INSIGHTS STATIC QUIZ 2020 - 21
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Question 1 of 5
1. Question
If the total size of the economy is growing year after year, it implies that
- Gross Capital formation in the economy must be increasing year after year.
- GDP growth rate must be increasing steadily year after year.
Which of the above statements is/are correct?
Correct
Solution: d)
GDP at market prices calculates total value of goods and services produced within a year at market prices.
If it increases, it means entrepreneurs have decided to produce more goods and services.
This can happen even without an increase in actual investment, with the same machinery and labour.
If the size of economy grows proportionately larger each year, while the growth rate is positive, it may not necessarily be increasing.
Incorrect
Solution: d)
GDP at market prices calculates total value of goods and services produced within a year at market prices.
If it increases, it means entrepreneurs have decided to produce more goods and services.
This can happen even without an increase in actual investment, with the same machinery and labour.
If the size of economy grows proportionately larger each year, while the growth rate is positive, it may not necessarily be increasing.
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Question 2 of 5
2. Question
Consider the following statements regarding Off-budget borrowing.
- Off-budget borrowings are loans taken by any public institution on the directions of the central government.
- Off-budget financing is not part of the calculation of the fiscal indicators and does not have any fiscal implications.
- Public sector banks can fund off-budget expenses.
Which of the above statements is/are correct?
Correct
Solution: c)
Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.
But since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit. This helps keep the country’s fiscal deficit within acceptable limits.
Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament. “Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications,” said the report.
Public sector banks are also used to fund off-budget expenses.
Incorrect
Solution: c)
Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.
But since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit. This helps keep the country’s fiscal deficit within acceptable limits.
Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament. “Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications,” said the report.
Public sector banks are also used to fund off-budget expenses.
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Question 3 of 5
3. Question
A share repurchase or buyback is a decision by a company to purchase its own stock from the market. Such a move may lead to
- It is often undertaken when the company’s shares are undervalued.
- It reduces the number of outstanding shares of the company.
- It tends to increase the price of remaining shares.
Select the correct answer code:
Correct
Solution: d)
What is a share buyback?
A share repurchase or buyback is a decision by a company to purchase its own stock from the market. Such a move reduces the number of outstanding shares of the company and tend to push up their price and is often undertaken when management considers the company’s shares undervalued.
It is also a key way to transfer surplus earnings to shareholders and tends to lead to an increase in share prices.
Incorrect
Solution: d)
What is a share buyback?
A share repurchase or buyback is a decision by a company to purchase its own stock from the market. Such a move reduces the number of outstanding shares of the company and tend to push up their price and is often undertaken when management considers the company’s shares undervalued.
It is also a key way to transfer surplus earnings to shareholders and tends to lead to an increase in share prices.
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Question 4 of 5
4. Question
Suppose a small factory owner actually needs only two workers to carry out his business, but if his entire family of five members are involved in running the business, then this situation is known as
Correct
Solution: a)
Disguised Unemployment is a kind of unemployment in which there are people who are visibly employed but are actually unemployed. This situation is also known as hidden Unemployment. In such a situation more people are engaged in a work than required.
Incorrect
Solution: a)
Disguised Unemployment is a kind of unemployment in which there are people who are visibly employed but are actually unemployed. This situation is also known as hidden Unemployment. In such a situation more people are engaged in a work than required.
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Question 5 of 5
5. Question
The actual liabilities of the Union government include which of the following
- Loans taken for the recapitalisation of banks
- Borrowings by PSUs
- Capital expenditures of various Ministries.
Select the correct answer code:
Correct
Solution: a)
In addition to the borrowings by PSUs, the actual liabilities of the government would include loans taken for the recapitalisation of banks.
Capital expenditure creates assets for the government and causes reduction in liabilities for the government.
Incorrect
Solution: a)
In addition to the borrowings by PSUs, the actual liabilities of the government would include loans taken for the recapitalisation of banks.
Capital expenditure creates assets for the government and causes reduction in liabilities for the government.
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