The term 'Crowding Out' in economics refers to: MCQ with Answer and Explanation

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The term 'Crowding Out' in economics refers to:

A. Decrease in imports due to tariffs

B. Decrease in private investment due to government borrowing

C. Increase in exports due to currency depreciation

D. Increase in private investment due to government spending

Answer: Option B

Solution (By JKSSB Mock Tests)

Crowding out occurs when increased government borrowing leads to higher interest rates, which reduces private sector investment.

This question belongs to: Economy GK Economy Set 1

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Question #1

Which of the following is a measure to control inflation?

A. Reduction in taxes during high inflation

B. Reduction in bank rate

C. Increase in CRR and SLR

D. Increase in government expenditure

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Correct Answer: Option C

Explanation:
Raising CRR and SLR reduces the lending capacity of banks, thereby contracting money supply and helping to control inflation.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a feature of the 'Financial Development' and growth literature?

A. Financial development always retards growth

B. Finance is completely neutral for real activity

C. Better-functioning financial systems can promote growth by improving the allocation of capital and reducing financing constraints

D. Only the size of the banking system matters and quality is irrelevant

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Correct Answer: Option C

Explanation:
A large body of research finds that financial development—deeper, more efficient and more inclusive financial systems—tends to raise long-run growth by relaxing credit constraints and improving resource allocation.

This question belongs to: Economy GK Economy Set 1

Question #3

The concept of indicative planning in India refers to:

A. state ownership of all means of production

B. planning in a mixed economy with public and private sectors

C. planning without any state intervention

D. planning based on forced targets

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Correct Answer: Option B

Explanation:
Indicative planning in India is planning in a mixed economy with both public and private sectors.

This question belongs to: Economy GK Economy Set 1

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