Question 1

Which among the following steps is most likely to be taken at the time of an economic recession?

Accepted Answer

During an economic recession, governments often increase expenditure on public projects to stimulate economic activity and create jobs. This increase in government spending helps boost demand in the economy and can lead to a multiplier effect, where the initial increase in spending generates further economic activity.

Question 2

Consider the following actions by the Government: 1. Cutting the tax rates 2. Increasing the government spending 3. Abolishing the subsidies in the context of economic recession. Which of the above actions can be considered a part of the 'fiscal stimulus' package?

Accepted Answer

Abolishing subsidies will cause prices of subsidized goods and services to increase. Lowering tax rates can serve as a stimulus.

Question 3

Which one of the following statements appropriately describes the 'fiscal stimulus'?

Accepted Answer

Governments utilize fiscal policy to impact the overall demand in the economy. This is done to reach economic goals like maintaining stable prices, achieving full employment, and fostering economic growth.

Question 4

In the context of governance, consider the following: 1. Encouraging Foreign Direct Investment inflows 2. Privatization of higher educational Institutions 3. Down-sizing of bureaucracy 4. Selling/offloading the shares of Public Sector Undertakings. Which of the above can be used as measures to control the fiscal deficit in India?

Accepted Answer

In the context of governance, measures like encouraging Foreign Direct Investment inflows, privatizing higher educational institutions, downsizing bureaucracy, and selling or offloading shares of Public Sector Undertakings can be utilized to control the fiscal deficit in India. The correct options are (d) 3 and 4 only. The idea of reducing the size of the bureaucracy was first considered in the early 1990s, and selling off shares of Public Sector Undertakings is another method to manage the fiscal deficit.

Question 5

What was the purpose of the Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

Accepted Answer

The Inter-Creditor Agreement was signed by Indian banks and financial institutions to facilitate the quicker resolution of stressed assets worth Rs 50 crore or more that are under consortium lending. This agreement is part of Project Sashakt initiated by the Finance Ministry to address the issue of Non-Performing Assets (NPAs) in Public Sector Banks in a time-bound manner. This particular approach focuses on dealing with mid-sized bad loans ranging from 50 to 500 crore through the Inter-Creditor Pact.

Fiscal Policy — UPSC Previous Year Questions

Which among the following steps is most likely to be taken at the time of an economic recession?

Year-wise Distribution

Sample Questions

Fiscal Policy — UPSC Previous Year Questions

Which among the following steps is most likely to be taken at the time of an economic recession?

Year-wise Distribution

Sample Questions