Daily Static Quiz (Economy) Nov 14, 2025
Contents
Daily Static Quiz (Economy) Nov 14, 2025
Question 1:
With reference to the Indian economy, demand-pull inflation can be caused/increased by which of the following?
Expansionary policies
Fiscal stimulus
Inflation-indexing wages
Higher purchasing power
Rising interest rates
Select the correct answer using the code given below:
(a) 1, 2 and 4 only
(b) 3, 4 and 5 only
(c) 1, 2, 3 and 5 only
(d) 1, 2, 3, 4 and 5
Question 2:
Consider the following statements regarding inflation targeting in India:
The RBI targets a Consumer Price Index (CPI) inflation of 4% with a tolerance band of +/- 2%.
The Monetary Policy Framework Agreement for inflation targeting was signed in 2015.
The inflation target is set by the RBI independently without consultation with the Government.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Question 3:
With reference to the Happy Planet Index, which of the following statements is/are correct?
It measures the efficiency with which countries convert environmental resources into long and happy lives.
It is published by the Hot or Cool Institute and was originally created by the New Economics Foundation.
In the current methodology, life expectancy and wellbeing are adjusted for inequality in all dimensions.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Question 4:
Stagflation is characterized by which of the following economic conditions?
High inflation accompanied by low unemployment
Stagnant economic growth with high unemployment
High inflation with high unemployment and low growth
Depreciation of currency with high inflation
Select the correct answer using the code given below:
(a) 1 and 4 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2, 3 and 4
Question 5:
Arrange the following poverty estimation committees in India in chronological order of their establishment:
Tendulkar Committee
Rangarajan Committee
Lakdawala Committee
Dandekar & Rath Committee
Select the correct answer using the code given below:
(a) 4, 3, 1, 2
(b) 3, 4, 2, 1
(c) 4, 3, 2, 1
(d) 3, 4, 1, 2
Question 6:
With reference to poverty measurement in India, which of the following statements is/are correct?
The Tendulkar Committee (2009) shifted from calorie-based poverty lines to a broader consumption basket.
The Rangarajan Committee (2012-14) recommended higher poverty thresholds than the Tendulkar Committee.
Both committees used the same methodology for calculating poverty lines.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Question 7:
The Atkinson Index differs from the Gini Coefficient in which of the following ways?
The Atkinson Index incorporates an inequality aversion parameter that can be adjusted.
The Gini Coefficient is more sensitive to changes at the lower end of income distribution.
The Atkinson Index allows for evaluation of social welfare losses due to inequality.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Question 8:
Which of the following can be correctly stated about the Lorenz Curve?
A perfectly equal income distribution is represented by the Lorenz Curve coinciding with the line of equality (45-degree line).
The farther the Lorenz Curve deviates from the line of equality, the greater the income inequality.
The Gini Coefficient is derived from the area between the Lorenz Curve and the line of equality.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Question 9:
According to the World Inequality Lab Report and recent data on India, which of the following statements is/are correct?
India’s income-based Gini coefficient has risen from 52 in 2004 to 62 in 2023.
India is now the most unequal country in terms of wealth distribution globally.
The top 1% in India holds approximately 40.1% of national wealth according to World Inequality Lab (2022-23 data).
Which of the statements given above is/are correct?
(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2 and 3
Question 10:
Based on Census 2011 poverty data (Rangarajan Committee methodology), which of the following statements about poverty in India is/are correct?
Chhattisgarh has the highest percentage of population below the poverty line among Indian states.
Kerala has the lowest poverty rate among Indian states.
Uttar Pradesh has the largest absolute number of people living below the poverty line.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
ANSWER KEY WITH EXPLANATIONS
Answer to Question 1: (a) 1, 2 and 4 only
Explanation:
Demand-pull inflation refers to a situation where aggregate demand outweighs aggregate supply, pushing prices upward. This is often described as “too much money chasing too few goods.”
Analyzing each statement:
Statement 1 – Expansionary Policies (CORRECT): Expansionary policies such as increased government spending or lower interest rates boost aggregate demand. When demand rises, it creates upward pressure on prices, contributing to demand-pull inflation.
Statement 2 – Fiscal Stimulus (CORRECT): Fiscal stimulus increases the money supply in the market through government spending or tax cuts. This enhances consumer and business spending, driving up demand and causing demand-pull inflation.
Statement 3 – Inflation-Indexing Wages (INCORRECT): Inflation-indexing wages means adjusting wages in line with inflation rates. If a worker earning Rs. 100 receives a wage increase of 5% when inflation is 5%, their real purchasing power remains unchanged. This does not increase aggregate demand or cause demand-pull inflation; instead, it protects purchasing power.
Statement 4 – Higher Purchasing Power (CORRECT): When consumers have higher disposable income (due to higher wages or reduced prices), they tend to spend more. This increased consumer spending contributes to higher aggregate demand, leading to demand-pull inflation.
Statement 5 – Rising Interest Rates (INCORRECT): Rising interest rates have a contractionary effect on the economy. They increase borrowing costs, reduce consumer spending and investment, and decrease aggregate demand. This is not conducive to demand-pull inflation; rather, it helps control inflation.
Concept Link: Demand-pull inflation is a monetary phenomenon driven by excess aggregate demand relative to aggregate supply. The Phillips Curve traditionally illustrated the inverse relationship between inflation and unemployment, though stagflation later challenged this theory.
Answer to Question 2: (a) 1 and 2 only
Explanation:
Inflation targeting is a crucial component of India’s monetary policy framework, formally adopted through a structured process.
Analyzing each statement:
Statement 1 (CORRECT): The Monetary Policy Framework Agreement between the Government of India and the RBI mandates the RBI to maintain CPI inflation at 4% with a tolerance band of +/- 2% (i.e., between 2% and 6%). This framework provides transparency and helps anchor inflation expectations.
Statement 2 (CORRECT): The Monetary Policy Framework Agreement was signed on February 20, 2015, between the Government of India and the RBI. This was the formal adoption of the Flexible Inflation Targeting framework. Subsequently, the RBI Act was amended in May 2016 to provide statutory basis, and the government officially notified the 4% target on August 5, 2016.
Note on Timeline: While some sources reference 2016 for formal statutory implementation, the framework agreement itself was signed in 2015, which represents the formal adoption date for practical purposes.
Statement 3 (INCORRECT): The inflation target is NOT set by the RBI independently. According to the RBI Act (as amended), the inflation target is set by the Government of India in consultation with the Reserve Bank, and this target is reviewed once every five years. The Government has the authority to set the target, not the RBI.
Additional Context: The RBI uses various tools such as the repo rate, reverse repo rate, and open market operations (OMOs) to achieve the inflation target. Inflation targeting provides credibility to monetary policy and helps maintain macroeconomic stability, though it faces challenges from external shocks like oil price volatility and supply-side disruptions.
Answer to Question 3: (a) 1 only
Explanation:
The Happy Planet Index (HPI) is a unique measure combining environmental sustainability with human well-being metrics.
Analyzing each statement:
Statement 1 (CORRECT): The Happy Planet Index measures how efficiently countries convert environmental resources (measured by ecological footprint) into long, healthy, and happy lives. It combines three key metrics: life expectancy, wellbeing (subjective life satisfaction), and ecological footprint. The HPI essentially answers the question: “Which countries deliver the greatest wellbeing for their citizens while maintaining environmental sustainability?”
A high HPI score indicates that a country is efficiently delivering good lives for its citizens without exceeding planetary boundaries. Conversely, countries with large carbon footprints relative to their wellbeing outcomes score lower.
Statement 2 (INCORRECT – CLARIFICATION UPDATE): The Happy Planet Index is currently published by the Hot or Cool Institute (as of 2024). It was originally created by the New Economics Foundation (nef) in 2006. It is NOT published by the United Nations Sustainable Development Solutions Network (UNSDSN).
It’s crucial to distinguish between these:
Happy Planet Index: Published by Hot or Cool Institute (formerly nef); focuses on sustainability and efficiency
World Happiness Report: Published by UN SDSN; measures subjective well-being based on various socioeconomic factors
Statement 3 (INCORRECT): In the current methodology of the Happy Planet Index, wellbeing and life expectancy are NOT adjusted for inequality. Although some earlier editions made such adjustments, the current version does not explicitly incorporate inequality adjustments for all components due to data availability issues. However, it is acknowledged that income inequality (which is associated with both average wellbeing and life expectancy) indirectly affects HPI scores.
Concept Connection: The Happy Planet Index represents a departure from traditional GDP-centric development measures and aligns with the Sustainable Development Goals (SDGs), particularly SDG 12 (Responsible Consumption and Production) and SDG 13 (Climate Action).
Answer to Question 4: (c) 3 only
Explanation:
Stagflation is an unusual and problematic economic phenomenon that combines contradictory economic conditions.
Analyzing each statement:
Statement 1 (INCORRECT): High inflation accompanied by low unemployment is actually the typical economic scenario according to the Phillips Curve—not stagflation. The Phillips Curve postulates an inverse relationship between inflation and unemployment. When inflation is high, unemployment tends to be low due to strong economic growth and labor demand.
Statement 2 (PARTIALLY INCOMPLETE): While stagnant economic growth with high unemployment is part of stagflation, this statement alone does not fully capture the defining feature of stagflation.
Statement 3 (CORRECT): This statement correctly defines stagflation. It is characterized by the simultaneous occurrence of:
High inflation rates (rising prices of goods and services)
High unemployment rates (fewer jobs available)
Stagnant or low economic growth (GDP growth is slow or negative)
This combination is particularly challenging because it violates the traditional Phillips Curve relationship. During stagflation:
Workers face rising prices (inflation) that erode purchasing power
Yet they also face job insecurity and difficulty finding employment
Businesses struggle with high production costs but weak demand, leading to reduced profitability and hiring
Statement 4 (INCORRECT): Currency depreciation with high inflation is not a defining characteristic of stagflation. While stagflation may coincide with currency depreciation in some cases, depreciation is not a necessary or defining feature. Stagflation is defined by the domestic economy’s combination of inflation, unemployment, and stagnant growth.
Historical Context: Stagflation was prominently witnessed during the 1970s oil crisis when OPEC nations imposed an embargo on oil exports. This caused oil prices to skyrocket (supply-side shock), leading to higher production costs and inflation, while simultaneously reducing economic activity and increasing unemployment. India also experienced stagflation symptoms during economic slowdowns accompanied by persistent inflation, such as in 2012-2013 and temporarily during the COVID-19 pandemic period.
Policy Dilemma: Stagflation creates a policy dilemma for governments and central banks. Traditional anti-inflation measures (raising interest rates) exacerbate unemployment, while measures to reduce unemployment (lower interest rates, fiscal stimulus) may worsen inflation. This makes stagflation particularly difficult to manage.
Answer to Question 5: (a) 4, 3, 1, 2
Explanation:
This question tests chronological knowledge of India’s poverty estimation committees. Here’s the timeline:
Statement 4 – Dandekar & Rath Committee (1971): This was the earliest and most landmark study among the options. The Dandekar & Rath Committee proposed the first systematic calorie-based poverty line for India. It suggested that poverty could be measured based on minimum caloric requirements (approximately 2,250 calories per person per day for both rural and urban areas).
Statement 3 – Lakdawala Committee (1993): Established by the Planning Commission, this committee recommended state-specific poverty lines using calorie consumption norms of 2,400 kcal (rural) and 2,100 kcal (urban) per day. It recognized that poverty lines varied across different states in India due to regional differences in price levels.
Statement 1 – Tendulkar Committee (2009): This committee introduced a significant methodological shift. It moved away from calorie-based poverty measurement to a broader consumption basket approach. The Tendulkar Committee included private expenditures on health and education in its poverty line calculation and adopted the Mixed Reference Period (MRP) methodology for data collection.
Statement 2 – Rangarajan Committee (2012-14): This committee reviewed and revised the Tendulkar methodology, criticizing it for underestimating poverty. The Rangarajan Committee proposed higher poverty thresholds and reverted to separate rural and urban poverty lines. It emphasized that poverty lines should include essential non-food items such as clothing, shelter, education, and healthcare.
Chronological Order: 4 → 3 → 1 → 2
This progression shows the evolution of poverty measurement in India, moving from simple calorie-based metrics to more comprehensive consumption-based approaches.
Answer to Question 6: (a) 1 and 2 only
Explanation:
This question assesses understanding of India’s evolving poverty measurement methodologies.
Analyzing each statement:
Statement 1 (CORRECT): The Tendulkar Committee (2009) indeed shifted the methodology from calorie-based poverty lines to a broader consumption basket approach. The key innovations included:
Inclusion of private expenditures on health and education
Adoption of the Mixed Reference Period (MRP) method
A uniform all-India Poverty Line Basket (PLB)
Estimated poverty line at Rs. 816 (rural) and Rs. 1,000 (urban) per capita per month in 2011-12
This broader approach recognized that poverty is multidimensional and not merely about caloric intake.
Statement 2 (CORRECT): The Rangarajan Committee (2012-14) recommended higher poverty thresholds than the Tendulkar Committee. Specifically:
Rangarajan suggested Rs. 972 (rural) and Rs. 1,407 (urban) per capita per month for 2011-12
This was significantly higher than Tendulkar’s estimates
The Rangarajan Committee criticized the Tendulkar Committee for underestimating poverty
It estimated approximately 29.5% of the population as living below the poverty line in 2011-12, whereas Tendulkar’s estimate was around 21.9%
Statement 3 (INCORRECT): The Tendulkar and Rangarajan Committees used different methodologies:
Tendulkar: Used calorie-adjusted consumption baskets with broader definitions
Rangarajan: Reverted to separate rural-urban poverty lines with explicit inclusion of food and non-food components
While both moved away from simple calorie-based approaches, their specific methodologies differed significantly
The Rangarajan Committee’s higher estimates reflected a more inclusive definition of poverty that considered essential non-food expenses beyond what the Tendulkar Committee included.
Answer to Question 7: (b) 1 and 3 only
Explanation:
This question tests understanding of different inequality measurement tools, specifically comparing the Atkinson Index with the Gini Coefficient.
Analyzing each statement:
Statement 1 (CORRECT): The Atkinson Index incorporates an inequality aversion parameter (ε/epsilon) that can be adjusted according to the society’s preference for equality. The parameter works as follows:
When ε = 0, the index shows no aversion to inequality
As ε increases (typically 0.5, 1, 1.5, or 2), the index becomes increasingly sensitive to inequality at the lower end of the income distribution
A higher ε value means greater weight is given to inequality affecting the poor
This flexibility is a key advantage of the Atkinson Index, allowing policymakers to reflect different societal values regarding equality.
Statement 2 (INCORRECT): This statement reverses the sensitivity characteristics. In fact:
The Atkinson Index is more sensitive to changes at the lower end of income distribution (depending on the ε parameter)
The Gini Coefficient is more sensitive to changes in the middle of income distribution
The Gini Coefficient treats all income changes equally regardless of where they occur in the distribution
This is an important distinction because poverty alleviation efforts affect the lower end of the distribution.
Statement 3 (CORRECT): The Atkinson Index explicitly evaluates social welfare losses due to inequality. Its intuitive interpretation is that an Atkinson Index value of, say, 0.20 means:
Society could achieve the same level of social welfare with only 80% of current income (100% – 20%)
The remaining 20% is “lost” due to inefficient distribution
This connects income inequality directly to social welfare, making it theoretically grounded in welfare economics and Rawlsian concepts of social justice
Comparative Advantages:
Gini Coefficient: Easier to calculate; ranges from 0 to 1; widely understood; sensitive to middle-income changes
Atkinson Index: Incorporates social values about equality; more sensitive to lower-income inequality; explicitly measures welfare losses; theoretically grounded in welfare economics
Key Concept: Atkinson’s work was influenced by philosopher John Rawls’ conception of social justice, arguing that inequality measures should incorporate societal judgments about how inequality affects welfare and fairness.
Answer to Question 8: (d) 1, 2 and 3
Explanation:
The Lorenz Curve is a fundamental graphical tool for measuring income inequality. All three statements are correct.
Analyzing each statement:
Statement 1 (CORRECT): In a Lorenz Curve diagram:
The x-axis represents the cumulative percentage of the population
The y-axis represents the cumulative percentage of income
The 45-degree line (line of equality) represents perfect income equality, where each person earns an identical share of income
A perfectly equal income distribution would result in the Lorenz Curve coinciding exactly with this 45-degree line
For example, in perfect equality, 50% of the population would earn 50% of the income, 75% of the population would earn 75% of the income, etc.
Statement 2 (CORRECT): Income inequality is directly reflected in the deviation of the Lorenz Curve from the 45-degree line:
The farther the Lorenz Curve deviates (bows outward) from the line of equality, the greater the income inequality
The maximum deviation occurs when the curve approaches the bottom-right corner, representing complete inequality where one person earns all the income
A larger gap between the Lorenz Curve and the line of equality indicates more unequal income distribution
For instance, in a country with extreme inequality, the Lorenz Curve would show that 80% of the population earns only 20% of the income, while the top 20% earns 80%.
Statement 3 (CORRECT): The Gini Coefficient is derived from the Lorenz Curve:
The Gini Coefficient is calculated as the ratio of the area between the Lorenz Curve and the line of equality to the total area of the triangle under the line of equality
Mathematically: Gini = (Area between Lorenz Curve and line of equality) / (Total area under the line of equality)
The Gini Coefficient ranges from 0 (perfect equality) to 1 (perfect inequality)
This mathematical relationship means that the Gini Coefficient quantifies the visual representation provided by the Lorenz Curve
Practical Application: For India:
The Lorenz Curve shows that the bottom 50% of the population earns only about 15% of the income
The top 10% earns approximately 30-35% of the income
India’s wealth-based Gini coefficient stands at approximately 0.62 (on a 0-1 scale), indicating substantial inequality
Limitation: Both the Lorenz Curve and Gini Coefficient measure income inequality but do not account for non-income dimensions of inequality such as education, health, or access to services. This is where multidimensional indices like the Human Development Index become relevant.
Answer to Question 9: (a) 1 and 3 only
Explanation:
This question tests knowledge of India’s inequality situation based on recent reports from the World Inequality Lab and related organizations.
Analyzing each statement:
Statement 1 (CORRECT): According to World Inequality Lab data:
India’s income-based Gini coefficient rose from 52 in 2004 to 62 in 2023
This represents a significant increase in income inequality over two decades
On a scale of 0 (perfect equality) to 100 (perfect inequality), India’s rise from 52 to 62 indicates worsening inequality
This trend contradicts claims that India is becoming more equal; rather, it demonstrates that economic growth has disproportionately benefited those at the top of the income distribution
Statement 2 (INCORRECT): While India faces severe inequality, it is NOT the most unequal country globally in terms of wealth distribution. According to World Inequality Lab data:
South Africa has even higher inequality (wealth-based Gini around 0.70)
India ranks among the world’s most unequal, but not as the absolute highest
However, India does rank as one of the top 5 most unequal countries globally in terms of both income and wealth
India’s inequality level is higher than Britain during the colonial period (1922), but not the highest globally today
Statement 3 (CORRECT): According to the World Inequality Lab and recent reports based on 2022-23 data:
The top 1% in India holds approximately 40.1% of national wealth
This extreme concentration represents one of the highest wealth concentration ratios globally
In contrast, the bottom 50% holds only about 6-7% of national wealth
This concentration of wealth is significantly higher than in developed democracies
Additional Context on India’s Inequality:
Income Inequality: The top 1% earns 22.6% of national income (as per World Inequality Database 2022-23)
Regional Disparities: Southern and Western states are significantly more developed than Eastern and Central regions
Rural-Urban Divide: Average monthly per capita consumption expenditure is Rs. 3,773 (rural) vs. Rs. 6,459 (urban)
Gender Inequality: Men earn 82% of labor income while women earn 18%
Causes of Persistence: Capital-intensive growth (jobless growth), unequal educational access, persistent caste discrimination, and high informalization
Global Comparison:
USA (income-based Gini): ~41
Germany: ~31
Sweden: ~28
South Africa: ~63
India: ~62
India’s inequality level approaches that of South Africa, often cited as one of the world’s most unequal societies.
Answer to Question 10: (d) 1, 2 and 3
Explanation:
This question assesses knowledge of state-wise poverty data based on Census 2011 using the Rangarajan Committee methodology.
Analyzing each statement:
Statement 1 (CORRECT): According to Census 2011 poverty data (Rangarajan Committee, 2012-14):
Chhattisgarh has the highest percentage of population below the poverty line at 39.93%
This was followed by Jharkhand (36.96%) and Manipur (36.89%)
Since the 2004-2011 period, Chhattisgarh’s poverty declined only marginally from 40.9% to 39.93%
Despite being one of India’s mineral-rich states, Chhattisgarh has remained the poorest in terms of poverty percentage
Statement 2 (CORRECT): Kerala has the lowest poverty rate among Indian states at 7.05%:
This is followed by Goa (5.09%), which is a Union Territory; among states, Kerala is lowest
Sikkim (8.19%), Himachal Pradesh (8.06%), and Jammu & Kashmir (10.35%) also have low poverty rates
Kerala’s low poverty is attributed to historical factors including:
High literacy rates and educational investment
Effective public health systems
Land reforms and social welfare programs
High female literacy and labor force participation
Kerala serves as a model for inclusive development despite lower per capita income compared to some other states
Statement 3 (CORRECT): Uttar Pradesh has the largest absolute number of people living below the poverty line:
Approximately 59-60 million people in Uttar Pradesh (29.43% of state population)
This was followed by Bihar (35.82 million), Madhya Pradesh (23.41 million), Maharashtra (19.79 million), and West Bengal (18.50 million)
While the percentage-wise poverty in UP (29.43%) is lower than states like Chhattisgarh, the sheer population size of UP means the absolute number of poor is highest
This makes poverty alleviation in UP critically important for achieving national poverty reduction targets
State-wise Poverty Data Summary (Census 2011, Rangarajan Committee):
Top 10 Poorest States (by percentage):
Chhattisgarh: 39.93%
Jharkhand: 36.96%
Manipur: 36.89%
Arunachal Pradesh: 34.67%
Bihar: 33.74%
Odisha: 32.59%
Assam: 31.98%
Madhya Pradesh: 31.65%
Uttar Pradesh: 29.43%
Dadra & Nagar Haveli: 28.79%
Least Poor States (by percentage):
Goa (UT): 5.09%
Kerala: 7.05%
Himachal Pradesh: 8.06%
Sikkim: 8.19%
Jammu & Kashmir: 10.35%
National Average: 21.92% (according to Rangarajan Committee methodology for 2011-12)
Important Considerations:
These figures are based on Census 2011 data and use the Rangarajan Committee methodology
More recent data from the National Multidimensional Poverty Index (NMPI) 2021 provides updated estimates
The NMPI uses a multidimensional approach considering health, education, and living standards deprivations
Poverty reduction efforts must account for both percentage-based and absolute number considerations
