A current account deficit means that: MCQ with Answer and Explanation

A current account deficit means that:
A. exports of goods and services exceed imports
B. capital inflows exceed outflows
C. imports of goods, services and income exceed exports
D. foreign exchange reserves increase
Answer: Option C
Solution (By JKSSB Mock Tests)
A current account deficit occurs when imports of goods, services and income exceed exports.

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Practice More Economy Set 1 Questions

Question #1
Which of the following is a characteristic of the 'Easterlin Paradox'?
A. Happiness always rises proportionally with income both within and across countries
B. Within countries, higher income is associated with higher happiness, but over time average happiness does not rise with average income
C. Income has no relation to happiness at any level
D. Only relative income matters and absolute income is irrelevant even within countries

Correct Answer: Option B


Explanation:
The Easterlin Paradox observes that, while richer individuals within a country tend to report higher happiness, average national happiness does not increase systematically as national income grows over the long run.

This question belongs to: Economy GK Economy Set 1
Question #2
In the context of global economic governance, the 'Bridgetown Initiative' is associated with:
A. Only trade liberalisation
B. Only monetary-policy coordination among advanced economies
C. Only bilateral aid without systemic reform
D. Proposals to reform the international financial architecture to better address climate vulnerability and development needs of small and vulnerable states

Correct Answer: Option D


Explanation:
The Bridgetown Initiative, championed by Barbados, calls for major reforms of the global financial system—including debt relief, new liquidity instruments and scaled-up climate finance—to meet the needs of climate-vulnerable developing countries.

This question belongs to: Economy GK Economy Set 1
Question #3
Which of the following is a characteristic of the 'Habit-Formation' models of consumption?
A. Only permanent income matters
B. Utility depends only on current consumption
C. Habits are irrelevant for saving behaviour
D. Current utility depends on current consumption relative to a habit stock formed by past consumption

Correct Answer: Option D


Explanation:
Habit-formation models allow current utility to depend on the deviation of current consumption from a habit level determined by past consumption, generating persistence in consumption growth.

This question belongs to: Economy GK Economy Set 1