The 'personal consumption expenditure price index' is commonly used in which country? MCQ with Answer and Explanation

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The 'personal consumption expenditure price index' is commonly used in which country?

A. United States

B. China

C. India

D. Japan

Answer: Option A

Solution (By JKSSB Mock Tests)

The PCE price index is a primary inflation measure in the US.

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 'Impossible Trinity' in open economy macroeconomics?

A. All three objectives are always compatible

B. A country can simultaneously maintain a fixed exchange rate, free capital mobility and independent monetary policy

C. A country can achieve only two of the three: fixed exchange rate, free capital flows and monetary independence

D. Only fiscal policy is constrained

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Correct Answer: Option C

Explanation:
The impossible trinity (or trilemma) states that it is impossible for a country to maintain a fixed exchange rate, free capital mobility and an independent monetary policy at the same time.

This question belongs to: Economy GK Economy Set 1

Question #2

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In the context of banking theory, the 'Diamond-Dybvig' model explains:

A. Only the role of banks in solving adverse selection

B. The existence of banks as providers of liquidity insurance and the possibility of bank runs

C. Why banks never face runs

D. Only the role of banks in monitoring firms

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Correct Answer: Option B

Explanation:
The Diamond-Dybvig model shows that banks transform illiquid assets into liquid liabilities, providing liquidity insurance to depositors, but that this arrangement is vulnerable to self-fulfilling runs.

This question belongs to: Economy GK Economy Set 1