Indian Economy MCQs

Notes:
Stagflation refers to persistent high inflation coupled with high unemployment and stagnant demand /growth in economy.
High Inflation + Low Economic Growth {or conditions of recession} + Low Employment Generation = Stagflation

Notes:
When the Reserve Bank of India (RBI) tightens its monetary policy, it typically raises the repo rate, which is the rate at which banks borrow from the RBI. This increase in borrowing costs leads banks to offer higher deposit rates to attract more savings from customers. Higher deposit rates incentivize individuals to save more, thus increasing the overall liquidity in the banking system. Historically, when the RBI has tightened policy, deposit rates have often risen to reflect these changes.

Notes:
Gini coefficient represents the income distribution of a country’s residents. It was developed by the Italian statistician and sociologist Corrado Gini. It measures the inequality. The coefficient ranges from zero to one, with zero representing perfect equality and one showing perfect inequality. The higher is the Gini Coefficient, more is gap between rich and poor in a country. If the value of Gini Coefficient is 1, it implies that all wealth of that country belongs to one person and everybody else is poor. The 0 value of Gini Coefficient implies that all people have exactly equal wealth. Practically, the Gini Coefficient value falls between 0 and 1 for all the countries.

Notes:
The correct answer is “Letter of Credit.” A Letter of Credit (LC) is a financial document issued by a bank that guarantees payment to the exporter upon presentation of specified documents, such as shipping and insurance documents. This arrangement reduces risk for both parties in international trade, ensuring that the exporter receives payment and the importer receives the goods. LCs are widely used in global commerce, with the first recorded use dating back to the 12th century in the Mediterranean trade.

Notes:
The tourist attractions mentioned, including the Chatham Saw Mill, which is one of the oldest and largest saw mills in Asia, and the scenic Wandoor Beach, along with Mount Harriet, the third highest peak in the Andamans offering stunning views, and the intrigue-filled Limestone Caves are all located in the beautiful Andaman and Nicobar Islands. This Indian Union Territory in the Bay of Bengal is rich in natural beauty and historical significance.

Notes:
Collateralized Borrowing and Lending Obligation (CBLO) is a money market instrument. It represents the terms and conditions of a loan between a borrower and a lender. CBLO is a short-term investment option that allows investors to earn interest on their excess funds. It also provides a source of short-term funding for borrowers.
CBLO is a discounted instrument that is available in electronic book entry form. The maturity period ranges from one day to one year.
CBLO is a low-risk instrument because it is adequately backed by collateral. It is also a short-term investment option, which means that investors can quickly liquidate their investment if needed.
CBLO is the largest overnight segment in India.

Notes:
There are 8 Core Industries or core sectors of the economy viz. coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity used in Index of Industrial Production (IIP).

Notes:
Foreign Direct Investment (FDI) involves long-term investments in physical assets, bringing capital, technology, and management expertise to a country. In contrast, Foreign Institutional Investment (FII) primarily involves short-term capital investments in financial markets, such as stocks and bonds, without direct control over businesses. FDI is typically more stable and less volatile than FII, which can quickly exit markets, impacting local economies. FDI often targets specific sectors for development, while FII can invest across various market segments.

Notes:
The first Bank with Limited Liability to be managed by Indian Board was Oudh Commercial Bank. It was established in 1881 at Faizabad. This bank failed in 1958. The first bank purely managed by Indians was Punjab National Bank, established in Lahore in 1895

Notes:
The primary difference between a free trade area and a customs union is that members of a customs union adopt a common set of external trade barriers. In a free trade area, member countries eliminate tariffs among themselves but maintain their own external tariffs. Examples include NAFTA (now USMCA) as a free trade area and the European Union as a customs union, which has a unified external tariff policy.