Economy UPSC Preliminary Question and Answer: Part 3 (2014-2011)

2014

1. In the context of food and nutritional security of India, enhancing the ‘Seed Replacement Rates’ of various crops helps in achieving the food production targets of the future. But what is/are the constraint/ constraints in its wider/greater implementation?

There is no National Seeds Policy in place.
There is no participation of private sector seed companies in the supply of quality seeds of vegetables and planting materials of horticultural crops.
There is a demand-supply gap regarding quality seeds in case of low value and high volume crops.

Select the correct answer using the code given below.

(a) 1 and 2

(b) 3 only

(d) None

Answer:

(b) 3 only

2. Which of the following organizations brings out the publication known as ‘World Economic Outlook’?

(a) The International Monetary Fund

(b) The United Nations Development Programme

(d) The World Bank

Answer:

(a) The International Monetary Fund

3. Which of the following are associated with ‘Planning’ in India?

The Finance Commission
The National Development Council
The Union Ministry of Rural Development
The Union Ministry of Urban Development
The parliament

Select the correct answer using the code given below.

(a) 1, 2 and 5 only

(b) 1, 3 and 4 only

(d) 1, 2, 3, 4 and 5

Answer:

(c) 2 and 5 only

4. The main objective of the 12th Five-Year Plan is

(a) inclusive growth and poverty reduction

(b) inclusive growth and sustainable growth

(d) faster, sustainable and more inclusive growth

Answer:

(d) faster, sustainable and more inclusive growth

5. If the interest rate is decreased in an economy, it will

(a) decrease the consumption expenditure in the economy

(b) increase the tax collection of the Government

(d) increase the total savings in the economy

Answer:

(c) increase the investment expenditure in the economy

6. What does venture capital mean?

(a) A short-term capital provided to industries

(b) A long-term start-up capital provided to new entrepreneurs

(d) Funds provided for replacement and renovation of industries

Answer:

(b) A long-term start-up capital provided to new entrepreneurs

7. The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in news, are used in relation to

(a) banking operations

(b) communication networking

(d) supply and demand of agricultural products

Answer:

(a) banking operations

8. What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?

It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
It enables the beneficiaries in the rural areas to make deposits and withdrawals.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer:

(c) Both 1 and 2

9. In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

To enable the Central Bank to control the amount of advances the banks can create
To make the people’s deposits with banks safe and liquid
To prevent the commercial banks from making excessive profits
To force the banks to have sufficient vault-cash to meet their day-to-day requirements

Select the correct answer using the code given below.

(a) 1 only

(b) 1 and 2 only

(d) 1, 2, 3 and 4

Answer:

(a) 1 only

10. The sales tax you pay while purchasing a toothpaste is a

(a) tax imposed by the Central Government

(b) tax imposed by the Central Government but collected by the State Government

(d) tax imposed and collected by the State Government

Answer:

(d) tax imposed and collected by the State Government

11. With reference to Balance of Payments, which of the following constitutes/ constitute the Current Account?

Balance of trade
Foreign assets
Balance of invisibles
Special Drawing Rights

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3

(d) 1, 2 and 4

Answer:

(c) 1 and 3

12. With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?

Defence expenditure
Interest payments
Salaries and pensions
Subsidies

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) None

Answer:

(c) 1, 2, 3 and 4

2013

1. Disguised unemployment generally means

(a) large number of people remain unemployed

(b) alternative employment is not available

(d) productivity of workers is low

Answer:

(c) marginal productivity of labour is zero

2. Which one of the following groups of items is included in India’s foreign-exchange reserves?

(a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries

(b) Foreign-currency assets, gold holdings of the RBI and SDRs

(d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank

Answer:

(b) Foreign-currency assets, gold holdings of the RBI and SDRs

3. An increase in the Bank Rate generally indicates that the

(a) Market rate of interest is likely to fall

(b) Central Bank is no longer making loans to commercial banks

(d) Central Bank is following a tight money policy

Answer:

(d) Central Bank is following a tight money policy

4. In India, deficit financing is used for raising resources for

(a) Economic development

(b) Redemption of public debt

(d) Reducing the foreign debt

Answer:

(a) Economic development

5. Priority Sector Lending by banks in India constitutes the lending to

(a) agriculture

(b) micro and small enterprises

(d) All of the above

Answer:

(d) All of the above

6. A rise in general level of prices may be caused by

an increase in the money supply
a decrease in the aggregate level of output
an increase in the effective demand

Select the correct answer using the codes given below.

(a) 1 only

(b) 1 and 2 only

(d) 1, 2 and 3

Answer:

(d) 1, 2 and 3

7. Which one of the following is likely to be the most inflationary in its effect?

(a) Repayment of public debt

(b) Borrowing from the public to finance a budget deficit

(d) Creating new money to finance a budget deficit

Answer:

(d) Creating new money to finance a budget deficit

8. Supply of money remaining the same when there is an increase in demand for money, there will be

(a) a fall in the level of prices

(b) an increase in the rate of interest

(d) an increase in the level of income and employment

Answer:

(b) an increase in the rate of interest

9. Which of the following grants/grant direct credit assistance to rural households?

Regional Rural Banks
National Bank for Agriculture and Rural Development
Land Development Banks

Select the correct answer using below.

(a) 1 and 2 only

(b) 1 only

(d) 1, 2 and 3

Answer:

(c) 1 and 3 only

10. Consider the following statements:

Inflation benefits the debtors.
Inflation benefits the bondholders.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer:

(a) 1 only

11. Consider the following liquid assets:

Demand deposits with the banks
Time deposits with the banks
Savings deposits with the banks
Currency

The correct sequence of these assets in the decreasing order of liquidity is

(a) 1-4-3-2

(b) 4-3-2-1

(d) 4-1-3-2

Answer:

(d) 4-1-3-2

12. The balance of payments of a country is a systematic record of

(a) All import and export transactions of a country during a given period of time, normally a year

(b) Goods exported from a country during a year

(d) Capital movements from one country to another

Answer:

(c) Economic transaction between the government of one country to another

13. The Reserve Bank of India regulates the commercial banks in matters of

Liquidity of assets
Branch expansion
Merger of banks
Winding-up of banks

Select the correct answer using the codes given below:

(a) 1 and 4 only

(b) 2, 3 and 4 only

(d) 1, 2, 3 and 4

Answer:

(d) 1, 2, 3 and 4

14. Which of the following constitute Capital Account?

Foreign Loans
Foreign Direct Investment
Private Remittances
Portfolio Investment

Select the correct answer using the codes given below.

(a) 1, 2 and 3

(b) 1, 2 and 4

(d) 1, 3 and 4

Answer:

(b) 1, 2 and 4

15. In the context of Indian economy, ‘Open Market Operations’ refers to

(a) borrowing by scheduled banks from the RBI

(b) lending by commercial banks to industry and trade

(d) None of the above

Answer:

(c) purchase and sale of government securities by the RBI

16. The national income of a country for a given period is equal to the

(a) total value of goods and services produced by the nationals

(b) sum of total expenditure

(d) money value of final goods and services produced

Answer:

(a) total value of goods and services produced by the nationals

17. To obtain full benefits of demographic dividend, what should India do?

(a) Promoting skill development

(b) Introducing more social security schemes

(d) Privatization of higher education

Answer:

(a) Promoting skill development

18. Economic growth in country X will occur if

(a) there is technical progress in the world economy

(b) there is population growth in X

(d) the volume of trade grows in the world economy

Answer:

(c) there is capital formation in X

2012

1. The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers which of the following?

Deprivation of education, health, assets and services at household level
Purchasing power parity at national level
Extent of budget deficit and GDP growth rate at national level

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Answer:

(a) 1 only

2. Consider the following specific stages of demographic transition associated with economic development

Low birthrate with low death rate
High birthrate with high death rate
High birthrate with low death rate

Select the correct order of the above stages using the codes given below:

(a) 1, 2, 3

(b) 2, 1, 3

(d) 3, 2, 1

Answer:

(c) 2, 3, 1

3. Which of the following can aid in furthering the Government’s objective of inclusive growth?

Promoting Self-Help Groups
Promoting Micro, Small and Medium Enterprises
Implementing the Right to Education Act

Select the correct answer using the codes given below:

(a) 1 only

(b) 1 and 2 only

(d) 1, 2 and 3

Answer:

(d) 1, 2 and 3

4. With reference to National Rural Health Mission, which of the following are the jobs of ‘ASHA’, a trained community health worker?

Accompanying women to the health facility for antenatal care checkup
Using pregnancy test kits for early detection of pregnancy
Providing information on nutrition and immunization
Conducting the delivery of baby

Select he correct answer using the codes given below:

(a) 1, 2 and 3 only

(b) 2 and 4 only

(d) 1, 2, 3 and 4

Answer:

(a) 1, 2 and 3 only

5. The endeavour of ‘Janani Suraksha Yojana’ Programme is

to promote institutional deliveries
to provide monetary assistance to the mother to meet the cost of delivery.
to provide for wage loss due to pregnancy and confinement

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(d) 1, 2 and 3

Answer:

(a) 1 and 2 only

6. How does the National Rural Livelihood Mission seek to improve livelihood options of rural poor?

By setting up a large number of new manufacturing industries and agribusiness centres in rural areas
By strengthening ‘self-help groups’ and providing skill development
By supplying seeds, fertilizers, diesel pump-sets and micro-irrigation equipment free of cost to farmers

Select the correct answer using the codes given below:

(a) 1 and 2 only

(b) 2 only

(d) 1, 2 and 3

Answer:

(b) 2 only

7. Consider the following:

Hotels and restaurants
Motor transport undertakings
Newspaper establishments
Private medical institutions

The employees of which of the above can have the `Social Security’ coverage under Employees’ State Insurance Scheme?

(a) 1, 2 and 3 only

(b) 4 only

(d) 1, 2, 3 and 4

Answer:

(d) 1, 2, 3 and 4

8. How do District Rural Development Agencies (DRDAs) help in the reduction of rural poverty in India?

DRDAs act as Panchayati Raj Institutions in certain Specified backward regions of the country.
DRDAs undertake area-specific scientific study of the causes of poverty and malnutrition and prepare detailed remedial measures.
DRDAs secure inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programmes.
DRDAs watch over and ensure effective utilization of the funds intended for anti-poverty programmes

Which of the statements given above is/are correct?

(a) 1, 2 and 3 only

(b) 3 and 4 only

(d) 1, 2, 3 and 4

Answer:

(a) 1, 2 and 3 only

9. The Reserve Bank of India (RBI) acts as a bankers’ bank.

This would imply which of the following?

Other banks retain their deposits with the RBI.
The RBI lends funds to the commercial banks in times of need.
The RBI advises the commercial banks on monetary matters.

Select the correct answer using the codes given below:

(a) 2, and 3 only

(b) 1 and 2 only

(d) 1, 2 and 3

Answer:

(b) 1 and 2 only

10. Under which of the following circumstances may ‘capital gains arise?

When there is an increase in the sales of a product
When there is a natural increase in the value of the property owned
When you purchase a painting and there is a growth in its value due to increase in its popularity

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Answer:

(b) 2 and 3 only

11. Which of the following measures would result in an increase in the money supply in the economy?

Purchase of government securities from the public by the Central Bank
Deposit of currency in commercial banks by the public
Borrowing by the government from the Central Bank
Sale of government securities to the public by the Central Bank

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 and 4 only

(d) 2, 3 and 4

Answer:

(c) 1 and 3

12. Consider the following statements: The price of any currency in international decided by the

World Bank
Demand for goods/services provided by the country concerned
Stability of the government of the concerned country
Economic potential of the country in question

Which of the statements given above are correct?

(a) 1, 2, 3 and 4

(b) 2 and 3 only

(d) 1 and 4 only

Answer:

(b) 2 and 3 only

13. The basic aim of Lead Bank Scheme is that

(a) big banks should try to open offices in each district

(b) there should be stiff competition among the various nationalized banks

(d) all the banks should make intensive efforts to mobilize deposits

Answer:

(c) individual banks should adopt particular districts for intensive development

14. Which of the following can be said to be essentially the parts of ‘Inclusive Governance”?

Permitting the Non-Banking Financial Companies to do banking
Establishing effective District Planning Committees in all the districts
Increasing the government spending on public health
Strengthening the Mid-day Meal Scheme

Select the correct answer using the codes given below:

(a) 1 and 2 only

(b) 3 and 4 only

(d) 1, 2, 3 and 4

Answer:

(d) 1, 2, 3 and 4

15. Which of the following would include Foreign Direct Investment in India?

Subsidiaries of foreign companies in India
Majority foreign equity holding in Indian companies
Companies exclusively financed by foreign companies
Portfolio investment

Select the correct answer using the codes given below:

(a) 1, 2, 3 and 4

(b) 2 and 4 only

(d) 1, 2 and 3 only

Answer:

(d) 1, 2 and 3 only

16. Consider the following statements:

The price of any currency in international market is decided by the

World Bank
Demand for goods/services provided by the country concerned
Stability of the government of the concerned country
Economic potential of the country in question.

Select the correct answer using the codes below:

(a) 1, 2, 3 and 4 are correct

(b) 2 and 3 are correct

(d) 1 and 4 are correct

Answer:

(b) 2 and 3 are correct

17. In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following are among those Eight Core Industries?

Cement
Fertilizers
Natural Gas
Refinery products
Textiles

Select the correct answer using the codes given below

(a) 1 and 5 only

(b) 2, 3 and 4 only

(d) 1, 2, 3, 4 and 5

Answer:

(d) 1, 2, 3, 4 and 5

18. What is/are the recent policy initiative(s) of Government of India to promote the growth of manufacturing sector?

Setting up of National Investment and Manufacturing Zones
Providing the benefit of ‘single window clearance’
Establishing the Technology Acquisition and Development Fund.

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Answer:

(d) 1, 2 and 3

2011

1. In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities?

(a) Commercial Banks

(b) Cooperative Banks

(d) Microfinance Institutions

Answer:

(a) Commercial Banks

2. Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?

The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt.
The Government no longer intends to retain the management control of the CPSEs.

Which of the statements given above is/ are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer:

(d) Neither 1 nor 2

3. Regarding the International Monetary Fund, which one of the following statements is correct?

(a) It can grant loans to any country

(b) It can grant loans to only developed countries

(d) It can grant loans to the central bank of a country

Answer:

(c) It grants loans to only member countries

4. Consider the following actions which the Government can take:

Devaluing the domestic currency.
Reduction in the export subsidy.
Adopting suitable policies which attract greater FDI and more funds from FIls.

Which, of the above action/actions can help in reducing the current account deficit?

(a) 1 and 2

(b) 2 and 3

(d) 1 and 3

Answer:

(d) 1 and 3

5. Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two?

(a) FII helps bring better management skills and technology, while FDI only brings in capital

(b) FII helps in increasing capital availability in general, while FDI only targets specific sectors

(d) FII is considered to be more stable than FDI

Answer:

(b) FII helps in increasing capital availability in general, while FDI only targets specific sectors

6. In terms of economy, the visit by foreign nationals to witness the XIX Common Wealth Games in India amounted to

(a) Export

(b) Import

(d) Consumption

Answer:

(a) Export

7. A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is “base effect”?

(a) It is the impact of drastic deficiency in supply due to failure of crops

(b) It is the impact of the surge in demand due to rapid economic growth

(d) None of the statements (a), (b) and (c) given above is correct in this context

Answer:

(c) It is the impact of the price levels of previous year on the calculation of inflation rate

8. Why is the offering of “teaser loans” by commercial banks a cause of economic concern?

The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future,
In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 or 2

Answer:

(a) 1 only

9. The lowering of Bank Rate by the Reserve Bank of India leads to

(a) More liquidity in the market

(b) Less liquidity in the market

(d) Mobilization of more deposits by commercial banks

Answer:

(a) More liquidity in the market

10. Which one of the following statements appropriately describes the “fiscal stimulus”?

(a) It is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth

(b) It is an intense affirmative action of the Government to boost economic activity in the country

(c) It is Government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation

(d) It is an extreme affirmative action by the Government to pursue its policy of financial, inclusion

Answer:

(b) It is an intense affirmative action of the Government to boost economic activity in the country

11. In the context of Indian economy, consider the following statements:

The growth rate of GDP has steadily increased in the last five years.
The growth rate in per capita income has steadily increased in the last five years.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer:

(d) Neither 1 nor 2

12. Among the following who are eligible to benefit from the “Mahatma Gandhi National Rural Employment Guarantee Act”?

(a) Adult members of only the scheduled caste and scheduled tribe households

(b) Adult members of below poverty line (BPL) households

(d) Adult members of any household

Answer:

(d) Adult members of any household

13. Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/services rendered under microfinance is/are:

1. Credit facilities
2. Savings facilities
3. Insurance facilities
4. Fund Transfer facilities
Select the correct answer using the codes given below the lists:

(a) 1 only
(b) 1 and 4 only
(c) 2 and 3 only
(d) 1, 2 ,3 and 4

Answer:

(d) 1, 2 ,3 and 4

14. With what purpose is the Government of India promoting the concept of “Mega Food Parks”?

To provide good infrastructure facilities for the food processing industry.
To increase the processing of perishable items and reduce wastage.
To provide emerging and eco-friendly food processing technologies to entrepreneurs.

Select the correct answer using the codes given below:

(a) 1 only

(b) 1 and 2 only

(d) 1, 2 and 3

Answer:

(d) 1, 2 and 3

15. A “closed economy” is an economy in which

(a) the money supply is fully controlled

(b) deficit financing takes place

(d) neither exports nor imports take place

Answer:

(d) neither exports nor imports take place

16. India has experienced persistent and high food inflation in the recent past. What could be the reasons?

Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30%.
As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
The food supply chain has structural constraints.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(d) 1, 2, and 3

Answer:

(b) 2 and 3 only

17. Which one of the following is not a feature of “Value Added Tax”?

(a) It is a multi point destination based system of taxation.

(b) It is a tax levied on value addition at each stage of transaction in the production-distribution chain.

(d) It is basically subject of the central government and state government are merely facilitator for its successful implementation.

Answer:

(d) It is basically subject of the central government and state government are merely facilitator for its successful implementation.

18. Economic growth is usually coupled with?

(a) Deflation

(b) Inflation

(d) Hyperinflation

Answer:

(b) Inflation

19. Which of the following can aid in furthering the Government’s objective
of inclusive growth?
1. Promoting Self-Help Groups
2. Promoting Micro, Small and Medium Enterprises.
3. Implementing the Right to Education Act
Select the correct answer using the codes given below:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer:

(d) 1, 2 and 3

20. With reference to “Aam Admi Bima Yojana”, consider the following statements:
1. The member insured under the scheme must be the head of the family or an earning member of the family in a rural landless household.
2. The member insured must be in the age group of 30 to 65 years.
3. There is a provision for free scholarship for up to two children of the insured who are studying between classes 9 and 12.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer:

(c) 1 and 3 only

21. India is regarded as a country with a “Demographic Dividend”. This is due to
(a) Its high population in the age group below 15 years
(b) Its high population in the group of 15-64 years
(c) Its high population in the age group above 65 years
(d) Its high total population

Answer:

(b) Its high population in the group of 15-64 years

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Economy Preliminary Previous year Questions – UPSC Prelims (2011-2023) Part 3

Economy UPSC Preliminary Question and Answer: Part 3 (2014-2011)

UPSC Economy Preliminary Question with Answers (2023-2019) Part 1

UPSC Economy Preliminary Question with Answers (2018-2015) Part 2

UPSC Economy Preliminary Question with Answers (2014-2011) Part 3

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