UPSC Static Quiz – Economy : 15 July 2024

UPSC Static Quiz – Economy : 15 July 2024 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.

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• Question 1 of 5 1. Question In an economy, the term for establishments having formal existence but with close to no operations or assets is called as a) Sick Industry b) Benami property c) Tax haven d) Ghost company Correct Solution: d) A shell corporation/ Ghost company is a corporation without active business operations or significant assets. These types of corporations are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. Shell corporations act as tax avoidance vehicles for legitimate businesses. Incorrect Solution: d) A shell corporation/ Ghost company is a corporation without active business operations or significant assets. These types of corporations are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. Shell corporations act as tax avoidance vehicles for legitimate businesses.

#### 1. Question

In an economy, the term for establishments having formal existence but with close to no operations or assets is called as

• a) Sick Industry

• b) Benami property

• c) Tax haven

• d) Ghost company

Solution: d)

A shell corporation/ Ghost company is a corporation without active business operations or significant assets. These types of corporations are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. Shell corporations act as tax avoidance vehicles for legitimate businesses.

Solution: d)

• Question 2 of 5 2. Question Consider the following statements regarding company limited by guarantee. A company limited by guarantee is one in which, if the company goes bankrupt, those running it only have to pay a sum they had guaranteed to pay when it was set up. Such a company has no shareholders, but is owned by a group of people called members. Usually, this structure is put in place for charitable organisations and non-profits. How many of the above statements is/are incorrect? a) Only one b) Only two c) All three d) None Correct Solution: d) What is a company limited by guarantee? A company limited by guarantee is one in which, if the company goes bankrupt, those running it only have to pay a sum they had guaranteed to pay when it was set up. The Companies Act, 2013, says, “Company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.” Put very simply, such a company has no shareholders, but is owned by a group of people called members or guarantors. When coming together to form the company, these members pledge to pay a certain amount — usually not a large amount — in case it is wound up. Their liability, if the company fails, is limited to this amount. Usually, this structure is put in place for charitable organisations and non-profits, where any profit earned by the company is re-invested into the business. The members or guarantors can seek donations and funds in the name of the company, but if it fails, they are shielded from the debts it may have accrued. Incorrect Solution: d) What is a company limited by guarantee? A company limited by guarantee is one in which, if the company goes bankrupt, those running it only have to pay a sum they had guaranteed to pay when it was set up. The Companies Act, 2013, says, “Company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.” Put very simply, such a company has no shareholders, but is owned by a group of people called members or guarantors. When coming together to form the company, these members pledge to pay a certain amount — usually not a large amount — in case it is wound up. Their liability, if the company fails, is limited to this amount. Usually, this structure is put in place for charitable organisations and non-profits, where any profit earned by the company is re-invested into the business. The members or guarantors can seek donations and funds in the name of the company, but if it fails, they are shielded from the debts it may have accrued.

#### 2. Question

Consider the following statements regarding company limited by guarantee.

• A company limited by guarantee is one in which, if the company goes bankrupt, those running it only have to pay a sum they had guaranteed to pay when it was set up.

• Such a company has no shareholders, but is owned by a group of people called members.

• Usually, this structure is put in place for charitable organisations and non-profits.

How many of the above statements is/are incorrect?

• a) Only one

• b) Only two

• c) All three

Solution: d)

What is a company limited by guarantee?

A company limited by guarantee is one in which, if the company goes bankrupt, those running it only have to pay a sum they had guaranteed to pay when it was set up.

The Companies Act, 2013, says, “Company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.”

Put very simply, such a company has no shareholders, but is owned by a group of people called members or guarantors. When coming together to form the company, these members pledge to pay a certain amount — usually not a large amount — in case it is wound up. Their liability, if the company fails, is limited to this amount.

Usually, this structure is put in place for charitable organisations and non-profits, where any profit earned by the company is re-invested into the business. The members or guarantors can seek donations and funds in the name of the company, but if it fails, they are shielded from the debts it may have accrued.

Solution: d)

What is a company limited by guarantee?

A company limited by guarantee is one in which, if the company goes bankrupt, those running it only have to pay a sum they had guaranteed to pay when it was set up.

• Question 3 of 5 3. Question Consider the following statements regarding Goods and Services Tax Council. Every decision of the Goods and Services Tax Council shall be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting. The vote of the Central Government in the GST council meeting shall have a weightage of two-thirds of the total votes cast. 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: b) Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely: — The vote of the Central Government shall have a weightage of one third of the total votes cast, and the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting. Incorrect Solution: b) Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely: — The vote of the Central Government shall have a weightage of one third of the total votes cast, and the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

#### 3. Question

Consider the following statements regarding Goods and Services Tax Council.

• Every decision of the Goods and Services Tax Council shall be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting.

• The vote of the Central Government in the GST council meeting shall have a weightage of two-thirds of the total votes cast.

Which of the above statements is/are incorrect?

• c) Both 1 and 2

• d) Neither 1 nor 2

Solution: b)

Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely: —

The vote of the Central Government shall have a weightage of one third of the total votes cast, and

the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

Solution: b)

The vote of the Central Government shall have a weightage of one third of the total votes cast, and

the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

• Question 4 of 5 4. Question Which of the following situations can lead to inflation? a) Sluggish growth of aggregate demand b) Higher levels of unemployment c) Reduction in the money supply d) Rapid growth of aggregate demand outweighing supply Correct Solution: d) Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast. If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation. Incorrect Solution: d) Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast. If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation.

#### 4. Question

Which of the following situations can lead to inflation?

• a) Sluggish growth of aggregate demand

• b) Higher levels of unemployment

• c) Reduction in the money supply

• d) Rapid growth of aggregate demand outweighing supply

Solution: d)

Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast. If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation.

Solution: d)

• Question 5 of 5 5. Question Which of the following is a measure that can be used by the Government to combat inflation? a) Increasing the non-planned expenditure on defence, police etc b) Providing more subsides on exports c) Increasing the rate of interest on savings and fixed deposits d) Reduction in the Cash Reserve Ratio (CRR) Correct Solution: c) Increasing the rate of interest on savings and fixed deposits attracts people to park their money in the banks, which in turn helps to reduce inflation. Incorrect Solution: c) Increasing the rate of interest on savings and fixed deposits attracts people to park their money in the banks, which in turn helps to reduce inflation.

#### 5. Question

Which of the following is a measure that can be used by the Government to combat inflation?

• a) Increasing the non-planned expenditure on defence, police etc

• b) Providing more subsides on exports

• c) Increasing the rate of interest on savings and fixed deposits

• d) Reduction in the Cash Reserve Ratio (CRR)

Solution: c)

Increasing the rate of interest on savings and fixed deposits attracts people to park their money in the banks, which in turn helps to reduce inflation.

Solution: c)

Increasing the rate of interest on savings and fixed deposits attracts people to park their money in the banks, which in turn helps to reduce inflation.

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