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Money & Banking — UPSC Prelims Economy previous year questions — page 2

195 solved previous year questions on Money & Banking, papers from 1995 to 2023, drawn from UPSC CSE Prelims, UPPCS, UPSC CDS. Each carries the printed answer key and the explanation from the source compilation.

1. #41UPPCS 2008
   'Financial Inclusion' can be encouraged
   • Aby issuing a 'specific letter of credit' to the deserving beneficiaries
   • Bby providing banking services to people of lower income group with 'zero' or 'minimum balance'
   • Cby providing financial services to low income group
   • Dby all of the above
   Answer: (D) by all of the above
   Explanation

   Option dis the correct the options can be considered as ways to inclusion, as explained below: By issuing a 'specific letter of credit' to the deserving beneficiaries: A letter of credit is a financial instrument that guarantees the payment of a specified amount of money by a bank on behalf of its client to a seller or exporter, if certain conditions are met. A letter of credit can help the beneficiaries, especially small and medium enterprises (SMEs), to access trade finance and expand their business opportunities. By providing banking services to people of lower income group with 'zero' or 'minimum balance': One of the barriers to financial inclusion is the lack of access to basic banking services, such as savings accounts, payments, transfers, etc., due to high fees, minimum balance requirements, or documentation hurdles. By providing banking services to people of lower income group w

2. #42UPPCS 2008
   Which one of the following is not a function of Reserve Bank of India?
   • ACredit control
   • BAs apex body of Scheduled Commercial Banks
   • CFormulation of monetary policy
   • DCredit creation
   Answer: (D) Credit creation
   Explanation

   Option dis the correct creation is not a function of Reserve Bank of credit creation is the process by which create money by lending to their customers deposits. The Reserve Bank of India does credit directly, but it regulates the credit creation banks through its monetary policy tools repo rate, reverse repo rate, cash reserve ratio, ratio, etc. The Reserve Bank of India functions of credit control, apex body of banks and formulation of monetary others

3. #43UPPCS 2008
   The rate at which banks lend to Reserve Bank of India is known as
   • ABank Rate
   • BRepo Rate
   • CReverse Repo Rate
   • DInterest Rate
   Answer: (C) Reverse Repo Rate
   Explanation

   Option c is the correct Repo Rate is the rate at which banks deposit funds with the Reserve Bank of India. It is a tool used by the central bank to control liquidity banking system. When the RBI increases the reverse it incentivizes banks to park more funds with the reducing the money supply in the economy. On hand, when the RBI decrea ses the reverse repo encourages banks to lend more to the RBI, leading to in the money supply

4. #44UPPCS 2007
   Which anwng the following is an asset a Commercial Bank? Government of India. 1.32. The term 'plastic money' applies to paper thread
   • ACredit to farmers
   • BDeposit of public
   • CBorrowings from R.B.I
   • DDemand deposits of Industries 13 l
   Answer: (A) Credit to farmers
   Explanation

   Option a is the correct to farmers refers to the loans and advances given banks to the agricultural sector, which loans, term loans, investment credit, etc. Cl'edit is an asset for a commercial bank, because the amount of money that the bank expects from the borrowers in the future, along with interest Important Tips Deposit of public is a liability for a commercial bank, because it represents the amount of money that the bank owes to its customers and has to repay on demand or at maturity. Borrowings from RBI are a liability for a commercial bank, because they represent the amount of money that the bank has to repay to the RBI along with interest. Demand deposits of Industries are a liability for a commercial bank, because they represent the amount of money that the bank owes to its customers and has to repay on demand

5. #45UPPCS 2005
   Which one of the following is not the function of Regional Rural Banks?
   • ATo provide credit to small and marginal farmers
   • BTo provide credit to common people in rural areas
   • CTo supplement Scheduled Cornmercial Banks
   • DTo take over the functions of Agricultural Refinance Corporation of India
   Answer: (D) To take over the functions of Agricultural Refinance Corporation of India
   Explanation

   Option d is the correct Rural Banks (RRBs) in India are the banks that conduct banking activities for areas at the state level. The various functions of regional Rural Banks are as follows Providing banking facilities to rural and semi -urban areas. To provide credit to small and marginal farmers To provide credit to common people in rural areas. To supplement Scheduled Commercial Banks Carrying out government operations like disbursement of wages of workers, distribution of pension etc. The agricultural credit function s of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC) was transferred to

6. #46UPPCS 2004
   Central Cooperative Banks work at
   • ADistrict level
   • BState level
   • CNational level
   • DBlock level ]
   Answer: (A) District level
   Explanation

   Option a is the correct Cooperative Banks (CCBs) are cooperatives that and managed in accordance with the Act. They provide financial services to rural populations across the country. They work level. Important Tips Central Cooperative Banks (CCBs They are supervised by the State cooperative department and are regulated by the Reserve Bank of India. They provide services such as deposits, loans, and other banking services to their members. They also promote and finance agricultural activities, such as crop insurance and input supply services. The working capital for the central cooperative banks is primarily raised from individual funds, deposits, borrowings etc

7. #47UPPCS 2004
   Consider the following statements: 1. Gorewala Committee's recommendation led to the establishment of State Bank of India 2. Six Commercial Banks were nationalized on 1980.Which one of the statements given above is/ are correct?
   • A1 only
   • B2 only
   • CBoth 1 and 2
   • DNeither 1 nor 2
   Answer: (C) Both 1 and 2
   Explanation

   Option c is the correct 1 is correct: SBI (State Bank of India) on the advice of the Gorwala committee. A committee lead by A. D. nationalization of banks and renaming the Imperial India like State Bank of 2 is correct: The second phase of banks took place on April 15, 1980, when six commercial banks were nationalized Banking Companies (Acqu isition and Transfer Ordinance, 1980. The six banks were: Corporation Bank, New Bank of India, Oriental Commerce, Punjab and Sind Bank, and Vijaya Bank

8. #48State PCS 2002
   Dist i., t Credit Planning is done
   • AUnder the Lead bank
   • BUnder the NABARD
   • CUnder the District Magistrate
   • DUnder the SBI
   Answer: (A) Under the Lead bank
   Explanation

   Option a is the correct answer. District Credit Planning is done under the Lead Bank Scheme, which is a mechanism to coordinate the efforts of banks, government agencies and other stakeholders for inclusive development and credit flow to priority sectors in rural areas Und.er this. scheme, each district is assigned to a lead bank, which is responsible for preparing the district credit plan in consultation with other banks and stakeholders. The district credit plan reflects the potential and the credit needs of various sectors and, activities in the district, and serves as a guide for banks to achieve their targets

9. #49State PCS 2015
   Financial sector reforms in India consist of
   • ALowering down of CRR and SLR
   • BEntry of private firms in insurance sector
   • CDeregulation of interest rates
   • DAll of the above
   Answer: (D) All of the above
   Explanation

   Option d is the correct the above measures are part of the financial in India that have transformed the of the finance sector from an to a competitive market-based system. Lowering down of CRR and SLR: The cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) are the regulatory requirements imposed by the Reserve Bank of India (RBI) on the commercial banks to maintain a certain percentage of their deposits as cash reserves and liquid assets respectively. These ratios affect the money supply and credit creation capacity of the banks. Entry of private firms in insurance sector: The insurance sector was dominated by public sector enterprises such as Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) until 1999, when the Insurance Regulatory and Development Authority (IRDA) was established to regulate and develop the insurance industry. Deregulation of intere

10. #50State PCS 2015
    Consider the following s 1. Bank Rate is the ntte of interest which RBI charges its on their short term borrmving. 2. Repo Rate is th e rate of interest which RBI charges its nts on their long-termWhich of the statements given above is / are incorrect?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct I is incorrect: Bank Rate is the rate of RBI charges its clients on their long-term short-term 2 is incorrect: Repo Rate is the rate of RBI charges its clients on their short-term long-term borrowing. Ii

11. #51Previous year
    The Committee on Sector Assessment is Co-chaired by whom? [M.P. P.C.S. (Pre) 2020)
    • AGovernor of Reserve Bank of India and Finance Minister of India
    • BDeputy Governor of Reserve Bank of India and Finance Secretary, Government of India
    • CGovernor and Deputy Governor of Reserve Bank of India
    • DPrime Minister of India and Governor of Reserve Bank of India
    Answer: (B) Deputy Governor of Reserve Bank of India and Finance Secretary, Government of India
    Explanation

    Option b is the correct answer. The Committee on Financial Sector Assessment (CFSA) was constituted by the Government of India in consultation with the Reserve Bank of India in September 2006 to undertake a comprehensive assessment of the Indian financial sector. focusing upon stability and development. The CFSA was co-chaired by Dr. Rakesh Mohan, Deputy Governor, Reserve Bank of India and Dr. D. Subbarao, Finance Secretary, Government of Deputy Governor of Reserve Bank of India Secretary, Government of India were the the CFSA that conducted a self-assessment of the sector in 2009. Important Tips Before 2020, the accounting year of the Reserve Bank of India (RBI) was July-June. This means that the RBI's financial statements were prepared for the period from July l to June 30 of the next year. The RBI had been following this accounting year from 1940 till 2020

12. #52Previous year
    Reserve Bank of India issues currency notes against which of the following? [. (Pre) 2012)
    • AGold
    • BForeign security
    • CGovt. of India security
    • DAll of the above
    Answer: (D) All of the above
    Explanation

    Option d is the correct Bank of India issues currency notes against security, and Government of India security. the Minimum Re serve System, the RBI has to keep reserve of Rs 200 crore comprising of gold gold bullion and foreign currencies. Out this value of gold to be maintained is Rs 115 crore. The also issue currency notes against Government of which are debt instruments issued by the to borrow money from the public. The RBI or sell these securities in the op en market to regulate supply in the economy

13. #53State PCS 1999
    Land Development Bank provides loan to farmers for
    • AShort term
    • BMedium term
    • CLong term
    • DOnly for 1 and improvement
    Answer: (C) Long term
    Explanation

    Option c is the correct development loan refers to the financial assistance by to farmers for carrying out various farm like land re clamation, soil development, development works, soil water conservation farm activities that help farmers earn income banks provide long term loans to banks provide loans for a period of 15-20 years at rate of interest for land reform. Important Tips Land Development Bank was earlier known as Land Mortgage Bank. They arc cooperative institutions registered under Cooperative Societies Act. Objective: To provide long-term lo ans facility to farmers to borrow equipment such as tractors, pump sets, etc. The first Land Mortgage Bank was set up in Jhind, Punjab in 1920. But its real beginning was marked by the establishment in 1929 in Madras

14. #54State PCS 1996
    Currency expansion can be best described
    • AHigher prices
    • BIncrease in price coordinates
    • CIncrease in purchasing power of currency
    • DIncrease in prices of specific commodities
    Answer: (A) Higher prices
    Explanation

    Option a is the correct expansion is a type of expansionary that aims to increase the rate of monetary stimulate the growth of a domestic economy. The the money supply, lowers interest rates, demand, which boosts economic growth. lowers the value of the currency, thereby exchange increase in the money supply leads to an increase levels, which means that the general level of goods and services rises. Therefore, Higher Prices most appropriate answer

15. #55Previous year
    Structure of Co-operative credit societies is: [R.A.S./R.T.S. (Pre) 1994)
    • ASingle tiered
    • BDouble tiered
    • CThree tiered
    • DFour tiered
    Answer: (C) Three tiered
    Explanation

    Option c is the correct credit societies are member-owned democratically controlled by its members Credit Institutions in India can be classified a three-tier structure Primary Credit Societies at the bottom Central Co-operative Bank at the middle State Co-operative Bank at the top Important Tips Primary Credit Co-operative Society Banks: It is a group of borrowers non-borrowers who live in a definite area. There is no restriction on who can join as a resident. Additionally, they show interest and help in each other's business affairs. Central Credit Co-operative Society Banks It is a group of individuals whose participation in the central co-operative bank is limited to only the primary societies. It is also referred to as a banking union. People can now become members of almost every Central Co-operative Banks. State Credit Co-operative Society Banks It is created to obtain credit from

16. #56Previous year
    Arrange the following in chronological order:[Chhattisgarh P.C.S. (Pre) 2017} 1. Nationalization of 14 major banks 2. Nationalization of SBI 3. Nationalization of RBI 4. Nationalization of LIC [ ] Codes
    • A3, 2, 4, 1
    • B2, 3, 4, 1
    • C3, 4, 2, 1
    • D4, 3, 2, 1 (e) None of these
    Answer: (A) 3, 2, 4, 1
    Explanation

    Option a is the correct answer. Nationalization of RBI: The Reserve Bank of India (RBI) was established in 1935 as a private bank under the RBI Act, 1934. It was nationalized in 1949 under the RBI (Transfer of Public Ownership) Act, 1948. Nationalization of SBI: The State Bank of India (SBI) was established in 1955 as a successor to the Imperial Bank of India, which was a private bank formed in 1921 by merging three presidency banks. The SBI was nationalized in 1955 under the SBI Act, 1955. Nationalization of LIC: The Life Insurance Corporation of India (LIC) was established in 1956 as a state-owned corporation under the LIC Act, 1956. The LIC was formed by nationalizing 245 private life insurance companies and consolidating them into one entity Nationalization of 14 major banks: The first phase of nationalization of banks took place in 1969 under the leadership of Prime Minister Indira

17. #57UPSC CDS 2023
    Which of the following policies help to raise interest rates unambiguously and thereby lead to appreciation of currency?
    • AExpansionary fiscal and monetary policy
    • BContractionary fiscal and monetary policy
    • CContractionary fiscal policy and expansionary monetary policy
    • DContractionary monetary policy and expansionary fiscal policy
    Answer: (D) Contractionary monetary policy and expansionary fiscal policy
    Explanation

    Option dis the correct monetary policy: When the central a contractionary monetary policy, it cost of borrowing and reduces the money supply economy. Higher interest rates make borrowing which discourages spending and fiscal policy: It leads to increased to finance the deficit. This increased compete with private borrowing, leading to rates in the combination of contractionary monetary policy fiscal policy can work together to raise unambiguously

18. #58UPSC CDS 2022
    Which one of the following statements about Non-Banking Financial Companies (NBFCs) is not correct?
    • ANBFCs cannot accept demand deposits
    • BNBFCs cannot give loans
    • CNBFCs cannot issue cheques drawn on themselves
    • DNBFCs cannot offer deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation
    Answer: (B) NBFCs cannot give loans
    Explanation

    Option b is the correct b is incorrect: NBFCs, or Non-Banking are financial institutions that provide a of financial services, including loans, to businesses. One of the primary functions of NBFCs lend money to borrowers. They are engaged in to banks but do not hold a banking can accept deposits, issue cheques, and offer services, including lending

19. #59UPSC CDS 2022
    Consider the following statements regarding e-RUPI prepaid digital vouchers:l. The maximum amount of e-RUPI is rupees one lakh. 2. Beneficiaries can receive e-RUPI without having a bank account. 3. To receive e-RUPI on mobile phones, beneficiaries need a smart phone with an Internet connection.Which of the statements given above is/ are correct?
    • A1 and 2
    • B3 only
    • C1 and 3
    • D2 only
    Answer: (A) 1 and 2
    Explanation

    Option a is the correct is a cashless and contactless method for It is a Quick Response (QR) code or SMS string based e-voucher, which is delivered to the mobile of The users will be able to redeem the voucher a card, digital payments app, or internet It connects the sponsors of the services with and service providers in a digital mode physical 1 is correct: The RBI has hiked the cap on digital vouchers from Rs I 0,000 to Rs 1 lakh the instrument for multiple 2 is correct: Beneficiaries can receive without having a bank 3 is incorrect: To receive e-RUPI on beneficiaries do not need a smart phone with connection

20. #60UPSC CDS 2022
    Which one of the following forms of money supply is considered as the most widely used in the Indian monetary system?
    • AMl
    • BM2
    • CM3
    • DM4
    Answer: (C) M3
    Explanation

    Option c is the correct total stock of money in circulation among the a particular point of time is called money supply. figures for four alternative measures of viz. Ml, M2, M3 and is considered as the most widely used measure of in India because it covers the largest set of that are available and commonly used by the transactions and savings. M3 includes not only demand deposits, but also time deposits, deposits, and borrowings from non-depository by the banking system. M3 is also known money and it reflects the liquidity and of the economy. Important Tips Ml CU (currency (notes plus coins) ) DD (net demand deposits held by commercial banks) M2 Ml Savings deposits with Post Office savings banks M3 Ml Net time deposits of commercial banks M4 M3 Total deposits with Post Office savings organizations (excluding National Savings Certificates)

21. #61UPSC CDS 2022
    Which one of the following is considered as an agency function of commercial banks in India?
    • AAcceptance of deposits
    • BInvestment of surplus funds
    • CAcceptance of income tax payments
    • DProviding overdraft facilities
    Answer: (A) Acceptance of deposits
    Explanation

    Option a is the correct refers to a financial institution where we deposit withdraw our money in case of emergency, and The banker is under obligation to repay the money depositor as and when demanded by the depositor. The depositor can withdraw his money through cheques, drafts, etc. The Agency functions can be divided under the following heads: Accepting deposits - Commercial banks accept deposits from their customers in the form of saving, fixed, and current deposits

22. #62Previous year
    The monetary policy in. India uses which of the following tools? 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenueSelect the correct answer using the codes given below: [CDS 2017 (II))
    • A1 and 2
    • B1 and 4
    • C2 and 3
    • DAll of the above
    Answer: (A) 1 and 2
    Explanation

    Option a is the correct monetary policy in India uses the tools of bank rate market operations. The bank rate refers to the rate the central bank lends money to ccmmerda.l the cost of borrowing. Open market buying and selling government securities to money supply and interest rates in the economy. Important Tips Apart from the Bank Rate and Open Market Operations, there are few other monetary policy tools in India: Repo Rate- The rate at which the central bank (Reserve Bank of India) lends money to commercial banks, influencing borrowing costs and liquid ity in the economy. Reverse Repo Rate- The rate at which the central bank borrows money from commercial banks, used to manage excess liquidity in the banking system. Cash Reserve Ratio The percentage of deposits that commercial banks must keep as reserves with the central bank, controlling the money supply. Statutory Liquidity Ratio The

23. #63UPSC CDS 2016
    Which of the following with regard 'to the term is correct?
    • AThe net balance of money a bank has in its chest at the end of the day's business
    • BThe ratio of bank's total deposits and total liabilities
    • CA panic situation when the deposit holders start withdrawing cash from the banks
    • DThe period in which a bank creates highest credit in the market
    Answer: (C) A panic situation when the deposit holders start withdrawing cash from the banks
    Explanation

    Option c is the correct "bank run" refers to a situation when a large number lose confidence in a bank's stability and withdraw their deposits in cash. It usually occurs concerns about the bank's financial health or its solvency. When depositors fear that the bank be able to fulfill their withdrawal requests or that are at risk, they may try to withdraw their causing a panic situation

24. #64UPSC CSE Prelims 2023
    the following 1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing rnicrocredit to the financially deprived.. 2. In an SHG, all members of a group take responsibility for a loan that an individual member takes. ployment and various Government 3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.How many of the above statements are correct? correct and Statement-II is the correct explanation for Statement-I correct and Statement-is not the correct explanation for Statement-I incorrect is correct With to casual workers employed in India, consider the foilowing statements
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the coned refers to the actions taken by a central bank the impact of its foreign exchange operations on money supply. a central bank intervenes foreign exchange market by buying or selling it affects the domestic money supply. Operations (OMO) is one of the primary tools central banks, including the Re serve Bank of India conduct monetary policy. In OMO, the central bank sells government securities (bonds) in the open influence the liquidity in the economy. the OMO, it impacts the money supply in the eco the RBI buys government securities, it injects money system, increasing the money supply. To prevent of money from creating inflationary RBI engages in sterilization. Sterilization involves sale or purchase of other securities, bills, to offset the impact of the initial open Important Tips Oversight of settlement payment systems refers to the role of the Reserve Bank of Indi

25. #65UPSC CSE Prelims 2002
    'World Development Report' is an annual publication of
    • AUnited Nations Development Programme
    • BInternational Bank for Reconstruction and Development
    • CWorld Trade Organisation
    • DInternational Monetary Fund
    Answer: (A) United Nations Development Programme
    Explanation

    Option a is the correct Hussain Committee (1997) recommended total and desired replacing policy of reservation policy of promotion and strengthening of small-scale Important Tips The Abid Hussain Committee was an expert committee on small enterprises that was constituted in December 1995 and submitted its report in January 1997. Some of the major recommendations of the Abid Hussain Committee are: Enactment of a separate law for small enterprises, including service enterprises in the SSI fold and enhancing the investment limit for SSI units Promotion of technology development through various measures such as setting up of technology development centres, technology development fund, technology information network, etc. Further streamlining of the credit delivery systems by simplifying the procedures, reducing the interest rates, increasing the flow of institutional credit, etc. Dereservati

26. #66UPSC CDS 2017
    Amartya Sen was awarded the Nohel Prize for his contribution to
    • AMonetary Economics
    • BWelfare Economics
    • CEnvironmental Economics
    • DDevelopment Economics
    Answer: (B) Welfare Economics
    Explanation

    Option b is the correct Sen was awarded the Nobel Prize in Economics for his contributions to welfare economics. His focused on the measurement of poverty and he has developed new concepts such as the to well-being. Welfare economics is a economics that studies the welfare of individuals It is concerned with how to measure to achieve economic efficiency, and how to fairly

27. #67UPSC CSE Prelims 2002
    Which one of the following committees recommended the abolition of reservation of items for the small scale sector in industry?
    • AAbid Hussian Committee
    • BNarasimham Committee
    • CNayak Committee
    • DRakesh Mohan Committee
    Answer: (C) Nayak Committee
    Explanation

    Option c is the correct 1 is correct. The IMFC has 24 members, the pool of 187 governors of central banks of The IMFC represents all the m ember countries Fund. The Committee discusses matters of affecting the global economy and also advises on the direction its 2 is correct. The IMFC meets twice a year, Spring and Annual Meetings. A number of including the World Bank, are taking part in meetings as observers

28. #68UPPCS 2017
    Who was the chairman of the committee on revisiting and revitalizing the PPP model of Infrastructure development?
    • ARakesh Mohan
    • BV. Kelkar
    • CArjun Sengupta
    • DBibek Deb Roy
    Answer: (B) V. Kelkar
    Explanation

    Option b is the Vijay Kelkar was the chairman of the committee and revitalizing the Public Private of report to the Finance Mi nistry on November 19) committee was set up in the Union Budget 2015-16 the existing PPP framework and suggest improve its performance. The committee made on various aspects of PPP projects, project identificat ion, preparation ap praisal, imple mentation, monitoring and Important Tips Some of the major recommendations of the Kelkar committee on Public Private Partnership are Establishing a national PPP policy document and a PPP law, if feasible, to provide a cl ear and consistent framework for PPP projects Setting up an independent institution called India to provide support, guidance and best practices for PPP projects Developing a case-based risk allocation formula for various project participants and a generic risk monitoring and evaluation framework Amending

29. #69Previous year
    Consider the following statements about G-20: 1. The G-20 group was originally established as a platform for the Finance Ministers and Central Bank Governors to discuss the international economic and financial issues. 2. Digital public infrastructure is one of India's G-20 priorities.Which of the statements given above is/are correct? [UPSC CSE Pre 2023)
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct 1 is correct: The G20 was founded in the Asian financial crisis as a forum for the and Central Bank Governors to discuss and financial 2 is correct: India is pitching its at G20 as an open-access platform Infrastructure is one of the key priorities G20 Presidency. It is a cross-cutting theme Working Groups including Digital Economy, and Global Partnership for Financial inclusion. Important Tips India first hosted G20 summit in 2002. Members of G20 includes - Canada, United States of America and Mexico (from North America); Argentina and Brazil (from South America}; France, Germany, Italy, Turkey and United Kingdom (from Europe); China, India, Indonesia, Japan, Russia, Saudi Arabia, South Korea (from Asia); South Africa (from Africa); Australia and European Union. The first G20 Leaders' Summit (Head of the State and Government) was held in 2008 following the Lehman

30. #70UPSC CSE Prelims 2012
    Consider the following statement:The price of any currency in international market is decided by the 1. World Bank. 2. Demand for goods/services provided by the country concerned, 3. Stability of the government of the concerned. country. 4. Economic potential of the country in question. KING RSelect the correct answer using the codes given below
    • A1, 2, 3 and 4
    • B2 and 3 only
    • C3 and 4 only
    • D1 and 4 only
    Answer: (C) 3 and 4 only
    Explanation

    Option c is the correct 1 is correct: Process of capital formation savings and effectiveness of financial institutions. and a strong banking system nudge higher capital 2 is correct: Investment is the essential capital formation. Capital assets are generally a The capital assets of an individual or a business real estate, cars, investments (long or other valuable possessions. Important Tips Capital formation: Capital formation is the net accumulation of capital goods, such as equipment, tools, transportation assets, and electricity, during an accounting period for a particular country. Capital formation doesn't happen on its own. It depends on the income of the people living in the country and their capacity to save and spend. Generally, the higher the capital formation of an economy, the faster an economy can grow its aggregate income. To accumulate additional capital, a country needs t

31. #71UPSC CDS 2021
    Exchange rates state the value of on.e currency in terms of other currencies. Which one of the following statements with respect to the exchange rate of is correct?
    • AFloating exchange rates are rates in which the Governments interfere by buying or selling their currencies
    • BFixed exchange rates are rates set by Government decisions and maintained by Government actions
    • CUnder the Bretton Woods System, the exchange rates are floated in terms of rise or fall in price of gold
    • DUnder the classical gold standard, the exchange rates are fixed in terms of the price of the dollar
    Answer: (D) Under the classical gold standard, the exchange rates are fixed in terms of the price of the dollar
    Explanation

    Option d is the correct in India is the act of removing unit of its status as a legal tender. The and the RBI outlined three key objectives to curb black money and corruption hoarding of cash; to prevent counterfeiting notes; and to fight against by cash funding of terrorist groups operating in India the tax base in the country. Other possible demonetization were: to increase savings, lower better economy, curbing anti-social activities, counterfeit currency notes. However, growth rate of G.D.P. was not a stated objective Important Tips Demonetization has occurred three times in India's history, in 1946, 1978, and 2016. The most recent demonetization in 2016 involved invalidating the INR 500 and INR 1000 notes, with the aim of combating black market activity and counterfeit bills

32. #72UPSC CDS 2015
    Under flexible exchange rate system, the exchange rate is determined
    • Apredominantly by market mechanism
    • Bby the Central Bank
    • Cas a weighted index of a group of currencies
    • Dby the World Trade Organization
    Answer: (B) by the Central Bank
    Explanation

    Option b is the correct Uttar Pradesh's Pratappur, District- Deoria India's foremost sugar mill was established, in the year in the absence of any established system of sugarcane farmers had many difficulties. Cane Act, 1934 passed by the Government of the State Government to fix the minimum sugarcane being used by the vacuum pan sugar mills i while controlling any area ] I

33. #73Practice set
    Consider the following statements with reference to the Liquidity trap: 1. It is a situation when expansionary monetary policy does not stimulate the economic growth. 2. Public would not want to purchase bonds during a Liquidity trap situation. 3. Open market operations has no effect on the market interest rates in case of a Liquidity trap. 4. Savings rates are high during Liquidity trap.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (D) All four
    Explanation

    Option d is the correct 1 is correct. Liquidity trap is a situation monetary policy (increase in money not increase the interest rate, income and hence stimulate economic growth. Liquidity trap is the of monetary policy. It is a situation in which the is prepared to hold on to whatever amount of supplied, at a given rate of interest. They do so because fear of adverse events like deflation and war 2 is During a liquidity trap, to avoid bonds and keep their funds in cash is because of the prevailing belief that interest rates rise, which would push bond prices down. bonds have an inverse relationship to interest rates, do not want to hold an asset with a price that to 3 is correct. In case of Liquidity trap, a carried out through open market operations has on either the interest rate, or the level of income. liquidity trap, the monetary policy is powerless to interest 4 is correct. In a l

34. #74Practice set
    Which one of the following statements correctly describes 'Shadow pricing'?
    • AIt is a practice of assigning a monetary value to an item, commodity, or service that is ordinarily not bought and sold in the marketplace
    • BIt is a method used to set prices for goods and services before their release in the open market
    • CIt is a process used by companies to estimate the cost of producing a product or service
    • DIt is a pricing strategy used by companies to inflate the price of their products or services above the market rate
    Answer: (A) It is a practice of assigning a monetary value to an item, commodity, or service that is ordinarily not bought and sold in the marketplace
    Explanation

    Option a is the correct pricing is the practice of assigning a to an item, commodity, or service that is bought and sold in any marketplace. is used in many different areas and comes with definition based on the context it is used in. A common context where shadow pricing is applied is that of what economists refer to as societal value. In such a context, shadow prices are utilized to the benefits to society that may be gained from things such as public parks or libraries. Shadow pricing may also be used to estimate costs, as well as benefits, to society. An area where it is frequently seen now is that of climate change. Shadow pricing is used to approximate the unseen costs to society of using carbon-based energy sources. In a business context, shadow pricing is often utilized as part of the decision-making process when a company is considering making a major capital investment

35. #75Practice set
    With reference to the functioning of the different kinds of economic systems, consider the following statements: 1. Great Depression reinforced the belief in the self-correcting quality of the market 2. Market socialism had been suggested in the context of the capitalist economy. 3. World Bank has given a fixed template of the mixed economic model for nations to follow. 4. Mixed Economy has become the most accepted way to organize an economy.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (A) Only one
    Explanation

    Option a is the correct 1 is incorrect: Great Depression was a the belief in the self-correcting quality of the market. aftermath of the Great Depression, Keynes very principles of 'laissez faire' and the nature of 2 is incorrect: Market socialism had in the context of the socialist economy. It who had suggested state intervention in the the capitalist 3 is incorrect: World Bank has not given any template. World Development Report 1999 "Governments play a vital role in development, is no simple set of rules that tells them what to 4 is correct: The emergence of the mixed was able to settle the long-standing debate as to the best way to organize an economy for all times

36. #76Practice set
    In which of the following liquidity trap may occur? 1. When interest rates are very low 2. When consumers expect a fall in prices. 3. When consumers invest in higher yielding bondsSelect the correct answer using the code given below
    • A1 and 2 only
    • B1 and 3 only
    • C2 only
    • D1, 2 and 3
    Answer: (A) 1 and 2 only
    Explanation

    Option a is the correct 1 is correct: Liquidity trap occurs when are zero or during a recession. People are too afraid so they just hold onto the cash. The situation monetary policy ineffective. There would be no interest rates when a country's reserve bank, tries the economy by increasing the money 2 is correct. Another possible reason of Liquidity Trap is expectation of fall in the consumers. If consumers expect a fall in prices the of interest can climb high even though the nominal close to zero. The difficulty is the creation of a interest rate i.e. a rare condition where banks us to borrow us so that the spending inc 3 incorrect: A liquidity trap is when becomes ineffective due to very low interest with consumers who prefer to save rather in higher-yielding bonds or other investments. Consumers avoid investing in higher yielding bonds trap

37. #77Practice set
    With reference to the 'Concept of Depredation', consider the following statements: 1. It is a measure to account for the reduction in value of capital goods due to their wear and tear. 2. Unexpected/sudden destruction of goods are not taken into account while calculating depreciation. 3. In India, the Ministry of Finance decides the rates of depreciation of assets.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct represents how much of an asset's value l is correct: The monetary value of an over time due to use, wear and tear or decrease is measured as depreciation. Depreciation annual allowance for wear and tear of a capital 2 is correct: Depreciation of fixed capital to normal wear and tear and foreseen does nol lake into account unexpected destruction or disuse of capital as can accidents, natural calamities or other such 3 is incorrect: The governments of and announce the rates by which assets depreciate. done in India by the Ministry of Commerce and a list is published, which is used by different sections economy to determine the real levels of depreciations assets

38. #78Practice set
    Which of the following is not the benefit of Treasury Single Account (TSA)?
    • AIt reduces the debt servicing costs
    • BIt helps to plan and implement budget execution in an efficient, transparent, and reliable manner
    • CIt will lower administrative cost of the government for maintaining different bank accounts
    • DIt allows to maintain a higher cash reserve/buffer to meet unexpected fiscal volatility
    Answer: (D) It allows to maintain a higher cash reserve/buffer to meet unexpected fiscal volatility
    Explanation

    Option d is the correct a is correct. A TSA is a unified structure bank accounts that gives a consolidated view of government cash resources. TSA significantly debt servicing b is correct. When the treasury has about cash resources, it can plan and execution in an efficient, transparent, and c is correct. TSA will enable the nmnber of bank accounts which will result in cost for the d is incorrect. A TSA reduces the volatility flows through the treasury, thus allowing it to lower cash reserve/buffer to meet unexpected

39. #79Practice set
    Consider the following statements regarding Public Debt management of India: 1. Public debt Management Cell manages the public debt of central and state governments. 2. State government agencies can never directly borrow funds from external agencies.Which of the statement given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (D) Neither 1 nor 2
    Explanation

    Option d is the correct 1 is incorrect. It is not the Public cell who manages the public debt of central government but the RBI manages 2 is incorrect. As per existing guidelines, the cannot directly borrow funds from But with the consent of Union can borrow. In such cases, state governments guarantees for the loans, while the Centre counter-guarantees. For instance, centre has sound' state government entities to from foreign agencies. D

40. #80Practice set
    Consider the following statements regarding the Financial Stability Development Council: 1. The council is chaired by RBI Governor and co-chaired by Deputy Governor. 2. Its objective is to strengthen and institutionalise the mechanism for maintaining financial stability. 3. The FSDC was created as a response to the financial crises of 2007-08.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct l is incorrect. Financial Stability is chaired by the Union Minister and of financial-sector regulatory authorities like IRDA as 2 and 3 are correct. With a view to institutionalizing the mechanism for stability, enhancing inter-regnlatory promoting financial sector development, the FSDC up. The FSDC was created as a response to the of 2007

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