Test: Structure Of The Indian Economy & Demographics - 1 (2019 - 2013)


20 Questions MCQ Test UPSC Topic Wise Previous Year Questions | Test: Structure Of The Indian Economy & Demographics - 1 (2019 - 2013)


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QUESTION: 1

The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat command the payment system providers that:
1. They shall ensure that entire data relating to payment systems operated by them are stored in a system only in India.
2. They shall ensure that the systems are owned and operated by public sector enterprises.
3. They shall submit the consolidated system audit report to the comptroller and Auditor General of India by the end of the calendar year.

Which of the statements given above is/are correct

[2019]

Solution:

As per RBI’s directive, payment system providers are required to store the data in India only. Other features are not required by RBI.

QUESTION: 2

Consider the following statements:
1. Petroleum and Natural Gas Regulatory Board (PNGRB) is the first regulatory body set up by the Government of India.
2. One of the tasks of PNGRB is to ensure competitive markets for gas.
3. Appeals against the decisions of PNGRB go before the Appellate Tribunals of Electricity.

Which of the statements given above is/are correct?

[2019]

Solution:

PNGRB was constituted under The Petroleum and Natural Gas Regulatory Board Act, 2006.
SEBI was formed in 1988 by an executive order, given statutory status in 1992. Besides, IRDAI and many other regulatory bodies were setup before 2006. So, PNGRB is certainly not the first body to be setup by Govt of India. #1 is wrong, by elimination we are left with answer b.

QUESTION: 3

The Chairman of public sector banks are selected by the

[2019]

Solution:

Bank Board Bureau (BBB) was setup in 2016, BBB selects top officials (MD, CEO, Chairman and full-time Directors) for PSBs, LIC and other public sector financial institutions.

QUESTION: 4

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?
1. The foreign currency earnings of India’s IT sector.
2. Increasing the government expenditure.
3. Remittances from Indians abroad.

Select the correct answer using the code given below.

[2019]

Solution:
  • Currency crisis usually denotes that Indian Rupee is weakening and dollar is strengthening at a rapid level. In ordinary circumstances, rupee dollar exchange rate is determined by the market forces of supply and demand. Therefore we have to encourage the inflow of dollars to reduce the risk of currency crisis. #1 and #3 can help in this regard, #2 is irrelevant. Infact #2 can backfire if raising Government Expenditure results in excessive printing of Rupee currency.
  • Thus, by elimination answer is b: 1 and 3.
QUESTION: 5

Which of the following is not included in the assets of a commercial bank in India?

[2019]

Solution:

NCERT Macroeconomics Class12, page 40: observe the table 3.1: Deposits are plotted on the liability side of a commercial bank’s balance sheet.

QUESTION: 6

Despite being a high saving economy, capital formation may not result in significant increase in output due to

[2018]

Solution:

Capital Output Ratio (ICOR) measures the percentage increase in capital formation required obtaining a percentage increase in GDP. Entrepreneurs, by investing their own savings and informally mobilizing the savings of their friends and relatives contribute to the process of capital formation.
These informal funding supplements the funds made available by the formal means of raising resources from banks, financial institutions and capital markets. So, "D" is the fitting option- if capital to output ratio is high then capital formation may not result in significant increase in the output.

QUESTION: 7

With reference to India's decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?
1. It is introduced as a part of the Income Tax Act.
2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the "Double Taxation Avoidance Agreements".

Select the correct answer using the code given below:

[2018]

Solution:

This was introduced in 2016, as a separate legislation under Finance Bill, and it doesn't provide tax credit in home country so both wrong.

QUESTION: 8

Consider the following items:
1. Cereal grains hulted
2. Chicken eggs cooked
3. Fish processed and canned
4. Newspaper containing advertising material

Which of the above items is/are exempted under GST (Goods and Services Tax)?

[2018]

Solution:

When client books add in newspaper, he has to pay 18% GST to newspaper owner who deposits it to Government. But when such newspaper is sold to public, they are not required to pay newspaper price + GST. So #4 is exempted from GST. Processed / Canned food (#3) is subject to GST. So, by elimination, we get correct answer C.
Some experts were divided that if eggs are cooked in a 5-star hotel, it'll be subjected to GST however UPSC's official Answer key has kept C is the correct option.

QUESTION: 9

Consider the following statements
1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
3. As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

[2018]

Solution:

As per Economic Survey, first statement is right but Central Government's domestic liability is ~46% so #2 is wrong. By elimination, we get (C)

QUESTION: 10

Consider the following statements:
1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
2. CAR is decided by each individual bank.

Which of the statements given above is/are correct?

[2018]

Solution:

CAR is decided by the benchmarks set by BASEL-III Committee on Banking supervision and implemented by the central bank of individual country. So, #2 is right, whereas #1 is correct.

QUESTION: 11

Which one of the following links all the ATMs in India?

[2018]

Solution:

Till 2009, RBI's Institute for Development and Research in Banking Technology (IDRBT) provided the linkages to ATM network in India but afterwards, it was taken over by NPCi's National Financial Switch (NFS).

QUESTION: 12

With reference to digital payments, consider the following statements:
1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.

Which of the statements given above is/are correct?

[2018]

Solution:
  • BHIM App was launched in 2016, it allows money transfer to UPI-enabled bank accounts so #1 is right.
  • The BHIM apps has three levels of authentication. For one, the app binds with a device's ID and mobile number, second a user needs to sync whichever bank account (UPI or non-UPI enabled) in order to the conduct transaction. Third, when a user sets up the app they are asked to create a pin which is needed to log into the app. Hence #2 is wrong.
QUESTION: 13

Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?

[2018]

Solution:

Merchant Discount Rate (MDR) is the fee borne by the merchant for using credit and debit card payment system. To encourage digital transactions, Ministry of Electronics and information technology (MEITY) had announced that from 1 January 2018 for the next two years, it'll bear the MDR fees of merchants, for payments up-to Rs.2,000/- IF such payment is made via debit card, BHIM or Aadhar enabled payment system.

QUESTION: 14

With reference to Indian economy, consider the following statements:
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.

Which of the statements given above is/are correct?

[2015]

Solution:

Due to recession in 2008, the growth rate of the Indian economy had declined for the next few years from 8-9% to 5-6%. Even though the growth rate had declined, it never became negative. So, the GDP at market prices has always increased year on year since last one decade

QUESTION: 15

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

[2014]

Solution:

Marginal Standing Facility  rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities. Net Demand and time liability  is the sum of demand and time liability of Banks with public and other banks wherein assets with other banks is subtracted to get net liability of other bank.

QUESTION: 16

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

[2014]

Solution:

12th Five Year Plan of the Government of India (2012-17) aims at faster, sustainable and more inclusive growth.

QUESTION: 17

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

[2013]

Solution:

It is an activity by a central bank(RBI) to buy or sell government securities. The aim of open market operations is to manipulate the short term interest rate and the supply of base money in an economy, and indirectly control the total money  supply.

QUESTION: 18

Which of the following constitute Capital Account?
1. Foreign Loans 
2. Foreign Direct Investment
3. Private Remittances
4. Portfolio Investment

Select the correct answer using the codes given below.

[2013]

Solution:

Capital Account comprises of Foreign loans, Foreign Direct Investment and Portfolio Investment. Capital Account is the net result of public and private international investments flowing in and out of a country. Portfolio investment is the buying of shares and bonds. FDI is the investments by foreigners in a country or the citizens investing in foreign countries.

QUESTION: 19

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

[2013]

Solution:

National Income is the money value of all the final goods and services produced by a country during a period of one year. National Income consists of a collection of different types of goods and services of different types.

QUESTION: 20

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

[2013]

Solution:

In India’s foreign exchange reserve, it includes foreign currency deposits, bonds, gold reserves, SDRs and IMF reserve position. Foreign exchange reserves are an important part of the international investment position of a country.