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 private investment due to government borrowing

B. Increase in exports due to currency depreciation

C. Decrease in imports due to tariffs

D. Increase in private investment due to government spending

Answer: Option A

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 characteristic of the 'Global Financial Cycle' hypothesis?

A. Only domestic monetary policy matters

B. Capital flows are always driven by local pull factors

C. Co-movements in capital flows, asset prices and credit growth across countries are driven in large part by global factors, especially US monetary policy

D. National financial conditions are completely independent of global factors

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Correct Answer: Option C

Explanation:
The global-financial-cycle hypothesis emphasises that fluctuations in global risk appetite, often linked to US monetary policy and the strength of the dollar, generate correlated movements in capital flows, credit and asset prices across many countries.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'Primary deficit' is a useful measure because it shows:

A. only revenue deficit

B. the deficit excluding interest payments

C. the entire fiscal deficit

D. only capital deficit

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Correct Answer: Option B

Explanation:
Primary deficit excludes interest payments from fiscal deficit.

This question belongs to: Economy GK Economy Set 1

Question #3

The term 'Special Economic Zone' (SEZ) is associated with:

A. Promoting exports and attracting investment

B. Increasing import tariffs

C. Restricting foreign investment

D. Reducing agricultural production

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Correct Answer: Option A

Explanation:
SEZs are designated areas that offer incentives such as tax benefits and simplified procedures to promote exports, attract domestic and foreign investment, and generate employment.

This question belongs to: Economy GK Economy Set 1

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