Attempt A Free Quiz Today! Leave a Comment / Blogs / By UPSC Revision Click here to start a free quiz – Welcome to your Free Quiz - Economics Miscellaneous Topics (Advance Level) 1. If the Indian government decides to issue Sovereign Gold Bonds (SGB) to domestic investors, what could be the potential impact on India’s Current Account Deficit (CAD)? (a) CAD will increase as gold demand rises. (b) CAD will decrease as physical gold imports decline. (c) CAD will remain unaffected as SGBs are domestic transactions. (d) CAD will turn into a surplus. None 2. During an economic downturn, the RBI lowers the repo rate significantly. Which of the following is likely to occur as a result? Increase in money supply Increase in investment Decrease in the inflation rate Select the correct answer using the code below: (a) 1 and 2 only (b) 2 and 3 only (c) 1, 2, and 3 (d) 1 only None 3. Which of the following monetary policy tools is most likely to affect the exchange rate directly? (a) CRR (b) Reverse Repo Rate (c) Open Market Operations (OMO) (d) Marginal Standing Facility (MSF) None 4. Capital Account Convertibility in India is associated with which of the following potential risks? Rapid inflow and outflow of foreign capital Volatility in the exchange rate Greater autonomy in fiscal policy Select the correct answer using the code below: (a) 1 and 2 only (b) 2 and 3 only (c) 1, 2, and 3 (d) 1 only None 5. A higher Inflation Rate relative to trading partners typically leads to which of the following outcomes in an open economy? (a) Depreciation of the domestic currency (b) Appreciation of the domestic currency (c) Improvement in the trade balance (d) Increase in foreign exchange reserves None 6. If the RBI adopts an expansionary monetary policy and the government simultaneously increases spending, what is the likely impact on the fiscal deficit? (a) It will increase (b) It will decrease (c) It will remain unaffected (d) It will turn into a surplus None 7. In the event of a liquidity trap, which of the following economic measures might prove ineffective? (a) Lowering interest rates (b) Increasing government spending (c) Implementing tax cuts (d) Currency devaluation None 8. If Indian exports become more price competitive, what impact is it likely to have on the Current Account Balance and the Exchange Rate? (a) CAD will increase; Rupee will depreciate. (b) CAD will decrease; Rupee will appreciate. (c) CAD will remain unchanged; Rupee will appreciate. (d) CAD will increase; Rupee will remain unchanged. None 9. If the US dollar appreciates significantly against major currencies, what is the likely impact on India’s export competitiveness? (a) Exports will become more competitive. (b) Exports will become less competitive. (c) Imports will become cheaper. (d) No impact on exports. None 10. Which of the following factors could cause a recessionary gap in an economy? Decrease in aggregate demand Increase in inflation Decrease in government spending Select the correct answer using the code below: (a) 1 only (b) 1 and 3 only (c) 2 and 3 only (d) 1, 2, and 3 None 11. An increase in household savings can lead to a paradox of thrift under which of the following conditions? (a) The economy is at full employment. (b) The economy is experiencing high inflation. (c) The economy is in a recession. (d) The economy has a large fiscal surplus. None 12. If GDP growth is positive but GNP growth is negative, which of the following could be a plausible reason? (a) Increase in domestic production (b) Significant outflow of income to foreign entities (c) Decrease in government expenditure (d) Higher imports compared to exports None 13. Which of the following would likely be a counter-cyclical fiscal policy in response to an economic boom? (a) Increasing government spending (b) Reducing tax rates (c) Cutting government spending (d) Increasing public borrowing None 14. A currency swap agreement between two central banks, like the RBI and the Bank of Japan, is likely to: (a) Increase India’s foreign exchange reserves permanently (b) Temporarily stabilize currency exchange rates (c) Encourage immediate FDI in both countries (d) Impact the fiscal policy of both countries None 15. Quantitative Easing (QE) as a monetary policy tool primarily aims to: (a) Control inflation (b) Increase government revenues (c) Stimulate economic growth by increasing money supply (d) Increase the central bank's reserves None 16. If interest rates are cut by the RBI, what is the most likely impact on stock markets in India? (a) Stock markets would decline as borrowing costs decrease. (b) Stock markets would remain unaffected. (c) Stock markets would rise due to cheaper financing for companies. (d) Stock markets would fall due to inflation concerns. None 17. In the balance of payments, if the current account shows a deficit but the capital account shows a surplus, it indicates: (a) Foreign exchange reserves are depleting. (b) The country is borrowing more capital to finance the deficit. (c) A net outflow of capital from the country. (d) Exports are higher than imports. None 18. Which of the following would be considered an automatic stabilizer in fiscal policy? (a) Infrastructure investment (b) Progressive income tax (c) Changes in repo rate (d) Direct tax incentives None 19. An increase in the Cash Reserve Ratio (CRR) by the RBI is likely to impact which of the following? Liquidity in the banking system Inflation rate Foreign Direct Investment (FDI) inflows Select the correct answer using the code below: (a) 1 and 2 only (b) 2 and 3 only (c) 1, 2, and 3 (d) 1 only None 20. If the Federal Reserve in the United States raises interest rates, what is the likely impact on the Indian Rupee and India’s capital inflows? (a) Rupee appreciates; capital inflows increase (b) Rupee depreciates; capital inflows decrease (c) Rupee appreciates; capital inflows decrease (d) Rupee depreciates; capital inflows increase None 21. If the government reduces corporate taxes significantly, which of the following is the most likely short-term impact on the fiscal deficit and aggregate demand? (a) Fiscal deficit increases; aggregate demand decreases (b) Fiscal deficit decreases; aggregate demand increases (c) Fiscal deficit increases; aggregate demand increases (d) Fiscal deficit decreases; aggregate demand decreases None 22. If India’s export prices increase faster than import prices (terms of trade deterioration), what could be the impact on trade balance and current account balance? (a) Trade balance improves; current account balance worsens (b) Trade balance worsens; current account balance improves (c) Trade balance worsens; current account balance worsens (d) Trade balance improves; current account balance improves None 23. Which of the following best describes the Phillips Curve relationship? (a) Inverse relationship between inflation and unemployment (b) Direct relationship between inflation and economic growth (c) Inverse relationship between GDP growth and fiscal deficit (d) Direct relationship between interest rates and money supply None 24. Suppose oil prices rise globally. If the Indian government decides to absorb part of the increase by reducing excise duty on fuel, what is the likely impact on inflation and fiscal deficit? (a) Inflation increases; fiscal deficit decreases (b) Inflation decreases; fiscal deficit increases (c) Inflation increases; fiscal deficit increases (d) Inflation decreases; fiscal deficit decreases None 25. If the repo rate in India is lower than in the U.S., what is the likely impact on foreign portfolio investments (FPI) into India and the Indian stock market? (a) Increase in FPI; stock market decline (b) Decrease in FPI; stock market decline (c) Decrease in FPI; stock market rise (d) Increase in FPI; stock market rise None Time's upTime is Up!
