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Generate QuizEconomics – Medium Level – GK Questions
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When a worker is employed for fewer hours than they are capable of and willing to work, resulting in underutilization of their labor capacity, this specific condition is termed as ___ unemployment.
- Rules
- product
- public
- underemployment
Answer: underemployment
Underemployment is a severe issue in developing economies like India, often manifesting visibly in the gig economy or invisibly in agriculture (disguised unemployment). It means the economy is not generating enough full-time, productive jobs, leading to lower aggregate wages, reduced purchasing power, and wasted human capital potential.
The 'Income Distance' criterion used by the Finance Commission to distribute funds among states favors richer, more industrialized states over poorer, less developed states.
- True
- False
Answer: False
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.
Payments Banks, a new category of niche banks introduced by the RBI based on the Nachiket Mor Committee recommendations, can accept demand deposits but are strictly prohibited from undertaking any ___ activities.
- two
- lending (or credit)
- decrease (or reduce / lower)
- 1999
Answer: lending (or credit)
Payments Banks are designed to provide safe, secure, and widespread payment and remittance services to migrant laborers and low-income households. While they can accept deposits (up to a specified limit) and issue debit cards, they cannot issue credit cards or lend money directly. They must invest their mobilized deposits in safe government securities and SLR-eligible bonds.
Small Finance Banks (SFBs) in India are restricted from lending to large corporations and must ensure that at least 75% of their Adjusted Net Bank Credit (ANBC) is directed towards priority sector lending.
- True
- False
Answer: True
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 'Swabhiman' initiative, launched by the Government of India and the RBI, was primarily focused on:
- Providing free life insurance to all rural citizens
- Ensuring financial inclusion by extending banking facilities to unbanked rural habitations
- Digitizing all land records in rural India
- Providing interest-free loans to women self-help groups
Answer: Ensuring financial inclusion by extending banking facilities to unbanked rural habitations
Launched in 2010, the Swabhiman campaign aimed to provide basic banking services to habitations with a population above 2,000. It utilized the Business Correspondent (BC) model and ICT-based accounts to bring the unbanked rural population into the formal financial fold, laying the groundwork for later schemes like PMJDY.
The Mahalanobis Model, which formed the mathematical foundation of India's Second Five Year Plan (1956-61), prioritized the rapid development of the consumer goods and textile industries.
- True
- False
Answer: False
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.
According to the Law of ___ Utility, the additional satisfaction a consumer gains from consuming one more unit of a good decreases as the total consumption of that good increases.
- Diminishing Marginal
- Lewis
- 1965
- indirect
Answer: Diminishing Marginal
This fundamental law explains why demand curves slope downward. As a person consumes more units of a specific commodity (like glasses of water on a hot day), the urgency and satisfaction derived from each successive unit fall, eventually reaching zero (satiety) or even becoming negative if overconsumption occurs.
If the price elasticity of demand for a good is exactly equal to one (unitary elastic), a change in price will lead to a proportionate change in quantity demanded, leaving the seller's total revenue completely unchanged.
- True
- False
Answer: True
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.
Which of the following is a defining characteristic of 'Monopolistic Competition'?
- A single seller with absolute control over pricing
- A few large firms engaged in fierce strategic rivalry
- Many sellers offering differentiated but substitutable products
- Homogeneous products and perfect information
Answer: Many sellers offering differentiated but substitutable products
Monopolistic competition blends elements of both perfect competition and monopoly. There are many buyers and sellers (like restaurants or soap brands), but firms differentiate their products through branding, quality, or features. This product differentiation gives each firm a slight degree of monopoly power to set prices within a narrow range.
The 'Demographic Dividend' as defined by the UNFPA refers to the economic growth potential that can result from shifts in a population's age structure, mainly when the share of the ___ is larger than the share of the non-working age.
- Elderly population (above 60)
- Working-age population (15-59 years)
- Infant population (below 5 years)
- Urban population
Answer: Working-age population (15-59 years)
A demographic dividend occurs when the dependency ratio falls significantly because the working-age cohort expands relative to children and the elderly. However, this dividend is not automatic; it can only be reaped if the economy generates sufficient quality employment and invests heavily in the health and skill development of this workforce.
The 'JAM Trinity', which has been instrumental in the successful implementation of Direct Benefit Transfers (DBT) and reducing leakages in welfare schemes, stands for Jan Dhan, Aadhaar, and ___.
- technological
- low (or zero / no)
- Solow (or Solow-Swan)
- Mobile
Answer: Mobile
The JAM (Jan Dhan-Aadhaar-Mobile) number trinity links the beneficiary's bank account (Jan Dhan) with their unique biometric identity (Aadhaar) and their registered mobile number. This technological architecture ensures that government subsidies are transferred directly to the intended beneficiary's account, eliminating ghost beneficiaries and middlemen.
Under the WTO's Agreement on Agriculture (AoA), 'Amber Box' subsidies are considered minimally trade-distorting and are therefore permitted without any quantitative limits.
- True
- False
Answer: False
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 International Development Association (IDA), a member of the World Bank Group, primarily provides:
- Short-term balance of payments support to developed nations
- Concessional loans and grants to the world's poorest developing countries
- Political risk insurance to foreign direct investors
- Technical assistance for intellectual property rights enforcement
Answer: Concessional loans and grants to the world's poorest developing countries
While the IBRD lends to middle-income countries at market-linked rates, the IDA focuses exclusively on the poorest nations. It provides 'soft loans' (credits) with zero or very low interest rates and long grace periods, as well as outright grants, to fund projects that promote economic growth, reduce inequalities, and improve basic living conditions.
Which of the following transactions is recorded in the 'Capital Account' of India's Balance of Payments?
- Export of IT services to the USA
- Remittances sent by NRIs to their families in India
- Foreign Direct Investment (FDI) received by an Indian manufacturing firm
- Payment of interest on external commercial borrowings
Answer: Foreign Direct Investment (FDI) received by an Indian manufacturing firm
The Capital/Financial account records transactions that alter the asset or liability status of a country's residents or government. FDI, Foreign Institutional Investment (FII), and external borrowings represent capital flows that change ownership of assets or create long-term liabilities. Exports, imports, remittances, and interest payments belong to the Current Account.
The Balance of Payments (BOP) is a systematic record of all economic transactions between the residents of a reporting country and the rest of the world over a specific period, and it must always ___ in an accounting sense.
- Green
- balance (or sum to zero)
- collusion
- OPHI
Answer: balance (or sum to zero)
The BOP follows the double-entry bookkeeping system. Therefore, the sum of the Current Account, the Capital Account, and the Financial Account, along with changes in official foreign exchange reserves, must mathematically equal zero. A deficit in the current account must be perfectly offset by a surplus in the capital/financial accounts or by drawing down forex reserves.
Non-Banking Financial Companies (NBFCs) are regulated by the RBI and are allowed to participate in the payment and settlement system, enabling them to issue cheques drawn on themselves.
- True
- False
Answer: False
While NBFCs are indeed regulated by the RBI and perform bank-like functions such as lending and asset financing, they are fundamentally different from banks. They cannot accept demand deposits (savings/current accounts), do not form part of the payment and settlement system, and consequently, cannot issue cheques drawn on themselves.
Gilt-edged securities are high-yield, high-risk corporate bonds issued by emerging startups to raise venture capital.
- True
- False
Answer: False
The term 'gilt-edged' historically referred to the gilded edges of paper certificates issued by the government. Today, Gilt-edged securities represent the highest grade, safest debt instruments issued by the Central or State Governments (like Treasury Bills and Dated Securities). They carry virtually zero default risk, though they are subject to interest rate risk.
Which of the following statements about Commercial Papers (CPs) is correct?
- They are long-term, secured debt instruments issued by the government
- They are unsecured, short-term money market instruments issued by highly rated corporates
- They are issued exclusively by Regional Rural Banks to fund agricultural credit
- They carry a fixed coupon rate paid annually
Answer: They are unsecured, short-term money market instruments issued by highly rated corporates
Commercial Papers are unsecured promissory notes issued by large, creditworthy corporations and primary dealers to meet their short-term working capital requirements. Because they are unsecured, only entities with high credit ratings can issue them, and they are always issued at a discount to their face value, maturing within 7 days to 1 year.
In the Indian money market, funds borrowed for a period ranging from 2 days to 14 days are technically referred to as ___ money.
- notice
- rivalrous (or unregulated common)
- 1999
- 2011-12
Answer: notice
The inter-bank money market is highly segmented by maturity. 'Call money' refers to overnight borrowing (1 day) to meet immediate reserve requirements. 'Notice money' covers short-term borrowing from 2 to 14 days, where the borrower must give a short 'notice' before repaying the funds.
Which of the following sectors is NOT explicitly categorized under the Priority Sector Lending (PSL) guidelines issued by the RBI?
- Renewable Energy
- Micro, Small and Medium Enterprises (MSMEs)
- Real Estate development for luxury housing
- Social Infrastructure (Schools, Hospitals)
Answer: Real Estate development for luxury housing
Priority Sector Lending mandates banks to direct 40% of their credit to sectors vital for inclusive growth but which might otherwise struggle to secure formal finance. This includes agriculture, MSMEs, education, housing (up to specific affordable limits), and renewable energy. Luxury real estate is a commercial, profit-driven venture and is strictly excluded from PSL.