Daily Static MCQs for UPSC & State PSC Exams - Economy (22 June 2023)

   

Daily Static MCQs Quiz for UPSC, IAS, UPPSC/UPPCS, MPPSC. BPSC, RPSC & All State PSC Exams

Subject : Economy

1. Which of the following factors can lead to cyclical slowdown in the Indian Economy?

1. Over-investment in capital assets and in inventory.
2. The production of final goods is not absorbed leading to lower prices and lower economic activity.
3. Changing demographics and change in consumer behaviour.

How many of the above statements are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (B)

Explanation:

  • Typically, a cyclical slowdown is caused by an excess of investment demand—over-investment in capital assets (residential and non-residential) and in inventory. The production of final goods generated by excess investment is not absorbed, leading to inventory reduction, lower prices, lower economic activity, and some loss in employment. When this is accompanied by excess debt, the cyclical slowdown can be prolonged or it may become structural.
  • A structural slowdown, on the other hand, is a more deep-rooted phenomenon that occurs due to a one-off shift from an existing paradigm. The changes, which last over a long-term, are driven by disruptive technologies, changing demographics, and/or change in consumer behaviour. Hence, option (b) is correct.

2. Consider the following statements:

1. The Reserve Bank of India (RBI) normally pays the dividend to the Central Government from the surplus income it earns on investments and valuation changes on its dollar holdings and the fees it gets from printing currency.
2. The Reserve Bank of India (RBI) has developed an Economic Capital Framework (ECF) for determining the allocation of funds to its capital reserves so that any risk contingency can be met.
3. The RBI can bank on the Contingency Fund in case of any emergency requirement.

How many of the above statements are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (C)

Explanation: The RBI normally pays the dividend from the surplus income it earns on investments and valuation changes on its dollar holdings and the fees it gets from printing currency, among others. The Reserve Bank of India (RBI) has developed an Economic Capital Framework (ECF) for determining the allocation of funds to its capital reserves so that any risk contingency can be met and as well as to transfer the profit of the RBI to the government. The RBI can bank on the Contingency Fund in case of any emergency requirement. Hence, all statements are correct.

3. Consider the following:

1. Microfinance institutions (MFIs) registered as NBFCs
2. Non-banking financial companies (NBFCs)
3. Scheduled commercial banks including small finance banks (SFBs).
4. Cooperative banks

In India, Microcredit is delivered through which of the following channels?

(a) Only one
(b) Only two
(c) Only three
(d) All four

Answer: (D)

Explanation: Microfinance is a form of financial service which provides small loans and other financial services to poor and low-income households. Microcredit is delivered through a variety of institutional channels viz., (i) scheduled commercial banks (SCBs) (including small finance banks (SFBs) and regional rural banks (RRBs)) lending both directly as well as through business correspondents (BCs) and self-help groups (SHGs), (ii) cooperative banks, (iii) non-banking financial companies (NBFCs), and (iv) microfinance institutions (MFIs) registered as NBFCs as well as in other forms. Hence, option (d) is correct.

4. A receipt is a capital receipt if it satisfies which of the following conditions?

1. The receipts must create a liability for the government.
2. The receipts must cause a decrease in the Government assets.

Which of the above statements is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (C)

Explanation: A receipt is a capital receipt if it satisfies any one of the two conditions:

  1. The receipts must create a liability for the government. For example, Borrowings are capital receipts as they lead to an increase in the liability of the government. However, tax received is not a capital receipt as it does not result in creation of any liability.
  2. The receipts must cause a decrease in the assets. For example, receipts from sale of shares of public enterprise are a capital receipt as it leads to reduction in assets of the government.

Hence, both statements are correct.

5. The term ‘Kostak rate’ sometimes seen in news, is related to which of the following?

(a) Capital Market
(b) Minimum Support Price (MSP)
(c) Initial Public Offer (IPO)
(d) Gross Domestic Product

Answer: (C)

Explanation: It relates to an IPO application. So, the rate at which an investor buys an IPO application before the listing is termed the Kostak rate. Hence, option (c) is correct.