Indian Economy MCQs

Notes:
Core Inflation is the rate of inflation calculated to exclude certain items that are subject to sudden and short-lived price movements, mainly food and energy. Core inflation is considered a better indicator of overall long-term than un-adjusted headline inflation.

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The Fourth Five-year plan was implemented during 1969 to 1974 in India. The plan has twin objectives of “Growth with stability” and “progressive achievement of self-reliance”. It focused on the growth rate of Agriculture.

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From Budget 2017-18 onward, the Government of India did away with the Plan and Non-Plan classification of expenditure. The budget now uses the more standard and meaningful classification into Revenue expenditure and Capital expenditure, which better reflects the nature of government spending.

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A commercial bank’s liabilities include deposits received from customers, such as demand deposits and time deposits, as well as borrowings from other banks or institutions. Security holdings are not liabilities; they appear on the asset side of the bank’s balance sheet because they represent investments made by the bank. Therefore, among the given options, security holdings is the item that is not treated as a liability of a commercial bank.

Notes:
Commercial banks are called creators of money because when they sanction loans, they credit the borrower’s account with a fresh deposit. This creates new bank money and increases the money supply. In modern economies, bank lending is an important source of deposit creation, while cash reserves and existing deposits are not simply transferred from one person to another. The key point is that lending by commercial banks expands deposits through the banking system.

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The Marrakesh Agreement, manifested by the Marrakesh Declaration, was an agreement signed in Marrakesh, Morocco, by 123 nations on 15 April 1994, marking the culmination of the 8-year-long Uruguay Round and establishing the World Trade Organization, which officially came into being on 1 January 1995.

Notes:
Chetan Bhagat worked as an investment banker at Goldman Sachs and Deutsche Bank in Hong Kong for about 11 years. He graduated from IIT Delhi in 1995 and IIM Ahmedabad in 1997. Bhagat wrote his first novel, Five Point Someone, while still an investment banker. He left banking after publishing his third novel in 2008.

Notes:
The Balance of Payments (BoP) records all economic transactions between residents and the rest of the world. Items 1 (Balance of Trade), 2 (Foreign Direct Investments), 3 (Foreign Portfolio Investments), 4 (Foreign Aid), and 5 (Foreign Tourist Expenditures) are included in BoP. Item 6 (Domestic Tourism Expenditures) involves only domestic money flow and is not recorded in BoP.

Notes:
In case of High-income elasticity of demand, an increase in income is accompanied by a relatively larger increase in quantity demanded for normal goods. Thus, among the given options Car has highest income elasticity of demand.

• Car: A luxury good with high income elasticity; demand rises sharply with an increase in income.
• Milk: A necessity good with low to moderate income elasticity.
• Paddy: A basic necessity and staple food, with very low income elasticity.
• Tobacco: Considered an addictive good with low or even negative income elasticity in some cases, as demand is less income-sensitive.

Notes:
Current Assets minus Current Liabilities is known as working capital.