[DAY 34] 60 DAY RAPID REVISION (RaRe) SERIES for UPSC Prelims 2023 – ECONOMICS, CURRENT AFFAIRS & CSAT TEST SERIES!

Solution (a)

Explanation:

• The Real Effective Exchange Rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other major currencies. (Hence statement 1 is correct)
• The weights are determined by comparing the relative trade balance of a country’s currency against each country within the index. (Hence statement 2 is correct)
• This exchange rate is used to determine an individual country’s currency value relative to the other major currencies in the index.
• REER is used to measure the value of a specific currency in relation to an average group of major currencies. A country’s REER is an important measure when assessing its trade capabilities.
• An increase in REER implies that exports become more expensive and imports become cheaper; therefore, an increase indicates a loss in trade competitiveness. (Hence statement 3 is incorrect)

Solution: (c)

Explanation:

• The NEER is used in economic studies and for policy analysis on international trade. It is also used by forex traders who engage in currency arbitrage.
• The Federal Reserve calculates three different NEER indices for the United States:

1. the broad index
2. the major currencies index and

• The other important trading partners (OITP) index.
• The NEER is a measure of the value of a currency against a weighted average of several foreign currencies. (Hence statement 1 is correct)
• An increase in the NEER indicates an appreciation of the local currency against the weighted basket of currencies of its trading partners. (Hence statement 2 is correct)
• The NEER only describes relative value. It cannot definitively show whether a currency is strong or gaining strength in real terms.
• It only describes whether a currency is weak or strong, or weakening or strengthening, compared to foreign currencies. As with all exchange rates, the NEER can help identify which currencies store value more or less effectively. Exchange rates influence where international actors buy or sell goods.

Solution (a)

Explanation:

• Certificate of Deposit – Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialized form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period. (Hence statement 1 is correct)
• Reserve Bank of India (RBI) is the apex of the monetary and banking structure of the country that regulates and controls the entire banking system of India. Reserve Bank of India (RBI) sells treasury bills on behalf of the government to the public in order to raise short term finance for the government which is usually for 3-6 months tenure. (Hence statement 2 is incorrect)

Solution (c)

Explanation:

Fixed Exchange Rate System:

• A fixed exchange rate is a regime imposed by a government or central bank which ties the official exchange rate of the country’s currency with the currency of another country.
• Fixed exchange-rates are not permitted to fluctuate freely or respond to daily changes in demand and supply. The government fixes the exchange value of the currency. (Hence statement 1 is correct)

Floating Exchange Rate System:

• A floating exchange rate is a type of exchange rate regime in which a currency’s value is allowed to fluctuate in response to foreign exchange market events.
• Flexible exchange rate system is the exchange system where the exchange rate is dependent upon the supply and demand of money in the market. (Hence statement 2 is correct)

Solution (d)

Explanation:

Money Market refers to the Financial Market that fills the demand-supply gap in short term funds with maturity period less than 1 year.

Instruments:

• Treasury Bills: Instruments that the government uses to raise short-term money from the financial market. (For long term: Dated Securities).
• Certificate of Deposit: Issued by the banks and the FIs to the individuals, companies, corporations, funds etc.
• Commercial Paper: Debt instruments issued by the companies to raise short term funds.
• Call/Notice Money: Used for inter-bank lending. Call money is usually availed for 1 day. Notice money is availed for 2-14 days.

(Hence option d) is correct answer)

Solution (c)

Explanation:

Objectives of SEBI

The main objective of SEBI is protection of the interest of investors, promotion of the development of stock exchange, and regulation the activities of stock market. The objectives of SEBI are as follows:

• Regulation of the activities of stock market.
• Protection of the rights of investors and ensuring safety of their investment.
• Prevention of fraudulent and malpractices by having a balance between self-regulation of business and its statutory regulations.
• Regulation and development of a code of conduct for the intermediaries like underwriters, brokers, etc.

(Hence statement 3 is incorrect)

Solution (d)

Explanation:

• A close- ended fund, usually, issues units to investors only once, when they launch an offer, called New Fund Offer (NFO) in India.
• Thereafter, these units are listed on the stock exchanges where they are traded on a daily basis. As these units are listed, any investor can buy and sell these units through the exchange. (Hence statement 1 is correct)
• Close-ended schemes are managed by fund houses for a limited number of years (as the name suggests), and at the end of the term either money is returned to the investors or the scheme is made open-ended. However, there is a word of caution here; Usually, units of close ended funds which are listed on the stock exchanges, trade at a high discount to their NAVs. But as the date for closure of the fund nears, the discount between the NAV and the trading price narrows, and vanishes on the day of closure of the scheme. (Hence statement 2 is correct)

Solution (c)

Explanation:

• The call money is the most important segment of the Indian financial system.
• Call money, also known as “money at call,” is a short-term interest-bearing loan that the borrower must repay immediately if the lender demands it. (Hence statement 1 is correct)
• Unlike a term loan, which has a fixed maturity and payment schedule, call money does not have to adhere to a set schedule, nor does the lender have to provide any advance notice of repayment. (Hence statement 2 is incorrect)
• Call money allows banks to earn interest on their excess funds, which is known as the call money rate (call loan rate/call rate).
• The call money market primarily serves to rebalance banks’ and other participants’ short-term liquidity positions. It consists of overnight money and money at short notice for a period of up to 14 days. (Hence statement 3 is correct)

Solution (c)

Explanation:

• A hedge fund is a limited partnership of private investors whose money is managed by professional fund managers who use a wide range of strategies, including leveraging or trading of non-traditional assets, to earn above-average investment returns. Hedge funds are limited to wealthier investors who can afford the higher fees and risks of hedge fund investing, and institutional investors, including pension funds (Hence statement 1 is incorrect)
• Hedge funds in India do not need to be necessarily registered with the Securities and Exchange Board of India. (Hence statement 2 is incorrect)

Solution (c)

Explanation:

• FDI involves a direct investment in a company with the intention of acquiring management control or influence, while FII involves investment in securities or assets of a foreign company. (Hence statement 1 is correct)
• FDI results in a long-term interest in the investee company, whereas FII investment is usually short-term and focused on the secondary market. (Hence statement 2 is incorrect)
• FDI brings in not just finance, but also technical knowledge and direct involvement in the day-to-day operations of the foreign company, while FII investment primarily provides financial benefits.
• FDI is subject to stricter regulations compared to FII, which allows for a relatively easy entry and exit from investment. (Hence statement 3 is correct)
• The maximum permissible investment by an FII in an Indian company is 24% of the paid-up capital, with a 2% lower cut-off, while there is no such limit for FDI.
• FDI is considered a more stable form of foreign investment as compared to FII, which is known as “hot money” due to its quick entry and exit from investments.

Solution (b)

Explanation:

• It is basically financing of new companies which are finding it difficult to go to the capital market at their early stage of existence. It is particularly offered to small and medium-sized businesses not for large scale industries. (Hence statement 1 is incorrect)
• Venture capitalists are those people who invest in early-stage companies having promising futures. A venture capitalist can be a sole investor or a group of investors who come together through investment firms. (Hence statement 2 is correct)
• This finance can also be loan-based or in-convertible debentures so that they carry a fixed yield for the providers of venture capital.
• Those who provide venture capital aim at capital gain due to the success achieved by the concern that borrows.
• It is a long-term investment and made in companies which have high growth potential. The provision of venture capital will bring rapid growth for the business. (Hence statement 3 is correct)
• The venture capital provider will also take part in the business of borrowing concern whereby, the venture capital financier not merely confines to finance, but also provide managerial skill.
• Not all the capitalists will experience high risk. But venture capital financing contains risks. But the risk is compensated with a higher return.
• Not much of technology is involved in venture capital, it involves financing mainly small and medium size firms, which are in their early stages. With the assistance of venture capital, these firms will stabilize and later can go in for traditional finance.

Solution (b)

Explanation:

A secondary market is a platform wherein the shares of companies are traded among investors. It means that investors can freely buy and sell shares without the intervention of the issuing company. In these transactions among investors, the issuing company does not participate in income generation, and share valuation is rather based on its performance in the market. Income in this market is thus generated via the sale of the shares from one investor to another.

Different Instruments in the Secondary Market

• Fixed Income Instruments: These are primarily debt instruments ensuring a regular form of payment such as interests, and the principal is repaid on maturity. Examples- debentures, sovereign bonds, and preference shares.
• Variable Income Instruments: These instruments generate an effective rate of return to the investor, and various market factors determine the quantum of such return. These securities expose investors to higher risks as well as higher rewards. Examples- equity shares and derivatives.
• Hybrid Instruments: Two or more different financial instruments are combined to form hybrid instruments. Convertible debentures serve as an example of hybrid instruments.

(Hence statement 1, 2 and 4 are correct)

• Initial Public Offering is a Primary market instrument, where the proceeds go to the issuing organization directly. (Hence statement 3 is incorrect)

Solution (d)

Explanation

• The Pension Fund Regulatory and Development Authority (PFRDA) is a statutory regulatory body established under the Pension Fund Regulatory and Development Authority Act, 2013. It was established to oversee the National Pension System (NPS), and regulate India’s pensions sector.(Hence statement 1 is correct)
• NPS was extended to all Indian citizens (including non-resident and overseas) on a voluntary basis and to corporate for its employees. (Hence statement 2 is correct).

Solution (c)

Explanation

• A debenture is a type of bond or other debt instruments that is unsecured by collateral. It is in the form of a certificate of indebtedness of the company and issued by the company itself. (Hence statement 1 is correct)
• It generally creates a charge on the undertaking or undertakings of the company. There is usually a specific date of redemption.
• A debenture is creditor of the company. (Hence statement 3 is correct)
• As the debenture holders are not the owner of the company so they are not entitled with the administration and management of the company. The debenture holders cannot claim the privilege to vote in any meeting of the company. (Hence statement 2 is incorrect)

Solution (b)

Explanation

• An asset which can be easily transformed into cash in less time and with no loss or little loss in value is known as a liquid asset. Liquid assets are usually compared with cash as the value remains the same whenever sold. This type of asset is commonly used by businesses and buyers.
• M1 is known as narrow money as it includes only 100% liquid deposits which is a very narrow definition of the money supply it includes the components of Cash held by the public and Demand deposits of the commercial banks (Hence option b) is correct answer).

Solution: a)

Explanation:

• Internal debt is part of the total debt that is owed to lenders within the country. Market borrowings, Treasury bills and special securities issued to RBI are the sources of internal borrowings. (Hence statements 1, 2 and 4 are correct)
• External Assistance is the flow of resources from developed countries to developing countries. However, a proper definition of Technical Co-operation would be the flow of resources from one country to another under mutually agreed arrangements and it is the source of external borrowings. (Hence statement 3 is incorrect)

Solution (c)

Explanation:

• Mutual Fund is trusts which pool the savings of large number of investors and then reinvests those funds for earning profits and then distribute the dividend among the investors. (Hence statement 1 is correct)
• Mutual funds are generally considered safer investments than hedge funds. That’s because fund managers are limited in their ability to use riskier strategies such as leveraging their holdings, which can increase returns, but it also increases volatility. (Hence statement 2 is correct)

Solution (c)

Explanation:

• A foreign company can access Indian securities market for raising funds through issue of Indian Depository Receipts (IDRs). An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets. (Hence statement 1 is correct)
• GDRs represent ownership of an underlying number of shares of a foreign company and are commonly used to invest in companies from developing or emerging markets by investors in developed markets. (Hence statement 2 is correct)

Solution (c)

Explanation:

• Money markets consist of short-term transactions of Certificates of Deposits, commercial paper, and treasury. Besides, the time period for these exchanges is usually equal to or less than 1 year. Whereas, capital markets involve trading of capital market tools for a period between 3 years and 10 years, or even longer. As a result, capital markets fulfill the medium and long-term capital goals of corporations. (Hence statement 1 is correct)
• Money market instruments like CDs, CPs, BAs, and Repurchase Agreement are valid for a period between 1 day and 1 year. As a result, their liquidity factor is significant for corporations to fund their short-term capital requirements. Whereas capital market instruments like shares, bonds, and debentures have a lower degree of liquidity. They contribute to long-term capital needs and are prone to changes in financial value as per appreciation and depreciation.
• Money markets exhibit lower levels of financial risk because the trading of short-term assets is done within a short period of time. Therefore, money market instruments benefit corporations immensely due to their ability to withstand market risks. Additionally, these instruments are liquid, and thus can be traded in the market to minimise risks. On the other hand, capital markets experience higher risk levels since they have a much longer period of maturity. As a result, these have an enhanced elasticity towards market and financial trends. (Hence statement 2 is correct)
• Another essential point of money market and capital market difference is that the former offers a comparatively lower rate of return on investment. Whereas, the rate of return on investment in capital markets is higher due to the long time period involved.

Solution: c)

Explanation:

• Inward FDI – Foreign firms investing overseas and taking control over foreign assets. (Hence statement 1 is incorrect)
• Conglomerate FDI Direct investment overseas aimed at manufacturing products not manufactured by the firm in the home country. (Hence statement 2 is correct)
• Forward vertical FDI – Direct investment in a foreign country aimed to sell the output of the firm’s domestic production. (Hence statement 3 is incorrect)
• Backward Vertical FDI – Direct investment overseas aimed at providing inputs for the firm’s production process in the home country.

Solution (d)

Explanation:

• NIRMAN Accelerator Program was launched by Start-ups Incubation and Innovation Centre (SIIC) IIT Kanpur.
• The accelerator program is supported by the Department of Science and Technology (DST) under the Ministry of Science & Technology through its NIDHI scheme. Hence statement 1 is not correct.
• The programme will focus on the manufacturing startups engaged in healthcare and agriculture domains to help them overcome the challenges from their prototype-to-market journey. The best performing startups among the cohort of 15 startups will receive a cash award of up to ₹1 million. Hence statement 2 is not correct.

Source: CLICK HERE

Solution (a)

Explanation:

• Facial recognition refers to the technology capable of identifying or verifying a subject through an image, video, or any audiovisual element of the face.
• Generally, this identification is used to access an application, system, or service and it works like a face scanner. It is a method of biometric identification that uses that body measures, in this case, face and head, to verify the identity of a person through its facial biometric pattern and data. Hence statement 1 is correct.
• Because computerized facial recognition involves the measurement of a human’s physiological characteristics, facial recognition systems are categorized as biometrics. Although the accuracy of facial recognition systems as a biometric technology is lower than iris recognition and fingerprint recognition, it is widely adopted due to its contactless process. Hence statement 2 is not correct
• Section 43A of the Information Technology Act, 2000 provides that a body corporate which possesses or deals or handles any sensitive personal data or information in a computer resource owned or controlled or operated by it is liable to compensate an affected person for causing wrongful loss or wrongful gain to any person due to negligence in implementing and maintaining reasonable security practices and procedures.
• Government, in exercise of its powers under the said section, has prescribed the rules regarding sensitive personal data or information as well as the reasonable security practices and procedures to be complied with. Thus, law to regulate facial recognition technology and manage data related to such technology is in place. Hence statement 3 is not correct

Source: CLICK HERE

Solution (c)

Explanation:

Source: CLICK HERE

Solution (d)

Explanation:

• Countries committed to protecting 30% of land and 30% of coastal and marine areas by 2030, fulfilling the deal’s highest-profile goal, known as 30-by-30. The deal also aspires to restore 30% of degraded lands and waters throughout the decade, up from an earlier aim of 20%. The framework has 23 targets that the world needs to achieve by 2030. Hence statement 1 is not correct.
• Overall, the Kunming Montreal agreement will focus on reducing the negative impacts of pollution to levels that are not considered harmful to nature, but the text provides no quantifiable target here. Hence statement 2 is not correct
• The Global Environment Facility has been requested to establish a Special Trust Fund to support the implementation of the Global Biodiversity Framework (“GBF Fund”). Hence statement 3 is correct.

Source: CLICK HERE

Solution (b)

Explanation:

• Cryomesh is a specially fabricated mesh used as substrate in cryopreservation. This is lightweight and can be manufactured cheaply. It better preserves coral and has the properties of cryoplates. The mesh technology will help store coral larvae at -196°C (-320.8°F).

Source: CLICK HERE

Solution (d)

Explanation:

In these type of questions try dividing the given series into a block of either 3/4/5/6 letters and find the repetitive pattern

Substituting option d in the above series we get

c a b b a c/ c a b b a c /c a b b a c  as the repetitive pattern

Hence, the missing letters are acbcb.

Solution (d)

Explanation:

Given sequence is ab_bc_c_ba_c.

By observing the sequence, we can get the pattern as follows:

Make a group of three letters

First group is ‘abc’

Now, shift the position of letters on the left by one place, we get the next group as ‘bca’

Following in the same manner, we get ‘cab’ and ‘abc’ as the next two groups.

Finally we get the series as abc/bca/cab/abc.

Hence, the correct option is caab.

Solution (a)

Explanation:

Sequence of the letters,

tuvwuvt/wvtuw/tuvwuvt/wvtuw

Hence, the correct answer is option a.

Solution (b)

Explanation:

SUMMER = RUNNER

In the given code, second, fifth and sixth letters are same. The first letter of the word (S → R) is moved one step backward, while the two middle letters (M → N and M → N) each moved one step forward to obtain the corresponding letters of the code. So,

WINTER = VIOUER.

Solution (c)

Explanation:

“Nothing could be farther from the truth. From as early as the 15th century, well before Europeans were even aware of direct sea routes to India, we have evidence that the battlefields and forts of the subcontinent resounded with the boom of gunpowder that Indian rulers proactively hired specialists”….

This excerpt from the passage makes it clear that option c is correct.