UPSC CSE Prelims 2015 – Economics Solutions

  1. Pradhan Mantri Jan Dhan Yojana has been launched for

(a) providing housing loan to poor people at cheaper interest rates

(b) Promoting women’s Self Help Groups in backward areas

(c) promoting financial inclusion in the country

(d) providing financial help to marginalised communities

PMJDY is a National Mission on Financial Inclusion encompassing an integrated approach to bring about comprehensive financial inclusion of all the households in the country. The plan envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility.

Ref : http://www.pmjdy.gov.in/pmjdy_mission.aspx


 

  1. With Reference to the Fourteenth Finance Commission, which of the following statements is/are correct?

1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent

2. It has made recommendations concerning sector-specific grants

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

We would like to bring on record some important requests received by us for sector specific grants and comment on them for consideration by the alternative institutional arrangement proposed for the purpose, as a part of the fiscal space of the Union. We have noted the views expressed by the Union ministries and State Governments in this regard and have identified the sector-specific grants-in-aid in four categories: general administration (including judiciary and police), environment (forests), maintenance (irrigation, roads and bridges) and social sector (education, health, drinking water and sanitation).

Ref: http://finmin.nic.in/14fincomm/14fcreng.pdf


 

  1. The ‘Fortaleza Declaration’ recently in the news, is related to the affairs of:

(a) ASEAN
(b) BRICS
(c) OECD
(d) WTO

Sixth BRICS summit was held in the city of Fortaleza in Brazil.

Ref: http://pib.nic.in/newsite/PrintRelease.aspx?relid=106712


 

  1. A decrease in tax to GDP ratio of a country indicates which of the following?
  2. Slowing economic growth rates
    2. Less equitable distribution of national income

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Ref: http://www.rediff.com/business/column/column-3-reasons-why-indias-tax-gdp-ratio-has-fallen/20150307.htm


 

  1. In the Index of Eight Core Industries, which one of the following is given the highest weight?

(a) Coal Production

(b) Electricity generation

(c) Fertilizer Production

(d) Steel Production

Total weight of the 8 core sectors is 37.903. Coal(4.379), Electricity(10.316, the highest), Fertilizer(1.254), Steel(6.684).

Ref: Page 490, IYB


 

  1. The Fair and Remunerative Price of Sugarcane is approved by the

(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Marketing Committee

Ref: http://www.thehindu.com/news/national/govt-hikes-cane-fair-price-to-rs230-per-qtl/article6794586.ece


 

  1. Which one of the following issues the “Global Economic Prospects” report periodically?

(a) The Asian Development Bank

(b) The European Bank for Reconstruction and Development

(c) The US Federal Reserve Bank

(d) The World Bank

Ref: http://www.worldbank.org/en/publication/global-economic-prospects


 

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

(a) India’s GDP growth rate increases drastically

(b) Foreign Institutional Investors may bring more capital into our country

(c) Scheduled Commercial Banks may cut their lending rates

(d) It  may drastically reduce the liquidity to the banking system.

SLR cut means more liquidity which may prompt the banks to lower the lending rates.

Ref: http://www.thehindu.com/business/Economy/rbi-cuts-slr-to-provide-liquidity/article6853210.ece


 

  1. In India, markets in agricultural products are regulated under the  

(a) Essential Commodities Act, 1955

(b) Agricultural Produce Market Committee Act enacted by States

(c) Agricultural Produce (Grading and Marking) Act, 1937

(d) Food Products Order, 1956 and Meat and Food Products Order, 1973


 

  1. Which of the following brings out the ‘Consumer Price Index Number for the Industrial Workers’?
    (a) The Reserve Bank of India
    (b) The Department of Economic Affairs
    (c) The Labour Bureau
    (d) The department of Personnel and Training

Labour Bureau is responsible for maintaining CPI(Industrial Workers), CPI(Rural Labourers) and CPI(Agricultural Labourers)


 

  1. The terms ‘Agreement on Agriculture’, ‘Agreement on the Application of Sanitary and Phytosanitary Measures’ and Peace Clause’ appear in the news frequently in the context of the affairs of the:

(a) Food and Agriculture Organization
(b) United Nations Framework Conference on Climate Change
(c) World Trade Organization
(d) United Nations Environment Programme

Peace Clause was quite in news.

Ref: http://www.thehindubusinessline.com/economy/wto-advantage-india-as-peace-clause-to-be-fully-rewritten/article6600200.ece


 

  1. Convertibility of rupee implies:

(a) being able to convert rupee notes into gold
(b) allowing the value of rupee to be fixed by market forces
(c) freely permitting the conversion of rupee to other currencies and vice versa
(d) developing an international market for currencies in India

Ref: http://www.investopedia.com/terms/c/convertibility.asp


 

  1. The Government of India has established NITI Aayog to replace the

(a) Human Rights Commission
(b) Finance Commission
(c) Law Commission
(d) Planning Commission

National Institution for Transforming India (NITI) replaced the erstwhile Planning Commission.


 

  1. In India the steel production industry requires the import of
  1. saltpetre
  2. rock phosphate
  3. coking coal
  4. All of the above

After going through several articles across a wide spectrum of newspapers it appears that rock phosphate is largely imported by the Fertilizer Industry. I could not find a single source linking rock phosphate and steel industry even remotely. Even the list of raw materials for steel industry does not mention rock phosphate or salt peter. So the logical answer appears to be option (c).


 

  1.  ‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to

(a) develop national strategies for the conservation and sustainable use of biological diversity
(b) improve banking sector’s ability to deal with financial and economic stress and improve risk management
(c) reduce the greenhouse gas emissions but places a heavier burden on developed countries
(d) transfer technology from developed Countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals

Basel  III is a set of reforms and measures to strengthen the supervision, regulation and risk management of the banking sector. They have been in news for the huge money that Indian Banks will require to switch to these norms.


  1. With reference to India 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 statement given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

The rate of growth of real Gross Domestic Product has fluctuated from about 7% in 2004-05 to 9.5% in 2005-06 then down to 6.7% in 2008-09.


 

 

      1. With reference to India 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?

      1. 1 only
      2. 2, 3 and 4
      3. 1 and 2
      4. 1, 3 and 4

Public debt is not part of Monetary Policy and OMOs together with CRR, SLR, Repo, Reverse Repo by RBI are certainly a part of their monetary policy. So answer should be option (c).


 

      1.  Which reference to inflation in India, which of the following statements is correct?

(a)  Controlling the inflation in India is the responsibility of the Government of India only

(b) The Reserve Bank of India has no role in controlling the inflation

(c) Decreased money circulation helps in controlling the inflation

(d) Increased money circulation helps in controlling the inflation

RBI plays a key/primary role in controlling inflation through its monetary policy. So option (a) and (b) are out. Now increased money supply shall only add fuel to the fire and send inflation skyrocketing. So the answer should be option (c).


 

      1.  The substitution of steel for wooden ploughs in agricultural production is an example of

(a) labour-augmenting technological progress

(b) capital-augmenting technological progress

(c) capital-reducing technological progress

(d) None of the above

The costlier steel needs more capital and hence it is a capital-augmenting progress.


 

      1. The problem of international liquidity is related to the non-availability of 

(a) goods and services
(b) gold and silver
(c) dollars and other hard currencies
(d) exportable surplus


 

  1. There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?

1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Expanding industries

Select the correct answer using the code given below.
(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 only
(d) 1,2,3 and 4

Introduction of new schemes would entail more spending and it goes just opposite to what we are trying to do i.e. reduce deficit. So we are left with option (a) and (c). Rationalising subsidies is certainly in vogue for reducing deficit. So the answer should be option (a).


 

      1. With reference to the Indian Renewable Energy Development Agency Limited (IREDA), which of the following statements is/are correct?

1. It is a Public Limited Government Company.
2. It is a Non – Banking Financial Company.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 or 2

IREDA has been awarded “Mini Ratna” status in 2015 by Ministry of  Renewable Energy. It is a public limited government company established as a Non Banking Financial Institution in 1987.  

Ref: www.ireda.gov.in

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