Editorials Quiz 2021-22
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Introducing yet another ingenious course, InsightsIAS is excited to announce our new initiative QUED – Questions from Editorials. Considering the number of questions that appeared from Editorials in previous year UPSC Prelims Examinations, we feel it is wise for students to cover Editorials from Prelims point of view as well in order to achieve that extra edge. Although, we have covered important editorials separately in our Editorial Section as well as under Secure Initiative, MCQ practice can prove to be crucial for better performance and guaranteed result.
We strongly recommend you at add QUED along with Static Quiz ,Current Affairs Quiz and RTM for your Daily MCQ practice.
We will be posting 5 MCQs at 11am everyday from Monday to Saturday on http://www.insightsonindia.com. QUED will be available under QUIZ menu.
We hope students utilize this initiative to the best of advantage. 🙂
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Question 1 of 5
1. Question
Which of the following statements best describes ‘fiscal consolidation’?
Correct
Solution: b)
Fiscal Consolidation refers to the policies undertaken by Governments (national and sub-national levels) to reduce their deficits and accumulation of debt stock.
FISCAL CONSOLIDATION is a process where government’s FISCAL health is getting improved and is indicated by reduced FISCAL deficit. Improved tax revenue realization and better aligned expenditure are the components of FISCAL CONSOLIDATION as the FISCAL deficit reaches at a manageable level.
Incorrect
Solution: b)
Fiscal Consolidation refers to the policies undertaken by Governments (national and sub-national levels) to reduce their deficits and accumulation of debt stock.
FISCAL CONSOLIDATION is a process where government’s FISCAL health is getting improved and is indicated by reduced FISCAL deficit. Improved tax revenue realization and better aligned expenditure are the components of FISCAL CONSOLIDATION as the FISCAL deficit reaches at a manageable level.
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Question 2 of 5
2. Question
External Aids is the best means to finance a government’s fiscal deficit because
- It brings in foreign currency that is also useful to bridge the Balance of payments (BoP) apart from its utility in developmental expenditures.
- It does not cause crowding out effect in the domestic market and is favourable to the domestic borrowers.
Which of the above statements is/are correct?
Correct
Solution: c)
If external aid is a grant or coming without interest, no better way to finance the deficit, if we ignore their inflationary effects.
When the domestic market has limited amount of funds, and if the government desires to borrow a large share of it to finance the fiscal deficit, it tends to raise the demand for funds in the market. This shoots the market interest rate for the funds and causes problems to the domestic investors who now have to pay a higher interest rate to avail the same loan.
If the same money is borrowed from abroad, the crowing out effect doesn’t occur.
Incorrect
Solution: c)
If external aid is a grant or coming without interest, no better way to finance the deficit, if we ignore their inflationary effects.
When the domestic market has limited amount of funds, and if the government desires to borrow a large share of it to finance the fiscal deficit, it tends to raise the demand for funds in the market. This shoots the market interest rate for the funds and causes problems to the domestic investors who now have to pay a higher interest rate to avail the same loan.
If the same money is borrowed from abroad, the crowing out effect doesn’t occur.
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Question 3 of 5
3. Question
Which of the following were the purpose of Fiscal Responsibility and Budget Management Act, 2003 (FRBMA)?
- Eliminate revenue deficit of the country
- Reduce fiscal deficit to 3% of the GDP
- Improve overall management of the public funds
Select the correct answer code:
Correct
Solution: d)
The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget and strengthen fiscal prudence. The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008. Since then, there have been several amendments to the Act essentially postponing the targets.
Incorrect
Solution: d)
The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget and strengthen fiscal prudence. The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008. Since then, there have been several amendments to the Act essentially postponing the targets.
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Question 4 of 5
4. Question
Washington Consensus refers to
Correct
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.
Incorrect
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.
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Question 5 of 5
5. Question
In India, deficit financing is usually resorted in order to
- Finance the revenue deficit component
- Undertake developmental expenditure
- Bridge the short-term Current Account Deficit (CAD)
Select the correct answer code:
Correct
Solution: a)
In India, revenue deficit is one of the major reasons for a large fiscal deficit. This means that the government cannot finance its revenue operations by the resources it generates.
Undertake developmental expenditure: This is done because the internal resources of the government are not adequate to undertake development expenditure. It must borrow money from the market.
CAD is financed by external flows. If government borrows from outside it would increase our external capital deficit, but not affect the short-term CAD.
Incorrect
Solution: a)
In India, revenue deficit is one of the major reasons for a large fiscal deficit. This means that the government cannot finance its revenue operations by the resources it generates.
Undertake developmental expenditure: This is done because the internal resources of the government are not adequate to undertake development expenditure. It must borrow money from the market.
CAD is financed by external flows. If government borrows from outside it would increase our external capital deficit, but not affect the short-term CAD.
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