Daily JAIIB Quiz 21 Oct 2026

Correct answer: Option 2. Nominal GDP measures output using current-year prices, so it can increase because of either higher production or higher prices. Real GDP adjusts for price changes and is therefore a better indicator of the change in the volume of goods and services produced. Using the approximate relationship, real GDP growth is about 9% − 6% = 3%. The exact result depends on the GDP deflator and the precise calculation, so 3% is an approximation.

Correct answer: Option 1. Demand-pull inflation occurs when aggregate demand grows faster than the economy’s ability to supply goods and services. When spare capacity is limited, producers may be unable to increase output sufficiently and prices rise. Cost-push inflation, by contrast, originates from increases in production costs such as wages, fuel or imported inputs.

Correct answer: Option 3. Disinflation means the rate at which prices are rising has slowed; prices may still be increasing. Deflation means a sustained fall in the general price level. A decline in inflation from 7% to 4% is disinflation, not deflation, because prices are still rising year on year.

Correct answer: Option 1. The Consumer Price Index (CPI) tracks changes in the prices paid by consumers for a representative consumption basket. It is a key measure of consumer-level inflation and is central to India’s inflation-targeting framework. The Wholesale Price Index (WPI) measures price movements at the wholesale level and has a different coverage and weighting structure.

Correct answer: Option 2. The approximate real interest rate equals the nominal interest rate minus expected inflation: 7% − 5% = 2%. The exact Fisher equation is (1 + nominal rate) / (1 + inflation rate) − 1, which gives about 1.90%. In exam questions, the approximate subtraction method is normally used when explicitly indicated.

Correct answer: Option 4. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Here, elasticity = −20% / 10% = −2, so its absolute value is 2. Since the absolute value exceeds 1, demand is price-elastic: quantity demanded changes proportionately more than price.

Correct answer: Option 1. Opportunity cost is the value of the next-best alternative sacrificed when a choice is made. It is not necessarily an accounting expense or a cash payment. For a bank allocating scarce funds, the expected return from the best alternative not selected is an important part of the economic assessment of a lending or investment decision.

Correct answer: Option 3. A contraction or recessionary phase is marked by falling or weakening economic activity, often accompanied by lower production, investment and employment. Expansion is the period of rising activity; a peak is the turning point before contraction, while a trough is the low point before recovery.

Correct answer: Option 2. Fiscal deficit broadly represents the excess of total government expenditure over total receipts excluding borrowings. It indicates the government’s borrowing requirement. Borrowings are excluded from the receipts side for this calculation because they finance the deficit rather than constitute non-debt receipts.

Correct answer: Option 4. The crowding-out effect occurs when increased government borrowing raises interest rates or absorbs financial resources that could otherwise finance private-sector investment. The effect depends on economic conditions and monetary policy; it is not inevitable or identical in every situation.

Correct answer: Option 1. In the simplified model, the multiplier is 1 / (1 − MPC). With MPC = 0.8, the multiplier is 1 / 0.2 = 5. This means an initial autonomous increase in expenditure can produce a larger total change in equilibrium income through successive rounds of spending. Actual multipliers are affected by taxes, imports, monetary responses and other leakages.

Correct answer: Option 3. The current account includes trade in goods, trade in services, primary income and secondary income (such as transfers). Foreign direct investment and portfolio investment are financial-account transactions, not current-account entries. A merchandise trade deficit alone does not necessarily mean the entire current account is in deficit because services and income flows also matter.

Correct answer: Option 2. Depreciation means the rupee buys fewer units of foreign currency. It can make Indian exports cheaper for foreign buyers and imports more expensive for Indian buyers, potentially increasing imported inflation. The eventual effect on the trade balance depends on factors such as demand elasticities, contracts and how quickly trade quantities adjust.

Correct answer: Option 1. A lower policy repo rate can reduce banks’ marginal funding costs and lending rates over time, supporting credit demand, consumption and investment. Transmission is not automatic or instantaneous: it depends on deposit costs, liquidity, risk perceptions, competition, loan repricing arrangements and the broader economic outlook.

Correct answer: Option 4. Stagflation combines stagnating or weak economic activity with high inflation, often alongside rising unemployment. It can be particularly difficult for policymakers because measures aimed at reducing inflation may weaken output further, while measures to stimulate demand can add to price pressures.

Correct answer: Option 2. GDP measures value added produced within a country’s domestic territory, regardless of who owns the production factors. GNI starts with GDP and adds net primary income receivable from the rest of the world (income received by residents from abroad minus similar income paid to non-residents). Thus, residents’ qualifying income from abroad can affect GNI without being domestic production in India.

Correct answer: Option 3. A pure public good is non-rivalrous (one person’s use does not reduce availability to others) and non-excludable (it is difficult or impractical to prevent people from benefiting). National defence is a standard example. These characteristics can create a free-rider problem, meaning private markets may undersupply such goods.

Correct answer: Option 1. In the simplified model, the deposit multiplier is the reciprocal of the required reserve ratio: 1 / 0.10 = 10. This is a theoretical maximum under restrictive assumptions. In the real economy, currency holdings, excess reserves, capital constraints, credit demand and regulatory requirements mean the actual relationship between reserves and broad money can differ substantially.

Correct answer: Option 4. Automatic stabilizers are features of the tax-and-transfer system that moderate fluctuations without requiring a fresh policy decision each time conditions change. In a downturn, lower tax liabilities and higher eligible transfers can support disposable income and demand; during an expansion, the reverse can help restrain demand.

Correct answer: Option 2. The value of merchandise imports exceeding merchandise exports indicates a merchandise trade deficit. It does not by itself establish the size or even the direction of the current-account balance, because the current account also includes services, primary income and secondary income. For example, a services surplus or transfers can partly or fully offset a goods deficit.