Prelims MCQs Quiz 8 : Economy


1. A decrease in Cash Reserve Ratio (CRR) can lead to which among the following ?
1. increase in cash availability of the banks
2. increase in repo rate
3. decrease in SLR
Select the correct answer using the codes given below.
a) 1 only
b)1 and 2 only
c) 1 and 3 only
d) 1,2 and 3

Answer & Explanation

2. The WTO follows the principle of ‘self selection’. This means :
a) countries decides to which agreement they want to be party.
b) countries decide the rate of tariff and tariff reduction
c) countries themselves decide whether they want to be in developed or developing categories.
d) None of the above

Answer & Explanation

3. Which of the following also acts as a mechanism for government lending.
1. CRR
2. Repo rate
3. Reverse repo rate
4. SLR
Select the correct answer using the codes given below.
a) 1 and 3 only
b) 1, 2 and 4 only
c) 1 and 4 only
d) 4 only

Answer & Explanation

4. With reference to foreign portfolio investments (FPI), consider the following statements :
1. FPIs are more volatile than loans from international financial institutions.
2. Foreign Direct Investments are part of FPIs.
Which of the statements given above is/are correct ?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Answer & Explanation

5. India’s central bank, RBI performs various functions. Which of these are its functions according to the RBI act, 1934.
1. managing inflation
2. acting as banker’s bank
3. managing India’s Forex
4. handling government’s borrowing program
Select the correct answer using the codes given below.
a) 2, 3 and 4 only
b) 1, 2 and 3 only
c) 2 and 3 only
d) 1, 2, 3 and 4

Answer & Explanation

6. Which among the following can result in ‘demand pull inflation’ ?
1. increase in subsidy on LPG
2. increase in fuel prices
3. decrease in income tax rates
Select the correct answer using the codes given below.
a) 1 and 2 only
b) 1 and 3 only
c) 2 and 3 only
d) 1, 2 and 3

Answer & Explanation

7. The term ‘narrow banking’ is best described as :
a) banks acting only as payment banks
b) banking by non-banking financial companies
c) limited areas of operation by banks
d) banks lending only to risk free sectors

Answer & Explanation

8. If indirect taxes in an economy are increased, then which of the following can occur ?
1. GDP at factor cost increases
2. GDP at factor cost decreases
3. GDP at market price increases
4. GDP at market price decreases
Select the correct answer using the codes given below.
a) 1 only
b) 2 and 3 only
c) 3 only
d) 4 only

Answer & Explanation

9. Equity market instruments help in financing a firm. Which of these is/are equity market instruments ?
1. Bonds
2. Shares
3. Debentures
Select the correct answer using the codes given below.
a) 1 and 2 only
b) 2 only
c) 2 and 3 only
d) 1, 2 and 3

Answer & Explanation

10. An economy pursuing an expansionary fiscal policy can witness :
1. increase in fiscal deficit
2. increase in wages of labour
3. increase in rate of income tax
Select the correct answer using the codes given below.
a) 1 only
b) 1 and 2 only
c) 1 and 3 only
d) 1,2 and 3

Answer & Explanation

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Please read these important articles about prelims preparation

1. How UPSC asks current affairs in GS Prelims

2. How to practice prelims MCQs for UPSC

3. Applying logic in UPSC General Studies Prelims

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