Insights Static Quiz -405, 2019
Economy
INSIGHTS STATIC QUIZ 2019
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Question 1 of 5
1. Question
Consider the following statements regarding Current Account Deficit (CAD).
- The current account measures the flow of goods, services and investments into and out of the country.
- Current Account Deficit may help a debtor nation in the short-term.
- High software receipts and private transfers can lower current account deficit.
Which of the above statements is/are correct?
Correct
Solution: c)
Current Account Deficit or CAD is the shortfall between the money flowing in on exports, and the money flowing out on imports. Current Account Deficit (or Surplus) measures the gap between the money received into and sent out of the country on the trade of goods and services and also the transfer of money from domestically-owned factors of production abroad.
The current account constitutes net income, interest and dividends and transfers such as foreign aid, remittances, donations among others.
A country with rising CAD shows that it has become uncompetitive, and investors are not willing to invest there. They may withdraw their investments.
Current Account Deficit may be a positive or negative indicator for an economy depending upon why it is running a deficit. Foreign capital is seen to have been used to finance investments in many economies. Current Account Deficit may help a debtor nation in the short-term, but it may worry in the long-term as investors begin raising concerns over adequate return on their investments.
The country’s current account deficit (CAD) narrowed to 2% of GDP, or $14.3 billion, in the first quarter of the current financial year from 2.3% of GDP, or $15.8 billion, reported during the same period of the previous year, data released by Reserve Bank of India (RBI) showed.
There were number of factors which led to lowering of current account deficit. One is software receipts have gone up, and also private transfers have also gone up.
Incorrect
Solution: c)
Current Account Deficit or CAD is the shortfall between the money flowing in on exports, and the money flowing out on imports. Current Account Deficit (or Surplus) measures the gap between the money received into and sent out of the country on the trade of goods and services and also the transfer of money from domestically-owned factors of production abroad.
The current account constitutes net income, interest and dividends and transfers such as foreign aid, remittances, donations among others.
A country with rising CAD shows that it has become uncompetitive, and investors are not willing to invest there. They may withdraw their investments.
Current Account Deficit may be a positive or negative indicator for an economy depending upon why it is running a deficit. Foreign capital is seen to have been used to finance investments in many economies. Current Account Deficit may help a debtor nation in the short-term, but it may worry in the long-term as investors begin raising concerns over adequate return on their investments.
The country’s current account deficit (CAD) narrowed to 2% of GDP, or $14.3 billion, in the first quarter of the current financial year from 2.3% of GDP, or $15.8 billion, reported during the same period of the previous year, data released by Reserve Bank of India (RBI) showed.
There were number of factors which led to lowering of current account deficit. One is software receipts have gone up, and also private transfers have also gone up.
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Question 2 of 5
2. Question
India’s tax-to-GDP ratio is well below the emerging market economies. In this context, which of the following feasible measures government can take to increase tax income?
- Increasing the indirect tax rate
- Implementation of Goods and Service tax
- Increasing the tax base
- Promotion of formal banking and digital transactions
Select the correct answer code:
Correct
Solution: d)
All the above measures help to increase the tax income of government.
Incorrect
Solution: d)
All the above measures help to increase the tax income of government.
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Question 3 of 5
3. Question
Match the following pairs
Term Definitions
- Deflation A. Reduction in the rate of inflation
- Disinflation B. General fall in the level of prices
- Stagflation C. Combination of inflation and rising unemployment due to recession
- Reflation D. Attempt to raise the prices to counteract the deflationary prices.
Select the correct answer code:
Correct
Solution: b)
Incorrect
Solution: b)
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Question 4 of 5
4. Question
In India, Alternative Investment Funds (AIFs) include:
- Mutual funds
- Venture Capital Fund
- Private equity funds
- Infrastructure funds
Select the correct code:
Correct
Solution: b)
Anything alternate to traditional form of investments gets categorized as alternative investments. In India, alternative investment funds (AIFs) are defined in Regulation 2(1) (b) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
The definition of AIFs includes venture Capital Fund, hedge funds, private equity funds, commodity funds, Debt Funds, infrastructure funds, etc, while, it excludes Mutual funds or collective investment Schemes, family trusts, Employee Stock Option / purchase Schemes, employee welfare trusts or gratuity trusts, ‘holding companies’ within the meaning of Section 4 of the Companies Act, 1956, securitization trusts regulated under a specific regulatory framework, and funds managed by securitization company or reconstruction company which is registered with the RBI under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
Investors in these funds are largely institutional, high net worth individuals and corporates.
Incorrect
Solution: b)
Anything alternate to traditional form of investments gets categorized as alternative investments. In India, alternative investment funds (AIFs) are defined in Regulation 2(1) (b) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
The definition of AIFs includes venture Capital Fund, hedge funds, private equity funds, commodity funds, Debt Funds, infrastructure funds, etc, while, it excludes Mutual funds or collective investment Schemes, family trusts, Employee Stock Option / purchase Schemes, employee welfare trusts or gratuity trusts, ‘holding companies’ within the meaning of Section 4 of the Companies Act, 1956, securitization trusts regulated under a specific regulatory framework, and funds managed by securitization company or reconstruction company which is registered with the RBI under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
Investors in these funds are largely institutional, high net worth individuals and corporates.
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Question 5 of 5
5. Question
Which of the following statements about Monetary Policy Framework Agreement is correct?
Correct
Solution: a)
Monetary Policy Framework Agreement is an agreement reached between Government and the central bank in India – The Reserve Bank of India (RBI) – on the maximum tolerable inflation rate that RBI should target to achieve price stability.
The Reserve Bank of India and Government of India signed the Monetary Policy Framework Agreement on 20 February 2015 which made inflation targeting and achieving price stability the responsibilities of RBI. Subsequently, the government, while unveiling the Union Budget for 2016-17 in the Parliament, proposed to amend the Reserve Bank of India (RBI) Act, 1934 for giving a statutory backing to the aforementioned Monetary Policy Framework Agreement and for setting up a Monetary Policy Committee (MPC).
Incorrect
Solution: a)
Monetary Policy Framework Agreement is an agreement reached between Government and the central bank in India – The Reserve Bank of India (RBI) – on the maximum tolerable inflation rate that RBI should target to achieve price stability.
The Reserve Bank of India and Government of India signed the Monetary Policy Framework Agreement on 20 February 2015 which made inflation targeting and achieving price stability the responsibilities of RBI. Subsequently, the government, while unveiling the Union Budget for 2016-17 in the Parliament, proposed to amend the Reserve Bank of India (RBI) Act, 1934 for giving a statutory backing to the aforementioned Monetary Policy Framework Agreement and for setting up a Monetary Policy Committee (MPC).
