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Upsc Civil Services Prelims 2012 Paper

Upsc Civil Services Prelims 2012 Paper

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Published by Sree Kanth Reddy
UPSC 2012 model paper of GROUP 1
UPSC 2012 model paper of GROUP 1

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Published by: Sree Kanth Reddy on May 27, 2012
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UPSC CIVIL SERVICES PRELIMS 2012 PAPER - I SOLUTIONS WITH EXPLANATIONS
1. Under which of the following circumstances may “capital gains” arise?
 1. When there is an increase in the sales of a product2. When there is a natural increase in the value of the property owned3. When you purchase a painting and there is a growth in its value due to increase in its popularitySelect the correct answer using the codes given below:(a) 1 only (b) 2 and 3 only(c) 2 only (d) 1, 2 and 3Ans. (b)Exp: Capital gains arise from sale of capital investments. It can be a home, a farm, a business,shares, mutual fund, jewellery, art and paintings, bonds, other real estate, etc. It excludes items forpersonal use like apparel, motor vehicle, furniture. It also excludes stock-in-trade for business andagricultural land.
Capital Gains Tax can be triggered by the ‘Transfer’ of above mentioned assets, which includes:
 
Acquisition of an asset
Sale of asset
Exchange of asset
Relinquishing of asset
Extinguishment of rights of an asset, etcMoreover this tax is related to the value of the asset rather than the quantum of sales of it,therefore statement 1 cannot be true rather statement 2 and 3 are true.2. Which of the following measures would result in an increase in the money supply in the economy?1. Purchase of government securities from the public by the Central Bank2. Deposit of currency in commercial banks by the public3. Borrowing by the government from the Central Bank4. Sale of government securities to the public by the Central BankSelect the correct answer using the codes given below:(a) 1 only (b) 2 and 4 only(c) 1 and 3 (d) 2, 3 and 4
 
Ans. (c)Exp: Money supply is increased in the system when currency is pushed into the market by any way.As per the given options statements 2 and 4 lead to the absorption of currency from the marketwhile actions following statements 1 and 3 would release it into the market, therefore the answerhas to be C.3. Which of the following would include Foreign Direct Investment in India?1. Subsidiaries of foreign companies in India2. Majority foreign equity holding in Indian companies3. Companies exclusively financed by foreign companies4. Portfolio investmentSelect the correct answer using the codes given below:(a) 1, 2, 3 and 4 (b) 2 and 4 only(c) 1 and 3 only (d) 1, 2 and 3 onlyAns. (d)Exp: The FDIs are categorized into vertical and horizontal based on how the subsidiary companyworks in par with the parent investor.Vertical FDIs happen when a corporation owns some share of the foreign enterprise. The localenterprise could either be supplying the input or selling finished goods to the parent corporation.The subsidiary here helps the parent company to grow more.When the MNCs kick off similar business operations in different countries it becomes horizontalForeign Direct Investment. It is actually a cloning that is happening here. Both the countries enjoythe same share of growth.(Source moneyguideindia.com)Further Wikipedia draws a distinction between FDI and portfolio investment as well. According toWikipedia Foreign direct investment (FDI) is direct investment into one country by a company inproduction located in another country either by buying a company in the country or by expandingoperations of an existing business in the country. Foreign direct investment is in contrast to portfolioinvestment which is a passive investment in the securities of another country such as stocks andbonds.From the above two sources it can be inferred that the answer to this question should be D.4. Consider the following statements:
 
The price of any currency in international market is decided by the1. World Bank2. Demand for goods/services provided by the country concerned3. Stability of the government of the concerned country4. Economic potential of the country in questionWhich of the statements given above are correct?(a) 1, 2, 3 and 4 (b) 2 and 3 only(c) 3 and 4 only (d) 1 and 4 onlyAns. (c)Exp: There is hardly any direct role of the World Bank in deciding the price of any currency, apartfrom the case of US dollar which the World Bank uses as its official currency. However the reason forthis is also related to the economic potential of the US economy rather than something else. Furtherstatement 2 and 4 imply almost the same thing yet statement 4 is more explicit. Therefore out of thegiven options, C option seems to be the best choice.5. The basic aim of Lead Bank Scheme is that(a) Big banks should try to open offices in each district(b) There should be stiff competition among the various nationalized banks(c) Individual banks should adopt particular districts for inten¬sive development(d) All the banks should make intensive efforts to mobilize depositsAns. (c)6. Consider the following:1. Assessment of land revenue on the basis of nature of the soil and the quality of crops2. Use of mobile cannons in warfare3. Cultivation of tobacco and red chilliesWhich of the above was/were introduced into India by the English?(a) 1 only (b) 1 and 2(c) 2 and 3 (d) None

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