Economics

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1.In the context of the 'credit channel' of monetary transmission, what is the primary effect of a higher policy rate on borrowers' balance sheets?

AIt improves borrowers' net worth
BIt reduces the value of existing collateral
CIt lowers the cost of external financing
DIt has no effect on borrowers' balance sheets

Explanation

Higher policy rates raise borrowing costs, which can depress asset prices and reduce the market value of collateral held by borrowers, thereby tightening credit conditions through the balance‑sheet channel.

2.In the context of Indian economic data, the term "circular flow of income" is useful because:

AIt demonstrates the inter‑dependence of households and firms through factor and product markets.
BIt explains why India's fiscal deficit is always higher than its trade deficit.
CIt shows how money supply directly determines GDP.
DIt provides a method to calculate PPP conversion factors.

Explanation

The circular flow model illustrates how income circulates between households (factors) and firms (goods/services), highlighting the link between production, income, and expenditure, a core concept for interpreting GDP data.

3.Which of the following best explains the term "Network Effects" in digital platforms?

AThe increase in platform value as the number of users on one side of the market grows, attracting more users on the other side.
BThe reduction in transaction costs due to improved logistics.
CThe rise in government revenue as more digital transactions are taxed.
DThe ability of a platform to switch from one technology stack to another.

Explanation

Network effects occur when each additional user makes the platform more valuable for other users, creating a positive feedback loop that can lead to market dominance.

4.In the context of India's 12th Five Year Plan (2012‑2017), the term ‘inclusive growth’ was operationalised through which of the following strategies?

AFocusing exclusively on high‑tech manufacturing
BExpanding the Mahatma Gandhi National Rural Employment Guarantee Scheme and increasing public investment in health, education and rural infrastructure
CReducing fiscal spending on social sectors to boost savings
DLiberalising foreign direct investment without any social safeguards

Explanation

The 12th Plan emphasized inclusive growth by strengthening MGNREGA, increasing public spending on health, education, rural roads, and sanitation, aiming to reduce regional and income disparities.

To ensure operational continuity during the proposed nationwide bank strike from September 28–30, 2026, which of the following measures were authorized?

Disbursement of September salaries and pensions on September 25 as "advance payments."
Mandatory opening of all Public Sector Banks (PSBs) and Regional Rural Banks (RRBs) on Sunday, September 27.
Special RBI approval for ATM-link branches and currency chests to remain fully operational on the holiday of September 27.

Which of the statements given above is/are correct?

A
1 only
B
2 and 3 only
C
1 and 3 only
D
1, 2, and 3

Explanation

This illustrates "administrative proactiveness." To prevent public distress during the strike (called by UFBU for a 5-day week), the government advanced salary disbursements. Crucially, Statement 3 is vital: the RBI granted specific approval for Sunday operations to ensure liquidity, highlighting the central bank's role as the lender of last resort and the guarantor of payment system continuity.

6.If the RBI raises the repo rate, the immediate effect on inflation is expected to be:

AIncrease, due to higher borrowing costs
BDecrease, as credit becomes more expensive
CNo change, as repo rate affects only exchange rates
DIncrease, because higher rates stimulate investment

Explanation

A higher repo rate makes borrowing costlier, reducing aggregate demand and thus putting downward pressure on inflation.

7.The "J‑curve" effect in trade economics refers to:

AAn initial deterioration of the trade balance after a currency depreciation, followed by an improvement
BA permanent improvement in the trade balance immediately after a depreciation
CA linear relationship between exchange rate and trade volume
DA situation where both exports and imports rise simultaneously after a depreciation

Explanation

The J‑curve describes the short‑run response of the trade balance: depreciation makes imports more expensive before export volumes adjust, worsening the balance, and later the balance improves as exports pick up.

8.According to the Reserve Bank of India's 2023 report, the share of digital payments in total retail payments (value) crossed:

A30%
B45%
C55%
D70%

Explanation

The RBI’s 2023 report indicated that digital payments accounted for about 55% of total retail payment value, reflecting rapid adoption of UPI, cards and mobile wallets.

The 'Gini Coefficient' is a measure used to assess:

A
Inflation rate
B
Income/wealth inequality
C
Unemployment rate
D
Fiscal deficit

Explanation

The Gini Coefficient (ranging 0 to 1) measures the degree of income or wealth inequality within a population, with 0 representing perfect equality and 1 representing maximum inequality.

10.

Consider the following statements about

measuring poverty in India:

I. Poverty estimates in India are based on sample

surveys of household consumer expenditure.

II. These surveys are conducted by the National

Sample Survey Organisation roughly every five years.

Which of the statements given above is/are correct?

A
I Only
B
II Only
C
Both I and II
D
Neither I nor II

Explanation

Both statements correctly describe how

poverty is measured in India. Statement I correctly

identifies that consumer expenditure surveys form the

basis of poverty estimation, and Statement II correctly

attributes this to the National Sample Survey

Organisation, conducted at roughly five-year intervals.

Option (a) and (b) wrongly exclude one correct

statement. Option (d) is wrong since both are

accurate.

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