Plan
(D) 8th Five-Year Plan
Answer: (A)
Explanation: Zero-based budgeting, requiring justification of all expenses, was adopted during the 6th Five-Year Plan (1980–85) in India, enhancing fiscal efficiency. - The institution that manages India’s public debt is –
(A) Ministry of Finance
(B) RBI
(C) SEBI
(D) SBI
Answer: (B)
Explanation: RBI manages India’s public debt, issuing bonds and handling repayments, ensuring fiscal stability, unlike SEBI’s market or SBI’s commercial roles. - The SEZ Act was passed in –
(A) 2002
(B) 2003
(C) 2005
(D) 2006
Answer: (C)
Explanation: The Special Economic Zones Act, passed in 2005, promotes export-oriented units in India, offering tax incentives, boosting trade and investment.