MCQs on Economics -14

1. Which of the following true about Advance Pricing Agreement (APA):
i) It provides a predictable transfer pricing regime.
ii) India’s first bilateral APA signed with a Japanese company.
iii) APA must at least have one tax authority.
Choose the correct answer from the codes given below
(a) i and ii
(b) ii and iii
(c) i and iii
(d) i, ii, iii


2. Tarapore Committee submitted its report on “Full Convertibility on Rupee” on-
(a) Current account
(b) Capital account
(c) Both in current as well as in Capital account
(d) Special Drawing Rights (SDR)


3. CAPART is related with-
(a) Assisting and evaluating rural welfare programs
(b) Computer hardware (c) Consultant service of export promotion
(d) Controlling pollution in big industries.


4. Which statement of the following false for IMF?
A. It is not an agency of UNO
B. It can grant loan to any country of the world
C. It can grant loan to State Government of a country.
D. It offers only conditional loans.
(a) b, c, d are true
(b) a, c, d are true
(c) b, c, d are true
(d) a, c, d are true


5. The cause of deflation is-
(a) Lack of goods and services as compared to money supply.
(b) Lack of imports as compared to exports.
(c) Lack of money supply as compared to supply of goods and services.
(d) None of these.


6. Mixed Economy means:
(a) Co-existence of small and large industries.
(b) Promoting both Agriculture and Industries in the economy.
(c) Co-existence of rich and poor.
(d) None of these.


7. In the case of agricultural goods if the government fixes the price above the market clearing price together with banning exports and buys up surpluses in production, which one of the following will characterize the market outcome?
(a) Consumers pay more for their food while producers get higher revenues.
(b) Consumers get cheaper food while producers get higher revenues.
(c) Consumers pay more for food while producers get lower revenues.
(d) Consumers gain but whether producers gain it cannot be said.


8. Which of the rate is not determined by Reserve Bank of India?
(a) Bank Rate
(b) Cash Reserve Ratio
(c) Statutory Lending Rate
(d) Prime Lending Rate


9. Which of the following will be correct if an economy follows a floating exchange rate regime’?
(a) The exchange rate will adjust to keep the current account deficit/surplus just equal to the capital account surplus/deficit.
(b) The government does not need to maintain a forex reserve.
(c) For such regime to follow, the economy must maintain more foreign assets than foreign liabilities
(d) The current account deficit must be maintained at a zero level by the economy.


10. Consider the following statements:
i. Under the World Trade Organisation (WTO) agreements, countries cannot normally discriminate between their trading partners.
ii. Any member country of the WTO granting one country a special favour needs to be extended to all other WTO members.

Select correct option:
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2


11. What does a short-run ‘phillips curve’ show?
(a) The rate of money-wage inflation for each level of possible unemployment and for a specific expected rate of inflation.
(b) The rate of money-wage inflation that is generated at fully employment.
(c) The rate of money-wage inflation which was already expected.
(d) None of the above.


12. Which of the following is correct about ‘hedging’?
(i) This is an act of reducing uncertainty about future price movements.
(ii) It may be done in commodity, security and currency.
(iii) This may be done by forward sales or purchases.
(a) i only
(b) i and ii
(c) ii and iii
(d) i, ii and iii


13. Consider the following statements and select the correct code:
i) Alpine Convertible Bond (ACB) is a bond issued by the Indian companies to the West European investors.
ii) The ACBs are a kind of foreign currency convertible bond (FCCB).
(a) Only I
(b) Only ii
(c) Both I and ii
(d) Neither I and ii


14. Select the statement which best explains the concept of ‘bubble’:
(a) Manipulate price rise of an asset usually riding the expectations of novice investors.
(b) Price rise of an asset unexplained by the fundamentals yet people showing interest to hold it.
(c) Speculative price rise of an asset when inflation is higher and employment shows expansion.
(d) A phase of boom in an economy with bubbles of strong fundamentals besides strong investors confidence.


15. Select the correct statement regarding the ‘debt swap’:
(a) A situation when unpaid part of loan of a borrower is written off by the lender.
(b) A phenomenon of replacing old loans with newer ones.
 (c) Two bodies exchange their mutual loans on the same rate of interest.
(d) None of these (ELSS)

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