GPSC Prelims Paper 2 Mock Test - 5 - GPSC (Gujarat) MCQ

Explanation:

1. Coming of the festive season: During the festive season, there is an increase in consumer spending, which leads to increased demand for goods and services. This will encourage banks to lend more money, increasing the money supply in the economy.

2. Rise in interest rate: An increase in interest rates makes borrowing more expensive, which generally leads to a decrease in the money supply. This is because people are less likely to take out loans, and businesses are less likely to invest when borrowing is more expensive.

3. Injection of High-powered money in the economy: High-powered money refers to currency and reserves held by the central bank. When the central bank injects more money into the economy, it increases the money supply.

4. Decrease in interest rate: When interest rates decrease, borrowing becomes more attractive, leading to an increase in loans and investments. This, in turn, increases the money supply in the economy.

Sangram Singh's transition into MMA marks a significant milestone in Indian sports, showcasing the increasing diversification of athletic careers and the growing interest in mixed martial arts in India.

A heat dome occurs when high-pressure systems trap warm air, creating a dome effect that leads to sustained high temperatures. This weather phenomenon has significant impacts on health and agriculture.

The PMAY aims to provide affordable housing for the urban poor, ensuring that basic amenities are included, which is crucial for improving living standards and promoting social equity.

Poet Siddhalinga Pattanashetti received the Gudleppa Hallikeri Award, which recognizes significant contributions to literature and promotes the appreciation of poetry in Indian culture.

In 1770, Captain James Cook "discovered" the Great Barrier Reef off the coast of Australia, which has since become a UNESCO World Heritage Site, known for its biodiversity and ecological significance.

GAIL’s plan to establish India’s largest KTA Ethane Cracker project represents a significant investment in the petrochemical sector, aiming to boost local industry and create job opportunities.

"Playing devil's advocate" means to take a position you do not necessarily agree with, purely for the sake of debate, ensuring that all perspectives are considered, which is crucial in critical thinking.

"Recalcitrant" refers to someone who is stubbornly disobedient or uncooperative, often creating challenges in group dynamics or authority settings, which can complicate teamwork.

Suhelwa Wildlife Sanctuary is designated to become the fifth tiger reserve in Uttar Pradesh, highlighting efforts to conserve tiger populations and their habitats in India.

The PM-KISAN scheme provides direct financial assistance to farmers, aimed at reducing the financial burden and enabling them to invest in their agricultural practices, thus supporting the rural economy.

On June 11, 1987, Margaret Thatcher became the first woman to serve as the British Prime Minister, a pivotal moment in political history that paved the way for more women in leadership roles worldwide.

The ILO's primary focus is on eradicating child labour globally, advocating for policies and programs that ensure children can attend school and have a childhood free from exploitation.

Heat-related illnesses encompass a range of health issues that can occur due to excessive heat exposure, including heat exhaustion and heat stroke, which pose serious risks during extreme weather events.

The Bandra-Worli Sea Link is recognized as the longest sea bridge in India, significantly reducing travel time between the city of Mumbai and its suburbs, and is an engineering marvel of its time.

Mangalore Refinery and Petrochemicals Limited (MRPL) received the Greentech Pollution Control Waste Management & Recycling Award in the Circular Economy Leadership category for its efforts in hazardous waste management, recycling, and achieving zero waste disposal to landfills in FY 2023-24. This recognition highlights the importance of sustainable practices in the industrial sector.

Introducing a Direct Tax code can be a prudent way to increase the Tax to GDP ratio. A Direct Tax code can simplify the tax laws, widen the tax base, and reduce the tax evasion, which can lead to an increase in tax collection and Tax to GDP ratio.

Lowering of the income tax exemption limit may increase the tax collection in the short term, but it can adversely impact the disposable income and demand, which can impact the economic growth.

Increasing excise duty on crude oil may increase the tax collection in the short term, but it can lead to an increase in inflation, which can negatively impact the economic growth.

Formalization of the labor market may increase the tax collection in the long term, but it can take time to implement, and it may not have an immediate impact on the Tax to GDP ratio.

• The most important role of RBI is as the controller of money supply and credit creation in the economy. RBI is the independent authority for conducting monetary policy in the best interests of the economy.

The instruments that the RBI uses for conducting monetary policy are as follows:

(1) Statement 1 is correct. Open Market Operations (OMO) - RBI purchases (or sells) government securities to the general public in a bid to increase (or decrease) the stock of high-powered

money in the economy.

(2) Statement 2 is correct. Varying Reserve Requirements - CRR and SLR also works through the Reserve Deposit Ratio route. A high (or low) value of CRR or SLR increases (or decreases) the

value of reserve deposit ratio, thus diminishing (or increasing) the value of money multiplier

and money supply in the economy in a similar fashion.

(3) Repo Rate - The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).

(4) Statement 4 is correct. Moral Suasion can be undertaken by RBI to persuade commercial banksto follow the monetary policy directives given by the Monetary Policy Committee.

• Statement 3 is incorrect. Sterilization is one of the important functions of RBI where it sterilizes the economy against adverse external shocks. However, it is not an instrument of monetary policy transmission.

Option (a) is the correct answer.

• Statement 1 is incorrect: Public goods are distinct from private goods as they cannot be provided through the market mechanism and thus must be provided by the government. This is known as the “allocation function” of the government.

• Statement 2 is incorrect: Public goods such as roads, public parks, highways, railways are for the benefit of all. The consumption of such goods by several individuals is not “rivalrous” in the sense that a person can enjoy the benefits without reducing their availability to others.

• Statement 3 is correct: In case of private goods if one does not pay then one can be excluded from enjoying its benefits. However, in case of public goods there is no feasible way of excluding anyone from enjoying its benefits. Thus, non-payers cannot be excluded.

Since public goods are “non-rivalrous” and “non-excludable” it becomes difficult to collect fees for the public goods. This leadsto a problem of “Free-reider”. Since consumers will not voluntarily pay for what they are getting for free it breaks the link between producers and consumers and therefore the government must step in to provide for such gods. This is known as “Public provisioning”.

• Statement 1 is not correct: Tax-to-GDP ratio represents the size of a country's tax kitty relative to its GDP. It is a representation of the size of the government's tax revenue expressed as a percentage of the GDP. The higher the tax to GDP ratio the better the financial position the country will be in. The ratio represents that the government is able to finance its expenditure. A higher tax to GDP ratio means that the government is able to cast its fiscal net wide. It reduces a government's dependence on borrowings.

• Statement 2 is not correct: Developed nations typically have higher tax-to-GDP ratios than developing nations.

Explanation:

1. An increase in the number of tourists visiting a country can lead to a positive trade balance because tourists spend money on goods and services in the country they visit. This increases the country's exports, which in turn can lead to a positive trade balance if the value of exports exceeds the value of imports.

2. Depreciation of the Rupee means that the value of the Rupee decreases relative to other currencies. This makes the country's exports cheaper for foreign buyers, which can lead to an increase in exports. If the increase in exports is greater than the increase in imports, it can lead to a positive trade balance.

• Statement 1 is correct. As part of the ongoing DISHA Week to mark the successful completion of 2 years of the District Development Coordination & Monitoring Committee (DISHA), the Union Minister of Rural Development, Panchayati Raj and Mines, held wide ranging discussions on the DISHA initiative with Special Secretaries of the states/ UTs at Vigyan Bhawan in New Delhi. The discussions centered on various topics related to DISHA initiative and ways and means to make it a powerful and potent tool of participative governance.

• Statement 2 is incorrect. DISHA initiative has provision for all three level i.e. Central DISHA committee, State DISHA committee and District DISHA committee.

• Statement 3 is correct. State DISHA committees are envisaged with the objective of ensuring quality of expenditure, particularly in the context of optimization of public funds spent under different programmes of the Central Government and other escalated issues from Distri ct Disha Committees. The Union Minister also launched a Meeting Management Software to serve the objective of end-to-end solution of paperless meeting. This software will help in preparing Meeting Notice, Agenda setting, communicating with members, circulating agenda, meeting minutes and also generate triggers on items which require follow-up action. An e-book on DISHA was also released which lucidly elaborates background of DISHA initiative, learning experience, requirement of DISHA Dashboard its features and user manual, and guidelines of district and state level DISHA committees. It has been created for effective coordination and development of Central Government’s programme for infrastructure development or Social and human resource development

• The Chairperson of the committee will be the senior most Member of Parliament (Lok Sabha) elected from the district, nominated by the Union Ministry of Rural Development

• It will ensure the participation of people’s representative at all levels and successful implementation of flagship programme of central government.

• Ensure that all Central Government programmes are implemented in accordance with the guidelines. Real Time Monitoring:

• DISHA dashboard, the application, which is now available to all members of Parliament and State Assemblies as well district officials, allows the user to track the progress of multiple and diverse schemes in a certain district, block, or even a gram panchayat.

• The application automatically turns sets of statistics and data into interactive and visually accessible graphics and maps.

• Currently, 18 schemes are covered; the ultimate plan is to integrate all 42 Central schemes representing a total outlay of ₹3 lakh crore, which are already monitored by DISHA or District Development Coordination and Monitoring Committees.

• Several schemes have good Management Information Systems, but they don’t talk to each other. So, it is difficult for elected representatives and local planners to go through all the data and get a sense of what is happening in a particular place.

• Currently, geographic mismatches make it difficult to unite data; for instance, while the Rural Development Ministry tracks its schemes by gram panchayat, the Health Ministry tracks it by anganwadis, which are mapped by population, while crime data uses different boundaries

• Statement 1 is incorrect: In a market economy, all economic activities such as supply and demand interactions, individuals freely exchanging their products with each other etc. are organized through the market without any government interference. There may be some government intervention or planning, but usually it refers to an economy that is more market oriented in general. In this kind of an economy most economic decision making is done through voluntary transactions according to the laws of supply and demand. Hence the arrangement which allow people to buy and sell commodities freely are the defining features of a market economy.

• Statement 2 is correct: Most of the economies are mixed economies, where some important decisions are taken by the government and the economic activities are by and large conducted by the market. The extent of government control varies, for example the United States of America the role of government is minimal whereas in China, the role of the government is much more interventionist. Statement 3 is also correct: in a centrally planned economy, the government or the central authority plans all the important activities in the economy. All important decisions regarding production, exchange, and consumption of goods and services are made by the government. Centrally-planned economic mandates surrounding the production of goods and services are often executed by state owned enterprises, which are government-created legal entities that engage in commercial activities on a government's behalf. The government may try to achieve a particular allocation of resources and distribution of final goods and services which is thought to be desirable for society as a whole.

• Statement 1 is incorrect. The mission aims at sensitizing all railway employees (not all government employees) about the need to adhere to good ethics and to maintain high standards of integrity at work

• Statement 2 is incorrect. Launched by the Ministry of Railways launched on 27th July 2018 and not by the ministry of personnel, Public Grievances and Pensions.

2 and 3 only

Explanation:
1. NBFCs are not necessarily the largest net borrowers of funds from the financial system. The extent of their borrowing depends on their size, operations, and market conditions. It is not accurate to generalize them as the largest net borrowers.

2. NBFCs can acquire shares, stocks, and other securities issued by the government. They often invest in government securities as part of their asset portfolio.

3. NBFCs are not part of the Payment and Settlement system, which is the system that deals with the transfer of funds between parties, such as banks and other financial institutions. NBFCs are primarily involved in providing financial services, such as loans, investments, and leasing, but they do not have the authority to facilitate payments and settlements between parties.

• The correct answer is option (c), both 1 and 2. The Wholesale Price Index (WPI) and the Consumer Price Index (CPI) are two measures of inflation in India. The WPI is a measure of the average change in the prices of goods traded between businesses, while the CPI is a measure of the average change in the prices of goods and services consumed by households.

• With regard to the statements provided, statement 1 is correct. The WPI basket does not cover services, such as housing, education, and recreation, while the CPI basket does. This means that the WPI measures the change in prices of only a subset of the goods and services consumed by households, while the CPI measures the change in prices of a broader range of goods and services. Statement 2 is also correct, as the weightage of the food group is higher in the CPI basket than in the WPI basket. This reflects the fact that food is a larger share of household consumption compared to business expenditure. Therefore, the correct answer is option (c).

• Statement 1 is correct: G-secs practically carry no risk of default and, hence, are called riskfree gilt-edged instruments. Gilt-edged securities are high-grade investment bonds offered by governments and large corporations as a means of borrowing funds.

• Statement 2 is not correct: Such securities are of two types:

  • Treasury Bills

    • They are short term instruments

    • With original maturities of less than one year- presently issued in three tenors, namely, 91 days, 182 days and 364 day

    • Government bonds or dated securities

    • They are Long term instruments.

    • With original maturity of one year or more.

• In India, the Central Government issues both treasury bills and bonds or dated securities

  • while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).