UPSC Static Quiz – Economy : 7 January 2026

UPSC Static Quiz – Economy : 7 January 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 statements regarding inflation measurement in India: Statement I: The Consumer Price Index (CPI) inflation rate can fall sharply even if the prices of goods do not fall and increase slightly compared to the previous month. Statement II: The ‘base effect’ means that if prices were very high in the same month last year, the current year’s inflation rate may appear lower. Which one of the following is correct? 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: A CPI inflation in India is calculated on a year-on-year basis, which means prices in a given month are compared with prices in the same month of the previous year, not with the immediately preceding month. Because of this, inflation can decline even when prices have not fallen in absolute terms. If prices were unusually high last year, the comparison base becomes large. This statistical impact is called the base effect. A high base mechanically lowers the current inflation rate, even if present-day prices are stable or rising slightly. Hence, the base effect clearly explains why inflation can fall without any real reduction in prices. Incorrect Solution: A CPI inflation in India is calculated on a year-on-year basis, which means prices in a given month are compared with prices in the same month of the previous year, not with the immediately preceding month. Because of this, inflation can decline even when prices have not fallen in absolute terms. If prices were unusually high last year, the comparison base becomes large. This statistical impact is called the base effect. A high base mechanically lowers the current inflation rate, even if present-day prices are stable or rising slightly. Hence, the base effect clearly explains why inflation can fall without any real reduction in prices.

#### 1. Question

Consider the following statements regarding inflation measurement in India: Statement I: The Consumer Price Index (CPI) inflation rate can fall sharply even if the prices of goods do not fall and increase slightly compared to the previous month. Statement II: The ‘base effect’ means that if prices were very high in the same month last year, the current year’s inflation rate may appear lower.

Which one of the following is correct?

• 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: A

CPI inflation in India is calculated on a year-on-year basis, which means prices in a given month are compared with prices in the same month of the previous year, not with the immediately preceding month. Because of this, inflation can decline even when prices have not fallen in absolute terms. If prices were unusually high last year, the comparison base becomes large. This statistical impact is called the base effect. A high base mechanically lowers the current inflation rate, even if present-day prices are stable or rising slightly. Hence, the base effect clearly explains why inflation can fall without any real reduction in prices.

Solution: A

• Question 2 of 5 2. Question Match the following Deficit measures with their implications: List I (Deficit Type) List II (Implication/Formula) List III (Significance) (A) Effective Revenue Deficit (i) Fiscal Deficit – Interest Payments (x) Measures borrowing for current year’s needs (B) Primary Deficit (ii) Revenue Deficit – Grants for Capital Assets (y) Isolates consumption spending from asset creation (C) Fiscal Deficit (iii) Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts) (z) Indicates total borrowing requirement Which one of the following combinations is correctly matched? (a) A-(ii)-(x) and B-(iii)-(z) (b) A-(i)-(x) and C-(ii)-(z) (b) A-(i)-(x) and C-(ii)-(z) (d) A-(ii)-(y) and B-(i)-(x) Correct Solution: D Effective Revenue Deficit (A): Formula is RD minus Grants for Capital Assets (ii). Its purpose is to filter out grants that create assets, thus focusing on pure consumption (y). Combination A-(ii)-(y) is correct. Primary Deficit (B): Formula is FD minus Interest Payments (i). It removes the burden of past debts (interest) to show the borrowing needed for the current year’s discretionary spending (x). Combination B-(i)-(x) is correct. Fiscal Deficit (C): Formula is Total Exp – Non-debt Receipts (iii). It represents the total borrowing requirement (z). Incorrect Solution: D Effective Revenue Deficit (A): Formula is RD minus Grants for Capital Assets (ii). Its purpose is to filter out grants that create assets, thus focusing on pure consumption (y). Combination A-(ii)-(y) is correct. Primary Deficit (B): Formula is FD minus Interest Payments (i). It removes the burden of past debts (interest) to show the borrowing needed for the current year’s discretionary spending (x). Combination B-(i)-(x) is correct. Fiscal Deficit (C): Formula is Total Exp – Non-debt Receipts (iii). It represents the total borrowing requirement (z).

#### 2. Question

Match the following Deficit measures with their implications:

List I (Deficit Type) | List II (Implication/Formula) | List III (Significance)

(A) Effective Revenue Deficit | (i) Fiscal Deficit – Interest Payments | (x) Measures borrowing for current year’s needs

(B) Primary Deficit | (ii) Revenue Deficit – Grants for Capital Assets | (y) Isolates consumption spending from asset creation

(C) Fiscal Deficit | (iii) Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts) | (z) Indicates total borrowing requirement

Which one of the following combinations is correctly matched?

• (a) A-(ii)-(x) and B-(iii)-(z)

• (b) A-(i)-(x) and C-(ii)-(z)

• (d) A-(ii)-(y) and B-(i)-(x)

Solution: D

• Effective Revenue Deficit (A): Formula is RD minus Grants for Capital Assets (ii). Its purpose is to filter out grants that create assets, thus focusing on pure consumption (y). Combination A-(ii)-(y) is correct.

• Primary Deficit (B): Formula is FD minus Interest Payments (i). It removes the burden of past debts (interest) to show the borrowing needed for the current year’s discretionary spending (x). Combination B-(i)-(x) is correct.

• Fiscal Deficit (C): Formula is Total Exp – Non-debt Receipts (iii). It represents the total borrowing requirement (z).

Solution: D

• Fiscal Deficit (C): Formula is Total Exp – Non-debt Receipts (iii). It represents the total borrowing requirement (z).

• Question 3 of 5 3. Question Consider the following statements regarding the ‘Outcome Budget’ in India: It is a statutory document mandated under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. It was introduced to shift the focus from ‘outlays’ (expenditure allocated) to ‘outcomes’ (quality of service delivery). It has been integrated into a consolidated ‘Output-Outcome Monitoring Framework’ (OOMF) presented along with the Budget. 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: The Outcome Budget was introduced administratively in 2005-06. The FRBM Act mandates documents like the “Macro-economic Framework Statement” and “Medium-term Fiscal Policy Strategy Statement,” but the Outcome Budget is not a statutory requirement under the Act. Statement 2 is Correct: The primary objective was to move beyond financial tracking (how much money was spent) to physical tracking (what was achieved), linking outlays to quantifiable outcomes. Statement 3 is Correct: Following the merger of Plan and Non-Plan expenditure, the Outcome Budget was revamped. It is now presented as the OOMF, covering Central Sector and Centrally Sponsored Schemes with measurable indicators. Incorrect Solution: B Statement 1 is Incorrect: The Outcome Budget was introduced administratively in 2005-06. The FRBM Act mandates documents like the “Macro-economic Framework Statement” and “Medium-term Fiscal Policy Strategy Statement,” but the Outcome Budget is not a statutory requirement under the Act. Statement 2 is Correct: The primary objective was to move beyond financial tracking (how much money was spent) to physical tracking (what was achieved), linking outlays to quantifiable outcomes. Statement 3 is Correct: Following the merger of Plan and Non-Plan expenditure, the Outcome Budget was revamped. It is now presented as the OOMF, covering Central Sector and Centrally Sponsored Schemes with measurable indicators.

#### 3. Question

Consider the following statements regarding the ‘Outcome Budget’ in India:

• It is a statutory document mandated under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.

• It was introduced to shift the focus from ‘outlays’ (expenditure allocated) to ‘outcomes’ (quality of service delivery).

• It has been integrated into a consolidated ‘Output-Outcome Monitoring Framework’ (OOMF) presented along with the Budget.

How many of the above statements are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

• Statement 1 is Incorrect: The Outcome Budget was introduced administratively in 2005-06. The FRBM Act mandates documents like the “Macro-economic Framework Statement” and “Medium-term Fiscal Policy Strategy Statement,” but the Outcome Budget is not a statutory requirement under the Act.

• Statement 2 is Correct: The primary objective was to move beyond financial tracking (how much money was spent) to physical tracking (what was achieved), linking outlays to quantifiable outcomes.

• Statement 3 is Correct: Following the merger of Plan and Non-Plan expenditure, the Outcome Budget was revamped. It is now presented as the OOMF, covering Central Sector and Centrally Sponsored Schemes with measurable indicators.

Solution: B

• Question 4 of 5 4. Question Which of the following best describes ‘Strategic Disinvestment’ by the Government of India? (a) The sale of minority shares in Central Public Sector Enterprises (CPSEs) through an Initial Public Offer (IPO) to meet the Minimum Public Shareholding norms. (b) The sale of a substantial portion of the Government shareholding of a CPSE, of up to 50% or more, along with the transfer of management control. (c) The repurchase of shares by a CPSE from the Government to utilize its surplus cash reserves. (d) The listing of CPSEs on foreign stock exchanges to attract Foreign Portfolio Investment (FPI). Correct Solution: B Option (a): This describes a “Minority Stake Sale” or “Offer for Sale (OFS).” Management remains with Govt.52 Option (b) is Correct: Strategic Disinvestment involves two key elements: (1) Sale of substantial stake (usually >50%), and (2) Transfer of Management Control to a private entity. This effectively means privatization. Option (c): This describes a “Buyback”. Option (d): This is overseas listing, a capital market operation. Incorrect Solution: B Option (a): This describes a “Minority Stake Sale” or “Offer for Sale (OFS).” Management remains with Govt.52 Option (b) is Correct: Strategic Disinvestment involves two key elements: (1) Sale of substantial stake (usually >50%), and (2) Transfer of Management Control to a private entity. This effectively means privatization. Option (c): This describes a “Buyback”. Option (d): This is overseas listing, a capital market operation.

#### 4. Question

Which of the following best describes ‘Strategic Disinvestment’ by the Government of India?

• (a) The sale of minority shares in Central Public Sector Enterprises (CPSEs) through an Initial Public Offer (IPO) to meet the Minimum Public Shareholding norms.

• (b) The sale of a substantial portion of the Government shareholding of a CPSE, of up to 50% or more, along with the transfer of management control.

• (c) The repurchase of shares by a CPSE from the Government to utilize its surplus cash reserves.

• (d) The listing of CPSEs on foreign stock exchanges to attract Foreign Portfolio Investment (FPI).

Solution: B

• Option (a): This describes a “Minority Stake Sale” or “Offer for Sale (OFS).” Management remains with Govt.52

• Option (b) is Correct: Strategic Disinvestment involves two key elements: (1) Sale of substantial stake (usually >50%), and (2) Transfer of Management Control to a private entity. This effectively means privatization.

• Option (c): This describes a “Buyback”.

• Option (d): This is overseas listing, a capital market operation.

Solution: B

• Option (a): This describes a “Minority Stake Sale” or “Offer for Sale (OFS).” Management remains with Govt.52

• Option (c): This describes a “Buyback”.

• Option (d): This is overseas listing, a capital market operation.

• Question 5 of 5 5. Question Consider the following statements regarding Public Debt in India: Internal debt comprises the majority (over 90%) of the total public debt of the Central Government. Most of India’s external debt is denominated in Indian Rupees, protecting the economy from exchange rate volatility. ‘Market Stabilization Scheme’ (MSS) bonds are issued by the RBI to absorb excess liquidity, and the interest on these bonds is paid by the Government of India. 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 Correct: India’s public debt profile is characterized by low external reliance. Over 95% is Internal Debt (G-Secs, T-Bills, Small Savings). Statement 2 is Incorrect: While the overall Public Debt is Rupee-dominated (because it’s mostly internal), the specific component of External Debt is dominated by the US Dollar (approx 54%), followed by the Rupee and SDR. Statement 3 is Correct: MSS Bonds are used for sterilization (sucking out excess liquidity). While issued by RBI, they are government bonds, and the interest burden falls on the Government, not the RBI. Incorrect Solution: B Statement 1 is Correct: India’s public debt profile is characterized by low external reliance. Over 95% is Internal Debt (G-Secs, T-Bills, Small Savings). Statement 2 is Incorrect: While the overall Public Debt is Rupee-dominated (because it’s mostly internal), the specific component of External Debt is dominated by the US Dollar (approx 54%), followed by the Rupee and SDR. Statement 3 is Correct: MSS Bonds are used for sterilization (sucking out excess liquidity). While issued by RBI, they are government bonds, and the interest burden falls on the Government, not the RBI.

#### 5. Question

Consider the following statements regarding Public Debt in India:

• Internal debt comprises the majority (over 90%) of the total public debt of the Central Government.

• Most of India’s external debt is denominated in Indian Rupees, protecting the economy from exchange rate volatility.

• ‘Market Stabilization Scheme’ (MSS) bonds are issued by the RBI to absorb excess liquidity, and the interest on these bonds is paid by the Government of India.

How many of the above statements are correct?

• (a) Only one

• b) Only two

• c) All three

Solution: B

• Statement 1 is Correct: India’s public debt profile is characterized by low external reliance. Over 95% is Internal Debt (G-Secs, T-Bills, Small Savings).

• Statement 2 is Incorrect: While the overall Public Debt is Rupee-dominated (because it’s mostly internal), the specific component of External Debt is dominated by the US Dollar (approx 54%), followed by the Rupee and SDR.

• Statement 3 is Correct: MSS Bonds are used for sterilization (sucking out excess liquidity). While issued by RBI, they are government bonds, and the interest burden falls on the Government, not the RBI.

Solution: B

• Statement 1 is Correct: India’s public debt profile is characterized by low external reliance. Over 95% is Internal Debt (G-Secs, T-Bills, Small Savings).

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.