Which of the following would most likely cause the rupee to appreciate? MCQ with Answer and Explanation

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Which of the following would most likely cause the rupee to appreciate?

A. Increase in imports

B. Large capital inflows into India

C. Higher domestic inflation

D. Lower foreign investment

Answer: Option B

Solution (By JKSSB Mock Tests)

Large capital inflows increase demand for rupee, causing appreciation.

This question belongs to: Economy GK Economy Set 1

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Question #1

The 'Pigou effect' suggests that falling prices:

A. increase real wealth and consumption

B. reduce real wealth

C. reduce money supply

D. increase unemployment

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Correct Answer: Option A

Explanation:
The Pigou effect states that lower prices raise real wealth and stimulate consumption.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a characteristic of the 'New Trade Theory' associated with Paul Krugman?

A. Trade is explained only by differences in factor endowments

B. Only comparative advantage based on technology differences matters

C. Trade always reduces welfare

D. Economies of scale and product differentiation can explain trade even between similar countries

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Correct Answer: Option D

Explanation:
New Trade Theory emphasises that increasing returns to scale and consumers’ preference for variety can generate trade and gains from trade even between countries with similar factor endowments.

This question belongs to: Economy GK Economy Set 1

Question #3

A price floor set above the equilibrium price generally creates:

A. no change

B. surplus

C. increase in demand

D. shortage

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Correct Answer: Option B

Explanation:
A price floor above equilibrium creates excess supply or a surplus.

This question belongs to: Economy GK Economy Set 1

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