PTS 2024 Preparatory Test 9 Solutions Eng

Page 1 of 27
PTS 2024 | Preparatory Test 9 – Solutions (111121) |
Q.1)
Ans) b
Exp) Option b is the correct answer.
Demand-pull inflation arises when the aggregate demand becomes more than the aggregate supply in the
economy. Cost push inflation occurs when aggregate demand remains the same but there is a decline in
aggregate supply due to external factors that cause a rise in price levels.
Statements 1 is incorrect. The prices of tomatoes and onions are the most volatile in Indian markets. The
unexpected price shocks to these two perishable commodities were triggered by unseasonal rains and
prolonged drought. The statement given mentions a rise in prices because of low yield, which is more
linked to supply-side disruptions, hence it is an example of cost-push inflation.
Statements 2 is incorrect. OPEC controls the majority of the world’s oil reserves, and in 1973, it restricted
production (hence, linked to supply-side disruptions), causing prices to skyrocket by 400%. As a result,
industries where inputs were oil- and gas-centric saw massive increases in production costs and were
forced to raise prices to keep up. This was a classic instance of cost-push inflation.
Statements 3 and 4 are correct. Demand-pull inflation arises when the aggregate demand becomes more
than the aggregate supply. Demand-pull inflation tends to be more short-term. When the Covid-19
pandemic first broke out, price increases for hand sanitiser and surgical masks as people began hoarding
products and supply simply couldn’t keep up. This is an example of demand-pull inflation. The increase in
prices of precious metals during the festive seasons is also an example of demand-pull inflation.
Source: Ramesh singh chapter 7 + shankar Ganesh economy
Q.2)
Ans) c
Exp) Option c is the correct answer.
Inflation is the rate of increase in prices of goods over a given period of time.
Option a is incorrect. Creeping inflation- It occurs when the price level grows at a low rate for an
extended period of time.
Option b is incorrect. Walking inflation occurs when prices rise moderately and annual inflation rate is in
a single digit. This occurs when the rate of rise in prices is in the intermediate range of 3 to less than 10
per cent.
Option c is correct. Hyperinflation is a very high and typically accelerating inflation. It quickly erodes
the real value of the local currency, as the prices of all goods increase. This causes people to minimize
their holdings in that currency as they usually switch to more stable foreign currencies. Hyperinflation is
rapidly rising inflation, typically measuring more than 50% per month. Various countries like Germany
(after World War-I), Yugoslavia (in 1993) and Venezuela (2020) suffered from hyperinflation.
Option d is incorrect. Galloping inflation refers to the state of the economy when the prices of the
goods and services increase at a rapid rate of 10% and more.
Q.3)
Ans) a
Exp) Option a is the correct answer.
The Department of Science and Technology first implemented ZBB in 1983. The Indian Government
adopted Zero Based Budgeting (ZBB) in 1986 as a way to systematically regulate the expenditure
budget. The first state to implement ZBB was Maharashtra.
Statement 1 is correct: As the name suggests, zero-based Budget refers to planning and preparing the
Budget from scratch or ‘zero base’. It is different from a traditional Budget that is based on previous
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Page 2 of 27
Budgets. The process of zero-based budgeting involves review and justification of each and every
ministry’s expenditure in order to receive funding at the beginning of each financial year.
Statement 2 is incorrect: Under the traditional budget system unspent money allocated to any ministry
or department is allowed to be carried forward. In a zero-based Budget, no balances are carried
forward, or there are no pre-committed expenses. Simply put, it is a procedure for preparing a Budget
with zero prior bases. Much bigger gains will mount up when hundreds of crores will have to be justified
across departments.
Source: Indian Economy by Nitin Singhania
Q.4)
Ans) c
Inflation is the steady rise of prices for goods and services over a period.
Statement 1 is correct: Inflation is one of the most important factors that affect the exchange rate. When
inflation is increasing, this tends to have a depreciating effect on the value of a country's currency. This is
because increased inflation reduces the currency's buying power, which leads to the depreciation of
domestic currency against other currencies. Thus, it would lead to the depreciation of domestic
currency.
Statement 2 is correct: Inflation benefits the borrowers. The primary benefit that borrowers see from
inflation is that it reduces the real value of the money that they have to repay the lender.
Statement 3 is correct: Every rise in prices is affecting your cost of living, leaving a dent in your savings
and investments. The reason is, with the rise in inflation, the amount of saving or investment from
income every month may not rise at the same rate. Therefore, the rise in price puts extra pressure on
your savings and investments. Similarly, decline in inflation rate leads to increase in savings rate as
relatively less amount will be spent on consumption.
Source: https://indianexpress.com/article/explained/how-covid-19-is-hurting-the-rupees-exchange-
rate-with-other-currencies-6371536/
Q.5)
Ans) a
The Ministry of Tourism has undertaken various measures to boost the tourism sectors and promote
India as a ‘major tourism destination’.
Option a is correct: Both NIDHI and SAATHI initiatives are related to tourism and Hospitality
industry. National Integrated Database of Hospitality Industry (NIDHI) is a digital portal on which the
Ministry of Tourism, with the help of State Governments and Union Territory Administrations, is making
efforts to register accommodation units in the country.
System for Assessment, Awareness, and Training for Hospitality Industry (SAATHI) was launched in
association with the Quality Council of India to restrict any further transmission of the virus while
providing accommodation and other services post-lockdown. The objective of the scheme is to sensitise
the industry on the Covid-19 regulations of the government.
Option b is incorrect: PM SVANidhi (Pradhan Mantri Street Vendor’s Aatmanirbhar Nidhi Scheme) was
launched to provide credit facility and digitisation of identities on e-Shram portal of the street vendors.
Option c is incorrect: PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) was launched to provide income
support to farmers and their families
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Option d is incorrect: Jan Shikshan Sansthan aims to provide vocational training to non-literates, neo-
literates as well as school dropouts in rural regions by identifying skills that have a relevant market in that
region.
Source: Economic Survey 2022-23 (pg. 300)
Q.6)
Ans) a
Option a is correct: An inflationary gap measures the difference between the current real GDP and the
GDP of an economy operating at full employment. An inflationary gap exists when the demand for goods
and services exceeds production due to higher levels of employment, increased trade activities, or
elevated government expenditure. The real GDP can exceed the potential GDP, resulting in an
inflationary gap. As demand increases but production lags, prices rise to restore market equilibrium.
Option b is incorrect: Stagflation is an economic cycle characterized by slow growth and a high
unemployment rate accompanied by inflation. Economic policymakers find this combination particularly
difficult to handle, as attempting to correct one of the factors can disrupt the other factors.
Option c is incorrect: The GDP (gross domestic product) price deflator, also known as the GDP deflator
or the implicit price deflator, measures the changes in prices for all the goods and services produced in
an economy. Using the GDP price deflator helps economists compare the levels of real economic activity
from one year to another.
Option d is incorrect: The Consumer Price Index measures the overall change in consumer prices based
on a representative basket of goods and services over time. The CPI is the most widely used measure of
inflation, closely followed by policymakers, financial markets, businesses, and consumers.
Source: https://www.investopedia.com/terms/i/inflationary_gap.asp#toc-the-bottom-line
https://www.investopedia.com/terms/s/stagflation.asp
https://www.investopedia.com/terms/g/gdppricedeflator.asp#toc-what-is-the-consumer-price-
index-cpi
https://www.investopedia.com/terms/c/consumerpriceindex.asp
Q.7)
Ans) a
Exp) Option a is the correct answer. The GDP deflator, also called implicit price deflator, is a measure of
inflation. It is the ratio of the value of goods and services an economy produces in a particular year at
current prices to that of prices that prevailed during the base year.
Statement 1 is incorrect. GDP Deflator is the ratio of the GDP at current prices to that of the GDP at
constant prices. The formula to find the GDP price deflator is:
GDP deflator = (nominal GDP ÷ real GDP) x 100.
Statement 2 is correct. GDP deflator does not include prices of imported goods. Imported goods are not
part of GDP and hence do not show up in the GDP deflator.
Statement 3 is incorrect. GDP deflator is available only on a quarterly basis along with GDP estimates,
whereas CPI and WPI data are released every month.
Source: Ramesh singh chapter 7
https://www.google.com/amp/s/www.thehindu.com/business/Economy/what-is-the-gdp-
deflator/article24489279.ece/amp/
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Q.8)
Ans) a
The WPI is used to measure the change in the overall price of goods before they are sold at retail prices.
This index measures inflation based on wholesale prices, or the prices of goods before they reach
consumers. The Office of Economic Advisor under the Ministry of Commerce and Industry publishes the
wholesale price index monthly. The index numbers used to calculate the retail inflation of a nation
constitute the CPI, which is also known as the "market basket" and is responsible for tracking the shift in
prices at the level of the household. The National Statistics Office (NSO) publishes CPI data every month.
Options 1, 2 and 5 are correct: The major difference between WPI and CPI is that the WPI does not
measure the change in the price levels of services, but these are included in the calculation of CPI. The
other items like the fuel items, electricity and food items are included in the calculation of both CPI and
WPI.
Options 3 and 4 are incorrect: The services are excluded from the calculation of WPI, so Transportation
services and Education services are not common items in calculation of both CPI and WPI.
Source: https://www.business-standard.com/budget/article/measures-of-inflation-understanding-
cpi-and-wpi-and-how-they-differ-
123020100153_1.html#:~:text=CPI%20captures%20price%20change%20at,CPI%20uses%20the%20calend
ar%20year.
https://indianexpress.com/article/explained/everyday-explainers/what-are-wholesale-price-index-
consumer-price-index-inflation-rates-7820831/
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Q.9)
Ans) b
Statement 1 is correct. Inflation Targeting is a method that focuses on adjusting monetary policy to
achieve a specified annual rate of inflation. It is done by the Central Bank in an economy as a part of their
monetary policy to realize the objective of a stable rate of inflation.
Statement 2 is correct. India commenced inflation targeting ‘formally’ in February 2015 when an
agreement between the Government of India and the RBI was signed related to it—the Agreement on
Monetary Policy Framework. Under this, the Monetary Policy Committee (MPC) of RBI overseas inflation
targeting in India.
Statement 3 is incorrect. In 2016, Parliament amended the RBI Act, 1934 to change the monetary policy,
and introduced an inflation targeting framework. As per the new framework, the central government, in
consultation with RBI sets: (i) an inflation target, and (ii) an upper and lower tolerance level for retail
inflation.
https://blog.forumias.com/effectiveness-of-inflation-targeting-in-india-explained-pointwise/
https://blog.forumias.com/inflation-targeting/
Q.10)
Ans) a
Exp) Option a is the correct answer. The Gender Inequality Index (GII), released by the UN Development
Programme (UNDP), is an inequality index for 159 countries.
Statement 1 is incorrect. The Gender Inequality Index (GII) is an index for the measurement of gender
disparity that was introduced in the 2010 Human Development Report 20th anniversary edition by the
United Nations Development Programme (UNDP).
Statement 2 is correct. GII is a composite metric of gender inequality using three dimensions:
reproductive health, empowerment and the labour market. A low GII value indicates low inequality
between women and men, and vice-versa.
Statement 3 is incorrect. The index ranges from 0, where women and men fare equally, to 1, where one
gender fares as poorly as possible in all measured dimensions. The higher the GII value, the more
disparities between females and males and the more loss to human development.
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://resourcewatch.org/
data/explore/soc025-Gender-Inequality-
Index&ved=2ahUKEwjYw9bIqPT_AhUyd2wGHRTqA5QQFnoECAEQAQ&usg=AOvVaw1WbCKswoXSOd_o
01uYKsNU
Q.11)
Ans) b
The non-accelerating inflation rate of unemployment (NAIRU) is the lowest level of unemployment that
can occur in the economy before inflation starts to inch higher.
Option a is incorrect: The NAIRU is the lowest unemployment rate (and not highest) that can be
sustained without causing wages growth and inflation to rise.
Option b is correct: The non-accelerating inflation rate of unemployment (NAIRU) is the specific
unemployment rate at which the rate of inflation stabilises and is constant – inflation will neither
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increase nor decrease. When unemployment rises above NAIRU level, inflation decreases; when
unemployment drops, inflation increases.
Option c is incorrect: NAIRU does not reflect the level of disguised unemployment in the economy. The
natural rate of unemployment is sometimes called the NAIRU because it is consistent with an economy
that is growing at its long-term potential, so there is no upward or downward pressure on inflation.
Disguised unemployment is hidden unemployment where labour that is employed in a job is not actually
utilised for the production of goods and services.
Option d is incorrect: There is no set formula to determine NAIRU. The countries use statistical models
to put the NAIRU level. Example: The US Federal Reserve puts it somewhere between 5% and 6%
unemployment.
Knowledge Base:
NAIRU is a concept that helps in gauging how much ‘spare capacity’ there is in the economy and
phenomenon of hysteresis. Hysteresis occurs when unemployed persons are unwilling to accept lower
wage rates as a means of returning to work. NAIRU defies the notion of cyclical, or self-adjusting,
unemployment. Example: If jobs are outsourced to lower-wage economies, workers of the home
economy may over time become unqualified to take on those jobs should they return or become
dependent on government welfare benefits. The NAIRU cannot be observed directly.
Source: https://www.thehindu.com/opinion/op-ed/what-is-hysteresis-in-
economics/article18701631.ece
https://www.investopedia.com/terms/n/non-accelerating-rate-unemployment.asp
https://www.economicsonline.co.uk/definitions/nairu.html/
https://www.imf.org/external/pubs/ft/fandd/basics/unemploy.htm
Q.12)
Ans) c
Option a is incorrect: Core inflation – It is inflation related to all the commodities, goods, and services in
the economy minus the volatile food prices and fuel prices. It is more stable than headline inflation due to
the absence of volatile commodities like food and petroleum.
Option b is incorrect: There is no such inflation calculation separately for major fuel items.
Option c is correct: Refined Core Inflation excludes main fuel items like, ‘petrol and diesel for vehicle’
and ‘lubricants and other fuels for vehicles’, in addition to ‘food and beverages’ and ‘fuel and light’ from
the headline retail inflation. Refined core inflation is much below core inflation which shows that the
impact of fuel in conventional core inflation is quite substantial.
Option d is incorrect: Headline inflation- It is inflation related to all the economy’s commodities, goods,
and services. The headline inflation includes inflation in a basket of goods that includes commodities like
food and energy.
Source: Pg 164, Economic Survey 2021-22
What the Economic Survey’s ‘Refined’ Core Inflation Tells us About Fuel Price Rise (thewire.in)
Headline Inflation - Overview, How To Calculate, Applications (corporatefinanceinstitute.com)
Q.13)
Ans) b
The PLFS is an annual survey conducted by the National Statistical Office (NSO).
Statement 1 is correct. Periodic Labour Force Survey (PLFS) is India’s first computer-based survey
launched by the National Statistical Office (NSO) in 2017.
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Statement 2 is correct. Periodic Labour Force Survey (PLFS) estimates the key employment and
unemployment indicators (viz. Worker Population Ratio (WPR), Labour Force Participation Rate (LFPR),
Unemployment Rate (UER)) in the short time interval of three months for the urban areas only in the
‘Current Weekly Status’ (CWS).
Statement 3 is incorrect. India's urban unemployment rate slid to its lowest level to 6.8 per cent in the
March quarter of FY23, showed the PLFS data for the previous quarter released on May 29,2023. The rate
was remarkably low for the first time since the National Statistical Office began publishing quarterly
bulletins on urban jobs in 2018.
Source: https://blog.forumias.com/periodic-labour-force-surveyplfs-annual-report-2/
https://blog.forumias.com/periodic-labour-force-surveyplfs-annual-report/
Q.14)
Ans) c
In September 2015, the General Assembly adopted the 2030 Agenda for Sustainable Development that
includes 17 Sustainable Development Goals (SDGs). Building on the principle of “leaving no one behind”,
the new Agenda emphasizes a holistic approach to achieving sustainable development for all.
Statement 1 is correct. Goal 2: End hunger, achieve food security and improved nutrition and promote
sustainable agriculture. The SDG 2 aims to end all forms of hunger and malnutrition by 2030, making sure
all people–especially children–have sufficient and nutritious food all year.
Statement 2 is correct. Goal 4: Ensure inclusive and equitable quality education and promote lifelong
learning opportunities for all. This goal ensures that all girls and boys complete free primary and
secondary schooling by 2030.l
Statement 3 is correct. Goal 16: Promote peaceful and inclusive societies for sustainable development,
provide access to justice for all and build effective, accountable and inclusive institutions at all levels. The
SDG 16 aims to significantly reduce all forms of violence, and work with governments and communities to
end conflict and insecurity. Promoting the rule of law and human rights are key to this process.
Statements 4 and 5 are not part of the Sustainable Development Goals (SDG's).
https://www.un.org/development/desa/disabilities/envision2030.html
Q.15)
Ans) a
Statement 1 is incorrect: Employment elasticity is a measure of the percentage change in employment
associated with a 1 percentage point change in economic growth (not inflation rate). The employment
elasticity indicates the ability of an economy to generate employment opportunities for its population as
a percent of its growth (development) process.
Statement 2 is correct: The employment elasticity refers to the percentage change in employment
associated with a 1% increase in GDP. Therefore, the higher the employment elasticity, the more labour-
intensive growth.
Statement 3 is incorrect: As per the Employment and Unemployment Survey (EUS), Growth rate in
employment slowed down to 1.1 per cent between 2012 and 2016 from 2.4 per cent between 2000 and
2005. Employment elasticity, which measures employment growth with GDP growth, reduced to 0.17 in
2016 from 0.20 in 2000. India's employment elasticity is now around 0.15.
Source: 7 PM | Jobless growth becomes more systemic | 12th July, 2019 -ForumIAS Blog
Reserve Bank of India - Publications (rbi.org.in)
India’s Employment Elasticity Almost Zero | Mint (livemint.com)
gupea_2077_61745_1.pdf;jsessionid=58734AA5B7EF98DAA41490E809A719B8
Page 8 of 27
Q.16)
Ans) b
Accessible India Campaign (Sugamya Bharat Abhiyan) as a nation-wide Campaign for achieving universal
accessibility for Persons with Disabilities (PwDs). It is aimed at making a barrier-free and conducive
environment for Divyangjans (Persons with Disabilities – PwDs) all over the country.
Statement 1 is correct: Accessible India Campaign (Sugamya Bharat Abhiyan) was launched by the
Department of Empowerment of Persons with Disabilities (DEPwD) of Ministry of Social Justice and
Empowerment as a nation-wide Campaign on December 3, 2015. It has three important verticals, namely
- the Build Environment, the transportation sector and the ICT ecosystem.
Statement 2 is incorrect: For enhancing the proportion of accessible government buildings, some of
targets had been decided:
1) Conducting accessibility audit of at least 25-50 most important government buildings and converting
them into fully accessible buildings in the selected 50 cities by June 2022.
2) Converting 50% of all the government buildings of National Capital and all the State capitals (not all
government buildings) into fully accessible buildings by June 2022.
Statement 3 is correct: It encourages sign-language interpretation of public television news
programmes. The campaign targets to develop and adopt national standards on captioning and sign-
language interpretation in consultation with National media authorities by June 2022. It also ensures that
25% of all public television programmes aired by government channels meet these standards by June
2022.
Source: https://disabilityaffairs.gov.in/content/page/accessible-india-campaign.php
Q.17)
Ans) d
Exp) Option d is the correct answer.
Socio-Economic Caste Census (SECC): In June 2011, India's Ministry of Rural Development begun the
Socio Economic and Caste Census (SECC) by conducting an extensive door-to-door enumeration across
the whole of India. This comprehensive exercise has been carried out for India's urban and rural areas.
1) For bringing transparency in the process of selection of beneficiaries, the Government of India uses
SECC data and its Temporary Identification Number of households for identification of poor under
Deendayal Antyodaya Yojana (DAY), Pradhan Mantri Awaas Yojana-Gramin (PMAY-G), National
Social Assistance Programme (NSAP), Pradhan Mantri Jan Arogya Yojna (PM-JAY), etc.
Knowledge Base: The Socio-Economic Caste Census involved the Ministry of Rural Development,
Ministry of Housing and Urban Poverty Alleviation, the Office of the Registrar General and Census
Commissioner India and the State Governments.
The Census in Rural Area was conducted by the Department of Rural Development (DoRD). In Urban
areas, the Census was conducted under the administrative jurisdiction of the Ministry of Housing and
Urban Poverty Alleviation (MoHUPA). Caste Census falls under the administrative control of Ministry of
Home Affairs: Registrar General of India (RGI) and Census Commissioner of India.
The benefit of SECC is that it offers budget space to address certain deprivations as well as a customized
priority list for each programme that suits programme objectives. Following a proper selection process
that was approved by the government, the Ministry of Rural Development created customized priority
lists from SECC for the Pradhan Mantri Awaas Yojna-Gramin (PMAY-G) and Deen Dayal Antyodaya Yojana
- National Rural Livelihoods Mission (DAY-NRLM).
Source: Ramesh Singh Chapter 20
Page 9 of 27

https://pib.gov.in/newsite/PrintRelease.aspx?relid=169111#:~:text=Government%20of%20India%20has
%20advised,PMAY%2DG)%2C%20etc.
https://secc.gov.in/
https://economictimes.indiatimes.com/news/politics-and-nation/government-to-use-secc-2011-
census-data-to-identify-beneficiaries/articleshow/58010701.cms?from=mdr
https://nha.gov.in/PM-
JAY#:~:text=Usage%20of%20beneficiary%20data%20%E2%80%93%20PM,beneficiaries%20than%20SEC
C%20defined%20numbers.
Q.18)
Ans) d
Extreme Poverty: The World Bank defines the state of extreme poverty as the number of people living on
less than $2.15 per person per day. Initially, the threshold was $1.90 per day but later in September 2022
it was updated to USD 2.15 per person per day.
1) The global poverty line is frequently updated to account for changes in global price differences. That’s
the reason in September 2022, the international poverty line has been updated from $1.90 to $2.15 per
person per day.
2) The updated extreme poverty line of $2.15 per person per day, which replaces the $1.90 poverty line, is
determined based on 2017 Purchasing Power Parities.
3) In other words, the real value of $2.15 in 2017 prices is the same as $1.90 was in 2011 prices.
4) As per the United Nations, extreme poverty is when the number of people survive on less than $1.25
per day.
Source: Ramesh Singh Chapter-20
https://www.worldbank.org/en/understanding-
poverty#:~:text=Source%3A%20Lakner%20et%20al%20(2022,less%20than%20%241.90%20per%20day.
https://www.un.org/en/academic-impact/addressing-
poverty#:~:text=Of%20those%20living%20in%20poverty,water%2C%20and%20adequate%20health%20s
ervices.
Q.19)
Ans) b
Exp) Option b is the correct answer
Vibrant Villages Programme is a Centrally Sponsored Scheme i.e., partly funded by the Union
Government and State Governments. The scheme envisages the development of certain border villages
located in India.
Statement 1 is incorrect: The Union Ministry of Home Affairs (not the Ministry of Defence) is the
implementing agency of the Vibrant Villages Programme (VVP).
Statement 2 is correct: It is true that the Vibrant Village Programme (VVP) is implemented in villages
that share its border only with China. The programme’s targets are to provide comprehensive
development of villages on the border with China and improvement in the quality of life of people living
in identified border villages. The development in these villages will help prevent migration, and thus also
boost security.
Statement 3 is correct: It is true that the scheme envisages providing 24×7 electricity, drinking water,
connectivity with all-weather roads, cooking gas, mobile and internet connectivity in the border areas.
Also, the scheme envisages giving special attention to solar and wind energy, tourist centres, multi-
purpose centres and health infrastructure and wellness centres.
Source: https://indianexpress.com/article/explained/amit-shah-launches-vibrant-villages-
programme-what-is-this-scheme-8554872/
Page 10 of 27
Q.20)
Ans) c
Pair 1 is correct: In 1979, a task force constituted by the Planning Commission for the purpose of poverty
estimation, chaired by YK Alagh, constructed a poverty line for rural and urban areas on the basis of
nutritional requirements.
Pair 2 is correct: Rangarajan Committee was set up in 2012. It reverted to the practice of having separate
all-India rural and urban poverty line baskets and deriving state-level rural and urban estimates from
these. It recommended separate consumption baskets for rural and urban areas which include food items
that ensure recommended calorie, protein & fat intake and non-food items like clothing, education,
health, housing and transport. This committee raised the daily per capita expenditure to Rs 47 for urban
and Rs 32 for rural from Rs 32 and Rs 26 respectively at 2011-12 prices.
Pair 3 is incorrect: In 1993, an expert group constituted to review methodology for poverty estimation,
chaired by DT Lakdawala, made the following suggestions: (i) consumption expenditure should be
calculated based on calorie consumption as earlier; (ii) state specific poverty lines should be
constructed and these should be updated using the Consumer Price Index of Industrial Workers (CPI-IW)
in urban areas and Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas; and (iii)
discontinuation of ‘scaling’ of poverty estimates based on National Accounts Statistics. This assumes
that the basket of goods and services used to calculate CPI-IW and CPI-AL reflect the consumption
patterns of the poor.
Pair 4 is correct: In 2005, expert group to review methodology for poverty estimation, chaired by Suresh
Tendulkar, was constituted by the Planning Commission. It recommended four major changes:
1) A shift away from calorie consumption-based poverty estimation.
2) A uniform poverty line basket (PLB) across rural and urban India.
3) A change in the price adjustment procedure to correct spatial and temporal issues with price
adjustment.
4) Incorporation of private expenditure on health and education while estimating poverty.
Source: https://prsindia.org/theprsblog/more-privatisation-on-the-cards
https://rural.nic.in/sites/default/files/WorkingPaper_Poverty_DoRD_Sept_2020.pdf
Q.21)
Ans) b
Statement 1 is incorrect: Stagflation is a situation in an economy when inflation and unemployment
both are at higher levels, contrary to conventional belief.
Skewflation is a phenomenon in which there is a price rise of one or a small group of commodities over
a sustained period of time, without a traditional designation.
Statement 2 is correct: Stagflation is an economic cycle characterized by slow growth and a high
unemployment rate accompanied by inflation. Economic policymakers find this combination particularly
difficult to handle, as attempting to correct one of the factors can exacerbate another.
Source:
https://www.thehindu.com/business/Economy/stagflation/article65422902.ece#:~:text=The%20idea
%20of%20stagflation%20is,is%20low%2C%20inflation%20is%20high.
Indian Economy by Vivek Singh, 5th Edition
Indian Economy by Ramesh Singh, 12th Edition
http://www.arthapedia.in/index.php/Skewflation
https://www.investopedia.com/terms/s/subprime-meltdown.asp
https://www.investopedia.com/articles/07/subprime-blame.asp
Page 11 of 27
Q.22)
Ans) b
Statement 1 is incorrect: Unemployment (not Underemployment) is a situation in which people with
enough skills and willing to work cannot find any work in the market. Underemployment on the other
hand, is a situation in which an individual is working much below his potential.
In short, unemployment means people not currently working and underemployment means people who
are currently working but not on par with their skills, for example a Postgraduate doing manual labour
in agriculture.
Statement 2 is correct: It is true that Underemployment is one of the likely consequences of the increase
in the working age population of the country. With rising population, employers receive overwhelming
applications for jobs thus supply exceeds demand of labourers. It results in employers raising the
qualifications of many occupations higher than is really necessary to perform the work creating a
situation of underemployment.
Statement 3 is correct: It is true that foreign investments in labour intensive industries may reduce
the problem of underemployment in India. For example, Niti Aayog recommended the creation of
Coastal Employment Zones (CEZ), which may attract multinational firms in labour-intensive sectors. It
may increase the productivity of local small and medium firms thereby multiplying the number of well-
paid jobs.
Source: https://www.thehindu.com/business/Economy/india-facing-problem-of-severe-under-
employment-says-niti/article19570289.ece
Q.23)
Ans) a
Exp) Option a is the correct answer
The Indian economy can be categorised majorly into Formal and Informal Economy. While the informal
economy employs more than 80% of the total workforce of India, the remaining are engaged in the formal
economy.
Statement 1 is correct: It is true that more than one third of the Indian workforce is employed with
MSME industries. Nearly 40% of the informal workforce are employed with MSME industries.
Statement 2 is incorrect: A recently released report by the State Bank of India (SBI) revealed the
shrinkage in the informal sector’s share in the overall economy from 52% in 2017-18 to 15- 20% in
2020-21, which means the share of informal sector to India’s GDP is less than that of formal sector. The
report claimed this is due to adoption of Goods and Service Tax (GST), enhanced digitalisation, and
demonetisation which resulted in the formalisation of the economy.
Source: https://indianexpress.com/article/cities/mumbai/informal-sector-economy-grwth-sbi-
report-7601151/
Q.24)
Ans) b
Fixed-term employment is a contract in which a company or an enterprise hires an employee for a
specific period of time. In most cases it is for a year but can be renewed after the term expires depending
on the requirement.
Statement 1 is incorrect: Fixed-term employment contract has a provision in which the employers can
terminate the contract on certain grounds before the due date. One of the prominent reasons could be
the non-performance or the individual has committed a fraud which was proved when investigated.
Page 12 of 27
Statement 2 is correct: In a fixed-term employment, the employee is not on the payroll of the company.
Payroll is defined as the process of paying salary to a company’s employees. It starts with preparing a list
of employees to be paid and ends with recording those expenses.
Statement 3 is correct: Under the fixed-term employment contract, the payout or the payment is fixed
in advance and is not altered till the term expires. However, such contracts cannot be given for routine
jobs. It is usually given out for jobs which are temporary. It cannot be used to replace existing employees,
if he or she is on a long leave.
Statement 4 is incorrect: A fixed-term worker must be granted the same access to a pension as a
comparable permanent employee. The Protection of Employees (Fixed-Term Work) Act 2003 ensures
that there is no discrimination between fixed-term workers and comparable permanent employees in
respect of their conditions of employment. The act covers pension arrangement, including eligibility for
membership, entitlements to rights under the pension arrangement, and conditions relating to the
making of contributions.
Source: https://economictimes.indiatimes.com/definition/fixed-term-employment
https://www.pensionsauthority.ie/en/lifecycle/joining_a_plan/fixed_term_contract_work/
Q.25)
Ans) a
Statement 1 is correct: The International Financial Services Centres Authority (IFSCA) was established in
2020 under the International Financial Services Centres Authority Act, 2019. It is headquartered at
Gujarat International Finance Tec (GIFT) city in Gandhinagar in Gujarat.
Statement 2 is incorrect: Securities and Exchange Board of India (SEBI) is still the authority to regulate
matters related to issuance of participatory notes in India. Recently in the Union Budget 2023-24, the
Union Government proposed amendments in Securities Contracts (Regulation) Act, 1956 allowing
Participatory Notes to be issued by Foreign Portfolio Investors (FPIs) in the International Finance
Service Centre (IFSC).
Statement 3 is incorrect: The Union Finance Minister is not the ex-officio chairperson of the IFSCA.
The Union Government appoints the chairperson of IFSCA. The IFSCA is a seven-member body including
one chairperson and six other members.
Source: https://www.ifsca.gov.in/Pages/Contents/AboutIFSCA
https://mintgenie.livemint.com/news/markets/budget-2023-govt-allows-ifsc-units-to-issue-p-notes-
to-overseas-investors-here-s-what-it-means-151675930669397#:~:text=be%20issued%20by-,FPI,-
in%20IFSC.
Q.26)
Ans) c
Exp) Option c is the correct answer
The Expenditure Budget of the government highlights the allotment of funds for disbursement to
different ministries, sectors, departments in a financial year as part of the Union Budget. The Union
Budget 2023-24 allocated different amounts of funds to various sectors.
Page 13 of 27
Option 2: Interest payment of the Union Government constitutes 20% of its total budgeted expenditure
and it is the single largest component of the Centre’s total expenditure. Market borrowings through G-
Secs & Treasury Bills accounts for 68% of the total sources of financing the fiscal deficit.
Option 1: States’ share of taxes and duties from the Union Government constitutes 18% of the total
expenditure of the Union Government. States’ share of taxes and duties includes states’ share from the
divisible pool of taxes.
Option 3: The Central Sector scheme accounts for 17% of the total expenditure of the Union
Government in 2023-24 and is the third largest component of Centre’s expenditure. The Central Sector
Schemes are those schemes that are implemented by a central agency and 100% funded by the Union
Government.
Option 4: Defence expenditure accounts for 8% of the total expenditure of the Union Government in
2023-24. The Union Ministry of Defence has been allocated the highest amount in the recent budget
compared to all other central government Ministries.
Source: https://transformingindia.mygov.in/budget-2023/
https://www.thehindubusinessline.com/data-stories/data-focus/interest-costs-account-for-a-fifth-
of-centres-total-expenditure/article66493947.ece
Page 14 of 27
Q.27)
Ans) d
Socio-Economic Caste Census (SECC): It was conducted in 2011 by the Ministry of Rural Development
(MoRD) through a door-to-door enumeration throughout the country. It was the first time that both the
rural and urban households were covered in a census exercise.
Houses that are automatically included under SECC are:
1) Households without shelter. Hence, option 1 is correct.
2) Destitute/ living on alms. Hence, option 2 is correct.
3) Manual scavengers. Hence, option 3 is correct.
4) Primitive tribal groups. Hence, option 4 is correct.
5) Legally released bonded labourers
Houses that are automatically excluded under SECC are:
1) Motorized two/three/four-wheeler/ fishing boat
2) Mechanized three/four-wheeler agricultural equipment
3) Kisan Credit Card (KCC) with credit limit of 50,000 rupees and above
4) Household with a Government employee
5) Households with non-agricultural enterprises registered with the Government
6) Any member of the family earning more than Rs. 10,000 per month
7) Income taxpayer
8) Professional taxpayer
9) 3 or more rooms with pucca walls and roof
10) Having a refrigerator
11) Having a Landline phone
12) 2.5 acres or more of irrigated land with at least 1 irrigation equipment
13) 5 acres or more of irrigated land for two or more crop seasons
14) Having at least 7.5 acres of land or more with at least one irrigation equipment
Source: Ramesh Singh Chapter-20
https://secc.gov.in/faq.htm
Q.28)
Ans) b
India Infrastructure Project Development Fund Scheme (IIPDF) was launched by the Union Ministry of
Finance in 2007-08.
Statement 1 is correct: India Infrastructure Project Development Fund Scheme (IIPDF) scheme is a
central sector scheme meaning it will be fully funded by the Union Government. The scheme will aid
development of quality Public Private Partnership (PPP) projects by providing necessary funding support
to the eligible projects.
Statement 2 is correct: The Projects of Central/ State Government Ministries, Public Sector Entities
(PSEs), Statutory authorities, are eligible to avail funding support under the IIPDF scheme.
Statement 3 is incorrect: The IIPDF does not provide financial grants, instead it would ordinarily give
interest free loans for private players engaged in PPP projects to cover their cost.
Source: https://mohua.gov.in/upload/uploadfiles/files/Guideline_Scheme_IIPDF.pdf ( pg no 2 - 1.6)
https://pib.gov.in/PressReleasePage.aspx?PRID=1873659#:~:text=Development%20Fund%20Scheme-
,(IIPDF%20Scheme)%20will,-aid%20development%20of
Page 15 of 27
Q.29)
Ans) b
The Union Finance Minister in the Union Budget 2023-24 launched a new small savings scheme called
Mahila Samman Savings Certificate (MSSC).
Statement 1 is incorrect: Mahila Samman Savings Certificate (MSSC) is a one-time scheme that can be
opened in the name of a woman or girl of any age; thus, it is not restricted to those who fall under the
age group of 18-40 years. An MSSC account can be opened by women of any age group.
Statement 2 is correct: It is true that currently both public as well as private banks are allowed to
implement MSCCs scheme. All Public sector and select private banks such as ICICI, HDFC, Axis Bank are
allowed to implement and operationalise the MSSCs scheme.
Statement 3 is correct: The amount invested in Mahila Samman Savings Certificate are not eligible for
tax exemptions under the Income Tax act,1961. Hence there will not be any income tax benefits for
investing in Mahila Samman Savings Certificate. Further, the interest earned on MSSCs will be taxable
according to the income tax slab applicable to account holders.
Statement 4 is incorrect: The premature closure of Mahila Samman Savings Certificate accounts is
allowed in case of the death of the account holder or case of extreme compassionate grounds such as
life-threatening disease and/or death of the guardian without penalty.
Source: https://www.centralbankofindia.co.in/en/Mahila_Samman_Savings_Certificate
https://economictimes.indiatimes.com/wealth/invest/mahila-samman-savings-post-office-scheme-
vs-bank-fds-at-7-5-rate-mssc-offers-higher-interest-than-bank-fds-who-should-
invest/articleshow/100005184.cms#:~:text=not%20be%20any-,income,-tax%20benefits%20for
https://www.aninews.in/news/business/business/public-sector-select-private-banks-authorised-to-
implement-mahila-samman-savings-certificate20230703114311/#:~:text=HDFC%20Bank%20Ltd.-,and,-
IDBI%20Bank%20%2D%2D%20to
Q.30)
The purpose of the Employees’ Deposit Linked Insurance Scheme 1976 (‘EDLI Scheme’) is to provide life
insurance benefits to the employees of the establishments covered under the Employees’ Provident
Funds and Miscellaneous Provisions Act 1952.
Statement 1 is correct: It is true that Employment Provident Fund Organisation (EPFO)’s Employees’
Deposit Linked Insurance (EDLI) Scheme covers all organisations registered under the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952.
Statement 2 is correct: Under the Employees’ Deposit Linked Insurance (EDLI) Scheme, all surviving
dependent family members of the members of this scheme are eligible to avail of benefits of EDLI in
case of the death of the member. Upon death of an employee while in service, a lump sum insurance
amount is payable to the nominee or the family members of such deceased employee
Statement 3 is incorrect: Casual or contractual employees too are eligible to avail benefits of EDLI
scheme. To benefit families of contractual/ casual workers, the condition of continuous employment in
only one establishment has been liberalised. Currently, the families of even those employees who may
have changed jobs in the last 12 months preceding his death too can avail benefits under this scheme.
Source: https://www.livemint.com/news/india/employees-deposit-linked-insurance-edli-scheme-
five-salient-features-to-know-about-11678868060980.html
Page 16 of 27
Q.31)
Ans) b
Statement 1 is correct. Gross fixed capital formation (GFCF), is an indicator of the level of investments
in the country. GFCF is not a measure of total investment, because only the value of net additions to
fixed assets is measured, and all kinds of financial assets are excluded, as well as stocks of inventories and
other operating costs.
Statement 2 is incorrect. Gross fixed capital formation (GFCF) component of India’s GDP has been
modest, showing a declining trend from 29.5% in FY19 to 26.6% in FY21.
Statement 3 is correct. As per RBI, Gross capital formation refers to the ‘aggregate of gross additions to
fixed assets (that is fixed capital formation) plus change in stocks during the counting period.’ Fixed
asset refers to the construction, machinery and equipment.
Source: https://www.moneycontrol.com/news/trends/india-gdp-data-gross-fixed-capital-formation-
rate-sees-decline-in-2020-21-6962921.html
Economic Survey
Q.32)
Ans) b
Statement 1 is correct: NHB RESIDEX is India’s first-ever official residential price index. NHB Residex
from the National Housing Bank, designed by a technical advisory committee comprising Government
representatives, lenders and property market players, is a set of benchmarks that aims to track housing
price indicators across Indian cities.
Statement 2 is incorrect: NHB RESIDEX was an initiative of the National Housing Bank (NHB),
undertaken at the behest of the Government of India, Ministry of Finance (not the Ministry of Housing
and Urban Affairs). The index was formulated under the guidance of a Technical Advisory Committee
(TAC) comprising of stakeholders from the housing market.
Statement 3 is correct: NHB RESIDEX will help recognize current trends in micro as well as macro
markets and predict future behaviour of the housing market. It will be of immediate use to banks, HFCs,
developers, and homebuyers.
Source: https://nhb.org.in/en/about-residex/
https://residex.nhbonline.org.in/HomePage-v5.aspx
https://residex.nhbonline.org.in/About-Residex.aspx
Q.33)
Ans) c
The Union Budget highlighted the government’s efforts for digitization in the country, including a digital
library for children and adolescents for preserving ancient inscriptions.
Statements 1 and 2 are correct. The Union Finance Minister in her Budget Speech made an
announcement to set up the Bharat Shared Repository of Inscriptions (Bharat SHRI), a digital epigraphy
museum, with the digitization of one lakh ancient inscriptions in the first stage. The Bharat SHRI will
be set up by the Archaeological Survey of India at Hyderabad.
Knowledge Base: The government will also strive to foster a reading culture by cooperating with non-
governmental organisations that will supply age-appropriate reading material to everyone. The event will
also include participation from the National Book Trust and the Children's Book Trust. "Device-
agnostic" would be the library's motto.
Page 17 of 27

Source:
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1895562#:~:text=The%20BharatSHRI%20will%20
be%20setup,'Vikas%20Bhi%20Viraasat%20Bhi'.
https://pib.gov.in/PressReleseDetail.aspx?PRID=1895497
Q.34)
Ans) b
The Central Government listed 7 priorities called ‘Saptarishi’ in Union Budget 2023-24 which includes-
inclusive development, Last mile delivery, Infrastructure, Green growth, Youth power, Unleashing
potential, and financial inclusion.
The government will set up an Accelerator Fund for Agri-startups to increase digital infrastructure in
rural areas and boost startups in this space.
Statement 1 is incorrect. Accelerator Fund will increase the number of agricultural startups in the rural
areas. There is no provision of Agriculture Credit under the Agriculture Accelerator Fund. In the Budget
2023, the agriculture credit target will be increased to Rs. 20 lakh crore with a focus on animal husbandry,
dairy, and fisheries. It will help to provide higher farm loans at subsidized rates to the farming
community.
Statement 2 is correct. The Agriculture Accelerator Fund will aim at bringing innovative and affordable
solutions for challenges faced by farmers.
Statement 3 is correct. The Agriculture Accelerator Fund will be set up to encourage Agri-startups by
young entrepreneurs in rural areas. It will also bring in modern technologies to transform agricultural
practices and increase productivity and profitability.
Source: https://www.investindia.gov.in/team-india-blogs/budget-2023-why-agriculture-accelerator-
fund-good-idea
Q.35)
Ans) d
In 2022-23 the government allocated Rs 71.61 lakh crores for social sector spending which was 0.4%
higher than the actual spending in the previous fiscal. This could, however, be largely attributed to
increased spending on healthcare, while spending on other sectors such as sanitation, labour welfare, and
women and child development saw a small decline.
Statement 1 is incorrect. The outlay for PM Awas Yojana is being enhanced by 66% to over Rs. 79,000
crores in the Budget 2023-24. PM Awas Yojana launched to achieve the objective of “Housing for All” by
2022, the erstwhile rural housing scheme Indira Awaas Yojana (IAY) was restructured into Pradhan Mantri
Awaas Yojana-Gramin (PMAY-G) w.e.f 1st April 2016.
Statement 2 is incorrect. The National Rural Employment Guarantee Act, 2005 provides for the
enhancement of livelihood security of rural households by providing at least 100 days of guaranteed work
to every household every year. The provisions of the Act are operationalized through the MGNREGS. The
scheme covers the entire country, except for those districts with 100% urban population.
MGNREGS fund in budget 2023-24 was cut by 33% to 60,000 crores. There is a sharp cut in the
budgeted allocation for the Mahatma Gandhi National Rural Employment Guarantee scheme from Rs
73,000 crore in 2022-23 to Rs 60,000 crore in 2023-24.
Statement 3 is incorrect. Pradhan Mantri Gram Sadak Yojana-Rural Road networks facilitate the growth
of rural market centres and rural hubs. PMGSY, launched in December 2000, aims to provide all-weather
connectivity to eligible rural habitations. Upgradation of existing rural roads in districts where all eligible
Page 18 of 27
roads have all-weather connectivity is also covered under the scheme. The scheme has been allocated Rs
19,000 crore in 2023-24, which is the same as the budget allocation and revised estimate for 2022-23.
While the budget allocation has remained around Rs 19,000 crore since 2017-18, the actual expenditure
has been lower.
Source: https://prsindia.org/budgets/parliament/demand-for-grants-2023-24-analysis-rural-
development#:~:text=Pradhan%20Mantri%20Gram%20Sadak%20Yojana,-
Rural%20road%20networks&text=The%20scheme%20has%20been%20allocated,been%20lower%20(Tabl
e%205).
https://pib.gov.in/PressReleasePage.aspx?PRID=1895315
https://economictimes.indiatimes.com/news/economy/policy/budget-allocation-for-mgnrega-
scheme-sees-a-sharp-decline-in-union-budget-
2023/articleshow/97530476.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=c
ppst
Q.36)
Ans) d
Liberalisation was expected to formalise India’s largely informal agrarian economy, with labour moving
from agriculture to the organised industrial sector. But we have witnessed contractualisation of the
employment.
Assertion is incorrect: The quality of employment in India has declined in the post-liberalisation period.
Of around 61 million jobs created in India over 22 years post-liberalisation of the economy, 92% were
informal jobs, according to an analysis of National Sample Survey Office (NSSO) data for 2011-12. While
formal workers comprised 6% of the total workforce in 1999-2000, this increased to around 9% in 2011-
12, showing that the jobs that were created in the formal sector were mainly informal, employing workers
with low earnings and with limited or no social protection.
Reason is correct: Agriculture accounted for nearly 30 per cent of the total GDP in 1991, and now
accounts for 17.4 per cent of the economy. The services sector presently contributes nearly 54 per cent to
domestic GDP and this was 39 per cent in 1991.
The industry sector's contribution to GDP stands at 29 per cent now against 30 in 1991.
Services sector contributes over 50 per cent to India's GDP. While Covid-19 pandemic has had an adverse
impact on most sectors of the economy, the services sector has been the worst affected as its' share in
India's GVA declined from 55 per cent in 2019-20 to 53 per cent in 2021-22.
Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1793804
https://economictimes.indiatimes.com/markets/stocks/news/since-1991-budget-size-grew-19-times-
economy-9-times-your-income-5-times/articleshow/62735382.cms?from=mdr
https://www.business-standard.com/article/jobs/90-of-jobs-created-over-two-decades-post-
liberalisation-were-informal-119050900154_1.html
Q.37)
Ans) a
Poverty alleviation programmes are launched by the government to remove poverty and provide better
access to work, food and basic facilities to the poor people.
Pair 1 is incorrect: The Integrated Rural Development Program (IRDP) was launched by the Government
of India (Morarji Desai) during 1978 and implemented during 1980. The program aimed at providing
employment opportunities to the poor and a chance to enhance their skill sets. The focus of IRDP was
also mainly on the target group i.e., small and marginal farmers, agricultural labourers and rural artisans.
Page 19 of 27

Its goal is to provide long term employment to disadvantageous group and increasing rural small scale
industry production.
Pair 2 is incorrect: Jawahar Rozgar Yojana was launched in 1989 (V.P. Singh) launched with the merger
of two schemes National Rural Employment Programme and Rural Landless Guarantee Programme
(RLGP) aimed at providing sustainable employment to rural population.
Objectives of Jawahar Rozgar Yojana:
(a) Providing employment opportunities to unemployed and under-employed population in the rural
areas.
(b) Developing rural Infrastructure and establishments for the benefits of the rural areas.
(c) Preference was given to the OBCs, SC/STs etc.
(d) Special reservation for women 30% of the employment opportunities.
Pair 3 is incorrect: Food for work programme was started in 1970s. Under this scheme, food grains were
provided instead of wages aiming to address poverty and food security in backward regions. Under this
scheme some unskilled manual labour like constructing kutcha road, cleaning historical monuments etc.
was given to disadvantageous group and were provided with food grains. This scheme later in 2001
revamped into National Food for Work Programme.
Pair 4 is correct: In 1995, during P.V. Narsimha Rao government, National Social Assistance
programme (NSAP) was launched. It represents a significant step towards the fulfilment of the Directive
Principles of State Policy under Article 41 and Article 42 enshrined in the Constitution of India which
encourages the State to undertake a number of welfare measures. The National Social Assistance
Programme (NSAP) then comprised of:
1) National Old Age Pension Scheme (NOAPS),
2) National Family Benefit Scheme (NFBS) and
3) National Maternity Benefit Scheme (NMBS).
These programmes target at providing social assistance benefit to the widows, destitute, aged, the BPL
households in the case of death of the primary breadwinner and for maternity. It ensures minimum
national standards in addition to the benefits that the States were then providing or would provide in
future.
Source: https://www.bankbazaar.com/saving-schemes/integrated-rural-development-program.html
https://www.indiamapped.com/yojanas-in-india/jawahar-rozgar-yojana/
https://www.indiamapped.com/yojanas-in-india/food-for-work-programme/
https://nsap.nic.in/circular.do?method=aboutus
Q.38)
Ans) c
Option 1 is incorrect. Increase in indirect tax rate like Goods and service tax (GST), excise duty will push
the price further up. So, reducing the indirect tax rate is a measure used by the government to curb
inflation. For example, government reduced the GST rate of COVID-19 medicines and instruments to five
per cent.
Option 2 is correct. Surplus budget means less expenditure than receipts. It reduces the money supply
and the government’s demand for goods and services. Surplus budget brings down the price level.
Option 3 is correct. Scheduled banks are required to keep a certain percentage of their Net Time and
Demand Deposits with RBI. Thus, the increased CRR means less money with banks to lend which will
reduce the money supply in the economy.
Option 4 is incorrect. Repo rate is the rate at which the commercial banks borrow money from RBI by
mortgaging their dated government securities and treasury bills. The decreased repo rate means the
Page 20 of 27
cheaper credit access to banks from RBI which will ultimately increase the money supply in the
economy.
Source: Indian economy Key concepts (Indian financial market, Inflation and deflation)
Q.39)
Ans) d
Economic Growth means the increase in the level of GDP of the country. It can be possible only when all
the factors of production are applied in the right manner i.e., land, labor, capital, and entrepreneurship.
Economic growth widens opportunities and provides the resources needed to invest in human
development. This also encourages people to send their children, including girls, to schools in the hope of
getting better economic returns from investing in education.
Option 1 is incorrect. Economic growth means an increase in national income, but economic growth may
not reduce income inequality because
1) Economic growth often creates the best opportunities for those who are highly skilled and educated.
2) Modern economies are creating an increased number of part-time/flexible service sector jobs. In
these sectors, wages have been lagging average earnings.
Option 2 is incorrect. Economic growth does not necessarily reduce poverty. Economic growth leads to
poverty reduction only when it is accompanied by equitable income distribution as well. Suppose there
is a disparity in income distribution and a wide gap between the income earned by the top and bottom
income strata. In the case of income inequality, economic growth will lead to concentration of income in
the hands of the few rich, the level of poverty might increase.
Option 3 is incorrect. Economic growth does not necessarily lead to a reduction in unemployment. The
phenomenon of jobless growth is often seen in economies around the world. For example, growth
cannot solve structural and frictional unemployment; this is unemployment caused by lack of skills and
geographical immobility.
Source: https://www.oecd.org/derec/unitedkingdom/40700982.pdf
https://www.economicshelp.org/macroeconomics/inequality/poverty-inequality-economic-growth/
https://nios.ac.in/media/documents/SrSec318NEW/318_Economics_Eng/318_Economics_Eng_Less
on3.pdf
Q.40)
Ans) d
Operational land holdings include all landholdings that are used wholly or partly for agricultural
production. They are operated as one technical unit by one person alone or with others without regard to
the title, legal form, size or location.
According to 10th Agriculture Census 2015-16, the total number of operational holdings in the country
has increased from 138.35 million in 2010-11 to 146.45 million in 2015-16 showing an increase of 5.86%.
Statement 1 is incorrect. In a total of 146.45 million operational agricultural land holdings in the country,
the highest number of operational land holdings in India belonged to Uttar Pradesh (23.82 million). UP is
followed by Bihar (16.41 million), Maharashtra (15.29 million), Madhya Pradesh (10.00 million).
Statement 2 is incorrect. According to the 10th agricultural census, the number of small and marginal
agricultural land holdings in the country have registered a marginal increase in 2015-16 compared to
2010-11. The small and marginal holdings taken together (0.00-2.00 ha.) constituted 86.08% of the total
holdings in 2015-16 against 85.01% in 2010-11 while their share in the operated area stood at 46.94% in
the current census as against 44.58% in 2010-11.
Page 21 of 27
Statement 3 is incorrect. As per the data on women’s operational holdings from the Agriculture Census
of 2011, in southern states an average of 15.4% of women hold land, and in the north-eastern states,
14.1%. With these low figures, these states outperform the northern states where 9.8% of women hold
land, and the eastern states where 9.2% of women do i.e., more women in the southern states hold land
as compared to the rest of the country. All the southern states fall within the first 10 ranks, with Andhra
Pradesh reporting the best figure–17.2% of the state’s women hold land, giving it the fourth place in the
all-India ranking.
Source: https://www.fao.org/india/fao-in-india/india-at-a-glance/en/
https://www.thehindu.com/sci-tech/agriculture/indian-farms-getting-smaller/article25113177.ece
https://agcensus.nic.in/document/agcen1516/T1_ac_2015_16.pdf
https://www.business-standard.com/article/current-affairs/the-landless-women-only-12-9-indian-
women-hold-agricultural-land-120121300771_1.html
Q.41)
Ans) a
Option a is correct. Kuznets Curve shows the relationship between economic growth and inequality. It is
inverted U shaped meaning that initially economic growth leads to greater inequality, followed later by
the reduction of inequality. Simon Kuznets indicates that inequalities rise with economic growth up to a
point and then decline. This is the so-called Kuznets inverted ‘U’ shape curve. Initially economic growth
increases overall inequality as the rural-urban transformation takes place and labour moves from low
productivity agriculture to high productivity urban industrial and service sector activities.
Option b is incorrect. The Lorenz curve shows the degree of inequality in income and wealth in a given
economy.
Page 22 of 27
The Philips Curve provides a relationship between inflation and unemployment. The theory claims that
with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.
The Phillips curve states that inflation and unemployment have a stable and inverse relationship.
Option c is incorrect. Gini coefficient is a degree of the distribution of income across a population. A Gini
Coefficient of zero means that everyone has the same income, while a Coefficient of 1 represents a single
individual receiving all the income. Gini index or coefficient measures distribution of income across
population. The Gini coefficient of 1 indicates full inequality and 0 indicates full equality. Thus, higher Gini
coefficient indicates greater inequality.
Option d is incorrect. The Gini coefficient was 35.7 per cent in 2011 in India. The coefficient increased to
47.9 per cent in 2018. Due to the COVID-19 pandemic, the Gini coefficient increased further. India is only
second to Russia in the world in terms of inequality.
Source: https://www.downtoearth.org.in/blog/economy/why-inequality-is-india-s-worst-enemy-
75778
https://www.thehindu.com/opinion/op-ed/what-is-kuznets-curve-
economics/article19127870.ece#:~:text=A%20curve%20used%20to%20demonstrate,by%20American%20
economist%20Simon%20Kuznets.
https://www.investopedia.com/terms/g/gini-index.asp
Page 23 of 27
Q.42)
Ans) b
The current methodology for poverty estimation is based on the recommendations of an Expert Group to
Review the Methodology for Estimation of Poverty (Tendulkar Committee) established in 2005. For 2011-
12, the poverty lines were fixed at daily expenditure of ₹27.2 in rural areas and ₹33.3 in urban areas.
According to a planning commission report, these poverty lines would vary from State to State because
of inter-state price differentials.
Source) UPSC CSE Pre 2019
Q.43)
Ans) d
Gold is always considered as a very important monetary asset across the world. It is a safe investment in
the long run.
Statement 1 is correct. Gold prices react to inflation, Indians prefer to invest in gold. When inflation
rises the currency values go down. Thus, people tend to hold money in the form of gold. When inflation
lasts high for a long period of time, gold acts as a hedging tool (tools that limit risk exposures in financial
assets) against inflationary conditions. As the value of currency keeps fluctuating, gold value is
considered stable in the long run.
Statement 2 is correct. Crude oil price that is one of the major contributors in the inflation of the
economy can dictate the gold prices in the market. The volatility of the crude oil prices and any sharp
moves by the economies regarding it would have implications for the inflation expectations as well as
gold prices.
Statement 3 is correct. The government holds reserves of gold. When RBI starts to buy greater quantity
than it sells, the price increases as it will result in insufficient supply of gold and vice versa. Hence, the
central bank’s decision to buy or sell gold can affect the price due to the sheer volume of transactions.
Statement 4 is correct. The Demand and Supply plays a vital role in influencing the prices of gold. Rural
demand plays an important role in the demand for gold. As per the NITI Aayog, the maximum purchase
and selling of gold in India is done from rural market. Good monsoon results in good harvest and the
amount earned is used to invest in gold. This raises the demand for gold. When there is a rise in
demand for gold, the price increases.
Statement 5 is correct. The US Dollar Index is a leading benchmark for the international value of the US
dollar and the world's most widely recognized, publicly traded currency index. The price of gold is
generally inversely related to the value of the United States dollar because the metal is dollar
denominated. All else being equal, a stronger U.S. dollar tends to keep the price of gold lower and more
controlled, while a weaker U.S. dollar is likely to drive the price of gold higher through increasing
demand because more gold can be purchased when the dollar is weaker.
Source: https://www.livemint.com/market/commodities/five-factors-affecting-gold-prices-
11656733639500.html
https://www.livemint.com/market/commodities/crude-oil-price-to-us-dollar-top-5-triggers-for-
gold-price-in-short-term-11660378803412.html
https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx
https://www.niti.gov.in/sites/default/files/2019-06/Report_GoldMarket.pdf
Page 24 of 27
Q.44)
Ans) c
Statement 1 is correct: PPI measures the average change in prices received by the producer and excludes
indirect taxes. The prices included in the PPI are from the first commercial transaction for many products
and some services.
Statement 2 is correct: Both PPI and CPI are important economic measures because they point to
monthly changes in prices. But they reflect prices from different standpoints. As noted above, the
Producer Price Index measures prices based on the first commercial transaction for a product or service.
This is in contrast to the consumer price index (CPI), which measures price changes encountered by the
consumer. Another key distinction is that the PPI does not include the price of imported goods, unlike
the CPI. Conversely, the PPI includes export prices while the CPI does not.
Statement 3 is correct: The Producer Price Index (PPI) measures the average change in sale prices for
the entire domestic market of raw goods and services. These goods and services are bought by
consumers from their primary producers, bought indirectly from retail sellers, or purchased by producers
themselves.
Source: https://www.investopedia.com/terms/p/ppi.asp#toc-producer-price-index-ppi-vs-
consumer-price-index-cpi
http://www.arthapedia.in/index.php/Producer_Price_Index_(PPI)
Q.45)
Ans) c
Statement 1 is correct. The share of agriculture investment in the total investment declined from 11.4% in
1980s to 7.4% in 2000s. Evidence show that inequality increased in post-reform period India. Even with a
doubling of per capita consumption growth in the post-reform decade, the decline in poverty was less by
a quarter compared to the pre-reform decade.
There has been a relative neglect of the agriculture sector by policymakers. While economic
development entails a move from the off farm to industry and services, deficiencies of public investments
in agriculture, and in the rural economy more generally, has been problematic precisely because the
productivity of agriculture determines the standards of living of the majority of the people in India.
Statement 2 is incorrect. Post-reform period saw an increase in casual labour and not a decline. The
growth of the labour-intensive manufacturing sector has been slow and has been lagging behind the
service sector, which is less labour intensive. Also, a high growth in the post-liberalisation period has
been accompanied by increased informalisation and de-unionisation of workforce. Economically and
socially deprived sections of society were mostly employed as casual labour. These are some of the
worrisome features of the labour market, as these workers have low bargaining power and earn meagre
wages.
Statement 3 is correct. Public expenditure on social sectors has suffered after 1991. As a percentage of
GDP, social sector expenditure after 1991 was generally less than what it was in the late 1980s. This has
impacted the improvement in health and quality of education in India, which affects economic growth
and its distribution.
Statement 4 is incorrect. India’s foreign direct investments has increased significantly since 1991. FDI
into India increased from $97 million in 1990-91 to about $84,835 million in FY 21-22.
Source: https://www.egyankosh.ac.in/bitstream/123456789/37979/1/Unit-11.pdf
https://www.thehindu.com/news/national/telangana/Economic-growth-post-reform-period-not-
inclusive/article17006542.ece
https://theprint.in/economy/97-mn-in-1991-to-82-bn-in-2021-how-reforms-made-india-a-go-to-
destination-for-fdi/699786/
Page 25 of 27
Q.46)
Ans) a
Unemployment is when a person who’s actively seeking employment can’t find work — but its effects
go beyond any one individual looking for a job. Unemployment also has implications for families,
employers, and the economy. There are several kinds of employment.
Pair 1 is incorrect: Frictional unemployment is the result of people voluntarily leaving their jobs.
People who’ve resigned from their jobs and graduates seeking their first jobs need time to find
employment, leaving them unemployed in the interim. Looking for a job, seeking a replacement
employee, and finding the right employee for a job takes time, but frictional unemployment isn’t
necessarily bad. This type of unemployment usually is short term, and it’s present even in a healthy
economy as people leave their jobs to seek new opportunities. Job loss due to automation would not fall
under frictional unemployment.
Pair 2 is incorrect: Fundamental changes in the economy and labor markets, such as evolving
technology, government policies, and competition, can create structural unemployment. This means
that while jobs are available, the people who could fill those roles either don’t have the right skills for
them or aren’t in the right location. Examples would include job loss due to automation. Unemployment
in skiing resorts in summer months would be an example of seasonal unemployment.
Pair 3 is correct: The term “cyclical unemployment” refers to the variation in the number of
unemployed workers during cycles of economic strength and weakness. When demand for a product or
service declines, production also goes down. This creates less need for employers to hire people who are
looking for jobs, causing the unemployment rate to increase. During the early stages of the COVID-19
pandemic, for example, people were confined to their homes, leading many businesses to shut down.
During this economic downturn, many employees of those businesses weren’t needed and were left
unemployed. The financial crisis of 2008 provides an example of cyclical unemployment.
Source: https://online.maryville.edu/blog/8-types-of-unemployment-understanding-each-type/
NCERT Class XI: Indian Economic Development; Chapter-7
Q.47)
Ans) b
Exp) option b is the correct answer.
The labor force participation rate measures the percentage of adults who are either employed or
actively looking for a job to the total working-age population. The participation of women in the labour
force varies considerably across developing countries and emerging economies, far more than in the case
of men.
Statement 1 is incorrect: The female labour force participation has not increased consistently in last
two decades. Female participation rates declined from 34.1 per cent in 1999-00 to 27.2 per cent in 2011-
12, and wide gender differences in participation rate also persists. As per PLFS 2020-21, all India Female
Labour Participation Rate is at 25.1.
Statement 2 is correct: The Periodic Labour Force Survey (PLFS) data in 2020-2021 highlights that
female labour force participation in rural area is higher than urban areas.
Source: https://economictimes.indiatimes.com/jobs/despite-policy-support-labour-participation-by-
women-still-low/articleshow/90061223.cms
https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---sro-
new_delhi/documents/genericdocument/wcms_342357.pdf
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1833855
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1833855
Page 26 of 27
Q.48)
Ans) d
Sustainable Development Goal 4 is about quality education. It aims at securing inclusive and equitable
quality education and promoting lifelong learning opportunities for all.
Statement 1 is correct: Rote learning is defined as the memorisation of information based on
repetition. Our education system suffers from the drawback of testing knowledge than developing
knowledge. It promotes rote learning among students specially of primary classes. ASER 2018 showed
that in grade 5, only half of all children could read a grade 2 level text fluently.
Statement 2 is correct: assessments in most of the schools were done in an ad hoc and dispersed
manner. There is a lack of consistent and high-quality data with the purpose of various assessments.
Standardized assessment is missing, which makes it difficult to effectively measure and track student
performance.
Statement 3 is correct: School teachers occupied with non-teaching activities leading to degradation
of quality of education in India. Instead of providing education, which is their primary role, they have to
deal with tasks like election duty and data collection. It increases the stress level among the teachers.
According to the report by the National Institute of Educational Planning and Administration (NIEPA)
only 19% of a teacher’s annual school hours are spent on teaching activities.
Statement 4 is correct: Data from SATH States has shown that teachers’ capacity is very weak on
pedagogy as well as on content of the topics. Particularly in middle and secondary grades. Many
teachers are scoring themselves <60-70% in papers of the grades that they teach. The situation is
similar for upper primary teachers in English, Hindi and Math.
Knowledge Base: National Education Policy (NEP) aims at achieving foundational skills which includes
reading, writing and arithmetic for all children in primary school, and beyond by 2025
Source: https://www.indiatoday.in/education-today/featurephilia/story/how-rote-learning-restricts-
a-child-s-creativity-1739093-2020-11-08
https://www.deccanchronicle.com/nation/current-affairs/220918/teachers-spend-only-191-per-cent-
time-teaching.html
https://www.niti.gov.in/sites/default/files/2021-11/BCG_SATHE_DIGITAL_13112021_0.pdf
Q.49)
Ans) c
The poverty line refers to the limit according to the government standards below which one is classified
as poor. In India, Tendulkar Committee has formulated a new poverty line in (2004-2005). According to
this, uniform poverty line basket for rural and urban areas of each state has been defined.
On the basis of income and consumption, poverty is classified into Absolute poverty and Relative
poverty.
Statement 1 is incorrect: Absolute poverty is when household income is below a certain level. This makes
it impossible for the person or family to meet basic needs of life including food, shelter, safe drinking
water, education, healthcare, etc.
Statement 2 is incorrect: Relative poverty is the condition in which people lack the minimum amount of
income needed in order to maintain the average standard of living in the society in which they live.
Relative poverty is defined relative to the members of a society and, therefore, differs across countries.
People are said to be impoverished if they cannot keep up with the standard of living as determined by
society.
Page 27 of 27

Relative poverty also changes over time. As the wealth of a society increases, so does the amount of
income and resources that the society deems necessary for proper living conditions.
Source: https://www.endpoverty.org/blog/relative-poverty-vs-absolute-poverty
https://www.habitatforhumanity.org.uk/blog/2018/09/relative-absolute-poverty/
https://www.thehindu.com/news/national/415-crore-indians-exited-multi-dimensional-poverty-
since-2005-
06/article66023269.ece#:~:text=The%20incidence%20of%20poverty%20there,10%20poorest%20in%20
2019%2F2021.
Q.50)
Ans) a
Deflation and disinflation refer to two very different conditions with respect to the direction and change
of general price levels in the economy. Deflation refers to falling prices or in other words, the opposite of
inflation (rising prices).
Disinflation does not refer to the direction of prices (as inflation and deflation do). It refers to the rate of
change. It is a slowdown in the rate of inflation. For example, deflation would be an inflation rate of -1
percent, while disinflation would be a change in the inflation rate from 3 percent one year to 2 percent in
the next.
Statement 1 is correct: Deflation means prices are falling and the inflation rate is in the negative, while
disinflation means a slowdown in the rate of inflation while still remaining in the positive.
Disinflation occurs more commonly than deflation.
Statement 2 is incorrect: During times of deflation, since the money supply is tightened, there is an
increase in the value of money, which increases the real value of debt. During disinflation the price of
goods and services increase over time, effectively decreasing the number of goods and services one can
buy with a rupee in the future as opposed to a rupee today. This effectively decreases the time value of
money. Since inflation is positive during disinflation, the value of money decreases.
Statement 3 is incorrect: During disinflation Stocks can, and often do, perform well when the bonds are
likely to deliver above-average returns in a disinflationary scenario since it makes central banks less likely
to raise interest rates and more likely to reduce them. Whereas deflation is an extremely destructive
condition for the economy and financial markets. During periods of deflation, stock prices are likely to
perform poorly.
Source : https://www.thebalancemoney.com/the-difference-between-deflation-and-disinflation-
416888#:~:text=Deflation%20means%20prices%20are%20falling,occurs%20more%20commonly%20than
%20deflation.

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Page 1 of 27

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

PTS 2024 | Preparatory Test 9 – Solutions (111121) |

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