[Mission 2022] QUIZ – 2022: INSIGHTS STATIC QUIZ, 09 April 2022 – Economy – INSIGHTSIAS

Solution: d)

• Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.
• Deflation is the general decline in prices for goods and services occurring when the inflation rate falls below 0%.

Solution: d)

The most important scale of asset quality is Non-Performing Assets (NPA). But NPA alone doesn’t tell the whole story of bad asset quality of loans given by banks. Hence a new classification is made in the form of stressed assets that comprises restructured loans and written off assets besides NPAs.

Restructured asset or loan are that assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures.

Written off assets are those the bank or lender doesn’t count the money borrower owes to it. The financial statement of the bank will indicate that the written off loans are compensated through some other way.

Solution: a)

In India, revenue deficit is one of the major reasons for a large fiscal deficit. This means that the government cannot finance its revenue operations by the resources it generates.

Undertake developmental expenditure: This is done because the internal resources of the government are not adequate to undertake development expenditure. It must borrow money from the market.

CAD is financed by external flows. If government borrows from outside it would increase our external capital deficit, but not affect the short-term CAD.

Solution: a)

Income tax is paid as per the provisions of the Income Tax Act (IT Act) but companies calculate their profit (through profit and loss account) as per the provisions of the Companies Act.

The IT Act allows several kinds of exemptions and other incentives from total income together with deductions on the gross income.

As a result of these exemptions, deductions and other incentives under IT Act, companies show their taxable income either ‘nil’ or ‘negative’, and this way, the ‘zero tax’ companies emerge and pay no taxes even though they may be paying huge dividends (under the Companies Act) to their shareholders.

To bring such companies under the income tax, MAT was imposed accordingly.

Solution: d)

Printing money just for meeting a deficit creates over flow of money into the market creating hyperinflation. So, RBI usually don’t take such measure.