QUIZ – 2020: Insights Current Affairs Quiz, 3 March 2021

Solution: a)

A key indicator of an economy’s long-run debt sustainability is the differential between interest paid on government debt and the economy’s nominal growth rate. When the cost of raising debt is lower than the gross domestic product (GDP) growth rate, public debt comes with low fiscal costs. In such a situation, the debt-to-GDP ratio of the economy declines as debts are rolled over.

Source

Solution: b)

Printing more money does not necessarily lead to inflation and a debasement of the currency. In fact, if the increased money supply creates a disproportionate increase in output because the money is invested to finance investment projects with positive net present value (where such value incorporates all the societal value generated by the investment), the increased money supply is beneficial to the citizens.

Evidence over the last two-and-a-half decades demonstrates clearly that in India, higher GDP growth causes the ratio of debt-to-GDP to decline but not vice-versa.

Source: Economic Survey 2020-21 Vol-1

Solution: d)

The most important scale of asset quality is Non-Performing Assets (NPA). But NPA alone doesn’t tell the whole story of bad asset quality of loans given by banks. Hence a new classification is made in the form of stressed assets that comprises restructured loans and written off assets besides NPAs.

Restructured asset or loan are that assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures.

Written off assets are those the bank or lender doesn’t count the money borrower owes to it. The financial statement of the bank will indicate that the written off loans are compensated through some other way.

Solution: c)

The Washington Consensus refers to a set of free-market economic policies supported by prominent financial institutions such as the International Monetary Fund, the World Bank, and the U.S. Treasury. A British economist named John Williamson coined the term Washington Consensus in 1989.

The ideas were intended to help developing countries that faced economic crises. In summary, The Washington Consensus recommended structural reforms that increased the role of market forces in exchange for immediate financial help. Some examples include free-floating exchange rates and free trade.

Solution: a)

Earth Overshoot Day marks the date when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that year. We maintain this deficit by liquidating stocks of ecological resources and accumulating waste, primarily carbon dioxide in the atmosphere. Earth Overshoot Day is hosted and calculated by Global Footprint Network, an international research organization that provides decision-makers with a menu of tools to help the human economy operate within Earth’s ecological limits.