The concept of 'Precautionary Saving' arises because: MCQ with Answer and Explanation

The concept of 'Precautionary Saving' arises because:
A. Individuals save only for retirement
B. Individuals save more when future income is uncertain
C. Saving is independent of uncertainty
D. Only permanent income matters
Answer: Option B
Solution (By JKSSB Mock Tests)
Precautionary saving is additional saving undertaken by risk-averse agents to buffer against future income or expenditure uncertainty.

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Practice More Economy Set 1 Questions

Question #1
The concept of 'Financial Accelerator' refers to:
A. The automatic stabilisers in the fiscal system
B. Only the exchange-rate channel
C. Only the direct interest-rate channel
D. The amplification of shocks through endogenous changes in credit conditions and asset prices

Correct Answer: Option D


Explanation:
The financial accelerator describes how deteriorations in borrowers’ balance sheets raise external finance premia, further reducing spending and amplifying the effects of the original shock.

This question belongs to: Economy GK Economy Set 1
Question #2
Which of the following is a characteristic of the Indian planning experience?
A. Complete abandonment of growth objectives
B. Exclusive reliance on market forces without any state role
C. Only focus on industrialisation without social objectives
D. Evolution from centralised planning to indicative planning and cooperative federalism

Correct Answer: Option D


Explanation:
Indian planning evolved from the centralised Five Year Plans of the Planning Commission era to a more indicative and cooperative federal approach under NITI Aayog.

This question belongs to: Economy GK Economy Set 1
Question #3
Which of the following is a feature of the 'Data Economy' or 'Attention Economy'?
A. Only traditional manufacturing matters
B. Data has no economic value
C. Only physical goods generate value
D. Economic value is increasingly derived from the collection, analysis and monetisation of data and user attention

Correct Answer: Option D


Explanation:
In the data and attention economy, the ability to collect, process and monetise large volumes of personal and behavioural data, as well as to capture user attention, has become a central source of economic value.

This question belongs to: Economy GK Economy Set 1