UPSC Static Quiz – Economy : 11 February 2026

UPSC Static Quiz – Economy : 11 February 2026 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. We are excited to bring you our daily UPSC Static Quiz, designed to help you prepare for the UPSC Civil Services Preliminary Examination. Each day, we will post 5 questions on static topics mentioned in the UPSC syllabus. This week, we are focusing on Indian and World Geography.

Why Participate in the UPSC Static Quiz?

Participating in daily quizzes helps reinforce your knowledge and identify areas that need improvement. Regular practice will enhance your recall abilities and boost your confidence for the examination. By covering various topics throughout the week, you ensure a comprehensive revision of the syllabus.

#### Quiz-summary

0 of 5 questions completed

Questions:

#### Information

Best of Luck! 🙂

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:

0 of 5 questions answered correctly

Your time:

Time has elapsed

You have reached 0 of 0 points, (0)

#### Categories

• Not categorized 0%

• Question 1 of 5 1. Question Consider the following international entities with their constituent institutions and primary objectives: Entity (Column 1) Institution (Column 2) Objective (Column 3) 1. World Bank Group I. MIGA A. Political Risk Insurance 2. IMF II. SDR Department B. Supplementary Reserve Assets 3. WTO III. Dispute Settlement Body C. Multilateral Trade Enforcement How many of the above are correctly matched? (a) Only one (b) Only two (c) All three (d) None Correct Solution: C The World Bank Group includes the Multilateral Investment Guarantee Agency (MIGA) as one of its constituent institutions. MIGA’s core function is to provide political risk insurance to investors against risks such as expropriation, currency transfer restrictions, war, and civil disturbance, making 1–I–A correct. The International Monetary Fund operates the SDR Department, which manages allocations and transactions related to Special Drawing Rights. SDRs are international reserve assets created to supplement the official reserves of member countries, making 2–II–B the correct match. The World Trade Organization administers the Dispute Settlement Body, which is central to enforcing multilateral trade rules by adjudicating trade disputes between member countries. Incorrect Solution: C The World Bank Group includes the Multilateral Investment Guarantee Agency (MIGA) as one of its constituent institutions. MIGA’s core function is to provide political risk insurance to investors against risks such as expropriation, currency transfer restrictions, war, and civil disturbance, making 1–I–A correct. The International Monetary Fund operates the SDR Department, which manages allocations and transactions related to Special Drawing Rights. SDRs are international reserve assets created to supplement the official reserves of member countries, making 2–II–B the correct match. The World Trade Organization administers the Dispute Settlement Body, which is central to enforcing multilateral trade rules by adjudicating trade disputes between member countries.

#### 1. Question

Consider the following international entities with their constituent institutions and primary objectives:

Entity (Column 1) | Institution (Column 2) | Objective (Column 3)

1.World Bank Group | I. MIGA | A. Political Risk Insurance
2.IMF | II. SDR Department | B. Supplementary Reserve Assets
3.WTO | III. Dispute Settlement Body | C. Multilateral Trade Enforcement

How many of the above are correctly matched?

• (a) Only one

• (b) Only two

• (c) All three

Solution: C

• The World Bank Group includes the Multilateral Investment Guarantee Agency (MIGA) as one of its constituent institutions. MIGA’s core function is to provide political risk insurance to investors against risks such as expropriation, currency transfer restrictions, war, and civil disturbance, making 1–I–A correct.

• The International Monetary Fund operates the SDR Department, which manages allocations and transactions related to Special Drawing Rights. SDRs are international reserve assets created to supplement the official reserves of member countries, making 2–II–B the correct match.

• The World Trade Organization administers the Dispute Settlement Body, which is central to enforcing multilateral trade rules by adjudicating trade disputes between member countries.

Solution: C

• The World Trade Organization administers the Dispute Settlement Body, which is central to enforcing multilateral trade rules by adjudicating trade disputes between member countries.

• Question 2 of 5 2. Question Consider the following statements: Statement-I: The implementation of the Goods and Services Tax (GST) in India aimed to remove the “cascading effect” of taxes. Statement-II: GST is a destination-based consumption tax that replaced multiple indirect taxes such as central excise duty and state-level VAT. Which one of the following is correct in respect of the above statements? (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I (c) Statement-I is correct but Statement-II is incorrect (d) Statement-I is incorrect but Statement-II is correct Correct Solution: B Statement-I is correct: A major objective of GST was to eliminate the “tax on tax” phenomenon, where tax was levied on the value of a product that already included taxes from previous production stages. Statement-II is correct: GST is indeed a destination-based tax and it did subsume various central and state levies to create a unified market. While both statements are factual, Statement-II describes the nature and structure of the tax, not the mechanism for removing the cascading effect. The cascading effect is removed specifically through the Input Tax Credit (ITC) mechanism, which allows a producer to set off the tax paid on inputs against the tax liability on the final output. Simply being destination-based or replacing other taxes does not inherently eliminate cascading; the credit-offset system does. Incorrect Solution: B Statement-I is correct: A major objective of GST was to eliminate the “tax on tax” phenomenon, where tax was levied on the value of a product that already included taxes from previous production stages. Statement-II is correct: GST is indeed a destination-based tax and it did subsume various central and state levies to create a unified market. While both statements are factual, Statement-II describes the nature and structure of the tax, not the mechanism for removing the cascading effect. The cascading effect is removed specifically through the Input Tax Credit (ITC) mechanism, which allows a producer to set off the tax paid on inputs against the tax liability on the final output. Simply being destination-based or replacing other taxes does not inherently eliminate cascading; the credit-offset system does.

#### 2. Question

Consider the following statements:

Statement-I: The implementation of the Goods and Services Tax (GST) in India aimed to remove the “cascading effect” of taxes.

Statement-II: GST is a destination-based consumption tax that replaced multiple indirect taxes such as central excise duty and state-level VAT.

Which one of the following is correct in respect of the above statements?

• (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

• (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

• (c) Statement-I is correct but Statement-II is incorrect

• (d) Statement-I is incorrect but Statement-II is correct

Solution: B

• Statement-I is correct: A major objective of GST was to eliminate the “tax on tax” phenomenon, where tax was levied on the value of a product that already included taxes from previous production stages.

• Statement-II is correct: GST is indeed a destination-based tax and it did subsume various central and state levies to create a unified market.

While both statements are factual, Statement-II describes the nature and structure of the tax, not the mechanism for removing the cascading effect. The cascading effect is removed specifically through the Input Tax Credit (ITC) mechanism, which allows a producer to set off the tax paid on inputs against the tax liability on the final output. Simply being destination-based or replacing other taxes does not inherently eliminate cascading; the credit-offset system does.

Solution: B

• Statement-II is correct: GST is indeed a destination-based tax and it did subsume various central and state levies to create a unified market.

• Question 3 of 5 3. Question Consider the following statements: Statement-I: The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, mandates the Central Government to place a “Macro-economic Framework Statement” before the Parliament annually. Statement-II: The primary objective of the FRBM Act is to ensure that the government completely eliminates the Fiscal Deficit by the end of the 15th Finance Commission cycle (2025-26). Which one of the following is correct in respect of the above statements? (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I (c) Statement-I is correct but Statement-II is incorrect (d) Statement-I is incorrect but Statement-II is correct Correct Solution: C Statement-I is correct. The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003 mandates the Central Government to lay before Parliament certain fiscal policy statements along with the Annual Financial Statement (Budget). These include: The Medium-Term Fiscal Policy Statement The Fiscal Policy Strategy Statement The Macro-economic Framework Statement The Macro-economic Framework Statement contains an assessment of the growth prospects, fiscal balance, and the external sector, along with the underlying assumptions of the government’s fiscal projections. This enhances transparency and parliamentary oversight over fiscal management. Statement-II is incorrect. The objective of the FRBM Act is not to completely eliminate the fiscal deficit. Rather, it aims to ensure fiscal discipline, reduce fiscal deficit to prudent levels, improve macroeconomic stability, and ensure inter-generational equity in fiscal management. Over time, amendments (including those based on the recommendations of the N.K. Singh Committee) have provided flexible targets rather than absolute elimination. The Act prescribes glide paths and targets, but not a complete elimination of fiscal deficit by 2025–26 or by the end of the 15th Finance Commission cycle. Incorrect Solution: C Statement-I is correct. The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003 mandates the Central Government to lay before Parliament certain fiscal policy statements along with the Annual Financial Statement (Budget). These include: The Medium-Term Fiscal Policy Statement The Fiscal Policy Strategy Statement The Macro-economic Framework Statement The Macro-economic Framework Statement contains an assessment of the growth prospects, fiscal balance, and the external sector, along with the underlying assumptions of the government’s fiscal projections. This enhances transparency and parliamentary oversight over fiscal management. Statement-II is incorrect. The objective of the FRBM Act is not to completely eliminate the fiscal deficit. Rather, it aims to ensure fiscal discipline, reduce fiscal deficit to prudent levels, improve macroeconomic stability, and ensure inter-generational equity in fiscal management. Over time, amendments (including those based on the recommendations of the N.K. Singh Committee) have provided flexible targets rather than absolute elimination. The Act prescribes glide paths and targets, but not a complete elimination of fiscal deficit by 2025–26 or by the end of the 15th Finance Commission cycle.

#### 3. Question

Consider the following statements:

Statement-I: The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, mandates the Central Government to place a “Macro-economic Framework Statement” before the Parliament annually.

Statement-II: The primary objective of the FRBM Act is to ensure that the government completely eliminates the Fiscal Deficit by the end of the 15th Finance Commission cycle (2025-26).

Which one of the following is correct in respect of the above statements?

• (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

• (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

• (c) Statement-I is correct but Statement-II is incorrect

• (d) Statement-I is incorrect but Statement-II is correct

Solution: C

• Statement-I is correct. The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003 mandates the Central Government to lay before Parliament certain fiscal policy statements along with the Annual Financial Statement (Budget). These include:

• The Medium-Term Fiscal Policy Statement The Fiscal Policy Strategy Statement The Macro-economic Framework Statement

• The Medium-Term Fiscal Policy Statement

• The Fiscal Policy Strategy Statement

• The Macro-economic Framework Statement

• The Macro-economic Framework Statement contains an assessment of the growth prospects, fiscal balance, and the external sector, along with the underlying assumptions of the government’s fiscal projections. This enhances transparency and parliamentary oversight over fiscal management.

• Statement-II is incorrect. The objective of the FRBM Act is not to completely eliminate the fiscal deficit. Rather, it aims to ensure fiscal discipline, reduce fiscal deficit to prudent levels, improve macroeconomic stability, and ensure inter-generational equity in fiscal management. Over time, amendments (including those based on the recommendations of the N.K. Singh Committee) have provided flexible targets rather than absolute elimination. The Act prescribes glide paths and targets, but not a complete elimination of fiscal deficit by 2025–26 or by the end of the 15th Finance Commission cycle.

Solution: C

• The Medium-Term Fiscal Policy Statement The Fiscal Policy Strategy Statement The Macro-economic Framework Statement

• The Medium-Term Fiscal Policy Statement

• The Fiscal Policy Strategy Statement

• The Macro-economic Framework Statement

• Question 4 of 5 4. Question Consider the following statements: Statement-I: Direct taxes in India are generally considered regressive because the tax burden falls disproportionately on the low-income earners. Statement-II: Progressive taxation is a method where the rate of tax increases as the taxable volume or value increases, promoting vertical equity in the economy. Which one of the following is correct in respect of the above statements? (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I (c) Statement-I is correct but Statement-II is incorrect (d) Statement-I is incorrect but Statement-II is correct Correct Solution: D Statement-I is incorrect: Direct taxes (like Personal Income Tax) in India are progressive, not regressive. In a progressive system, those with higher incomes pay a higher percentage of their income as tax. It is indirect taxes (like GST) that are often described as regressive because the same rate applies to all consumers regardless of their wealth. Statement-II is correct: This is the textbook definition of progressive taxation. Its goal is to achieve vertical equity, which means individuals in a better financial position contribute a larger share to the public exchequer. This revenue is then used for social welfare, serving the broader objective of income redistribution. Incorrect Solution: D Statement-I is incorrect: Direct taxes (like Personal Income Tax) in India are progressive, not regressive. In a progressive system, those with higher incomes pay a higher percentage of their income as tax. It is indirect taxes (like GST) that are often described as regressive because the same rate applies to all consumers regardless of their wealth. Statement-II is correct: This is the textbook definition of progressive taxation. Its goal is to achieve vertical equity, which means individuals in a better financial position contribute a larger share to the public exchequer. This revenue is then used for social welfare, serving the broader objective of income redistribution.

#### 4. Question

Consider the following statements:

Statement-I: Direct taxes in India are generally considered regressive because the tax burden falls disproportionately on the low-income earners.

Statement-II: Progressive taxation is a method where the rate of tax increases as the taxable volume or value increases, promoting vertical equity in the economy.

Which one of the following is correct in respect of the above statements?

• (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

• (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

• (c) Statement-I is correct but Statement-II is incorrect

• (d) Statement-I is incorrect but Statement-II is correct

Solution: D

Statement-I is incorrect: Direct taxes (like Personal Income Tax) in India are progressive, not regressive. In a progressive system, those with higher incomes pay a higher percentage of their income as tax. It is indirect taxes (like GST) that are often described as regressive because the same rate applies to all consumers regardless of their wealth. Statement-II is correct: This is the textbook definition of progressive taxation. Its goal is to achieve vertical equity, which means individuals in a better financial position contribute a larger share to the public exchequer. This revenue is then used for social welfare, serving the broader objective of income redistribution.

Solution: D

• Question 5 of 5 5. Question With reference to the Indian economy after the 1991 reforms, consider the following statements: The percentage share of the agriculture sector in India’s total exports has steadily increased over the last three decades. India shifted from a fixed exchange rate regime to a dual exchange rate system and then to a market-determined managed float. Foreign Institutional Investors were allowed to invest in India’s equity markets for the first time post 1991 reforms. How many of the above statements are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: B Statement 1 is incorrect. Although the absolute value of agricultural exports has increased over the past three decades, the percentage share of agriculture in India’s total exports has not steadily increased. With economic liberalisation, India’s export basket diversified significantly toward manufactured goods and services—particularly IT and pharmaceuticals. As a result, agriculture’s proportional share in total exports has generally declined or fluctuated rather than showing a consistent upward trend. Structural transformation typically leads to a declining share of agriculture in GDP and exports as economies industrialise and expand their services sector. Statement 2 is correct. In 1992, India introduced the Liberalised Exchange Rate Management System (LERMS), which created a dual exchange rate system—partly official and partly market-determined. By 1993, India unified the exchange rate and moved toward a market-determined managed float system. Under this regime, exchange rates are largely determined by market forces, but the Reserve Bank of India intervenes when necessary to reduce excessive volatility. Statement 3 is correct. As part of financial sector reforms following the 1991 balance of payments crisis, India opened its capital markets to Foreign Institutional Investors (FIIs) in 1992. This marked a major shift toward financial globalisation and increased capital inflows into Indian equity markets. Incorrect Solution: B Statement 1 is incorrect. Although the absolute value of agricultural exports has increased over the past three decades, the percentage share of agriculture in India’s total exports has not steadily increased. With economic liberalisation, India’s export basket diversified significantly toward manufactured goods and services—particularly IT and pharmaceuticals. As a result, agriculture’s proportional share in total exports has generally declined or fluctuated rather than showing a consistent upward trend. Structural transformation typically leads to a declining share of agriculture in GDP and exports as economies industrialise and expand their services sector. Statement 2 is correct. In 1992, India introduced the Liberalised Exchange Rate Management System (LERMS), which created a dual exchange rate system—partly official and partly market-determined. By 1993, India unified the exchange rate and moved toward a market-determined managed float system. Under this regime, exchange rates are largely determined by market forces, but the Reserve Bank of India intervenes when necessary to reduce excessive volatility. Statement 3 is correct. As part of financial sector reforms following the 1991 balance of payments crisis, India opened its capital markets to Foreign Institutional Investors (FIIs) in 1992. This marked a major shift toward financial globalisation and increased capital inflows into Indian equity markets.

#### 5. Question

With reference to the Indian economy after the 1991 reforms, consider the following statements:

• The percentage share of the agriculture sector in India’s total exports has steadily increased over the last three decades.

• India shifted from a fixed exchange rate regime to a dual exchange rate system and then to a market-determined managed float.

• Foreign Institutional Investors were allowed to invest in India’s equity markets for the first time post 1991 reforms.

How many of the above statements are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

• Statement 1 is incorrect. Although the absolute value of agricultural exports has increased over the past three decades, the percentage share of agriculture in India’s total exports has not steadily increased. With economic liberalisation, India’s export basket diversified significantly toward manufactured goods and services—particularly IT and pharmaceuticals. As a result, agriculture’s proportional share in total exports has generally declined or fluctuated rather than showing a consistent upward trend. Structural transformation typically leads to a declining share of agriculture in GDP and exports as economies industrialise and expand their services sector.

• Statement 2 is correct. In 1992, India introduced the Liberalised Exchange Rate Management System (LERMS), which created a dual exchange rate system—partly official and partly market-determined. By 1993, India unified the exchange rate and moved toward a market-determined managed float system. Under this regime, exchange rates are largely determined by market forces, but the Reserve Bank of India intervenes when necessary to reduce excessive volatility.

Statement 3 is correct. As part of financial sector reforms following the 1991 balance of payments crisis, India opened its capital markets to Foreign Institutional Investors (FIIs) in 1992. This marked a major shift toward financial globalisation and increased capital inflows into Indian equity markets.

Solution: B

Join our Official Telegram Channel HERE for Motivation and Fast Updates

Join our Twitter Channel HERE

Follow our Instagram Channel HERE

Stay Consistent

Consistency is key in UPSC preparation. By making the UPSC Static Quiz a part of your daily routine, you will steadily improve your knowledge base and exam readiness. Join us every day to tackle new questions and make your journey towards UPSC success more structured and effective.