Ecomics Test 1 Solution

8/15/2019 Ecomics Test 1 Solution

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Q1.Sol(b)

AAY was launched in December 2000.Under the scheme one crore of the poorest

among the BPL families covered under the targeted public distribution system

were identified.Poor families were identified by the respective state rural

development departments through a Below Poverty Line (BPL) survey.Twenty

five kilograms of food grains were made available to each eligible family at a

highly subsidised+ rate of Rs 2 per kg for wheat and Rs 3 per kg for rice.This

quantity has been enhanced from 25 to 35 kgs with effect from April 2002. The

scheme has been further expanded twice by additional 50 lakh BPL families in

June 2003 and in August 2004. With this increase, 2 crore families have been

covered under the AAY.

Q2.Sol(c)

In case of disguised unemployment people appear to be employed. If a work

requiring at most 5 people employs 8 people, then the extra 3 do not add to the

output and are essentially unemployed in disguise,i.e. under utilization of the

extra labour. So, option (c) is correct.

Option (d) is a case of more efficient utilization of existing labour. So, wrong.

Option (b) is a general phenomenon seen in developing countries like India

where skill sets do not match with available job demand.

In India, this is more common in agriculture and low productivity sectors like

small households establishments. For e.g. 90% of industrial units in India face

the issue of disguised unemployment.

Factors that contribute to it are: a) large unemployment: b) low skill base of

labour; c) less efficient technology and capital utilization; d) sub-optimal

production management etc.

Q3.Sol(d)


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It was established in 1905 at Pusa (Bihar) with a generous grant from an

American philanthropist. No Parliamentary act established it.So, statement 1 is

wrong.

During the fifties, the advancement of scientific disciplines constituted the core

program of IARI and provided the base for its fast expansion in the 1960's and

1970's. So, it also claims credit for enabling the Green Revolution, in part by

developing rust resistant strains of wheat, apart from the HYVs introduced from

abroad.

Green Revolution in India was a period during which agriculture in India

increased its yields due to improved agronomic technology.

The introduction of high-yielding varieties of seeds and the increased use of

chemical fertilizers and irrigation led to the increase in production needed to

make India self-sufficient in food grains, thus improving agriculture in India.

In many areas, Green Revolution is associated with the loss of soil fertility

due to increased use of chemical fertilizers. Also, continuous use of groundwater

for tubewell irrigation has reduced the water -table below the ground.

Q4.Sol(a)

Minimum Support Price (MSP) is a form of market intervention by the

Government of India to insure agricultural producers against any sharp fall in

farm prices .The minimum support prices are announced by the Government of

India at the beginning of the sowing season for certain crops on the basis of the

recommendations of the Commission for Agricultural Costs and Prices (CACP).

The major objectives are to support the farmers from distress sales and to

procure food grains for public distribution. In case the market price for thecommodity falls below the announced minimum price due to bumper production

and glut in the market, govt. agencies purchase the entire quantity offered by

the farmers at the announced minimum price.

Q5.Sol(b)

Since 2004, it is being run by Department of Food & Public Distribution. The

main objective of the scheme was to provide safeguard against starvation during


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the period of natural calamity or during lean season when the marginalized food

insecure households did not have sufficient resources to purchase rations.

Such people in need of food grains will be able to borrow food grains from the

Village Grain Bank. The grain banks are to be set up in food scarce areas like the

drought prone areas, the hot and cold desert areas, tribal areas and the

inaccessible hilly areas which remain cut off because of natural calamities like

floods, etc.

These villages are to be notified by the concerned State Government/Union

Territory. The scheme envisages inclusion of all willing BPL/AAY families in the

villages to be identified by the State Government in food deficit areas.

The quantity to be lent and the period of repayment is to be decided by the

Group themselves. Village Panchayat/Gram Sabha, Self Help Group for NGOs etc

are identified by the state governments and eligible for running the Grain banks.

The scheme has been discontinued w.e.f. 2014.

Q6.Sol(a)

Only unskilled manual work is allotted under MGNREGA. So,statement 1 is

incorrect.

MGNREGA aims at creating durable assets like roads, canals etc. So, statement 2

is correct.

Contractors cannot be used in allotting MGNREGA work. So, statement 3 iscorrect.

It aims to guarantee the 'right to work'. Employment is to be provided within 5

km of an applicant's residence, and minimum wages are to be paid. If work is

not provided within 15 days of applying, applicants are entitled to an unemployment

allowance. Thus, employment under MGNREGA is a legal entitlement. So,

statement 4 is also correct.


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The statute is hailed by the government as "the largest and most ambitious

social security and public works programme in the world". In its World

Development Report 2014, the World Bank termed it a "stellar example of rural

development. Work is provided to every household whose adult members

volunteer to do unskilled manual work. Apart from providing economic security

and creating rural assets, NREGA can help in protecting the environment,

empowering rural women, reducing rural-urban migration and fostering social

equity, among others.

Q7.Sol(d)

The World Bank has been publishing poverty line since 1990 World Development

Report (WDR) on Poverty. It has anchored its international poverty lines to thenational poverty lines used in the poorest countries.

In 2008, the World Bank came out with a figure (revised largely due to inflation)

of $1.25 at 2005 purchasing-power parity (PPP). The common international

poverty line has in the past been roughly $1 a day.

In 2015 World Bank updated international poverty line to US $1.90 a day.

Determining the poverty line is usually done by finding the total cost of all theessential resources that an average human adult consumes in one year.

Note: World Bank should not be confused with the United Nations World Bank

Group, a member of the United Nations Economic and Social Council.

Q8.Sol(b)

The President of India is the Visitor of 114 central institutions. This includes

Central Universities, NITs, IITs, IISERs etc. under the administrative control of

Ministry of HRD. Some of the institutions are under the administrative control of

Ministry of Shipping, Ministry of External Affairs, Ministry of Agriculture, Ministry

of Sports, Ministry of Textiles and Ministry of Chemicals & Fertilizers. The powers

of the President as a Visitor of these institutions are defined in their respective

Acts.


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Some of his powers are to inspect the university, chair conference of Directors,

power to annul unconstitutional provisions/rules w.r.t to the Universities.

Q9.Sol(d)

Chemical fertilizers provide minerals which dissolve in water and are

immediately available to plants. So, statement 1 is wrong.

But these minerals may not be retained in the soil for long. They may escape

from the soil and pollute groundwater, rivers and lakes. So, statement 3 is

correct.

Chemical fertilizers can also kill bacteria and other microorganisms in the soil.

This means some time after their use, the soil will be less fertile than ever

before, and some symbiotic relations based on micro-organisms will be broken.

So, statement 2 and 4 are correct.

It has been explained very well here.

Q10.Sol(c)

Its world headquarters are located in Rome. It leads international efforts to

defeat hunger.

Serving both developed and developing countries, FAO acts as a neutral forum

where all nations meet as equals to negotiate agreements and debate policy.

FAO is also a source of knowledge and information, and helps developing

countries and countries in transition modernize and improve agriculture, forestry

and fisheries practices, ensuring good nutrition and food security for all.

FAO and the World Health Organization created the Codex Alimentarius

Commission in 1961 to develop food standards, guidelines and texts such as

codes of practice under the Joint FAO/ WHO Food Standards Programme.


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Q11.Sol(d)

Rainfall in coastal areas is not adequate, especially some of the eastern coasts.

This is why coastal areas have a well-developed irrigation infrastructure.

Statement A is wrong, and so is R.

Groundwater system irrigation is the largest in India. In 2010, only about 35%

of total agricultural land in India was reliably irrigated. About 2/3rd cultivated

land in India is dependent on monsoons.

Riverine plains in India are well-irrigated. In contrast, plateau regions such as

the Deccan plateau have low levels of irrigation.

Q12.Sol(d)

Human labour and land contribute to production. So, statements 1 and

2 are correct.

Capital goods are machines which are used to produce other goods. So,statement 4 is also correct.'

Consumer goods are finished products. They are not factors of production, but

products. So, statement 3 is wrong.

It describes the inputs that are used in the production of goods or services

in the attempt to make an economic profit. The factors of production includeland, labor, capital and entrepreneurship. Capital can be further divided into

fixed (machines etc) and working capital (money, raw material etc).

Q13.Sol(b)

It is a quasi-judicial body. So, 2 is wrong.

The Consumer Protection Act, 1986 is lays down the rights of the consumers and

provides for promotion and protection of the rights of the consumers.


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The Act mandates establishment of Consumer Protection Councils at the Centre

as well as in each State and District, with a view to promoting consumer

awareness.

The Central Council is headed by Minster, In-charge of the Department of

Consumer Affairs in the Central Government and the State Councils by the

Minister In-charge of the Consumer Affairs in the State Governments. It also

provides for a 3-tier structure of the National and State Commissions and

District Forums for speedy resolution of consumer disputes.

Each District Forum is headed by a person who is or has been or is eligible to be

appointed as a District Judge and each State Commission is headed by a personwho is or has been a Judge of High Court.

Q14.Sol(a)

The term special economic zone (SEZ) is commonly used as a generic

term to refer to any modern economic zone.

In these zones business and trades laws differ from the rest of the country.

Broadly, SEZs are located within a country's national borders.

The aims of the zones include: increased trade, increased investment, job

creation and effective administration. To encourage businesses to set up in the

zone, financially libertarian policies are introduced. These policies typically

regard investing, taxation, trading, quotas, customs and labour regulations.

Additionally, companies may be offered tax holidays.

Q15.Sol(d)

A barrier to trade is a government-imposed restraint on the flow of

international goods or services.


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The most common barrier to trade is a tariff'a tax on imports. Tariffs raise the

price of imported goods relative to domestic goods (goods produced at home).

Quota reduces imports. So, (a) and (b) are trade barriers.

Another common barrier to trade is a government subsidy to a particular

domestic industry. Subsidies make those goods cheaper to produce than in

foreign markets. This results in a lower domestic price. Both tariffs and subsidies

raise the price of foreign goods relative to domestic goods, which reduces

imports. For e.g. subsidies on agriculture is a major point of contention in WTO.

So, (c) is also a trade barrier. WTO agreements bring uniformity in trade policies

of countries and reduce trade barriers. So, (d) is the answer.

Q16.Sol(c)

The various types of loans can be conveniently grouped as formal sector loans

and informal sector loans. Among the former are loans from banks and

cooperatives. The informal lenders include moneylenders, traders, employers,

relatives and friends, etc.Formal loans are regulated by RBI.

Q17.Sol(b)

Money does not have any intrinsic value. However, it is still accepted as a

medium of exchange because the currency is authorised by the government of

the country. In India, the Reserve Bank of India issues currency notes on behalf

of the central government.

As per Indian law, no other individual or organisation is allowed to issue

currency. Moreover, the law legalises the use of rupee as a medium of payment

that cannot be refused in settling transactions in India. No individual in India can

legally refuse a payment made in rupees. Hence, the rupee is widely accepted asa medium of exchange.

Q18.Sol(b)

Grameen Bank (GB) has reversed conventional banking practice by removing the

need for collateral (security against which a loan is made, e.g. house) and

created a banking system based on mutual trust, accountability, participation

and creativity.


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Professor Muhammad Yunus, the founder of "Grameen Bank" and its Managing

Director, reasoned that if financial resources can be made available to the poor

people on terms and conditions that are appropriate and reasonable, "these

millions of small people with their millions of small pursuits can add up to create

the biggest development wonder.'

As of 2011, it has 8.349 million borrowers, 97 percent of whom are women. With

2,565 branches, GB provides services in 81,379 villages, covering more than 97

percent of the total villages in Bangladesh.

Q19.Sol(d)

Option (a) is wrong as GDP includes services too.

Option (b) is wrong as non-monetary goods and services (e.g. cooking by

housewife) is not included in GDP calculation.

Option (c) is wrong as economic transactions virtually include everythingeconomic in the country. For e.g. if a stock broker sells and purchases the same

stock worth Rs. 1000 five times in a day, it does not increase the GDP of the

country by Rs.5000. Economic transactions may also include buying and selling

of bonds, FII inflows and outflows etc.

GDP includes the value of all goods and services produced within a country

within a year.

Q20.Sol(d)

A straight forward question.

Per capita income shows living standard and economic status. So, 1 is correct.

Literacy rate shows educational achievement and is used in some form in the

Human Development Index (HDI). So, 2 is correct.


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Health indicators like IMR, MMR, malnutrition rate etc. show the general health

and well-being of the population and its life expectancy. So, 3 is correct.

Q21.Sol(d)

As the water table lowers, the water must be pumped farther to reach the

surface, using more energy. In extreme cases, using such a well can be cost

prohibitive. So, 1 is correct.

Land subsidence occurs when there is a loss of support below ground. This is

most often caused by human activities, mainly from the overuse of groundwater,

when the soil collapses, compacts, and drops. So, 2 is correct.

Saltwater intrusion is the movement of saline water into freshwater aquifers.

The movement happens because saltwater has a higher mineral content than

freshwater, it is denser and has a higher water pressure. As a result, saltwater

can push inland beneath the freshwater, which can lead to contamination of

drinking water sources and other consequences. So, 3 is correct.

An ecotone is a transition area between two biomes. It is where two

communities meet and integrate. Groundwater feeds soil moisture throughpercolation, and many terrestrial vegetation communities depend directly on

either groundwater or the percolated soil moisture above the aquifer for at least

part of each year. Hyporheic zones (the mixing zone of stream water and

groundwater) and riparian zones are examples of ecotones largely or totally

dependent on groundwater. So, 4 is correct.

Q22.Sol(a)

Option (b) is known as Under 5 Mortality Rate (U5MR).

Option (c) describes neo-natal mortality rate.

Option (a) describes IMR.

Presently the IMR of India is around 42 per 1000 births which also nearly

fulfils the MDG criteria for IMR


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IMR is dependent on several factors such as institutional delivery, sanitation,

water, health facilities, early disease prevention, malnutrition of mother and

child, educational levels of the mother and family etc.

Q23.Sol(a)

These reports (dealing with development) are being published every year;

published by the Government of India (Economic Survey), United Nations

Development Programme (Human Development Report) and World Bank (World

Development Indicators).

World Development Indicators is the primary World Bank collection of

development indicators, compiled from officially-recognized international

sources. It presents the most current and accurate global development data

available, and includes national, regional and global estimates.

Q24.Sol(d)

Ever since the SHG-Bank Linkage Programme was launched by NABARD, the Self

Help Promoting Agencies such as NGOs, Banks (RRBs, DCCBs), Farmers Clubs

and Individual Rural Volunteers (IRV) are being extended grant support to

organise and nurture SHGs of the poor.

In fact, the phenomenal growth of SHG-Bank Linkage Programme in the country,is the result of the painstaking efforts put in by these agencies in forming and

nurturing SHGs especially in areas where the concept never existed.

Q25.Sol(a)

Consumers International (CI) is the world federation of consumer groups

that, working together with its Members, serves as the only independent and

authoritative global voice for consumers.


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Founded in 1960, it is fighting for a fair, safe and sustainable future for all

consumers in a global marketplace increasingly dominated by international

corporations.

CI is a not-for-profit company limited by guarantee and registered in the UK.

Today, Consumers International has become an umbrella body to over 220

member organisations from over 115 countries.

Q26.Sol(a)

The first statement which says that in Developing Countries the income

distribution is highly skewed is a correct statement. The second statement,

which says that in Developing countries the ratio of Labour/ Capital is generally

very low is incorrect. The ratio would be high, as these countries will have less

capital and more labour. The third statement is almost irrelevant as one can not

link the stage of development with the Balance of payments.

Q27.Sol(d)

Tiger Range Countries

The 13 Tiger Range Countries (TRCs) are Bangladesh, Bhutan, China, India,

Indonesia, Cambodia, Laos, Malaysia, Myanmar, Nepal, Russia, Thailand and

Vietnam. However, these 13 Tiger Range Countries cannot implement the global

tiger recovery programme without the support of the countries which are

destination or transit points for the illegal tiger trade. The total wild population of

tigers is 3200. Only 6 subspecies exist viz. Sumatran, Bengal, Amur,

Indochinese, South China and Malayan tiger. The number of Sumatran tigers is400 and it is 12% of the global tiger population. In India 1400 tigers are left.

India‘s project tiger was launched in 1973. The first governmental meeting on

tiger conservation was held in Kathmandu, Nepal in October 2009. This meeting

had recommended a series of 15 global actions that need to be taken to change

the trajectory of tigers from extinction to recovery, as well as commitments from

several tiger range countries. Later, first Asian ministerial

conference adopted the goal of doubling the number of tigers by 2022. 2022 is

the next Year of the Tiger. In July 2010, the Indonesian Island Bali had hosted a

Pre-Tiger Summit Partners‘ Dialogue Meeting in which a Global Tiger Recovery

programme was drafted. After that, the World Tiger Heads of Government


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Summit was held at St Petersburg in Russia from September 15 to 18, 2010.

After two years of deliberations, 13 Tiger-range countries finalized an ambitious

global programme for restoring the population of wild tigers, whose count now

stands less than 3,000 across the world. According to the Global Tiger Initiative

(GTI), the GTRP has a high probability of success because all 13 TRCs are

working in concert.

Q28.Sol(b)

Appliances consume energy to operate, but materials used in the

construction of buildings consume energy, too. Embodied energy, or EE, is

the sum of all energy used in the construction process—right from

extraction of raw materials, manufacture of products to their

transportation and incorporation in buildings. Lesser the extraction,

processing and refining, lower is the EE, and greener the product.

Cement, steel and bricks, the basic construction materials, are the major

EE contributors. Their use can be reduced only to an extent. Materials like

ceramic and vitrified tiles, which are highly energy intensive, can be easily

replaced with energy-benign materials like stone.

Q29.Sol(d)

Most of you know about the water footprint caused by meat

production.

Rising meat consumption in the last five decades has also caused a 38 per

cent increase in the world‘s per capita ―phosphorus footprint‖. This is

because it takes many kilogrammes of feed, grown using phosphate

fertilizers, to breed a cattle for its meat. Phosphorus is being mined for

these fertilisers at amuch faster rate than geological cycles can replenish

it. Inclusion of diet change strategies in phosphorus management studies

could bring down the demand for mined phosphorus.

Meat production also increases Carbon footprint.

Q30.Sol(a)

Second statement is incorrect because the scheme will be a one year

cover, renewable from year to year.

Q31.Sol(d)

Dirty Money versus Black Money

Money laundering is the process by which large amounts of illegallyobtained is given the appearance of having originated from a legitimate


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source. So basically, all the ways to convert the black money into white

money are Money laundering. But in Money laundering, the black money

must involve a predicate crime such as the violation of Indian Penal Code,

IPC, Narcotics, Prevention of Corruption Act and Human Trafficking. This

is because in India,stashing black money is simply a civil crime involvingtax evasion, money laundering has criminal dimensions related to black

money. That is why, we use the term Dirty Money in this context.

Q32.Sol(d)

Shadow Banking in Indian Context

The term ‘shadow banking system‗ was first used in 2007 and refers to

the bank-like functions performed by entities outside the regular banking

system.

The more comprehensive definition, as adopted by the Financial StabilityBoard (FSB), i.e., ‗credit intermediation involving and activity (fully or

partially) outside the regular banking system‘ has been globally

accepted. This definition has two important components:

• Non bank financial entities or entities outside the banking system

that engage in the ‗bank like‘ activities of maturity transformation,

undertaking credit risk transfer and using direct or indirect financial

leverage.

• Activities such as securitization, securities lending and repotransactions that act as important sources of funding for non bank

entities.

Thus, shadow banks comprise entities which conduct financial

intermediation directly, such as finance companies or NBFCs, and entities

which provide finance to such entities, such as mutual funds. Globally,

shadow banking entities could be covered under the broad heads of

• Money Market Funds,

• Credit investment Fund

• Hedge Funds

• Finance Companies accepting deposits or deposit like funding

• Securities brokers dependent on wholesale funding

• Credit insurers, financial guarantee providers

• Securitisation vehicles.

The Shadow banking institutions function as intermediaries between the

investors and the borrowers, providing credit and generating liquidity in


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the system. Although these entities do not accept traditional demand

deposits offered by banks, they do provide services similar to what

commercial banks offer. And this was one reason why they escaped

regulation abroad. The shadow banking system had overtaken the regular

banking system in offering loans in US before the financial crisis eruptedin 2008.

Q33.Sol(c)

Though the prices of Gasoline are deregulated, yet it means that the

increases will be made by the Public Sector Oil Marketing Companies

(OMCs) in consultation with the Ministry of Petroleum & Natural Gas. It

has also been decided that in case of a high rise and volatility in

international oil prices, Government will suitably intervene in the pricing

of Petrol and Diesel.

Q34.Sol(c)

Jurisdiction and Powers of NGT Jurisdiction:

NGT has Original as well as Appellate jurisdiction on over all civil cases

where a substantial dispute is related to the matters that are connected

to Water Pollution, Forest Conservation, Air Pollution, Environment

Protection and Biological Diversity. These disputes may be related to any

of the following acts:

1. The Water (Prevention and Control of Pollution) Act, 1974;

2. The Water (Prevention and Control o[Pollution) Cess Act, 1977;

3. The Forest (Conservation) Act

4. The Air (Prevention and Control of Pollution) Act, 1981;

5. The Environment (Protection) Act, 1986;

6. The Public Liability Insurance Act, 1991;

7. The Biological Diversity Act, 2002.

The Tribunal has power to provide

1.Relief and compensation to the victims of pollution and other

environmental damage

2.Restitution of property damaged;

3.Restitution of the environment for such area or areas, as the Tribunalmay think fit.


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Q35.Sol(c)

Second statement is incorrect because it reduces its energy content per

volume

Q36.Sol(d)All are correct statements

Q37.Sol(a)

Independent Evaluation Office (IEO) has been established to

undertake impartial and objective assessment of the various

public programmes and improve the eff ectiveness of public

interventions. The office has functional autonomy and is

attached to Planning Commission under a Governing Boardchaired by the Deputy Chairman, Planning Commission. It is

funded by the Planning Commission and has as its head, a full-

time Director General (DG) in the rank and status of Member,

Planning Commission. It imparts advice to Planning Commission

and the implementing agencies in developing appropriate

management systems consistent with the evaluation objectives.

Q38.Sol(a)

Merit and Non-Merit Subsidies.Q39.Sol(b)

First statement is incorrect because the Pradhan Mantri Khanij KshetraKalyan Yojana (PMKKKY) will be implemented by the District MineralFoundations (DMFs) of the respective districts.

Q40.Sol(d)

First statement is incorrect because the unit will assist Tax Policy Council

chaired by Finance Minister. Second statement is incorrect because theunit will be headed by an officer of the level of Chief Commissioner atfunctional level alternatively from CBDT and CBEC for a fixed tenure, whowill directly report to Revenue Secretary.

Second statement is incorrect because 100% of unemployment allowanceis to be given by state governments and not by central government.

Q41.Sol(c)

Second statement is incorrect because 100% of unemployment allowance

is to be given by state governments and not by central government.


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Q42.Sol(a)

Third statement is incorrect because the Juristiction will be based on Codeof Criminal Procedure. Rest two statements are correct.

Q43.Sol(d)

First statement is incorrect because ‗Jan Aushadhi Scheme‘ envisages

availability of quality generic medicines at affordable prices to all, and not

only to BPL families. Second statement is incorrect because the scheme

mandates Bureau of Pharma PSUs of India (BPPI) to provide one-time

assistance of Rs.2.50 lakhs as furnishing and establishment costs for

setting up a Jan Aushadhi Outlet in government hospitals. State

Governments are required to provide space in Government Hospital

premises or any other suitable locations for the running of the Jan

Aushadhi.

Q44.Sol(b)

Second statement is incorrect because Zero Budget Natural Farming is

different from organic farming.

Q45.Sol(b)

A regressive tax is a tax that takes a larger percentage from low-income

people than from high- income people. As the income rises, the tax rate

decreases in regressive taxation. So, it will prove to be a hindrance toStart-up India programme. Widening of the tax base will reduce the

revenue deficit and hence will help to boost Start-up initiatives.

Q46.Sol(c)

First statement is incorrect because the fund supports both greenfield and

brownfield projects in the country. Third statement is incorrect because

government's contribution/share in the corpus will be 49% in each entity

set up as an alternate Investment Fund (AIF) and will neither be

increased beyond, nor allowed to fall below, 49%.

Q47.Sol(d)

All are correct statements

Q48.Sol(a)

Second statement is incorrect because it is a feature of UDAY (Ujwal

DISCOM Assurance Yojana)

Q49.Sol(a)

Third statement is incorrect because services are delivered in anintegrated manner at the anganwadi, or child care center


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Q50.Sol(d)

DPT includes diphtheria, pertussis (Whooping cough) and tetanus

immunization.

Q51.Sol(c)Both are correct statements.

Q52.Sol(c)

Interim Budgets are usually presented in an election year either just

before the general polls or immediately after them. A government that is

about to complete its five-year term and has already presented five full

Budgets is required to come up with an interim Budget. This allows the

government to draw funds from the exchequer and keep its

administration and finances running for a period of about four monthsbefore which elections can be held and a new elected government is put

in place with enough time for it to present a full Budget for the year. An

interim Budget becomes necessary also when a new government is

formed but does not have enough time to present a full Budget before the

end of the financial year beyond which it has no power to draw money

from the Consolidated Fund of India. The need for an interim Budget,

arises largely out of the timing of the general elections. If the elections

are held sometime in the middle or the latter half of a financial year,

interim Budgets are not required. Only when general elections are

scheduled in the first quarter of the financial year, the government has no

option other than an interim budget.

Q53.Sol(d)

First statement is incorrect because member states have equal voting

rights irrespective of their size of economy. Second statement is incorrect

because the topmost decision-making body of the WTO is the Ministerial

Conference, which usually meets every two years. Third statement is

incorrect because Council for TRIPS operates under the general guidance

of the General Council and not of Ministerial Conference.

Q54.Sol(b)

Third statement is incorrect because there are some relaxations from

SEBI regulations, but it does not bring the acquired shares outside SEBI

regulations. The scheme allows creditor banks to convert their unpaid

loans to equity of troubled firms.

Q55.Sol(c)

First statement is correct because the primary market of commodity

trading is the market of raw products. Secondary market is the


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commodity exchanges. Second statement is also correct because

commodity exchanges provide both spot as well as derivative market

facilities.

Q56.Sol(d)

All are correct statements.

Q57.Sol(a)

Third statement is incorrect because no credit card facility is available

only RuPay Debit card and RuPay Kisan card are available. "Swabhimaan"

campaign of the Government of India aims to bring banking services to

large rural areas. It was through help of Business Correspondents.

Q58.Sol(c)

Both are correct statements.

Q59.Sol(c)

Start up India programme is inspired from the Yozma programme of

Israel.

Q60.Sol(b)

Third statement is incorrect indian not the member of it. The organisation

for Economic Co- operation and Development is a unique forum where thegovernments of 34 market democracies work together to address the

economic, social and governance challenges of globalisation as well as to

exploit its opportunities.

Q61.Sol(d)

NGT has both appellate powers and original powers. Its appellate powers

are exercised against orders passed by statutory authorities under various

environmental legislation such as the Air Act and the Water Act. In

pursuance of its original powers, the NGT can award damages for death

or injury to any person or property if the same has resulted from ―an

accident or the adverse impact of an activity or operation or process‖,

under any of the special environmental legislation specified in Schedule I

of the NGT Act.

Q62.Sol(c)

More than 65 % of the installed power plants in India are thermal based

power plants, which have low energy efficiency of around 30 %. Load

factor is defined as average energy demand (load) to the maximum

demand. Indian power plants are suffering from low load factor rather.Further, due to lack of continuous availability of coal or fuel the power


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plants are able to produce less than their installed capacity; thus low

utilization factor. Also, high distribution-line losses are among the most

vexing problems in the Indian power sector. India's aggregate technical

and commercial losses average about 32% of electricity which is very

high as compared to those developed countries (6-11%).Q63.Sol(a)

Second statement is incorrect because liquid funds are debt funds. Third

statement is incorrect because it is regulated by RBI and not by SEBI.

Liquid funds are open ended schemes that invest in debt and money

market instruments with maximum maturity of up to 91 days only.

Hence, the average maturity of a liquid fund is equal to or less than 91

days. This strategy helps in mitigating risk arising out of interest rate

volatility, provide high liquidity to portfolio and generate stable income.

Q64.Sol(a)

Bonus shares are gifts to existing shareholders as the company issues

additional shares to them at no cost. Issuing of bonus shares further

attaracts new investors to company.

Q65.Sol(a)

Mudra Bank stands for Micro Units Development Refinance Agency. It has

been established as a subsidiary of SIDBI to refinance small business

loans under the Pradhan Mantri Mudra Yojana (PMMY). MUDRA Bank isrefinancing through State level institutions, MUDRA will deliver the loan

through NBFCs, MFIs, Rural Banks, District Banks, Nationalize Banks,

Private Banks, Primary Lending Institutions and other intermediaries.

Currently, MUDRA operates as an NBFC registered under RBI. However,

MUDRA Bill is proposed to be tabled in parliament, which is likely to

enable its conversion into MUDRA Bank. Every bank branch is advised to

fund at least one SC/ST and one women entrepreneur.

Q66.Sol(a)

White color forms are for Resident Indian, and blue color forms are for

NRIs, Foreign Venture Capital, Investor, and Foreign Institutional

Investors. These forms are issued by SEBI for investment in capital

market.

Q67.Sol(a)

Money raised through government securities and loans from IMF and

World Bank will create liability to the government and hence, will not

reduce fiscal deficit of the government.


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Q68.Sol(b)

Increased NRI deposits are an external debt. Inward remittance is not

because it is not to be repaid back. ECBs are again external debt. Grants

are never debt because they don't need to be paid back. Depreciation of

US dollar against the rupee will reduce external debt as rupee gettingstronger.

Q69.Sol(a)

First statement is correct. The eight infrastructure sectors that make up

the core sector index – coal, crude oil, natural gas, refinery products,

fertilisers, steel, cement and electricity together have a 38% weightage in

the Index of Industrial Production (IIP). We note here that India's core

sector has contracted almost 1.3% within last few months. This downfall

is a result of reduced consumer spending, which leads to lower demandsituation. The producers respond by cutting down on the production. Low

industrial production results in lower corporate sales and profits, which

directly affects stock prices. So a direct impact of weak IIP data is a

sudden fall in stock prices as well as low GDP.

Second statement is incorrect because the Reserve Bank of India had

adopted Consumer Price Index (CPI) as the key measure of inflation, but

CPI report is published by the Central Statistics Office (CSO) and not by

RBI.

Q70.Sol(a)

Commercial transactions between the different parts of the multinational

groups may not be subject to the same market forces shaping relations

between the two independent firms. One party transfers to another goods

or services, for a price. That price is known as ―transfer price‖. It is

mainly done for tax-dodging in a country.

Q71.Sol(a)

Recently, RBI Governor Raghuram Rajan urged the government to stick to

the fiscal consolidation path. Fiscal consolidation refers to steps taken by

government to reduce the spending and check Fiscal deficit. First

statement is correct because RBI increasing Repo rate will curb the

commercial banks lending and contribute to fiscal consolidation. Second

statement is correct because increase in SLR will again curb the

commercial banks lending capacity and contribute to fiscal consolidation.

Third statement is incorrect Start-up India programme is leading to fiscal

stimulus. Fourth statement is incorrect because government borrowing in

bonds and T-bills will increase government‘s liability and hence no fiscal

consolidation.


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Q72.Sol(b)

Third statement is incorrect because if three-fourths of the creditors

decide that the case is complex and cannot be addressed within 180 days,

then only, the adjudicator can grant a one-time extension of upto 90 days

on the process.

Q73.Sol(b)

First statement is incorrect because appreciation of US Dollar against

Indian Rupee will weaken Indian currency and make export more

profitable for Indians, and hence, will increase the Indian export market.

Second state have worsened the pain for stocks in the countries, as their

purchasing power reduced. Please note that Indian pharmaceutical

industry has very good market capitalization in Asia, Africa, Middle East

and Eastern Bloc countries. Third statement is correct because in recentmonth‘s tighter scrutiny of Indian manufacturing sites by US Food and

Drug Administration (FDA) has reduced the easy access of Indian

pharmaceutical industry. Further, as per recent reports Indian

pharmaceutical exports over the next four years will decline, and the

annual growth rate in pharmaceutical exports may almost halve to 7.98%

by 2020 from 14.77% CAGR during 2010-2014.ment is correct because

weaker currencies in Africa and Middle-East

Q74.Sol(c)

According to RBI, terms loans on which interest or instalment of principal

remain overdue for a period of more than 90 days from the end of a

particular quarter is called a Non-performing Asset. The Securitization and

Reconstruction of Financial Assets and Enforcement of Security Interest

(SARFAESI) Act have provisions for the banks to take legal recourse to

recover their dues. When a borrower makes any default in repayment and

his account is classified as NPA; the secured creditor has to issue notice to

the borrower giving him 60 days to pay his dues. If the dues are not paid

then the bank can take possession of the assets and can also give it on

lease or sell it; as per provisions of the SARFAESI Act.

Q75.Sol(a)

"Bull" and "Bear" are two terms used in stock markets to signify the

different market conditions. While bear denotes a market condition in

which prices of securities are falling, bull denotes a market condition in

which prices of a group of securities are rising or are expected to rise.

Q76.Sol(c)

First statement is incorrect because the main components of the capital

account include foreign investment, loans and banking capital.Foreign


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investment comprises of Foreign Direct Investment (FDI) and Foreign

Portfolio Investment or Institutional investment. But due to global fall in

oil prices, oil producing economies are slashing budgets, thus, lower

investment as FII and FDI in India and other economy from gulf and

major oil producing countries. Second statement is incorrect becauserecent reports have a say that, India, which imports 80 percent of its oil

requirement, has already made a windfall gain of about Rs 3 lakh crore in

import bills due to falling global oil prices. Hence, Import bill has fallen

drastically, improving the current account balance of the country.

Deflation is a monetary phenomenon, that is, it is affected by the demand

and supply of money. Third statement is correct because deflation is a

situation just opposite of inflation, it occurs when prices fall for a long

enough period of time. At present many countries including India are at

high risk of deflation due to falling oil prices.

Q77.Sol(d)

Mutual funds are open ended funds. It means they generally create and

sell new shares to accommodate new investors unlike closed end funds

which sell a fixed number of shares at one time (in an initial public

offering) that later trade on a secondary market.

Q78.Sol(d)

First statement is incorrect world world economic forum is a swiss non

profit foundation, based in Cologny, Geneva. Second statement is againincorrect because the Forum is best known for its annual winter meeting

in Davos, a mountain resort in Graubünden, in the eastern Alps region of

Switzerland. Third statement is also incorrect because it publishes the

Global Competitiveness Report. The World Economic Outlook report is

published by IMF.

Q79.Sol(a)

The term was coined by RBI governor Raghuram Govind Rajan. He

explain his point, with an imaginary example of a pensioner with a

savings of Rs 1 lakh who earns an interest rate of 10 per cent and wants

to buy dosas that cost Rs 50 a piece. The RBI governor assumes inflation

to be 10 per cent. ―He could buy 2,000 dosas with the money today, but

he wants more by investing. At 10 per cent interest, he gets Rs 10,000

after one year plus his principal,‖ Rajan argued. With dosa prices going up

by 10 per cent to Rs 55, he can buy 182 dosas approximately with the Rs

10,000 interest. However, with his principle amount the pensioner can

now buy 1818 dosas. Thus, stateing that that low deposit rate coupled

with low inflation is better than high rates with high prices.


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Q80.Sol(d)

All of the above are correct statements.

Q81.Sol(b)

First statement is incorrect because at present cash prize of Rs 1 lakh isgiven with awards. The award was first given in 1955, the Sahitya

Akademi Award prizes to the most outstanding books of literary merit

published in any of the major Indian languages recognised by the

Academy. The amount given for the award is now Rs.1,00,000 with a

citation.

Q82.Sol(d)

All are correct statements.

Q83.Sol(c)

Second statement is incorrect because minimum lock period is of 3 years.

Q84.Sol(c)

First statement is incorrect because bio-diesel is prepared from renewable

resources such as animal fats or vegetable oils. But only diesel engines can run

on biodiesel and not all engines can cope with it. Flex fuel involves bio-ethanol

and petrol, or a blend of both. Ethanol is largely seen as a environmentally

friendly alternative to petrol. It is made from the fermentation of crops such as

sugarcane in Brazil and soybean in the US. Second statement is correct becauseflex fuels reduce emission of sulphur dioxide, lead and zinc depending upon

blending. Tftird statement is incorrect because flex fuels are less volatile, but

have higher octane ratings than petroleum. Also, note that E-85 is a flex fuel,

which has 85 percent ethanol with 15 percent petrol blending. Ethanol is

produced from cane molasses, a by-product of the sugar production process. So,

at present, the most obvious and reliable source of bio-ethanol in India is

sugarcane. With India being the world‘s second largest sugar market,

government wishes to shift to flex fuels, with minimum 10 per cent blending.

Furthermore, flex-fuel and biofuels in general, are promoted because they are

cleaner alternatives to fossil fuels.

Q85.Sol(b)

First statement is incorrect because lower oil prices dampen inflation both

directly when the price of oil-related products falls and indirectly when

production costs for other goods fall. So, lower oil prices lead to lower global

inflation. In an assessment made by the World Bank (2015), global inflation

would fall by 0.4–0.9 percentage points over 2015 and further in 2016.

Second statement is correct as the fall in oil prices would result in savings in oil

importing countries while less revenue accrued to oil exporting countries.


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Third statement is correct

A SWF is state-owned investment fund composed of financial assets such as

stocks, bonds, property, precious metals or other financial instruments.

Sovereign funds are as a result of budget and trade surpluses, and even from

revenue generated from the exports of natural resources. And with the decreasein oil prices globally the volume of investment from the Middle East funds would

decline significantly as Gulf countries cut back spending.

Q86.Sol(d)

SGBs are government securities issued by Reserve Bank on behalf of

Government of India. The bonds are excellent substitutes for holding physical

gold. Investors are assured of the market value of gold at the time of maturity

and periodical interest, but there may be a risk of capital loss if the market price

of gold declines with the time period.

Q87.Sol(d)

Prime Minister Narendra Modi has unveiled the "Start-up India, Stand-up India"

action plan in New Delhi to boost startup ventures in the country. Its important

features are:

Start-up profits to be tax-free for 3 years and also no labour inspections for 3

years of launch of the venture.

Compliance regime based on self-certification for labour and environmental laws

Easy exit policy for start-ups with 90 days

Tax exemption to be provided on capital gains if money is invested in anotherstart up Government to create Rs. 10,000 crore corpus fund for development

and growth of innovation driven enterprises

It will be Rs. 2500 crore a year for four years Liberalised Fast-track mechanism

for start-up patent applications under intellectual property rights protection with

80% cost rebate

Q88.Sol(a)

Third statement is wrong because both foreign institutional investors and

domestic investors are allowed to invest in IIBs.

Q89.Sol(d)

Hedge funds are managed much more aggressively than their mutual fund

counterparts, and hence are more risky. The main aim behind investing in hedge

funds is to enhance the leverage – and thus the risk – of the fund. This also

means that it's possible for hedge funds to make money when the market is

falling. Mutual funds, on the other hand, are not permitted to take these highly

leveraged positions and are typically safer as a result. Also, hedge funds are only

available to a specific group of sophisticated investors with high net worth,

whereas, in case for mutual funds, it is very easy to purchase with minimal

amounts of money.


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Q90.Sol(d)

Masala bonds are capital market debt instrument, which allow Indian corporates

to raise money from overseas investors. Furthermore, any capital gains arising

in case of appreciation of rupee between the date of issue and the date of

redemption against the foreign currency in which the investment is made wouldbe exempt from capital gains tax. No registration as FII with SEBI is required for

investment in masala bonds.

Q91.Sol(c)

First statement is incorrect because the scheme sets no capping on Government

subsidy over farmers claim. Third statement is incorrect because the scheme is

optional for both loanee farmers and non-loanee farmers.

Q92.Sol(d)

First statement is correct because depreciation of INR or strengthening of USDollar against Indian Rupee will make gold imports more costly and hence it will

reduce its commercial as well as substantial demand in India. Second statement

is correct because India imports about 80% of its crude oil from Middle East

countries, and with OPEC (Organization of the Petroleum Exporting Companies)

decision to not cut oil production, it has increased the supply of crude oil in

international market; thus lowering its prices globally. This has increased the

gold‘s capacity to purchase crude oil. This increases gold‘s capacity to purchase

crude oil and affecting its demand negatively. Tftird statement is also correct

because incidentally, rural India contributes 60% to the country‘s gold

consumption of 950-1,000 tonne annually. ―Rural India has not been able to

invest heavily in gold within last few years, as continuous and frequent drought

conditions in India has resulted in lower yield of income to farmers and hence,

less investment in gold.

Q93.Sol(c)

Growth stocks are associated with high-quality; successful companies whose

earnings are expected to continue growing at an above-average rate relative to

the market. But with declining GDP growth rate in India, earnings growth rates

have also eroded. With declining GDP growth rate, earnings growth rates have

also eroded. Furthermore, growth stocks have higher price-to-earnings ratios

when compared to value stocks, but growth stocks generally do not return anydividend. Thus; all this led to decline of growth stock in Indian financial markets.

On the other hand foreign investors prefer stocks that are currently undervalued

and have a steady dividend paying record over those companies with a

reputation of consistent earnings growth. Since value stocks are traded at

undervalued rate and generally earn high dividends; these stocks performed well

above growth stocks.

Q94.Sol(d)

Software Defined Radio utilize and benefit from SDR technologies to solve

market specific problems such as; cost of development, cost of production, costof upgrades and maintenance, time to market in supporting new and evolving air


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interface standards, or problems associated with network interoperability. These

have been deployed on wide scale in Indian defense system in recent years.

Q95.Sol(c)

Only 2 & 3 are correct statements. Kindly note that a fiat currency is one which

is backed by some government and has no intrinsic value. The bitcoin does not

have an intrinsic value but it is not backed by a sovereign so it cannot be called

a fiat currency.

Q96.Sol(a)

Cyclical demand and costs are those which changes in a regular way over time,

depending on the part of the trade cycle that a country is in or the time of year.

Kindly note that demand and input costs are cyclical for many sectors such as

commodities, capital goods, real estate, construction and financial services. The

second statement is not correct. Although the capital good sector has a

weightage of 8.8% in the IIP, contributes 12% to the total manufacturingactivity (which is about 15% of the GDP), yet it is spread in many sectors. The

eight core industries include: Coal, Crude Oil, Natural Gas, Petroleum Refinery

Products, Fertilizers, Steel, Cement and Electricity.

Q97.Sol(a)

Surface water is the major source of water for the industries (41%) followed by

groundwater (35%) and municipal water (24%). The use of municipal water is

limited to industries located in urban/ peri-urban areas (See Figure 1). A vast

majority of industries use surface and groundwater in conjunction with

groundwater being relied as a source when surface water availability is on adecline or is impacted by water pollution bound to have an impact on the

industrial process.

Q98.Sol(c)

The basic character of the Indian industry was influenced by the Mahalanobis

model of economic development. The Mahalanobis model underlined the

importance of basic industries for the production process. In the initial stages of

the industrialisation of India, when the private capital did not flow into

infrastructure areas, the government‘s investments in infrastructure such as

basic industries, transport, roads, railways, mining of coal and iron ore, steelmills, heavy machinery etc. were considered essential for providing momentum

for industrial progress. The establishment of basic industries by the government

was thought essential to evoke a reaction in the development of various spheres

of industrial activity. The crucial factor which led to the adoption of Mahalanobis

model was the low level of capital-stock formation in the economy. Growth in

income was linked to the expansion of capital-stock and investment by the

government was thought essential to expand the capital-stock. In a closed

economy, the domestic supply of capital goods influenced the investment

pattern and hence the production of capital goods by the public sector became

essential. The emphasis was on those capital goods which could lead to the

production of other capital goods. The implementation of Mahalanobis model

required centralised control and planning. The industrial policy resolution of 1956


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and the second five year plan (1956-61) gave a practical shape to the

Mahalanobis model. The 1956 resolution categorised industries under three

headings. The first category was the monopoly of the government. In the second

category, the industries meant for progressive takeover by the state were

enlisted. The third category of industries was left open for the operation of the

private sector.

Q99.Sol(b)

Services may involve the transport distribution and sale of goods from producer

to a consumer, as may happen in wholesaling and retailing, or may involve the

provision of a service, such as in pest control or entertainment. The goods may

be transformed in the process of providing the service, as happens in the

restaurant industry. However, the focus is on people interacting with people and

serving the customer rather than transforming physical goods.

Q100.Sol(b)

IIP is a representative figure which measures the general level of Industrial

activity in the country. Being an abstract number, it does not so Volume of

activity and only shows the magnitude which represents the status of production

in the industrial sector for a given period of time as compared to a reference

period of time. The index of industrial production (IIP) with 2004-05 as base is

the leading indicator for industrial performance in the country. Compiled on a

monthly basis, the current IIP series based on 399 products/ product groups is

aggregated into three broad groups of mining, manufacturing, and electricity.

The IIP as an index shows both the level of production and growth.

Documents

Ecomics Test 1 Solution