Static Quiz 1st August 2025 (Indian Economy)
Quiz-summary
0 of 5 questions completed
Questions:
- 1
- 2
- 3
- 4
- 5
Information
Static Quiz 1st August 2025 (Indian Economy) For UPSC Exam
You have already completed the quiz before. Hence you can not start it again.
Quiz is loading...
You must sign in or sign up to start the quiz.
You have to finish following quiz, to start this quiz:
Results
0 of 5 questions answered correctly
Your time:
Time has elapsed
You have reached 0 of 0 points, (0)
Categories
- Not categorized 0%
- 1
- 2
- 3
- 4
- 5
- Answered
- Review
- Question 1 of 5
1. Question
Which of the following best describes the term “Dutch Disease” in economics?
CorrectCorrect Answer: (b)
Explanation:
• Dutch Disease refers to the negative impact on a country’s manufacturing sector due to a surge in revenues from natural resource exports. The inflow of foreign currency appreciates the domestic currency, making exports from other sectors (especially manufacturing) less competitive internationally.
• The term originated from the Netherlands’ discovery of natural gas in the 1960s.IncorrectCorrect Answer: (b)
Explanation:
• Dutch Disease refers to the negative impact on a country’s manufacturing sector due to a surge in revenues from natural resource exports. The inflow of foreign currency appreciates the domestic currency, making exports from other sectors (especially manufacturing) less competitive internationally.
• The term originated from the Netherlands’ discovery of natural gas in the 1960s. - Question 2 of 5
2. Question
The term “Stagflation” refers to:
CorrectCorrect Answer: (c)
Explanation:
• Stagflation is an economic condition where stagnation (slow or negative economic growth) coexists with high inflation and high unemployment.
• It contradicts the traditional Phillips Curve trade-off and is particularly challenging for policymakers because tools to control inflation often worsen unemployment and vice versa.IncorrectCorrect Answer: (c)
Explanation:
• Stagflation is an economic condition where stagnation (slow or negative economic growth) coexists with high inflation and high unemployment.
• It contradicts the traditional Phillips Curve trade-off and is particularly challenging for policymakers because tools to control inflation often worsen unemployment and vice versa. - Question 3 of 5
3. Question
Consider the following statements regarding Balance of Payments (BoP):
1. A BoP surplus always implies an increase in a country’s foreign exchange reserves.
2. BoP includes both current account and capital account transactions.
3. FDI inflows are recorded under the current account of BoP.
How many of the above statements are correct?CorrectCorrect Answer: (b)
Explanation:
• Statement 1: Correct. A BoP surplus typically leads to an increase in forex reserves, especially if the central bank chooses to absorb excess dollars.
• Statement 2: Correct. BoP has two main components: Current Account and Capital & Financial Account.
• Statement 3: Incorrect. FDI inflows are recorded under the capital account, not current account.
• Hence, only two statements are correct.IncorrectCorrect Answer: (b)
Explanation:
• Statement 1: Correct. A BoP surplus typically leads to an increase in forex reserves, especially if the central bank chooses to absorb excess dollars.
• Statement 2: Correct. BoP has two main components: Current Account and Capital & Financial Account.
• Statement 3: Incorrect. FDI inflows are recorded under the capital account, not current account.
• Hence, only two statements are correct. - Question 4 of 5
4. Question
Which of the following policies can be considered as part of expansionary monetary policy?
1. Reducing repo rate.
2. Purchasing government securities in the open market.
3. Increasing the Cash Reserve Ratio (CRR).
4. Reducing the Statutory Liquidity Ratio (SLR).
Select the correct answer using the code:CorrectCorrect Answer: (c)
Explanation:
• Statement 1: Correct. Reducing repo rate lowers borrowing costs, promoting credit and investment.
• Statement 2: Correct. Buying government securities injects liquidity into the system.
• Statement 3: Incorrect. Increasing CRR absorbs liquidity — it’s a contractionary measure.
• Statement 4: Correct. Reducing SLR frees up funds for lending — expansionary in nature.
• So, 1, 2, and 4 are correct.IncorrectCorrect Answer: (c)
Explanation:
• Statement 1: Correct. Reducing repo rate lowers borrowing costs, promoting credit and investment.
• Statement 2: Correct. Buying government securities injects liquidity into the system.
• Statement 3: Incorrect. Increasing CRR absorbs liquidity — it’s a contractionary measure.
• Statement 4: Correct. Reducing SLR frees up funds for lending — expansionary in nature.
• So, 1, 2, and 4 are correct. - Question 5 of 5
5. Question
With reference to the Phillips Curve, consider the following:
1. It shows the inverse relationship between inflation and unemployment in the short run.
2. In the long run, the Phillips Curve is vertical at the natural rate of unemployment.
3. Monetarists argue that inflation can permanently reduce unemployment.
Which of the above statements is/are correct?CorrectCorrect Answer: (b)
Explanation:
• Statement 1: Correct. The original Phillips Curve showed a short-run trade-off between inflation and unemployment.
• Statement 2: Correct. In the long run, the curve becomes vertical at the natural rate of unemployment (NAIRU), where inflation has no impact on unemployment.
• Statement 3: Incorrect. Monetarists (like Milton Friedman) argue that inflation cannot permanently reduce unemployment — only temporary effects exist.
• Hence, 1 and 2 only are correct.IncorrectCorrect Answer: (b)
Explanation:
• Statement 1: Correct. The original Phillips Curve showed a short-run trade-off between inflation and unemployment.
• Statement 2: Correct. In the long run, the curve becomes vertical at the natural rate of unemployment (NAIRU), where inflation has no impact on unemployment.
• Statement 3: Incorrect. Monetarists (like Milton Friedman) argue that inflation cannot permanently reduce unemployment — only temporary effects exist.
• Hence, 1 and 2 only are correct.
