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Basic Economic and Indian Economy: Social Development, Poverty and Inclusion: Prelims Questions and Solutions
India has experienced persistent and high food inflation in the recent past. What could be the reasons?(2011)
Which of the statements given above1 are correct?
(a.) 1 and 2 only
(b.) 2 and 3 only
(c.) 1 and 3 only
(d.) 1, 2 and 3
Solution (b)
In terms of economy, the visit by foreign nationals to witness the XIX Common Wealth Games in India amounted to(2011)
(a.) Export
(b.) Import
(c.) Production
(d.)Consumption
Solution (a)
Which one of the following statements appropriately describes the “fiscal stimulus”?(2011)
(a.) It is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth
(b.) It is an intense affirmative action of the Government to boost economic activity in the country
(c.) It is Government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation
(d.) It is an extreme affirmative action by the Government to pursue its policy of financial inclusion
Solution (b)
Consider the following actions which the Government can take:
Which of the above action/actions can help in reducing the current account deficit?
(a.) 1 and 2
(b.) 2 and 3
(c.) 3 only
(d.) 1 and 3
Solution (a)
A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is “base effect”?(2011)
(a.) It is the impact of drastic deficiency in supply due to failure of crops
(b.) It is the impact of the surge in demand due to rapid economic growth
(c.) It is the impact of the price levels of previous year on the calculation of inflation rate
(d.)None of the statements (a), (b) and (c) ‘given above is correct in this context
Solution (c)
Why is the offering of “teaser loans” by commercial banks a cause of economic concern?(2011)
Which of the statements given above is/are correct?
(a.) 1 only
(b.) 2 only
(c.) Both 1 and 2
(d.) Neither 1 nor 2
Solution (c)
In the context of Indian economy, consider the following statements :(2011)
Which of the statements given above is/are correct?
(a.) 1 only
(b.) 2 only
(c.) Both 1 and 2
(d.) Neither 1 nor 2
Solution (b)
In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities?(2011)
(a.) Commercial Banks
(b.) Cooperative Banks
(c.) Regional Rural Banks
(d.) Microfinance Institutions
Solution (a)
Economic growth is usually coupled with (2011)
(a.) Deflation
(b.) Inflation
(c.) Stagflation
(d.) Hyperinflation
Solution (b)
The lowering of Bank Rate by the Reserve Bank of India leads to (2011)
(a.) More liquidity in the market
(b.) Less liquidity in the market
(c.) No change in the liquidity in the market
(d.) Mobilization of more deposits by commercial banks
Solution (a)
Which one of the following is not a feature of “Value Added Tax”? (2011)
(a.) It is a multi-point destination-based system of taxation
(b.) It is a tax levied on value addition at each stage of transaction in the production-distribution chain
(c.) It is a tax on the final consumption of goods or services and must ultimately be borne by the consumer
(d.) It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation
Solution (c)
A “closed economy” is an economy in which (2011)
(a.) the money supply is fully controlled
(b.) deficit financing takes place
(c.) only exports take place
(d.) neither exports nor imports take place
Solution (d)
Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two? (2011)
(a.) FII helps bring better management skills and technology, while FDI only brings in capital
(b.) FII helps in increasing capital availability in general, while FDI only targets specific sectors
(c.) FDI flows only into the secondary market, while FII targets primary market
(d.) FII is considered to be more stable than FDI
Solution (b)
Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/services rendered under micro-finance is/are: (2011)
Select the correct answer using the codes given below the lists:
(a.) 1 only
(b.) 1 and 4 only
(c.) 2 and 3 only
(d.) 1, 2, 3 and 4
Solution (d)
Which of the following can aid in furthering the Government’s objective of inclusive growth? (2011)
Select the correct answer using the codes given below:
(a.) 1 only
(b.) 1 and 2 only
(c.) 2 and 3 only
(d.) 1, 2 and 3
Solution (d)
Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)? (2011)
Which of the statements given above is/are correct?
(a.) I only
(b.) 2 only
(c.) Both 1 and 2
(d.) Neither 1 nor 2
Solution (d)
2012 UPSC Prelims Questions and Solutions
The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following? (2012)
Select the correct answer using the codes given below :
(a) 2 and 3 only
(b) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (d)
Under which of the following circumstances may ‘capital gains’ arise? (2012)
Select the correct answer using the codes given below :
(a) 1 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3
Solution (b)
Which of the following measures would result in an increase in the money supply in the economy? (2012)
Select the correct answer using the codes given below :
(a) 1 only
(b) 2 and 4 only
(c) 1 and 3
(d) 2, 3 and 4
Solution (c)
Which of the following would include Foreign Direct Investment in India? (2012)
Select the correct answer using the codes given below :
(a) 1, 2, 3 and 4
(b) 2 and 4 only
(c) 1 and 3 only
(d) 1, 2 and 3 only
Solution (d)
Consider the following statements: (2012)
The price of any currency in international market is decided by the
Which of the statements given above are correct?
(a) 1, 2, 3 and 4
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1 and 4 only
Solution (b)
The basic aim of Lead Bank Scheme is that: (2012)
(a) big banks should try to open offices in each district
(b) there should be stiff competition among the various nationalized banks
(c) individual banks should adopt particular districts for intensive development
(d) all the banks should make intensive efforts to mobilize deposits
Solution (c)
In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37-90%. Which of the following are among those Eight Core Industries? (2012)
Select the correct answer using the codes given below :
(a) 1 and 5 only
(b) 2, 3 and 4 only
(c) 1, 2, 3 and 4 only
(d) 1, 2, 3, 4 and 5
Solution (c)
The balance of payments of a country is a systematic record of (2012)
(a) all import and transactions of a during a given period normally a year
(b) goods exported from a country during a year
(c) economic transaction between the government of one country to another
(d) capital movements from one country to another
Solution (a)
The Reserve Bank of India regulates the commercial banks in matters of (2013)
Select the correct answer using the codes given below.
(a) 1 and 4 only
(b) 2, 3 and 4 only
(c) 1, 2 and 3 only
(d) 1, 2, 3 and 4
Solution (d)
An increase in the Bank Rate generally indicates that the: (2013)
(a) market rate of interest is likely to fall
(b) Central Bank is no longer making loans to commercial banks
(c) Central Bank is following an easy money policy
(d) Central Bank is following a tight money policy
Solution (d)
In India, deficit financing is used for raising resources for (2013)
(a) economic development
(b) redemption of public debt
(c) adjusting the balance of payments
(d) reducing the foreign debt
Solution (a)
Which of the following constitute Capital Account? (2013)
Select the correct answer using the codes given below.
(a) 1, 2 and 3
(b) 1, 2 and 4
(c) 2, 3 and 4
(d) 1, 3 and 4
Solution (b)
Consider the following statements : (2013)
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (a)
Disguised unemployment generally means (2013)
(a) large number of people remain unemployed
(b) alternative employment is not available
(c) marginal productivity of labour is zero
(d) productivity of workers is low
Solution (c)
Consider the following liquid assets: (2013)
1.Demand deposits with the banks
2.Time deposits with the banks
3.Savings deposits with the banks
4.Currency
The correct sequence of these decreasing order of Liquidity is
(a) 1-4-3-2
(b) 4-3-2-1
(c) 2-3-1-4
(d) 4-1-3-2
Solution (d)
In the context of Indian economy,Open Market Operations’ refers to: (2013)
(a) borrowing by scheduled banks from the RBI
(b) lending by commercial banks to industry and trade
(c) purchase and sale of government securities by the RBI
(d) None of the above
Solution (c)
Priority Sector Lending by banks in India constitutes the lending to: (2013)
(a) agriculture
(b) micro and small enterprises
(c) weaker sections
(d) All of the above
Solution (d)
A rise in general level of prices may be caused by: (2013)
Select the correct answer using the codes given below.
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Solution (d)
Which one of the following groups of items is included in India’s foreign-exchange reserves? (2013)
(a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
(b) Foreign-currency assets, gold holdings of the RBI and SDRs
(c) Foreign-currency assets, loans from the World Bank and SDRs
(d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank
Solution (b)
Which one of the following is likely to be the most inflationary in its effect? (2013)
(a) Repayment of public debt
(b) Borrowing from the public to finance a budget deficit
(c) Borrowing from banks to finance a budget deficit
(d) Creating new money to finance a budget deficit
Solution (d)
Supply of money remaining the same when there is an increase in demand for money, there will be: (2013)
(a) a fall in the level of prices
(b) an increase in the rate of interest
(c) a decrease in the rate of interest
(d) an increase in the level of income and employment
Solution (b)
Economic growth in country X will necessarily have to occur if (2013)
(a) there is technical progress in the world economy
(b) there is population growth in X
(c) there is capital formation in X
(d) the volume of trade grows in the world economy
Solution (c)
The national income of a country for a given period is equal to the: (2013)
(a) total value of goods and services produced by the nationals
(b) sum of total consumption and investment expenditure
(c) sum of personal income of all individuals
(d) money value of final goods and services produced
Solution (a)
Which of the following grants/ grant direct credit assistance to rural households? (2013)
Select the correct answer using the codes given below:
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (c)
The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in news, are used in relation to (2014)
Solution (a)
What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?(2014)
Select the correct answer using the code given below.
Solution (c)
If the interest rate is decreased in an economy, it will (2014)
Solution (3)
In the context of Indian economy which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?
Select the correct answer using the code given below.
Solution (b)
If the interest rate is decreased in an economy, it will
Solution (c)
With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?
Select the correct answer using the code given below.
Solution (c)
The sales tax you pay while purchasing a toothpaste is a
Solution (d)
The main objective of the 12th Five-Year Plan is
Solution (d)
What does venture capital mean?
Solution (b)
With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?
Select the correct answer using the code given below.
Solution (c)
Which of the following organizations brings out the publication known as ‘World Economic Outlook’?
Solution (a)
Demographics:
India is regarded as a country with “Demographic Dividend”. This is due to: (2011)
(a.) Its high population in the age group below 15 years
(b.) Its high population in the age group of 15-64 years
(c.) Its high population in the age group above 65 years
(d.) Its high total population
Solution (b)
Consider the following specific stages of demographic transition associated with economic development : (2012)
Select the correct order of the above stages using the codes given below :
(a) 1, 2, 3
(b) 2, 1, 3
(c) 2, 3, 1
(d) 3, 2, 1
Solution (c)
To obtain full benefits of demographic dividend, what should India do? (2013)
(a) Promoting skill development
(b) Introducing more social security schemes
(c) Reducing infant mortality rate
(d) Privatization of higher education
Solution (a)