Static Quiz 04 March 2025 (Indian Economy)
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Static Quiz 04 March 2025 (Indian Economy) For UPSC Exam
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- Question 1 of 5
1. Question
Consider the following statements regarding GDP and GNP:
1. GDP includes income earned by residents abroad.
2. GNP is always greater than GDP for an open economy.
Which of the statements given above is/are correct?
CorrectCorrect Answer: (d) Neither 1 nor 2
Statement 1 is incorrect: GDP (Gross Domestic Product) measures the total value of goods and services produced within a country’s borders, irrespective of who produces it. It does not include income earned by residents abroad.
Statement 2 is incorrect: GNP (Gross National Product) = GDP + Net Factor Income from Abroad (NFIA). If NFIA is positive, GNP > GDP (e.g., India before liberalization). If NFIA is negative, GNP < GDP (e.g., India today due to high foreign investments). Thus, GNP is not always greater than GDP.
IncorrectCorrect Answer: (d) Neither 1 nor 2
Statement 1 is incorrect: GDP (Gross Domestic Product) measures the total value of goods and services produced within a country’s borders, irrespective of who produces it. It does not include income earned by residents abroad.
Statement 2 is incorrect: GNP (Gross National Product) = GDP + Net Factor Income from Abroad (NFIA). If NFIA is positive, GNP > GDP (e.g., India before liberalization). If NFIA is negative, GNP < GDP (e.g., India today due to high foreign investments). Thus, GNP is not always greater than GDP.
- Question 2 of 5
2. Question
Assertion (A): Headline inflation is a better measure of overall price rise than core inflation.
Reason (R): Headline inflation includes all goods and services, while core inflation excludes volatile components like food and fuel.
CorrectCorrect Answer: (a) Both A and R are true, and R is the correct explanation of A.
Headline Inflation includes all goods and services, making it a broader measure of inflation.
Core Inflation excludes food & fuel prices as they are volatile, making it a stable but incomplete indicator.
R correctly explains A because headline inflation provides a comprehensive view of price rise, even though core inflation helps understand underlying trends.
IncorrectCorrect Answer: (a) Both A and R are true, and R is the correct explanation of A.
Headline Inflation includes all goods and services, making it a broader measure of inflation.
Core Inflation excludes food & fuel prices as they are volatile, making it a stable but incomplete indicator.
R correctly explains A because headline inflation provides a comprehensive view of price rise, even though core inflation helps understand underlying trends.
- Question 3 of 5
3. Question
Match the terms in Column A with their correct definitions in Column B.
Column A:
A. Repo Rate
B. CRR (Cash Reserve Ratio)
C. SLR (Statutory Liquidity Ratio)
D. Reverse Repo RateColumn B:
1. Percentage of NDTL banks must keep in liquid assets
2. Interest rate at which RBI lends to commercial banks
3. Interest rate at which RBI borrows from commercial banks
4. Percentage of NDTL banks must keep with RBI as reserves
Select the correct matching code:
CorrectCorrect Answer: (a) A-2, B-4, C-1, D-3
Repo Rate (A-2): The rate at which RBI lends money to commercial banks.
CRR (B-4): The percentage of Net Demand and Time Liabilities (NDTL) that banks must keep with RBI as reserves.
SLR (C-1): The percentage of NDTL that banks must hold in liquid assets (cash, gold, etc.).
Reverse Repo Rate (D-3): The interest rate at which RBI borrows from commercial banks.
IncorrectCorrect Answer: (a) A-2, B-4, C-1, D-3
Repo Rate (A-2): The rate at which RBI lends money to commercial banks.
CRR (B-4): The percentage of Net Demand and Time Liabilities (NDTL) that banks must keep with RBI as reserves.
SLR (C-1): The percentage of NDTL that banks must hold in liquid assets (cash, gold, etc.).
Reverse Repo Rate (D-3): The interest rate at which RBI borrows from commercial banks.
- Question 4 of 5
4. Question
Which of the following are components of the Current Account in Balance of Payments (BoP)?
1. Trade in goods and services
2. Foreign Direct Investment (FDI)
3. Net income from abroad
4. Remittances from Indians abroad
Select the correct answer using the codes below:
CorrectCorrect Answer: (b) 1, 3, and 4 only
Trade in goods and services : Includes exports and imports of goods (merchandise trade) and services (IT services, tourism, etc.).
Foreign Direct Investment (FDI) : FDI is a long-term capital flow and belongs to the Capital Account, not the Current Account.
Net income from abroad : Includes salaries, interest, and dividends earned abroad and sent to the home country.
Remittances from Indians abroad : Money sent home by Indians working abroad (e.g., Gulf remittances).
IncorrectCorrect Answer: (b) 1, 3, and 4 only
Trade in goods and services : Includes exports and imports of goods (merchandise trade) and services (IT services, tourism, etc.).
Foreign Direct Investment (FDI) : FDI is a long-term capital flow and belongs to the Capital Account, not the Current Account.
Net income from abroad : Includes salaries, interest, and dividends earned abroad and sent to the home country.
Remittances from Indians abroad : Money sent home by Indians working abroad (e.g., Gulf remittances).
- Question 5 of 5
5. Question
Arrange the following economic policies in chronological order of their implementation in India:
1. Nationalization of Banks
2. LPG Reforms
3. Green Revolution
4. Introduction of GST
Select the correct order:
CorrectCorrect Answer: (b) 3 – 1 – 2 – 4
Green Revolution (1960s, mainly 1965-70): Introduced HYV seeds, irrigation, and fertilizers to increase agricultural productivity.
Nationalization of Banks (1969): Under Indira Gandhi’s government, 14 private banks were nationalized to increase financial inclusion.
LPG Reforms (1991): India adopted Liberalization, Privatization, and Globalization (LPG) due to the Balance of Payments crisis.
Introduction of GST (2017): Goods and Services Tax (GST) replaced multiple indirect taxes, creating a unified tax system.
Thus, the correct chronological order is:
Green Revolution (1960s) → Nationalization of Banks (1969) → LPG Reforms (1991) → GST (2017).IncorrectCorrect Answer: (b) 3 – 1 – 2 – 4
Green Revolution (1960s, mainly 1965-70): Introduced HYV seeds, irrigation, and fertilizers to increase agricultural productivity.
Nationalization of Banks (1969): Under Indira Gandhi’s government, 14 private banks were nationalized to increase financial inclusion.
LPG Reforms (1991): India adopted Liberalization, Privatization, and Globalization (LPG) due to the Balance of Payments crisis.
Introduction of GST (2017): Goods and Services Tax (GST) replaced multiple indirect taxes, creating a unified tax system.
Thus, the correct chronological order is:
Green Revolution (1960s) → Nationalization of Banks (1969) → LPG Reforms (1991) → GST (2017).
