Previous Year Economy Questions

India has experienced persistent and
high food inflation in the recent
past. What could be the reasons?
(2011)
1. Due to a gradual switchover
to the cultivation of
commercial crops, the area
under the cultivation of food
grains has steadily
decreased in the last five
years by about 30%.
2. As a consequence of
increasing incomes, the
consumption patterns of the
% people have undergone a
significant change.
3. The food supply chain has
structural constraints.
Which of the statements given
above1 are correct?
(a.) 1 and 2 only
(b.) 2 and 3 only
(c.) 1 and 3 only
(d.) 1, 2 and 3
Solution (b)
In terms of economy, the visit by
foreign nationals to witness the XIX
Common Wealth Games in India
amounted to(2011)
(a.) Export
(b.) Import
(c.) Production
(d.)Consumption
Solution (a)
Which one of the following
statements appropriately describes
the “fiscal stimulus”?(2011)
(a.) It is a massive investment by
the Government in manufacturing
sector to ensure the supply of goods
to meet the demand surge caused
by rapid economic growth
(b.) It is an intense affirmative
action of the Government to boost
economic activity in the country
(c.) It is Government’s intensive
action on financial institutions to
ensure disbursement of loans to
agriculture and allied sectors to
promote greater food production and
contain food inflation
(d.) It is an extreme affirmative
action by the Government to pursue
its policy of financial inclusion
Solution (b)
Consider the following actions
which the Government can take:
1. Devaluing the domestic
currency.
2. Reduction in the export
subsidy.
3. Adopting suitable policies
which attract greater FDI
and more funds from FIIs.
Which of the above action/actions
can help in reducing the current
account deficit?
(a.) 1 and 2
(b.) 2 and 3
(c.) 3 only
(d.) 1 and 3
Solution (a)
A rapid increase in the rate of
inflation is sometimes attributed to
the “base effect”. What is “base
effect”?(2011)
(a.) It is the impact of drastic
deficiency in supply due to failure of
crops
(b.) It is the impact of the surge in
demand due to rapid economic
growth
(c.) It is the impact of the price
levels of previous year on the
calculation of inflation rate
(d.)None of the statements (a), (b)
and (c) ‘given above is correct in
this context
Solution (c)
Why is the offering of “teaser
loans” by commercial banks a
cause of economic concern?(2011)
1. The teaser loans are
considered to be an aspect
of sub-prime lending and
banks may be exposed to
the risk of defaulters in
future.
2. In India, the teaser loans are
mostly given to
inexperienced entrepreneurs
to set up manufacturing or
export units.
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
Solution (c)
In the context of Indian economy,
consider the following statements :
(2011)
1. The growth rate of GDP has
steadily increased in the last
five years.
2. The growth rate in per capita
income has steadily
increased in the last five
years.
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
Solution (b)
In India, which of the following have
the highest share in the
disbursement of credit to agriculture
and allied activities?(2011)
(a.) Commercial Banks
(b.) Cooperative Banks
(c.) Regional Rural Banks
(d.) Microfinance Institutions
Solution (a)
Economic growth is usually coupled
with (2011)
(a.) Deflation
(b.) Inflation
(c.) Stagflation
(d.) Hyperinflation
Solution (b)
The lowering of Bank Rate by the
Reserve Bank of India leads to
(2011)
(a.) More liquidity in the market
(b.) Less liquidity in the market
(c.) No change in the liquidity in the
market
(d.) Mobilization of more deposits
by commercial banks
Solution (a)
Which one of the following is not a
feature of “Value Added Tax”?
(2011)
(a.) It is a multi-point destination-
based system of taxation
(b.) It is a tax levied on value
addition at each stage of transaction
in the production-distribution chain
(c.) It is a tax on the final
consumption of goods or services
and must ultimately be borne by the
consumer
(d.) It is basically a subject of the
Central Government and the State
Governments are only a facilitator
for its successful implementation
Solution (c)
A “closed economy” is an economy
in which (2011)
(a.) the money supply is fully
controlled
(b.) deficit financing takes place
(c.) only exports take place
(d.) neither exports nor imports take
place
Solution (d)
Both Foreign Direct Investment (FDI)
and Foreign Institutional Investor
(FII) are related to investment in a
country. Which one of the following
statements best represents an
important difference between the
two? (2011)
(a.) FII helps bring better
management skills and technology,
while FDI only brings in capital
(b.) FII helps in increasing capital
availability in general, while FDI only
targets specific sectors
(c.) FDI flows only into the
secondary market, while FII targets
primary market
(d.) FII is considered to be more
stable than FDI
Solution (b)
Microfinance is the provision of
financial services to people of low-
income groups. This includes both
the consumers and the self-
employed. The service/services
rendered under micro-finance is/
are: (2011)
1. Credit facilities
2. Savings facilities
3. Insurance facilities
4. Fund Transfer facilities
Select the correct answer using the
codes given below the lists:
(a.) 1 only
(b.) 1 and 4 only
(c.) 2 and 3 only
(d.) 1, 2, 3 and 4
Solution (d)
Which of the following can aid in
furthering the Government’s
objective of inclusive growth?
(2011)
1. Promoting Self-Help Groups
2. Promoting Micro, Small and
Medium Enterprises
3. Implementing the Right to
Education Act
Select the correct answer using the
codes given below:
(a.) 1 only
(b.) 1 and 2 only
(c.) 2 and 3 only
(d.) 1, 2 and 3
Solution (d)
Why is the Government of India
disinvesting its equity in the Central
Public Sector Enterprises (CPSEs)?
(2011)
1. The Government intends to
use the revenue earned-from
the disinvestment mainly to
pay back the external debt.
2. The Government no longer
intends to retain the
management control of the
CPSEs.
Which of the statements given
above is/are correct?
(a.) I only
(b.) 2 only
(c.) Both 1 and 2
(d.) Neither 1 nor 2
Solution (d)
2012 UPSC Prelims Questions and
Solutions
The Reserve Bank of India (RBI)
acts as a bankers’ bank. This would
imply which of the following?
(2012)
1. Other banks retain their
deposits with the RBI.
2. The RBI lends funds to the
commercial banks in times
of need.
3. The RBI advises the
commercial banks on
monetary matters.
Select the correct answer using the
codes given below :
(a) 2 and 3 only
(b) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (d)
Under which of the following
circumstances may ‘capital gains’
arise? (2012)
1. When there is an increase in
the sales of a product
2. When there is a. natural
increase in the value of the
property owned
3. When you purchase a
painting and there is a
growth in its value due to
increase in its popularity
Select the correct answer using the
codes given below :
(a) 1 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3
Solution (b)
Which of the following measures
would result in an increase in the
money supply in the economy?
(2012)
1. Purchase of government
securities from the public by
the Central Bank
2. Deposit of currency in
commercial banks by the
public
3. Borrowing by the
government from the Central
Bank
4. Sale of government
securities to the public by
the Central Bank
Select the correct answer using the
codes given below :
(a) 1 only
(b) 2 and 4 only
(c) 1 and 3
(d) 2, 3 and 4
Solution (c)
Which of the following would
include Foreign Direct Investment in
India? (2012)
1. Subsidiaries of companies in
India
2. Majority foreign equity
holding in Indian companies
3. Companies exclusively
financed by foreign
companies
4. Portfolio investment
Select the correct answer using the
codes given below :
(a) 1, 2, 3 and 4
(b) 2 and 4 only
(c) 1 and 3 only
(d) 1, 2 and 3 only
Solution (d)
Consider the following statements:
(2012)
The price of any currency in
international market is decided by
the
1. World Bank
2. demand for goods/services
provided by the country
concerned
3. stability of the government
of the concerned country
4. economic potential of the
country in question
Which of the statements given
above are correct?
(a) 1, 2, 3 and 4
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1 and 4 only
Solution (b)
The basic aim of Lead Bank Scheme
is that: (2012)
(a) big banks should try to open
offices in each district
(b) there should be stiff competition
among the various nationalized
banks
(c) individual banks should adopt
particular districts for intensive
development
(d) all the banks should make
intensive efforts to mobilize deposits
Solution (c)
In India, in the overall Index of
Industrial Production, the Indices of
Eight Core Industries have a
combined weight of 37-90%. Which
of the following are among those
Eight Core Industries? (2012)
1. Cement
2. Fertilizers
3. Natural gas
4. Refinery products
5. Textiles
Select the correct answer using the
codes given below :
(a) 1 and 5 only
(b) 2, 3 and 4 only
(c) 1, 2, 3 and 4 only
(d) 1, 2, 3, 4 and 5
Solution (c)
The balance of payments of a
country is a systematic record of
(2012)
(a) all import and transactions of a
during a given period normally a
year
(b) goods exported from a country
during a year
(c) economic transaction between
the government of one country to
another
(d) capital movements from one
country to another
Solution (a)
The Reserve Bank of India regulates
the commercial banks in matters of
(2013)
1. liquidity of assets
2. branch expansion
3. merger of banks
4. winding-up of banks
Select the correct answer using the
codes given below.
(a) 1 and 4 only
(b) 2, 3 and 4 only
(c) 1, 2 and 3 only
(d) 1, 2, 3 and 4
Solution (d)
An increase in the Bank Rate
generally indicates that the: (2013)
(a) market rate of interest is likely to
fall
(b) Central Bank is no longer making
loans to commercial banks
(c) Central Bank is following an easy
money policy
(d) Central Bank is following a tight
money policy
Solution (d)
In India, deficit financing is used for
raising resources for (2013)
(a) economic development
(b) redemption of public debt
(c) adjusting the balance of
payments
(d) reducing the foreign debt
Solution (a)
Which of the following constitute
Capital Account? (2013)
1. Foreign Loans
2. Foreign Direct Investment
3. Private Remittances
4. Portfolio Investment
Select the correct answer using the
codes given below .
(a) 1, 2 and 3
(b) 1, 2 and 4
(c) 2, 3 and 4
(d) 1, 3 and 4
Solution (b)
Consider the following statements :
(2013)
1. Inflation benefits the
debtors.
2. Inflation benefits the bond-
holders.
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
Solution (a)
Disguised unemployment generally
means (2013)
(a) large number of people remain
unemployed
(b) alternative employment is not
available
(c) marginal productivity of labour is
zero
(d) productivity of workers is low
Solution (c)
Consider the following liquid assets:
(2013)
1.Demand deposits with the banks
2.Time deposits with the banks
3.Savings deposits with the banks
4.Currency
The correct sequence of these
decreasing order of Liquidity is
(a) 1-4-3-2
(b) 4-3-2-1
(c) 2-3-1-4
(d) 4-1-3-2
Solution (d)
In the context of Indian
economy,Open Market Operations’
refers to: (2013)
(a) borrowing by scheduled banks
from the RBI
(b) lending by commercial banks to
industry and trade
(c) purchase and sale of government
securities by the RBI
(d) None of the above
Solution (c)
Priority Sector Lending by banks in
India constitutes the lending to:
(2013)
(a) agriculture
(b) micro and small enterprises
(c) weaker sections
(d) All of the above
Solution (d)
A rise in general level of prices may
be caused by: (2013)
1. an increase in the money
supply
2. a decrease in the aggregate
level of output
3. an increase in the effective
demand
Select the correct answer using the
codes given below.
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Solution (d)
Which one of the following groups
of items is included in India’s
foreign-exchange reserves? (2013)
(a) Foreign-currency assets, Special
Drawing Rights (SDRs) and loans
from foreign countries
(b) Foreign-currency assets, gold
holdings of the RBI and SDRs
(c) Foreign-currency assets, loans
from the World Bank and SDRs
(d) Foreign-currency assets, gold
holdings of the RBI and loans from
the World Bank
Solution (b)
Which one of the following is likely
to be the most inflationary in its
effect? (2013)
(a) Repayment of public debt
(b) Borrowing from the public to
finance a budget deficit
(c) Borrowing from banks to finance
a budget deficit
(d) Creating new money to finance a
budget deficit
Solution (d)
Supply of money remaining the
same when there is an increase in
demand for money, there will be:
(2013)
(a) a fall in the level of prices
(b) an increase in the rate of interest
(c) a decrease in the rate of interest
(d) an increase in the level of income
and employment
Solution (b)
Economic growth in country X will
necessarily have to occur if (2013)
(a) there is technical progress in the
world economy
(b) there is population growth in X
(c) there is capital formation in X
(d) the volume of trade grows in the
world economy
Solution (c)
The national income of a country for
a given period is equal to the:
(2013)
(a) total value of goods and services
produced by the nationals
(b) sum of total consumption and
investment expenditure
(c) sum of personal income of all
individuals
(d) money value of final goods and
services produced
Solution (a)
Which of the following grants/ grant
direct credit assistance to rural
households? (2013)
1. Regional Rural Banks
2. National Bank for Agriculture
and Rural Development
3. Land Development Banks
Select the correct answer using the
codes given below :
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution (c)
The terms ‘Marginal Standing
Facility Rate’ and ‘Net Demand and
Time Liabilities’, sometimes
appearing in news, are used in
relation to (2014)
1. banking operations
2. communication networking
3. military strategies
4. supply and demand of
agricultural products
Solution (a)
What is/are the facility/facilities
the beneficiaries can get from the
services of Business Correspondent
(Bank Saathi) in branchless areas?
(2014)
1. It enables the beneficiaries
to draw their subsidies and
social security benefits in
their villages.
2. It enables the beneficiaries
in the rural areas to make
deposits and withdrawals.
Select the correct answer using the
code given below.
1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
Solution (c)
If the interest rate is decreased in
an economy, it will (2014)
1. decrease the consumption
expenditure in the economy
2. increase the tax collection of
the Government
3. increase the investment
expenditure in the economy
4. increase the total savings in
the economy
Solution (3)
In the context of Indian economy
which of the following is/are the
purpose/purposes of ‘Statutory
Reserve Requirements’?
1. To enable the Central Bank
to control the amount of
advances the banks can
create
2. To make the people’s
deposits with banks safe
and liquid
3. To prevent the commercial
banks from making
excessive profits
4. To force the banks to have
sufficient vault cash to meet
their day-to-day
requirements
Select the correct answer using the
code given below.
1. 1 only
2. 1 and 2 only
3. 2 and 3 only
4. 1, 2, 3 and 4
Solution (b)
If the interest rate is decreased in
an economy, it will
1. decrease the consumption
expenditure in the economy
2. increase the tax collection of
the Government
3. increase the investment
expenditure in the economy
4. increase the total savings in
the economy
Solution (c)
With reference to Union Budget,
which of the following is/are
covered under Non-Plan
Expenditure?
1. Defense -expenditure
2. Interest payments
3. Salaries and pensions
4. Subsidies
Select the correct answer using the
code given below.
1. 1 only
2. 2 and 3 only
3. 1, 2, 3 and 4
4. None
Solution (c)
The sales tax you pay while
purchasing a toothpaste is a
1. tax imposed by the Central
Government.
2. tax imposed by the Central
Government but collected by
the State Government
3. tax imposed by the State
Government but collected by
the Central Government
4. tax imposed and collected
by the State Government
Solution (d)
The main objective of the 12th Five-
Year Plan is
1. inclusive growth and poverty
reductions
2. inclusive and sustainable
growth
3. sustainable and inclusive
growth to reduce
unemployment
4. Faster, sustainable and more
inclusive growth.
Solution (d)
What does venture capital mean?
1. A short-term capital
provided to industries
2. A long-term start-up capital
provided to new
entrepreneurs
3. Funds provided to industries
at times of incurring losses
4. Funds provided for
replacement and renovation
of industries
Solution (b)
With reference to Balance of
Payments, which of the following
constitutes/constitute the Current
Account?
1. Balance of trade
2. Foreign assets
3. Balance of invisibles
4. Special Drawing Right
Select the correct answer using the
code given below.
1. 1 only
2. 2 and 3
3. 1 and 3
4. 1, 2 and 4
Solution (c)
Which of the following organizations
brings out the publication known as
‘World Economic Outlook’?
1. The International Monetary
Fund
2. The United Nations
Development Programme
3. The World Economic Forum
4. The World Bank
Solution (a)
Demographics:
India is regarded as a country with
“Demographic Dividend”. This is due
to: (2011)
(a.) Its high population in the age
group below 15 years
(b.) Its high population in the age
group of 15-64 years
(c.) Its high population in the age
group above 65 years
(d.) Its high total population
Solution (b)
Consider the following specific
stages of demographic transition
associated with economic
development : (2012)
1. Low birthrate with low death
rate
2. High birthrate with high
death rate
3. High birthrate with low
death rate
Select the correct order of the above
stages using the codes given below :
(a) 1, 2, 3
(b) 2, 1, 3
(c) 2, 3, 1
(d) 3, 2, 1
Solution (c)
To obtain full benefits of
demographic dividend, what should
India do? (2013)
(a) Promoting skill development
(b) Introducing more social security
schemes
(c) Reducing infant mortality rate
(d) Privatization of higher education
Solution (a)