QUESTION- Prelims-IAS – ECONOMICS MCQ-33
- Devaluating a currency is decided by the government issuing the currency, and unlike depreciation, is not the result of non-governmental activities.
- Increased Aggregate Demand (AD) – Exports become cheaper and more competitive to foreign buyers.
- Higher exports relative to imports can increase aggregate demand as increased consumer spending on domestic goods and services.
- Inflation is more likely to occur because imports are more expensive causing cost push inflation, AD is increasing causing demand pull inflation and with exports becoming cheaper manufacturers may have less incentive to cut costs and become more efficient. Therefore over time, costs may increase.
- Improvement in the current account balance. With exports more competitive and imports more expensive, we may see higher exports and lower imports, which will reduce the current account deficit.
As per the Insolvency and Bankruptcy Code 2016:
o Debt Recovery Tribunal and National Company Law Tribunal will act as Adjudicating Authority and deal with the cases related to insolvency, liquidation and bankruptcy process in respect of individuals and unlimited partnership firms and in respect of companies and limited liabilities entities respectively.
o An Insolvency and Bankruptcy Board of India will be established to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and information utilities.
- Statement 1 is correct. Post 1991 reforms, there is an increase in foreign direct investment due to liberalization process and hence an increase in forex reserves
- Statement 2 is incorrect. It is complained that economic reforms have bypassed agriculture sector. Public investment in agricultural infrastructure has reduced during reforms period
- Statement 3 is incorrect. There is an increasing regional disparities after the reforms. Growth has concentrated in few areas and regions which are experiencing unprecedented prosperity.
- Statement 1 is incorrect. Restriction on imports and restrictions on entry of foreign companies to India leads to lesser competition for domestic players and lesser choice for the consumers.
- The Indian consumers will have to purchase whatever the Indian producers produce
- Statement 2 is correct. Because of lesser competition, domestic players have greater incentive to sell their goods at higher price
- Statement 3 is correct. This policy by ways of tariffs and quotas helps domestic industries compete against foreign players
- Statement 4 is incorrect. As a result of protectionism, import of goods are restricted. This results in lesser imports and thus helps in saving of precious forex reserve.
Balance of payments summarizes an economy’s transactions with the rest of the world for a specified time period. To correct deficit in BoP, a country will have to take steps which would:
- attract more foreign investment
- increase exports and decrease unnecessary imports
- is not correct as Reducing import duty would lead to increase in imports and hence would lead to more deficit in BoP.
- is correct as restrictive monetary policy(lower money supply) would lead to fall in prices of goods in country which would make exports competitive in international market.
- is not correct as Appreciation of increase in value of domestic currency would make exports less competitive.
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