1indian Economy Basics

INDIAN ECONOMY BASICS
1. Consider the following statements.

1. Participatory Notes are derivative
instruments
2. They are used by Foreign Institutional
Investors (FIIs) who are registered with
SEBI.
3. They are used on Indian shares, but at a
location outside India.
Which of the above statements are correct?
(a) Only 1 & 2 (b) Only 1 & 3
(c) Only 2 & 3 (d) All of the above
2. Consider the following definition of urban area
according to Indian census.
1. minimum population of 5000.
2. at least seventy five percent of all working
population engaged is nonagricultural
pursuits.
3. a density of population of at least 400
persons per square kilometer.
4. such urban settlement are also known as
census towns.
5. all other places with a municipality,
cooperation, cantonment board etc. are
regarded as urban area.
(a) Only 1, 2 & 3 (b) Only 2, 3, 4 & 5
(c) Only 1, 3, 4 & 5 (d) All of the above
3. Indian Parliament accepted in December, 1954,
the socialistic pattern of society as the objective
of social and economic policy. Industrial policy,
as other policies, must therefore, be governed
by these principles and directions. Which of the
following is not true about the Industrial Policy
1956?
1. ScheduleA
of Industrial Policy Resolution
1956 proposed that all new industrial units
in the first category, save where their
establishment in the private sector has
already been approved, will be sent only
by the State.
2. Industries in the second category will be
those listed in ScheduleB.
With a view to
accelerating their future development, the
State will increasingly establish new
undertakings in these industries. At the
same time, private enterprise will also have

the opportunity to develop in this field,
either on its own or with State participation.
3. The third category C contained all the
remaining industries where industrial
development will be undertaken ordinarily
through the initiative and enterprise of the
private sector, though it will be open to the
State to start any industry even in this
category.
4. Industrial undertakings in the private sector
were not necessarily required to fit into the
framework of the social and economic
policy of the State and they would not be
subject to control and regulate in terms of
the Industries (Development and
Regulation) Act and other relevant
legislation.
Select the correct code:
(a) Only 2 (b) Only 2 & 4
(c) Only 4 (d) Only 3
4. Consider the following statements about the
National Manufacturing Policy (NMP).
1. The policy aims to create 100 million
additional jobs over the next decade.
2. National Investment and Manufacturing
Zones (NIMZs) has been accorded with
benefits like exemption from capital gains
tax, simplified procedures and easier exit
norms.
3. The policy aims to raise the share of
manufacturing to 25 percent of GDP by
2022.
(a) Only 1 & 2 (b) Only 2 & 3
Fiscal Policy.
1. Fiscal policy is the use of government
spending and taxation to influence the
economy.
2. The most immediate effect of fiscal policy
is to change the aggregate demand for
goods and services.
3. Fiscal policy is said to be loose or
expansionary when revenue is higher than
spending.
(a) Only 1 & 2 (b) Only 2 & 3
IAS TEST SERIES 2014 3

1. Gross Domestic Product (GDP), measures
the output of goods and services produced
within the geographical boundary of a
nation regardless of the residence of that
labour or owner of capital.
2. Gross National Product (GNP) is total
output of goods and services produced by
residents of a nation regardless of where
they live and work or where they own
capital.
Which of the above statements is/are correct?
(a) Only 1 (b) Only 2
(c) Both 1 & 2 (d) Neither 1 nor 2
7. Among the various sub sectors of the service
sector which claims the largest share in India's
GDP?
(a) Insurance, real estate and business services
(b) Trade, hotels, and restaurants
(c) Community, social, and personal services
(d) Construction
8. Consider the following statements about
unemployment:
1. Cyclical unemployment occurs when there
is not enough aggregate demand in the
economy to provide jobs for everyone who
wants to work.
2. Frictional unemployment occurs when a
labour market is unable to provide jobs for
everyone who wants one because there is
a mismatch between the skills of workers
and skills needed for jobs.
9. "Comparative Rating Index for Sovereigns"
(CRIS), is a welcome development in the area
of economic ratings of the various countries as
it is believed to give a clear picture of the
economic state of affairs of the countries
concerned. Consider the following statements
in this context:
1. A nation that has travelled down the rating
ladder in absolute terms may, in
comparative terms, be better off because
others have done even worse.
2. If nation X's absolute rating is unchanged,
but all other nations find their ratings rise,
then nation X's comparative rating would

go down; and an investor may well have
reason to consider pulling some of his
investment out of that nation.
3. The two factors on the basis of which CRIS
is constructed are Moody's foreign currency
credit ratings and the International
Monetary Fund's (IMF) GDP statistics, with
no purchasing power parity (PPP)
correction.
4. If a nation X's sovereign credit rating is
constant, and all other nations Moody's
ratings rise, then nation X's CRIS will rise.
Which of the following statements are correct?
(a) All 1, 2, 3 & 4 (b) Only 2, 3 & 4
(c) Only 1, 2 & 3 (d) Only 1, 3 & 4
Balance Of Payments (BOP).
1. Balance of payments accounts are an
accounting record of all monetary
transactions between a country and the rest
of the world.
2. Balance of payments data is concerned
with actual payments made and received
by an economy.
3. Balance of payments also includes financial
claims on and liabilities to the rest of the
world and transfers such as gifts.
(a) Only 1 & 2 (b) Only 2 & 3
11. Consider the following statements in the context
of instruments of Money Market Management:
1. A certificate of deposits is a time deposit,
commonly offered to consumers by banks,
thrift institutions, and credit unions and
which has a specific, fixed term usually,
and a fixed interest rate.
2. Commercial papers is a moneymarket
security issued (sold) by large corporations
to get money to meet short term debt
obligations, and is only backed by an
issuing bank or corporation's promise to
pay the face amount on the maturity date
specified on the note.
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3. Treasury bills can be purchased by any one
(including individuals) except State govt.
which are issued by RBI and sold through
fortnightly or monthly auctions at varying
discount rate depending upon the bids.
(a) All 1, 2 & 3 (b) Only 1 & 2
(c) Only 2 & 3 (d) Only 1 & 3
Government debt.
1. Government debt is one method of
financing government operations.
2. Government usually borrow by issuing
securities, government bonds and bills.
3. Government debt is an indirect debt of the
taxpayers.
(a) Only 1 & 2 (b) Only 2 & 3
13. The Central Statistics Office (CSO) of the
Ministry of Statistics and Programme
Implementation (MOSPI) released the new
series of the IIP with 200405
as its new base in
2011, replacing the IIP series with 19934
as
base. Which of the following is/are true about
the new IIP?
1. Besides a more recent year as its base, the
new series has an enlarged and more
representative basket to better capture the
industrial structure.
2. The number of items from the mining sector
included in the IIP with 200405
base has
gone down while the number of items from
manufacturing sector and electricity has
increased from that of 199394.
linked exchange rate system.
1. A linked exchange rate system is a type of

exchange rate regime to link the exchange
rate of a currency to another.
2. In this system government or central bank
actively interferes in the foreign exchange
market by controlling supply and demand
of the currency.
15. Consider the following statements about Fiscal
Deficit.
1. When a government's total expenditures
exceed the revenue that it generates
including money from borrowings it is
called fiscal deficit.
2. A large fiscal deficit leads to a weaker
national currency.
16. Which of the following is true about inflation?
1. It is a measure of rise in the general price
level or equivalently average level of prices
of all the goods and services in an economy.
2. It is often viewed as a reduction in the
purchasing power of money and it does
not necessarily mean that the prices of all
the goods and services in an economy rise.
3. In an inflationary situation, the average
level of prices rise with some items showing
excessive rise while others may not follow
suit.
4. A macroeconomic
policy measure mostly
used by the countries across the world, to
alleviate the adverse effects of inflation is
indexation.
(a) Only 1 & 2 (b) Only 2 & 4
1. Current Account Deficit is a measurement
of a country's trade in which the value of
goods and services it imports exceeds the
value of goods and services it exports.
2. The current account also includes net
income, such as interest and dividends, as
well as transfers, such as foreign aid.
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3. The current account is a calculation of a
country's foreign transactions, and along
with the capital account is a component of
a country's balance of payment.
(a) Only 1 & 2
(b) Only 1 & 3
(c) Only 2 & 3
(d) All of the above
18. Recently the definition of infrastructure lending
has been extended by the Reserve Bank of India.
Which of the following sector has been included
in this?
(a) Urban Public Transport
(b) Hotels and convention centres.
(c) Solid Waste Management
(d) Terminal markets.
1. The Jan Sankhya Sthirta Kosh focus on
involving the civil society in responsible
parenthood strategy called 'Prerna'.
2. Prerna is a monetary incentive strategy
aimed at pushing up the age of marriage
of girls and delay the birth of the first child
in the interest of health of young mothers
and infants.
3. The beneficiaries of this scheme must
undergo sterilisaiton after the second child.
4. The strategy can be implemented by NGOs
or community level organizations etc.
Which of the above statements is/are incorrect?
(a) Only 1 & 2
(b) Only 3
(c) Only 4
(d) None of the above
20. Which of the following provides correct
definition of GNP deflator?
(a) The ratio of GNP at current prices to the
GNP at constant prices.
(b) GNP at current prices divided by Wholesale
Price Index.
(c) GNP of current year divided by GNP of
the previous year.
(d) None of the above.

Engel curve.
1. It describes how household expenditure on
a particular good or service varies with
household income.
2. The shape of Engel curves depend only on
consumer characteristics.
3. For inferior goods, the Engel curve has a
negative gradient.
(a) Only 1 & 2 (b) Only 2 & 3
22. Consider the following statements about Lorenz
curve.
1. It represents inequality of the wealth
distribution.
2. Lorenz curve always starts at (0, 0) and
ends at (1, 1).
23. Misery Index is defined as:
(1) Inflation plus rate of unemployment
(2) Sometimes also as inflation plus rate of
unemployment plus rate of interest.
(3) Inflation as measured by Consumer Price
Index only
(4) Inflation as measured by Wholesale Price
Index only
(a) Only 1 & 2 (b) Only 2 & 4
Phillips curve.
1. It represents the relationships between
inflation and employment in an economy.
2. According to the Phillips curve, the lower
an economy's rate of unemployment, the
more rapidly wages paid to labour increase
in that economy.
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'Laffer Curve.
1. It shows the relationship between tax rates
and tax revenue collected by governments.
2. According to it, as taxes increase from low
levels, tax revenue collected by the
government also increases.
3. It also shows that tax rates increasing after
a certain point would cause people not to
work as hard or not at all, thereby reducing
tax revenue.
(a) Only 1 & 2 (b) Only 2 & 3
Open Market Operations also known as OMO.
1. Open Market Operations include buying
and selling of government securities in the
open market.
2. Open market operations are the principal
tools of monetary policy.
3. Central government has the main
responsibility for implementing Open
market operations.
(a) Only 1 & 2 (b) Only 2 & 3
27. Which of the following is/are true about
measurement of poverty in India?
1. Official estimates of poverty in India have
hitherto been made by the Planning
Commission on the basis of the
methodology that was recommended by the
Lakdawala Committee (1993).
2. The official poverty lines presently in use
are based on the per capita consumption
level, which in 197374,
was associated
with a commodity bundle that yielded a
specified level of calories.
3. The original link with calories was broken
over time, mainly because consumption
patterns have changed since 197374.
4. With rising living standards and accelerated

growth, a purely calorie based norm is no
longer regarded as appropriate.
(a) Only 1 & 4 (b) Only 1, 3 & 4
Stagflation.
1. Stagflation is a condition of slow economic
growth and relatively high unemployment
accompanied by a rise in prices, or inflation.
2. Stagflation can result from inappropriate
macroeconomic policies.
29. The European Commission has proposed a
temporary ban on which of the following
vegetables and fruits?
1. Mangoes
2. Eggplant
3. The taro plant
4. Bitter gourd
5. Bottle gourd
(a) Only 1, 2, 3 & 5
(b) Only 1, 2, 3 & 4
(c) Only 1, 3, 4 & 5
30. Consider the following statements in the context
of financial markets and intermediation:
1. Equity derivative is a derivative instrument
with underlying assets based on equity
securities whose value will fluctuate with
changes in its underlying asset's equity,
which is usually measured by share price.
2. Currency futures are contracts to buy or
sell a specific underlying currency at a
specific time and specific price in the future,
are standardized in terms of delivery date,
amount and contract terms.
3. Options Contract is a type of Derivatives
Contract which gives the buyer/holder of
the contract the right (but not the
obligation) to buy/sell the underlying asset
at a predetermined price within or at end
of a specified period.
(a) Only 1 & 2 (b) Only 2 & 3
(c) Only 1 & 3 (d) Only 1, 2 & 3
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31. Consider the following statements about Followon
Public Offer (FPO)?
1. It is an issuing of shares to investors by a
public company that is already listed on
an exchange.
2. Followon
Public Offer is both dilutive and
Nondilutive
types.
3. An FPO is essentially a stock issue of
supplementary shares.
(a) Only 1 & 2 (b) Only 1 & 3
32. Consider the following statements about Special
Drawing Rights (SDR).
1. SDRs also called paper gold are
international financing instrument created
by the International Monetary Fund (IMF).
2. SDR is backed by currency or precious
metal.
33. Which of the following is correct order (high to
low) of recipients of remittances for year 2013?
(a) India ChinaMexicoPhillippines.
(b) IndiaChinaPhillippines
Mexico.
(c) ChinaIndiaMexicoPhilippines.
(d) IndiaPhilippines
ChinaMexico.
34. Which of the following has been included in
the sensitive list of countries by the Reserve Bank
of India (RBI)?
(a) Hong Kong (b) Singapore
(c) UAE (d) Rwanda
35. The NEER and REER indices are used as
indicators of external competitiveness of the
country over a period of time. Consider the
following statements in this context:
1. REER is the weighted average of bilateral
nominal exchange rates of the home

currency in terms of foreign currencies.
2. NEER is defined as a weighted average of
nominal exchange rates, adjusted for home
and foreign country relative price
differentials.
(c) Both 1 and 2 (d) Neither 1 nor 2
36. National Commodity & Derivatives Exchange
(NCDEX) on 31 March 2014 has launched the
future contract for which of the following
crops?
(a) Bajra (b) Maize
(c) Wheat (d) Barley
37. Consider the top 5 economies with the highest
GDP per capita.
1. Qatar
2. Macao
3. Luxembourg
4. Kuwait
5. Brunei.
Which among the following is the correct order?
(a) 1 4
3
2
5
(b) 3 1
2
4
5
(c) 1 2
3
4
5
(d) 3 4
1
2
5
38. Capital inflows can be classified by instrument
(debt or equity) and maturity (shortterm
or
long term). Consider the following statements
in the same context:
1. Foreign investment comprising FDI and
portfolio investment represents nondebt
liabilities, while loans (external assistance,
ECBs, and trade credit) and banking capital
including NRI deposits are debt liabilities.
2. In India, portfolio is preferred over FDI
flows as the portfolio flows tend to be more

stable than FDI and other forms of capital
flows.
3. Rupeedenominated
debt is preferred over
foreign currency debt while medium and
longterm
debt is preferred over shortterm.
(a) Only 1 (b) Only 2 & 3
(c) Only 1 & 3 (d) All 1, 2 & 3
39. Consider the top four economies with highest
actual individual consumption per capita:
1. US
2. Bermuda
3. Cayman Islands
4. Hong Kong
Which among the following is the correct order?
(a) 1 4
3
2
(b) 2 1
3
4
(c) 1 2
3
4
(d) 2 4
1
3
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roles and responsibilities of Bharat Bill Payment
System (BBPS) as suggested by the Umesh Bellur
headed GIRO Advisory Group.
1. It will be a 'notforprofit
organization'
registered under the Companies Act 1956.
2. It will be responsible for carrying out
payment, clearing and settlement of the
transactions carried out at various
BBPOUs3.
BBPS shall act as the final dispute
resolution escalation point.

(a) Only 1 & 2 (b) Only 2 & 3
Bridge Loan.
1. It is a shortterm
(usually less than a year)
loan taken to cover the period between the
expiry of one loan and the beginning of
another loan.
2. Bridge loan is arranged mostly to
accomplish a purchase before the borrower
gets payment from a sale.
3. Bridge loans are normally more cheaper
than normal financing,.
(a) Only 1 & 2
(b) Only 2 & 3
(c) Only 1 & 3
42. The cheap and dear money policy relate to
changes in
(a) REPO rate
(b) Bank rate
(c) Both REPO rate and reverse REPO rate
(d) Both REPO rate and Bank rate
43. Consider the following statements about the P.
Vijaya Bhaskar Committee's recommendations
relating to Financial Benchmarks.
1. It has suggested Indian money and
currency markets should move their
benchmarks towards transactionbased
from pollbased
in an attempt to comb out
manipulation.
2. It has suggested establishing an
independent body for recommending
benchmark foreign exchange rate in order
to avoid any potential manipulation by the
bankers.
Foreign Portfolio Investors (FPIs), a newly
created class for overseas investors.
1. FPIs will be allowed to invest only in listed
nonconvertible
debentures or bonds issued
by governments in the infrastructure sector.

2. FPIs are barred from buying shortterm
government securities.
45. The Lok Sabha in 2012 gave its approval for
the Companies Bill 2011, paving the way for a
new modern company law. The main proposals
for the amendment of the act include:
1. It brings in the concept of a 'One Man
Company' in India.
2. It includes a more extensive range of
activities possible online.
3. The Mandatory Rotation of Auditors every
five years.
4. Corporate Social Responsibility has been
made mandatory
(a) Only 1 & 2 (b) Only 3 & 4
Government bonds or dated securities.
1. These are long term Government securities
with original maturity of one year or more.
2. Government securities are issued via
"Auctions" conducted by the Reserve Bank
of India.
3. The Short term Government securities are
called Treasury bills with maturities of less
than one year.
(a) Only 1 & 2 (b) Only 2 & 3
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Indian Banks Base Rate (IBBR) suggested by
RBI panel headed by Anand Sinha.
1. It is a fresh benchmark for floating interest
rate products.
2. In the beginning, IBBR may be used for
home loans.
3. It will be compared and released by RBI on
a periodical basis.
(a) Only 1 & 2
(b) Only 2 & 3
(c) Only 1 & 3
48. Consider the following statements about Ways
and Means Advances (WMA).
1. RBI provides Ways and Means Advances
(WMA) to the States in order to assist them
to overcome the temporary mismatches in
the cash flow of their receipts and
payments.
2. Time Period of WMA facility is maximum
90 days.
new corporate governance norms approved by
SEBI.
1. It has restricted independent directors to
serve as directors on a maximum of 7 listed
companies.
2. If a person is a whole time director in a
listed company then also he can serve on
seven boards.
3. There should be at least one woman director
on the Board of the company.
(a) Only 1 & 2
(b) Only 1 & 3
(c) Only 2 & 3
50. What are sovereign bonds?
(a) Sovereign bonds are bonds held by
sovereign countries which can be traded
as foreign exchange.
(b) Sovereign bonds are bonds floated by
sovereign countries which can be traded
as foreign exchange.
(c) Sovereign bonds are bonds floated by some
strong industrialized countries which are
bought by other countries and are
considered akin to foreign exchange
reserves.
(d) Sovereign bonds are bonds floated by
sovereign countries in any currency which
can be freely traded in the open market.
51. Recently the Bombay Stock Exchange (BSE)
launched an Institutional Trading Platform (ITP)

to help Small and Medium Enterprises (SMEs)
and startup
companies. Which of the following
is correct in this context?
1. It will help Small and Medium Enterprises
(SMEs) and startup
companies to list on
the bourses without an Initial Public Offer
(IPO).
2. It will facilitate capital raising by small and
medium enterprises.
3. It will provide easier entry and exit options
for investor's viz. angel investors, venture
capital funds, and private equity players.
(a) Only 1 & 2 (b) Only 1 & 3
Financial Action Task Force (FATF).
1. It is a Parisbased
multidisciplinary
and
intergovernmental
body whose purpose is
the development and promotion of national
and international policies to combat money
laundering and terrorist financing.
2. It was founded at the 1989 OECD
Economic Summit.
53. Non convertible debentures are:
(a) Debt instruments which acquire equity
status only at the investors' option.
(b) Debt instruments which acquire equity
status only with the permission of Registrar
of Companies.
(c) Debt instruments which acquire equity
status only on maturity.
(d) Debt instruments which retain their debt
character and cannot acquire equity status.
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54. As per RBI guidelines, which of the following
is covered under Nonperforming
Assets (NPA)?
1. Non performing
asset (NPA) is a loan or
an advance where Interest and/ or
installment of principal remain overdue for
a period of more than a year in respect of
a term loan.
2. It is a loan or an advance where the
account remains 'out of order' in respect of
an Overdraft/Cash Credit.
55. The Rashtriya Krishi Vikas Yojana (RKVY)?
1. To incentivize the states so as to increase
public investment in Agriculture and allied
sectors.
2. To provide flexibility and autonomy to
states is in the process of planning and
executing Agriculture and allied sector
schemes.
3. To ensure the preparation of agriculture
plans for the districts and the states based
on agroclimatic
conditions availability of
technology and natural resources.
4. To achieve the goal of maximizing the yield
gaps in important crops, through focused
interventions.
(a) Only 1, 2 & 3 (b) Only 1, 3 & 4
(c) Only 2, 3 & 4 (d) Only 1, 2 & 4
56. As per their risk profiles, Foreign Portfolio
Investors (FPIs) are divided into three categories.
Consider the following statements in this
context..
1. Foreign government and governmentrelated
foreign investors have been included
in categoryI
which has lowest risk.
2. Qualified Foreign Investors (QFIs) has been
included in categoryIII.
57. Which of the following is not true about services
sector?
(a) National Accounts classification of the
services sector incorporates trade, hotels,
and restaurants; transport, storage, and
communication; financing, insurance, real
estate, and business services; and
community, social, and personal services.
(b) Construction sector is not included in
service sector category in the National
Accounts classification.
(c) Only Pucca construction is included in
service sector category in the National
Accounts classification.
(d) In World Trade Organization (WTO) and
Reserve Bank of India (RBI) classifications,
construction is also included.
58. Consider the following statements
1. The components of GDI includes female live
expectancy, female adult literacy and gross
enrolment ratio as well as female per capita
income.
2. The greater the difference between HDI and
GDI the greater is the gender equality.
Which of the above statements are incorrect?
59. The Indian President has recently launched
Rupay, India's own card payment network.
Consider the following statements related to it.
1. The new payment network has been
developed by the National Payments
Corporation of India (NPCI), a not for
profit company envisioned by the RBI.
2. It covers all the Automated Teller Machines
(ATMs) and most of the retail and ecommerce
platform.
3. This scheme provides flexibility to card
issuing banks to issue special purpose cards
like kisan cards, milk procurement cards
etc.
4. The system is expected to increase the
dependence on cash and cheque modes of
settlements within the country.
(a) Only 1, 3 & 4 (b) Only 1, 2 & 3
(c) Only 2, 3 & 4 (d) All of the above

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60. The Government is extremely concerned about
the old age income security of the working poor
and is focused on encouraging and enabling
them to join the NPS. Consider the following
statements in the context of NPS:
1. The NPS was opened up for all citizens in
India to join on a voluntary basis.
2. Swavalamban Scheme is a cocontributory
pension scheme whereby the central
government would contribute a sum of
Rs.1,000 per annum in each NPS account
opened having a saving of Rs. 1,000 to
Rs.12,000 per annum.
objectives and strategies of the 12th Five Year
Plans.
1. Its strategy for growth depends crucially
on productivity gains as one of the key
drivers of growth.
2. Development cannot take place without
additional energy and the energy
requirement of development will have to
be reconciled with the objective of
protection of environment.
3. Eliminate gender and social gap in school
enrolment and between SCs, STs, Muslims
and the rest of the population by the end
of the plan.
4. To connect all villages with all weather
roads by the end of the Twelfth Plan.
5. To complete eastern and western Dedicated
Freight corridors by the end of the plan.
Which of the above statements are incorrect?
(a) Only 1, 2 & 3
(b) Only 2, 3 & 4
(c) Only 3, 4 & 5
(d) None of the above
62. The UN Conference on Sustainable
Development (UNCSD) or Earth summit 2012,

was the third international conference on
sustainable development aimed at reconciling
the economic and environmental goals of the
global community. The conference's objectives
include:
1. securing renewed political commitment for
sustainable development.
2. assessing the progress and implementation
gaps in meeting the previous commitments.
3. addressing new and emerging challenges.
4. they also agreed on Long term Cooperative
Action LCA.
(a) Only 1, 2 & 3
(b) Only 2 & 3
(c) Only 3 & 4
1. High levels of lead primarily from vehicle
emission have been identified as the greatest
environmental damage in a number of large
cities in the developing world.
2. High levels in adults are linked with
hindered neurological development
including lower IQ and agility.
3. In children, the consequence include risks
of higher blood pressure and higher risks
of heart attacks, strokes and death.
Which of the above statement are incorrect?
(a) Only 1 & 2 (b) Only 2 & 3
(c) Only 1 & 3 (d) None of the above
64. Consider the following statement about the
recent study of WHO.
1. The national capital has the highest
concentration of particulate matters less
than 2.5 microns form of air pollution which
is considered most serious.
2. This form of concentration consists of tiny
particles that put people at additional risk
of respiratory diseases and other health
problems.
3. Many factors contribute to this increase
including reliance on nuclear power.
Which of the above statement are correct?
(a) Only 1 & 2
(b) Only 2 & 3
(c) Only 1 & 3
GS SCORE
65. The RBI has recently issued the guidelines to
allow the minors of age above 10 years to
independently open and operate saving bank
accounts and use other facilities like ATM and
cheque books. Indentify the incorrect statement.
(a) All minors can now open a saving/fixed/
recurring bank deposit account through
either his/her natural guardian or legally
appointed guardian.
(b) The banks can also decide on the minimum
documents which are required for opening
of accounts by minors.
(c) Banks with prior permission of RBI can also
offer additional banking facilities like
internet banking subject the safeguards that
minor accounts are not allowed to be
overdrawn and that these always remain
in credit.
(d) On attaining majority, the minor would be
required to confirm the balance in his/her
account.
1. Agreement on Agriculture is a multilateral
trade negotiation under the aegis of World
Bank.
2. The agreement is concerned with reduction
in subsidies given by different countries to
their agricultural sector.
concept of money supply calculated by RBI:
1. M1 includes currency with public as well
as deposits (time and demand) with the
banks.
2. M3 which also includes post office deposits
is known as broad money.
1. RBI deposits consists of bank's deposits with
RBI as well as deposits of some individual

people.
2. Reserve money includes the deposits with
RBI also.
69. Consider the following objectives of the National
Program For the Health care of the ELDERLY
(NPHCE) in India.
1. To provide an easy access to promotional,
preventive, curative and rehabilitative
services through community based primary
healthcare
(PHC) approach
2. To identify health problems in the elderly
and provide appropriate health
interventions in the community with a
strong referral backup support
3. To build capacity of the medical and
paramedical professionals as well as the
caretakers
within the family for providing
healthcare
to the senior citizen
4. To provide referral services to the elderly
patients through district hospital regional
medical institutions
5. Convergence with National Rural Health
Mission (NRHM), Ayush and other line
departments like Ministry of Social Justice
and Empowerment.
(a) Only 1, 2, 3 & 4 (b) Only 2, 3, 4 & 5
70. Recently Reserve Bank of India (RBI) issued the
final guidelines for licensing of new private
sector banks. Consider the following statements
and choose the correct options1.
Entities both from private and public sector
shall be eligible to set up a bank through a
whollyowned
nonoperative
financial
holding company (NOFHC).
2. The NOFHC will be registered as a nonbanking
finance company with the RBI.
3. The new banks must meet the criteria of
having 50% of its branches in unbanked
rural areas with population upto 9,999.
4. New bank should achieve priority sector

lending target of 40%.
(a) Only 1, 2 & 4 (b) Only 1, 2 & 3
GS SCORE
1. The QFIs would be individuals, groups or
associations residing in a foreign country
that is compliant with the Financial Action
Task Force (FATF) and that is a signatory
to The International Organisation of
Securities Commissions's (IOSCO)
multilateral MoU.
2. The RBI would grant general permission to
the QFIs to invest in the Portfolio Investment
Scheme (PIS) route similar to FIIs.
3. The individual and aggregate investment
limit for QFIs shall be 25 per cent and 50
per cent respectively of the paidup
capital
of an Indian company.
4. The QFIs shall be allowed to invest through
the SEBIregistered
Qualified Depository
Participant (DP), with the QFI required to
open only one demat account and a trading
account with any of the qualified DP and
make purchase and sale of equities through
that DP only.
(a) Only 1, 2 & 3
(b) Only 1, 2 & 4
(c) Only 3 & 4
(d) All 1, 2, 3 & 4
72. Managed currency is said to be the
(a) Currency, the exchange rate of which can
be managed easily.
(b) Currency, the intrinsic value of which can
be managed by increasing or decreasing its
supply.
(c) The government of the country intervenes
in some way or the other to influence the
prevailing rate of exchange.

(d) Quota of currency to be managed by the
Central Bank at times of deflation.
73. Out of the following groups, with which group
India's trade is maximum?
(a) OECD
(b) OPEC
(c) Eastern Europe
(d) Developing Countries
74. Which one of the following statements is correct
with reference to FEMA in India?
(a) The Foreign Exchange Regulation Act
(FERA) was replaced by Foreign Exchange
Management Act in the year 2001.
(b) FERA was given as unset clause of one year
till 31st May, 2002 to enable Enforcement
Directorate to complete the investigation of
pending issues.
(c) Under FEMA, violation of foreign exchange
rules has ceased to be a criminal offence.
(d) As per the new dispensation, Enforcement
Directorate can arrest and prosecute the
people for the violation of foreign exchange
rules.
Cooperative Banks in India.
1. They are required to assist the weaker
sections and agricultural sector.
2. They are organized under the state
government's laws.
3. They have access to liberal financial
assistance from NABARD
4. They are organized in a tiered structure.
(a) 1, 3 & 4 are correct
(b) 1, 2 & 4 are correct
(c) 1 & 3 are correct
(d) All of the above are correct
76. The Net Asset Value (NAV) of the units of a
mutual fund serves as:
(a) Market price of the unit
(b) Value of assets of the mutual fund
(c) Face value of the unit
(d) Price at which the units are offered to public
through NFO.
77. Which of the following facts can effect the value
of sensex?
1. GDP growth rate
2. Foreign investment
3. Political stability
4. Literacy rate
(a) Only 1, 2 & 4 (b) Only 1, 2 & 3
(c) All of the above (d) None of the above
GS SCORE
78. Which of the following organisation facilitate
demat trading in the stock exchanges?
1. National Securities Depository Limited
2. National Informatics Centre
79. The Phillip's curve is the schedule showing the
relationship between:
(a) aggregate supply and demand
(b) total savings and investment
(c) the rate of unemployment and rate of
inflation
(d) demand for and supply of loanable funds
80. The index of a stock exchange measures the
change in:
(a) Size and performance of the selected
companies.
(b) Share prices of all the companies listed in
the stock exchange.
(c) Value of real assets of the selected
companies.
(d) Market capitalization of the selected
companies.
81. Which of the following statements define the
difference between NEFT and RTGS?
1. NEFT facilitate transfer of funds from bank
branch to other bank branch of the same
bank whereas RTGS allows transfer of
funds from one branch to any other bank
branch.
2. NEFT allows transfer of funds of individuals
only whereas RTGS allows transfer of funds
of individuals, firms and corporate.
3. The minimum amount to be remitted
through RTGS is '2 lakh' whereas there is
no minimum amount in NEFT.

(c) Only 3 (d) Only 1 & 3
82. Consider the following statements related to nofrill
savings account scheme launched by RBI:
1. Nofrills
savings account enables excluded
people to open a savings account thus lead
to financial inclusion.
2. Cheque book and ATM facilities are not
provided in nofrill
savings account scheme.
3. Nofrill
savings account scheme is provided
by public sector banks in rural areas only.
(c) Only 1 & 3 (d) Only 2 & 3
83. Consider the following statements related to
Basel III norms and select the correct answer:
1. Basel III is a set of reform measures,
developed by the Basel Committee to
strengthen the regulation, supervision and
risk management of the banking sector.
2. The highest form of lossabsorbing
capital
known as common equity has been raised
under Basel III from 2% to 4.5% of total
riskweighted
assets.
3. Banks will be required to hold a capital
conservation buffer of 2.5%.
4. Deadline for implementation of Basel III in
India is 2016.
(a) Only 1, 2 & 3 (b) Only 2, 3 & 4
84. Consider the following statements:
1. Current accounts deposits are payable on
demand but can be drawn upon by cheque
without any restriction.
2. Fixed Account Deposits are not payable on
demand and do not enjoy cheque facilities.
3. Savings Accounts Deposits are payable on
demand and also withdrawable by cheque,
but with certain restrictions on the number
of cheques issued in a period of time.
(a) Only 1 & 2 (b) Only 2 & 3
concept of Non Resident Indian and select the

correct answer:
1. It is an economic concept and refers only
to the tax status of an person who has not
resided in India for a specified period for
the purposes of the Income Tax Act.
GS SCORE
2. For the purposes of the Incometax
Act,
"residence in India" requires stay in India
of at least 182 days in a calendar year or
365 days spread out over four consecutive
years.
3. NRI are the citizens of India but their
economic interest lies in other countries.
(a) Only 1 & 2 (b) Only 2 & 3
"merit and demerit" goods provided by
government?
1. Merit goods are goods that would be
provided in a free market system, but would
almost certainly be underprovided.
2. Demerit goods are goods whose cost fall
on people other than those consuming the
goods.
3. Example of merit and demerit goods
include: education and cigarette
respectively.
(a) Only 1 & 3 (b) Only 2 & 3
87. Consider the following statement about
Consolidated Fund of India:
1. The Consolidated Fund of India has been
established under Article 267 (1) of the
Constitution.
2. All revenues received by the Government
by way of taxes nonTax
Revenues are
credited into the Consolidated Fund.
3. The fund is held on behalf of President by
the Cabinet Secretary.

88. Which of the following are correctly matched?
1. Different proceeds of taxes levied by the
government Revenue
Account
2. Government borrowings from the Reserve
Bank and treasury billsCapital
Account
3. Divestment of equity holding in public sector
enterprises Revenue
Account
4. Market loans raised by the government Capital
Account
(a) Only 1 & 3 (b) Only 1 & 2
13th finance commission recommendations and
select the correct answer:
1. The share of states in net proceeds of
shareable central taxes shall be 32 per cent
in each of the financial years from 201011
to 201415.
2. Local bodies should be transferred 2.28%
of the divisible pool of taxes.
3. State taxes should be divided between states
and local bodies.
(a) Only 1 & 2 (b) Only 2 & 3
90. In which of the following ways the Government
could provide/redesign fiscal incentives for
R&D activities in the country?
1. Government should provide Tax incentives
instead of tax credit.
2. There should be Credit on inputs/capital
goods used for R&D outside the factory
premises.
91. A strong intellectual property regime is a
prerequisite for creation of global IP from India.
It has also become a requirement under WTO.
Which of the following steps need to be taken
in this context?
1. Improve IP management and protection
mechanisms.
2. Develop global information database on IPs
accorded.
3. Strengthen and modernise the process of
patent examination and according patents.
(a) Only 1 & 2 (b) Only 2 & 3
GS SCORE
92. Indian capital goods industry is facing severe
competition from Chinese companies over the
last few years. The major factors responsible
for increasing Chinese competitiveness are?
1. Artificially appreciated Chinese currency.
2. Much lower interest rates.
3. Simpler labour laws.
4. Tax advantages and subsidies given by the
Government.
(a) Only 1, 2 & 3 (b) Only 2, 3 & 4
93. The present business regulatory environment is
seriously deficient for various reasons. Which
of the following are correct in this context?
1. Lack of coherence in business regulatory
governance across country.
2. Absence of national repository of business
regulations.
3. Ambiguous nature and vast scope of
business regulations.
(a) Only 1 & 2
(b) Only 2 & 3
(c) Only 1 & 3
94. Which of the following are the key challenges
identified in 12th five year plan faced by Indian
industries?
1. Many segments of the industry, especially
MSMEs, have limited information and
access to risk capital for sourcing/
developing and internalizing new
technologies.
2. Absence of national agenda and policy

framework to support innovation.
3. The Indian Industry has not given sufficient
importance to the documentation of
knowledge and creation of IP.
(a) Only 1 & 2 (b) Only 2 & 3
95. Policy interventions for MSMEs must be tailored
to their conditions. Government policies for
MSMEs should therefore help them improve
their technological capabilities by focusing on
which of the following steps.
1. Providing access to risk capital.
2. Improving Industry/research institute/
academia interaction, mostly in clusters
3. Stimulating demand/providing scale
through similar treatment in government
purchases.
(a) Only 1 & 2 (b) Only 2 & 3
96. Consider the following statements about 'ValueAdded
Tax VAT'.
1. VAT is a type of consumption tax.
2. The amount of valueadded
tax that the
user pays is the cost of the product, less
any of the costs of materials used in the
product that have already been taxed.
(a) Only 1
(b) Only 2
(c) Both 1 & 2
(d) Neither 1 nor 2
Minimum Alternate Tax.
1. The concept of MAT was introduced under
the Income Tax Act.
2. The intent to introduce MAT was to ensure
that no tax payer with substantial income
can avoid tax liability.
Which of the above statements is/are correct?:
(a) Only 1
(b) Only 2
(c) Both 1 & 2
(d) Neither 1 nor 2
98. Which of the following features about the Right
of Children to Free and Compulsory Education
Act (RTE Act) are correct?
1. Every child of the age 614

years shall have
a right to free and compulsory education
in a neighbourhood school till the
completion of elementary & secondary
education.
GS SCORE
2. The appropriate government and the local
authority shall establish within such area
or limits of neighbourhood three years.
3. If shall be the duty of every guardian or
parent to admit or cause to be admitted to
his or her child or ward to an elementary
and secondary education in the
neighbourhood school.
4. No teacher shall engage himself or herself
in private tuition or private teaching
activity.
5. No school or person shall while admitting
a child, collect any capitation fee and
subject the child or his or her parent or
guardian to any screening procedure.
(a) Only 1, 2 & 3
(b) Only 3, 4 & 5
(c) Only 2, 4 & 5
99. Which of the following is true about Industrial
Policy resolutions of India since independence?
1. The Industrial Policy Resolution 1948 was
the first such resolution after India's
independence.
2. The Industrial Policy Resolution 1948
recognized the need for mixed economy,
i.e. need for combined participation of the
public and private sectors for
industrialization of India.
3. The Mahalanobis strategy of industrial
growth adopted in the Second five year
plan envisaged development of labour
intensive industries as there was deficiency
of capital in India.
4. MontekManmohan
Strategy of Industrial
development adopted in the 1991 industrial
policy was based on the pillars of
liberalization, privatization and
globalization, but it departed from
trickledown theory of the Mahalanobis
strategy.
(a) Only 1 & 2
(b) Only 3
(c) Only 4
(d) Both 3 & 4
100. Select the correct facts about the contribution
of services sector in GDP.
1. Countries like the UK, USA, and France
have the highest share of services in GDP
at above 78 per cent.
2. India's share of 57 per cent is much below
than that of China at 71.8 per cent.
3. India is the topmost country in terms of
increase in its services share in GDP (7
percentage points) followed by Spain and
Canada (5.3 percentage points each)
4. None of the above
(a) Both 1 & 3 (b) Only 3
(c) Only 1 (d) Only 4

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INDIAN ECONOMY BASICS

1. Consider the following statements.

same time, private enterprise will also have

IAS TEST SERIES 2014 3

6. Consider the following statements.

then nation X's comparative rating would

1. A linked exchange rate system is a type of

(d) None of the above.

4. With rising living standards and accelerated

IAS TEST SERIES 2014 7

nominal exchange rates of the home

flows as the portfolio flows tend to be more

resolution escalation point.

by governments in the infrastructure sector.

launched an Institutional Trading Platform (ITP)

(c) Only 2, 3 & 4 (d) All of the above

Development (UNCSD) or Earth summit 2012,

RBI as well as deposits of some individual

4. New bank should achieve priority sector

prevailing rate of exchange.

(a) Only 1 (b) Only 2

concept of Non Resident Indian and select the

the Cabinet Secretary.

2. Absence of national agenda and policy

1. Every child of the age 614

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