The 'Giffen paradox' occurs when: MCQ with Answer and Explanation

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The 'Giffen paradox' occurs when:

A. the substitution effect dominates the income effect

B. the good is a luxury

C. the good has many substitutes

D. the income effect of a price rise dominates the substitution effect for an inferior good

Answer: Option D

Solution (By JKSSB Mock Tests)

Giffen goods have a strong negative income effect that outweighs the substitution effect, causing demand to rise with price.

This question belongs to: Economy GK Economy Set 1

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Question #1

The 'Goods and Services Tax' on government fees such as passport and visa is:

A. exempt

B. 5%

C. 0%

D. 18%

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Correct Answer: Option A

Explanation:
Government fees like passport and visa are exempt from GST.

This question belongs to: Economy GK Economy Set 1

Question #2

The Foreign Exchange Management Act was enacted in which year?

A. 2005

B. 1973

C. 1992

D. 1999

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Correct Answer: Option D

Explanation:
FEMA was enacted in 1999, replacing FERA.

This question belongs to: Economy GK Economy Set 1

Question #3

In the context of banking regulation, the Capital Adequacy Ratio is prescribed to ensure that:

A. Interest rates on deposits are maximised

B. CRR is fixed at a particular level

C. Banks maintain adequate capital relative to their risk-weighted assets

D. Dividend distribution is unrestricted

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Correct Answer: Option C

Explanation:
The Capital Adequacy Ratio requires banks to hold a minimum amount of capital in proportion to their risk-weighted assets so that they can absorb losses and protect depositors.

This question belongs to: Economy GK Economy Set 1

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