APPSC Group-2 Mains Past Paper 2024 - Test 13

APPSC - Group-2 Mains - 2024 Test-13 (5-5-2024) Answers Q.1) With reference to Indian economy, consider C. Income going to the household sector the following statements : D. Net national product at factor cost...

APPSC - Group-2 Mains - 2024 Test-13 (5-5-2024) Answers Q.1) With reference to Indian economy, consider C. Income going to the household sector the following statements : D. Net national product at factor cost 1. The government of India follows the chain Answer: B base method of calculating gross Explanation: domestic product (GDP).  National income and net national income are 2. The fixed base method estimates GDP same terms and used interchangeably. compared to the previous years data. National income = net national income (NNI) = net Which of the statements given above is/are national product(NNP) correct?  NNP=GNP-Depreciation A. 1 only  Earlier NSO was using factor cost to calculate B. 2 Only NNP but now it uses market price to calculate C. Both 1 and 2 NNP. D. Neither 1 nor 2 Answer: D Q.3) Consider the following statements: Explanation: 1. In India, the rates by which assets  Chain base method is where the national depreciates are decided by the ministry of account statistics or gross domestic product corporate affairs. estimates are compared with those of the 2. Private remittances are counted in the previous period. Where as in the fixed base segment of income from abroad. method, a base year is fixed and revised every 3. The World Bank uses market exchange five years. So, statement 2 is not correct. rates to determine the weights in its  The ministry of statistics and program regional aggregations of real GDP. implementation of India is exploring the idea of How many of the above statements are correct? a chain base index. However, it has not been A. Only one finalized yet and India still uses the fixed base B. Only two method. So, statement 1 is not correct. C. All three D. None Q.2) The national income of a country (India) is Answer: A equal to which of the following: Explanation: A. Gross national product (GNP)  The international monetary fund and the B. Net national product at market prices organization for economic cooperation and Call: 93929 57733 KPSIR UPSC Universe - ( 1 )  development use weights based on PPP demanded of a product when there is a (purchasing power parity) rates, while the fluctuation in its price. world bank uses market exchange rates to  The price elasticity of demand is lower if the determine the weights in its regional and global good is something the consumer needs. The aggregations of real GDP. So, statement 3 is price elasticity of demand tends to be higher if correct. it is a luxury good. So, point 1 is correct.  Every asset goes for depreciation in the process of their uses, which means they wear and tear. Q.5) If factories are running at full capacity The governments of the economies decide and utilization, then the marginal productivity announce the rates by which assets depreciate. utilization, then the marginal productivity of It is done in India by ministry of commerce and capital will be: industry and a list published, which is used by A. Positive different sections of the economy to determine B. Negative the real levels of depreciation in different C. One assets. D. Zero So, statement 1 is incorrect. Answer: A  Gross national product (GNP) Is the gross Explanation: domestic product (GDP) of a country added with Marginal productivity of capital = change in its income from abroad. here, the trans- output/change in capital boundary economic activities of an economy are  When the factories are running at full capacity also taken into account. Remittances are utilization and we add some extra capital then transfer payment. So, statement 2 is incorrect. that will produce some additional output/goods in the economy. Q.4) Consider the following:  So, marginal productivity of capital will be some 1. Luxury type of goods positive number. 2. Non availability of substitutes 3. Short time period of consumption Q.6) If the capacity utilization in the economy is 4. Small proportion of budget spent on good decreasing then consider the following How many of the above factors increase the statements: price elasticity of demand a good? 1. Per unit cost of production will increase A. Only one 2. Capital to output ratio will decrease B. Only two Select the correct answer using the code given C. Only three below: D. All four A. 1 only Answer: A B. Both 1 and 2 Explanation: C. 2 only  Elasticity is a general measure of the D. Neither 1 nor 2 responsiveness of an economic variable in Answer: A respons to a change the another economic Explanation: variable. The three major forms of elasticity are  If the capacity utilization is decreasing that price elasticity of demand , cross-price elasticity means the entire capacity of the factory is not of demand and income elasticity demand. being utilized to produce goods and services.  Price elasticity of demand is an economic tool And this may be because of less demand that measures the change in quantity  This means that output decrease even if the same amount of capital was there in the Call: 93929 57733 KPSIR UPSC Universe - ( 2 )  economy. The resulted in decrease in smart phones, smart cars, etc while outsourcing productivity of capital. Because now the same their fabrication. capital is producing less output as some capital  The term fables means the company which was idle. So, this will result in an increase in designs and sells the hardware and capital-output ratio. semiconductor chips.  Instead, it outsources the fabrication to the Q.7) With reference to NITI Aayog, consider the manufacturing plant called foundry. following statements: 1. It is chaired by the president of India. Q.9) Planning was considered Prerequisite : 2. It was established by an executive 1, For balanced socio-economic resolution of the government of India development. 3. Its governing council includes chief 2. for extending the benefits of ministers of all the states only. development in an even manner. How many of the above statements are correct? 3. for focusing on removal of regional A. Only one disparities. B. All three 4. for maximizing the utilization of available C. None resources D. Only two Select the correct answer from the codes given Answer: A below: Explanation: A. 1 only  The prime minister of India is the chairperson B. 2 and 3 only of NITI Aayog. The vice chairperson of NITI aayog C. All the four is appointed bt the prime minister. So, D. 3 only statement 1 is not correct. Answer: C  It was established by an executive resolution of Explanation: government of India. Hence, it is also neither a In a nation, planning is adopted for the following constitutional body nor a statutory body. So, purposes – statement 2 is correct. 1. for balanced socio-economic  The governing council comprises the chief development. minister of all states, chief minister of union 2. To broaden the benefits of development territories with legislatures and Lt.Governors of uniformly. other union territories. So, statement 3 is not 3. To concentrate on removing the regional correct. disparities. 4. To make the maximum use of available Q.8) The term ‘Fabless industries’ is sometimes seen resources. in the news, with reference to: Hence all the four statements are correct. A. Semiconductor chips B. Renewable energy technologies Q.10) The basic difference between imperative and C. Biomedical devices indicative planning is that: D. Food processing sector A. In imperative planning, a command Answer: A hierarchy replaces the market Explanation: mechanism, while in indicative planning,  Fables industries are companies that design it's used to enhance the market system. and sell semiconductors for use in various types B. In the case of indicative planning there is of electronic devices, such as in digital cameras, no need to nationalize any industry. Call: 93929 57733 KPSIR UPSC Universe - ( 3 )  C. In the case of indicative planning all  National Planning Committee was constituted economic activities belong to public by the then President of the Congress (Subhash sector, while in the other type they Chandra Bose) in October, 1938. Bose requested belong to the private sector. Pandit Jawaharlal Nehru to become its D. It is easier to achieve targets in imperative chairman. type of planning. Answer: A Q.12) The Gandhian Plan was expounded in 1944 by: Explanation: A. Jaya parkas narayan  In imperative planning, economic decisions are B. N.R. sarkar made through the centralized planning C. Shri man narayan agarwal authority usually the government and the D. Kasturi bhai lal bhai market forces of demand and supply have a very Answer: C limited role to play in such centralized system. Explanation: In indicative planning, the role of the state is to  In the light of the basic principles of Gandhian indicate and provide directions and support to economics, Shriman Narayan Agarwal the market for their functioning. Indicative propounded 'The Gandhian Plan' in 1944 in planning serves to complement and enhance which he put emphasis on the expansion of the market, as oppose to replace the market small unit production and agriculture. The mechanism (in imperative planning) hence it fundamental feature of the Gandhian Plan was adopted in market based and mixed economies. the decentralization of economic structure with self-contained villages and cottage industries. Q.11) What is true for Planning in India? 1. In August 1937, the Congress Working Q.13) Consider the following statements about Committee at its meeting in Wardha 'Rolling Plan'. It is : adopted a resolution of national 1. A plan for a single year. reconstruction and social planning 2. A plan that is determined for 3, 4 or 5 2. Subhash Chandra Bose, in his presidential years. speech at Haripura declared that the 3. Renewed every year according to the national state on the advice of planning necessities of the economy. commission would adopt a 4. A prerequisite plan for 10, 15 or 20 years. comprehensive scheme. Of these, 3. Modi Government renamed 'Planning How many of the above statements are correct? Commission' as 'Niti Aayog'. A. Only 3 and 4 4. Sub hash Chandra Bose announced the B. Only 1 and 2 formation of a National Planning C. All are correct Committee with Jawaharlal Nehru as D. None of the above Chairman in 1938. Answer: C How many of the above statements are correct? Explanation: A. 1 only  The 'Rolling Plan' for backward countries was B. All are correct suggested by Gunnar Myrdal in his book 'Indian C. 3 only Economic Planning in its Broader Setting'. D. 2 and 3 only  The Rolling Plan consists of three different plans. Answer: B First, a plan for the current year which includes Explanation: the annual budget and second, a plan fixed for a Call: 93929 57733 KPSIR UPSC Universe - ( 4 )  fixed number of years, which may be 3, 4 or 5 3. Manufacturing Growth Rate of 10.0 per cent years. 4. Every State must have an average growth rate in  As per the requirement of the economy, it is the Twelfth Plan preferably higher than that revised every year. achieved in the Eleventh Plan.  Third, a perspective plan for long terms i.e. 10, Poverty and Employment: 15 or 20 years. 5. Head-count ratio of consumption poverty to be  The main advantage of the Rolling Plans was reduced by 10 percentage points over the that they were flexible and were able to preceding estimates by the end of Twelfth Plan. overcome the rigidity of fixed Five Year Plans by 6. Generate 50 million new work opportunities in mending targets, the object of the exercise, the nonfarm sector and provide skill projections and allocations as per the changing certification to equivalent numbers during the conditions in the country’s economy. Twelfth Plan. Q.14) The 'Rolling Plan' concept in National Planning Q.16) The main objective of the 12th Five Year Plan is was introduced by : : A. The national front government A. Sustainable and inclusive growth to B. Rajiv Gandhi reduce unemployment. C. Indira Gandhi B. Faster, sustainable and more inclusive D. The Janata government growth. Answer: D C. Inclusive growth and poverty reduction. Explanation: D. Inclusive and sustainable growth.  The ‘Rolling Plan’ concept in National Planning Answer: B of India was introduced by the Janta Party Explanation: Government in 1978-79. It rejected the Fifth  12th Five Year Plan (2012-17) was launched with Five Year Plan of the preceding Congress a focus on 'Faster, Sustainable and More government and launched the Rolling Plan Inclusive Growth' while the theme of 11th Five which could be revised as per the needs of the Year Plan (2007-12) was ‘Towards Faster and economy due to the inherent flexibility in the More Inclusive Growth’. Plan. Q.17) What is the theme of the Eleventh Five Year Q.15) Which of the following is not a vision of 12th Plan for education sector : Five Year Plan : A. Education for all A. Real GDP growth rate of 8 percent B. Compulsory elementary education B. Agricultural growth rate of 4 percent C. Vocationalism of education C. Head count ratio of consumption poverty D. Education with sports to be reduced by 10 percent points Answer: B D. None of the above Explanation: Answer: D  The theme for education sector in the 11th Five Explanation: Year Plan was ‘compulsory elementary Targets of the 12th Five Year Plan: Six core indicators education’. The following five monitorable listed below reflect the vision of rapid, sustainable and socio-economic targets in education had been more inclusive growth of the Twelfth Plan: outlined in the Eleventh Five Year Plan: Economic Growth:  Reduction in the dropout rates of children from 1. Real GDP Growth Rate of 8.0 per cent. elementary school from 52.2% in 2003-2004 to 2. Agriculture Growth Rate of 4.0 per cent. Call: 93929 57733 KPSIR UPSC Universe - ( 5 )  20% by 2011-12, i.e. by the end of the Eleventh D. Ninth five year plan Five Year Plan period. Answer: D  Developing minimum standards of educational Explanation: attainment in elementary schools, to ensure  The notion of Women's Component Plan (WCP) quality education. had entered the planning process in the Seventh  Increasing the literacy rate for persons of age 7 Plan with the initiation of a special mechanism years or more to 85% by 2011-12. to monitor 27 beneficiary oriented schemes for  Reducing the gender gap in literacy to 10 women. However, the Ninth Five Year Plan percentage points by 2011-12. Increasing the (1997- 2002) marked a significant progress in percentage of each cohort going to higher this regard. The notion of WCP, as it was education from the present 10% to 15% by adopted in the Ninth Plan, earmarked a clear, 2011-12. unconditional minimum quantum of funds/ benefits for women in the schemes run by all Q.18) Which of the following statements are true Ministries/ Departments that were perceived to about the 10th Five Year Plan? be ‘women-related’ and thereby recognized 1. Literacy to be increased to 73% by 2007 empowerment. Under WCP, both Central as 2. 8% increase in GDP during the plan period well as State Governments were required to 3. Poverty ratio to be reduced and brought ensure that ‘‘not less than 30 percent of the to 20% by 2007 funds/benefits are ear-marked for women Select the correct answer from the code given under the various schemes of the ‘women- below the statements: related’ Ministries/Departments’. A. 1,2 and 3 B. 1 and 2 Q.20) Which of the following Five Year Plans of India C. 2 and 3 recognized human development as the core of D. None developmental efforts? Answer: C A. Seventh five year plan Explanation: B. Sixth five year plan  The Tenth Five Year Plan (2002-2007) had set C. Eighth five year plan monitorable targets for a few key indicators of D. Ninth five year plan human development in addition to the 8 Answer: C percent GDP growth target. These, inter alia, Explanation: include reduction of poverty ratio by 5  The 8th Five Year Plan recognized ‘human percentage points and brought it to about 20 development’ as the core of all developmental percent by 2007, providing gainful employment efforts. Human development, in all its many to at least the addition to labour force over the facets, was the ultimate goal of the Eighth Plan. plan period, all children in school by 2003 and It was towards fulfilling this goal that the Eighth increase in the literacy rate to 75 percent within Plan accorded priority to the generation of the plan period. adequate employment opportunities to achieve near-full employment by the turn of the Q.19) In which of the following Five Year Plans the century, building up of people's institutions, Women's Component Plan was introduced as a control of population growth, universalization of major strategy? elementary education, eradication of illiteracy, A. Sixth five year plan provision of safe drinking water and primary B. Eleventh five year plan health facilities to all, growth and diversification C. Tenth five year plan Call: 93929 57733 KPSIR UPSC Universe - ( 6 )  of agriculture to achieve self-sufficiency in Q.22) The most appropriate measure of a country’s foodgrains and generate surpluses for exports. economic growth is its – A. Gross domestic product (GDP) Q.21) One of the reasons for India's occupational B. Net national product(NNP) structure remaining more or less the same over C. Net domestic product(NDP) the years has been that D. Per capita product(PCP) A. investment pattern has been directed Answer: D towards capital intensive industries Explanation: B. productivity in agriculture has been high  The most suitable measure of the economic enough to induce people to stay with growth of any country is its Per Capita Real agriculture Income or Per Capita Net National Product. It is C. ceiling on land holdings have enabled used to measure a country's standard of living more people to own land and hence their and thus a better indicator of economic growth. preference to stay with agriculture D. people are largely unaware of the Q.23) Consider the following statements and select significance of transition from agriculture the correct answer from the code given below to industry for economic development Assertion (A) : Economic development requires Answer: A a multidimensional approach. Explanation: Reason (R) : The present Government of India is  The occupational structure of any country is focussing mainly on micro-economic issues. defined by the segment of a country's A. Both (A) and (R) are true and (R) is the population that is engaged in economic correct explanation of (A) ventures and various professions. In India after B. Both (A) and (R) are true, but (R) is not the independence, in spite of multiple times correct explanation of (A) increase in GDP and in spite of huge changes in C. (A) is true, but (R) is false the share of primary, secondary and tertiary D. (A) is false, but (R) is true sector in GDP, the occupational structure is still Answer: C more or less remained the same as it was earlier. Explanation: The main reason behind that is the investment  Economic development of any country requires pattern has been directed towards capital a multidimensional approach so that the targets intensive industries. It has been one of the chief of inclusive development can be achieved. Thus criticisms of the planning in India, which Assertion (A) is correct. The present emphasized the capital intensive industries in Government of India is focusing on 'Micro' as place of promoting the labor intensive well as 'Macro' economic issues. industries. The efforts of the planners with Macroeconomic issues includes Current regard to the development of the industries Account Deficit, Fiscal Deficit, Inflation, National turned beneficiary towards the large scale Income, Employment rate, Balance of Payment, capital sector, whilst the small scale and cottage increase in Investment etc. A micro economic industries failed to respond to the issue includes production of firm, industry, developments. The large scale industries are person etc., consumption, distribution, price intensively capital oriented, and their determination etc. development failed to procure employment to the workforce. Q.24) There is a Chinese company doing business in India. The profit made by the company will be part of: Call: 93929 57733 KPSIR UPSC Universe - ( 7 )  1) India’s GDP regeneration are under the direct control, 2) Chinas GDP responsibility and management of institutional Select the correct answer using code given units. below:  The term ‘Gross fixed capital formation’ is A. Both 1 and 2 interchangeably used as “gross investment” as B. 2 only valuable metals and change in stock/inventory is C. 1 only less than 1%. D. Neither 1 nor 2 Answer: A Q.26) Consider the following statements regarding Explanation: the current "Wholesale Price Index (WPI)"  If the Chinese company in India produces a series with base year 2011-12: BURGER and sells it and earns REVENUE of Rs. 1. The weights of the commodities in WPI 100 then it means the value of production in basket are determined based on domestic India is Rs. 100. Then out of this Rs. 100, product plus net to exports company pays for the costs and keeps some 2. Manufactured products have the highest profit. So, profit is just a part of the value of weight in WPI basket production and hence it will be part of India’s 3. The weights of the commodities in WPI GDP. But this profit belongs to the person in basket are fixed till the revision/change in China (whether he takes it away or not does not base year matter) who owns the company in India and 4. The weights of the commodities in WPI hence the profit will be part of china’s GNP also. basket are determined based on domestic production plus net of exports Q.25) Which of the following are part of gross fixed Select the correct answer using code given capital formation below: 1. Intellectual property rights A. 1 only 2. Machinery and equipment B. 1,2 and 3 only 3. Construction of building and other C. All of the above infrastructure D. 2,3 and 4 only Select the correct answer using code given Answer: D below: Explanation: A. All of the above  DPIIT started the new series of WPI with base B. 1 only year 2011-12, then it measured/calculated the C. 2 only "Net traded value" of the 697 different items D. 2 and 3 only  Net traded value = Domestic production plus Answer: A imports minus exports = Domestic production Explanation: plus Net imports  Gross Capital Formation = Gross Fixed Capital  So, the weights of the 697 different items in the Formation (machinery + equipment + building + WPI basket is based on "Domestic production of cultivated biological resources + intellectual that item plus Net imports" which is also called property) + Valuable Metals + Change in "Net traded value". And this weight is kept stock/inventory constant till the revision of base year. And every  Cultivated biological resources is defined as month only the price change of 697 different animal resources yielding repeat products and items will be measured in the wholesale tree, crop and plant resources yielding repeat mandis/markets and the Index will be products whose natural growth and calculated. Because, it is very cumbersome Call: 93929 57733 KPSIR UPSC Universe - ( 8 )  process to measure the ‘Net traded Value’ every Q.29) Consider the following statements regarding month/year and revise the weights. And the GDP deflator: anyways the ‘Net traded Value’ does not change 1. GDP deflator is calculated by the much in proportion every month/year. Department of Expenditure under the  Now let us say base year is changed to 2021-22, Ministry of Finance then again, the "Net traded Value" will be 2. It reflects the prices of all domestically measured in 2021-22 and new weights will be produced goods and services in the assigned. economy.  All the 697 items are divided into three groups Which of the given statement above are correct:  Primary Articles = overall weight 22.62% A. 1 only  Fuel and Power = overall weight 13.15% B. 2 only  Manufactured Products = overall weight 64.23% C. Both1 and 2 D. Neither1 nor 2 Q.27) Which of the following commodities had the Answer: B highest share in merchandise exports in 2023- Explanation: 24?  The Gross Domestic Product (GDP) deflator is a A. Petroleum products measure of general price inflation. It is B. Gold and other metal jewellery calculated by dividing nominal GDP by real GDP C. Marine products and then multiplying by 100. Nominal GDP is the D. Rice including basmati rice market value of goods and services produced in Answer: A an economy, unadjusted for inflation (It is the Explanation: GDP measured at current prices). Real GDP is  Maximum export is petroleum products and nominal GDP, adjusted for inflation to reflect maximum import is crude petroleum. changes in real output (It is the GDP measured at constant prices). o GDP Deflator = (Nominal Q.28). Which of the following reasons are mainly GDP/Real GDP) x 100 responsible for slow growth of Real Per Capita  The Ministry of Statistics and Programme Income in India - Implementation (MOSPI) comes out with a GDP 1. Rapid increase in population deflator in National Accounts Statistics as price 2. High increase in prices indices. The base of the GDP deflator is revised 3. Slow growth in agriculture and industrial when the base of the GDP series is changed. So, sectors statement 1 is not correct. 4. Unavailability of foreign exchange  There are other measures of inflation too like Find the correct answer using following codes: Consumer Price Index (CPI) and Wholesale Price A. 1 only Index (or WPI); however, the GDP deflator is a B. 2,3 and4 only much broader and more comprehensive C. 1 and 3 only measure. Since Gross Domestic Product is an D. All the four aggregate measure of production, being the Answer: D sum of all final uses of goods and services (fewer Explanation: imports), the GDP deflator reflects the prices of  All the factors mentioned in the above question all domestically produced goods and services in were responsible for slow growth in Real Per the economy whereas, other measures like CPI Capita Income of India during the question and WPI are based on a limited basket of goods period. But at present there is sufficient and services, thereby not representing the availability of foreign exchange in India. entire economy (the basket of goods is changed Call: 93929 57733 KPSIR UPSC Universe - ( 9 )  to accommodate changes in consumption expenditures, including salaries of government patterns but after a considerable period of employees, road construction/repair, public time). Another important distinction is that the schools, and military expenditures. ✓ I = sum of basket of WPI (at present) has no representation a country’s investments spent on capital of the services sector. The GDP deflator also equipment, inventories, and housing. ✓ NX = includes the prices of investment goods, net exports or a country’s total exports less total government services, and exports, and excludes imports. the price of imports. Changes in consumption  Income Method: As we mentioned in the patterns or the introduction of new goods and beginning, the sum of final expenditures in the services or structural transformation are economy must be equal to the incomes received automatically reflected in the deflator which is by all the factors of production taken together not the case with other inflation measures. so, (final expenditure is the spending on final goods, statement 2 is correct. it does not include spending on intermediate goods). Total National Income – the sum of all Q.30) Which of the following is not used to calculate wages, rent, interest, and profits. Balance of national income? Payment: In international economics, the A. Expenditure method balance of payments of a country is the B. Product method difference between all money flowing into the C. Balance of Payment method country in a particular period of time and the D. Income method outflow of money to the rest of the world. Answer: C Balance of Payment is primarily an indicator of Explanation: an economy's link with the outside world and is  The Product or Value-Added Method: In the not used as a method to calculate the national product method, the aggregate annual value of income. goods and services produced (if a year is the unit of time) is calculated. If we sum the gross value Q.31) Consider the following statements: added of all the firms of the economy in a year, 1. A nominal GDP increase necessarily we get a measure of the value of the aggregate means that the production output has amount of goods and services produced by the increased economy in a year (just as we had done in the 2. Real GDP changes express changes in wheat-bread example). Such an estimate is production output in the country. called Gross Domestic Product (GDP) Which of the given above statements is/are  Expenditure Method: An alternative way to correct? calculate the GDP is by looking at the demand A. 1 only side of the products. This method is referred to B. 2 only as the expenditure method. C. Both1 and 2  The expenditure approach is the most D. Neither 1 nor 2 commonly used GDP formula, which is based on Answer: C the money spent by various groups that Explanation: participate in the economy. GDP = C + G + I + NX;  While calculating GDP, if prices change, then ✓ C = consumption or all private consumer there may be difficulties in comparing GDPs. If spending within a country’s economy, including, we measure the GDP of a country in two durable goods (items with a lifespan greater consecutive years and see that the figure for the than three years), nondurable goods (food & GDP of the latter year is twice that of the clothing), and services. ✓ G = total government previous year, we may conclude that the volume Call: 93929 57733 KPSIR UPSC Universe - ( 10 )  of production of the country has doubled. But it and control of most of the means of production, is possible that only prices of all goods and but often under government regulation and services have doubled between the two years socialize selected industries that are deemed whereas the production has remained constant. essential or that produce public goods. Gandhi  Nominal GDP, on the other hand, is simply the an socialist economy is based on value of GDP at the current prevailing prices. decentralization and equal distribution of Hence, it may happen that the numbers of resources without any exploitation and nominal GDP have increased due to price rise violence. Self-employment and self-reliance are and not necessarily due to production increase. key features of Gandhi an self-sufficient Actually, production may have remained economy. constant or decreased in an economy but due to price rise, the nominal GDP figures may have Q.33) Mixed economy means : improved. so, statement 1 is not correct. A. Where agriculture and industry are given  Therefore, in order to compare the GDP figures equal importance (and other macroeconomic variables) of B. Where public sector and private sector different countries or to compare the GDP co-exist in the national economy figures of the same country at different points C. Where process of globalization is affected of time, we cannot rely on GDPs evaluated at by heavy dose of swadeshi in national current market prices. For comparison, we take economy the help of real GDP. Real GDP is calculated in a D. Where the Centre and States are equal way such that the goods and services are partners in economic planning and evaluated at some constant set of prices (or development constant prices). Since these prices remain Answer: B fixed, if the Real GDP changes we can be sure Explanation: that it is the volume of production that is  A mixed economy is variously defined as an undergoing changes. An increase in real GDP economic system blending elements of a market implies an increase in the production of goods economy with elements of a planned economy, and services. So, statement 2 is correct. capitalism with socialism, free markets with state interventionism, or private enterprise with Q.32) Indian Economy is : public enterprise. Hence, mixed economy is A. Socialist economy referred to the economic system in which both B. Mixed economy public and private sector co-exist and the C. Gandhi socialist economy government encourages both the sectors to D. Capitalist economy develop simultaneously. Answer: B Explanation: Q.34) Which of the following features indicates that  Indian economy is a prominent example of Indian economy is in a developing category? mixed economy. A mixed economic system is a 1) Occupation is mainly agriculture system that combines aspects of both capitalism 2) Disguised unemployment and socialism. A mixed economic system 3) Poor quality of human capital protects private property and allows a level of 4) High per capita intake of proteins economic freedom in the use of capital, but also Select the correct answer from the codes given allows for governments to interfere in economic below: activities in order to achieve social aims. Mixed A. 1 only economies typically maintain private ownership B. 4 only Call: 93929 57733 KPSIR UPSC Universe - ( 11 )  C. All of the above 4. Cost of Labor D. 1,2, and 3 How many of the factors given above affects the Answer: D supply of a product? Explanation: A. only 1 Indian economy is characterised as a developing B. only 2 economy. C. both 1 and 2 The following features indicates that Indian economy D. all four is in a developing category– Low per capita income Answer: D  Excessive dependence on agriculture Explanation: (Occupation is mainly agriculture);  The quantity of a commodity that is supplied in  High rate of population growth and over the market depends not only on the price population; Existence of chronic unemployment obtainable for the commodity but also on and disguised unemployment; Poor rate of potentially many other factors, such as the capital formation; Low level of technology; Poor prices of substitute products, the production quality of human capital; Lack of infrastructure; technology, and the availability and cost of High level of poverty and inequality; Low labour and other factors of production. industrial development.  In basic economic analysis, analyzing supply involves looking at the relationship between Q.35) The term National Income represents: various prices and the quantity potentially A. Gross National Product at market prices offered by producers at each price, again minus depreciation holding constant all other factors that could in B. Gross National Product at market prices fluency the price. minus depreciation plus net factor  Those price-quantity combinations may be income from abroad plotted on a curve, known as a supply curve, C. Gross National Product at market prices with price represented on the vertical axis and minus depreciation and indirect taxes quantity represented on the horizontal axis. plus subsidies  A supply curve is usually upward-sloping, D. Gross National Product at market prices reflecting the willingness of producers to sell minus net factor income from abroad more of the commodity they produce in a Answer: C market with higher prices. Explanation:  Any change in non-price factors would cause a  The term National Income (NI) represents Gross shift in the supply curve, whereas changes in the National Product at market prices MP (GNP) price of the commodity can be traced along a minus depreciation and indirect taxes plus fixed supply curve. subsidies. Net National Product at Factor Cost FC (NNP) is known as national Income (NI). – Q.37) Which one of the following statement speci fi DepreciationNNP GNP MP MP – Indirect Taxes es ‘Public good ‘most appropriately? + SubsidiesFC MP NNI NI NNP ( ) NNPMP – Net A. Public good works on welfarism and Product Taxes – Net Production Taxes GNPMP – government invests for benefits of society Depreciation – Indirect Taxes + Subsidies. B. They should benefit all irrespective of status or income of individual Q.36) Consider the following: C. These goods can only be used by one 1. Capital Input person at a time 2. Technology used for D. Public goods are fully non-rivalorus and 3. Prices of substitute products non-excludable Call: 93929 57733 KPSIR UPSC Universe - ( 12 ) Answer: A base year (i.e. 2011-12), it will be called National Explanation: Income at constant prices. Public good  The two main criteria that distinguish a public Q.39) Read the following statements and choose the good are that it must be nonrivalrous and non- correct option : excludable. Statement I : Net Domestic Product = Gross  Non-rivalrous means that the goods do not Domestic Product + Depreciation. dwindle in supply as more people consume Statement II : Per Capita Income = Net Domestic them; non-excludability means that the good is Product/ Total Population of the Nation. available to all citizens, Statement III : Net Domestic Product is the  In some cases, public goods are not fully non- better metrics than Gross Domestic Product for rivalrous and non-excludable. comparing the economies of the world.  For example, the post offi ce can be seen as a A. Statement 1,2 and 3 are true public good, since it is used by a large portion of B. Statement 2 and 3 are true the population and is fi nanced by taxpayers. C. Statement 1 and 2 false  The opposite of a public good is a private good, D. None of the above which is both excludable and rivalrous. Answer: D  These goods can only be used by one person at Explanation: a time—for example, a wedding ring.  Net Domestic Product (NDP) is an annual  In some cases, they may even be destroyed in measure of the economic output of a nation that the act of using them, such as when a slice of is calculated by subtracting depreciation from pizza is eaten. Private goods generally cost Gross Domestic Product (GDP). It means, Net money, and this amount pays for their private Domestic Product = Gross Domestic Product – use. Depreciation. Hence, Statement I is incorrect while Statement II is also not true. Per Capita Q.38) 'Base year' in National Income accounting Income is the average income earned per means? person in a nation or geographic region in a A. The year whose income is being used to specified year. It can be calculated by dividing calculate the nominal GDP National Income (Net National Product) from B. The year whose prices are being used to the total population of the nation. Only calculate the nominal GDP Statement III is correct as Net Domestic Product C. The year whose prices are being used to is the better metrics than Gross Domestic calculate the real GDP Product for comparing the economies of the D. The year whose income is being used to world, since the former also reveals the amount calculate the real GDP of investment spent on improving the obsolete Answer: C equipments to maintain the production level. Explanation:  'Base year' in National Income accounting Q.40) Given below are two statements: means – the year whose prices are being used as Assertion (A) : The Indian economic policy is reference prices to calculate the real GDP or real increasingly being criticized by insiders as well as National Income. At present, the base year for outsiders National Income accounting is 2011-12. For Reason (R) : The criticism is largely based on example – if goods and services produced during ideological differences. the year 2021-22 are valued at the prices of the Select the correct answer from the codes given below : Call: 93929 57733 KPSIR UPSC Universe - ( 13 )  A. Both A and R are true and R is the correct adjustment. Stabilization is related to the explanation of A. management of demand side of the economy B. Both A and R are true, but R is NOT the which includes inflation control, fiscal correct explanation of A. management and balance of payment. C. A is true, but R is false. Structural adjustment is related to the D. A is false, but R is true. management of supply side of the economy Answer: A which includes reforms in trade and capital flow, Explanation: industrial control, investment and finance  The criticism of New Economic Policy adopted reforms etc. Although stabilization and by India in the year 1991, which is based on structural adjustment are complimentry but liberalization, privatization and globalization, is structural adjustment is related to supply side continued till now. The developed economies of and takes more time as compared to the world are criticising on the ground that the stabilization. Stabilization component of any new economic policy was not adopted at right economy is essentially a short-term programme time whereas within the country it is criticised while the structure. on the ground that it is adopting capitalism and. deviating from the path of socialism mentioned Q.42) Who is called the pioneer of liberalization of in the Constitution. These criticisms are largely Indian Economy? based on ideological differences. Hence, both A A. Narendra modi and R are true and R is the correct explanation B. Manmohan singh of A. C. H.d.deva gowda D. Rajiv Gandhi Q.41) Which one of the following is correct regarding Answer: B stabilization and structural adjustment as two Explanation: components of the new economic policy  Liberalization of Indian Economy started in the adopted in India? year 1991. At that time Dr. Manmohan Singh A. Stabilization is a gradual, multi-step was the Finance Minister of India. So he is called process while structural adjustment is a as the 'Pioneer of liberalization of Indian quick adaptation process Economy. B. Structural adjustment is a gradual multi- step process, while stabilization is a quick Q.43) Which among the following is NOT a major adaptation process factor of economic growth? C. Stabilization and structural adjustment A. Accumulation of capital and reforms in are very similar and complimentary technology policies. It is difficult to separate one from B. Change in population the other C. Division of labour in specialised activities D. Stabilization mainly deals with a set of D. Technocrats and Bureaucrats policies which are to be implemented by Answer: D the Central Government while structural Explanation: adjustment is to be set in motion by the  Major factors of economic growth are as follows State Governments : Natural Resources Physical Capital or Answer: B Infrastructure Population or Labour Explanation:  Human Capita  New Economic Policy adopted by India has two  Technology Law executive sides – stabilization and structural Call: 93929 57733 KPSIR UPSC Universe - ( 14 )   Among the given options, Technocrats and needs". Broadly defined, sustainable Bureaucrats are not the major factors of development is a systems approach to growth economic growth. So, option (d) is the and development and to manage natural, correct answer. produced, and social capital for the welfare of their own and future generations. The above Q.44) Which of the following is a Nodal Institution for definitions clearly indicate that sustainable implementation of Sustainable Development development is important for well being of Goals in India? human society. A. Planning Commission B. Disinvestment Commission Q.46) Saving energy and other resources for the C. NITI Aayog future without sacrificing people’s comfort in D. Finance Commission the present’ is the definition of which of the Answer: C following concepts? Explanation: A. Economic growth  NITI (National Institution for Transforming India) B. Economic development Aayog is the Nodal Institution for coordination C. Sustainable development and implementation of Sustainable D. Human development Development Goals (Agenda 2030) in India. Answer: C Explanation: Q.45) Given below are two statements, one labelled  ‘Saving energy and other resources for the as Assertion (A) and other as the Reason (R). future without sacrificing people’s comfort in Assertion (A): Sustainable development is the present’ is the definition of sustainable important for well being of human society. development. In other words, sustainable Reason (R): Sustainable development is a kind of development can be defined as development development that meets the needs of the that meets the needs of the present without present without compromising the ability of compromising the ability of future generations future generations to meet their own needs. to meet their own needs. The modern concept Select the correct answer using the codes of sustainable development is derived mostly below : from the 1987 Brundtland Report ‘Our Common Codes : Future’. Sustainable development is the A. Both (A) and (R) are true and (R) is the organizing principle for meeting human correct explanation of (A) development goals while simultaneously B. Both (A) and (R) are true but (R) is not the sustaining the ability of natural systems to correct explanation of (A) provide the natural resources and ecosystem C. (A) is true but (R) is false services on which the economy and society D. (A) is false but (R) is true depends. Answer: A Explanation: Q.47) In the context of any country, which one of the  Sustainable development has been defined in following would be considered as part of its many ways. The most frequently quoted social capital? definition is from ‘Our Common Future’, also A. The proportion of literates in the known as the Brundtland Report: "Sustainable population development is a development that meets the B. The stock of its buildings, other needs of the present without compromising the infrastructure and machines ability of future generations to meet their own Call: 93929 57733 KPSIR UPSC Universe - ( 15 )  C. The size of population in the working age skill certification scheme is to enable a large group number of Indian youth to take up industry- D. The level of mutual trust and harmony in relevant skill training that will help them in the society securing a better livelihood. Answer: D Explanation: Q.49) Increase in absolute and per capita real GNP do  Social capital basically comprises the value of not connote a higher level of economic social relationships and networks that development, if compliment the economic capital for economic A. industrial output fails to keep pace with growth of any country. Social capital involves agricultural output the effective functioning of social groups B. agricultural output fails to keep pace with through interpersonal relationships, a shared industrial output sense of identity, a shared understanding, C. poverty and unemployment increase shared norms, shared values, trust, cooperation, D. imports grow faster than exports and reciprocity. Thus, in the context of any Answer: C country it is, the level of mutual trust and Explanation: harmony in the society.  Economic growth is a conservative concept and it denotes the rise in a nation’s actual level of Q.48) Skill development programme enhances : output whereas economic development is A. Human capital comparatively a normative concept, and it B. Physical capital denotes economic growth with enhancement in C. Working capital the standards of living. Better standard of living D. Fixed capital includes various things like safe drinking water, Answer: A improved sanitation systems, medical facilities, Explanation: spread of primary education to improve literacy  Human capital is the skills, knowledge and rate, eradication of poverty, increase in experience possessed by an individual or employment opportunities etc. Thus, increase in population, viewed in terms of their value or absolute and per capita real GNP (i.e. economic cost to an organization or country. Skill growth) do not connote a higher level of development program me enhances human economic development, if poverty and capital. India adds on about 12 million people to unemployment increases. its work force every year. By 2030, one third of the world's working age population is going to Q.50) Which of the following factors / policies were be from India. There are as many as 711 million affecting the price of rice in India in the recent people in India in the working age group of 15- past? 59 years, with the majority requiring new or 1. Minimum Support Price additional skill to keep them relevant and 2. Government's trading productive in social and economic growth and 3. Government's stockpiling development. This makes India the youngest 4. Consumer subsidies and ambitious country in the world with skill and Select the correct answer using the code given human capital development on top most below: agenda. For this, Pradhan Mantri Kaushal Vikas A. 1 only Yojana (PMKVY) is the flagship scheme of the B. 2 only Ministry of Skill Development and C. All four Entrepreneurship (MSDE). The objective of this D. 1,2 and 3 Call: 93929 57733 KPSIR UPSC Universe - ( 16 ) Answer: C  The self-employed and self-funded producers Explanation: with holdings large enough to support pair of  All of the given factors/policies were affecting bullocks are defined as ‘Bullock Capitalists’ by the price of rice in India in the recent past. Lloyd and Susanne Rudolph (1987), while Minimum support price impacts the price of rice denoting the crucial role of public subsidies in in India as it is directed at providing insurance to preserving this faction of informal agrarian agricultural producers against any sharp fall in capitalism. They are small to medium-sized, self- farm prices. The government typically buys employed agricultural producers who have more than onethird of the country's rice output some resources but are not rich. at a fixed price, which also has a direct impact on prices paid by traders. In the recent years, Q.53) With reference to the measures of tenancy sale of wheat and rice is undertaken through reforms in India, which of the statements is/are Open Market Sale Scheme (OMSS) so as to check correct? inflationary trend in prices of foodgrains. Prices 1. Regulation of rent of rice (and wheat) remained stable in recent 2. Security of tenure past due to adequate supply and also due to 3. Conferment of ownership on tenants maintenance of adequate buffer stock of rice Select the correct answer using codes given (and wheat) by the FCI. The impact of consumer below : subsidies is to lower prices for the consumers, A. 1 only e.g. the National Food Security Act provides rice B. 1,2 and3 at Rs. 3 per kg to the poor families C. 2 and 3only D. 2 only Q.51) Which of the following measures have been Answer: B taken to make the agrarian structure conducive Explanation: to agricultural growth?  Land reforms in general and tenancy reforms in A. Abolition of Intermediaries particular aim at redistributing ownership B. Tenancy reforms holding from the view point of social justice, and C. Ceiling on land holdings reorganizing operational holdings from the view D. All of the above point of optimum utilization of land. The scope Answer: D of land reforms therefore entails abolition of Explanation: intermediaries and tenancy reforms, i.e.  Abolition of intermediaries, tenancy reforms regulation of rent, security of tenure for tenants and ceiling on land holdings- all these measures and conferment of ownership on them. The have been taken in India to make the agrarian entire concept aims at the abolition of structure conducive to agricultural growth. intermediaries and bringing actual cultivator in direct contact with the State. The provisions of Q.52) What is meant by a Bullock Capitalist? security of tenancy and rent regulation provide A. Farmers who are poor a congenial atmosphere in which the B. Farmers who are rich agriculturist feels sure of reaping the fruits of his C. Farmers who have some resources but labour. are not rich D. Farmers who are big Zamindars Q.54) Which of the followings is the effective reason Answer: C of slow agricultural development in India? Explanation: A. Rural Poverty B. Urban Poverty Call: 93929 57733 KPSIR UPSC Universe - ( 17 )  C. Skilled Labour D. Maharashtra D. Migration from cities to villages Answer: C Answer: A Explanation: Explanation:  Based on the figures of the year 2009-10 the  Among the given options, rural poverty is the largest area under Soyabean cultivation was in effective reason of slow agricultural Madhya Pradesh (5.35 million hectares) development in India. Rural poverty discourages followed by Maharashtra (3.02 million farmers from investment in the advance hectares). As per the data of Kharif 2021 season, agricultural technology. Most Indians who are three States with largest area under Soyabean involved in agriculture do live in villages instead cultivation are as follows : 1. Madhya Pradesh of cities. Therefore the impact of urban poverty (5.57 million hectares) 2. Maharashtra (4.38 on agricultural development is quite less or million hectares) and 3. Rajasthan (9.3 million insignificant. Skilled labour and migration from hectares). As per the Economic Survey 2021-22, cities to villages are not the causes of slow in 2020-21 (4th A.E.), three largest Soyabean agricultural development. producing States are Maharashtra (6.20 million tonnes), Madhya Pradesh (4.61) million tonnes) Q.55) The contribution of agriculture in Indian and Rajasthan (1.09 million tonnes). It is notable Economy is : that in 2020-21, Maharashtra outstripped A. increasing Madhya Pradesh as the leading soyabean B. decreasing producing state in the country. C. constant D. None of the above Q.57) consider the following statements about Answer: B Amartya Sen’s advices regarding priorities for Explanation: Indian Economy  As per the Economic Survey 2021-22, the 1. It should be commodity-oriented contribution of agriculture and allied sectors in 2. It should be people-oriented GVA (Gross Value Added) of the country at 3. Economic security to the poorest of the current prices has decreased from 18.6% in poor 2013-14 to 17.7% in 2015-16 and 17.6% in 2018- 4. Safeguards against integration of these 19. Within the agriculture sector, the share of with world economy crops has fallen from 11.2 percent in 2014-15 to Select the correct answer using the code given 9.7 percent in 2018-19. The share has been below: declining on account of relatively higher growth A. 1, 2 and 3 are correct performance of non-agricultural sectors. In fact, B. 2, 3 and 4 are correct the contribution of agriculture in Indian C. 1, 3 and 4 are correct Economy is steadily declining with the country’s D. 1, 2 and 4 are correct broad based economic growth. Due to the shock Answer: B of the COVID-19 pandemic on the Indian Explanation: economy.  Amartya Sen is associated with welfare economics. According to him the main objective Q.56) Which one of the following States has largest of economic development is human area under Soyabean cultivation: development. Due to this perception Amartya A. Uttar Pradesh Sen has suggested the statement 2, 3 and 4 B. Bihar mentioned in the question for the Indian C. Madhya Pradesh economy. Call: 93929 57733 KPSIR UPSC Universe - ( 18 ) Q.58) The Hindu rate of growth refers to the growth Economic liberalization was introduced in India rate of: on 24 July 1991 by the Narsimha Rao A. Per Capita Income government after its formation in June 1991. B. National Income New Industrial policy was declared on 24 July C. Population 1991. In this policy all the industries except 18 D. Literacy prominent industries were made free from Answer: B licence Explanation:  The term Hindu rate of growth was used for the Q.61) With reference to the 'Capital formation' which first time by Prof. Raj Krishna in the year 1981 of the statements is/are correct? while speaking in the American Economic 1. Process of capital formation depends on Association. According to him the Hindu savings and effectiveness of financial tradition which is not favourable to institutions. development or which do not promote 2. Investment is the essential factor of development is the major cause of the slow capital formation. growth rate of National Income/GDP in India, Select the correct answer using the codes given which stagnated around 3.5% from 1950s to below. 1980s. Hence it is clear that Hindu rate of Codes: growth mentioned by Prof. Raj Krishna is related A. 1 only to National Income/GDP. B. 2 only C. Both1 and 2 Q.59) Economic growth is usually coupled with : D. Neither 1 nor 2 A. Deflation Answer: C B. Inflation Explanation: C. Stagflation  Capital formation is a term used to describe the D. Hyper-inflation net capital accumulation during an accounting Answer: B period for a particular country. To accumulate Explanation: additional capital, a country needs to generate  Generally along with the economic savings and investments from household development there is an increase in the savings or based on government policy. demands of goods with increase in income. That Countries with a high rate of household savings is why economic development is usually can accumulate funds to produce capital goods accompanied by inflation. faster, and a government that runs a surplus can invest the surplus in capital goods. The World Q.60) Economic liberalization in India started with: Bank measures capital formation by assessing A. substantial changes in industrial licensing the change in net savings. If the household policy savings rate is increasing, savers may invest the B. the convertibility of Indian rupee additional money and purchase stocks and C. doing away with procedural formalities bonds. If more households are saving and for foreign direct investment financial institutions are effective, the country D. significant reduction in tax rates may report a cash surplus, which is a positive Answer: A sign for capital formation. Explanation:  Economic liberalization in India started with Q.62) The Planned Development Model was adopted substantial changes in industrial licensing policy. in India from : Call: 93929 57733 KPSIR UPSC Universe - ( 19 )  A. 1st April 1951 Select the correct answer with the codes given B. 15th August, 1947 below : C. 26th Jan. 1950 A. 2, 4, 1, 3 D. 1st May, 1965 B. 4, 3, 1, 2 Answer: A C. 1, 2, 3, 4 Explanation: D. 2, 4, 3, 1  Though the planned economic development in Answer: B India began in 1951 (1st April, 1951) with the Explanation: inception of First Five Year Plan, theoretical Chronological order of the given statements is as efforts had begun much earlier, even prior to follows : the independence. Setting up of National 1. India became member of IMF. (1945) Planning Committee by Indian National 2. First devaluation of Indian currency after Congress in 1938, The Bombay Plan and independence took place. (1949) Gandhian Plan in 1944, People’s Plan in 1945 (by 3. First Five Year Plan was submitted to post war reconstruction committee of Indian Parliament. (8 Dec. 1951) Trade Union), Sarvodaya Plan in 1950 by 4. National Development Council was set-up. (6 Jaiprakash Narayan were steps in this direction Aug. 1952) Q.63) Who authored the book, 'Planned Economy for Q.65) Consider the following: India'? 1. Currency with the public A. M. Visvesvaraya 2. Demand deposits with banks B. J.R.D. Tata 3. Time deposits with banks C. G.B. Birla Which of these are included in Broad Money D. Pattabhi Sitaramayya (M3) in India? Answer: A A. 1,2 and 3 Explanation: B. 2 and 3  M. Visvesvaraya authored the book ‘Planned C. 1 only Economy for India’. He was the first to advocate D. 1 and 2 the idea of planning for India. In this book, he Answer: A proposed a ten-year plan with the aim of Explanation: doubling the income of the country. His main  RBI publishes figures for four alternative emphasis was on industrialization so as to measures of money supply, viz, M0 , M1 , M2 reduce the population's dependent on and M3. M3 is known as Broad Money. M3 agriculture. includes : M3 = Currency with the public + Demand deposits with banks + Other deposits Q.64) Arrange the following in their chronological with RBI + Net time deposits of commercial order : banks or M3 = M1 + Net time deposits of 1. First Five Year Plan was submitted to Commercial banks. Parliament. 2. National Development Council was set-up Q.66) Which of the following is a most likely 3. First devaluation of Indian currency after consequence of implementing the ‘Unified independence took place. Payments Interface (UPI)’? 4. India became member of International A. Mobile wallets will not be necessary for Monetary Fund (IMF). online payments. Call: 93929 57733 KPSIR UPSC Universe - ( 20 )  B. Digital currency will totally replace the proceeds are usually received in cash from physical currency in about two decades. underground economic activity and, as such, are C. FDI inflows will drastically increase. not taxed. It is a big threat for the development D. Direct transfer of subsidies to poor people of a country’s economy. The government had will become very effective taken many step to bring out illegal money from Answer: A time to time, such as – Voluntary Disclosure of Explanation: Income Scheme.  Unified Payments Interface (UPI) is an instant real-time payment system developed by Q.69) Which of the following was not the stated National Payment Corporation of India (NPCI) objective of demonetization in India? for facilitating inter-bank transactions through A. Reduction in the use of cash in the mobile phone. UPI allows sending or requesting economy. money between any two bank accounts through B. Increasing in the use of digital modes of inter-bank payment system. The most likely transaction. consequence of implementing the UPI is that C. Expanding the tax base. mobile wallets will not be necessary for online D. Increasing the growth rate of G.D.P payments, because customer’s mobile number Answer: D is directly linked with the bank account using Explanation: bank’s ‘customized app’ which is built on the UPI  On 8 November 2016, the Government of India platform. announced the demonetization of all Rs. 500 and Rs. 1000 banknotes of the Mahatma Gandhi Q.67) Money multiplier in India is defined as : Series. The government said that the main A. Broad Money/ Base Money objective of the exercise was curbing black B. Broad Money/ Reserve Money money, which included income which had not C. Reserve Money/ Base Money been reported and thus was untaxed; money D. Base Money/ Reserve Money gained through corruption, illegal goods sales Answer: B and illegal activities such as human trafficking; Explanation: and counterfeit currency.  In India, we define money multiplier as the ratio Other stated objectives included: of the stock of money or Broad Money (M3 ) to  expanding the tax base and increasing the the stock of high powered money or Reserve number of taxpayers; * reducing the number of Money (M0 or Rm ). So if money multiplier is K, transactions carried out by cash; * increasing then K = M3 /M0 or M3 /Rm. the use of digital modes of transaction; * reducing the finances available to terrorists and Q.68) What is black money? radical groups; and * integrating the formal and A. It is an illegal currency informal economy. B. It is a Fake currency C. It is dirty/bad money Q.70) In India ‘Currency Notes issue system’ is based D. It is an illegal income upon which income on : tax is not paid A. Proportional reserve system Answer: D B. Minimum reserve system Explanation: C. Fixed exchange rate system  Black money includes all funds earned through D. Full convertibility system illegal activity and otherwise legal income that is Answer: B not recorded for tax purposes. Black money Explanation: Call: 93929 57733 KPSIR UPSC Universe - ( 21 )  The system of note issue by the Reserve Bank of period of the previous year. Increased food India was founded on the proportional reserve supply affects prices, but it is not a definite system which was replaced by a system of implication of a fall in inflation rate. minimum holding of foreign securities (Minimum Reserve System) of Rs. 400 crore and Q.72) Consider the following statements : gold coin and bullion of Rs. 115 crore or a total 1. Inflation benefits the debtors of Rs. 515 crore in 1956. Under the Reserve Bank 2. Inflation benefits the bond-holders. (Second Amendment) Act, 1957, the aggregate Which of the statements given above is/are value of gold coin, gold buillion and foreign correct? securities in the Issue Department was A. Only 1 stipulated at not less than Rs. 200 crore at any B. Only 2 time, of which the value of gold coin and bullion C. Both 1 and 2 should at no time be less than Rs. 115 crore. D. Neither 1 nor 2 These stipulations have not been revised since Answer: A then. Explanation:  Inflation occurs when there is a general increase Q.71) Which of the following is/are definite in the price of goods and services and a fall in implication(s) of a fall in inflation rate : purchasing value of money. Inflation allows I. Prices have fallen. debtors (borrowers) to pay credtitors (lenders) II. Prices are increasing more slowly than back with money worth less than when it was before. originally borrowed, which benefits debtors. III. Food supply has increased. Thus, inflation brings about a redistribution of IV. There is industrial stagnation. real wealth in favour of debtors at the cost of Select the correct answer from the codes given creditors. Investors in bonds and securities with below : fixed interest rates, consumers, pensioners etc. Codes : also lose in real terms during inflation. A. I and III B. I only Q.73) A zero rate of inflation obtains necessarily in a C. II only year where the annual rate of inflation : D. I, III and IV A. in every week of the year is zero Answer: C B. is falling in every week of the year Explanation: C. is both falling and rising in a year  A falling rate of inflation means that prices are D. is constant in every week of the year increasing more slowly than before. The Answer: A common measure of inflation is the inflation Explanation: rate, the annualized percentage change in a  If there is a 5 percent inflation in a particular general price index (e.g. consumer price index). week of a month in a year, it means that in If inflation rate is 5% in any month of the last comparison to same week of the same month in year and it is 4% in same month this year, that previous year, the prices of goods have means prices are increasing in both years in increased by 5 percent. It means inflation is comparison to their previous years, but prices measured on the basis of week by week. Hence, are increasing more slowly this year than the it is clear that to get a zero rate of inflation, the last year. Deflation, or negative inflation on the annual rate of inflation in every week of the year otherhand, happens when prices generally fall in should be zero. a economy in comparison to the prices of same Call: 93929 57733 KPSIR UPSC Universe - ( 22 ) Q.74) Given below are two statements one is labelled temporary price volatility as in the case of some as Assertion (A) and other as Reason (R) : commodities such as food items, fuel products Assertion (A) : The government faces a tough etc. Hence, core inflation is defined as headline time tackling the bottleneck inflation inflation excluding both food inflation and fuel Reason (R) : The situation is due to deficiencies inflation. existing in the economy such as supply bottleneck and inefficient distribution. Q.76) The most common measure of estimating Select the correct answer from the codes given inflation in India is : below. A. Price Index Codes : B. Wholesale Price Index