Correct Answer: B) Fiscal consolidation
Explanation: Fiscal consolidation involves policies aimed at reducing government deficits and debt through spending cuts or increased taxation.
A) Decrease the money supply
B) Increase the money supply
C) Stabilize the money supply
D) Not affect the money supply
Correct Answer: A) Decrease the money supply
Explanation: Increasing the repo rate makes borrowing more expensive for banks, thus reducing the money supply in the economy.
A) Fiscal expansion
B) Fiscal consolidation
C) Deficit financing
D) Capital adequacy
Correct Answer: B) Fiscal consolidation
Explanation: Fiscal consolidation involves policies aimed at reducing government deficits and debt through spending cuts or increased taxation.
A) Monopoly
B) Oligopoly
C) Perfect competition
D) Monopolistic competition
Correct Answer: A) Monopoly
Explanation: A monopoly exists when a single seller controls the entire market for a product or service, with no close substitutes.
A) Central Board of Direct Taxes
B) Central Board of Indirect Taxes and Customs
C) Reserve Bank of India
D) State Governments
Correct Answer: A) Central Board of Direct Taxes
Explanation: The Central Board of Direct Taxes is responsible for the administration of direct taxes like income tax and wealth tax in India.
A) Marginal cost
B) Total cost
C) Average cost
D) Opportunity cost
Correct Answer: A) Marginal cost
Explanation: Marginal cost is the cost of producing one more unit of a good, considering the cost of resources used in the production.
A) Monopolistic competition
B) Oligopoly
C) Monopoly
D) Perfect competition
Correct Answer: D) Perfect competition
Explanation: Perfect competition is a market structure where many firms offer a homogeneous product.
A) Trade surplus
B) Balanced budget
C) Budget deficit
D) Trade deficit
Correct Answer: C) Budget deficit
Explanation: A budget deficit occurs when expenses exceed revenue, indicating that the government is spending more than it earns.
A) Protect domestic industries
B) Enhance environmental protection
C) Promote rapid economic growth
D) Increase agricultural output
Correct Answer: C) Promote rapid economic growth
Explanation: SEZs are established to promote rapid economic growth by leveraging tax incentives to attract investors and businesses.
A) Generate substantial revenue for banks
B) Indicate financial health of banks
C) Reflect the economic growth of a country
D) Show efficient management of a bank
Correct Answer: B) Indicate financial health of banks
Explanation: Non-performing assets are important as they indicate the level of risk and financial health of banks regarding defaulted loans that are not bringing in any interest income.
A) Bull run
B) Bear hug
C) Market correction
D) Market crash
Correct Answer: D) Market crash
Explanation: A market crash is a sudden, dramatic decline of stock prices across a significant cross-section of a stock market, resulting in a significant loss of paper wealth.
A) Capital rationing
B) Fiscal swapping
C) Open market operations
D) Debt anchoring
Correct Answer: C) Open market operations
Explanation: Open market operations involve the buying and selling of government securities in the open market to regulate the liquidity and money supply in the economy.
A) The stiffness of the economy
B) The sensitivity of one variable to changes in another
C) The duration of long-term economic policies
D) The resistance to changes in fiscal policy
Correct Answer: B) The sensitivity of one variable to changes in another
Explanation: Elasticity in economics measures how one economic variable responds to changes in another, such as the change in quantity demanded in response to a price change.
A) Consumer income levels
B) Production costs
C) Prices of related goods
D) Consumer preferences
Correct Answer: B) Production costs
Explanation: Production costs are a determinant of supply, not demand. Demand is influenced by factors such as consumer income, prices of related goods, and consumer preferences.
A) Political stability
B) Stock market performance
C) A basket of goods
D) Gold reserves
Correct Answer: C) A basket of goods
Explanation: Purchasing Power Parity (PPP) is an economic theory that compares different countries’ currencies through a “basket of goods” approach to determine the relative value of the currencies.
A) Relationship between tax rates and government revenue
B) Impact of technological innovation on productivity
C) Correlation between unemployment rates and workforce skill levels
D) Effect of education on economic growth
Correct Answer: A) Relationship between tax rates and government revenue
Explanation: The Laffer Curve illustrates the relationship between tax rates and the amount of tax revenue collected by governments, showing that increasing tax rates beyond a certain point is counter-productive.
A) Investment in machinery and technology
B) The value of a company’s employee base
C) Investments in education, training, and health
D) The total market value of all physical assets
Correct Answer: C) Investments in education, training, and health
Explanation: Human capital refers to the economic value of a worker’s experience and skills, including education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality.
A) Increasing per-unit costs with increased production
B) Decreasing per-unit costs with increased production
C) Stable per-unit costs regardless of production levels
D) Variable costs proportionate to sales
Correct Answer: B) Decreasing per-unit costs with increased production
Explanation: Economies of scale occur when a company’s production increases, leading to lower per-unit costs.
A) The market does not allocate resources efficiently on its own
B) All producers in the market suffer from heavy losses
C) The stock market crashes unexpectedly
D) Foreign markets dominate the local market
Correct Answer: A) The market does not allocate resources efficiently on its own
Explanation: Market failure occurs when the allocation of goods and services by a free market is not efficient, often justifying government intervention.
A) Capital infusion
B) Fiscal injection
C) Deficit financing
D) Sterilization
Correct Answer: D) Sterilization
Explanation: Sterilization is an economic policy used to counter the effects on interest rates and exchange rates due to the central bank engaging in open-market operations to counteract effects of balance of payments fluctuations.
A) Recession
B) Depression
C) Stagnation
D) Contraction
Correct Answer: B) Depression
Explanation: A depression is a severe and prolonged downturn in economic activity, typically featuring significant declines in the GDP and widespread unemployment.
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