MODULE 6: Question Bank with Answers

 1. Indian Economy: Nature and Characteristics

Q1: What is the nature of the Indian economy?
Answer: The Indian economy is a mixed economy, combining features of both capitalism and socialism, where both private and public sectors coexist.

Q2: Mention any four characteristics of the Indian economy.
Answer:

1.     Predominantly agricultural

2.     Overpopulation

3.     Low per capita income

4.     Unequal distribution of wealth

 2. Basic Concepts of Economics

Q1: Define GDP.
Answer: Gross Domestic Product (GDP) is the total value of goods and services produced within a country in a given period.

Q2: What is economic development?
Answer: Economic development refers to improvements in living standards, income, and economic health of a nation, including indicators like education, infrastructure, and life expectancy.

 3. Fiscal and Monetary Policy

Q1: What is fiscal policy?
Answer:
Fiscal policy involves government spending and taxation to influence the economy.

Q2: Define monetary policy.
Answer:
Monetary policy refers to the control of money supply and interest rates by the central bank to maintain economic stability.

Q3: Differentiate between fiscal and monetary policy.
Answer:

Fiscal Policy	Monetary Policy
Controlled by government	Controlled by central bank
Involves spending & taxation	Involves money supply & rates
Long-term impact	Short- to medium-term impact

 4. LPG (Liberalization, Privatization, Globalization)

Q1: What is LPG?
Answer:
LPG stands for Liberalization, Privatization, and Globalization, the economic reforms introduced in India in 1991 to make the economy more market-oriented.

Q2: Briefly explain each component.
Answer:

·        Liberalization: Reducing government restrictions on business.

·        Privatization: Transfer of ownership from public to private sector.

·        Globalization: Integration with the global economy.

 5. Inflation

Q1: Define inflation.
Answer:
Inflation is the persistent rise in the general price level of goods and services over time.

Q2: Mention two types of inflation.
Answer:

1.     Demand-pull inflation – Caused by excessive demand.

2.     Cost-push inflation – Caused by rising input costs.

 6. Sensex

Q1: What is Sensex?
Answer:
Sensex is the stock market index of the Bombay Stock Exchange (BSE), representing the performance of 30 well-established companies.

 7. GATT, WTO, and IMF

Q1: What was GATT?
Answer:
GATT (General Agreement on Tariffs and Trade) was a multilateral agreement to reduce trade barriers, replaced by the WTO in 1995.

Q2: What is WTO?
Answer:
The World Trade Organization (WTO) facilitates international trade, resolves disputes, and enforces trade agreements among member countries.

Q3: What is IMF?
Answer:
The International Monetary Fund (IMF) provides financial support, policy advice, and technical assistance to member countries facing economic crises.

 8. Difference Between Central Bank and Commercial Banks

Q1: Distinguish between Central Bank and Commercial Bank.
Answer:

Central Bank (e.g., RBI)	Commercial Banks (e.g., SBI, HDFC)
Regulates money supply and credit	Accepts deposits and offers loans
Issues currency	Does not issue currency
Controls inflation and monetary policy	Works under regulations of central bank
Lender of last resort	Profit-oriented institutions