IAS Questions of Economy Set 16 for Prelims Exam

Q1. Which of the following statements are correct?

(1) Price rise in India is the cumulative result of a number of factors.
(2) Inflation rate continue to rise in India since last one decade.

Codes:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. a

Explanation: Price rise in India is the result of a number of factors including factors working on the demand and supply side and structural elements. Inflation rate was high after 6th Pay Commission which came down in last 2-3 years.

Q2. The major objective of ‘Make in India’ initiative is to focus on job creation and skill development in 25 sectors of the economy. 100% FDI is allowed in all these sectors except

(1) Defence
(2) Bio-technology
(3) Space
(4) News media

Codes
(a) 1 and 2 only
(b) 1, 3 and 4 only
(c) 2 and 4 only
(d) All of these

Ans. b

Explanation: 100% FDI is allowed except Defence (49%), Space (74%) and News media (26%).

Q3. Which of the following strategies will be used in Smart City Project to improve infrastructure in the identified smart cities?

(1) Retrofitting
(2) Redevelopment
(3) Greenfield development

Codes
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All of these

Ans. d

Explanation: Retrofitting is city improvement which would be implemented in an existing built-up area to improve the living conditions by providing more intensive infrastructure services. Under Redevelopment, an existing built-up area will be replaced enabling creation of new layout with enhanced infrastructure. Greenfield development will be introduced in new areas which were not occupied earlier.  

Q4. Which of the following are included in broad money (M3)?

(1) Currency and coins
(2) Savings accounts
(3) Fixed deposits more than ten years
(4) Non-institutional money market accounts

Codes
(a) 1 and 2 only
(b) 3 and 4 only
(c) 1, 2 and 4 only
(d) All of these

Ans. c

Explanation: Long term deposits are not included in broad money, however small time deposits are part of  broad money.

Q5. Which of the following can be called as Withholding tax?

(a) Tax on future transactions in the market.
(b) Tax on P-notes by FIIs
(c) Tax on sale and purchase of immovable property
(d) Tax deducted at source, especially levied on interest and dividends paid to a resident out of the country.

Ans. d

Explanation: This tax is also known as Retention tax. It is a tax levied on income from securities owned by a non-resident.

Q6. Which of the following statements are correct about Bombay Plan?

(1) It was published by leading industrialist of India.
(2) It focused only on industrialization in India.
(3) It became a part of the First Five Year Plan.

Codes:
(a) 1 only
(b) 3 only
(c) 2 and 3 only
(d) All of these

Ans. a

Explanation: Bombay Plan aimed to double the output of agricultural sector and a five-fold growth in industrial output. It was proposed in 1940s before independence. It was not given place formally in Five Year Plan.

Q7. Which of the following statements are true about Non-Banking Financial Companies (NBFCs) in India?

(1) NBFCs can provide loans and credits.
(2) These cannot accept demand deposits.
(3) These are registered under the Companies Act, 1956.
(4) These cannot engage in the acquisition of shares, stocks, binds etc.

Codes
(a) 1 and 2 only
(b) 3 and 4 only
(c) 1, 2 and 3 only
(d) All of these

Ans. c

Explanation: NBFCs can engage in business of loans and advances, shares, stocks, insurance, chit funds etc.

Q8. Which of the following statements are true?

(1) Regional Rural Banks are sponsored by the commercial banks.
(2) Lead Banks main function is to bring about coordination of cooperative banks, commercial banks and other financial institutions in their respective lead districts.

Codes:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Ans. c

Explanation: Lead banks survey the resources and potential for banking development by identifying unbalanced centers in the allotted districts. RRBs work towards developing rural areas with the help of funds from commercial banks.

Q9. Which of the following pairs are correctly matched?

            Institution                                          Headquarter
(1) International Monetary Fund               Washington, DC
(2) World Trade Organization                      Chicago
(3) Asian Development Bank                       Tokyo

Codes:
(a) 1 only
(b) 3 only
(c) 2 and 3 only
(d) All of these

Ans. a

Explanation: The headquarter of WTO is located at Geneva and the headquarter of ADB is located at Mandaluyong, Manila, Philippines.

Q10. Which of the following statements are true regarding New Development Bank (NDB)?

(1) China holds the maximum number of shares in the bank.
(2) The bank has no African nation as a member.
(3) The headquarter of the bank is located at Shanghai.

Codes:
(a) 1 only
(b) 3 only
(c) 2 and 3 only
(d) None of these

Ans. b

Explanation: All five BRICS nations, namely, Brazil, Russia, India, China and South Africa have equal shares in the bank with equal voting rights.