GK (Economics)

The Reserve Bank of India (RBI) was nationalized on January 1, 1949, under the RBI Act, 1948. Prior to this, it was privately owned with shareholders. The RBI was originally established in 1935. Nationalization gave the government complete control over India's central banking and monetary policy functions.

Wealth is a stock concept (measured at a point in time), not a flow concept (measured over a period of time). Stock concepts represent accumulation, while flow concepts represent rates of change. Wages, income, and dividends are all flow concepts as they are measured over time periods (monthly, annually). Wealth represents accumulated assets at a specific moment.

Public revenue refers to income sources for the government, including taxes, public borrowing, and surpluses from public undertakings. Subsidies are government expenditures (payments made to support specific sectors or populations), not revenue sources. Subsidies represent outflows from the government budget, not inflows.

Fiscal deficit is defined as Total Revenue Income minus Total Revenue Expenditure, but this is a simplified version. More precisely, fiscal deficit = (Current Income + Capital Receipts) - (Current Expenditure + Capital Expenditure). Option D represents this concept correctly by showing that current income must cover both current and capital expenditures. Fiscal deficit indicates the total borrowing requirements of the government.

(B) Marshall's equation is M = kPy while that of Robertson's is P = M/kT. P in these equation represents price level.

An indirect tax can be levied on commodities (goods like GST on products), services (service tax), and imported goods (customs duty). Since indirect taxes apply to all these categories, 'all of the above' is the correct answer. Indirect taxes are collected by intermediaries (sellers) from the actual burden-bearers (consumers) and passed on to the government.

When demand is highly inelastic (consumers are relatively unresponsive to price changes), sellers can pass the tax burden onto buyers by increasing prices. If demand were elastic, consumers would reduce purchases significantly in response to price increases, making it difficult to add taxes to prices. This is why 'sin taxes' on addictive goods (with inelastic demand) are effective.

The ability-to-pay approach to taxation fulfills both horizontal equity (equals should be taxed equally) and vertical equity (unequals should be taxed unequally). This principle states that those with greater ability to pay (higher income/wealth) should bear a larger tax burden. The benefit approach taxes based on benefits received, while expediency and socio-political approaches don't systematically address equity.

The Marshall-Lerner condition states that devaluation will improve the balance of payments only if the sum of the price elasticities of demand for exports and imports is greater than one. If this sum is less than or equal to one, devaluation worsens the BOP or has no effect. This is because devaluation makes exports cheaper and imports dearer, improving the trade balance only if quantity responses are sufficiently strong.

Free international trade leads to price equalization between countries through the law of one price - identical goods should sell for the same price when expressed in common currency, after accounting for transportation costs and tariffs.

The Offer Curve (or reciprocal demand curve) was developed by Marshall and Edgeworth to analyze international trade equilibrium, showing how a country's offer of exports varies with the relative price of imports.

The concept of multiplier was developed by J. M. Keynes as easy as 1929, R. F. Kahn developed it in 1931.

Devaluation improves trade balance only when export demand is elastic (Marshall-Lerner condition). If demand is inelastic, devaluation may worsen the trade balance by increasing import costs without sufficiently increasing export volumes.

This is Pigou's equation of exchange from his quantity theory approach. Pigou extended the Cambridge cash-balance version of the quantity theory, where P represents price level, and the equation shows the relationship between money supply, prices, and cash balances.

All three schemes - NREGS (employment guarantee), SGRY (wage employment), and SGSY (self-employment) - address rural unemployment through different approaches. NREGS provides guaranteed wages, SGRY creates community assets, and SGSY promotes self-employment entrepreneurship.

The 12th Finance Commission (2005-10) provided recommendations for fiscal transfers and revenue sharing between the center and states. Finance Commissions typically recommend for five-year periods, and this one covered 2005-2010.

Bank rate is a quantitative credit control tool as it directly affects the cost of borrowing and money supply. Moral suasion is qualitative, while regulation of consumer credit and margin requirements are selective credit controls, not general quantitative tools.

The State Bank of India was established in 1955 based on the recommendations of the Gorewala Committee (1954), which proposed nationalization of Imperial Bank of India. All other committees mentioned were related to different economic matters - Niyogi Committee (labor), Lakdawala Committee (poverty), and V.K.R.V. Rao Committee (economic planning).