Question 1

In the context of Indian economics, what does 'Fiscal Deficit' refer to?

Accepted Answer

Fiscal deficit is the difference between government expenditure and government revenue, indicating the amount the government must borrow to meet its spending obligations.

Question 2

Which of the following best defines Gross Domestic Product (GDP)?

Accepted Answer

GDP is the total monetary value of all finished goods and services produced within a country's borders in a specific time period, regardless of the nationality of the producers.

Question 3

What is the primary difference between Gross National Product (GNP) and Gross Domestic Product (GDP)?

Accepted Answer

GNP includes income earned by nationals abroad but excludes income earned by foreigners domestically, while GDP includes all production within borders regardless of nationality.

Question 4

Inflation refers to:

Accepted Answer

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money.

Question 5

Which of the following is measured by the Consumer Price Index (CPI) in India?

Accepted Answer

CPI measures the average change in prices paid by consumers for a basket of goods and services over time, reflecting inflation at the retail level.

Question 6

Which of the following best describes the relationship between GDP and GNP?

Accepted Answer

GDP (Gross Domestic Product) measures the total economic output produced within a country's borders, regardless of who owns the resources. GNP (Gross National Product) measures the total economic output produced by a country's nationals, regardless of where the production occurs. The key difference is that GNP includes net income from abroad (income earned by residents from overseas investments minus income earned by foreigners within the country), while GDP does not.

Question 7

If the nominal GDP of India grows at 10% annually while the inflation rate is 6%, what is the approximate real GDP growth rate?

Accepted Answer

Real GDP growth = Nominal GDP growth − Inflation rate. This tests understanding of the relationship between nominal and real GDP, a fundamental economic concept.

Question 8

Which of the following best defines Gross Domestic Product (GDP) in the context of Indian economics?

Accepted Answer

GDP measures the total monetary value of all final goods and services produced within a country's geographical boundaries during a specific period, regardless of the nationality of the producers.

Question 9

Inflation in an economy is primarily measured by which of the following indices in India?

Accepted Answer

In India, inflation is primarily measured using the Consumer Price Index (CPI), which tracks changes in the prices of a basket of goods and services consumed by households. The RBI uses CPI as the primary inflation metric for monetary policy decisions.

Question 10

If the inflation rate in an economy increases while the nominal GDP remains constant, what happens to the real GDP?

Accepted Answer

Real GDP is calculated by adjusting nominal GDP for inflation. When inflation increases while nominal GDP stays constant, real GDP decreases because the same monetary value represents fewer actual goods and services produced.

Question 11

Which of the following statements about deflation is correct?

Accepted Answer

Deflation is a sustained decrease in the general price level of goods and services in an economy, leading to an increase in the purchasing power of money. It is the opposite of inflation.

Question 12

If the Real GDP of a country grows at 6% annually while the inflation rate is 5%, what is the approximate Nominal GDP growth rate, assuming the Fisher equation approximation holds?

Accepted Answer

This question tests understanding of the relationship between Real GDP, Nominal GDP, and inflation using the Fisher equation: Nominal GDP Growth ≈ Real GDP Growth + Inflation Rate.

SSC MTS Inflation, GDP, GNP

Inflation, GDP, GNP— Rules & Concept

Key Points to Remember

Exam-Specific Tips

Inflation, GDP, GNP — Practice Questions

60-Second Revision — Inflation, GDP, GNP