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Statics MCQs for UPSC & State PSC Exams - Economics 22 Feb 2024

Statics MCQs for UPSC & State PSC Exams - Economics

Q1:

Consider the following administrative measures:

1. Price controls

2. Rationing

3. Wage controls

4. Import restrictions

5. Export restrictions

6. Black marketing

How many of the above-mentioned measures can be used to control inflation in the short run?

A: Only two

B: Only three

C: Only four

D: Only five

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Answer: (b)

Explanation:

Price controls: Fixing prices artificially can temporarily suppress inflation

Rationing: Limiting the quantity of goods available can cool demand and curb price increases

Wage controls: Capping wage growth can moderate cost pressures and inflation

Import restrictions: Limiting imports can raise the prices of domestic goods by reducing competition

Export restrictions: While temporarily restricting exports of certain goods might push down domestic prices

Black marketing: refers to the illegal sale of goods at higher than controlled prices

Q2:

Consider the following statements, with reference to PPP (Public Private Partnership) model:

Statement I: It is an arrangement between the government and private sector for the provision of public assets and also includes Public Services.

Statement II: In such time of arrangement, the risk is entirely shared by the private entity.

Which one of the following is correct in respect to the above statements?

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.

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Answer: (c)

Explanation:

PPP (Public Private Partnership) model is an arrangement between the government and private sector for the provision of public assets and also includes Public Services. In PPP (Public Private Partnership), there is a well defined allocation of risk between the private sector and public entity. Hence, Statement I is correct but Statement II is incorrect.

Q3:

Consider the following statements, with reference to Special Drawing Rights (SDR):

1. It is an international reserve asset, created by IMF in 1969.

2. It has having its own value i.e. not based on any other currency.

3. It is neither a currency nor a claim on the IMF.

Which of the statements given above are correct?

A: 1 and 2 only

B: 2 and 3 only

C: 1 and 3 only

D: 1, 2 and 3

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Answer: (c)

Explanation:

Special Drawing Rights (SDRs) is an international reserve asset, created by the IMF in 1969 to supplement its member countries official reserves. Hence, statement 1 is correct.

Its value is based, on a basket of five currencies the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. Hence, statement 2 is incorrect.

It is neither a currency nor a claim on the IMF. Hence, statement 3 is correct.

Q4:

Consider the following statements in respect of economic growth and development:

1. It refers to an increase in the real GDP of an economy over time.

2. It is a broader concept that encompasses not only economic growth but also improvements in social welfare, such as education, health, and living standards.

Which of the statements given above is/are correct?

A: 1 only

B: 2 only

C: Both 1 and 2

D: Neither 1 nor 2

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Answer: (c)

Explanation:

Economic growth refers to an increase in the real GDP of an economy, but it's often considered insufficient as a standalone measure of progress. Economic development refers to a broader concept that encompasses not only economic growth but also improvements in social welfare, education, health, and overall living standards. Therefore, development goes beyond just increasing the size of the economy and emphasizes broader societal well-being. Hence, Both 1 and 2 are correct.

Q5:

Consider the following statements about core inflation:

1. It excludes volatile components of the Consumer Price Index (CPI), such as food and energy prices.

2. It is considered a better measure of underlying inflationary trends than the overall CPI.

Which of the statements given above is/are correct?

A: 1 only

B: 2 only

C: Both 1 and 2

D: Neither 1 nor 2

Show

Answer: (c)

Explanation:

Core inflation indeed excludes volatile components of the CPI, such as food and energy prices, making it a better measure of underlying inflationary trends. These temporary fluctuations can obscure the true picture of inflationary pressures driven by monetary policy, demand, and other factors. By excluding these volatile elements, core inflation provides a clearer signal of the long-term inflationary trajectory in the economy, aiding policymakers in making informed decisions. Hence, Both 1 and 2 are correct.