IAS Questions of Economy Set- 11 for Prelims Exam

1. Which of the following comprise internal debt of the country?

(1) Market borrowing
(2) Treasury bills
(3) Securities issued to RBI

Codes

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

Ans. d

Explanation: All these are internal debts as these are not sought from any foreign institution

.

2. Which of the following can be done to maintain Balance of Payment (BoP)?

(1) Exchange control
(2) Devaluation
(3) Import restrictions

Codes

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

Ans. d

Explanation: All these tools can be used to maintain BoP. These help in increasing export, decreasing import and improving foreign reserves.

3. Which of the following statements are correct?

(1) International Development Association provides soft loan to its poor member countries.
(2) It publishes World Development Report.

Codes:

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

Ans. a

Explanation: World Development Report is published by United Nations Conference on Trade and Development (UNCTAD).

4. Which of the following are among the focal areas of Global Environment Fund (GEF)?

(1) Biodiversity
(2) Poverty alleviation
(3) Ozone depletion
(4) Climate Change

Codes

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

Ans. b

Explanation: GEF projects address six focal areas: biodiversity, climate change, land degradation, ozone depletion, international waters and persistent organic pollutants.

5. Consider the following statements:

(1) Marginal Standing Facility (MSF) is an ultra short term borrowing scheme for one day period to meet liquidity shortfalls.
(2) MSF can be used both by all types of banks and NBFCs.

Which of the above statements is/are correct?

Codes:

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

Ans. a

Explanation: MSF is meant only for scheduled commercial banks in which they can borrow from RBI for one day period to meet their liquidity shortfalls by offering government dated securities.

6. Which of the following statements are correct?

(1) Eurasian Group is an inter-government policy making body to combat money laundering and terrorist financing
(2) India is a member of this group.

Codes:

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

Ans. c

Explanation: Eurasian Group came into existence in Moscow in 2004. India became the ninth member of the Eurasian Group.

7. Which of the following statements are correct?
 
(1) India is a founding member of IMF.
(2) All the quotas and transactions of IMF are expressed in Special Drawing Rights (SDR).
(3) All member countries have equal voting rights in IMF.

 Codes:

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

Ans. a

Explanation: The member countries of IMF do not have equal value for the vote.

8. Engel’s Law is a law of economics which establishes relationship between

(a) Tax laws and revenue collection through taxation
(b) Income distribution and inequality in the society
(c) Income and proportion of spending on food items
(d) Government policies and trade

Ans. c

Explanation: Engel’s Law states that the proportion of income spent on food diminishes as income increases.

9. Economic reforms policy includes

(1) Adoption of realistic exchange rate policy
(2) deregulation of market forces
(3) trade liberalization

Codes:

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

Ans. d

Explanation: The economic reforms by the government means more liberalization and free trade but with certain regulations by the government. The government tries to minimize the role of government.
 
10. Frictional unemployment arises due to

(a) Periodic slackness in business activities.
(b) Inadequacy in productive capacity
(c) transfer of labour from one occupation to another
(d) demand proven unemployment.  

Ans. c

Explanation: Frictional unemployment exists during the period of the transfer of labour from one occupation to another.