QUESTIONS

1. Which of the following statements Which of the above statements is/are correct?
is/are correct regarding monetary (a) 1 only
aggregates and Money supply in the
(b) 2 only
economy?
1. Narrow money is the most liquid part of the (c) Both 1 and 2
money supply because demand deposits (d) Neither 1 nor 2
can be withdrawn anytime during the
banking hours.
4. Consider the following statements
2. Money supply is the product of Money
multiplier and Reserve money. regarding the National Adaptation
3. Reserve money is also called High Powered Fund on Climate Change (NAFCC):
Money. 1. The projects related to adaptation in sectors

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Select the correct answer using the code give such as agriculture, animal husbandry,
below: water, forestry, tourism, etc. are eligible for
funding under NAFCC.
(a) 1 only
2. National Bank for Agriculture and Rural
(b) 1 and 2 only
Development (NABARD) is the National
(c) 3 only O Implementing Entity (NIE) for this scheme.
(d) 1, 2 and 3 Which of the above statements is/are correct?
(a) 1 only
2. If Reserve Bank of India (RBI) wants
2 only
to inject liquidity in the economy, (b)
SC
which of the following measures will (c) Both 1 and 2
it adopt? (d) Neither 1 nor 2
1. Selling Government Securities
2. Net FOREX purchases by the RBI 5. Consider the following statements
3. Reducing Statutory Liquidity Ratio (SLR) regarding the applications of crop-
GS

Select the correct answer using the code given residue:

below: 1. 1. Bio-char briquettes
(a) 1 only 2. 2. Brick kiln
(b) 2and 3 only 3. 3. Soil mulching
(c) 1 and 3 only Which of the above statements are correct?
(d) 1, 2 and 3
(a) 1 and 2 only
(b) 2 and 3 only
3. With reference to India’s commitment
under Nationally Determined (c) 1 and 3 only
Contribution of the Paris Agreement, (d) 1, 2 and 3
consider the following statements:
1. To reduce its emission intensity of GDP by 6. As per the India State of the Forest
33 to 35 percent below 2015 levels by the
year 2030.
Report, 2019, consider the following
statements:
2. Increase its forest cover and additional
carbon sink equivalent to 2.5 to 3 billion 1. The tropical dry deciduous forest is high in
tons of carbon dioxide by 2030. Arunachal Pradesh.

3 P2020_CRCA_500/D23
 2. Tropical Littoral and swamp forests are high 9. A decrease in Bank Rate generally
in Uttar Pradesh.
indicates that:
3. Tropical Evergreen forest is high in Kerala
followed by Karnataka. (a) Market rate of interest is likely to grow.

Which of the above statements are correct? (b) Central bank is no longer making loans to
(a) 1 and 2 only commercial banks.

(b) 1 and 3 only (c) Central bank is following an easy money

(c) 2 and 3 only policy.

(d) 1, 2 and 3 (d) Central bank is following a tight money

policy.
7. Shannon-Weiner Index is related to
which of the following? 10. With reference Female Participation in
(a) It is used to measure visibility in smog in Labour Market, consider the following
polluted regions
statements:

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(b) It is used for measuring species richness
and abundance. 1. Female labour force participation rate
(LFPR) for productive age-group (15-59
(c) It is used to measure the rate of biomass
transfer in the food chain. years) as per usual status shows a declining
trend between 2011-12 and 2017-18.
(d) None of the above
2. The ratio of female to male labour force
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8. Which of the following is not the role decreased between 2011-12 and 2017-18.
of RBI: Which of the above statements is/are correct?
Bank of the banks
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(a) (a) 1 only
(b) Credit controller
(b) 2 only
(c) Custodian of foreign currency
(c) Both 1 and 2
(d) Allocating funds directly to the farmers for
agricultural development (d) Neither 1 nor 2
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P2020_CRCA_500/D23 4
 ANSWER HINTS

Answer Key

Q. 1 (d) Q. 3 (b) Q. 5 (d) Q. 7 (b) Q. 9 (c)

Q. 2 (b) Q. 4 (c) Q. 6 (a) Q. 8 (d) Q. 10 (a)

1. Correct option: (d) Explanation:

Explanation:  Statement 1 is incorrect: Purchase of G-Sec

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Supplementary notes:
Monetary aggregates:
 Narrow Money (M1) = Currency with the
public + Demand Deposits of public in Banks
Narrow money is the most liquid part

of the money supply because demand
O economy through following measures:
deposits can be withdrawn anytime during
the banking hours.
M2 = M1 + Post Office Savings
SC

 Broad Money (M3) = Narrow money + Time
deposits of public in Banks
 M4 = M3 + Post Office Savings
 Reserve Money (M0) = Currency in circulation
+ Bankers’ deposits with the RBI + ‘Other’
deposits with the RBI + Cash reserves of banks
GS
by RBI increases liquidity, as it releases money
in return.
Supplementary notes:
 Liquidity condition in the economy: Systemic
liquidity in 2019-20 has been largely in surplus
since June 2019. Liquidity was injected in the
 Four Open Market Operations (OMOs)
 One US$ 5 billion buy/sell swap auction
for three year term
 RBI’s FOREX operations, augmenting
domestic rupee liquidity
 Reducing Statutory Liquidity Ratio (SLR)
 Moderation in currency demand after
two years of high demand following
demonetisation.

with themselves
 OMO is the sale and purchase of government
 Reserve Money is all the Cash in the securities (G-Sec) and treasury bills by RBI.
economy. Purchase of G-Sec by RBI increases liquidity,
 It’s also called High Powered Money. as it releases money in return.

 M2 and M4 are relatively irrelevant indicators,
due to less prominence of Post Office
Savings.
 Factors affecting Money supply:
 Monetary Base: Monetary Base depends
on Reserve Money. Money supply moves
in the same direction as Reserve Money.
 Money Multiplier (m): Measured as a
ratio of M3/M0.
 Money supply is the product of Money
multiplier and Reserve money.
2. Correct Option (b)
 OMO raise G-Sec bond prices. As bond
prices go up, the yields go down.
 RBI also conducted a ‘Special OMO’ where
there was simultaneous sale (of short term
securities) and purchase (of long term
securities).
 This was done to reduce the difference
between short and long term yields.
 A foreign exchange Buy/Sell swap comes
under RBI’s Liquidity Management Framework
(LMF).
 Banks sell dollars to the RBI at a dollar-
rupee exchange rate fixed by the central
bank. In turn the RBI will pay rupees to

P2020_CRCA_500/D23 6
 the participating banks at the current spot
rate (thereby increasing liquidity in the
system).
 Three years later, the banks would buy back
the dollars, in rupee terms, at an exchange
rate that includes the cut-off premium.
 A Net FOREX purchases by the RBI causes
return of currency to the banking system.
 SLR is the portion of net demand and time
liabilities (NDTL) which banks are required to
park in treasury bills and other instruments. By
reducing the level of SLR,RBI can increase
funds available with commercial banks,
resulting in increased investment. This can fuel
growth and demand.
3. Correct Option: (b)
Explanation:
 Statement 1 is incorrect: In its NDC, India
has promised to reduce its emission intensity
of GDP by 33 to 35 percent below 2005 levels
by the year 2030.
O material for animals, livestock feed, soil
Supplementary notes:
India’s Nationally Determined Contribution
 India submitted its Nationally Determined
Contribution (NDC) under the Paris Agreement
SC
on a “best effort basis” keeping in mind the
developmental imperatives of the country.
 In its NDC, India promised to:
 Reduce its emission intensity of GDP by
33 to 35 percent below 2005 levels by
the year 2030;
GS
 40 percent of cumulative electric power
installed capacity would be from non-fossil
fuel sources by 2030 and
 Increase its forest cover and additional
carbon sink equivalent to 2.5 to 3 billion
tons of carbon dioxide by 2030.
 The Paris Agreement is to be implemented
in the post-2020 period in line with
the guidelines adopted under the Paris
Agreement Work Programme.
4. Correct Option: (c)
Explanation:
 Both statements are correct
Supplementary notes:
National Adaptation Fund on Climate
Change
7 P2020_CRCA_500/D23
 It is a Central Sector Scheme which was set up
in the year 2015-16. The overall aim of NAFCC
is to support concrete adaptation activities
that mitigate the adverse effects of climate
change. The activities under this scheme are
implemented in a project mode.
 The projects related to adaptation in sectors
such as agriculture, animal husbandry,
water, forestry, tourism, etc. are eligible for
funding under NAFCC.
 National Bank for Agriculture and Rural
Development (NABARD) is the National
Implementing Entity (NIE).
5. Correct Option: (d)
Explanation:
RE
 All statements are correct
Supplementary notes:
Applications of Crop Residues
 Crop residues are primarily used as bedding
mulching, bio-gas generation, bio-manure/
compost, thatching for rural homes, mushroom
cultivation, biomass energy production, fuel
for domestic and industrial use, crop residue-
based biochar briquettes in local industries,
brick kiln and hotel/Dhaba as an alternate
fuel etc.
 Green bonds are debt securities issued by
financial, non-financial or public entities where
the proceeds are used to finance 100 percent
green projects and assets.
 Climate Bonds remain focused on green
bonds, which are specifically linked to climate
change mitigation, adaptation and resilience.
India has the second-largest Emerging
green bond market after China.
6. Correct Option: (a)
Explanation:
India State of the Forest Report 2019
 It assessed the Shannon-Weiner Index for
16 bio-diverse areas.
 The Index shows that:
 Tropical Evergreen forest is high in
Karnataka followed by Kerala.
 Tropical moist deciduous forests cover is
high in Arunachal Pradesh, Karnataka, and
Maharashtra.
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P2020_CRCA_500/D23
  Tropical dry deciduous forest is high in  When RBI decreases the bank rate, the cost of
Arunachal Pradesh and semi-evergreen borrowing for banks fall and this credit volume
forests are high in Karnataka. gets expanded leading to increase in supply of
 Tropical Littoral and swamp forests are money.
high in UP
 Thus, decrease in Bank rate reflects easing of
 Tropical thorn forests are seen widely in RBI monetary policy.
Andhra Pradesh.

10. Correct Option: (a)

7. Correct Option: (b)
Explanation:
Explanation:
Female Participation in Labour Market
Shannon-Weiner Index
 According to NSO-EUS and PLFS estimates,
 India is one of the 17 megadiverse countries
female labour force participation rate (LFPR)
in the world. This is evident in the Shannon-
Weiner Index for Diversity which is used for for productive age-group (15-59 years) as per
measuring species richness and abundance. usual status (ps+ss) shows a declining trend.
Female labour force participation declined by

RE
The index also compares the diversity of
species among various habitats. India State 7.8 percentage points from 33.1 per cent in
of the Forest Report 2019 assessed Shannon- 2011-12 to 25.3 per cent in 2017-18.
Weiner Index for 16 bio-diverse areas.
 The ratio of female to male labour force
also remained constant between 2011-12
8. Correct option: (d) and 2017-18.
Explanation:

O
RBI allocates funds to NABARD for agricultural
development.
 As per PLFS, female WPR for the productive
age group (15-59 ages) stood at 23.8 per
cent (25.5 per cent in rural areas and 19.8 per
cent in urban areas) in 2017-18 as compared
NABARD further allocates funds to farmers for
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to 32.3 per cent in 2011-12.
agricultural development through rural banks
and commercial banks.  Based on the activity status - principal (ps)
and subsidiary (ss)- indicates that participation
9. Correct Option : (c) of females, especially in rural areas, who were
engaged in subsidiary activities has drastically
Explanation: declined (from 25 per cent in 2004-05 to 5.7
Central Bank is following a easy money per cent in 2017-18) as compared to females
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policy. engaged as per principal status.

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