An inflationary gap exists when: MCQ with Answer and Explanation

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An inflationary gap exists when:

A. aggregate demand exceeds full employment output

B. actual output is below potential output

C. aggregate demand is less than full employment output

D. unemployment is high

Answer: Option A

Solution (By JKSSB Mock Tests)

An inflationary gap occurs when aggregate demand exceeds what the economy can produce at full employment.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

The 'Goods and Services Tax' on services by diplomatic missions is:

A. 0%

B. 18%

C. exempt

D. 5%

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Correct Answer: Option C

Explanation:
Services by diplomatic missions are exempt from GST.

This question belongs to: Economy GK Economy Set 1

Question #2

The concept of 'Intergenerational Equity' in fiscal policy emphasises:

A. Only short-term stabilisation

B. Only reducing taxes for the current generation

C. Fair distribution of the burden of public debt between present and future generations

D. Only maximising current consumption

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Correct Answer: Option C

Explanation:
Intergenerational equity requires that the burden of financing public expenditure and debt is distributed fairly across generations so that future generations are not unduly burdened.

This question belongs to: Economy GK Economy Set 1

Question #3

The 'Appropriation Bill' is passed by Parliament to:

A. regulate banks

B. declare war

C. impose new taxes

D. authorize withdrawal of funds from the Consolidated Fund of India

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Correct Answer: Option D

Explanation:
The Appropriation Bill allows the government to withdraw funds from the Consolidated Fund of India.

This question belongs to: Economy GK Economy Set 1

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