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

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The concept of 'Precautionary Saving' arises because:

A. Individuals save only for retirement

B. Only permanent income matters

C. Saving is independent of uncertainty

D. Individuals save more when future income is uncertain

Answer: Option D

Solution (By JKSSB Mock Tests)

Precautionary saving is additional saving undertaken by risk-averse agents to buffer against future income or expenditure uncertainty.

This question belongs to: Economy GK Economy Set 1

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Question #1

The concept of 'Opportunity Cost of Holding Money' refers to:

A. The cost of producing goods and services

B. The cost of banking services only

C. The interest income forgone by holding cash instead of interest-bearing assets

D. The cost of printing currency notes

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Correct Answer: Option C

Explanation:
The opportunity cost of holding money is the interest that could have been earned by holding bonds or other interest-bearing assets instead of cash.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'Minimum Support Price' is based on which cost concept?

A. only paid-out costs

B. C3 cost only

C. A2 + FL cost

D. C2 cost

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Correct Answer: Option C

Explanation:
MSP is based on A2 plus family labour (FL) cost, though CACP recommends and government can consider C2.

This question belongs to: Economy GK Economy Set 1

Question #3

The term 'Fiscal Drag' refers to:

A. Deliberate reduction in government spending

B. Increase in fiscal deficit

C. Automatic increase in tax revenue due to inflation

D. Decrease in tax rates

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Correct Answer: Option C

Explanation:
Fiscal drag occurs when inflation pushes taxpayers into higher tax brackets, increasing tax revenue without any change in tax rates, acting as an automatic stabiliser.

This question belongs to: Economy GK Economy Set 1

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