2011 GS Paper I, all questions
UPSC Prelims 2011 · GS Paper I
Question 17: Economy and Social Development
A "closed economy" is an economy in which
athe money supply is fully controlled
bdeficit financing takes place
conly exports take place
dneither exports nor imports take place
AnswerThe answer is (d).
A closed economy has no economic dealings with the rest of the world: there are neither exports nor imports, and no international capital flows. Output must equal domestic spending, so GDP is just consumption plus investment plus government spending. An economy that trades is an open economy. Money supply control and deficit financing happen in both kinds of economy, and an economy with only exports is not closed.
Why each option is right or wrong
- (a) Money supply control occurs in any economy, open or closed.
- (b) Deficit financing occurs in open and closed economies alike.
- (c) An economy with exports is open, so this cannot be closed.
- (d) Right: no trade in either direction.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2011, General Studies Paper I, Series A. The paper on upsc.gov.in.