The 'New Economic Policy 1991' devalued the rupee by about how much in two stages? MCQ with Answer and Explanation

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The 'New Economic Policy 1991' devalued the rupee by about how much in two stages?

A. 5%

B. 30%

C. 18%

D. 50%

Answer: Option C

Solution (By JKSSB Mock Tests)

In July 1991, the rupee was devalued by about 18% in two steps.

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 'Second-Generation' models of currency crises?

A. Crises can be self-fulfilling and depend on the government’s trade-off between the benefits of maintaining the peg and the costs of doing so

B. Crises never involve multiple equilibria

C. Only current-account deficits matter

D. Crises are caused only by inconsistent fiscal policy

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Correct Answer: Option A

Explanation:
Second-generation models emphasise that the decision to abandon a peg depends on policy trade-offs; expectations of devaluation can themselves raise the cost of defending the peg, generating self-fulfilling crises and multiple equilibria.

This question belongs to: Economy GK Economy Set 1

Question #2

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The term 'Repo Rate' is the rate at which:

A. Banks lend to each other in the call market

B. Government borrows from the public

C. RBI borrows from commercial banks

D. Commercial banks borrow from the RBI against collateral of government securities

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Correct Answer: Option D

Explanation:
Repo rate is the interest rate at which the RBI lends short-term funds to commercial banks against the collateral of government securities under the Liquidity Adjustment Facility.

This question belongs to: Economy GK Economy Set 1