10 Economy GK Questions with Answers

1. Who gave us the term 'fiscal federalism'
   1. Adam Smith
   2. Richard Musgrave
   3. J. M. Keynes
   4. Milton Friedman
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   Answer: (B) Richard Musgrave

   The term was given in 1959 by Richard Musgrave, an economist born in Germany who later became known as American.

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2. What share of the total plan outlay did the First Five Year Plan put on agriculture
   1. 21%
   2. 31%
   3. 41%
   4. 51%
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   Answer: (B) 31%

   Agriculture took 31%, and after it came transport and communication, then social services, then power and finally industry.

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3. On whose recommendation are grants under Article 275 given
   1. The GST Council
   2. NITI Aayog
   3. The Finance Commission
   4. A state legislature
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   Answer: (C) The Finance Commission

   Statutory grants under Article 275 are given on the Finance Commission's recommendation, chiefly for the welfare of Scheduled Tribes.

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4. National income is equal to — (IAS, 2001)
   1. Gross National Product at market prices minus depreciation
   2. Gross National Product at market prices minus depreciation plus net factor income from abroad
   3. Gross National Product at market prices minus depreciation and indirect taxes plus subsidies
   4. Gross National Product at market prices minus net factor income from abroad
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   Answer: (C) Gross National Product at market prices minus depreciation and indirect taxes plus subsidies

   Taking depreciation out of GNP gives NNP at market price; taking out indirect taxes and adding subsidies gives NNP at factor cost, which is national income.

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5. A "closed economy" is an economy in which — (UPSC, 2011)
   1. the money supply is fully controlled
   2. deficit financing takes place
   3. only export takes place
   4. neither export nor import takes place
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   Answer: (D) neither export nor import takes place

   The only mark of a closed economy is that it does not trade with other economies — the consumer gets everything within the economic borders.

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6. What is the maximum guaranteed insurance benefit under EDLI
   1. ₹1 lakh
   2. ₹2.5 lakh
   3. ₹5 lakh
   4. ₹7 lakh
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   Answer: (D) ₹7 lakh

   EDLI guarantees a benefit of at least ₹2.5 lakh and at most ₹7 lakh.

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7. What percentage of Foreign Direct Investment (FDI) is allowed in Indian companies publishing newspapers and periodicals dealing with news and current affairs — (IAS, 2005)
   1. 26%
   2. 49%
   3. 74%
   4. 100%
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   Answer: (A) 26%

   FDI in publications dealing with news and current affairs is capped at 26%.

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8. Which of these is not a cause on the demand side
   1. A rise in public expenditure
   2. A reduction in direct taxes
   3. Hoarding by traders
   4. A growing population
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   Answer: (C) Hoarding by traders

   Hoarding cuts supply, so it is a cause on the supply side.

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9. What is the correct meaning of fiscal space
   1. The government’s total budget size
   2. The room to spend without putting financial stability at risk
   3. The rate of tax collection
   4. The size of the foreign exchange reserves
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   Answer: (B) The room to spend without putting financial stability at risk

   It shows how much more the government can spend without upsetting its own financial stability.

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10. By Malthus's theory, in what progression does food production grow, and in what progression does population grow?
    1. Both in arithmetic progression
    2. Both in geometric progression
    3. Food in arithmetic, population in geometric
    4. Food in geometric, population in arithmetic
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    Answer: (C) Food in arithmetic, population in geometric

    This exact gap was the root of Malthus's worry — food grows slowly, population grows fast.

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