In the context of elasticity, if income elasticity of demand for a good is negative, the good is: MCQ with Answer and Explanation

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In the context of elasticity, if income elasticity of demand for a good is negative, the good is:

A. Inferior good

B. Normal good

C. Luxury good

D. Necessary good

Answer: Option A

Solution (By JKSSB Mock Tests)

A negative income elasticity of demand indicates that the good is inferior; demand for it falls as income rises.

This question belongs to: Economy GK Economy Set 1

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Question #1

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Which of the following is a feature of the 'Uncovered Interest Parity' puzzle or forward-premium puzzle?

A. Forward rates are perfect predictors of future spot rates

B. High-interest currencies tend to appreciate rather than depreciate as uncovered interest parity would predict

C. Interest differentials are always zero

D. High-interest currencies always depreciate as predicted

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Correct Answer: Option B

Explanation:
Empirical evidence often shows that currencies with high interest rates tend to appreciate, contrary to the prediction of uncovered interest parity that they should depreciate; this is known as the forward-premium puzzle.

This question belongs to: Economy GK Economy Set 1

Question #2

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The 'Goods and Services Tax' is often described as a game-changing reform because it:

A. removed all taxes

B. increased direct tax

C. unified the Indian market and simplified indirect taxes

D. increased many taxes

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Correct Answer: Option C

Explanation:
GST unified the Indian market and simplified indirect taxation.

This question belongs to: Economy GK Economy Set 1

Question #3

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The 'Goods and Services Tax' Council chairperson is:

A. Union Finance Minister

B. RBI Governor

C. Prime Minister

D. President

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Correct Answer: Option A

Explanation:
GST Council is chaired by the Union Finance Minister.

This question belongs to: Economy GK Economy Set 1

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