Test: The Tertiary Sector In The Indian Economy - 1 (2019 - 2013)


20 Questions MCQ Test UPSC Topic Wise Previous Year Questions | Test: The Tertiary Sector In The Indian Economy - 1 (2019 - 2013)


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QUESTION: 1

In the context of any country which one of the following would be considered as part of its social capital?

[2019]

Solution:
  • A: Human Capital would be a suitable word.
  • B: Economic capital or tangible capital would be a suitable word.
  • C: Demographic dividend would be a suitable word.
  • By elimination we are left with Ans (d).
QUESTION: 2

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?

[2019]

Solution:

Participatory Note (P-Notes): A for eigner wishes to invest in India but does not want to go through the hassles of registering with SEBI, getting PAN card number, opening a DEMAT account etc. So, he will approach a SEBI registered foreign institutional investor (FII) / foreign portfolio investor (FPI) and invest via Participatory Notes.

QUESTION: 3

The Service Area Approach was implemented under the preview of

[2019]

Solution:

Basic function of Lead Bank: Preparation of service area credit plan. Coordination with the efforts of Government, banks and credit agencies. Service Area approach is a modification of Lead Bank scheme.

QUESTION: 4

Which one of the following statements correctly describes the meaning of legal tender money?

[2018]

Solution:

Legal tender- is a fiat money which cannot be refused by any citizen of the country for settlement of any kind of transaction. So, B is the appropriate description.

QUESTION: 5

With reference to the governance of public sector banking in India, consider the following statements
1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected

Which of the statements given above is/are correct?

[2018]

Solution:

From government reports, If we look at the data graph of capital infusion in last one decade, there have been ups and downs to #1 is wrong. And as per Economic Survey, #2 is correct.

QUESTION: 6

‘Global Financial Stability Report’ is prepared by the

[2016]

Solution:

(i) The Global Financial Stability Report (GFSR) is a survey by the IMF staff published twice a year, in the spring and fall. The report draws out the financial ramifications of economic issues highlighted in the IMF’s World Economic Outlook (WEO).
(ii) IMF prepares this report.

QUESTION: 7

Which of the following is/are included in the capital budget of the Government of India?
1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.
2. Loans received from foreign governments
3. Loans and advances granted to the States and Union Territories

Select the correct answer using the code given below.

[2016]

Solution:

The main items of capital budget are receipts and expenditure for capital (Financial) gains. It also includes loans raised by Government from public, Reserve Bank and other parties, and from foreign Governments and bodies. It also includes capital expenditure on acquisition of assets like land, buildings, machinery, equipment, etc and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties.

QUESTION: 8

There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Reducing import duty

Select the correct answer using the code given below.

[2016]

Solution:

(i) In order to reduce the fiscal deficit, the government needs to increase its earnings and reduce its expenditure.
This is done by following methods: Cut down the subsidies; reforms in tax structures; improve profit generated by Public Sector Enterprises and austerity measures.
(ii) Just by applying logic i.e. to reduce deficit, we’ve to increase income and reduce Expenditure.

QUESTION: 9

The term ‘Base Erosion and Profit Shifting’ is sometimes seen in the news in the context of

[2016]

Solution:

(i) Base Erosion and Profit Shifting (BEPS) is a tax avoidance strategy used by multinational companies, wherein profits are shifted from jurisdictions that have high taxes (such as the United States and many Western European countries) to jurisdictions that have low (or no) taxes (so-called tax havens). The BEPS project is said to be an “attempt by the world’s major economies to try to rewrite the rules on corporate taxation to address the widespread perception that the [corporations] don’t pay their fair share of taxes”.
(ii) BEPS aims to curb the tax evasion by MNCs, hence B is the answer.

QUESTION: 10

With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct?
1. Bitcoins are tracked by the Central Banks of the countries.
2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
3. Online payments can be sent without either side knowing the identity of the other.

Select the correct answer using the code given below.

[2016]

Solution:

(i) Bitcoin are not maintained by the Central Bank. Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger.
(ii) They’re not tracked by any central bank or authority. Both 2 and 3 are right.

QUESTION: 11

The term ‘Core Banking Solutions’ is sometimes seen in the news. Which of the following statements best describes/ describe this term? 
1. It is a networking of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
2. It is an effort to increase RBI’s control over commercial banks through computerization.
3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.

Select the correct answer using the code given below.

[2016]

Solution:

(i) Core Banking Solution (CBS) is networking of branches, which enables Customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account. The customer is no more the customer of a Branch. He becomes the Bank’s Customer. Thus CBS is a step towards enhancing customer convenience through Anywhere and Anytime Banking.
(ii) 3 is definitely not the purpose, so by elimination the answer is (a).

QUESTION: 12

The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?
1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.
2. Payment Banks can issue both credit cards and debit cards.
3. Payment Banks cannot undertake lending activities.

Select the correct answer using the code given below.

[2016]

Solution:

(i) They can enable transfers and remittance through mobile phones. The RBI guidelines say that the payments bank cannot undertake lending activities.
(ii) Mobile phone companies and supermarket eligible. But, Payment banks can’t issue credit card or give loans. Go by eliminating all options with “2”, and you’re left with (b) 1 and 3 only.

QUESTION: 13

What is/are the purpose/purposes of the ‘Marginal Cost of Funds based Lending Rate (MCLR)’ announced by RBI?
1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.

Select the correct answer using the code given below.

[2016]

Solution:

(i) With effect from 1st April, 2016, all loans in India shall be priced with reference to Marginal Cost of Funds based Lending Rates (MCLR) which will comprise of :- 1. Marginal Cost of Funds 2. Negative carry on account of CRR 3. Operating Costs 4. Tenor of premium. Banks shall review and publish their MCLR every month on a preannounced date. Marginal Cost of Funds which will comprise of marginal cost of borrowings and return on networth.
(ii) Both right. Verbatim lifted from RBI's press statement first paragraph.

QUESTION: 14

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?

[2015]

Solution:

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points; the Scheduled Commercial Banks may cut their lending rates.

QUESTION: 15

With reference to Indian economy, consider the following
1. Bank rate
2. Open market operations
3. Public debt
4. Public revenue

Which of the above is/are component/ components of Monetary Policy?

[2015]

Solution:

The RBI implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, moral persuasion and through many other instruments.

QUESTION: 16

'Basel III Accord' or simply 'Basel III', often seen in the news, seeks to

[2015]

Solution:

Basel III is a comprehensive set of reform measures which was  developed by the Basel Committee on Banking Supervision and  to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:
Improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source; improve risk management and governance; strengthen banks' transparency and disclosures.

QUESTION: 17

In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?
1. To enable the Central Bank to control the amount of advances the banks can create
2. To make the people’s deposits with banks safe and liquid
3. To  prevent the commercial banks from making excessive profits
4. 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.

[2014]

Solution:

1 is definitely correct as CRR. SLR is used to control money supply and credit off take. 2 may or may not be correct, to make people's deposit safe, capital adequacy ratio is the norm. 3 is definitely wrong as to control excess profit, margins would have to be reduced, not CRR, SLR.

QUESTION: 18

What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?
1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
2. It enables the beneficiaries in the rural areas to make deposits and withdrawals.

Select the correct answer using the code given below.

[2014]

Solution:

Besides giving access to banking, it also enables government subsidies and social security benefits to be directly credited to the accounts of the beneficiaries, enabling them to draw the money from the bank saathi or business correspondents in their village itself.

QUESTION: 19

Consider the following liquid assets: 
1. Demand deposits with the banks
2. Time deposits with the banks
3. Saving deposits with the banks
4. Currency

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

[2013]

Solution:

Currency/cash is the most liquid, then the demand deposits (current accounts), then the saving deposits with bank and finally the least liquid is the time deposits with the bank (fixed deposits).

QUESTION: 20

Consider the following statements:
1. Inflation benefits the debtors.
2. Inflation benefits the bondholders.
Which of the statements given above is/are correct?

[2013]

Solution:

Those who benefit from higher inflation are debtors and those who suffer from it are creditors. If one has substantial debt, each rupee one has to repay would be worth less than when it was borrowed. In this way, one pays back less in real terms.