In the context of public debt, the 'Domar Condition' for debt sustainability relates to: MCQ with Answer and Explanation

In the context of public debt, the 'Domar Condition' for debt sustainability relates to:
A. Only the level of absolute debt
B. Only external debt
C. The relationship between the interest rate, growth rate and primary balance
D. Only the maturity structure of debt
Answer: Option C
Solution (By JKSSB Mock Tests)
The Domar condition indicates that the debt-to-GDP ratio will stabilise or decline if the primary surplus is sufficient relative to the difference between the interest rate and the growth rate of GDP.

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Practice More Economy Set 1 Questions

Question #1
Which of the following is NOT a type of public debt?
A. Market borrowings
B. External debt
C. Tax revenue
D. Internal debt

Correct Answer: Option C


Explanation:
Tax revenue is a receipt, not debt. Public debt includes internal debt (market borrowings, treasury bills) and external debt.

This question belongs to: Economy GK Economy Set 1
Question #2
The 'balanced growth theory' emphasizes simultaneous investment in:
A. multiple sectors to create demand
B. agriculture only
C. one sector only
D. banking only

Correct Answer: Option A


Explanation:
Balanced growth advocates simultaneous investment in mutually supporting sectors.

This question belongs to: Economy GK Economy Set 1
Question #3
The term 'Soft Loan' typically refers to:
A. Only short-term trade credit
B. Loans with commercial interest rates
C. Only domestic commercial bank loans
D. Loans with concessional interest rates and longer repayment periods

Correct Answer: Option D


Explanation:
Soft loans are provided by multilateral agencies or governments at below-market interest rates with longer maturities and grace periods, often for development purposes.

This question belongs to: Economy GK Economy Set 1