IAS Questions of Economy Set 14 for Prelims Exam

1. Which of the following are called as “Bretton Woods’ twin sisters”?

(a) IMF and IBRD
(b) IMF and WTO
(c) WTO and IBRD
(d) WTO and UNCTAD

Ans. a

Explanation: The World Bank was created as IBRD in 1944 along with its twin, the IMF. Together, they came to be known as “Bretton Woods’ twin sisters”.

2. Balance of current account includes

(1) Balance of trade
(2) Balance of invisibles
(3) Balance of unrequited transfers

Codes

(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. d

Explanation: Balance of current account balance of trade, services and unrequited transfers.

3. Which of the following statements are correct?

(1) Dumping means selling a product in foreign market at a lower price than in the home market.
(2) Dumping encourages home industry.

Codes:

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. b

Explanation: Dumping is harmful to the home industry.

4. Which of the following statements are correct?

(1) Ratio of public expenditure is decreasing.
(2) Ratio of taxes to GDP in increasing.

Codes:

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. b

Explanation: Ratio of public expenditure is decreasing. The subsidies and welfare schemes add to the public expenditure.

5. Budgetary deficit takes into account

(1) Revenue deficit
(2) Capital budget deficit
(3) Balance of payment deficit
(4) Interest payment on public debt

Codes

(a) 1 and 2 only
(b) 2, 3 and 4 only
(c) 1, 2 and 4 only
(d) All of these

Ans. c

Explanation: Balance of payment is not a part of budget deficit. Budget deficit considers revenue deficit, capital deficit and interest payment.

6. Which of the following statements are correct?

(1) Industrialization of an economy is considered synonymous with growth.
(2) The transfer of resources from agriculture to industry may be capital or labour or both.

Codes:

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. c

Explanation: Growth and industrialization go hand in hand. With industrialization, job opportunities increase out of agriculture sector which results in transfer of labour and more profit in industries lead to transfer of capital to industrial sector.

7. Which of the following statements are correct?

(1) India’s assistance to foreign governments is mostly in the form of grants.
(2) Most of the amount to foreign governments is channeled through Ministry of External Affairs.
(3) India’s assistance to foreign governments has increased over the years.

Codes

(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. d

Explanation: The Indian government has been giving assistance through grants to backward and underdeveloped countries especially Afro-Asian countries.

8. Which of the following statements are correct?

(1) Bihar has registered the highest growth in terms of GDP.
(2) According to census 2011, the lowest population growth rate was in Kerala.
(3) Maharashtra witnessed the highest immigration in last decade.

Codes

(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. a

Explanation: According to census 2011, the lowest population growth rate of -0.5 was recorded in Nagaland.

9. Factors responsible for creating conditions for emergence and growth of monopoly are

(1) Patents
(2) Laissez Faire
(3) Licensing
(4) Control over strategic raw materials

Codes

(a) 1 and 2 only
(b) 1, 3 and 4 only
(c)  2 and 4 only
(d) All of these

Ans. b

Explanation: Laissez Faire means free trade which does not promote monopoly.

10. Malthusian theory explains relationship between

(a) Population increase and food supply
(b) Inflation rate and unemployment
(c) Growth and inequality
(d) Industrialization and growth

Ans. a

Explanation: The theory states that population increase faster than food supply and if unchecked leads to misery and shortage in food.