The 'Taylor rule' is used by central banks to set: MCQ with Answer and Explanation

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The 'Taylor rule' is used by central banks to set:

A. foreign exchange reserves

B. exchange rates

C. policy interest rates based on inflation and output gap

D. reserve requirements

Answer: Option C

Solution (By JKSSB Mock Tests)

The Taylor rule prescribes setting policy interest rates based on inflation and output gap.

This question belongs to: Economy GK Economy Set 1

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Question #1

The Lewis model of economic development is based on:

A. foreign aid

B. labour transfer from agriculture to industry

C. import substitution

D. export-led growth

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Correct Answer: Option B

Explanation:
The Lewis model explains development through transfer of surplus labour from traditional agriculture to modern industry.

This question belongs to: Economy GK Economy Set 1

Question #2

The concept of 'Framing Effects' demonstrates that:

A. Preferences are completely invariant to description

B. The way in which a choice is presented can systematically affect decisions even when the underlying outcomes are identical

C. Only the objective outcomes matter

D. Framing never affects choices

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Correct Answer: Option B

Explanation:
Framing effects occur when logically equivalent descriptions of the same decision problem lead to different choices, violating the invariance assumption of standard rational-choice theory.

This question belongs to: Economy GK Economy Set 1

Question #3

Which of the following is a characteristic of the 'Circular Economy' concept?

A. Only the maximisation of resource extraction

B. An economic system aimed at eliminating waste and the continual use of resources through reuse, repair, remanufacturing and recycling

C. Only the maximisation of consumption without regard to waste

D. A linear take-make-dispose model

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Correct Answer: Option B

Explanation:
The circular economy seeks to keep products, materials and resources in use for as long as possible, extracting maximum value and then recovering and regenerating them at the end of their service life.

This question belongs to: Economy GK Economy Set 1

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