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Question 1 of 5
1. Question
During a global recession, which of the following economic policies is typically NOT recommended to stimulate economic recovery?
Correct
(c) Implementing protectionist trade policies
Protectionist trade policies, such as tariffs and trade barriers, can often lead to decreased global trade and economic inefficiency. In times of global recession, these policies can exacerbate economic downturns rather than stimulate recovery. The other measures listed (A, B, and D) are more conventional approaches to boost economic activity.
Incorrect
(c) Implementing protectionist trade policies
Protectionist trade policies, such as tariffs and trade barriers, can often lead to decreased global trade and economic inefficiency. In times of global recession, these policies can exacerbate economic downturns rather than stimulate recovery. The other measures listed (A, B, and D) are more conventional approaches to boost economic activity.
Question 2 of 5
2. Question
‘’Rapid Financing Instrument’’ and ‘’Rapid Credit Facility’’ are related to the provisions of lending by which one of the following International institution?
Correct
(b) International Monetary Fund
The Rapid Financing Instrument (RFI): It is a lending facility of the International Monetary Fund (IMF) which provides rapid financial assistance. It is available to all member countries facing an urgent balance of payments need. The RFI was created as part of a broader reform to make the IMF’s financial support more flexible to address the diverse needs of member countries. The RFI replaced the IMF’s previous emergency assistance policy and can be used in a wide range of circumstances. IMF’s Rapid Credit Facility (RCF) provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments (BoP) need with no ex-post conditionality where a full-fledged economic program is neither necessary nor feasible.
Incorrect
(b) International Monetary Fund
The Rapid Financing Instrument (RFI): It is a lending facility of the International Monetary Fund (IMF) which provides rapid financial assistance. It is available to all member countries facing an urgent balance of payments need. The RFI was created as part of a broader reform to make the IMF’s financial support more flexible to address the diverse needs of member countries. The RFI replaced the IMF’s previous emergency assistance policy and can be used in a wide range of circumstances. IMF’s Rapid Credit Facility (RCF) provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments (BoP) need with no ex-post conditionality where a full-fledged economic program is neither necessary nor feasible.
Question 3 of 5
3. Question
With reference to the Indian economy, consider the following statements:
1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
How many of the above statements is/are correct?
Correct
(b) Only two statements are correct
The nominal effective exchange rate (NEER) is an unadjusted weighted average rate at which one country’s currency exchanges for a basket of multiple foreign currencies. The nominal exchange rate is the amount of domestic currency needed to purchase foreign currency. If a domestic currency increases against a basket of other currencies inside a floating exchange rate regime, NEER is said to appreciate. If the domestic currency falls against the basket, the NEER depreciates. (Statement 1 is correct)
The Real Effective Exchange Rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other major currencies. The weights are determined by comparing the relative trade balance of a country’s currency against that of each country in the index. An increase in a nation’s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. This results in losing its trade competitiveness. (Statement 2 is incorrect)
REER remains in sync with the inflationary trends—the upward biases in REER due to inflation was recently seen in India. An increase in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER. The increasing difference between trends of NEER and REER in recent times was due to India’s domestic inflation being higher relative to the six major currencies considered. (Statement 3 is correct)
Incorrect
(b) Only two statements are correct
The nominal effective exchange rate (NEER) is an unadjusted weighted average rate at which one country’s currency exchanges for a basket of multiple foreign currencies. The nominal exchange rate is the amount of domestic currency needed to purchase foreign currency. If a domestic currency increases against a basket of other currencies inside a floating exchange rate regime, NEER is said to appreciate. If the domestic currency falls against the basket, the NEER depreciates. (Statement 1 is correct)
The Real Effective Exchange Rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other major currencies. The weights are determined by comparing the relative trade balance of a country’s currency against that of each country in the index. An increase in a nation’s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. This results in losing its trade competitiveness. (Statement 2 is incorrect)
REER remains in sync with the inflationary trends—the upward biases in REER due to inflation was recently seen in India. An increase in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER. The increasing difference between trends of NEER and REER in recent times was due to India’s domestic inflation being higher relative to the six major currencies considered. (Statement 3 is correct)
Question 4 of 5
4. Question
Consider the following statements,
1. The labor force participation rate (LFPR) is the percentage of a country’s population that is either working or looking for work.
2. The worker population ratio (WPR) is the percentage of people in a country’s population who are employed.
3. Indian employment report 2024 is released by NSSO.
How many of the statements is/are correct?
Correct
(b) Only two statements are correct
India’s youth account for almost 83% of the unemployed workforce and the share of youngsters with secondary or higher education in the total unemployed youth has almost doubled from 35.2% in 2000 to 65.7% in 2022, as per the India Employment Report 2024 released by the International Labour Organisation (ILO) and the Institute of Human Development (IHD).
The labour force participation rate is a measure of the proportion of a country’s working-age population that engages actively in the labour market, either by working or looking for work; it provides an indication of the size of the supply of labour available to engage in the production of goods and services, relative to the population at working age. The breakdown of the labour force (formerly known as economically active population) by sex and age group gives a profile of the distribution of the labour force within a country.
The worker population ratio (WPR) is the percentage of people in a country’s population who are employed. It’s calculated by dividing the total number of workers by the population and multiplying by 100.
Incorrect
(b) Only two statements are correct
India’s youth account for almost 83% of the unemployed workforce and the share of youngsters with secondary or higher education in the total unemployed youth has almost doubled from 35.2% in 2000 to 65.7% in 2022, as per the India Employment Report 2024 released by the International Labour Organisation (ILO) and the Institute of Human Development (IHD).
The labour force participation rate is a measure of the proportion of a country’s working-age population that engages actively in the labour market, either by working or looking for work; it provides an indication of the size of the supply of labour available to engage in the production of goods and services, relative to the population at working age. The breakdown of the labour force (formerly known as economically active population) by sex and age group gives a profile of the distribution of the labour force within a country.
The worker population ratio (WPR) is the percentage of people in a country’s population who are employed. It’s calculated by dividing the total number of workers by the population and multiplying by 100.
Question 5 of 5
5. Question
With reference to Private Final Consumption Expenditure (PFCE), consider the following statements
1. It is defined as the expenditure incurred by the resident households and non-profit institutions serving households (NPISH) on final consumption of goods and services.
2. It is based on the expenditure made entirely within the country.
Which of these statements is/are correct?
Correct
(a) 1 Only
The Private final consumption expenditure (PFCE) is defined as the expenditure incurred by the resident households and non-profit institutions serving households (NPISH) on final consumption of goods and services, whether made within or outside the economic territory. (Statement 2 is incorrect).
Private Final Consumption Expenditure (PFCE) is the spending by households and non-profit institutions serving households (NPISHs) on goods and services, whether made within or outside the economic territory. It includes:
• New durable and non-durable goods (except land)
• Services
• Imputed gross rent of owner-occupied dwellings
• Consumption of own-account production evaluated at producers’ prices
• Payments in kind of wages and salaries valued at cost
The resident households and NPISHs incur expenditure while traveling abroad, while non-resident households, NPISHs and extra territorial bodies make final consumption expenditure within the economic territory of the country.
Incorrect
(a) 1 Only
The Private final consumption expenditure (PFCE) is defined as the expenditure incurred by the resident households and non-profit institutions serving households (NPISH) on final consumption of goods and services, whether made within or outside the economic territory. (Statement 2 is incorrect).
Private Final Consumption Expenditure (PFCE) is the spending by households and non-profit institutions serving households (NPISHs) on goods and services, whether made within or outside the economic territory. It includes:
• New durable and non-durable goods (except land)
• Services
• Imputed gross rent of owner-occupied dwellings
• Consumption of own-account production evaluated at producers’ prices
• Payments in kind of wages and salaries valued at cost
The resident households and NPISHs incur expenditure while traveling abroad, while non-resident households, NPISHs and extra territorial bodies make final consumption expenditure within the economic territory of the country.