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UPSC2022 > Economics > Flashcards

Economics Flashcards

1
Q

Forensic audit”, recently seen in the news refers to examination of:

A

Financial records of any individual or company

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2
Q

_____ are a form of monetary policy that sees interest rates fall below 0%. Central banks and regulators use this unusual policy tool when there are strong signs of deflation.

A

Negative interest rates

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3
Q

When the interest rate is ______, banks lend more to households and companies and the people tend to spend more, thereby leading to an increase in economic activity and an increase in inflation levels.

A

negative

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4
Q

______ is the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. Negative interest rates will discourage investors and will lead to a reduction of its inflows into the economy.

A

Hot money

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5
Q

The concept of_____ is an inverted-U or bell- shaped relation between economic growth and inequality. This implies that at the initial stages of growth, the economic inequality increases, and it starts declining after growth reaches a threshold.

A

‘Kuznets’ curve

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6
Q

______ is a special power vested in members of the Lok Sabha to oppose a demand being discussed for specific allocation by the government in the Finance Bill as part of the Demand for Grants.

A

Cut Motion

There are three types of Cut Motions; Disapproval of Policy Cut Motions, Economy Cut Motions and Toke Cut Motions

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7
Q

It is the Capital Expenditure taken together with provision made for creation of capital assets through Grants-In-Aid to States.

A

Effective capital expenditure

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8
Q

The D-SIIBs are identified by the——- and fall under its regulation.

A

Insurance Regulatory and Development Authority of India (IRDAI)

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9
Q

Domestic Tariff Area (DTA) includes the whole of India (including the territorial waters and continental shelf) but does not include the areas of the

A

SEZ

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10
Q

Reverse repo normalisation is the process of……. by the Central bank of a country.

A

increasing Reverse Repo rates

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11
Q

…….. is a common measure of market concentration and is used to determine market competitiveness, often in pre- and post-merger & acquisition (M&A) transactions.

A

The Herfindahl-Hirschman Index (HHI)

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12
Q

……..l is essentially the ratio of provisioning to gross non- performing assets and indicates the extent of funds a bank has kept aside to cover loan losses.
A high ….. ratio (ideally above 70%) means most asset quality issues have been taken care of and the bank is not vulnerable.

A

Provisioning Coverage Ratio (PCR)

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13
Q

Keynesian theory states that, during economic depressions, the Governments should increase their spending and lower taxes to stimulate demand and pull the global economy out of the depression. The…….. Effect is against Keynesian economic theory as it professes that in periods of deflation a drop in aggregate demand would be self-correcting. The deflation would cause an increase in wealth, causing expenditures to rise, thus correcting the drop in demand.

A

Pigou

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14
Q

…….., is the measure of income distribution across a population. Developed by an Italian statistician in 1912, it often serves as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population.
It is based on the difference between the Lorenz curve (the observed cumulative income distribution) and the notion of a perfectly equal income distribution.

A

The Gini coefficient, or Gini Index

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15
Q

An increase in a nation’s …. is an indication that its exports are becoming more expensive and its imports are becoming cheaper. It is losing its trade competitiveness.

A

Real effective exchange rate

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16
Q

Sale of foreign exchange reserves of a country to balance the deficit in Balance of Payment.

A

Official reserve sale 

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17
Q

The inverse relationship between unemployment rate and inflation when graphically charted is called the…….

A

Phillips curve

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18
Q

It refers to a phenomenon where the prices of certain goods witness fluctuations that are cyclical in nature. It happens due to faulty producer expectations.
The producers of agricultural goods, for instance, might decide to increase their output one year because their product commanded a very high price the previous year.
This, however, might lead to overproduction and cause prices to slump that year, thus leading to losses. Such cyclical price fluctuations are more severe in markets where speculators are banned from hoarding goods to sell them later at a higher price.

A

Cobweb theory

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19
Q

Difference between the loan amount and the value of the asset used as collateral.

A

Haircut

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20
Q

The….. a graphical distribution of wealth developed in 1906, shows the proportion of income earned by any given percentage of the population.

A

Lorenz Curve (the actual distribution of income curve),

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21
Q

……measures the degree of income equality in a population

A

The Gini Coefficient

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22
Q

…is the lowest unemployment rate that can be sustained without causing wages growth and inflation to rise.

A

Non-Accelerating inflation rate of unemployment

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23
Q

On the ruins of the Kushan empire arose a new empire, which established its sway over a good part of the former dominions of both the Kushans and Satavahanas. This was the empire of the….

A

Guptas.

24
Q

An Inflationary situation in an economy results out of a process of wage and price interaction as when wages press prices up and prices pull wages up. It is known as an……. The wage-price interaction was seen as a plausible cause of inflation in the year 1935.

A

inflationary spiral.

25
Q

What will be the effect of ‘operation twist’ under Open Market Operation by the RBI?

A

It decreases long-term investment rates and increases short-term rates.

26
Q

….it is large-scale purchases of financial assets, like government
and corporate bonds and even stocks. This triggers powerful outcomes as the amount of money circulating in an economy increases, which helps lower longer-term interest rates. Thus, ….. by the US Federal Reserve leads to an increase in investment in emerging economies like India which is generally seen in the form of FPI inflow and hence a rise in Forex Reserve.

A

Quantitative Easing (QE):

27
Q

In general, rate hike (……) by the US Federal Reserve leads to FPIs exiting emerging markets such as India that are considered riskier than developed economies.

A

Quantitative Easing Tapering

28
Q

…..is the measure of the risk-adjusted return of a financial portfolio. A portfolio with a higher …. is considered superior relative to its peers. It is used to help investors understand the return of an investment compared to its risk.

A

Sharpe ratio

29
Q

……is used to measure purchasing power parity (PPP) between nations, using the price of a McDonald’s Big Mac as the benchmark

A

The Big Mac index

30
Q
  1. It is the rate at which an investor buys an Initial Public Offering (IPO) in a grey market. 2. It indicates how a company’s performance will be after listing it on the stock market.
A

Kostak rate

31
Q

It is a financial instrument which is a hybrid of debt & equity financing that gives the lender the right to convert to an ownership or equity interest in the company in case of default, generally, after venture capital companies and other senior lenders are paid.

Which among the following financial instruments is best described by the above passage?

A

(a) Mezzanine Financing

32
Q

….are negotiable financial instruments that represent the publicly traded securities of a foreign company.

A

Depository Receipts or DRs

33
Q

……was evolved in 1969 for determining the allocation of central assistance for state plans in India. It was adopted for distribution of plan assistance during Fourth and Fifth Five Year Plans.

A

The Gadgil Mukherjee formula

34
Q

–the higher price makes it more desirable

A

. Veblen goods

35
Q

In the context of US Federal Reserve, which of the following best describes taper tantrum, a term sometimes seen in the news?

.

A

(b) It refers to a shift in monetary policy that led to decrease in the purchase of the treasury bonds by US Fed

36
Q

…remained India’s top trading partner for the second consecutive fiscal in 2019-20, which shows increasing economic ties between the two countries

A

The US

37
Q

….was the most imported commodity into India, at about 21 percent in fiscal year 2021.

A

Crude petroleum

38
Q

It is a tax to discourage negative production externalities.

A

Pigovan tax

39
Q

A situation wherein inflation or income growth moves taxpayers into higher tax brackets

A

Fiscal drag

40
Q

Sterilization helps to check inflation & counters rupee depreciation; hence it might result in rupee….. But it makes our exports costly in importing countries, as depreciating currency results in competitive exports.

A

appreciation

41
Q

Sterilization… forex reserves of the central bank.

A

increases

42
Q

PCA framework applies to all banks in India (including the foreign banks) but excludes….. from initiation of the action.

A

payment banks and small financial banks

43
Q
  1. It is the average interest rate for loans issued in US Dollars with a maturity period of 1 day.
    .
  2. It is based on completed financial transactions.
A

Secured overnight financing rate

44
Q

is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans. Since the lending doesn’t use collateral, the credit is unsecured, and hence it includes a credit risk premium.

A

The London Interbank Offered Rate (LIBOR)

45
Q

A government cuts taxes and runs a budget deficit in order to stimulate consumer spending. However, consumer responds to it by increasing savings instead of spending more. The forward looking approach of consumers is based on the fact that increased borrowings by the government will be repaid by taxes in future. This will lead to a similar impact on the economy as borrowing by the government today.

Which of the following is best described in the passage given above?

A

Ricardian equivalence

46
Q

receives the highest FDI Equity inflows both in terms of value and share (in percent).

A

Computer Software and Hardware

47
Q

According to the new guidelines under the policy, the privatization of PSUs in non-strategic sectors will be undertaken by the Department of Investment and Public Asset Management (DIPAM) and the closure of Public Sector Undertakings (PSUs) will be ….responsibility.

A

Department of Public Enterprises (DPE)

48
Q

…is the difference between the Revenue receipts plus Non-debt Capital Receipts and total expenditure.

A

Fiscal Deficit

49
Q

The provisions of MAT are applicable for ….. whereas, the provisions of AMT are applicable for…..

A

corporates, cooperatives

50
Q

A ……means an account opened and maintained for holding Government securities, by an entity or a person including a person resident outside India’ with a “Custodian” permitted by the Reserve Bank of India

A

Gilt Account”

51
Q

as CRR or SLR is increased by RBI, money multiplier is

A

decreased, as there would be less amount of money for credit creation with the banks.

52
Q

….is a screen based electronic anonymous order matching system for secondary market trading in Government securities owned by RBI. The membership of the system is open to entities like Banks, Primary Dealers, Insurance Companies, Mutual Funds etc. i.e. entities who maintain SGL accounts with RB

A

Negotiated Dealing System-Order Matching(NDS-OM)

53
Q

Calibrated typing policy the RBI

A

Would increase the policy rate or keep them constant

54
Q

Under the external benchmarking of loans the RBI has included any of the four external benchmarks

A

Repo rate,
Yield Of the treasury bill T 91
the of T1 80
Or any reference market rate of interest published by the financial benchmarks India Private Limited

55
Q

Refined core inflation covers all categories except

A

Food and beverages
 fuel and light - electricity kerosene LPG coal dung cake
petrol and diesel under miscellaneous

56
Q

Core inflation was all categories accept

A

food beverage

fuel and light

57
Q

·In a bid to make the MSME sector more competitive, the Government of India (GOI) will be rolling out the …programme with an outlay of ₹6,000 crores over five years. Hence, option (a) is the

A

Raising and Accelerating MSME Performance (RAMP)

UPSC2022 (8 decks)

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