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TEST BOOKLET
GENERAL STUDIES
INDIAN ECONOMY-1
Time Allowed : Two Hours Maximum Marks :200
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1) Which of the following are the issues related
to measurement of national Income through
Income method in India?
1. Wages and salary paid in Kind
2. Self-employed persons
3. Goods meant for self-consumption
Select the correct answer using the code
given below:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: D
Explanation:
The following problems arise in the computation
of National Income by income method:
• Owner-occupied Houses: A person who
rents a house to another earns rental
income, but if he occupies the house
himself, will the services of the house-owner
be included in national income. The services
of the owner-occupied house are included
in national income as if the owner sells to
himself as a tenant its services.
• Self-employed Persons: Another problem 2)
arises with regard to the income of self-
employed persons. In their case, it is very
difficult to find out the different inputs
provided by the owner himself. He might
be contributing his capital, land, labour and
his abilities in the business. But it is not
possible to estimate the value of each factor
input to production. So he gets a mixed
KPIAS (2 - D)
income consisting of interest, rent, wage and
profits for his factor services. This is
included in national income.
• Goods meant for Self-consumption: In
under-developed countries like India,
farmers keep a large portion of food and
other goods produced on the farm for self-
consumption. The problem is whether that
part of the produce which is not sold in the
market can be included in national income
or not. If the farmer were to sell his entire
produce in the market, he will have to buy
what he needs for self-consumption out of
his money income. If, instead he keeps some
produce for his self-consumption, it has
money value which must be included in
national income.
• Wages and Salaries paid in Kind:
Another problem arises with regard to
wages and salaries paid in kind to the
employees in the form of free food, lodging,
dress and other amenities. Payments in kind
by employers are included in national
income. This is because the employees
would have received money income equal
to the value of free food, lodging, etc. from
the employer and spent the same in paying
for food, lodging, etc.
Consider the following statements regarding
Rebate of State and Central Taxes and Levies
(RoSCTL):
1) It was introduced by the Ministry of
Finance.
2) RoSCTL scrips cannot be used for special
Customs duties, cesses, and surcharges.
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 3) It covers both State and Central levies.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (b)
# An initiative called the Rebate of State and
Central Taxes and Levies (RoSCTL) was
offered for embedded state and central
duties and taxes that are not refunded
through/ Goods and Services Tax (GST). It
was/ introduced by the Ministry of Textiles.
Hence, statement 1 is not correct.
# The government delivers RoSCTL benefits
in the form of transferable duty credit
scrips, not cash. These scrips can be used
only for payment of basic import duties.
These cannot be used for special Customs
duties, cesses, and surcharges. Hence,
statement 2 is correct. RoSCTL scrips are
transferable.
# RoSCTL covers both State and Central
levies. The entire RoSCTL burden,
however, ostensibly falls on the Central
Government as it issues and pays the 4)
RoSCTL scrips. Hence, statement 3 is
correct.
3) With reference to ‘Urban Infrastructure
Development Fund (UIDF)’, consider the
following statements:
1) UIDF will be established through the use
of priority sector lending shortfall and will
be managed by the Micro Units
KPIAS (3 - D)
Development and Refinance Agency Bank.
2) The fund will be used by public agencies to
create urban infrastructure in tier-1 and
tier-2 cities.
Select the correct statement(s) from the code
given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (d)
# UIDF will be established through the use
of priority sector lending shortfall. It will be
managed by the National Housing Bank. It
will be established on the lines of the Rural
Infrastructure Development Fund (RIDF).
# The fund will be used by public agencies to
create urban infrastructure in tier-2 and
tier-3 cities. States will be encouraged to
leverage resources from the grants of the
15th Finance Commission, as well as
existing schemes, to adopt appropriate user
charges while accessing the UIDF.
Consider the following statements regarding
Foreign Portfolio Investor (FPI):
1) They constitute a part of country’s capital
account are exhibited on its Balance of
Payments (BOP).
2) FPIs don’t have any control over the
companies whose shares they hold.
3) As compared to Foreign Direct Investment
(FDI), FPU is more volatile and riskier.
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 Which of the above statements are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (d)
# FPIs are those that invest funds in markets
outside of their home turf.
Examples of FPIs include stocks, bonds,
mutual funds, exchange traded funds,
American Depositary Receipts (ADRs),
and Global Depositary Receipts (GDRs).
* FPI is part of a country’s capital account
and is shown on its Balance of Payments
(BOP). Hence, statement 1 is correct.
# They are generally not active shareholders
and do not exert any control over the
companies whose shares they hold. Hence,
statement 2 is correct.
# FPI is often referred to as “hot money”
because of its tendency to flee at the first
signs of trouble in an economy. FPI is more
liquid, volatile and therefore riskier than
Foreign Direct Investment (FDI). Hence,
statement 3 is correct.
5. The corporate bond market in India is
regulated by:
a) Reserve Bank of India
b) Securities and Exchange Board of India
c) Insurance Regulatory and Development
Authority of India
d) Department of Company Affairs
KPIAS (4 - D)
Answer: B
Explanation:
* Corporate bonds are debt securities issued
by private and public corporations.
* Companies issue corporate bonds to raise
money for a variety of purposes, such as
building a new plant, purchasing equipment,
or growing the business. At present, the
corporate bond market is regulated by the
SECURITIES AND EXCHANGE
BOARD OF INDIA (SEBI) and the
government bond market is regulated by the
Reserve Bank of India (RBI). Hence,
OPTION B IS CORRECT.
6. In the Product method or Gross Value Added
(GVA) method, the Gross Domestic Product
(GDP) is calculated by adding the gross value
added (GVA) of all firms in the economy.
Which of the following are used to find the
GVA of a firm?
1. Sales of the firm
2. Change in inventories
3. Value of intermediate goods used
Select the correct answer using the code
given below.
(a) 1 and 3 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: D
Explanation:
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 * Gross value added of firm = Gross value of
the output produced by the firm – Value of
intermediate goods used by the firm:
* GVA = Value of sales by the firm + Value
of change in inventories – Value of
intermediate goods used by the firm
7) Which of the following is ‘not’ a component
of Current Account Deficit?
(a) Visible Trade
(b) Foreign Direct Investment (FDI)
(c) Invisible Trade
(d) Transfer Payments
Solution (b)
# The current account of a country refers to
its balance of short-term transactions, which Select the correct answer using the code
is determined by the disparity between its
savings and investments. It encompasses
various elements, including visible and
invisible trade, transfer payments, net factor b) 2 only
income, and remittances, all of which are
recognized as tangible transactions that can
affect the economy’s income, output, and
employment levels by driving the movement Answer: A
of goods and services.
Foreign investment, such as FDI and
FPI, immovable properties, intangible
assets, trade credits, borrowings from other
nations, banking capital, and changes in the
foreign exchange reserve are all
components of the capital account.
# The capital account of a country records
the flow of funds between the domestic
economy and the rest of the world. Its
components include foreign investment,
loans, and capital transfers, which are
KPIAS (5 - D)
classified as either long- term or short-term
capital movements. These transactions
represent changes in a country’s ownership
of assets and liabilities and can have
significant impacts on its financial stability
and economic growth.
8. With reference to Prompt Corrective Action
(PCA), which of the following statements is/
are correct?
1. It is a supervisory intervention of the RBI
to initiate and implement remedial measures
for banks to restore its financial health.
2. The prompt corrective action framework
is also imposed on cooperative banks and
non- banking financial companies.
given below:
a) 1 only
c) Both 1 and 2
d) Neither 1 nor 2
* Explanation: RBI, under its supervisory
framework, uses various measures/tools to
maintain sound financial health of banks.
Under the Prompt Corrective Action (PCA)
framework, RBI has specified certain
regulatory trigger points in terms of three
parameters, i.e. capital to risk weighted
assets ratio (CRAR), net non-performing
assets (NPA) and Return on Assets (RoA).
* The Reserve Bank of India (RBI) has
recently revised its prompt corrective action
(PCA) framework to exclude the
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 profitability parameter (Return on Asset)
from its list of triggers.
Explanation:
* Capital, asset quality and leverage will be
the key areas for monitoring in the revised
framework.
* STATEMENT 1 IS CORRECT: The
objective of the PCA Framework is to
enable supervisory intervention at an
appropriate time and require the Supervised
Entity to initiate and implement remedial
measures in a timely manner, so as to restore
its financial health.
* STATEMENT 2 IS NOT CORRECT: The
PCA Framework applies only to commercial
banks and does NOT cover cooperative
banks and non-banking financial companies.
RBI has brought in ‘Supervisory Action
Framework’ (SAF) for Urban Cooperative
Banks in place of PCA for commercial
banks.
9. Which of the following may lead to an
increase in Personal Income in an economy?
1. Increase in national income
2. Increase in undistributed profits
3. Increase in corporate taxes
Select the correct answer using the code
given below.
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
KPIAS (6 - D)
Answer: A
* Personal Income is the part of National
Income which is received by households.
To calculate personal income we have to
consider the following factors:
* Undistributed Profits: It is a part of the profit
which is earned by the firms and
government enterprises and is not
distributed among the factors of production.
We have to deduct UP from NI to arrive at
PI, since UP does not accrue to the
households. Increasing it will reduce
personal income. Hence option 2 is not
correct.
* Corporate taxes: Similarly, Corporate Tax,
which is imposed on the earnings made by
the firms, will also have to be deducted from
the NI, since it does not accrue to the
households. Increasing it will reduce
personal income. Hence option 3 is not
correct.
* Net interest payments by the households:
The households do receive interest
payments from private firms or the
government on past loans advanced by
them. And households may have to pay
interests to the firms and the government
as well, in case they had borrowed money
from either. So, we have to deduct the net
interests paid by the households to the firms
and government. Increasing it will reduce
personal income.
* Transfer payments: The households receive
transfer payments from government and
firms (pensions, scholarship, prizes, for
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 example) which have to be added to
calculate the Personal Income of the
households. Increasing it will increase
personal income.
Thus, Personal Income (PI) =
National Income- Undistributed profits –
Net interest payments made by households
– Corporate tax + Transfer payments to the
households from the government and firms.
Hence option 1 is correct.
10) Windfall Tax sometimes seen in news refers
to
(a) Tax levied on non-renewable energy
consuming industries
(b) Tax on profit accrued from unprecedented
events
(c) Tax levied on import of luxury goods
(d) Tax on companies earning profits from
foreign locations
Solution (b)
* Windfall taxes are designed to tax the profits
a company derives from an external,
sometimes unprecedented event— for
instance, the energy price-rise as a result
of the Russia-Ukraine conflict. These are
profits that cannot be attributed to
something the firm actively did, like an
investment strategy or an expansion of
business.
11. With reference to Liquidity Adjustment
Facility (LAF), consider the following
statements:
KPIAS (7 - D)
1. It is a monetary policy tool which allows
the bank to borrow money through
repurchase agreements.
2. Under LAF, RBI performs short term and
long term repo operations to inject liquidity
into the banking system.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: C
Explanation:
* Statement 1 is correct: Liquidity Adjustment
Facility (LAF) is a tool by which the
Reserve Bank adjust money supply in the
economy. It is a monetary policy tool which
allows the bank to borrow money through
repurchase agreements (repo and reverse
repos).
* Statement 2 is correct: Under Liquidity
Adjustment Facility (LAF), RBI does
overnight as well as long term repo
operations. The LAF works through various
instruments devised by the RBI to inject
liquidity into the banking system when the
system/institutions need cash as well as to
absorb liquidity when the banking system
has excess money.
12. In the context of the Indian economy, which
of the following statements is/are correct
about Wholesale Price Index (WPI)?
1. It measures the inflation in goods and
Cell: 91332 37733

services.
2. Manufacturing Products constitute the
highest weightage in calculation of WPI.
Select the correct answer using the code
given below:
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: B
Explanation:
* The Wholesale Price Index is the price of a
representative basket of wholesale goods. WPI
captures the average movement of wholesale
prices of goods and is primarily used as a GDP
deflator. WPI is released by the Economic Advisor
in the Ministry of Commerce and Industry.
* Statement 1 is not correct: As services are
not traded/transacted in the wholesale
markets, WPI data does NOT include the
inflation due to services.
* Statement 2 is correct: The index basket of
the WPI covers commodities falling under
the three major groups namely Primary
Articles, Fuel and Power and Manufactured
products.
* MANUFACTURED PRODUCTS
CONSTITUTE THE HIGHEST
WEIGHTAGE WITH 64.23 % followed by
Primary Articles with 22.62 % and Fuel and
Power with 13.15 %.
13. Which among the following is not a macro-
economic stabilisation policy?
KPIAS (8 - D)
a) High government expenditure for poverty
alleviation.
b) Fiscal Responsibility and Budget
Management Act, 2003
c) Inflation targeting
d) Export promotional offers
Answer: a
* Macroeconomics is a branch of the
economics field that studies how the
aggregate economy behaves. It studies the
behaviour and performance of an economy
as a whole.
* In macroeconomics, a variety of economy-
wide phenomena is thoroughly examined
such as, inflation, price levels, rate of growth,
national income, gross domestic product and
changes in unemployment.
* Macro-economic stability means controlled
fiscal deficit, controlled current account
deficit, and controlled inflation along with
stable growth. High government
expenditure for non-capital expenditure will
result in possibility of de-stabilisation.
* The Fiscal Responsibility and Budget
Management Act, 2003 (FRBMA) is an Act
of the Parliament of India to institutionalize
financial discipline, reduce India’s fiscal
deficit, improve macroeconomic
management and the overall management
of the public funds by moving towards a
balanced budget.
* Inflation targeting is a monetary policy
regime in which a central bank has an
explicit target inflation rate for the medium
term and announces this inflation target to
Cell: 91332 37733
 the public.
14. What do you understand by the term transfer
payment?
(a) Payment given to the importers by a
domestic firm for the goods supplied.
(b) It is a part of profit which is not distributed
among the factors of production.
(c) It is a one-way payment to a person who
has given or exchanged no money, good, or
service for it.
(d) Payment made by the parent company to
subsidiary companies for use of goods or
Services.
Answer: C
* Explanation: A transfer payment is a one-
way payment to a person who has given or
exchanged no money, good, or service for
it. It is a process used by governments as a
way to redistribute money through programs
such as old age or disability pensions,
student grants, scholarships, prizes,
unemployment compensation, etc.
`15) Which of the following statements are correct
regarding the Labour Force Participation
Rate as per Economic Survey 2022-23?
1) Labour markets rebounded from Covid-19
with a drop in unemployment rates in 2020-
21 as compared to 2018-19.
2) An increase in Rural Female Labour Force
Participation Rate has been recorded in
2020-21 as compared to 2018-19.
Select the correct answer using the codes
given below:
KPIAS (9 - D)
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (c)
# According to the Centre for Monitoring
Indian Economy (CMIE), the labour force
consists of people who are 15 years or older,
and belong to either of the following two
categories: a) Are Employed b) Are
unemployed and are willing to work and are
actively looking for a job. These two
categories have people “demanding” jobs.
This demand is what LFPR refers to.
Thus, the LFPR essentially is the
percentage of the working-age (15 years
or older) population that is asking for a job.
It represents the “demand” for jobs in an
economy. It includes those who are
employed and those who are unemployed.
Labour Force Participation as per Economic
Survey 2022-23:
* Labour markets have recovered from the
effects of Covid-19, with unemployment
rates falling from 5.8% in 2018-19 to 4.2%
in 2020-21. Hence, statement 1 is correct.
*- The Rural Female Labour Force
Participation Rate has risen from 19.7% in
2018-19 to 27.7% in 2020-21, which is a
positive development. Hence, statement 2
is correct. More than 75% of rural female
workers are employed in the agricultural
sector, implying a need to upskill and create
Cell: 91332 37733

employment for women in this sector. Here,
self-help groups are serving as an effective
conduit to tap the rising willingness of
females to work.
16. Which one of the following statements best
describes the term ‘Dearness Allowance
(DA)’ given to government employees?
a) An allowance to meet a particular type of
expenditure over and above salary.
b) It is a component of salary received
towards the rent payment.
c) It is a reward that is paid to an employee as
an incentive for his work.
d) It is paid by the government to its employees
to offset the impact of inflation.
Answer: D
Explanation:
* ‘Dearness Allowance (DA)’ is provided by
the government to its employees to cushion
the impact of the rising cost of living.
Inflation (or rate of increase in prices) eats
away the buying power of money, hence
the justification for DA. Dearness
Allowance is paid by the government to its
employees as well as a pensioner to offset
the impact of inflation.
17. Which of the following needs to be subtracted
from the National Income to get the Personal 18.
Disposable Income of all households?
1. Net interest payments made by households
2. Corporate Tax
3. Undistributed part of the profits earned by
KPIAS (10 - D)
the firms
4. Personal tax and non-tax payments
Select the correct answer using the code
given below.
(a) 1 and 4 only
(b) 1, 3 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4
Answer: D
Explanation:
* The part of National Income (NI) which is
received by households is referred to as the
Personal Income (PI).
* Personal Income (PI) = NI – Undistributed
profits – Net interest payments made by
households – Corporate tax + Transfer
payments to the households from the
government and firms.
* However, even PI is not the income over
which the households have complete say.
They have to pay taxes from PI. If we
deduct the Personal Tax Payments (income
tax, for example) and Non-tax Payments
(such as fines) from PI, we obtain what is
known as the Personal Disposable Income.
Thus Personal Disposable Income (PDI )
= PI – Personal tax payments – Non-tax
payments.
Consider the following statements:
1. The government of India sets monetary
policy for every five years.
2. The primary objective of monetary policy
Cell: 91332 37733
 is to maintain price stability.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: B
Explanation:
* Statement 1 is not correct: Monetary Policy
refers to the policy of the central bank. In
India, the Reserve Bank of India (RBI) is
responsible for monetary policy. Repo,
Reverse Repo, CRR, SLR etc are part of
monetary policy.
* Statement 2 is correct: The primary
objective of monetary policy is to maintain
price stability while keeping in mind the
objective of growth. Price stability is a
necessary precondition for sustainable
growth. To maintain price stability, inflation
needs to be controlled. The government of
India sets an inflation target for every five
years.
19. With reference to methods of GDP
estimation, consider the following statements
regarding ‘basic prices’:
1. It includes the payment to factors of
production but does not include any tax.
2. The Gross Value added at basic prices will 20.
always be less than Gross Value added at
market prices.
KPIAS (11 - D)
Select the correct answer using the code
given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: D
Explanation:
* Factor cost includes only the payment to
factors of production, it does not include any
tax. In order to arrive at the market prices,
we have to add to the factor cost the total
indirect taxes less total subsidies.
* The basic prices lie in between: they include
the production taxes (less production
subsidies) but not product taxes (less
product subsidies). Therefore in order to
arrive at market prices, we have to add
product taxes (less product subsidies) to the
basic prices, not the production taxes or
production subsidies.
GVA at factor costs + Production taxes-
Production subsidies = GVA at basic prices
GVA at basic prices + Product taxes -
Product subsidies = GVA at market prices
* So, the interplay between product taxes and
product subsidies would determine if GVA
at Basic Prices would be less than or more
than GVA at market prices.
Consider the following statements regarding
Reserve Bank of India (RBI):
1. RBI acts as Manager of Foreign Exchange
Cell: 91332 37733
 under the Foreign Exchange Management
Act, 1999.
2. It acts as a banker to the government and
bank of the banks.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: C
Explanation:
* The Reserve Bank of India was set up on
the basis of the recommendations of the
Hilton Young Commission, under the
Reserve Bank of India Act, 1934.
* RBI acts as the Manager of Foreign
Exchange of GoI under the Foreign
Exchange Management Act, 1999.
* It facilitates external trade and payment and
promote orderly development and
maintenance of foreign exchange market
in India. Hence statement 1 is correct.
* It issues the currency of the country. This
currency issued by the central bank can be
held by the public or by the commercial
banks and is called the ‘high-powered
money’ or ‘Reserve money’ or ‘monetary
base’ as it acts as a basis for credit creation.
* It controls the money supply of the country
through various methods, like bank rates,
open market operations and variations in
reserve ratios.
KPIAS
* It acts as a banker to the government. It is
the custodian of the foreign exchange
reserves of the economy and also acts as a
bank to the banking system. Hence
statement 2 is correct.
21) Which of the following is a part of Fiscal
Policy?
1. Government expenditure
2. Taxation by the Government
3. Interest rate determination
4. Revenues from disinvestment of PSUs.
Select the correct answer using the code
given below:
a) 1, 2, 3 and 4
b) 1, 2 and 4 only
c) 1 and 2 only
d) 1, 2 and 3 only
Answer: b
* Fiscal policy is based on the theories of
British economist John Maynard Keynes.
Also known as Keynesian economics, this
theory basically states that governments can
influence macroeconomic productivity levels
by increasing or decreasing tax levels and
public spending.
* This influence, in turn, curbs inflation
(generally considered to be healthy when
between 2-3%), increases employment and
maintains a healthy value of money. Fiscal
policy is very important to the economy.
Proceeds from disinvestment are always
taken into account while presenting the
(12 - D) Cell: 91332 37733

Union Budget.
* These receipts are treated as part of Capital
Receipts. Interest rate determination is the
job of Central bank and is a part of monetary
policy.
* There are two types of fiscal policy. The
first, and most widely-used, is expansionary.
It stimulates economic growth. It’s most
critical at the contraction phase of the
business cycle. The second type,
contractionary fiscal policy, is to stamp out
inflation.
23)
22. With reference to inflation, consider the
following statements:
1. Core inflation measures price inflation
arising due to volatile components i.e. food
and fuel items.
2. Core inflation is considered a prime indicator
of underlying long-term inflation.
Solution (a)
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: B
Explanation:
* Core inflation is an inflation measure which
excludes transitory or temporary price
volatility as in the case of some commodities
such as food items, energy products etc. It
reflects the inflation trend in an economy.
KPIAS (13 - D)
statement 1 is not correct: Headline inflation
measures price inflation arising due to all
types of commodities in the economy.
* Core inflation measures the headline
inflation EXCLUDING volatile components
i.e. food and fuel items.
* statement 2 is correct: Core inflation is
considered a prime indicator of underlying
long- term inflation. This is important
because it is used to calculate the impact
of rising prices on consumer income.
Which of the following is a characteristic of a
Rentier Economy?
(a) High levels of inequality
(b) A diversified economy with many sources
of income
(c) Dependence on productive activity
(d) Low levels of unemployment
* A rentier economy is an economic system
where a significant portion of the income is
derived from rents, i.e., the payment made
for the use of assets such as land, natural
resources, patents, and intellectual property.
* This results in a concentration of wealth
among those who own these assets, leading
to income inequality and dependence on
passive income rather than productive
activity.
* Rentier economies are often characterized
by slow economic growth and high levels
of inequality.
Cell: 91332 37733
24) Consider the following statements
1) Cess are resorted to only for specified
purposes and it is discontinued when the
purpose for levying it is fulfilled.
2) Cess is levied only on direct taxes and all
the cesses are utilized by the Central
Government.
Select the correct statement(s) using the
code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (a)
# They are resorted to only for a specific
purpose and are to be discontinued after
the objective is fulfilled. A cess is an
additional tax levied by the government to
raise funds for a specific purpose. Major
cesses include the health and education
cess, additional excise duties on petrol and
diesel, road and infrastructure cess, national
calamity contingent duty, cesses on crude
oil and exports.
# Cess can be levied both on direct and indirect
taxes. Cesses and surcharges, are not part
of the divisible tax pool that is shared with
states. Only GST compensation cess, which
are wholly appropriated by the states under
a revenue guarantee mechanism.
KPIAS (14 - D)
25. What are the reasons for not using GDP as
the indicator of well being of the people of a
Country?
1. It does not account for distribution of
income.
2. It takes into account only those economic
activities that are evaluated in monetary
terms.
3. It neglects negative externalities on health
and environment.
Select the correct answer using the code
given below.
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: D
Explanation:
Limitations of GDP
There are several limitations of GDP as a welfare
indicator.
• GDP does not reflect inequality present
within the economy. Economic inequality is
not revealed by GDP figures.
• Non-monetary exchanges: Many activities
in an economy are not evaluated in
monetary terms. For example, domestic
services women perform at home are not
paid for. This is a case of underestimation
of GDP. GDP ignores voluntary and
charitable work, social service as it is
unpaid.
• Externalities: Externalities refer to the
benefits (or harms) a firm or an individual
Cell: 91332 37733
 causes to another for which they are not
paid (or penalized). Externalities do not have
any market in which they can be bought
and sold. For example, output of oil refinery
is taken into GDP calculation but pollution
and ill effects are not deducted from GDP.
This is the case of overestimation of GDP
26) Consider the following statements:
1. A higher GDP growth in an economy must
increase employment growth.
2. A higher employment growth must decrease
unemployment rate.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: d
* Higher GDP growth may not always
increase employment growth, a
phenomenon called Jobless Growth. Even
higher employment growth may not always
decrease unemployment rate as it depends
also on how many people are entering the
labour force (employed + unemployed).
27. Which of the following statements is/are true
regarding the Monetary Policy Committee
(MPC)?
1. MPC has the authority to decide repo rate,
CRR & SLR.
2. The Governor of RBI is ex-officio
KPIAS (15 - D)
Chairman of the MPC.
Select the correct answer using the code
given below:
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: B
Explanation:
* Statement 1 is not correct: The Monetary
Policy Committee (MPC) constituted by the
Central Government under Section 45ZB
determines the policy interest rate required
to achieve the inflation target. MPC has the
authority to decide only the repo rate and
not CRR & SLR.
* Statement 2 is correct: The committee will
have six members. Of the six members, the
government will nominate three. No
government official will be nominated to the
MPC. The other three members would be
from the RBI with the governor being the
ex-officio chairperson. Deputy governor of
RBI in charge of the monetary policy will
be a member, as also an executive director
of the central bank.
28. For incom e accounting, the domestic
territory of a country includes which of the
following?
1. Territory within the political frontiers
2. Oil and natural gas rigs operated by the
country in international waters
3. Embassies of other countries located on its
own territory
Cell: 91332 37733
 Select the correct answer using the code
given below.
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1 and 3 only
Answer: B
Explanation:
The domestic territory of a country includes:
• Territory living within political frontiers,
including its territorial waters.
• Ships and aircraft operated by the country
between political frontiers of two or more
countries.
• Oil and natural gas rigs, fishing vessels and
floating platforms operated by the country
in international waters.
• Embassies, military establishments and
consulates of the country located in other
countries of the world.+
* It does not include the embassies of other
countries and international organisations
located on its own territory.
Solution (d)
# This report is the tenth edition of the
(Organisation for Economic Co-operation
and Development) OECD’s Tax
Administration Series. It provides
internationally comparative data on global
trends in tax administrations across 58
advanced and emerging economies.
# The report is intended to inform and inspire
tax administrations as they consider their
future operations, as well as to provide
information on global tax administration
trends and performance for stakeholders
and policy makers.
The report is structured around nine
chapters that examine the performance of
tax administration systems, using an
extensive data set and a variety of examples
to highlight recent innovations and
successful practices.
# This edition also provides a first glimpse of
the impact of the COVID-19 pandemic on
the work of tax administrations. The
underlying data comes from the
International Survey on Revenue
Administration and the Inventory of Tax
Technology Initiatives.

29) Tax Administration 2022 report was released

by which of the following? 30) Consider the following statements with
respect to ‘Post Devolution Revenue Deficit
(a) United Nations Development Programme
Grant’.
(b) World Trade Organisation
1) It is provided to the States under Article
(c) International Monetary Fund 275 of the Constitution.
(d) Organisation for Economic Co-operation 2) It is released to the States as per the
and Development recommendations of the successive Finance
Commissions.
KPIAS (16 - D) Cell: 91332 37733
 Select the correct statement(s) using the
code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (c)
# The Post Devolution Revenue Deficit
Grants are provided to the States under
Article 275 of the Constitution. The grants
are released to the States as per the
recommendations of the successive Finance
Commissions to meet the gap in Revenue
Accounts of the States post devolution.
# The eligibility of States to receive this grant
and the quantum of grant for the period from
2020-21 to 2025-26 was decided by the
Fifteenth Finance Commission based on the
gap between assessment of revenue and
expenditure of the State after taking into
account the assessed devolution during this
period.
31) India is expected to grow between 6.5 and
7.0% in FY23. Which of the following have
been India’s growth drivers in FY23
according to Economic survey?
1) Rebound in domestic consumption.
2) Thrust on Public Capital expenditure.
3) It is due to advantage of ‘Base effect’.
Select the correct answer using the code
given below:
(a) 1 and 2 only
(b) 2 and 3 only
KPIAS
(c) 1 only
(d) 1, 2 and 3
Solution (a)
# Despite the downward revision, the growth
estimate for FY23 is higher than for almost
all major economies and even slightly above
the average growth of the Indian economy
in the decade leading up to the pandemic.
IMF estimates India to be one of the top
two fast-growing significant economies in
2022. Despite strong global headwinds and
tighter domestic monetary policy, if India is
still expected to grow between 6.5 and
7.0%, and that too without the advantage
of a base effect, it is a reflection of India’s
underlying economic resilience. Hence,
statement 3 is not correct.
# The rebound in consumption has also been
supported by the release of “pent-up”
demand, a phenomenon not again unique to
India but nonetheless exhibiting a local
phenomenon influenced by a rise in the
share of consumption in disposable
income. Hence, statement 1 is correct.
# Capex thrust in the last two budgets of the
Government of India was not an isolated
initiative meant only to address the
infrastructure gaps in the country. It was
part of a strategic package aimed at
crowding-in private investment into an
economic landscape broadened by the
vacation of non-strategic PSEs
(disinvestment) and idling public sector
assets. Hence, statement 2 is correct.
(17 - D) Cell: 91332 37733
32. With reference to Unified Logistics Interface
Platform (ULIP), consider the following
statements:
1. It enables all logistics stakeholders to track
& trace consignment including
verification of drivers and vehicle details.
33.
2. It was launched under the National
Transport Policy.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: A
Explanation:
* Unified Logistics Interface Platform
(ULIP) was recently launched by the
government as part of the ‘National
Logistics Policy (NLP)’, a promising
initiative in the logistics sector that aims to
bring ease of doing business in the logistics
sector by simplifying the logistics processes,
improving its efficiency, bringing in
transparency and visibility, and reducing
logistics cost & time.
* STATEMENT 1 IS CORRECT: ULIP will
give direct and indirect benefits to all
logistics stakeholders like verification of
drivers and vehicles details in a single click,
tracking & tracing of consignment,
Route Optimization Planning, timely update
on the destination of the consignment,
reduce paper works, empty carrier &
container visibility, inventory management
etc.
KPIAS (18 - D)
* STATEMENT 2 IS NOT CORRECT:
Unified Logistics Interface Platform
(ULIP) was launched as part of the
‘National Logistics Policy (NLP)’.
Which of the following statements is not
correct about ‘Effective Revenue Deficit’?
a) It excludes those grants given to States
which are used by States for creation of
capital assets.
b) Effective Revenue deficit will always be
lower than Revenue Deficit.
c) It clearly distinguishes grants used for
consumption purposes and those
or investments.
d) This concept was introduced in the year
2008-2009.
Answer: d
* This concept was introduced in the Union
Budget for 2012-13 with the objective of
fiscal consolidation path to be adopted by
the government. Effective Revenue Deficit
will always be less than Revenue Deficit
as it excludes productive grants for capital
assets to States.
* Reason –While revenue deficit is the
difference between revenue receipts and
revenue expenditure, the present
accounting system includes all grants from
the Union Government to the state
governments/Union territories/other bodies
as revenue expenditure, even if they are
used to create assets. Such assets created
by the sub-national governments/bodies are
owned by them and not by the Union
Government. Nevertheless, they do result
Cell: 91332 37733

in the creation of durable assets. Such
revenue expenditures contribute to the
growth in the economy and therefore, should
not be treated as unproductive in nature.
34) Consider the following statements:
1. Demographic Dividend is associated with
lower dependency ratio in the country.
2. Such dividend is followed by Demographic
Echo under which old-age dependency ratio
increases.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: c
* Demographic dividend occurs when the
proportion of working people in the total
population is high because this indicates that
more people have the potential to be
productive and contribute to growth of the
economy.
* The dependency ratio is a measure showing
the number of dependents, aged zero to 14
and over the age of 65, to the total population,
aged 15 to 64. It is also referred to as the
“total dependency ratio.” This indicator
gives insight into the amount of people of
nonworking age compared to the number
of those of working age.
KPIAS (19 - D)
35. It is calculated by adding residents’
investment incom e from overseas
investments and subtracting foreign
residents’ investment income earned within
a country to the Gross Domestic Product
(GDP).
Which of the following concepts is explained
in the above paragraph?
(a) Gross National Product
(b) Net National Product
(c) Net Domestic Product
(d) Net National Income
Answer: A
Explanation:
* Gross National Product (GNP) is an
estimate of the total value of all the final
products and services turned out in a given
period by the means of production owned
by a country’s residents. GNP is commonly
calculated by taking the sum of personal
consumption expenditures, private domestic
investment, government expenditure, net
exports and any income earned by residents
from overseas investments, minus income
earned within the domestic economy by
foreign residents. Net exports represent the
difference between what a country exports
minus any imports of goods and services.
* GNP a” GDP + Factor income earned by
0the domestic factors of production
employed in the rest of the world – Factor
income earned by the factors of production
of the rest of the world employed in the
domestic economy
* Hence, GNP a” GDP + Net factor income
Cell: 91332 37733

from abroad
36. The State Bank of India has recently raised
the marginal cost of funds-based lending
rates (MCLR). Which of the following factors
is/are considered for calculation of MCLR?
1. Marginal cost of deposits
2. Cost of maintaining CRR and SLR
3. Operational Costs of Banks
Select the correct answer using the code
given below:
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Answer: D
Explanation:
* From 1st April 2016, RBI introduced a new
methodology for calculation of the Base
Rates based on marginal cost of funds rather
than average cost of funds. This new
methodology is called Marginal Cost of
Funds based Lending Rate (MCLR).
* MCLR calculation methodology will be
based on the following factors:
- MARGINAL COST OF DEPOSITS/
FUNDS
- COST OF MAINTAINING CRR AND
SLR
- OPERATIONAL COSTS OF BANKS
- Tenor Premium (based on the time period
for which loan is given)
KPIAS (20 - D)
Hence, OPTION D IS CORRECT.
37. What is crowding out?
a) Decrease in private consumption due to rise
in government expenditure
b) Decrease in private investment due to rise
in government expenditure
c) Decrease in private expenditure due to
inflation
d) None of the above
Answer: b
* The crowding out effect is an economic
theory arguing that rising public sector
spending drives down or even eliminates
private sector spending. Sometimes,
government adopts an expansionary fiscal
policy stance and increases its spending to
boost the economic activity.
* Usually this increase in government
spending is funded using higher taxes or
borrowing on part of the government.
* When governments raise taxes in order to
introduce or expand welfare programs,
individuals and businesses are left with less
discretionary income, which can reduce
charitable contributions. In this respect,
public sector expenditures for social welfare
can reduce private sector giving for social
welfare, offsetting the government’s
spending on those same causes.
38. With reference to Securities and Exchange
Board of India (SEBI), consider the following
statements:
1. It is a non-statutory body.
Cell: 91332 37733
 2. It is the regulator of capital markets in India.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: B
Explanation:
* The Securities and Exchange Board of India
(SEBI)– Regulator of the financial markets
in India was established on 12 th April 1988.
It was initially established as a non-statutory
body.
* STATEMENT 1 IS NOT CORRECT:
SEBI is a STATUTORY BODY in
accordance with the provisions of the
Securities and Exchange Board of India Act,
1992.
* STATEMENT 2 IS CORRECT: The
primary objective of SEBI is to protect the
interest of people in the stock market and
provide a healthy environment for them. It
regulates the capital market in India.
39) Indian currency can depreciate with respect
to a foreign currency when
1. The global price of imported crude oil
increases
2. Foreign investors take investments out of
India
4. Indian companies’ dependence on External
Commercial Borrowings increases
Select the correct answer using the code
given below:
a) 1 only
b) 1 and 2 only
c) 1, 2 and 3 only
d) 1, 2, 3 and 4
Answer: c
* Currency depreciation is a fall in the value
of a currency in a floating exchange rate
system.
* Reasons – economic fundamentals, interest
rate differentials, political instability, risk
aversion among investors. Currency
depreciation generally happens either due
to factors which increase demand for
foreign currency like costlier imports or
which decreases its supply like lower
exports or foreign investment outflow. ECBs
increase foreign currency supply.
40. Who among the following can invest in the
Government Securities (G-Secs)?
1. Commercial banks
2. Foreign Portfolio Investors
3. Individuals
Select the correct answer using the code
given below:
a) 1 and 2 only

3. Indian exports decline due to global b) 2 and 3 only

slowdown c) 1 and 3 only
KPIAS (21 - D) Cell: 91332 37733
 d) 1, 2 and 3
Answer: D
Explanation:
* The RBI conducts auctions of G-secs
(Government-dated securities with original
maturity of one year or more) where
institutional investors can place competitive
bids for them, and retail investors can apply
for allotment.
* OPTION 1 IS CORRECT: Auctions are
conducted on the electronic platform called
the E-Kuber, the Core Banking Solution
(CBS) platform of RBI. Commercial banks,
scheduled Urban Cooperative Banks
(UCBs), Primary Dealers (PD), insurance
companies and provident funds are members
of this platform.
* OPTION 2 IS CORRECT: Foreign Portfolio
Investors (FPIs) can also invest in
Government Securities (G-Secs) upto 6 %
of outstanding stocks of securities.
* OPTION 3 IS CORRECT: The RBI has
unveiled a scheme under which retail
investors will be allowed to open retail direct
gilt accounts (RDG) directly with the central
bank. The retail direct scheme is a one-stop
solution to facilitate investment in
government securities (G-secs) by individual
investors.
41. Which of the following are the “factors of
production” used in the production of goods
and services in economic activity?
1. Land
2. Labour
KPIAS (22 - D)
3. Money
4. Capital
5. Entrepreneurship
Select the correct answer using the code
given below.
(a) 1, 2 and 4 only
(b) 1, 2, 3, 4 and 5
(c) 3 and 5 only
(d) 1, 2, 4 and 5 only
Answer: D
Explanation:
* The factor of production is “an economic
term that describes the inputs that are used
in the production of goods or services to
make an economic profit”.
• The factors of production include land, labor,
capital, and entrepreneurship. Out of these
four, entrepreneurship has recently been
accepted as a potential new factor of
production. Money is not a factor of
production.
• Money is only a facilitator in the acquisition
of those goods. Money facilitates trade and
stores value very effectively, individuals
cannot eat, wear or be sheltered by their
bank account balances. The ultimate aim
of economic activity, work, and trade, is to
acquire goods, not money.
Cell: 91332 37733

42. Consider the following statements:
1. Nominal GDP is the value of GDP at the
current prevailing prices.
2. Real GDP is calculated in a way such that
the goods and services are evaluated at
constant prices.
Which of the statements given above are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: C
Explanation:
* Statement 1 is correct: Nominal GDP, is the
value of GDP at the current prevailing
prices.
* Statement 2 is correct: GDP. Real GDP is
calculated in a way such that the goods and
services are evaluated at some constant set
of prices (or constant prices).
* Therefore, in order to compare the GDP
figures (and other macroeconomic
variables) of different countries or to
compare the GDP figures of the same
country at different points of time, we
cannot rely on GDPs evaluated at current
market prices. For comparison, we take the
help of real GDP.
43) Which of the following instruments of
Monetary Policy does not involve the use of
government securities?
a) Cash Reserve Ratio
KPIAS (23 - D)
b) Statutory Liquidity Ratio
c) Repo Rate
d) Open Market Operations
Answer: a
* Cash Reserve Ratio (CRR) – It is the
percentage of cash deposits that banks need
to keep with the Reserve Bank of India on
a fortnightly basis.
* Statutory Liquidity Ratio (SLR) – Apart
from CRR, banks have to invest certain
percentage of their deposits in specified
financial securities like Central Government
or State Government securities. Unlike
CRR, banks earn some amount on it.
* Repo Rate and Reverse Repo Rate. Repo
rate is the rate at which RBI lends to its
clients generally against government
securities.
* Open market operations (OMO) refer to
the buying and selling of government
securities in the open market in order to
expand or contract the amount of money in
the banking system.
44. The Sensex index has been continuously
rising in recent days. Which of the following
factors affect the change in market
movements?
1. Rate of inflation in the economy
2. Extreme weather events
3. Level of trust placed on the legal system
Select the correct answer using the code
given below:
a) 1 and 2 only
Cell: 91332 37733
 b) 2 and 3 only
c) 1 and 3 only 45. Gross National Product (GNP) is the GDP of
d) 1, 2 and 3 a country added with its ‘income from
abroad’. Which of the following is/are part of
income from abroad in India?
Answer: D 1. Private Remittances
Explanation: 2. Participation in international games by
* The stock market (Sensex and Nifty in Indian Sports persons
India) is a complex, interrelated system 3. Interest on External loans
composed of large and small investors
making uncoordinated decisions about a Select the correct answer using the codes
huge variety of investments. given below:

* OPTION 1 IS CORRECT: The law of (a) 1 only

supply and demand holds true as in any (B) 1 and 2 only
market. Some factors, such as the RATE (C) 1 and 3 only
OF INFLATION, have the power to move
the market as a whole higher or lower. (D) 1, 2 and 3

- Events that affect investor confidence and Answer: C

cause the market to move up and down
include:
* OPTION 2 IS CORRECT: Natural
disasters or extreme weather events
* OPTION 3 IS CORRECT: Changes in the
level of trust placed on the legal system
- The publication of economic indicators such
as the Consumer Confidence Index
Explanation:
* Gross National Product (GNP) is the GDP
of a country added with its ‘income from
abroad’. Here, the trans-boundary economic
activities of an economy are also taken into
account. The items which are counted in
the segment ‘Income from Abroad’ is:
• Private Remittances

- Wars or other conflicts • Interest on external loans

- Concerns over inflation or deflation • External grants

- Government fiscal and monetary policy

- Technological changes 46)
- Corporate or government performance data
- Regulation or deregulation
- Changes in the level of trust placed in an
industry such as the financial sector
KPIAS (24 - D)
What was the reason for the deviation of the
credit-to-GDP ratio from its trend during the
second decade of the millennium?
(a) A lack of investment opportunities in the
private non-financial sector.
Cell: 91332 37733
 (b) An increase in the number of bad loans in
the banking sector.
(c) A decrease in the demand for credit in the
private non-financial sector.
(d) An improvement in the banking sector’s
credit supply.
Solution (b)
# Unsurprisingly, the credit to the private non-
financial sector as a percent of GDP was
consistently below its trend value for most
of the second decade of the millennium,
implying a negative credit gap to GDP ratio.
# The gap worsened to an unprecedented
level of 25% in 2017. A statistically
significant negative correlation (-0.5)
between the Gross NPAs and credit growth
shows that the banks’ credit supply was
severely constrained due to stress in their
balance sheet during the second decade.
That explains the large negative deviation
of the credit-to-GDP ratio from its trend.
47) With reference to off-budget borrowings by
the Indian government, which of the following
statements is/are correct?
1. These loans are not taken by the centre
directly, but by another public institution that
borrows on the directions of the
KPIAS (25 - D)
central government.
2. These loans are included in the national
fiscal deficit.
3. These borrowings can be used to fund both
capital and revenue expenditure.
Select the correct answer using the code
given below.
(a) 1 and 3 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
Answer: a
* Off-budget borrowings are loans that are
taken not by the Centre directly, but by
another public institution that borrows on
the directions of the central government.
Such borrowings are used to fulfil the limits.
Both the centre and states are making such
borrowings. Hence statement 1 is correct.
* Off-budget borrowing figures did not include
the loans that public sector undertakings
were supposed to take on their behalf or
the deferred payments of bills and loans by
the Centre. Loans and deferred payments
are not part of the fiscal deficit calculation.
Hence statement 2 is not correct.
* Such borrowings are made by state-owned
firms to fund government schemes but are
not part of the official budget calculations.
Other public sector undertakings have also
been borrowed from the government. For
instance, public sector oil marketing
companies were asked to pay for subsidized
gas cylinders for Pradhan Mantri Ujjwala
Yojana beneficiaries in the past. Public
Cell: 91332 37733
 sector banks are also used to fund off-
budget expenses. For example, loans from
PSU banks were used to make up for the
shortfall in the release of fertilizer subsidies.
Hence statement 3 is correct.
48) Consider the following statements regarding
Goods and Services Tax (GST):
1) It is value-added tax levied on most goods
and services sold for domestic consumption
within the country.
2) Import of goods or services are treated as
inter-state supplies and are subject to
Central GST (CGST).
3) Central GST (CGST), State GST (SGST)
and Integrated Goods & Services Tax
(IGST) are levied at rates to be mutually
agreed upon by the Centre and the States.
Which of the statements given above is/are
correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (c)
# The Goods and Services Tax (GST) is a
value-added tax levied on most goods and
services sold for domestic consumption. The 49)
GST is paid by consumers, but it is remitted
to the government by the businesses selling
the goods and services. Hence, statement
1 is correct.
# Main Features of GST:
a) Applicable On supply side: GST is applicable
on ‘supply’ of goods or services as against
KPIAS (26 - D)
the old concept on the manufacture of goods
or on sale of goods or on provision of
services.
b) Destination based Taxation: GST is based
on the principle of destination-based
consumption taxation as against the present
principle of origin-based taxation.
c) Dual GST: It is a dual GST with the Centre
and the States simultaneously levying tax
on a common base. GST to be levied by
the Centre is called Central GST (CGST)
and that to be levied by the States is called
State GST (SGST). Import of goods or
services would be treated as inter-state
supplies and would be subject to Integrated
Goods & Services Tax (IGST) in addition
to the applicable customs duties. Hence,
statement 2 is not correct.
d) GST rates to be mutually decided: CGST,
SGST & IGST are levied at rates to be
mutually agreed upon by the Centre and the
States. The rates are notified on the
recommendation of the GST
Council. Hence, statement 3 is correct.
e) Multiple Rates: The schedule or list of items
that would fall under these multiple slabs
are worked out by the GST council.
An economy is going through a slowdown.
Which of the following are likely to be true?
1. Level of Effective Demand is coming down.
2. Growth of Effective Demand is coming
down.
3. Inflation rate is going up.
4. Unemployment rate is going up.
Cell: 91332 37733
 Select the correct answer using the code
given below:
a) 1 and 2 only
b) 2 and 4 only
c) 2 and 3 only
d) 1, 2 and 4 only
Answer: b
* Effective demand refers to the willingness
and ability of consumers to purchase goods
at different prices. It shows the amount of
goods that consumers are actually buying.
In Keynesian economics, effective demand
is the point of equilibrium where aggregate
demand equals aggregate supply.
* ED is same as the National Income of the
economy generally measured through GDP.
Slowdown only means decrease in GDP
growth with its level still increasing.
Normally inflation rate is lower during a
slowdown except when it is due to supply
side constraints. Unemployment rate
normally increases in any type of slowdown 51.
as with less GDP growth, job creation is
affected.
50. In which of the following cases will the factor
cost will be greater than the market price of
a product?
(a) When subsidies are less than the indirect
taxes.
(b) When subsidies are more than indirect taxes.
(c) When the labour cost increase substantially.
(d) When the cost of marketing and
advertisement decrease.
KPIAS (27 - D)
Answer: B
Explanation:
* Option (B) is correct: Market prices prices
are the prices as paid by the consumers
Market prices also include product taxes
and subsidies. The term factor cost refers
to the prices of products as received by the
producers. Thus, factor cost is equal to
market prices, minus net indirect taxes.
* Net indirect taxes are calculated by
subtracting subsidies from indirect taxes.
Factor Cost = Market Price-Net Indirect
taxes = Market Price - (Indirect taxes-
subsidies)
* The market price is greater than factor cost
when the net indirect tax is positive, that is,
indirect taxes are more than subsidies and
market prices are less than the factor cost
when the net indirect tax is negative, that
is, indirect taxes are less than the subsidies
Consider the following statements:
1. Repo Rate is the rate at which the central
bank lends short term money to banks.
2. The Repo Rate is always higher than the
Reverse Repo Rate.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: C
Explanation:
Cell: 91332 37733
 * Statement 1 is correct: Repo Rate, or
repurchase rate, is the key monetary policy
rate of interest at which the central bank or
the Reserve Bank of India (RBI) lends short
term money to banks, essentially to control
credit availability, inflation, and the economic
growth.
* Statement 2 is correct: Reverse Repo Rate
is the rate at which RBI borrows money
from the banks for the short term. The Repo
Rate always stands higher than the Reverse
Repo Rate, and the spread between the two
is RBI’s income.
52. With reference to 5th generation mobile
network, consider the following statements:
1. 5G is based on a method of modulating a
digital signal across several different
channels to reduce interference.
2. 5G will bring wider bandwidths by
expanding the usage of spectrum resources.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: C
Explanation:
* 5G is the 5th generation mobile network. It
is a new global wireless standard after 1G,
2G, 3G, and 4G networks. 5G enables a new
kind of network that is designed to connect
KPIAS (28 - D)
virtually everyone and everything together
including machines, objects, and devices.
* STATEMENT 1 IS CORRECT: 5G is based
on OFDM (Orthogonal frequency-division
multiplexing), a method of modulating a
digital signal across several different
channels to reduce interference.
* STATEMENT 2 IS CORRECT: 5G will
bring wider bandwidths by expanding the
usage of spectrum resources, from sub-3
GHz used in 4G to 100 GHz and beyond.
53. While calculating the Gross Domestic
Product (GDP) by expenditure method, which
of the following factors are taken into
account?
1. Final household consumption expenditure
2. Expenditure on intermediate goods
3. Final capital expenditure
4. Government expenditure on unemployment
allowance
Select the correct answer using the code
given below.
(a) 1 and 4 only
(b) 1, 3 and 4 only
(c) 1 and 3 only
(d) 2, 3 and 4 only
Answer: C
Explanation:
* The expenditure method is a system for
calculating gross domestic product (GDP)
that combines consumption, investment,
government spending, and net exports. It is
Cell: 91332 37733
 the most common way to estimate GDP.
* This final expenditure is made up of the sum
of 4 expenditure items, i.e GDP=
C+I+G+X-M namely:
* Hence option 1 is correct: Consumption (C):
Personal Consumption made by households,
the payment of which is paid by households
directly to the firms which produced the
goods and services desired by the
households.
* Investment Expenditure (I): Investment is
an addition to the capital stock of an
economy in a given time period. It includes
capital expenditures by firms on assets, such
as equipment, production facilities, and
plants.
* Option 2 is not correct and option 3 is
correct: It is to be noted that final investment
includes investment on capital goods and
not on intermediate goods.
* Government Expenditure (G): It represents
expenditures by the government on defense
and non-defense goods and services, such
as weaponry, health care, and education.
* Option 4 is not correct: Government
expenditure on pension schemes,
scholarships, unemployment allowances
etc. are not included in this as all of them
come under transfer payments.
* Net Exports (X-IM): Expenditure on
foreign-made products (Imports) are
expenditure that escapes the system, and
must be subtracted from total expenditures.
In turn, goods produced by domestic firms
which are demanded by foreign economies
involve expenditure by other economies on
our production (Exports), and are included
KPIAS
in total expenditure. The combination of the
two gives us Net Exports.
54) Demand pull inflation in India can result from
1. Increase in proportion of young-age
population in the country
2. Government reducing subsidy on electricity
bills
3. Decrease in Indian exports
Select the correct answer using the code
given below:
a) 1 only
b) 1 and 2 only
c) 1 and 3 only
d) 1, 2 and 3
Answer: a
* Demand-pull inflation results from strong
consumer demand. Many individuals
purchasing the same good will cause the
price to increase, and when such an event
happens to a whole economy for all types
of goods, it is called demand-pull inflation.
* Demand-pull inflation is used by Keynesian
economics to describe what happens when
price levels rise because of an imbalance
in the aggregate supply and demand. When
the aggregate demand in an economy
strongly outweighs the aggregate supply,
prices go up.
* Generally, the reasons are higher
consumption, investment, government
expenditure, exports etc. In Keynesian
theory, an increase in employment leads to
an increase in aggregate demand. Due to
(29 - D) Cell: 91332 37733
 the increase of demand, firms hire more
people to increase their output. The more
people firms hire, the more employment
increases. Eventually, output by firms
becomes so small that the prices of their
goods rise.
55) Shwetha was working as a software engineer
with an IT company. She quits her job to
prepare for Civil Services Examination.
Shwetha is
a) Seasonally Unemployed
b) Structurally Unemployed
c) Cyclically Unemployed
d) Frictionally Unemployed
Answer: d
* Seasonal unemployment occurs when
people are unemployed at particular times
of the year when demand for labour is lower
than usual. seasonal-unemployment. For
example, in a Ski resort unemployment is
likely to be higher in the summer when there
is no snow.
* Structural unemployment refers to a
mismatch between the jobs available and
the skill levels of the unemployed. Unlike
cyclical unemployment, it’s caused by
forces other than the business cycle. It
occurs when an underlying shift in the
economy makes it difficult for some groups
to find jobs.
* Cyclical unemployment is a factor of overall
unemployment that relates to the cyclical
trends in growth and production that occur
within the business cycle. When business
cycles are at their peak, cyclical
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unemployment will be low because total
economic output is being maximized.
* Frictional unemployment is unemployment
during the intermediate time period between
two jobs. It is mostly voluntary and
temporary in nature.
56) The most likely consequence of a higher
minimum wage in an economy is
(a) An increase in demand for labour
(b) Reduction in unemployment rate
(c) An increase in supply of labour
(d) Increase in GDP growth rate
Answer: c
* A minimum wage is the lowest
remuneration that employers can legally
pay their workers. Option (c) is Correct
* A higher minimum wage attracts more
people into the workforce, thereby
increasing the labour supply. Options (a),
(b) and (d) are Incorrect
* A higher minimum wage may make
manufacturing or construction less
competitive. Thus, higher minimum wage
can possibly reduce the labour demand.
* Such a reduction in labour demand can
result in increasing unemployment rate.
GDP growth rate is influenced by a very
large number of factors like manufacturing,
international trade, inflation, agriculture etc.
Minimum wages alone can’t influence GDP
growth rate.
Cell: 91332 37733
57) Which of the following gives Global Human given below:
Capital Index to the countries of the world? (a) 1 only
(a) World Health Organisation (b) 2 onlys
(b) World Bank (c) Both 1 and 2
(c) World Economic Forum
(d) Neither 1 nor 2
(d) UN Human rights council Solution (d)
Answer: c # GST Sahay is a digital platform developed
* The Global Human Capital Index is by the Goods and Services Tax Network
published by the World Economic Forum. (GSTN) in India to provide assistance to
* The GHCI measures countries’ ability to taxpayers in resolving their queries and
nurture, develop and deploy talent for grievances related to the Goods and
economic growth against four key areas of Services Tax (GST). Hence, statement 1 is
human capital development: correct.

o Capacity (determined by past investment # The GSTN was established as a not-for-

in formal education)
o Deployment (accumulation of skills through
work)
o Development (reskilling and continued
upskilling of existing workers)
o Know-how (specialised skills-use at work).
Note: The Human Capital Index is an annual
measurement prepared by the World Bank
whereas Global Human Capital Index is
published by the World Economic Forum.
58) Which of the following statements is/
are incorrect?
1) The GST Sahay platform was created by
the GSTN to assist taxpayers in addressing
their concerns and questions related to GST.
profit, public-private partnership
company, with the aim of providing a shared
IT infrastructure and services to Central
and State Governments, taxpayers, and
other stakeholders in the GST ecosystem.
Hence, statement 2 is correct.
59) Stressed assets’ is an important indicator of
the health of banking system. Which among
the following constitute stressed assets?
1. Non-performing assets
2. Written off assets
3. Restructured loans
Choose the correct answer using the code
given below
(a) 1 only

2) The GSTN was established as a not-for- (b) 1 and 3 only

profit, public-private partnership company. (c) 3 only
Select the correct answer using the code (d) 1, 2 and 3
KPIAS (31 - D) Cell: 91332 37733
Answer: d
* Stressed assets are an essential indicator
of used to gauge the health of the banking
system.
* Non-performing assets - A non performing
asset (NPA) is a loan or advance for which
the principal or interest payment remained
overdue for a period of 90 days.
* Written off assets are those assets for which
the bank or lender doesn’t account the
money borrower owes to it. The financial
statement of the bank will indicate that the
written off loans are compensated through
some other way.
* Restructured loans are new loans that
replaces the outstanding balance on an older
loan, and is paid over a longer period,
usually with a lower installment amount.
Loans are commonly rescheduled to
accommodate a borrower in financial
difficulty and, thus, to avoid a default.
Stressed assets = NPAs + Restructured
loans + Written off assets
60. The maximum amount of income available
within a domestic economy for the
consumption of goods and savings is termed
as:
(a) Gross Domestic Product
(b) Gross National Product
(c) National Disposable Income
(d) Gross Value Added
Answer: C
Explanation:
KPIAS (32 - D)
* Option (c) is correct: National Disposable
Income is the maximum amount of goods
and services a country has which could be
used for the purpose of saving and
consumption.
* It is obtained by adding Net National
Product at market prices with current
transfers from the rest of the world. It gives
an idea of what is the maximum amount of
goods and services the domestic economy
has its disposal. This is the maximum
amount of goods and services a country has
which could be used for the purpose of
saving and consumption.
61. With reference to RBI’s balance sheet, which
of the following constitutes RBI’s income?
1. Printing of currency notes.
2. Returns earned on its foreign currency
assets.
3. Commission earned on managing
government borrowings.
Select the correct answer using the code
given below:
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Answer: B
Explanation:
* The balance sheet of the Reserve Bank
plays a critical role in the functioning of the
country’s economy largely reflecting the
activities carried out in pursuance of its
Cell: 91332 37733
 currency issue function as well as monetary
policy and reserve management objectives.
* Option 1 is not correct: RBI’s expenditure
constitutes Printing of Notes, Expenditure
on Remittance of Currency, Agency
Charges, Employee Cost etc.
* Option 2 & 3 are correct: RBI’s income
include Returns earned on its foreign
currency assets, Interest on its holdings of
local rupee-denominated government bonds
or securities, Management commission on
handling the borrowings of State
governments and the Central government.
62) Which among the following best describes
‘Vote-on-Account’?
(a) The estimates of expenditure from the
Consolidated Fund included in the Annual
Financial Statement
(b) Grant in advance pending completion of
procedure for the voting of the Demands
(c) Amount required to meet the expenditure
charged on the Consolidated Fund
(d) Grant for meeting an unexpected demand
upon the resources of India
Answer: b
* Vote on account is the permission to
withdraw money from the Consolidated
Fund of India in that period, usually two
months. Vote on account is a formality and
requires no debate. When elections are
scheduled a few months into the new
financial year, the government seeks vote
on account for four months. Essentially,
vote on account is the interim permission
of the parliament to the government to
KPIAS (33 - D)
spend money.
63) Reserve Bank of India acts as ‘the lender of
the last resort’. It implies which of the
following?
1. Other banks retain their deposits with the
RBI
2. RBI has the authority to demonetizes any
value of currency
3. RBI extends liquidity to bank to prevent a
possible failure of the bank.
Select the correct answer using the codes
given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Answer: c
Statement 1 – RBI as ‘Banker to Banks’
* In order to facilitate a smooth inter-bank
transfer of funds, or to make payments and
to receive funds on their behalf, banks need
a common banker. By providing the facility
of opening accounts for banks, the Reserve
Bank becomes this common banker, known
as ‘Banker to Banks’ function.
* As Banker to Banks, the Reserve Bank
provides short-term loans and advances to
select banks, when necessary, to facilitate
lending to specific sectors and for specific
purposes. These loans are provided against
promissory notes and other collateral given
by the banks.
* Statement 3 – RBI as ‘lender of the last
Cell: 91332 37733
 resort’
* As a Banker to Banks, the Reserve Bank
also acts as the ‘lender of the last resort’.
It can come to the rescue of a bank that is
solvent but faces temporary liquidity
problems by supplying it with much needed
liquidity when no one else is willing to
extend credit to that bank. The Reserve
Bank extends this facility to protect the
interest of the depositors of the bank and to
prevent possible failure of the bank, which
in turn may also affect other banks and
institutions and can have an adverse impact
on financial stability and thus on the
economy.
* Statement 2 – RBI - legal aspect of
demonetisation. Section 26(2) of RBI Act
stipulates that on recommendation of the
Central Board of Directors of RBI, the
Central Government may, by notification in
the Gazette of India, declare that, with effect
from such date as may be specified in the
notification.
64) Consider the following statements:
1) The Tax-to-GDP ratio is a metric that
compares a country’s tax income to its
overall economic output.
2) Developing nations tend to have a greater
proportion of their GDP coming from tax
revenues when compared to developed
nations.
Which of the statements given above is/
are not correct?
(a) 1 only
KPIAS (34 - D)
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (b)
# The Tax-to-GDP ratio is a measure of a
nation’s tax revenue relative to the size of
its economy. Hence, statement 1 is correct.
This ratio is used with other metrics to
determine how well a nation’s government
directs its economic resources via taxation.
# Developed nations typically have higher
tax-to-GDP ratios than developing
nations. Hence, statement 2 is not correct.
Higher tax revenues mean a country is able
to spend more on improving infrastructure,
health, and education—keys to the long-
term prospects for a country’s economy and
people. According to the World Bank, tax
revenues above 15% of a country’s gross
domestic product (GDP) are a key
ingredient for economic growth and,
ultimately, poverty reduction.
65. Consider the following statements.
1. A base year is used for comparison in the
measure of economic indices like GDP or
CPI.
2. A change in the base year is essential to
track structural changes in an economy.
3. Currently, in India the base year for GDP
calculation is 2011-12 and for CPI
calculation is 2010.
Which of the statements given above is/are
correct?
(a) 1, 2 and 3
Cell: 91332 37733
 (b) 1 and 3 only
(c) 1 and 2 only
(d) 1 only
Answer: C
Explanation:
* A base year is the first of a series of years
in an economic or financial index. It is
typically set to an arbitrary level of 100. New,
up-to-date base years are periodically
introduced to keep data current in a
particular index. Any year can serve as a
base year, but analysts typically choose
recent years.
• A base year is used for comparison in the
measure of a business activity or economic
index. Hence, statement 1 is correct.
• A revision in the base year is essential for
better policymaking. It is meant to track
structural changes in an economy and
improve or update macroeconomic
indicators that reflect the economic
performances of a country. Hence,
statement 2 is correct.
• Currently, the base year for GDP calculation
is 2011-12 and the base year for CPI
calculation is 2012. Hence, statement 3 is
not correct.
67)
66) Liquidity trap’ is associated with
(a) Low interest rates and low savings rates
(b) High interest rates and low savings rates
(c) Low interest rates and high savings rates
(d) High interest rates and high savings rates
Answer: c
KPIAS (35 - D)
* Liquidity trap is a situation in which
prevailing interest rates are low and savings
rates are high, making monetary policy
ineffective. In a liquidity trap, consumers
choose to avoid bonds and keep their funds
in savings, because of the prevailing belief
that interest rates will soon rise. Because
bonds have an inverse relationship to
interest rates, many consumers do not want
to hold an asset with a price that is expected
to decline.
* Should the regulatory committee try to
stimulate the economy by increasing the
money supply, there would be no effect on
interest rates, as people do not need to be
encouraged to hold additional cash.
* As part of the liquidity trap, consumers
continue to hold funds in standard deposit
accounts, such as savings and checking
accounts, instead of in other investment
options, even when the central banking
system attempts to stimulate the economy
through the injection of additional funds.
These consumer actions, often spurred by
the belief of a negative economic event on
the horizon, causes monetary policy to be
generally ineffective.
Consider the following statements regarding
economic survey 2022-23:
1) India meets 60% of its edible oils demand
through imports and sunflower oil, constitute
up to 15% of our total edible oil imports.
2) Quantity and value of edible oil is
continuously increased in last 5 years.
Which of the statements given above is/are
correct?
Cell: 91332 37733
 (a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (a)
# India meets 60 per cent of its edible oils
demand through imports, making it
vulnerable to international movements in
prices. For instance, sunflower oil, which
makes up 15 per cent of our total edible oil
imports, is procured mainly from Ukraine
and Russia. Hence, statement 1 is correct.
# Out of 60% of the edible oils consumed in
the country through imports, palm oil
constitutes around 54% of the total edible
oil imported mainly from Indonesia and
Malaysia, while Soyabean oil constitutes
around 25% and is imported from Argentina
and Brazil and Sunflower oil constitutes 15%
and is imported mainly from Ukraine and
Russia.
# Statement 2 is self-explanatory from
image. Hence, statement 2 is not correct.
68) Which of the following statement best
describes the term “Inflationary Gap”?
KPIAS (36 - D)
(a) Difference in the rate of inflation in
successive years
(b) Difference between current level of real
GDP and Potential GDP
(c) Difference between rate of Inflation and
rate of deflation
(d) High or low levels of inflation in a previous
month distorting headline inflation of the
most recent month
Answer: b
* An inflationary gap is a macroeconomic
concept that describes the difference
between the current level of real gross
domestic product (GDP) and the anticipated
GDP that would be experienced when an
economy is at full employment, also referred
to as the potential GDP.
* For the gap to be considered inflationary,
the current real GDP must be the higher of
the two metrics.
* The inflationary gap exists when the
demand for goods and services exceeds
production due to factors such as higher
levels of overall employment, increased
trade activities or increased government
expenditure. This can lead to the real GDP
exceeding the potential GDP, resulting in an
inflationary gap.
69) Consider the following statements about PM
YUVA (Young, Upcoming and Versatile
Authors) 2.0 Scheme.
1. The scheme functions under the aegis of
the Department of Higher Education, the
Ministry of Education.
Cell: 91332 37733
 2. The National Book Trust is the implementing
agency of the scheme.
3. The scheme aims to mentor and train young
and budding authors below the age of 30
years.
Chose the correct statements:
a) 1, 2 and 3
b) 1 and 2 only
c) 2 and 3 only
d) 1 and 3 only
Answer: a
* The Ministry of Education, Department of
Higher Education, launched YUVA 2.0 -
Prime Minister’s Scheme for Mentoring
Young Authors.
* The National Book Trust (NBT), India, as
the implementing agency under MoE will
ensure the phase wise execution of the
scheme under well-defined stages of
mentorship.
* The scheme is an Author Mentorship
programme to train young and budding
authors (below 30 years of age) in order to
promote reading, writing and book culture
in the country, and project India and Indian
writings globally.
70) Consider the following statements about
National Informatics Centre.
1. It was established in 1976 and works under
the aegis of the Ministry of Science and
technology.
2. It has developed digital governance
platforms like MyGov and PM-Kisan.
KPIAS (37 - D)
Choose the incorrect statements:
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: a
* The National Informatics Centre (NIC)
was established in 1976 and is located in
New Delhi. It comes under the Ministry of
Electronics and Information Technology
(MeitY).
* Its main objective is to provide technology-
driven solutions to the Central and State
Governments. It has developed digital
governance platforms including MyGov,
PM-Kisan, National Power Portal, and e-
Shram. It offers free services to state
government entities and funded by the
Central budget.
71) ‘Pahari’, a community seen in news are native
of
a) Uttarakhand
b) Jammu and Kashmir
c) Ladakh
d) Arunachal Pradesh
Answer: b
* The Pahari people or Pahari-speaking
people is a cover term for a number of
heterogeneous communities inhabiting the
Indian union territory of Jammu and
Kashmir, Himachal Pradesh and parts of
Azad Kashmir administered by Pakistan.
Cell: 91332 37733
 Centre granted ST status to Pahari Which of the following constitutes the
community in J&K. Saptarishi priorities?
72) With reference to ‘Light Combat Helicopter- 1) Inclusive Development
Prachanda’, consider the following 2) Infrastructure and Investment
statements.
3) Unleashing the Potential
1. The LCH is the first indigenous Multi-Role
Combat Helicopter designed and 4) Digital Growth
manufactured by DRDO 5) Financial Sector
2. It is capable of operating from high altitude 6) Youth Power
terrain and carrying out precision strike at
7) Reaching the Last Mile
high altitude targets.
Select the correct answer using the codes
Select the correct statement(s)
given below:
a) 1 only
(a) 1, 2, 3, 4, 5 and 6 only
b) 2 only
(b) 1, 2, 4, 5, 6 and 7 only
c) Both 1 and 2
(c) 1, 2, 3, 5, 6 and 7 only
d) Neither 1 nor 2
(d) 1, 2, 3, 4, 5, 6 and 7
Answer: b
Solution (c)
* The LCH is the first indigenous MultiRole
Combat Helicopter designed and
manufactured by HAL. It has potent ground
attack and aerial combat capability.
* The helicopter possesses modern stealth
characteristics, robust armour protection
and formidable night attack capability.
Onboard advanced navigation system, guns
tailored for close combat and potent air to
air missiles make the LCH especially suited
for the modern battlefield. Capable of
operating from high altitude terrain and
carrying out precision strike at high altitude
targets.

73) The term “Saptarishi” was recently

mentioned in the Union Budget 2023-24.

KPIAS (38 - D) Cell: 91332 37733


74) With reference to ‘OPEC+’, consider the
following statements.
1. The non-OPEC countries which export
crude oil are termed as OPEC plus countries
2. It is an informal grouping of three countries
which consists of Mexico, Russia and
United Arab Emirates.
Select the correct statement(s)
a) 1 only
Answer: a
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: a
* The non-OPEC countries which export
crude oil are termed as OPEC plus countries.
These countries also participate in the
organisation’s initiatives such as voluntary
supply cuts in order to further bind policy
objectives between OPEC and non-OPEC
members.
* OPEC+ includes Azerbaijan, Bahrain,
Brunei, Kazakhstan, Malaysia, Mexico,
Oman, Philippines, Russia, Sudan and South
Sudan. United Arab Emirates is a member
of OPEC.
76)
75) Consider the following statements with
respect to ‘Quality Council of India’.
1. It was set up as a non-profit autonomous
society under The Companies Act of 1956
2. The Chairman of QCI is appointed by the
Minister of Commerce and Industry on
recommendation
KPIAS (39 - D)
of the industry to the government
3. Its mandate is to establish and operate the
National Accreditation Structure (NAS)
Choose the correct answer using the code
given below
a) 3 only
b) 1 and 2 only
c) 2 and 3 only
d) 1 only
* Quality Council of India as a non-profit
autonomous society registered under
Societies Registration Act XXI of 1860 to
establish an accreditation structure in the
country and spread the quality movement
in India by undertaking a National Quality
Campaign.
* The Chairman of QCI is appointed by the
Prime Minister on recommendation of the
industry to the government.
* Its mandate is to establish and operate the
National Accreditation Structure (NAS) for
conformity assessment bodies and providing
accreditation in the field of health, education
and quality promotion.
The budget documents presented to the
Parliament does not comprise of which of the
following:
(a) Outcome Budget
(b) Consumption Profile
(c) Expenditure Profile
(d) Budget at a Glance
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Solution (b)
* The budget documents presented to the
Parliament comprise of the following:
* Budget Speech, Annual Financial
Statement, Demands for Grants,
Appropriation Bill, Finance Bill, Expenditure
Budget, Receipts Budget, Expenditure
Profile, Memorandum Explaining the
Provisions in the Finance Bill, Budget at a
Glance, Outcome Budget.
77) Consider the following statements with
respect to ‘Finance Commission’
1) The Finance Commission is constituted by
the President at the end of every fifth year
or earlier as deemed necessary.
2) Finance Commission (Miscellaneous
Provisions) Act provides the requisite
qualifications for appointment as members
of the Commission.
3) The recommendations of the Finance
Commission are binding on the government
and the members are not eligible for re-
appointment.
Choose the correct answer using the code
given below
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 3 only
Solution (a)
# The Finance Commission is constituted by 79.
the President under article 280 of the
Constitution. It is constituted at the end of
KPIAS (40 - D)
every fifth year or earlier, as the deemed
necessary by the President.
# Finance Commission (Miscellaneous
Provisions) Act, 1951 was passed by the
Parliament to determine the requisite
qualifications for appointment as members
of the Commission and the procedure of
their selection.
# Every member will be in office for the time
period as specified in the order of the
President and is eligible for reappointment.
The recommendations of the Finance
Commission are not binding on the
government.
78) ‘Trade and Development report 2022’ was
released by
a) World Trade Organization
b) International Monetary Fund
c) World Bank
d) United Nations Conference on Trade and
Development
Answer: d
* Trade and Development Report is an annual
report released by UNCTAD. It provides
comprehensive and authoritative analysis of
economic trends and policy issues of
international concern. It offers
recommendations for building a global
economy that ensures better future for all
people and the planet.
Consider the following statements about
Non-Banking Financial Companies (NBFCs):
Cell: 91332 37733
 1. They can lend and make investments. 80)
2. Deposits in NBFCs are guaranteed by the
Deposit Insurance and Credit Guarantee
Corporation.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: A
Explanation:
* Non-Banking Financial Company (NBFC)
is a company registered under the
Companies Act, 1956 engaged in the
business of loans and advances, acquisition
of shares/ stocks/ bonds/ debentures/
securities issued by Government or local
authority or other marketable securities.
* STATEMENT 1 IS CORRECT: NBFCs
lend and make investments and hence their
activities are akin to that of banks; however
there are a few differences as given below:
- NBFC cannot accept demand
deposits;
- NBFCs do not form part of the
payment and settlement system and
cannot issue cheques drawn on itself.
* STATEMENT 2 IS NOT CORRECT:
Deposit insurance facility of Deposit
Insurance and Credit Guarantee
Corporation is not available to depositors
of NBFCs, unlike in case of banks.
KPIAS (41 - D)
Consider the following statements:
1) Regressive Tax is a tax that takes a larger
percentage of income from high-income
groups than from low-income groups.
2) Proportional Tax is a tax that takes the same
percentage of income from all income
groups.
3) Progressive Tax is a tax that takes a larger
percentage of income from low-income
groups than from high-income groups.
Which of the above statements are correct?
(a) 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of the above
Solution (a)
# In simple terms, tax is the money paid by
the taxpayers to the government. Tax is
compulsory payment and not voluntary
payment or donation made by the
taxpayers. It is compulsory as it is extracted
by the government through legislation. If
taxpayer fails to pay the taxes or evade
taxes, it is punishable by law. Government
performs various functions – such as
maintenance of law and order/ defence,
undertakes welfare and developmental
activities, provides public goods and
services.
# Types of Taxes according to fairness:
Progressive Tax, Proportional Tax and
Regressive Tax.
a) Progressive Tax: A tax that takes
a larger percentage of income from
high-income groups than from low-
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 income groups. For example –
Income Tax rate India. (Tax rate
goes up as income level rises). Rich
people pay a larger portion of their
income as tax in comparison to poor
people.
b) Proportional Tax: A tax that takes
the same percentage of income from
all income groups. For example, if the
Government decides to have a single
slab in Income tax rate (let us assume
30%). Then the percentage of
income paid in taxes will be same for
the low-income group, middle-income
group and high- income group.
c) Regressive Tax: A tax that takes
a larger percentage of income from
low-income groups than from high-
income groups. For example, an
indirect tax on Hair Oil (let us
suppose – 18%). Lower income
group pay high proportion of their
income as tax while buying it than
higher income group.
81) Consider the following statements with
respect to ‘Information Technology Rules,
2021’.
1. The rules provide for the identification of
the first originator of the information
2. The rules have stemmed from Section 69
of the Information Technology Act
Select the correct statement(s)
a) 1 only
b) 2 only
c) Both 1 and 2
KPIAS (42 - D)
d) Neither 1 nor 2
Answer: a
* Rule 4(2) covers the “identification of the
first originator of the information”. The
extent of the first originator is limited to
India— “Provided further that where the
first originator of any information on the
computer resource of an intermediary is
located outside the territory of India, the first
originator of that information within the
territory of India shall be deemed to be the
first originator of the information.”
* The 2021 rules have stemmed from section
87 of the Information Technology Act, 2000
and are a combination of the draft
Intermediaries Rules, 2018 and the OTT
Regulation and Code of Ethics for Digital
Media.
82) ‘Reverse Flipping’ a term found in the
Economic Survey is used in the context of
(a) Companies relying on input tax credit for
clearing dues
(b) Companies showing profits in offshore
locations to evade taxation
(c) Companies misusing inverted duty structure
(d) Companies shifting their domicile back to
India
Solution (d)
* According to the Economic Survey 2022-
23 , Indian start-ups are exploring ‘reverse
flipping’, or shifting their domicile back to
India, with easy access to capital from
private equity and venture capital, changes
in rules regarding round-tripping, and the
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 growing maturity of India’s capital markets. Answer: D
Explanation:
83) ‘Cook Islands’ seen in news recently is POLICY TOOLS TO CONTROL MONEY
located in SUPPLY:
a) Atlantic Ocean *% Reserve Bank is the only institution which
can issue currency. This role of RBI, that
b) Indian Ocean
of being ready to lend to banks at all times,
c) Pacific Ocean is another important function of the central
d) Southern Ocean bank, and due to this the central bank is
said to be the lender of last resort.
Answer: c
* The tools used by the Central bank to
* The Cook Islands is a nation in the South
control money supply can be quantitative
Pacific, with political links to New Zealand.
or qualitative.
Its 15 islands are scattered over a vast area.
The largest island, Rarotonga, is home to * Quantitative tools: control the extent of
rugged mountains and Avarua, the national money supply by changing the CRR, or bank
capital. rate or open market operations. Hence
statement 1 is not correct.
* The United States (U.S.) President Joseph
Biden has announced U.S recognition of the * Qualitative tools include persuasion by the
Cook Islands as a sovereign state. Central bank in order to make commercial
banks discourage or encourage lending
which is done through moral suasion, margin
84. Consider the following statements regarding requirement, etc. Hence statement 2 is not
tools used by the RBI to control money correct.
supply:
1. Quantitative tools control the extent of
85. In the context of Indian economy, what does
money supply by moral suasion, margin
‘Stagflation’ mean?
requirement, etc.
a) There is a high rate of inflation accompanied
2. Qualitative tools include changing the CRR,
by a high employment rate.
or bank rate or open market operations.
b) There is a decline in the price level of goods
Which of the statements given above is/are
and services due to increased productivity.
correct?
c) There is a stagnant economic growth with
a) 1 only
high unemployment rate and inflation.
b) 2 only
d) There is a low level of inflation due to falling
c) Both 1 and 2 demand.
d) Neither 1 nor 2
KPIAS (43 - D) Cell: 91332 37733
Answer: C 87.
* Explanation: Stagflation is an economic
condition when stagnant economic growth, a)
high unemployment, and high inflation b)
combine together. Basically, inflation plus
stagnant growth equals stagflation. c)
Stagflation is the stagnation in the economy d)
accompanied by high inflation (instead of
Answer: D
low inflation due to falling demand).
Triggered first in 1973 by the OPEC’s * Explanation: Co-operative banks are
fourfold increase in oil prices which raised
all prices, thus slowing down economic
growth.
86. In the context of Indian economy, which one
of the following statements describes
‘Interest rate transmission’?
a) Decrease in interest rate by RBI increases
the cost of loanable funds.
88.
b) Increase in interest rate by RBI raises
consumption demand.
c) Increase in interest rate by RBI raises
investment.
d) Decrease in interest rate by RBI decreases
the cost of loanable funds.
Answer: D
* Explanation: The interest rate transmission
emerges as the dominant transmission
mechanism of monetary policy. An
expansionary monetary policy (decrease in
interest rate), for instance, is expected to
lead to a lowering of the cost of loanable
funds, which, in turn, raises investment and
consumption demand and should eventually
be reflected in aggregate output and prices.
KPIAS (44 - D)
The ‘Urban Co-operative Banks’, in India are
regulated by:
Security and Exchange Board of India
Registrar of State societies
Banks Board Bureau
Reserve Bank of India
financial entities established on a co-
operative basis and belonging to their
members. Reserve Bank of India is vested
with the responsibility of regulating and
supervising primary (urban) cooperative
banks, which are popularly known as Urban
Cooperative Banks (UCBs). Hence,
OPTION D IS CORRECT.
The Insurance Regulatory and Development
Authority of India (IRDAI) is the apex body
that supervises and regulates the insurance
sector in India. Which of the following is/are
the functions of IRDAI?
1. To safeguard the policyholder’s interest.
2. To ensure faster and a hassle-free
settlement of genuine insurance claims.
3. To oversee the conduct of insurance
companies in the financial markets.
Select the correct answer using the code
given below:
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
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Answer: D
Explanation:
* The Insurance Regulatory and Development
Authority of India is a statutory regulatory
body set up in 1999 under the jurisdiction of
the Ministry of Finance and is tasked with
regulating and licensing the insurance and
reinsurance industries in India.
Some of the functions of IRDAI include:
- To safeguard the policyholder’s interest
while ensuring a fair and just treatment.
Hence, STATEMENT 1 IS CORRECT.
* To ensure faster and hassle-free settlement
of genuine insurance claims. Hence,
STATEMENT 2 IS CORRECT.
* To promote fairness, transparency and
oversee the conduct of insurance
companies in the financial markets. Hence,
STATEMENT 3 IS CORRECT.
* To have a fair regulation of the insurance
industry while ensuring financial soundness
of the applicable laws and regulations.
* To ensure the dealings are carried on in a
fair, integral manner along with financial
soundness keeping in mind the competence
90.
of the insurance company.
* To address the grievances of the
policyholder through a proper channel.
* To avoid malpractices and prevent fraud.
* To form a reliable management system with
high standards of financial stability.
89. With reference to Central Bank Digital
Currency (CBDC), consider the following
KPIAS (45 - D)
statements:
1. It is the legal tender issued by a central
bank in a digital form.
2. It is exchangeable one-to-one with the fiat
currency.
Which of the statements given above is/are
correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: C
Explanation:
* The Reserve Bank of India (RBI) has
recently said it may introduce digital rupee,
the Central Bank Digital Currency (CBDC),
in phases beginning with wholesale
businesses in the current financial year.
* STATEMENTS 1 & 2 ARE CORRECT:
CBDC is the legal tender issued by a central
bank in a digital form. It is the same as a
fiat currency and is exchangeable one-to-
one with the fiat Currency.
With reference to Telecom Technology
Development Fund (TTDF), consider the
following statements:
1. It aims to fund Research and Development
in rural-specific communication technology
applications.
2. It was launched by the Universal Service
Obligation Fund (USOF).
Which of the statements given above is/are
correct?
Cell: 91332 37733
 a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Answer: C
Explanation:
* Telecom Technology Development Fund
(TTDF) Scheme was recently launched by
the Universal Service Obligation Fund
(USOF), a body under the Department of
Telecommunications. The Scheme aims to
promote technology ownership and
indigenous manufacturing, create a culture
of technology co-innovation, reduce imports,
boost export opportunities and creation of
Intellectual Property. Under the scheme,
USOF is also targeting to develop standards
to meet countrywide requirements and
create the ecosystem for research, design,
prototyping, use cases, pilots, and proof of
concept testing, among others.
* STATEMENT 1 IS CORRECT: Telecom
Technology Development Fund (TTDF)
aims to fund R&D in rural-specific
communication technology applications and
form synergies among academia, start-ups,
research institutes, and the industry to build
and develop the telecom ecosystem.
* STATEMENT 2 IS CORRECT: Telecom
Technology Development Fund (TTDF)
was launched by Universal Service
Obligation Fund (USOF), a body under the
Department of Telecommunications.
91. Which among the following is not a micro-
economic structural reform?
KPIAS (46 - D)
a) Delicensing of textile industry
b) Deregulation of cement price
c) Repealing Foreign Exchange Regulation
Act (FERA) 1973
d) Dereservation of telecom
Answer: c
* Microeconomics is the study of individuals,
households and firms’ behavior in decision
making and allocation of resources. It
generally applies to markets of goods and
services and deals with individual and
economic issues.
* The Foreign Exchange Regulation Act
(FERA) 1973, imposed strict regulations on
transactions involving foreign exchange and
controlled the import and export of
currency. FERA was repealed by the
government in 1999 and replaced by the
Foreign Exchange Management Act.
(FEMA), which liberalized foreign
exchange controls and removed many
restrictions on foreign investment.
* Repealing FERA is not sector sensitive and
therefore it is a macro-economic policy
reform. All others are targeting specific
sectors and so micro economic.
92) Consider the following statements:
1) The Revenue Deficit includes such
transactions that affect the current income
and expenditure of the government.
2) Fiscal Deficit equals the money the
government needs to borrow during the
year.
3) Primary Deficit equals Fiscal deficit minus
Cell: 91332 37733
 interest payments.
Which of the above statements are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of the above
Solution (d)
Measures of Government Deficit:
1) Revenue Deficit: It refers to the excess of
government’s revenue expenditure over
revenue receipts.
Revenue Deficit = Revenue expenditure –
Revenue receipts.
The revenue Deficit includes such
transactions that affect the current income
and expenditure of the government. When
the government incurs a revenue deficit, it
implies that the government is dissaving and
is using up the savings of the other sectors
of the economy to finance a part of its
consumption expenditure.
2) Fiscal Deficit: It is the gap between the
government’s expenditure requirements
and its receipts. This equals the money the
government needs to borrow during the
year. A surplus arises if receipts are more
than expenditure.
Fiscal Deficit = Total expenditure –
(Revenue receipts + non-debt creating
capital receipts). It indicates the total
borrowing requirements of the government
from all sources.
From the financing side: Gross fiscal
deficit = Net borrowing at home +
KPIAS (47 - D)
Borrowing from RBI + Borrowing from
abroad. The gross fiscal deficit is a key
variable in judging the financial health of
the public sector and the stability of the
economy.
3) Primary Deficit: Primary deficit equals
fiscal deficit minus interest payments. This
indicates the gap between the government’s
expenditure requirements and its receipts,
not taking into account the expenditure
incurred on interest payments on loans taken
during the previous years.
Primary deficit = Fiscal deficit – Interest
payments
93) Which of the following statements is/are
correct regarding Fiscal Responsibility and
Budget Management (FRBM) Act, 2003?
1) It limits the annual budget deficit of the
Central government to 3% of Gross
Domestic Product (GDP).
2) It ensures inter-generational equity in fiscal
management and long-term macro-
economic stability.
Select the correct answer using the codes
given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Solution (c)
* Fiscal Responsibility and Budget
Management (FRBM) Act, 2003 aims to
make the Central government responsible
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 for ensuring inter-generational equity in
fiscal management and long-term macro-
economic stability. Hence, statement 2 is
correct.
* The Act envisages the setting of limits on
the Central government’s debt and deficits.
It limited the fiscal deficit to 3% of the GDP.
Hence, statement 1 is correct.
* The NK Singh committee (set up in 2016)
recommended that the government should
target a fiscal deficit of 3% of the GDP in
years up to March 31, 2020 cut it to 2.8%
in 2020-21 and to 2.5% by 2023.
94) Consider the following statements with
respect to ‘Union Budget 2022-23’
1) Goods and Services Tax forms the largest
share of central revenue.
2) Securities against small savings has the
highest share in financing deficits.
3) Effective Revenue Deficit as a percentage
of GDP has consistently decreased over the
last three years.
Choose the correct answer using the code
given below
a) 1, 2 and 3
b) 1 and 2 only
c) 2 only
d) 1 and 3 only
Solution (c)
95) Consider the following statements?
1) Revenue Receipts are receipts which do
KPIAS
not have a direct impact on the assets and
liabilities of the government.
2) Salaries, Pensions, etc are the examples of
Revenue Expenditure.
3) Capital expenditure is used to create assets
or to reduce liabilities.
Which of the above statements are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of the above
Solution (d)
Components of Government Budget:
I) Revenue Budget: It consists of the Revenue
Expenditure and Revenue Receipts.
* Revenue Receipts are receipts which do
not have a direct impact on the assets and
liabilities of the government. It consists of
the money earned by the government
through tax (such as excise duty, income
tax) and non-tax sources (such as dividend
income, profits, interest receipts).
* Revenue Expenditure is the expenditure by
the government which does not impact its
assets or liabilities. For example, this
includes salaries, interest payments, pension,
and administrative expenses.
II) Capital Budget: It includes the Capital
Receipts and Capital Expenditure.
* Capital Receipts indicate the receipts which
lead to a decrease in assets or an increase
in liabilities of the government. It consists
of: (i) the money earned by selling assets
(or disinvestment) such as shares of public
(48 - D) Cell: 91332 37733
 enterprises, and (ii) the money received in
the form of borrowings or repayment of
loans by states.
* Capital expenditure is used to create assets
or to reduce liabilities. It consists of: (i) the
long-term investments by the government
on creating assets such as roads and
hospitals, and (ii) the money given by the
government in the form of loans to states
or repayment of its borrowings.
96. With reference to GDP deflator, consider the
following statements:
1. It is the ratio of GDP measured at current
prices to GDP measured at constant prices.
2. It automatically reflects the changes in
consumption pattern and structural
transformations in the economy.
measured at current prices). Real GDP is
nominal GDP, adjusted for inflation to reflect
changes in real output (It is the GDP
measured at constant prices).
GDP Deflator = (Nominal GDP/ Real GDP)
x 100
Statement 2 is correct: The weights of
goods and services in GDP deflator are not
constant and differ according to the
production level of each good and services
in the country. Due to these changes in
consumption patterns or the introduction of
new goods and services or structural
transformation are automatically reflected
in the deflator which is not the case with
other inflation measures.
97. The term ‘Tax Expenditure’ implies:

Which of the statements given above is/are
correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: C
Explanation:
* Statement 1 is correct: The Gross
Domestic Product (GDP) deflator is a
measure of general price inflation. It is c) 3 only
calculated by dividing nominal GDP by real
GDP and then multiplying by 100. Nominal
GDP is the market value of goods and Answer: c
services produced in an economy,
unadjusted for inflation (It is the GDP
1. Expenditure incurred by the government in
collecting taxes.
2. Total revenue from taxation as percentage
of total expenditure of the government.
3. Revenue foregone by the government due
to various exemptions and rebates given on
direct and indirect taxes.
Which of the statements given above is/are
correct?
a) 1 and 3 only
b) 1 only
d) 1, 2 and 3
* Tax Expenditure corresponds to relaxations
given when tax burden becomes difficult

KPIAS (49 - D) Cell: 91332 37733

 for the sustainability of a particular sector.
Tax exemptions or incentives are given in
the form of lower rates of tax relative to
normal rates. Tax expenditures are revenue
losses attributable to tax provisions that
often result from the use of the tax system
to promote social goals without incurring
direct expenditures.
* It does not relate to the expenditures
incurred by the Government in the collection
of taxes. Rather it refers to the opportunity
cost of taxing at concessional rates, or the 99. Which of the following represents National
opportunity cost of giving exemptions,
deductions, rebates, deferrals credits etc.
to the tax payers. Tax expenditures indicate
how much more revenue could have been
collected by the Government if not for such
measures. In other words, it shows the
extent of indirect subsidy enjoyed by the
tax payers in the country.
98. Expenditures on which of the following are
considered Transfer expenditure of the
Government?
1. Pension Schemes
2. Subsidies
3. Unemployment allowances
Select the correct answer using the code
given below.
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: D
KPIAS (50 - D)
Explanation:
* Option (d) is correct: Transfer expenditure
relates to the expenditure in the form of
payments against which there is no
corresponding return. Such expenditure
includes public expenditure on National Old
Age Pension Schemes, Interest payments,
Subsidies, Unemployment allowances,
Welfare benefits to weaker sections, etc.
Income?
(a) Net National Product at factor cost
(b) Net National Product at market prices
(c) Gross National Product at factor cost
(d) Gross National Product at market prices
Answer: A
Explanation:
* Option (a) is correct: Net National Product
at factor cost is also called as National
Income.
* Thus, NNP at factor cost a” National
Income (NI ) a” NNP at market prices –
(Indirect taxes –Subsidies) a” NNP at
market prices – Net indirect taxes (Net
indirect taxes a” Indirect taxes – Subsidies)
100) Consider the following statements with
respect to ‘Swachh Survekshan Survey 2022’.
1. Service level progress has the highest
weightage in determining the rank
2. The survey was launched by the Ministry
of Housing and Urban Affairs
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 3. Indore emerged as India’s first 7-star
Garbage Free city
Choose the correct answer using the code
given below
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) All the above
Answer: d
* Service level progress has the highest
weightage in determining the rank with 40%
weightage. Citizens’ voice and certification
have 30% weightage each.
* Minister of Housing and Urban Affairs
(MoHUA) had launched the seventh
consecutive edition of Swachh Survekshan
(SS), the world’s largest urban cleanliness
survey conducted by Swachh Bharat
Mission-Urban (SBM-U). Designed with
‘People First’ as its driving philosophy,
Swachh Survekshan 2022 is curated
towards capturing the initiatives of cities for
the overall welfare and well-being of
frontline sanitation workers.
* Indore, the city of lakes and palaces, walked
away with the Cleanest City title for the
sixth consecutive year, in the ‘more than 1
lakh population’ category, while Surat was
adjudged the second cleanest city, for the
second time in a row.

KPIAS (51 - D) Cell: 91332 37733