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IAS Exam: Prelims Economy NCERT Questions: Liberalisation, Privatisation and Globalisation Set I

Jan 22, 2016 12:57 IST

    NCERT Books are dispensable for the IAS Preparation. IAS Exam requires the good understanding of the NCERT Books. Economy is one of the most asked subjects on the IAS Prelims Exam. Here we present NCERT Based Questions for the IAS Prelims Exam.

    Q1. Consider the following statements with regard to Indian economy in early 1990s, prior to economic reforms (LPG).
    1. The proportion of GDP contributed by the industrial sector decreased in the period from 24.6 per cent in 1950-51 to 11.8 per cent in 1990-91.
    2. The Indian industry was still restricted largely to cotton textiles and jute.

    Which of the above statements is/are not correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. c)

    Explanation: The proportion of GDP contributed by the industrial sector increased in the period from 11.8 per cent in 1950-51 to 24.6 per cent in 1990-91. The industrial sector had become well diversified by 1990.

    Q2. Consider the below statements:

    1. In 1991, India met with an economic crisis relating to its external debt — the government was not able to make repayments on its borrowings from abroad.
    2. The system of mixed economy framework was adopted as part of the major economic reforms in early 1990s.
    3. Foreign exchange reserves, which we generally maintain to import petrol and other important items, dropped to levels that were not sufficient for even a fortnight (two weeks).

    Select the correct statements using the codes given below:
    a) 1 and 2 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) All are correct

    Answer.  c)

    Explanation: The government sought loan from the IMF to furnish its debt obligations. Mixed economy was adopted since Independence.

    Q3. Which of the below are correct with reference to economic crisis that India faced in 1990s?
    1. India approached only the International Monetary Fund for loan.
    2. No country or international funder was willing to lend to India as there was no sufficient foreign exchange to pay the interest that needs to be paid to international lenders.

    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. b)

    Explanation:
    India approached the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund for loan.

    Q4. Which among the following were the regulatory mechanisms that were enforced prior to 1991 New Economic Policy (NEP) was taken up?
    1. Industrial licensing, under which every entrepreneur had to get permission from government officials to start a firm, close a firm or to decide the amount of goods that could be produced.
    2. Public sector was not allowed in many industries.
    3. Some goods could be produced only in small scale industries.
    4. Controls on price fixation and distribution of selected industrial products.

    Select the correct answer using the codes given below
    a) 1, 2 and 3 only
    b) 2, 3 and 4 only
    c) 1, 3 and 4 only
    d) 1, 2, 3 and 4

    Answer. c)

    Explanation: Private sector was not allowed in many industries. Public sector was present in almost all major industries.

    Q5.  Consider the below statements regarding economic reforms of 90s.
    1. The goods produced by the small-scale industries have continued to be reserved for these industries.
    2. In many industries, the market has been allowed to determine the prices.
    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. b)

    Explanation: Many goods produced by small-scale industries have now been de-reserved. The MSME sector has been given other benefits in availability of credit, etc.

    Q6. Financial sector does not include financial institutions such as:
    1. Commercial banks
    2. Investment banks
    3. Stock exchange operations
    4. Foreign exchange market

    Select the correct answer using the codes given below
    a) 1, 2 and 3 only
    b) 2, 3 and 4 only
    c) 1, 2 and 4 only
    d) None of the above

    Answer. d)

    Explanation: The Financial sector is the set of institutions, instruments, and markets. It also includes the legal and regulatory framework that permits transactions to be made through the extension of credit.

    Q7. Foreign Institutional Investors (FII), which are now allowed to invest in Indian financial markets include:
    1. Merchant bankers
    2. Mutual funds
    3. Pension funds

    Select the correct statements using the codes given below:
    a) 1 and 2 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) All are correct

    Answer.  d)

    Explanation: Foreign institutional investors (FIIs) are those institutional investors which invest in the assets belonging to a different country other than that where these organizations are based.

    Q8. Consider the below statements with reference to the Indian tax system:
    1. Tax reforms are concerned with the reforms in government’s taxation and public expenditure policies which are collectively known as its monetary policy.
    2. Since 1991, there has been a continuous increase in the taxes on individual incomes.

    Which of the above statements is/are incorrect?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. c)

    Explanation: They are known as its fiscal policy not monetary policies. Since 1991, there has been a continuous reduction in the taxes on individual incomes as it was felt that high rates of income tax were an important reason for tax evasion.

    Q9. Consider the below statements with regard to important reforms made in the external sector:
    1. The rupee was devalued against foreign currencies which led to a decrease in the inflow of foreign exchange.
    2. Now, more often than not, markets determine exchange rates based on the demand and supply of commodity exchange.
    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. d)

    Explanation:
    The rupee was devalued against foreign currencies which led to an increase in the inflow of foreign exchange. Markets determine exchange rates based on the demand and supply of foreign exchange.

    Q10. Evaluate the below sentences about GATT:
    1. GATT was established in 1945 with 23 countries as the global trade organization.
    2. Its purpose was to administer all multilateral trade agreements by providing equal opportunities to all countries in the international market for trading purposes.

    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. b)

    Explanation:
    GATT was established in 1948. GATT was signed by 23 nations in Geneva on October 30, 1947 and took effect on January 1, 1948. It lasted until the signature by 123 nations in Marrakesh on April 14, 1994 of the Uruguay Round Agreements, which established the World Trade Organization (WTO) on January 1, 1995.

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