The term 'Fiscal Consolidation' refers to: MCQ with Answer and Explanation

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The term 'Fiscal Consolidation' refers to:

A. Only increasing tax rates

B. Only printing more money

C. Policies aimed at reducing fiscal deficit and public debt

D. Increase in government expenditure without regard to revenue

Answer: Option C

Solution (By JKSSB Mock Tests)

Fiscal consolidation refers to policies and measures undertaken to reduce the fiscal deficit and put public finances on a sustainable path.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

The 'inflation targeting' in India uses which index as the nominal anchor?

A. GDP deflator

B. WPI

C. CPI-Combined

D. CPI-IW only

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Correct Answer: Option C

Explanation:
RBI's inflation targeting uses CPI-Combined as the nominal anchor.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a feature of the 'Carry Trade' strategy in foreign-exchange markets?

A. Only hedging all exchange-rate risk

B. Only trading on the basis of purchasing-power parity

C. Borrowing in a high-interest-rate currency and investing in a low-interest-rate currency

D. Borrowing in a low-interest-rate currency and investing in a high-interest-rate currency

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Correct Answer: Option D

Explanation:
A carry trade involves borrowing funds in a currency with a low interest rate and investing them in a currency with a higher interest rate, thereby earning the interest differential while remaining exposed to exchange-rate risk.

This question belongs to: Economy GK Economy Set 1

Question #3

In the context of production, the law of variable proportions is also known as:

A. Law of diminishing returns

B. Law of increasing returns

C. Law of returns to scale

D. Law of constant returns

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Correct Answer: Option A

Explanation:
The law of variable proportions (or law of diminishing returns) states that as more units of a variable factor are applied to a fixed factor, after a point, the marginal product of the variable factor diminishes.

This question belongs to: Economy GK Economy Set 1

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