Part 3: Advanced Macroeconomics and Indian Economy

Previous Part 1 is Here

Intermediate Level (Q.201 - Q.250):

The term "business cycle" refers to:

a) The ups and downs in the stock market

b) Fluctuations in aggregate economic activity around its long-term growth trend

c) The seasonal variations in production

d) The process of launching new businesses

Answer: (b)
The four phases of a business cycle are typically:

a) Expansion, Boom, Recession, Depression

b) Peak, Contraction, Trough, Expansion

c) Growth, Stagnation, Decline, Recovery

d) Inflation, Deflation, Stagflation, Disinflation

Answer: (b)
During a recession, which of the following is most likely to occur?

a) Increase in employment

b) Increase in inflation

c) Decrease in GDP

d) Increase in investment

Answer: (c)
Okun's Law describes the inverse relationship between:

a) Inflation and interest rates

b) Unemployment and real GDP growth

c) Money supply and price level

d) Consumption and savings

Answer: (b)
The concept of "potential GDP" refers to the:

a) Maximum GDP an economy has ever achieved

b) GDP that would be produced if all resources were fully and efficiently employed

c) GDP predicted by economic models

d) GDP after adjusting for inflation

Answer: (b)
The output gap is the difference between:

a) Nominal GDP and Real GDP

b) Actual GDP and Potential GDP

c) GDP at market price and GDP at factor cost

d) Gross National Product and Net National Product

Answer: (b)
An "inflationary gap" occurs when:

a) Actual GDP is below potential GDP

b) Actual GDP is above potential GDP

c) There is deflation in the economy

d) Unemployment is very high

Answer: (b)
A "recessionary gap" (or deflationary gap) occurs when:

a) Actual GDP is above potential GDP

b) Actual GDP is below potential GDP

c) There is hyperinflation in the economy

d) Employment is at its peak

Answer: (b)
The "Great Depression" of the 1930s is often cited as a key event that led to the development of:

a) Classical economics

b) Supply-side economics

c) Keynesian economics

d) Monetarism

Answer: (c)
The IS-LM model is used in macroeconomics to represent the interaction between:

a) Goods market and labor market

b) Goods market and money market

c) Money market and foreign exchange market

d) Labor market and capital market

Answer: (b)
The IS curve represents equilibrium in the:

a) Money market

b) Goods market

c) Labor market

d) Foreign exchange market

Answer: (b)
The LM curve represents equilibrium in the:

a) Goods market

b) Labor market

c) Money market

d) Foreign exchange market

Answer: (c)
In the IS-LM model, an increase in government spending shifts the IS curve to the:

a) Left

b) Right

c) No change

d) Upwards along the curve

Answer: (b)
In the IS-LM model, an increase in the money supply shifts the LM curve to the:

a) Left

b) Right

c) No change

d) Downwards along the curve

Answer: (b)
The concept of "sticky wages" and "sticky prices" is central to which macroeconomic school of thought?

a) Classical economics

b) New classical economics

c) Keynesian economics

d) Supply-side economics

Answer: (c)
The Solow Growth Model explains economic growth based on:

a) Only technological progress

b) Capital accumulation, labor growth, and technological progress

c) Government spending and taxation

d) Money supply and interest rates

Answer: (b)
Endogenous growth theory emphasizes the role of ______ in driving long-run economic growth.

a) Exogenous technological shocks

b) Factors within the economic system such as human capital, innovation, and knowledge accumulation

c) Foreign aid

d) Natural resource endowments

Answer: (b)
The Kuznets curve suggests that as an economy develops, income inequality first ______ and then ______.

a) Decreases, increases

b) Increases, decreases

c) Remains constant, increases

d) Increases, remains constant

Answer: (b)
The concept of "financial repression" refers to:

a) Policies that encourage financial innovation

b) Government policies that suppress the financial sector to channel funds to the government or favored industries

c) Excessive regulation of financial markets

d) A financial crisis leading to a credit crunch

Answer: (b)
Capital flight refers to:

a) Investment in new capital goods within a country

b) The large-scale outflow of financial assets and capital from a country due to political or economic instability

c) Government bonds issued in foreign markets

d) The process of attracting foreign direct investment

Answer: (b)
The concept of "Dutch Disease" describes a situation where:

a) A country experiences rapid economic growth due to sound macroeconomic policies

b) The discovery or exploitation of natural resources leads to the decline of other sectors of the economy

c) A country faces a severe financial crisis

d) High inflation leads to currency depreciation

Answer: (b)
What is the current policy framework for monetary policy in India?

a) Flexible inflation targeting

b) Fixed exchange rate targeting

c) Money supply targeting

d) Interest rate targeting

Answer: (a)
The Monetary Policy Committee (MPC) in India consists of how many members?

a) 3

b) 5

c) 6

d) 7

Answer: (c)
Who chairs the Monetary Policy Committee (MPC) in India?

a) Union Finance Minister

b) Governor of RBI

c) Chief Economic Advisor

d) Secretary, Ministry of Finance

Answer: (b)
The primary objective of the Monetary Policy Committee (MPC) is to maintain inflation within a target range, with a medium-term target of ______ percent.

a) 2

b) 4

c) 6

d) 8

Answer: (b)
What is the current Goods and Services Tax (GST) regime in India?

a) Dual GST (Central GST and State GST)

b) Single national GST

c) Origin-based GST

d) Destination-based GST

Answer: (a) and (d) - GST in India is a dual GST based on the destination principle. For SSC CGL, "Dual GST" is often the most direct answer, but understanding the destination principle is crucial.
Which of the following is NOT a component of the current account in the Balance of Payments?

a) Trade in goods

b) Trade in services

c) Income (e.g., remittances, interest, dividends)

d) Foreign direct investment

Answer: (d)
Which of the following is a component of the capital account in the Balance of Payments?

a) Remittances

b) External commercial borrowings

c) Tourism revenue

d) Interest payments on foreign loans

Answer: (b)
The concept of "Hot Money" refers to:

a) Investments in the real estate sector

b) Short-term capital flows that respond quickly to changes in interest rates or exchange rates

c) Long-term foreign direct investment

d) Black money (undeclared income)

Answer: (b)
The 'twin balance sheet problem' in India refers to:

a) High debt in both government and corporate sectors

b) High Non-Performing Assets (NPAs) in banks and highly indebted corporate sector

c) Discrepancies between national income and expenditure

d) Dual accounting standards in public and private sectors

Answer: (b)
What is the primary objective of the Insolvency and Bankruptcy Code (IBC) in India?

a) To facilitate quick liquidation of healthy companies

b) To streamline and expedite the resolution process for insolvent companies

c) To provide debt relief to individuals only

d) To regulate financial markets

Answer: (b)
The "Make in India" initiative primarily aims to:

a) Increase agricultural exports

b) Promote foreign direct investment in manufacturing and boost domestic production

c) Develop the service sector

d) Reduce trade deficits through import restrictions

Answer: (b)
The "Start-up India" initiative aims to:

a) Promote large-scale industries

b) Foster entrepreneurship and innovation, and create a robust ecosystem for start-ups

c) Encourage public sector undertakings

d) Provide financial assistance for traditional businesses

Answer: (b)
"Digital India" is a program to transform India into a digitally empowered society and knowledge economy by focusing on:

a) Only e-commerce

b) Digital infrastructure, digital delivery of services, and digital literacy

c) Only IT exports

d) Promoting social media usage

Answer: (b)
"Pradhan Mantri Jan-Dhan Yojana (PMJDY)" aims at:

a) Providing housing for the poor

b) Financial inclusion by providing access to financial services like banking, savings, deposit accounts, remittances, credit, insurance, and pension.

c) Providing health insurance to the rural population

d) Promoting digital payments only

Answer: (b)
The "Goods and Services Tax (Compensation to States) Act, 2017" provides for compensation to states for loss of revenue arising on account of implementation of GST for a period of:

a) 3 years

b) 5 years

c) 7 years

d) 10 years

Answer: (b)
The term "demographic dividend" in economics refers to:

a) A period when a country has a declining population

b) A period when a country's population structure is favorable for economic growth, with a high proportion of working-age people

c) A situation where the birth rate equals the death rate

d) The decline in population due to emigration

Answer: (b)
The "economic survey" in India is presented to the Parliament by the:

a) Reserve Bank of India

b) NITI Aayog

c) Ministry of Finance

d) Prime Minister's Office

Answer: (c)
Which of the following is NOT a component of the M3 money supply in India?

a) Currency with the public

b) Demand deposits with banks

c) Time deposits with banks

d) Deposits with post office savings banks

Answer: (d)
The "base effect" in inflation calculation refers to:

a) The impact of government policies on inflation

b) The effect of the previous year's inflation rate on the current year's calculation

c) The influence of global prices on domestic inflation

d) The impact of changes in interest rates on price levels

Answer: (b)
The concept of "fiscal federalism" deals with:

a) The division of powers between the central and state governments

b) The distribution of financial powers and responsibilities between different levels of government

c) The decentralization of political authority

d) The role of federal banks in the economy

Answer: (b)
The "minimum support price (MSP)" in India is announced by the government to:

a) Ensure high profits for farmers

b) Protect farmers from excessive price falls and encourage production

c) Control food inflation

d) Reduce government subsidies

Answer: (b)
Which institution calculates the Wholesale Price Index (WPI) in India?

a) Central Statistical Office (CSO)

b) National Sample Survey Office (NSSO)

c) Office of Economic Adviser, Ministry of Commerce & Industry

d) Reserve Bank of India (RBI)

Answer: (c)
Which institution calculates the Consumer Price Index (CPI) in India?

a) Office of Economic Adviser, Ministry of Commerce & Industry

b) Central Statistical Office (CSO) now National Statistical Office (NSO)

c) Reserve Bank of India (RBI)

d) NITI Aayog

Answer: (b)
What is "open market operations" (OMO) by the RBI mainly used for?

a) Controlling foreign exchange rates

b) Managing government debt

c) Managing liquidity and influencing interest rates in the economy

d) Providing direct loans to industries

Answer: (c)
The "moral suasion" tool of monetary policy involves:

a) Direct financial incentives to banks

b) The central bank advising, urging, and appealing to commercial banks to cooperate with its monetary policy

c) Legal compulsion for banks to follow rules

d) Imposing penalties on banks

Answer: (b)
The concept of "financial literacy" refers to:

a) The ability to read and write financial reports

b) The knowledge and skills to make informed financial decisions

c) The regulation of financial institutions

d) The study of financial markets

Answer: (b)
Priority Sector Lending (PSL) in India is a directive by the RBI to banks to lend a certain proportion of their credit to:

a) Large industries only

b) Sectors considered important for the basic needs of the economy and weaker sections

c) Export-oriented units only

d) Foreign companies investing in India

Answer: (b)
The "financial inclusion" index in India is released by:

a) Ministry of Finance

b) NITI Aayog

c) Reserve Bank of India (RBI)

d) SEBI

Answer: (c)
The "Index of Industrial Production (IIP)" measures:

a) The growth of the agricultural sector

b) The general level of prices in the industrial sector

c) The growth of output in different industrial sectors

d) The level of employment in industries

Answer: (c)

Advanced Level (Q.251 - Q.300):

Which of the following is considered a leading indicator of economic activity?

a) GDP

b) Unemployment rate

c) Stock market prices

d) Inflation rate

Answer: (c)
Which of the following is considered a lagging indicator of economic activity?

a) New building permits

b) Consumer confidence index

c) Unemployment rate

d) Manufacturing new orders

Answer: (c)
The "shadow economy" (or black economy) refers to:

a) Economic activities that are untaxed and unregulated

b) The part of the economy controlled by foreign companies

c) The informal sector of the economy which is recorded

d) Industries operating at night

Answer: (a)
The concept of "transfer payments" refers to:

a) Payments for goods and services

b) Payments made by the government to individuals or firms without any direct exchange of goods or services

c) Payments made by consumers to producers

d) International trade payments

Answer: (b)
Examples of transfer payments include:

a) Salaries and wages

b) Social security benefits and unemployment benefits

c) Interest on loans

d) Rent payments

Answer: (b)
What is "portfolio investment" in the context of international finance?

a) Direct investment in physical assets like factories

b) Investment in financial assets such as stocks and bonds, without gaining managerial control

c) Loans provided by international organizations

d) Investment in real estate abroad

Answer: (b)
The concept of "dumping" in international trade refers to:

a) Exporting goods at a price higher than their domestic price

b) Exporting goods at a price lower than their domestic price or cost of production

c) Importing goods at a very low price

d) Bartering goods without currency exchange

Answer: (b)
The "Terms of Trade" refer to the ratio of:

a) A country's imports to its exports

b) A country's export prices to its import prices

c) A country's GDP to its national income

d) A country's balance of trade to its balance of payments

Answer: (b)
A favorable terms of trade implies that a country can:

a) Export more goods for the same amount of imports

b) Import more goods for the same amount of exports

c) Face a trade deficit

d) Experience a currency depreciation

Answer: (b)
The "tariff-rate quota" system combines features of:

a) Quotas and subsidies

b) Tariffs and quotas

c) Free trade and protectionism

d) Exports and imports

Answer: (b)
What is the primary role of the Securities and Exchange Board of India (SEBI)?

a) To regulate the banking sector

b) To regulate the insurance sector

c) To regulate the Indian capital and securities market

d) To regulate foreign exchange markets

Answer: (c)
The concept of "capital adequacy ratio (CAR)" in banking is related to:

a) The minimum amount of capital that banks must hold as a percentage of their risk-weighted assets

b) The maximum amount of loans banks can provide

c) The interest rates on savings accounts

d) The ratio of a bank's deposits to its withdrawals

Answer: (a)
"Basel III" norms are international regulatory frameworks that deal with:

a) Environmental protection in banking

b) Capital adequacy, stress testing, and market liquidity risk for banks

c) Trade agreements between countries

d) Fiscal policy recommendations for governments

Answer: (b)
The term "Non-Performing Asset (NPA)" in banking refers to:

a) An asset that is generating very high returns

b) A loan or advance for which the principal or interest payment remained overdue for a period of 90 days

c) A bank's investment in government securities

d) Cash reserves held by a bank

Answer: (b)
"Recapitalization of Public Sector Banks" by the government aims to:

a) Reduce their lending capacity

b) Provide them with additional capital to strengthen their balance sheets and support credit growth

c) Facilitate their privatization

d) Increase their interest rates

Answer: (b)
The "Financial Stability and Development Council (FSDC)" in India is chaired by the:

a) Prime Minister

b) Governor of RBI

c) Union Finance Minister

d) Chief Economic Advisor

Answer: (c)
The "Financial Sector Legislative Reforms Commission (FSLRC)" in India aimed at:

a) Regulating only the banking sector

b) Reforming the entire legal framework of the Indian financial sector

c) Promoting financial inclusion

d) Restructuring public sector banks

Answer: (b)
The concept of "Inclusive Growth" in India emphasizes:

a) Growth that benefits only the urban elite

b) Growth that takes into account equity, poverty reduction, and environmental sustainability

c) Growth achieved through rapid industrialization

d) Growth based solely on foreign investment

Answer: (b)
"NREGA" is a major step towards achieving which of the following Sustainable Development Goals (SDGs)?

a) Quality Education

b) Zero Hunger

c) Decent Work and Economic Growth

d) Good Health and Well-being

Answer: (c)
The "Food Security Act, 2013" in India aims to provide subsidized food grains to approximately two-thirds of the population, thereby addressing issues of:

a) Malnutrition and poverty

b) Agricultural productivity

c) Food processing industries

d) Rural-urban migration

Answer: (a)
The "Ayushman Bharat" scheme in India is related to:

a) Rural housing

b) Healthcare and health insurance

c) Education for girls

d) Skill development for youth

Answer: (b)
The "UDAY (Ujwal DISCOM Assurance Yojana)" scheme is related to the financial turnaround and revival of:

a) Indian Railways

b) Discoms (Power Distribution Companies)

c) Public sector banks

d) Small and Medium Enterprises (SMEs)

Answer: (b)
What is the "National Skill Development Mission" in India aimed at?

a) Promoting higher education

b) Creating convergence across sectors and states in terms of skill training activities

c) Providing financial assistance to skilled workers

d) Regulating vocational training institutes

Answer: (b)
The "Swachh Bharat Abhiyan" is primarily focused on:

a) Water conservation

b) Sanitation and cleanliness

c) Forest conservation

d) Air pollution control

Answer: (b)
The concept of "leapfrogging" in development refers to:

a) Skipping intermediate stages of development by adopting advanced technologies directly

b) Relying solely on traditional methods of production

c) Slow and gradual economic growth

d) Dependence on foreign aid for development

Answer: (a)
The "demographic transition theory" describes the historical shift from:

a) High birth rates and high death rates to low birth rates and low death rates

b) Low birth rates and low death rates to high birth rates and high death rates

c) High birth rates and low death rates to low birth rates and high death rates

d) Constant birth and death rates over time

Answer: (a)
The concept of "base erosion and profit shifting (BEPS)" in international taxation refers to:

a) Encouraging foreign direct investment

b) Tax planning strategies used by multinational corporations to exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.

c) Harmonizing tax rates across countries

d) Providing tax incentives for domestic companies

Answer: (b)
The "Global Financial Crisis of 2008" primarily originated in which sector?

a) Agricultural sector

b) Manufacturing sector

c) Housing and financial sectors

d) Information technology sector

Answer: (c)
The term "fiscal consolidation" refers to:

a) Increasing government expenditure

b) Reducing the fiscal deficit and public debt

c) Increasing taxation without reducing expenditure

d) Expanding public sector undertakings

Answer: (b)
What is "quantitative easing" (QE) as a monetary policy tool?

a) Selling government bonds to decrease money supply

b) Buying large quantities of government bonds and other financial assets from commercial banks to inject money into the economy and lower long-term interest rates

c) Increasing the repo rate

d) Restricting credit availability

Answer: (b)
The "Poverty and Un-British Rule in India" book, which estimated national income, was written by:

a) Jawaharlal Nehru

b) Mahatma Gandhi

c) Dadabhai Naoroji

d) R. C. Dutt

Answer: (c)
Who is known as the "Father of Indian Planning"?

a) Mahatma Gandhi

b) Jawaharlal Nehru

c) M. Visvesvaraya

d) P. C. Mahalanobis

Answer: (c)
The concept of the "command economy" is most closely associated with:

a) Capitalism

b) Socialism/Communism

c) Mixed economy

d) Market economy

Answer: (b)
The "economic problem" is fundamentally about:

a) How to achieve unlimited wants with limited resources

b) How to distribute wealth equally among all citizens

c) How to ensure full employment in a country

d) How to control inflation in a developing economy

Answer: (a)
What is the main role of the "Competition Commission of India (CCI)"?

a) To regulate the stock market

b) To prevent practices having an adverse effect on competition in India

c) To promote public sector enterprises

d) To regulate foreign investments

Answer: (b)
The term "infant industry argument" is used to justify:

a) Free trade policies

b) Protectionist policies for nascent domestic industries

c) Subsidies for agricultural products

d) Deregulation of markets

Answer: (b)
"Absolute advantage" in international trade refers to a country's ability to:

a) Produce a good at a lower opportunity cost than another country

b) Produce a good using fewer inputs than another country

c) Export more than it imports

d) Have a stronger currency than another country

Answer: (b)
"Comparative advantage" in international trade refers to a country's ability to:

a) Produce a good using fewer inputs than another country

b) Produce a good at a lower opportunity cost than another country

c) Export more than it imports

d) Have a stronger currency than another country

Answer: (b)
The "Ricardian equivalence theorem" states that under certain conditions, a government's financing choice (taxation vs. borrowing) has no effect on:

a) Aggregate demand

b) National saving

c) Interest rates

d) All of the above

Answer: (d)
The "life-cycle hypothesis" of consumption states that individuals plan their consumption and savings over their entire lifetime to smooth out their consumption path.

a) True

b) False

c) Only applies to short-term consumption

d) Only applies to high-income individuals

Answer: (a)
The "permanent income hypothesis" of consumption suggests that consumption depends on:

a) Current disposable income only

b) Temporary income fluctuations

c) Long-run average (permanent) income

d) Current wealth only

Answer: (c)
The "Keynesian cross" model is a simple graphical tool to illustrate the relationship between:

a) Money supply and interest rates

b) Aggregate expenditure and output

c) Inflation and unemployment

d) Savings and investment in an open economy

Answer: (b)
What is the "Marginal Efficiency of Capital (MEC)"?

a) The rate of return expected from an additional unit of capital investment

b) The cost of capital goods

c) The average productivity of capital

d) The total value of capital stock

Answer: (a)
The "Accelerator Principle" states that the level of net investment is a function of the change in:

a) Consumption

b) Income

c) Output

d) Interest rates

Answer: (c)
The concept of "animal spirits" in economics refers to:

a) Rational decision-making by economic agents

b) Instinctive and spontaneous human emotions or sentiments that influence economic behavior, especially investment

c) The natural forces of the market

d) The impact of environmental factors on economic activity

Answer: (b)
"Wage-price spiral" is a phenomenon where:

a) Wages increase, leading to lower prices

b) Rising wages lead to higher production costs, which then lead to higher prices, and subsequently higher wage demands, creating a cycle.

c) Prices increase, leading to lower wages

d) Government intervention controls both wages and prices

Answer: (b)
The "paradox of thrift" suggests that in a recession, an increase in saving by individuals can lead to:

a) Higher aggregate demand and economic growth

b) Lower aggregate demand and a deeper recession

c) No change in economic activity

d) Increased investment opportunities

Answer: (b)
The "Lump-of-Labor Fallacy" is the mistaken belief that:

a) All labor is equally productive

b) There is a fixed amount of work to be done in an economy, so new entrants or technological advancements necessarily displace existing workers

c) Labor is the only factor of production

d) Wages are determined solely by supply and demand for labor

Answer: (b)
The concept of "Ricardian Vice" is associated with:

a) Focusing too much on short-term economic fluctuations

b) Over-simplification of economic models, making them unrealistic

c) Emphasizing the role of government intervention

d) Ignoring the role of technological progress

Answer: (b)
The "Say's Law" in classical economics states that:

a) Demand creates its own supply

b) Supply creates its own demand

c) Government spending is the key to economic growth

d) Money supply determines the price level

Answer: (b)

Part 3: Advanced Macroeconomics and Indian Economy

Previous Part 1 is Here

Intermediate Level (Q.201 - Q.250):

Advanced Level (Q.251 - Q.300):

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