Quiz July 8, 2026

Consider the following statements in the context of inflation: 

1. An inflationary gap occurs when real GDP exceeds the potential GDP.
2. The bonus brought by inflation to the borrowers is known as the inflation premium.
3. Inflation tax means inflation is always at the level to which the government may go for deficit financing.

Which of the statements given above is/are correct?

Which of the following is/are the criteria for deciding a particular Financial Year as Base Year:

1. Year with less monsoon deficit
2. That year should not have inflation at alarming rates
3. Unstable years in terms of economic activity are not considered as base year
4. There should not be much gap between base year chosen and current year

Select the correct code:

Consider the following statements regarding the various types of economic systems:

1. In a market economy, most economic decision making is done through voluntary transactions according to the laws of supply and demand.
2. In a non-market economy, a state has a complete or substantially complete monopoly of its trade.
3. The mixed economy is based on the principle of laissez-faire.

Which of the statements given above is/are correct?

GDP of a country is calculated based on its economic territory. Which of the following is/are included in the definition of economic territory?

1. Political frontiers including territorial waters and air space
2. Indian embassies located abroad.
3. Ships operated by the residents between two or more countries
4. Fishing vessels operated by the residents in the jurisdiction of another nation. 

Select the correct answer using the code given below.

It is a market structure in which there is freedom of entry and exit of firms, but firms can differentiate their products. Therefore, they have an inelastic demand curve and so they can set prices. However, because there is freedom of entry, supernormal profits will encourage more firms to enter the market leading to normal profits in the long term. This the best description of: