ANSWERS WITH EXPLANATION

INDIAN ECONOMY BASICS

1.

(c)

Exp.: They are used by Foreign Institutional

Investors (FIIs) who are NOT registered with
SEBI.
2.

(c)

Exp.: At least 75% of only male working

population engaged in nonagricultural
pursuits.
3.

(c)

4.

(d)

5.

(a)

Exp.: Fiscal policy is said to be tight or

contractionary when revenue is higher than
spending (i.e., the government budget is in
surplus).

10.

(c)

Exp.: The balance of payments, also known as

balance of international payments,
encompasses all transactions between a
country's residents and its nonresidents
involving goods, services and income;
financial claims on and liabilities to the rest
of the world; and transfers such as gifts.
Despite its name, the "balance of payments"
data is not concerned with actual payments
made and received by an economy, but
rather with transactions.
11.

(a)

12.

(d)

6.

(c)

7.

(b)

Exp.: As the government draws its income from

much of the population, government debt
is an indirect debt of the taxpayers.
Government debt can be categorized as
internal debt (owed to lenders within the
country) and external debt (owed to foreign
lenders).

8.

(a)

13.

(c)

14.

(a)

Exp.: Frictional unemployment is the time period

between jobs when a worker is searching
for, or transitioning from one job to another.
It is sometimes called search unemployment
and can be voluntarily based on the
circumstances of the unemployed individual.
Structural unemployment occurs when a
labour market is unable to provide jobs for
everyone who wants one because there is a
mismatch between the skills of workers and
skills needed for jobs.
9.

(c)

Exp.: If a nation X's sovereign credit rating is

constant, and all other nations' Moody's
ratings rise, then nation X's CRIS will
decline.

Exp.: Unlike a fixed exchange rate system, the

government or central bank does not actively
interfere in the foreign exchange market by
controlling supply and demand of the
currency in order to influence the exchange
rate.
15.

(c)

Exp.: When a government's total expenditures

exceed the revenue that it generates
(excluding money from borrowings). Deficit
differs from debt, which is an accumulation
of yearly deficits. In milder forms high
inflation and a large fiscal deficit lead to a
weaker national currency (imports become
expensive) and reduce the creditworthiness
of the country.

16.

(d)

33.

17.

(d)

18.

(b)

Exp.: The top recipients of officially recorded

remittances for 2013 are:
1. India $71 billion

Exp.: RBI has extended infrastructure sector

lending subcategory to include hotels and
convention centres.
(d)

20.

(a)

21.

(c)

3. Philippines $26 billion

4. Mexico $22 billion
5. Nigeria $21 billion

23.

(a)

24.

(b)

SC

(c)

Exp.: Phillips curve is an inverse relationship

between rates of unemployment and
corresponding rates of inflation that result
in an economy.
25.

(d)

26.

(a)

(d)

28.

(c)

29.

(b)

GS

Exp.: An open market operation (also known as

OMO) is an activity by a central bank to
buy or sell government bonds in the open
market.
27.

Exp.: The European Commission has proposed a

temporary ban on Mangoes, Eggplant, the
taro plant, Bitter gourd, Snake gourd.
30.

(d)

31.

(d)

32.

(a)

Exp.: It is not backed by any currency or precious

metal, and is used only among governments
and IMF for balance of payments
settlements.
2

6. Egypt $20 billion

34.

(a)

Exp.: The Reserve Bank of India (RBI) has

included Hong Kong and Macau in the
sensitive list of countries. Pakistan,
Bangladesh, Sri Lanka, Afghanistan, Iran
and China are already in the sensitive list
which means entities and residents of these
countries will need prior RBI permission to
establish a branch office or a liaison office
or a project office in India.

OR

Exp.: The shape of Engel curves depend on many

demographic variables and other consumer
characteristics. For inferior goods, the Engel
curve has a negative gradient. That means
that as the consumer has more income, they
will buy less of the inferior good because
they are able to purchase better goods.
22.

2. China $60 billion

19.

(b)

35.

(d)

Exp.: The definitions are interchanged.

36.

(a)

37.

(c)

38.

(c)

Exp.: In India, FDI is preferred over portfolio

flows as the FDI flows tend to be more stable
than portfolio and other forms of capital
flows.
39.

(b)

Exp.: Top five economies with highest actual

individual consumption per capita:
BermudaUSCayman IslandsHong Kong
Luxembourg.
40.

(d)

Exp.: Bharat Bill Payment System (BBPS)

This entity will be responsible for setting

standards (a) Business standards, rules and
processes for on boarding the BBPOUs (b)
Process standards, rules and processes for
various use cases including management of
dispute resolution (c) Information exchange
standards.

The entity would be responsible for

marketing and brand positioning of the pan
India Bharat Bill payments system, the
INDIAN ECONOMY BASICS

oversight and certification for conduct of

operations of the BBPOUs
This entity will be responsible for carrying
out payment, clearing and settlement of the
transactions carried out at various BBPOUs.

BBPS shall act as the final dispute resolution

escalation point. The first point of contact
for dispute resolution shall always be the
operating unit.
It will also set up a single website on behalf
of the brand for online payment of bills
pertaining to all billers onboarded by the
BBPOUs.

The entity would be a 'notforprofit

organization' registered under the
Companies Act 1956, like NPCI or similar
entity. The BBPS shall have a Steering
Group comprising of representatives from
the participating BBPOUs and other stake
holders.
(a)

SC

41.

(b)

43.

(c)

44.

(b)

GS

Exp.: Bridge loans are normally more costly than

normal financing, to pay off for the extra
risk. The lender also may demand cross
collateralization and a lower loantovalue
ratio. On the other hand Bridge Loans are
generally
arranged
rapidly
with
comparatively little documentation.
42.

Exp.: FPIs would also be allowed to invest in

unlisted nonconvertible debentures or bonds
issued by corporate in the infrastructure
sector. Furthermore, FPI can invest in
privately placed bonds if it is listed within
15 days.
45.

(d)

46.

(d)

47.

(a)

(c)

49.

(b)

Exp.: In case a person is a whole time director in

a listed company then he can only be on
three boards.
50.

(d)

OR

48.

loans. IBBR should comply with the

standards benchmarks set by the Committee
on Financial Benchmarks. Banks may
extend floating rate products linked to the
Base Rate, IBBR or any other floating rate
benchmark, ascertaining that at the time of
sanction, the lending rates should be equal
to or above the Base Rate of bank.

Exp.: The RBI panel asked Indian Banks

Association (IBA) to develop IBBR, a fresh
benchmark for floating interest rate
products, which may be compared and
released by IBA on a periodical basis. In the
beginning, IBBR may be used for home
INDIAN ECONOMY BASICS

51.

(d)

52.

(c)

53.

(d)

54.

(b)

Exp.: Non performing asset (NPA) is a loan or

an advance where Interest and/or
installment of principal remain overdue for
a period of more than 90 days in respect of
a term loan.
55.

(a)

Exp.: The RKVY aimed at achieving 4% annual

growth in the agriculture sector during the
XI Plan period by ensuring a holistic
development of Agriculture and allied
sector. One of its objective include to achieve
the goal of reducing the yield gaps in
important crops through focused
interventions.
56.

(c)

Exp.: Category I - the lowest risk entities

comprises foreign government and
governmentrelated foreign investors.
Category II - regulated entities such as
university funds, universityrelated
endowments and pension funds, etc.
Category III - other entities viz. Qualified
Foreign Investors (QFIs), etc.
57.

(c)

58.

(b)

Exp.: If gender inequality did not exist, the value

of GDI and HDI would be the same, but if
gender inequality exists, the value of GDI
would be lower than that of HDI. The
3

59.

(b)

60.

(d)

61.

(d)

62.

(a)

(b)

SC

Exp.: The primary result of the conference was

the nonbinding document 'The Future we
want'. The fourth statement is related to
Cancun Climate Change Conference held
during NovDec. 2010.
63.

Exp.: Reverse is true for statement 2 & 3 i.e.

children is related to statement 2 and adult
is to statement 3
64.

(a)

GS

Exp.: WHO said that is most cities where there is

enough data to compare the situation today
with previous years, air pollution is getting
worse. Many factors contribute to this
increase including reliance on fossil fuels.
The 2014 version of the Ambient Air
Pollution (AAP) database contains results
of outdoor air pollution monitoring from
almost 1600 cities in 9 countries. According
to global burden of disease estimates, air
pollution is the fifth largest killer in India.
65.

(c)

66.

(b)

Exp.: AOA is a multilateral trade negotiation of

World Trade Organization (WTO).
67.

(d)

Exp.: M1 includes currency with public and only

demand deposits with bank and not time
deposits. It is known as narrow money.
4

68.

(c)

69.

(d)

70.

(a)

Exp.: The new banks must meet the criteria of

having 25% of its branches in unbanked
rural areas with population upto 9,999.
71.

(b)

72.

(c)

73.

(d)

OR

Exp.: With the launch of new system, India is

now ranked among the few countries in
the world to have such a network built
domestically to meet the card based
payment system needs of the country. It will
certainly not only reduce the dependence
on cash and cheque modes of settlement
but will also make it easier to offer products
based on specific requirements of diverse
user sets within the country.

M3 includes M1 and time deposits with banks

(not post office deposits) and known as
broad money.

greater the difference between HDI and

GDI, the greater is the gender inequality. It
is the developing and under developing
country where gender inequality persists.

74.

(c)

75.

(d)

76.

(a)

77.

(b)

78.

(a)

79.

(c)

80.

(d)

81.

(c)

82.

(a)

Exp.: RBI has directed all the commercial banks

to offer zero balance account with minimum
facilities like cheque book and ATM to all
customers. Nofrill savings account scheme
is provided by both public and private sector
banks.
83.

(a)

Exp.: Deadline for implementation of Basel III in

India is 2019.
84.

(d)

85.

(d)

86.

(d)

87.

(b)

Exp.: The Consolidated Fund of India has been

established under Article 266 (1) of the
Constitution.
88.

(d)

89.

(d)

90.

(b)

Exp.: 12th plan has recommended Tax credit

instead of tax incentives: With the
INDIAN ECONOMY BASICS

imposition of Minimum Alternate Tax

(MAT) of 20 per cent, companies are unable
to avail full benefit of weighted deduction.
Credit on inputs/capital goods used for
R&D outside the factory premises.
91.

(d)

Exp.: 12th plan recomd Also, in order to leverage

the benefits of IP:

approach helping specialisation of labour

and engineering skills
93.

(d)

94.

(d)

95.

(a)

Exp.:
Providing access to risk capital

Setting up of standards for the industry

Create national IP mission to continually

evolve the IP strategy of the nation.

Improving Industry/research institute/

academia interaction, mostly in clusters

Encourage joint IP filings by industry/

academia/research institutes.

Encourage the formation of companies

specializing in IPs (through tax incentives).

Stimulating demand/providing scale

through preferential treatment in
government purchases.

OR

Build awareness about IP through education

and training.

Modular industrial estates/laboratories near

premier technical institutions with the
required plug and play facilities.

96.

(c)

Exp.: The major factors responsible for increasing

Chinese competitiveness are:

97.

(c)

98.

(c)

Artificially depreciated Chinese currency

Tax advantages and Government subsidies

given by the Government

Exp.: RTE Act is applicable for only elementary

education.
99.

(d)

Much lower interest rates

100.

(a)

Simpler labour laws

Better infrastructure leading to lower cost

of power, transportation and cluster

Exp.: The share of service sector in GDP of China

is lower than that of India at 43.3% (2011
est.)

Exempt income tax for the income

generated from domestic IPs.

92.

(b)

GS

SC

INDIAN ECONOMY BASICS