Indian Economy MCQs

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The process of laundering money generally involves three steps: placement, layering, and integration. Placement refers to injecting the “dirty money” into the legitimate financial system. Layering conceals the source of the money through a series of transactions and bookkeeping tricks. in Integration, the now-laundered money is withdrawn from the legitimate account to be used for desired purposes.

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Disinflation means the decrease in the rate of inflation. It is a slowdown in the rate of increase of price levels of goods and services. This is different from deflation, in the way that Disinflation is only a marginal and short term decrease in rate of inflation.

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A Giffen good is a low income, non-luxury product for which demand increases as the price increases and vice versa. A Giffen good has an upward-sloping demand curve which is contrary to the fundamental laws of demand which are based on a downward sloping demand curve.

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The correct answer is the International Monetary Fund (IMF). The World Economic Outlook Report is published biannually by the IMF, providing analysis and projections of the global economy. It includes data on economic growth, inflation, and other key indicators, helping policymakers and economists understand global economic trends. The IMF was established in 1944 and has 190 member countries, focusing on global monetary cooperation and financial stability.

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Deflation benefits salary earners because it increases the purchasing power of money. When prices fall, the real value of wages rises, allowing consumers to buy more with the same income. In contrast, pensioners may suffer if their fixed incomes do not adjust for deflation, equity holders may see asset values decline, and debtors face higher real debt burdens. Historically, deflation has been linked to economic downturns, such as the Great Depression, where falling prices led to reduced consumer spending.

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A “Hot card” in the context of credit cards in India refers to a “Lost Credit Card.” When a card is reported lost or stolen, it is immediately flagged as hot to prevent unauthorized transactions. This term is crucial for fraud prevention in the banking sector. In India, the Reserve Bank of India (RBI) mandates that banks must have robust systems to handle such cases efficiently.

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The correct answer is the Finance Commission. The Finance Commission is a constitutional body established under Article 280 of the Indian Constitution. Its primary role is to recommend the distribution of tax revenues between the central and state governments, ensuring fiscal federalism. It also lays down principles for grants-in-aid to states, addressing financial relations between different levels of government. The Finance Commission is constituted every five years, and its recommendations are crucial for maintaining balanced economic development across states.

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The National Payments Corporation of India is an umbrella organisation for operating retail payments and settlement systems in India. It is promoted by 10 banks.

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The Seed Crop Insurance (PSSCI) scheme was introduced in India in 2000. The scheme was a pilot program that provided financial security and income stability to seed growers in the event of crop failure. The scheme was introduced in 11 states.

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The Tobin tax, named after the economist James Tobin, was a proposal aimed specifically at taxing transactions of currency exchanges. Its primary goal was to curb short-term currency speculation, thereby stabilizing foreign exchange markets. Though it hasn’t been widely implemented, the concept has influenced many wider financial transaction taxes.