UPSC STATIC QUIZ – Economy : 10 May 2024
Kartavya Desk Staff
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We will post 5 questions daily on static topics mentioned in the UPSC civil services preliminary examination syllabus. Each week will focus on a specific topic from the syllabus, such as History of India and Indian National Movement, Indian and World Geography, and more.
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• Question 1 of 5 1. Question Consider the following statements regarding Cost to Company (CTC). Cost to Company (CTC) is a company’s spending on hiring and sustaining the services of an employee. CTC is lower for contract employment when compared to permanent employment. Usually the take-home salary of an employee will be higher than the CTC. How many of the above statements is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: b) Statement 3 is incorrect. Cost to company (CTC) indicates the total amount of expenses a company (organisation) spends on an employee during one year. It is calculated by adding salary to the cost of all additional benefits an employee receives during the service period. To put it in simpler terms, CTC is a company’s spending on hiring and sustaining the services of an employee. The CTC can include many elements in addition to salary/wages, such as health care, pension and allowances for housing, travel and entertainment. Apparently, the cost to the company (CTC) is lower for contract employment when compared to permanent employment. Incorrect Solution: b) Statement 3 is incorrect. Cost to company (CTC) indicates the total amount of expenses a company (organisation) spends on an employee during one year. It is calculated by adding salary to the cost of all additional benefits an employee receives during the service period. To put it in simpler terms, CTC is a company’s spending on hiring and sustaining the services of an employee. The CTC can include many elements in addition to salary/wages, such as health care, pension and allowances for housing, travel and entertainment. Apparently, the cost to the company (CTC) is lower for contract employment when compared to permanent employment.
#### 1. Question
Consider the following statements regarding Cost to Company (CTC).
• Cost to Company (CTC) is a company’s spending on hiring and sustaining the services of an employee.
• CTC is lower for contract employment when compared to permanent employment.
• Usually the take-home salary of an employee will be higher than the CTC.
How many of the above statements is/are correct?
• (a) Only one
• (b) Only two
• (c) All three
Solution: b)
Statement 3 is incorrect.
Cost to company (CTC) indicates the total amount of expenses a company (organisation) spends on an employee during one year. It is calculated by adding salary to the cost of all additional benefits an employee receives during the service period.
To put it in simpler terms, CTC is a company’s spending on hiring and sustaining the services of an employee.
The CTC can include many elements in addition to salary/wages, such as health care, pension and allowances for housing, travel and entertainment.
Apparently, the cost to the company (CTC) is lower for contract employment when compared to permanent employment.
Solution: b)
Statement 3 is incorrect.
Cost to company (CTC) indicates the total amount of expenses a company (organisation) spends on an employee during one year. It is calculated by adding salary to the cost of all additional benefits an employee receives during the service period.
To put it in simpler terms, CTC is a company’s spending on hiring and sustaining the services of an employee.
The CTC can include many elements in addition to salary/wages, such as health care, pension and allowances for housing, travel and entertainment.
Apparently, the cost to the company (CTC) is lower for contract employment when compared to permanent employment.
• Question 2 of 5 2. Question Which of the following is correct regrading ‘double coincidence of wants’? a) Paying double the cost of the product when there is high demand. b) Buying a product together by two agents in an economy for lesser rate. c) Two economic agents have complementary demand for each other’s’ surplus production. d) Availability of double the required capital for a firm Correct Solution: c) Double coincidence of wants is a situation where two economic agents have complementary demand for each other’s surplus production. It is an economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly without any monetary medium. This type of exchange is the foundation of a bartering economy. Incorrect Solution: c) Double coincidence of wants is a situation where two economic agents have complementary demand for each other’s surplus production. It is an economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly without any monetary medium. This type of exchange is the foundation of a bartering economy.
#### 2. Question
Which of the following is correct regrading ‘double coincidence of wants’?
• a) Paying double the cost of the product when there is high demand.
• b) Buying a product together by two agents in an economy for lesser rate.
• c) Two economic agents have complementary demand for each other’s’ surplus production.
• d) Availability of double the required capital for a firm
Solution: c)
Double coincidence of wants is a situation where two economic agents have complementary demand for each other’s surplus production.
It is an economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly without any monetary medium. This type of exchange is the foundation of a bartering economy.
Solution: c)
Double coincidence of wants is a situation where two economic agents have complementary demand for each other’s surplus production.
It is an economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly without any monetary medium. This type of exchange is the foundation of a bartering economy.
• Question 3 of 5 3. Question Consider the following statements regarding Extended Credit Facility of IMF. The Extended Credit Facility (ECF) provides financial assistance to countries with short-term balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) to make IMFs financial support more flexible and better tailored to the diverse needs of low-income countries (LICs). Which of the above statements is/are incorrect? a) 1 only b) 2 only c) Both 1 and 2 d) Neither 1 nor 2 Correct Solution: a) The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs. Incorrect Solution: a) The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs.
#### 3. Question
Consider the following statements regarding Extended Credit Facility of IMF.
• The Extended Credit Facility (ECF) provides financial assistance to countries with short-term balance of payments problems.
• The ECF was created under the Poverty Reduction and Growth Trust (PRGT) to make IMFs financial support more flexible and better tailored to the diverse needs of low-income countries (LICs).
Which of the above statements is/are incorrect?
• c) Both 1 and 2
• d) Neither 1 nor 2
Solution: a)
The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs.
Solution: a)
The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs.
• Question 4 of 5 4. Question Consider the following statements regarding Rahn Curve. a) It is a method for predicting the likely production rate of any finite resource over time. b) It is a graphical representation of the relationship between unemployment and the job vacancy rate. c) It is a graph which indicates that there is a level of government spending that maximizes economic growth. d) It describes how household expenditure on a particular good or service varies with household income. Correct Solution: c) The Rahn curve is a graph used to illustrate an economic theory, proposed in 1996 by American economist Richard W. Rahn, which indicates that there is a level of government spending that maximizes economic growth. The theory is used by classical liberals to argue for a decrease in overall government spending and taxation. The inverted-U-shaped curve suggests that the optimal level of government spending is 15–25% of GDP. Incorrect Solution: c) The Rahn curve is a graph used to illustrate an economic theory, proposed in 1996 by American economist Richard W. Rahn, which indicates that there is a level of government spending that maximizes economic growth. The theory is used by classical liberals to argue for a decrease in overall government spending and taxation. The inverted-U-shaped curve suggests that the optimal level of government spending is 15–25% of GDP.
#### 4. Question
Consider the following statements regarding Rahn Curve.
• a) It is a method for predicting the likely production rate of any finite resource over time.
• b) It is a graphical representation of the relationship between unemployment and the job vacancy rate.
• c) It is a graph which indicates that there is a level of government spending that maximizes economic growth.
• d) It describes how household expenditure on a particular good or service varies with household income.
Solution: c)
The Rahn curve is a graph used to illustrate an economic theory, proposed in 1996 by American economist Richard W. Rahn, which indicates that there is a level of government spending that maximizes economic growth. The theory is used by classical liberals to argue for a decrease in overall government spending and taxation. The inverted-U-shaped curve suggests that the optimal level of government spending is 15–25% of GDP.
Solution: c)
The Rahn curve is a graph used to illustrate an economic theory, proposed in 1996 by American economist Richard W. Rahn, which indicates that there is a level of government spending that maximizes economic growth. The theory is used by classical liberals to argue for a decrease in overall government spending and taxation. The inverted-U-shaped curve suggests that the optimal level of government spending is 15–25% of GDP.
• Question 5 of 5 5. Question Consider the following statements about Socialist economy. It emphasises the collective ownership of the means of production. Its only central goal is to attain economic efficiency by most optimum utilization of factors of production. Which of the above statements is/are correct? a) 1 only b) 2 only c) Both 1 and 2 d) Neither 1 nor 2 Correct Solution: a) Socialistic economy emphasises the collective ownership of the means of production (property and assets). It also ascribes a large role to the state in running the economy. A socialist economy’s central goal is the welfare of its subjects by progressive and equitable distribution of income, widespread employment, economic growth etc. Economic efficiency is generally the goal of capitalist economies. Incorrect Solution: a) Socialistic economy emphasises the collective ownership of the means of production (property and assets). It also ascribes a large role to the state in running the economy. A socialist economy’s central goal is the welfare of its subjects by progressive and equitable distribution of income, widespread employment, economic growth etc. Economic efficiency is generally the goal of capitalist economies.
#### 5. Question
Consider the following statements about Socialist economy.
• It emphasises the collective ownership of the means of production.
• Its only central goal is to attain economic efficiency by most optimum utilization of factors of production.
Which of the above statements is/are correct?
• c) Both 1 and 2
• d) Neither 1 nor 2
Solution: a)
Socialistic economy emphasises the collective ownership of the means of production (property and assets). It also ascribes a large role to the state in running the economy.
A socialist economy’s central goal is the welfare of its subjects by progressive and equitable distribution of income, widespread employment, economic growth etc.
Economic efficiency is generally the goal of capitalist economies.
Solution: a)
Socialistic economy emphasises the collective ownership of the means of production (property and assets). It also ascribes a large role to the state in running the economy.
A socialist economy’s central goal is the welfare of its subjects by progressive and equitable distribution of income, widespread employment, economic growth etc.
Economic efficiency is generally the goal of capitalist economies.
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