Daily Quiz: UPSC Prelims Marathon – January 23, 2018

A mixed economic system is an economic system that features characteristics of both capitalism and socialism. A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims.

All the above statements are correct. Inflation redistributes wealth from creditors to debtors. This implies that the lenders suffer and borrowers benefit out of inflation.

As per Phillips curve inflation and unemployment have a stable and inverse relationship.

Rising inflation indicates rising aggregate demand and indicates comparatively lower supply and higher purchasing capacity among the consumers.

Quinary activities are services that focus on the creation, re-arrangement and interpretation of new and existing ideas; data interpretation and the use and evaluation of new technologies. Often referred to as ‘gold collar’ professions, they represent another subdivision of the tertiary sector representing special and highly paid skills of senior business executives, government officials, research scientists, financial and legal consultants, etc. Their importance in the structure of advanced economies far outweighs their numbers. The highest level of decision makers or policy makers performs quinary activities.

A liquidity trap is a situation, described in Keynesian economics, in which injections of cash into the private banking system by a central bank fail to decrease interest rates and hence make monetary policy ineffective. Thus interest rate will not decrease thus fail to make economic growth.

A revenue deficit occurs when the net income generated, revenues less expenditures, falls short of the projected net income. This happens when the actual amount of revenue received and/or the actual amount of expenditures do not correspond with budgeted revenue and expenditure figures. This is the opposite of a revenue surplus, which occurs when the actual amount of net income exceeds the projected amount.

To reduce revenue deficit, either we need to increase the revenue receipts or reduce the revenue expenditure.

Fiscal consolidation is a process where government’s fiscal health is getting improved and is indicated by reduced fiscal deficit. Improved tax revenue realization and better aligned expenditure are the components of fiscal consolidation as the fiscal deficit reaches at a manageable level.

Following measures from the expenditure side and revenue side are envisaged by the government to achieve fiscal consolidation.

1. Improved tax revenue realization: For this, increasing efficiency of tax administration by reducing tax avoidance, eliminating tax evasion, enhancing tax compliance etc. are to be made.
2. Enhancing tax GDP ratio by widening the tax base and minimizing tax concessions and exemptions also improves tax revenues.
3. Better targeting of government subsidies and extending Direct Benefit Transfer scheme for more subsidies.

Statement 1 is incorrect. India is the world’s largest producer and consumer of pulses. It imports about 3.5 million tonnes of pulses every year from the U.S., Australia, Myanmar, East Africa and Ukraine, besides Canada to meet its domestic demand.

Statement 2 is incorrect. Amid unrest among farmers for multiple reasons in different states, the Center has increased the minimum support price (MSP) of pulses, oil-seeds and cotton for the 2017-18 crop year and asked states to procure it by all means so that the farmers are not forced to sell it at low prices. Idea of this move is to provide remunerative prices to farmers when the prices are under pressure due to supply glut.