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IAS Questions of Economy Set 13 for Prelims Exam

Dec 9, 2015 14:36 IST

    1. Which of the following statements are correct?

    (1) Consumer Price Index (CPI) measures changes in the price basket of consumer goods and services purchased by households.
    (2) It is released by Central Statistical organization.
    (3) CPI is used to calculate Dearness Allowance for government employees.



    Codes:

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

    Ans. d

    Explanation:
    Consumer Price Index is used to calculate the inflation rate. It is important as it gives a picture of the effect of inflation on common people.

    2. Insider Trading refers to

    (a) Trading of goods within the country
    (b) Sale and purchase of shares of a company by its own promoter.
    (c) Trading of shares by individuals with potential access to non-public information about the company.
    (d) Sale of goods produced by the foreign investors inside the home economy

    Ans. c

    Explanation:
    It is the trading of a public company’s stock or other securities by individuals with access to non-public information about the company. This type of trading is illegal in many countries.

    3. An Angel Investor is the one who

    (a) provides capital to revive a sick company
    (b) provides capital for a business start-up
    (c) provides FDI to a domestic company
    (d) solely provides fund to small scale industries

    Ans. b

    Explanation:
    Angel Investors are usually affluent and experienced entrepreneurs who provide capital for a business start-up, usually in return for convertible debt or ownership equity.

    4. Which of the following statements are correct regarding Kisan Vikas Patra (KVP)?

    (1) The maximum age of eligibility is 70 years.
    (2) Rs. 50000 is the upper ceiling on investment.
    (3) The certificate can be pledged as security to avail loan from bank.

    Codes:

    (a) 1 only
    (b) 3 only
    (c) 2 and 3 only
    (d) 1 and 2 only

    Ans. b

    Explanation:
    There is no maximum age for eligibility. There is no upper ceiling on investment.

    5. Which of the following statements are correct about proposed Goods and Services Tax (GST) Bill?

    (1) It is a constitutional amendment bill.
    (2) It will confer powers both to the parliament and state legislatures to make laws for levying GST.
    (3) GST will simplify and harmonize the direct tax regime in the country.

    Codes:

    (a) 1 only
    (b) 3 only
    (c) 2 and 3 only
    (d) 1 and 2 only

    Ans. d

    Explanation:
    Goods and Services Tax will simplify the indirect tax system in India.

    6. Which of the following statements are correct about Foreign Trade Policy 2015-2020?

    (1) It seeks to raise India’s share in world exports to 3.5%.
    (2) Foreign Trade Policy will be reviewed annually.
    (3) Duty credit scrips could be used to pay custom duty, excise duty and service tax.  

    Codes:

    (a) 1 only
    (b) 1 and 3 only
    (c) 2 and 3 only
    (d) 1 and 2 only

    Ans. b

    Explanation:
    Till now, Foreign Trade Policy was being reviewed annually. This time, it will be reviewed after two and a half year.


    7. Which of the following statements are true about Indicative Planning?

    (1) It is effort to solve the problem of imperfect information in the market
    (2) The market is manipulated through incentives and inducements.

    Codes:

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

    Ans. c

    Explanation:
    Indicative Planning is used in order to increase economic performance by solving the problem of of imperfect information in the market and mixed economy.

    8. Which of the following statements are true about Currency Deposit Ratio?

    (1) If banks keep more excess reserves, the money supply will decline.
    (2) It reflects people preference for liquidity.
    (3) It is a behavioral parameter.

    Codes:

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

    Ans. d

    Explanation:
    The currency held by the people depends on the cost and benefit of keeping money in the bank. The public will hold less currency if it can earn higher interest rate in the bank.

    9. Which of the following statements are true?

    (1) Higher interest rates will result in appreciation of the domestic currency.
    (2) Higher inflation rate will result in appreciation of the domestic currency.
    (3) Greater demand for a country’s product means greater demand for country’s currency.

    Codes:

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

    Ans. b

    Explanation:
    Higher inflation rate will lead to depreciation of the domestic currency. However, higher interest rates may also lead to higher inflation rate.

    10. Which of the following are types of Non-Tariff Barriers in trade?

    (1) Foreign exchange restrictions
    (2) Quantity restrictions
    (3) Preferential arrangement

    Codes:

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

    Ans. d

    Explanation:
    Some major types of Non-Tariff Barriers in trade are quantity restrictions, quotas and licensing procedures, foreign exchange restrictions, preferential arrangement, state trading, consular formalities and technical and administrative regulation.

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