IASbaba's Daily Static Quiz
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UPSC Static Quiz - 2020 : IASbaba's Daily Static Quiz - ECONOMY [Day 13]
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Question 1 of 10
1. Question
Consider the following statements
- Cobweb theory is the idea that price fluctuations can lead to fluctuations in supply which cause a cycle of rising and falling prices.
- CPI for Industrial Workers (IW) is compiled by Labour Bureau.
Which of the statements given above is/are NOT correct?
Correct
Solution (d)
Cobweb theory is the idea that price fluctuations can lead to fluctuations in supply which cause a cycle of rising and falling prices.
Hence Statement 1 is correct.
CPI for Industrial Workers (IW) is compiled by Labour Bureau in the Ministry of Labour.
Hence Statement 2 is correct.
Incorrect
Solution (d)
Cobweb theory is the idea that price fluctuations can lead to fluctuations in supply which cause a cycle of rising and falling prices.
Hence Statement 1 is correct.
CPI for Industrial Workers (IW) is compiled by Labour Bureau in the Ministry of Labour.
Hence Statement 2 is correct.
-
Question 2 of 10
2. Question
Consider the following statements
- Fuel and Power group has the highest weightage while calculating Wholesale Price Index (WPI).
- CPI for Agricultural Labourers (AL) is compiled by the Central Statistical Organization.
Which of the statements given above is/are correct?
Correct
Solution (d)
Manufacturing products has the highest weightage while calculating Wholesale Price Index (WPI).
Hence Statement 1 is incorrect.
CPI for Agricultural Labourers (AL) is compiled by Labour Bureau in the Ministry of Labour.
Hence Statement 2 is incorrect.
Incorrect
Solution (d)
Manufacturing products has the highest weightage while calculating Wholesale Price Index (WPI).
Hence Statement 1 is incorrect.
CPI for Agricultural Labourers (AL) is compiled by Labour Bureau in the Ministry of Labour.
Hence Statement 2 is incorrect.
-
Question 3 of 10
3. Question
Consider the following statements
- Inflation means increase in the prices of all the goods and services in an economy.
- Unanticipated inflation in the economy leads to redistribution of wealth with no regard to social goals.
Which of the statements given above is/are correct?
Correct
Solution (b)
Inflation does not necessarily mean that the prices of all the goods and services in an economy rise. In an inflationary situation, the average level of prices rise with some items showing excessive rise while others may not follow suit.
Hence Statement 1 is incorrect.
Unanticipated inflation in the economy leads to redistribution of wealth with no regard to social goals. Consequential effects can be: flow of wealth from fixed-income earners and weakly unionized workers to strongly unionised workers, from lenders to borrowers, from tax-payers to the government, from public sector employees to private sector employees, and from profit-earners to wage-earners.
Hence Statement 2 is correct.
Incorrect
Solution (b)
Inflation does not necessarily mean that the prices of all the goods and services in an economy rise. In an inflationary situation, the average level of prices rise with some items showing excessive rise while others may not follow suit.
Hence Statement 1 is incorrect.
Unanticipated inflation in the economy leads to redistribution of wealth with no regard to social goals. Consequential effects can be: flow of wealth from fixed-income earners and weakly unionized workers to strongly unionised workers, from lenders to borrowers, from tax-payers to the government, from public sector employees to private sector employees, and from profit-earners to wage-earners.
Hence Statement 2 is correct.
-
Question 4 of 10
4. Question
Consider the following statements:
- Inflation target is set by the Reserve Bank of India, in consultation with the Government of India.
- 6 per cent Consumer Price Index (CPI) inflation is the target for the period from August 5, 2016 to March 31, 2021.
Which of the statements given above is/are NOT correct?
Correct
Solution (c)
Inflation target is set by the Government of India, in consultation with the Reserve Bank, once in every five years.
Hence Statement 1 is incorrect.
The Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
Hence Statement 2 is incorrect.
Incorrect
Solution (c)
Inflation target is set by the Government of India, in consultation with the Reserve Bank, once in every five years.
Hence Statement 1 is incorrect.
The Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
Hence Statement 2 is incorrect.
-
Question 5 of 10
5. Question
Consider the following statements:
- Since July 2018, CPI-Urban inflation has been consistently above CPI-Rural inflation.
- Since July 2019, urban areas have registered much higher food inflation when compared to rural areas.
Which of the statements given above is/are correct?
Correct
Solution (c)
Since July 2018, CPI-Urban inflation, has been consistently above CPI-Rural inflation. This is in contrast to earlier experience where rural inflation has been mostly higher than urban inflation. Hence Statement 1 is correct.
Since July 2019, urban areas have registered much higher food inflation when compared to rural areas.
Hence Statement 2 is correct.
Incorrect
Solution (c)
Since July 2018, CPI-Urban inflation, has been consistently above CPI-Rural inflation. This is in contrast to earlier experience where rural inflation has been mostly higher than urban inflation. Hence Statement 1 is correct.
Since July 2019, urban areas have registered much higher food inflation when compared to rural areas.
Hence Statement 2 is correct.
-
Question 6 of 10
6. Question
Consider the following statements.
- Mild form of recession is known as depression.
- Price deflation, financial crises, stock market crash and bank failures are common elements of a recession.
Which of the statements given above is/are correct?
Correct
Solution (d)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession.
Hence Statement 1 is incorrect
Price deflation, financial crises, stock market crash, and bank failures are common elements of a depression that do not normally occur during a recession.
Hence Statement 2 is incorrect
Incorrect
Solution (d)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession.
Hence Statement 1 is incorrect
Price deflation, financial crises, stock market crash, and bank failures are common elements of a depression that do not normally occur during a recession.
Hence Statement 2 is incorrect
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Question 7 of 10
7. Question
Which of the following is/are the measures to be adopted to recover from recession?
- Direct and indirect taxes should be cut down.
- Salaries and wages should be revised by the government.
- The government usually goes on to follow a dear money supply policy.
Select the correct answer using the codes given below:
Correct
Solution (b)
Direct and indirect taxes should be cut down, so that the consumers have higher disposable incomes.
Hence Statement 1 is correct
Salaries and wages should be revised by the government to encourage general spending by the consumers
Hence Statement 2 is correct
The government usually goes on to follow a cheap money supply policy by slashing down interest rates across the board and the lending procedure is also liberalized.
Hence Statement 3 is incorrect
Incorrect
Solution (b)
Direct and indirect taxes should be cut down, so that the consumers have higher disposable incomes.
Hence Statement 1 is correct
Salaries and wages should be revised by the government to encourage general spending by the consumers
Hence Statement 2 is correct
The government usually goes on to follow a cheap money supply policy by slashing down interest rates across the board and the lending procedure is also liberalized.
Hence Statement 3 is incorrect
-
Question 8 of 10
8. Question
Consider the following statements with reference to the Monetary Policy Committee (MPC):
- The committee comprises three officials of the RBI and three external members nominated by the Governor of RBI.
- The Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC.
- The committee is answerable to the RBI if the inflation exceeds the range prescribed for three consecutive months.
Which of the statements given above is/are correct?
Correct
Solution (b)
The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
Hence Statement 1 is incorrect
The Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC which will bring more transparency and accountability in fixing India’s Monetary Policy
Hence Statement 2 is correct
The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months
Hence Statement 3 is incorrect
Incorrect
Solution (b)
The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
Hence Statement 1 is incorrect
The Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC which will bring more transparency and accountability in fixing India’s Monetary Policy
Hence Statement 2 is correct
The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months
Hence Statement 3 is incorrect
-
Question 9 of 10
9. Question
Which of the following statements is/are correct about Wholesale Price Index?
- Wholesale Price Index (WPI) represents the price of goods at a wholesale stage.
- India uses Wholesale Price Index (WPI) whereas United States uses Producer Price Index (PPI) to measure inflation.
- Indian WPI is published by the Economic Advisor, Ministry of Commerce and Industry.
Select the correct answer using the codes given below:
Correct
Solution (d)
Wholesale Price Index (WPI) represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers.
Hence Statement 1 is correct
WPI is used as an important measure of inflation in India. Fiscal and monetary policy changes are greatly influenced by changes in WPI. In the United States, Producer Price Index (PPI) is used to measure inflation.
Hence Statement 2 is correct
Indian WPI is published by the Economic Advisor, Ministry of Commerce and Industry.
Hence Statement 3 is correct
Incorrect
Solution (d)
Wholesale Price Index (WPI) represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers.
Hence Statement 1 is correct
WPI is used as an important measure of inflation in India. Fiscal and monetary policy changes are greatly influenced by changes in WPI. In the United States, Producer Price Index (PPI) is used to measure inflation.
Hence Statement 2 is correct
Indian WPI is published by the Economic Advisor, Ministry of Commerce and Industry.
Hence Statement 3 is correct
-
Question 10 of 10
10. Question
Consider the following statements:
- The National Statistical Commission (NSC) updated base year for GDP calculation to 2011-12, as per the recommendations of the Central Statistics Office (CSO).
- Change of base year to calculate GDP is done in line with the global exercise to capture economic information accurately.
Which of the statements given above is/are NOT CORRECT?
Correct
Solution (a)
The Central Statistics Office (CSO) updated base year for GDP calculation to 2011-12, replacing the old series base year of 2004-05, as per the recommendations of the National Statistical Commission.
Hence Statement 1 is incorrect
Why is base year changed?
Change of base year to calculate GDP is done in line with the global exercise to capture economic information accurately. Ideally, the base year should be changed after every five years to capture the changing economy. GDP based on 2004-05 did not reflect current economic situation correctly. The new series is also compliant with the United Nations guidelines in System of National Accounts-2008. It takes information for the corporate sector and has better estimates of the unorganised sector from 2010-11 National Sample Survey on unincorporated enterprises and data on sales and service taxes.
Hence Statement 2 is correct
Incorrect
Solution (a)
The Central Statistics Office (CSO) updated base year for GDP calculation to 2011-12, replacing the old series base year of 2004-05, as per the recommendations of the National Statistical Commission.
Hence Statement 1 is incorrect
Why is base year changed?
Change of base year to calculate GDP is done in line with the global exercise to capture economic information accurately. Ideally, the base year should be changed after every five years to capture the changing economy. GDP based on 2004-05 did not reflect current economic situation correctly. The new series is also compliant with the United Nations guidelines in System of National Accounts-2008. It takes information for the corporate sector and has better estimates of the unorganised sector from 2010-11 National Sample Survey on unincorporated enterprises and data on sales and service taxes.
Hence Statement 2 is correct
