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Generate QuizEconomics – GK Questions
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Under a Fractional Reserve Banking system, commercial banks are required to keep 100% of their customers' deposits as liquid reserves in their vaults or with the central bank, preventing them from creating new credit.
- True
- False
Answer: False
Fractional reserve banking is the exact opposite; banks are only required to hold a small 'fraction' of their total deposits as reserves (dictated by the CRR and SLR). They are legally permitted to lend out the remaining vast majority of the deposits to borrowers. This lending process creates new money in the economy through the 'money multiplier' effect, which is the foundational mechanism of modern credit creation and economic expansion.
What is the fundamental difference between 'Fiat Money' and 'Fiduciary Money'?
- Fiat money is backed by gold, while fiduciary money is backed by silver
- Fiat money derives its value from government decree, while fiduciary money relies on the trust and confidence between the transacting parties
- Fiat money is digital, while fiduciary money is strictly physical paper
- There is no difference; they are two terms for the exact same concept
Answer: Fiat money derives its value from government decree, while fiduciary money relies on the trust and confidence between the transacting parties
Fiat money (like modern currency notes) has no intrinsic value and is legally mandated as tender by the state. Fiduciary money, however, depends entirely on the mutual trust of the parties involved, without a strict legal mandate or commodity backing. Examples of fiduciary money include cheques, bank drafts, and promissory notes; they are accepted only because the receiver trusts the issuer's bank will honor the underlying value.
To avoid the problem of double counting while estimating National Income, economists only consider the value of ___ goods and services, completely ignoring the value of intermediate goods used in the production process.
- final
- India Debt Resolution Company Ltd (IDRCL)
- Mobile
- countervailing
Answer: final
Double counting occurs when the value of raw materials (like wheat) and the final product (like bread) are both added to the GDP, artificially inflating the national income. By strictly counting only 'final' goods—those purchased by the end consumer for direct consumption or investment—the economy accurately captures the total value created without duplicating the costs of intermediate inputs.
The 'Green GDP' attempts to adjust the conventional Gross Domestic Product by monetizing and subtracting the costs of environmental degradation, resource depletion, and ecological damage caused by economic activities.
- True
- False
Answer: True
Conventional GDP treats the extraction and sale of natural resources as pure income, ignoring the destruction of natural capital. Green GDP accounts for the 'bads' alongside the 'goods' by deducting the monetary value of pollution, deforestation, and loss of biodiversity. While conceptually superior for measuring sustainable development, it remains difficult to implement globally due to the complexities of accurately pricing ecological damage.
When calculating Gross Value Added (GVA) at basic prices, which of the following components is explicitly included, unlike in the older GDP at factor cost methodology?
- Net indirect taxes (Indirect taxes minus subsidies)
- Production taxes (like stamp duty and property tax) net of production subsidies
- Product taxes (like GST and excise duty) net of product subsidies
- Net factor income from abroad
Answer: Production taxes (like stamp duty and property tax) net of production subsidies
In 2015, India aligned its national accounts with the UN's System of National Accounts (SNA) 2008. It shifted from GDP at Factor Cost to GVA at Basic Prices. GVA at basic prices includes 'production taxes' (taxes paid irrespective of the volume of production, like land revenue or stamp duty) but excludes 'product taxes' (taxes proportional to output, like GST). This provides a purer measure of the producer's actual value addition.
The 'Deendayal Antyodaya Yojana - National Urban Livelihoods Mission' (DAY-NULM) focuses on reducing poverty among the urban poor by organizing them into Self-Help Groups (SHGs) and providing support for setting up ___ enterprises.
- Coase
- micro
- Paper Gold
- base
Answer: micro
While its rural counterpart (NRLM) operates in villages, DAY-NULM specifically targets the urban poor, including street vendors, ragpickers, and slum dwellers. It provides capital subsidies, skill training, and access to institutional credit to help them establish sustainable micro-enterprises, thereby facilitating their transition from informal, precarious daily-wage labor to stable, self-employed entrepreneurs.
The 'National Social Assistance Programme' (NSAP) is a centrally sponsored scheme that provides financial assistance to elderly persons, widows, and persons with disabilities in the form of social pensions, exclusively targeting households Below the Poverty Line (BPL).
- True
- False
Answer: True
NSAP represents a significant commitment to social security for the most vulnerable demographics who lack any other means of subsistence. It comprises schemes like the Indira Gandhi National Old Age Pension Scheme (IGNOAPS) and the National Family Benefit Scheme. Eligibility is strictly tied to the deprivation criteria defined by the government (historically BPL, now aligned with SECC parameters), ensuring the safety net reaches the absolute poorest.
Under the 'Atal Pension Yojana' (APY), which targets workers in the unorganized sector, what is the minimum age of entry and the guaranteed monthly pension range upon reaching the age of 60?
- 18-40 years; Rs. 1,000 to Rs. 5,000
- 21-50 years; Rs. 2,000 to Rs. 10,000
- 18-60 years; Rs. 500 to Rs. 2,000
- 25-45 years; Rs. 3,000 to Rs. 7,000
Answer: 18-40 years; Rs. 1,000 to Rs. 5,000
APY was launched to provide a social security net for the vast unorganized workforce, which lacks employer-sponsored pensions. Subscribers must join between the ages of 18 and 40 to ensure a minimum contribution period of 20 years. Upon turning 60, they are guaranteed a fixed monthly pension ranging from Rs. 1,000 to Rs. 5,000, depending on their chosen contribution tier.
The 'PM Gati Shakti' National Master Plan is a digital platform that integrates and coordinates the infrastructure planning and execution of ___ central ministries and state governments to avoid siloed working.
- Unfunded
- micro
- frictional
- 16
Answer: 16
Historically, infrastructure projects in India suffered from severe delays because ministries worked in silos (e.g., a road being dug up immediately after completion to lay optical fiber cables). Gati Shakti integrates the spatial data and plans of 16 key ministries (including Railways, Roadways, Petroleum, and Telecom) onto a single GIS-based digital platform, ensuring synchronized, multi-modal infrastructure development.
The 'National Logistics Policy' (NLP) launched in 2022 aims to reduce India's logistics costs, which are currently estimated to be around 13-14% of GDP, to single digits, making Indian goods globally competitive.
- True
- False
Answer: True
High logistics costs (driven by fragmented transport networks, complex regulatory check-posts, and poor warehousing) make Indian exports uncompetitive globally. The NLP, complemented by the PM Gati Shakti National Master Plan, seeks to create a trusted, seamless, and cost-efficient logistics ecosystem through digitization (like the Unified Logistics Interface Platform) and multi-modal connectivity, targeting a reduction in costs to match developed nations.
The 'UDAY' (Ujwal DISCOM Assurance Yojana) scheme was launched to address the chronic financial distress in the power sector. What was its primary mechanism?
- Privatizing all state-owned power generation plants
- Taking over 75% of the outstanding debt of State Power Distribution Companies (DISCOMs) by issuing state government bonds
- Providing free electricity to all agricultural consumers across India
- Banning the import of thermal coal to force reliance on solar energy
Answer: Taking over 75% of the outstanding debt of State Power Distribution Companies (DISCOMs) by issuing state government bonds
State DISCOMs were drowning in massive debt due to high Aggregate Technical & Commercial (AT&C) losses and the provision of heavily subsidized or free power. UDAY aimed to financially restructure them by having state governments take over their debt (which carries lower interest rates than private bank loans) in exchange for strict commitments to reduce power theft, improve operational efficiency, and align tariffs with actual costs.
The National Agricultural Cooperative Marketing Federation of India Ltd, commonly known as ___, is the apex body of cooperative marketing societies in India and plays a crucial role in price support operations for pulses and oilseeds.
- NAFED
- Lewis
- negative
- 3.5
Answer: NAFED
Established in 1958, NAFED acts as the central nodal agency for implementing the Price Support Scheme (PSS) under PM-AASHA. When market prices for pulses, oilseeds, and copra fall below the Minimum Support Price (MSP), NAFED steps in to procure these commodities directly from farmers, thereby protecting them from distress sales and ensuring food security buffer stocks.
The 'Pradhan Mantri Kisan Maan-Dhan Yojana' (PM-KMY) is a contributory pension scheme where the central government bears 100% of the premium cost, requiring no financial contribution from the small and marginal farmers.
- True
- False
Answer: False
PM-KMY is a co-contributory pension scheme. While the Central Government matches the farmer's contribution to the pension fund, the farmer is still required to make a nominal monthly contribution (ranging from Rs. 55 to Rs. 200 depending on their age of entry) until they reach the age of 60. This shared responsibility ensures active participation and financial discipline among the beneficiaries.
What is the primary objective of the 'Paramparagat Krishi Vikas Yojana' (PKVY) launched by the Government of India?
- To promote the use of high-yielding genetically modified seeds
- To provide subsidies for purchasing heavy farm machinery like combine harvesters
- To promote organic farming through the adoption of the organic village concept and cluster approach
- To construct massive concrete irrigation canals in arid regions
Answer: To promote organic farming through the adoption of the organic village concept and cluster approach
PKVY aims to shift Indian agriculture away from the heavy chemical dependence of the Green Revolution. It encourages farmers to form clusters and adopt traditional, organic farming practices. The scheme provides financial assistance for certification, marketing, and capacity building, ultimately aiming to improve soil health, reduce environmental degradation, and fetch premium prices for organic produce.
The Agricultural and Processed Food Products Export Development Authority (APEDA) was established by the Government of India to promote the export of agricultural products, and it functions under the administrative control of the Ministry of ___.
- Okun's
- High Powered (or Base / M0)
- Commerce and Industry
- 1998
Answer: Commerce and Industry
While domestic agriculture is handled by the Ministry of Agriculture, APEDA operates under the Ministry of Commerce and Industry because its primary mandate is export-oriented. It is responsible for setting standards, conducting market research, and providing financial assistance to exporters of fruits, vegetables, meat, poultry, and processed foods to enhance India's footprint in global agri-trade.
The concept of 'PURA' (Providing Urban Amenities to Rural Areas), which aimed to bridge the rural-urban divide by creating physical, electronic, and knowledge connectivity, was championed by Dr. A.P.J. Abdul Kalam.
- True
- False
Answer: True
Dr. Kalam envisioned PURA as a strategic solution to curb distress migration from villages to overcrowded cities. By establishing high-quality healthcare, education, and digital infrastructure in rural hubs, the model aimed to create local economic opportunities and transform rural landscapes into self-sustaining growth centers, a vision that later influenced schemes like the Shyama Prasad Mukherji Rurban Mission.
During the severe Balance of Payments crisis in 1991, India had to pledge its gold reserves to secure an emergency loan from the IMF. Where was this gold physically airlifted and pledged?
- Federal Reserve, New York
- Bank of England, London and Union Bank of Switzerland
- Bank for International Settlements, Basel
- World Bank Headquarters, Washington D.C.
Answer: Bank of England, London and Union Bank of Switzerland
In a defining moment of economic history, India airlifted 67 tonnes of gold to the Bank of England and the Union Bank of Switzerland in May-July 1991. This desperate measure secured a $600 million emergency loan from the IMF, preventing a sovereign default and setting the stage for the historic LPG (Liberalization, Privatization, Globalization) reforms spearheaded by Dr. Manmohan Singh.
The term 'Hindu Rate of Growth', coined by Professor Raj Krishna, was used to describe the slow and unimpressive annual growth rate of the Indian economy, which hovered around ___% during the pre-1980s era.
- 3.5
- John Maynard Keynes
- Rules
- Net Factor Income from Abroad (NFIA)
Answer: 3.5
The 'Hindu Rate of Growth' referred to the sluggish 3.5% average annual GDP growth India experienced from the 1950s to the 1980s. Because the population was growing at roughly 2% per year, the per capita income growth was a mere 1.5%. The term was used critically to highlight the failure of the highly regulated, state-controlled 'License Raj' to generate rapid economic prosperity.
The 'Rolling Plan' concept in India, introduced by the Janata Party government in 1978, completely abandoned the idea of fixed five-year targets in favor of an annually reviewed and continuously extended plan.
- True
- False
Answer: True
The Rolling Plan was designed to provide flexibility and adapt to changing economic realities, avoiding the rigidities of a fixed five-year horizon. It involved three parallel plans: an annual plan, a fixed five-year plan, and a perspective 15-year plan. However, it was short-lived and was discarded when the Congress party returned to power in 1980, reverting to the traditional Five-Year Plan model.
The 'Gadgil-Mukherjee Formula', historically used by the Planning Commission to determine the allocation of central plan assistance to states, primarily gave the highest weightage to which criterion?
- Population of the state
- Per capita income and fiscal discipline
- Geographical area and forest cover
- Industrial output and tax effort
Answer: Population of the state
The Gadgil-Mukherjee formula was the cornerstone of federal resource distribution during the Planning Commission era. It assigned a massive 60% weightage to the state's population (based on the 1971 census) to ensure that resources flowed to states with the highest absolute number of people needing development, while the remaining weight was distributed among per capita income, fiscal management, and special problems.