QUIZ – 2020: Insights Static Quiz, 14 January 2020 – Economy
INSIGHTS STATIC QUIZ 2019
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Question 1 of 5
1. Question
Which of these is/are not the examples of fixed capital formation?
- Energy infrastructure
- Office equipment, such as computers
- Accumulation of foreign exchange reserve
Select the correct answer code:
Correct
Solution: c)
Currency is not considered as fixed capital, it is liquid capital. Fixed capital are the assets used in the productive process.
Examples include Building or expanding existing factory, Purchase of transport equipment and all other machineries used in the productive process.
Increasing an economy’s capital stock also increases its capacity for production, which means an economy can produce more.
Incorrect
Solution: c)
Currency is not considered as fixed capital, it is liquid capital. Fixed capital are the assets used in the productive process.
Examples include Building or expanding existing factory, Purchase of transport equipment and all other machineries used in the productive process.
Increasing an economy’s capital stock also increases its capacity for production, which means an economy can produce more.
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Question 2 of 5
2. Question
In economics, ‘Externalities’ refer to
Correct
Solution: c)
Externalities occur when producing or consuming a good cause an impact on third parties not directly related to the transaction.
Externalities can either be positive or negative.
Positive Externality
A farmer grows apple trees. An external benefit is that he provides nectar for a nearby beekeeper who gains increased honey as a result of the farmers’ orchard. The beekeeper provides an external benefit to the apple grower because his bees help to fertilise the apple tree.
Negative Externality
Making furniture by cutting down rainforests in the Amazon leads to negative externalities to other people. Firstly, it harms the indigenous people of the Amazon rainforest. It also leads to higher global warming as there are fewer trees to absorb carbon dioxide.
Incorrect
Solution: c)
Externalities occur when producing or consuming a good cause an impact on third parties not directly related to the transaction.
Externalities can either be positive or negative.
Positive Externality
A farmer grows apple trees. An external benefit is that he provides nectar for a nearby beekeeper who gains increased honey as a result of the farmers’ orchard. The beekeeper provides an external benefit to the apple grower because his bees help to fertilise the apple tree.
Negative Externality
Making furniture by cutting down rainforests in the Amazon leads to negative externalities to other people. Firstly, it harms the indigenous people of the Amazon rainforest. It also leads to higher global warming as there are fewer trees to absorb carbon dioxide.
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Question 3 of 5
3. Question
Consider the following statements:
- Stagflation is a situation in which the inflation rate is high and at the same time economic growth rate remains steadily high.
- Deflation refers to the decrease in the general price level of goods and services but inflation rate remains above zero.
Which of the above statements is/are correct?
Correct
Solution: d)
- Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.
- Deflation is the general decline in prices for goods and services occurring when the inflation rate falls below 0%.
Incorrect
Solution: d)
- Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.
- Deflation is the general decline in prices for goods and services occurring when the inflation rate falls below 0%.
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Question 4 of 5
4. Question
Which of the following is generally not an activity carried out by shell companies?
Correct
Solution: b)
Typically shell companies include multiple layers of companies that have been created for the purpose of diverting money or for money laundering. Most shell companies do not manufacture any product or deal in any product or render any service. They are mostly used to make financial transactions. Generally, these companies hold assets only on paper and not in reality. These companies conduct almost no economic activity.
Incorrect
Solution: b)
Typically shell companies include multiple layers of companies that have been created for the purpose of diverting money or for money laundering. Most shell companies do not manufacture any product or deal in any product or render any service. They are mostly used to make financial transactions. Generally, these companies hold assets only on paper and not in reality. These companies conduct almost no economic activity.
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Question 5 of 5
5. Question
Consider the following statements regarding Banks Board Bureau (BBB).
- Banks Board Bureau (BBB) is an autonomous body of the Government of India tasked to recommend selection of chiefs of government owned banks and financial institutions.
- The BBB works as step towards governance reforms in Public Sector Banks (PSBs) as recommended by P.J. Nayak Committee.
- It also aims to lessen the Government of India’s burden of fiscal deficit and current account deficit.
Which of the above statement is/are correct?
Correct
Solution: c)
Banks Board Bureau (BBB) is an autonomous body of the Government of India tasked to improve the governance of Public Sector Banks, recommend selection of chiefs of government owned banks and financial institutions and to help banks in developing strategies and capital raising plans.
The BBB works as step towards governance reforms in Public Sector Banks (PSBs) as recommended by P.J. Nayak Committee.
The BBB was the part of Indradhanush Plan of government.
Incorrect
Solution: c)
Banks Board Bureau (BBB) is an autonomous body of the Government of India tasked to improve the governance of Public Sector Banks, recommend selection of chiefs of government owned banks and financial institutions and to help banks in developing strategies and capital raising plans.
The BBB works as step towards governance reforms in Public Sector Banks (PSBs) as recommended by P.J. Nayak Committee.
The BBB was the part of Indradhanush Plan of government.
