UPSC Static Quiz – Economy : 17 April 2025
Kartavya Desk Staff
UPSC Static Quiz – Economy : 17 April 2025 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 In Economy, Kuznets’ theory is related to a) Population growth b) Inequality c) GDP per capita d) Fiscal deficit Correct Solution: b) While there is an argument in literature that inequalities are a manifestation of the average level of income, as explained by the Kuznets’ theory. Kuznets believed that inequality would follow an inverted “U” shape as it rises and then falls again with the increase of income per-capita. Incorrect Solution: b) While there is an argument in literature that inequalities are a manifestation of the average level of income, as explained by the Kuznets’ theory. Kuznets believed that inequality would follow an inverted “U” shape as it rises and then falls again with the increase of income per-capita.
#### 1. Question
In Economy, Kuznets’ theory is related to
• a) Population growth
• b) Inequality
• c) GDP per capita
• d) Fiscal deficit
Solution: b)
While there is an argument in literature that inequalities are a manifestation of the average level of income, as explained by the Kuznets’ theory.
Kuznets believed that inequality would follow an inverted “U” shape as it rises and then falls again with the increase of income per-capita.
Solution: b)
While there is an argument in literature that inequalities are a manifestation of the average level of income, as explained by the Kuznets’ theory.
Kuznets believed that inequality would follow an inverted “U” shape as it rises and then falls again with the increase of income per-capita.
• Question 2 of 5 2. Question Which of these actions by the Reserve Bank of India (RBI) may lead scheduled commercial banks to lend less money to their retail customers? Reduction in Cash Reserve Ratio Increase in Repo Rate Increase in Statutory Liquidity Ratio How many of the above statements is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: b) Statement 1 is incorrect. RBI uses various policy instruments to bring forth a healthy Reserve deposit ratio (rdr) in commercial banks. The first instrument is the Cash Reserve Ratio which specifies the fraction of their deposits that banks must keep with RBI. There is another tool called Statutory Liquidity Ratio which requires the banks to maintain a given fraction of their total demand and time deposits in the form of specified liquid assets. A decline in CRR gives banks more cash at hand, so more lending. An increase in SLR gives less cash at hand, so less lending. An increase in repo rate makes borrowing unattractive for customers since banks now face a higher rate of funds, so less lending from banks. Incorrect Solution: b) Statement 1 is incorrect. RBI uses various policy instruments to bring forth a healthy Reserve deposit ratio (rdr) in commercial banks. The first instrument is the Cash Reserve Ratio which specifies the fraction of their deposits that banks must keep with RBI. There is another tool called Statutory Liquidity Ratio which requires the banks to maintain a given fraction of their total demand and time deposits in the form of specified liquid assets. A decline in CRR gives banks more cash at hand, so more lending. An increase in SLR gives less cash at hand, so less lending. An increase in repo rate makes borrowing unattractive for customers since banks now face a higher rate of funds, so less lending from banks.
#### 2. Question
Which of these actions by the Reserve Bank of India (RBI) may lead scheduled commercial banks to lend less money to their retail customers?
• Reduction in Cash Reserve Ratio
• Increase in Repo Rate
• Increase in Statutory Liquidity Ratio
How many of the above statements is/are correct?
• (a) Only one
• (b) Only two
• (c) All three
Solution: b)
Statement 1 is incorrect.
• RBI uses various policy instruments to bring forth a healthy Reserve deposit ratio (rdr) in commercial banks. The first instrument is the Cash Reserve Ratio which specifies the fraction of their deposits that banks must keep with RBI.
• There is another tool called Statutory Liquidity Ratio which requires the banks to maintain a given fraction of their total demand and time deposits in the form of specified liquid assets.
• A decline in CRR gives banks more cash at hand, so more lending. An increase in SLR gives less cash at hand, so less lending. An increase in repo rate makes borrowing unattractive for customers since banks now face a higher rate of funds, so less lending from banks.
Solution: b)
Statement 1 is incorrect.
• RBI uses various policy instruments to bring forth a healthy Reserve deposit ratio (rdr) in commercial banks. The first instrument is the Cash Reserve Ratio which specifies the fraction of their deposits that banks must keep with RBI.
• There is another tool called Statutory Liquidity Ratio which requires the banks to maintain a given fraction of their total demand and time deposits in the form of specified liquid assets.
• A decline in CRR gives banks more cash at hand, so more lending. An increase in SLR gives less cash at hand, so less lending. An increase in repo rate makes borrowing unattractive for customers since banks now face a higher rate of funds, so less lending from banks.
• Question 3 of 5 3. Question The speculative demand for money, ordinarily, is inversely proportional to the a) national stock indices b) change in gold prices c) interest rate d) money supply Correct Solution: c) When the interest rate is very high everyone expects it to fall in future and hence anticipates capital gains from bond-holding. Hence people convert their money into bonds. Thus, speculative demand for money is low. When the interest rate comes down, more and more people expect it to rise in the future and anticipate capital loss. Thus, they convert their bonds into money giving rise to a high speculative demand for money. Hence speculative demand for money is inversely related to the rate of interest. Incorrect Solution: c) When the interest rate is very high everyone expects it to fall in future and hence anticipates capital gains from bond-holding. Hence people convert their money into bonds. Thus, speculative demand for money is low. When the interest rate comes down, more and more people expect it to rise in the future and anticipate capital loss. Thus, they convert their bonds into money giving rise to a high speculative demand for money. Hence speculative demand for money is inversely related to the rate of interest.
#### 3. Question
The speculative demand for money, ordinarily, is inversely proportional to the
• a) national stock indices
• b) change in gold prices
• c) interest rate
• d) money supply
Solution: c)
When the interest rate is very high everyone expects it to fall in future and hence anticipates capital gains from bond-holding. Hence people convert their money into bonds. Thus, speculative demand for money is low. When the interest rate comes down, more and more people expect it to rise in the future and anticipate capital loss. Thus, they convert their bonds into money giving rise to a high speculative demand for money. Hence speculative demand for money is inversely related to the rate of interest.
Solution: c)
When the interest rate is very high everyone expects it to fall in future and hence anticipates capital gains from bond-holding. Hence people convert their money into bonds. Thus, speculative demand for money is low. When the interest rate comes down, more and more people expect it to rise in the future and anticipate capital loss. Thus, they convert their bonds into money giving rise to a high speculative demand for money. Hence speculative demand for money is inversely related to the rate of interest.
• Question 4 of 5 4. Question Consider the following statements. Core inflation represents the long run trend in the price level, including food and fuel inflation. In measuring core inflation, transitory price changes are usually excluded. 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) Core inflation represents the long run trend in the price level. In measuring long run inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy. Incorrect Solution: a) Core inflation represents the long run trend in the price level. In measuring long run inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.
#### 4. Question
Consider the following statements.
• Core inflation represents the long run trend in the price level, including food and fuel inflation.
• In measuring core inflation, transitory price changes are usually excluded.
Which of the above statements is/are incorrect?
• c) Both 1 and 2
• d) Neither 1 nor 2
Solution: a)
Core inflation represents the long run trend in the price level. In measuring long run inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.
Solution: a)
Core inflation represents the long run trend in the price level. In measuring long run inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.
• Question 5 of 5 5. Question Consider the following statements. When an economy goes through a phase of high inflation, there are chances that the unemployment rate will fall. High inflation can lower the purchasing power of the consumer. The RBI monetary policy has a direct impact on controlling “cost-push” inflation. 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. There is a trade-off between inflation and unemployment. Typically, when an economy goes through a phase of high inflation, chances are that the unemployment rate will fall. That’s because firms, enticed by higher prices, try to ramp up production by recruiting more people. High inflation may be robbing people of their purchasing power. It is also important to understand that monetary policy does not have a direct solution to controlling such “cost-push” inflation. It cannot make fuel prices lower by raising interest rates. All it can do is to control demand in the economy. Incorrect Solution: b) Statement 3 is incorrect. There is a trade-off between inflation and unemployment. Typically, when an economy goes through a phase of high inflation, chances are that the unemployment rate will fall. That’s because firms, enticed by higher prices, try to ramp up production by recruiting more people. High inflation may be robbing people of their purchasing power. It is also important to understand that monetary policy does not have a direct solution to controlling such “cost-push” inflation. It cannot make fuel prices lower by raising interest rates. All it can do is to control demand in the economy.
#### 5. Question
Consider the following statements.
• When an economy goes through a phase of high inflation, there are chances that the unemployment rate will fall.
• High inflation can lower the purchasing power of the consumer.
• The RBI monetary policy has a direct impact on controlling “cost-push” inflation.
How many of the above statements is/are correct?
• (a) Only one
• (b) Only two
• (c) All three
Solution: b)
Statement 3 is incorrect.
There is a trade-off between inflation and unemployment. Typically, when an economy goes through a phase of high inflation, chances are that the unemployment rate will fall. That’s because firms, enticed by higher prices, try to ramp up production by recruiting more people.
High inflation may be robbing people of their purchasing power.
It is also important to understand that monetary policy does not have a direct solution to controlling such “cost-push” inflation. It cannot make fuel prices lower by raising interest rates. All it can do is to control demand in the economy.
Solution: b)
Statement 3 is incorrect.
There is a trade-off between inflation and unemployment. Typically, when an economy goes through a phase of high inflation, chances are that the unemployment rate will fall. That’s because firms, enticed by higher prices, try to ramp up production by recruiting more people.
High inflation may be robbing people of their purchasing power.
It is also important to understand that monetary policy does not have a direct solution to controlling such “cost-push” inflation. It cannot make fuel prices lower by raising interest rates. All it can do is to control demand in the economy.
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.