IAS Prelims 2014: Gs Paper I: Economic And Social Development: Previous Year Questions

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Questions: 60 | Attempts: 684 | Updated: Mar 18, 2023

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Questions and Answers

1.

The balance of payments of a country is a systematic record of
- 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 transactions between the government of one country to another
- D.
  
  Capital movements from one country to another
Correct Answer
A. All import and transactions of a during a given period normally a year

Explanation
The balance of payments of a country is a systematic record of all imports and transactions of a country during a given period, typically a year. This includes not only the goods that are exported from the country, but also all the economic transactions that take place between the government of one country and another. Additionally, it also includes capital movements from one country to another. In summary, the balance of payments provides a comprehensive overview of a country's economic transactions with the rest of the world.

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2.

The Reserve Bank of India regulates the commercial banks in matters of1. liquidity of assets2. branch expansion3. merger of banks4. winding-up of banksSelect 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
Correct Answer
D. 1, 2, 3 and 4

Explanation
The Reserve Bank of India regulates commercial banks in matters of liquidity of assets, branch expansion, merger of banks, and winding-up of banks. This means that the RBI has authority over these areas and sets rules and guidelines for commercial banks to follow in these matters. The correct answer is 1, 2, 3, and 4 because all of these options are included in the regulation of commercial banks by the RBI.

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3.

Which of the following constitute Capital Account?1. Foreign Loans2. Foreign Direct Investment3. Private Remittances4. Portfolio InvestmentSelect 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
Correct Answer
B. 1, 2 and 4

Explanation
The correct answer is 1, 2 and 4. Capital account includes foreign loans, foreign direct investment, and portfolio investment. Private remittances, on the other hand, are considered as a part of the current account.

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4.

Consider the following statements: 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
Correct Answer
A. 1 only

Explanation
Inflation benefits the debtors because the value of money decreases over time, making it easier for debtors to repay their loans with money that is worth less than when they borrowed it. On the other hand, inflation does not benefit bond-holders because the fixed interest rate on bonds becomes less valuable as the purchasing power of money decreases. Therefore, the correct answer is "1 only".

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5.

Consider the following liquid assets:1.Demand deposits with the banks2.Time deposits with the banks3.Savings deposits with the banks4.CurrencyThe correct sequence of these decreasing orders of Liquidity is
- A.
  
  1-4-3-2
- B.
  
  4-3-2-1
- C.
  
  2-3-1-4
- D.
  
  4-1-3-2
Correct Answer
D. 4-1-3-2

Explanation
The correct sequence of decreasing liquidity is 4-1-3-2. Currency (4) is the most liquid asset as it can be used immediately for transactions. Demand deposits with the banks (1) can also be easily accessed and used for transactions. Savings deposits with the banks (3) are less liquid as there may be some restrictions or penalties for withdrawal. Time deposits with the banks (2) have the least liquidity as they have a fixed term and penalties for early withdrawal.

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6.

An increase in the Bank Rate generally indicates that the
- 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
Correct Answer
D. Central Bank is following a tight money policy

Explanation
When the central bank increases the Bank Rate, it indicates that they are following a tight money policy. This means that the central bank is trying to reduce the money supply in the economy by increasing the cost of borrowing for commercial banks. By doing so, they aim to control inflation and curb excessive borrowing and spending. This increase in the Bank Rate makes loans more expensive for commercial banks, which in turn leads to higher interest rates in the market. Therefore, the correct answer is that an increase in the Bank Rate indicates that the central bank is following a tight money policy.

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7.

In India, deficit financing is used for raising resources for
- A.
  
  Economic development
- B.
  
  Redemption of public debt
- C.
  
  Adjusting the balance of payments
- D.
  
  Reducing the foreign debt
Correct Answer
A. Economic development

Explanation
Deficit financing is a method used by the government to raise resources for economic development. It involves borrowing money from the central bank or other sources to cover the deficit between government expenditure and revenue. This borrowed money is then used to finance various developmental projects, such as infrastructure development, education, healthcare, and poverty alleviation. By investing in these sectors, the government aims to stimulate economic growth, create employment opportunities, and improve the overall standard of living in the country.

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8.

Disguised unemployment generally means
- 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
Correct Answer
C. Marginal productivity of labour is zero

Explanation
Disguised unemployment refers to a situation where there are more workers employed in a job than actually required for its efficient functioning. In such cases, the marginal productivity of labor becomes zero, meaning that the additional output produced by each additional worker is negligible or non-existent. This implies that even if some workers were to be removed from the job, there would be no significant impact on the overall productivity.

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9.

In the context of Indian economy, Open Market Operations' refers to
- 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
Correct Answer
C. Purchase and sale of government securities by the RBI

Explanation
Open Market Operations in the context of the Indian economy refers to the purchase and sale of government securities by the Reserve Bank of India (RBI). The RBI conducts these operations to regulate the money supply in the economy. When the RBI buys government securities from commercial banks, it injects money into the economy, increasing liquidity. Conversely, when the RBI sells government securities, it absorbs money from the economy, reducing liquidity. These operations help the RBI control inflation, manage interest rates, and stabilize the financial system.

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10.

Priority Sector Lending by banks in India constitutes the lending to
- A.
  
  Agriculture
- B.
  
  Micro and small enterprises
- C.
  
  Weaker sections
- D.
  
  All of the above
Correct Answer
D. All of the above

Explanation
Priority Sector Lending by banks in India includes lending to agriculture, micro and small enterprises, and weaker sections. This means that banks in India are required to allocate a certain percentage of their lending towards these sectors to promote their development and financial inclusion. By doing so, banks contribute to the growth of the agricultural sector, support small businesses, and provide financial assistance to marginalized and economically weaker sections of society.

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11.

A rise in general level of prices may be caused by1. an increase in the money supply2. a decrease in the aggregate level of output3. an increase in the effective demandSelect 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
Correct Answer
D. 1, 2 and 3

Explanation
An increase in the money supply can lead to a rise in the general level of prices because when there is more money in circulation, people have more purchasing power, which can drive up demand and prices. A decrease in the aggregate level of output can also contribute to inflation because when there is less production, there is less supply available to meet demand, which can lead to price increases. Finally, an increase in effective demand, which refers to the desire and ability of consumers to purchase goods and services, can also drive up prices as it increases competition for limited resources. Therefore, all three factors can contribute to a rise in the general level of prices.

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12.

Which one of the following groups of items is included in India's foreign-exchange reserves?
- 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
Correct Answer
B. Foreign-currency assets, gold holdings of the RBI and SDRs

Explanation
India's foreign-exchange reserves include foreign-currency assets, gold holdings of the RBI, and Special Drawing Rights (SDRs). This means that India holds foreign currencies, such as the US dollar and euro, as well as gold reserves and SDRs, which are international reserve assets created by the International Monetary Fund (IMF). These reserves are important for maintaining stability in the country's economy, facilitating international trade, and meeting any external payment obligations.

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13.

Which one of the following is likely to be the most inflationary in its effect?
- 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
Correct Answer
D. Creating new money to finance a budget deficit

Explanation
Creating new money to finance a budget deficit is likely to be the most inflationary in its effect. When a government creates new money to finance a budget deficit, it increases the money supply in the economy. This excess money supply leads to an increase in aggregate demand, which can result in higher prices for goods and services. This is known as inflation. In contrast, repayment of public debt, borrowing from the public, or borrowing from banks to finance a budget deficit do not directly increase the money supply and therefore have less inflationary effects.

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14.

To obtain full benefits of demographic dividend, what should India do?
- A.
  
  Promoting skill development
- B.
  
  Introducing more social security schemes
- C.
  
  Reducing infant mortality rate
- D.
  
  Privatization of higher education
Correct Answer
A. Promoting skill development

Explanation
Promoting skill development is the correct answer because to fully benefit from the demographic dividend, India needs to focus on developing the skills of its young population. By investing in education and training programs, India can ensure that its workforce is equipped with the necessary skills to contribute to the economy. This will lead to increased productivity, higher incomes, and overall economic growth. Additionally, promoting skill development can also help address the issue of unemployment by creating more job opportunities for the youth.

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15.

Supply of money remaining the same when there is an increase in demand for money, there will be
- 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
Correct Answer
B. An increase in the rate of interest

Explanation
When there is an increase in demand for money, but the supply of money remains the same, there will be an increase in the rate of interest. This is because when the demand for money increases, individuals and businesses are willing to pay a higher price (interest rate) to borrow money. This increase in the rate of interest helps to balance the increased demand for money with the limited supply, as lenders are incentivized to lend out their money at higher interest rates.

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16.

Economic growth in country X will necessarily have to occur if
- 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
Correct Answer
C. There is capital formation in X

Explanation
The correct answer is "there is capital formation in X". Economic growth in country X will necessarily occur if there is capital formation because capital formation refers to the increase in the stock of capital goods in an economy. When there is an increase in capital goods, it leads to an increase in productivity and efficiency, which in turn drives economic growth. Therefore, capital formation is a crucial factor in promoting economic growth in a country.

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17.

The national income of a country for a given period is equal to the
- 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
Correct Answer
A. Total value of goods and services produced by the nationals

Explanation
The correct answer is "total value of goods and services produced by the nationals." National income refers to the total value of all goods and services produced within a country's borders by its nationals during a specific time period. It includes the value of all final goods and services produced, regardless of whether they are consumed domestically or exported. This measure provides an indication of the overall economic activity and productivity of a country.

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18.

Which of the following grants/ grant direct credit assistance to rural households?1. Regional Rural Banks2. National Bank for Agriculture and Rural Development3. Land Development BanksSelect 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
Correct Answer
C. 1 and 3 only

Explanation
Regional Rural Banks and Land Development Banks grant direct credit assistance to rural households. National Bank for Agriculture and Rural Development (NABARD) does not directly grant credit assistance to rural households, but it provides refinance facilities and other forms of support to these banks. Therefore, the correct answer is 1 and 3 only.

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19.

With reference to the usefulness of the by-products of sugar industry, which of the following statements is / are correct?1. Bagasse can be used as biomass fuel for the generation of energy.2. Molasses can be used as one of the feed stocks for the production of synthetic chemical fertilizers.3. Molasses can be used for the production of ethanol.Select the correct answer using the codes given below.
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
D. 1, 2 and 3

Explanation
The by-products of the sugar industry have multiple uses. Bagasse, the fibrous residue left after extracting juice from sugarcane, can be used as biomass fuel to generate energy. Molasses, a by-product of sugar production, can be used as feedstock for the production of synthetic chemical fertilizers and also for the production of ethanol. Therefore, all three statements are correct, making the correct answer option 1, 2, and 3.

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20.

Which one among the following industries is the maximum consumer of water in India?
- A.
  
  Engineering
- B.
  
  Paper and pulp
- C.
  
  Textiles
- D.
  
  Thermal power
Correct Answer
D. Thermal power

Explanation
Thermal power is the maximum consumer of water in India because it requires large amounts of water for cooling purposes. In thermal power plants, water is used to cool the steam that is used to generate electricity. This water is then released back into the environment, but at a higher temperature, which can have negative impacts on aquatic ecosystems. The engineering, paper and pulp, and textiles industries also consume water, but not to the same extent as thermal power.

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21.

Which of the following can be said to be essentially the parts of ‘inclusive Governance’?1. Permitting the Non-Banking Financial Companies to do banking2. Establishing effective District planning Committees in all the districts3. Increasing the government spending on public health4. Strengthening the Mid-day Meal SchemeSelect the correct answer using the codes given below:
- A.
  
  1 and 2 only
- B.
  
  3 and 4 only
- C.
  
  2, 3 and 4 only
- D.
  
  1, 2, 3 and 4
Correct Answer
D. 1, 2, 3 and 4

Explanation
The question asks for the parts of 'inclusive governance'. Inclusive governance refers to a governance system that includes and represents all sections of society, particularly marginalized and vulnerable groups. The given answer options suggest that all of the listed actions contribute to inclusive governance. Permitting non-banking financial companies to do banking can help increase financial inclusion and access to banking services for all. Establishing effective district planning committees ensures that local communities have a say in decision-making processes. Increasing government spending on public health and strengthening the mid-day meal scheme both aim to improve the well-being and access to basic services for all. Therefore, options 1, 2, 3, and 4 can be considered as essentially the parts of inclusive governance.

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22.

With reference to National Rural Health Mission, which of the following are the jobs of ‘ASHA’, a trained community health worker?1. Accompanying women to the health facility for antenatal care checkup2. Using pregnancy test kits for early detection of pregnancy3. Providing information on nutrition and immunization4. Conducting the delivery of babySelect the correct answer using the codes given below:
- A.
  
  1, 2 and 3 only
- B.
  
  2 and 4 only
- C.
  
  1 and 3 only
- D.
  
  1, 2, 3 and 4
Correct Answer
D. 1, 2, 3 and 4

Explanation
ASHA, a trained community health worker, is responsible for accompanying women to the health facility for antenatal care checkup, using pregnancy test kits for early detection of pregnancy, providing information on nutrition and immunization, and conducting the delivery of a baby.

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23.

How does the National Rural Livelihood Mission seek to improve livelihood options of rural poor?1. By setting up a large number of new manufacturing industries and agribusiness centers in rural areas2. By strengthening ‘self-help groups’ and providing skill development3. By supplying seeds, fertilizers, diesel pump-sets and micro-irrigation equipment free of cost to farmersSelect 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
Correct Answer
B. 2 only

Explanation
The National Rural Livelihood Mission seeks to improve livelihood options of rural poor by strengthening 'self-help groups' and providing skill development. This means that the mission focuses on empowering rural communities by promoting self-sufficiency and building their capacity to generate income through various means. It does not involve setting up new industries or providing free agricultural inputs as mentioned in options 1 and 3. Therefore, the correct answer is option 2 only.

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24.

The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers which of the following?1. Deprivation of education, health, assets and services at household level2. Purchasing power parity at national level3. Extent of budget deficit and GDP growth rate at national levelSelect the correct answer using the codes given below:
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
A. 1 only

Explanation
The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers deprivation of education, health, assets, and services at the household level. This means that it measures poverty based on a range of factors that go beyond just income or purchasing power parity at the national level. The index takes into account the lack of access to basic necessities and services that are essential for a decent standard of living. Therefore, the correct answer is 1 only.

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25.

What is/are the recent policy initiative(s) of Government of India to promote the growth of manufacturing sector?1. Setting up of National Investment and manufacturing Zones2. Providing the benefit of ‘single window clearance’3. Establishing the Technology Acquisition and Development FundSelect the correct answer using the codes given below:
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
D. 1, 2 and 3

Explanation
The recent policy initiatives of the Government of India to promote the growth of the manufacturing sector include setting up National Investment and Manufacturing Zones, providing the benefit of 'single window clearance', and establishing the Technology Acquisition and Development Fund. These initiatives aim to attract investment, simplify regulatory processes, and promote technological development in the manufacturing sector.

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26.

Consider the following specific stages of demographic transition associated with economic development:1. Low birthrate with low death rate2. High birthrate with high death rate3. High birthrate with low death rateSelect 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
Correct Answer
C. 2, 3, 1

Explanation
The correct order of the stages of demographic transition associated with economic development is 2, 3, 1. This means that initially there is a high birthrate with a high death rate, indicating a less developed economy. As the economy develops, there is a transition to a high birthrate with a low death rate, indicating improved healthcare and living conditions. Finally, the birthrate decreases and approaches the death rate, resulting in a low birthrate with a low death rate, indicating a more developed economy.

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27.

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 Industries?1. Cement2. Fertilizers3. Natural gas4. Refinery products5. TextilesSelect 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
Correct Answer
C. 1, 2, 3 and 4 only

Explanation
The correct answer is 1, 2, 3 and 4 only. This means that among the eight core industries with a combined weight of 37.90% in the Index of Industrial Production in India, the industries included are Cement, Fertilizers, Natural gas, and Refinery products. Textiles is not included in the list of these eight core industries.

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28.

The endeavor of 'Janani Suraksha Yojana' Programme is1. to promote deliveries institutional2. to provide monetary assistance to the mother to meet the cost of delivery3. to provide for wage loss due to pregnancy and confinementWhich of the statements given above is / are correct?
- A.
  
  1 and 2 only
- B.
  
  2 only
- C.
  
  3 only
- D.
  
  1, 2 and 3
Correct Answer
A. 1 and 2 only

Explanation
The correct answer is 1 and 2 only. The Janani Suraksha Yojana program aims to promote institutional deliveries and provides monetary assistance to the mother to cover the expenses of delivery. It does not provide for wage loss due to pregnancy and confinement, which is stated in statement 3.

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29.

Consider the following:1. Hotels and restaurants2. Motor transport undertakings3. Newspaper establishments4. Private medical institutionsThe employees of which of the above can have the 'Social Security' coverage under Employees' State Insurance Scheme?
- A.
  
  1, 2 and 3 only
- B.
  
  4 only
- C.
  
  1, 3 and 4 only
- D.
  
  1, 2, 3 and 4
Correct Answer
A. 1, 2 and 3 only

Explanation
Employees of hotels and restaurants, motor transport undertakings, and newspaper establishments can have social security coverage under the Employees' State Insurance Scheme. Private medical institutions are not included in the coverage.

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30.

How do District Rural Development Agencies (ORDAs) help in the reduction of rural poverty in India?1. DRDAs act as Panchayati Raj Institutions in certain specified backward regions of the country.2. DRDAs undertake area-specific scientific study of the causes of poverty and malnutrition and prepare detailed remedial measures.3. DRDAS secure inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programmes.4. DRDAs watch over and ensure effective utilization of the funds intended for anti-poverty programmes.Which of the statements given above is/are correct?
- A.
  
  1, 2 and 3 only
- B.
  
  3 and 4 only
- C.
  
  4 only
- D.
  
  1, 2, 3 and 4
Correct Answer
B. 3 and 4 only

Explanation
District Rural Development Agencies (DRDAs) help in the reduction of rural poverty in India by securing inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programs. They also watch over and ensure the effective utilization of funds intended for these programs. However, they do not act as Panchayati Raj Institutions or undertake area-specific scientific studies of the causes of poverty and malnutrition. Therefore, the correct answer is 3 and 4 only.

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31.

The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following?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
Correct Answer
B. 1 and 2 only

Explanation
The correct answer is 1 and 2 only. This means that the RBI acts as a bankers' bank by performing two functions: other banks retain their deposits with the RBI, and the RBI lends funds to commercial banks in times of need. The statement does not mention anything about the RBI advising commercial banks on monetary matters, so option 3 is not included in the correct answer.

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32.

Under which of the following circumstances may 'capital gains' arise?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 owned3. When you purchase a painting and there is a growth in its value due to increase in its popularitySelect the correct answer using the codes given below:
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  2 only
- D.
  
  1, 2 and 3
Correct Answer
B. 2 and 3 only

Explanation
Capital gains may arise when there is a natural increase in the value of the property owned, as well as when you purchase a painting and its value grows due to an increase in its popularity. This means that option 2 and 3 only are correct, as option 1 does not involve the concept of capital gains.

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33.

Which of the following measures would, result in an increase in the money supply in the economy?1. Purchase of government securities from the public by the Central Bank.2. Deposit 'of currency in commercial banks by the public3. Borrowing by the government from' the Central Bank4. Sale of government securities to the public by the Central BankSelect 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
Correct Answer
C. 1 and 3

Explanation
Purchasing government securities from the public by the Central Bank increases the money supply because it injects money into the economy. When the Central Bank buys these securities, it pays the public with money, thereby increasing the amount of money circulating in the economy.

Borrowing by the government from the Central Bank also leads to an increase in the money supply. When the government borrows from the Central Bank, the Central Bank creates new money to lend to the government. This increases the money supply in the economy.

Therefore, the correct answer is 1 and 3.

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34.

Which of the following would include Foreign Direct Investment in India?1. Subsidiaries of foreign companies in India2. Majority foreign equity holding Indian companies3. Companies exclusively financed by foreign companies4. Portfolio investmentSelect 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
Correct Answer
C. 1 and 3 only

Explanation
Foreign Direct Investment (FDI) refers to the investment made by foreign entities in the form of establishing subsidiaries or financing exclusive companies in a host country. Option 1 states that subsidiaries of foreign companies in India would include FDI, which is correct. Option 3 states that companies exclusively financed by foreign companies would also include FDI, which is also correct. Therefore, the correct answer is 1 and 3 only.

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35.

Consider the following statements:The price of any currency in international market is decided by the1. World Bank2. demand for goods/services provided by the country concerned3. stability of the government of the concerned country4. economic potential of the country in questionWhich 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
Correct Answer
B. 2 and 3 only

Explanation
The correct answer is 2 and 3 only. The price of any currency in the international market is determined by the demand for goods/services provided by the country concerned and the stability of the government of the concerned country. Factors such as economic potential and the role of organizations like the World Bank may have some influence, but they do not directly decide the price of a currency in the international market.

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36.

The basic aim of Lead Bank Scheme is that
- 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
Correct Answer
C. Individual banks should adopt particular districts for intensive development

Explanation
The correct answer is individual banks should adopt particular districts for intensive development. The Lead Bank Scheme was introduced by the Reserve Bank of India to ensure the spread of banking facilities in rural and semi-urban areas. Under this scheme, individual banks are assigned specific districts where they take responsibility for promoting banking services and development activities. The aim is to focus on the development of these districts by providing access to financial services and promoting economic growth.

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37.

If National Mission on water is properly and completely implemented, how will it impact the country?1. Part of the water needs of urban areas will be met through recycling of waste-water.2. The water requirements of coastal cities with inadequate alternative source of water will be met by adopting appropriate technologies that allow for the use of ocean water.3. All the rivers of Himalayan origin will be linked to the rivers of peninsular India.4. The expenses incurred by farmers for digging bore-wells and for installing motors and pump-sets to draw ground-water will be completely reimbursed by the Government.Select the correct answer using the codes given below:
- A.
  
  1 only
- B.
  
  1 and 2 only
- C.
  
  3 and 4 only
- D.
  
  1, 2, 3 and 4
Correct Answer
B. 1 and 2 only

Explanation
If the National Mission on water is properly and completely implemented, it will have the following impacts on the country:
1. Part of the water needs of urban areas will be met through recycling of waste-water.
2. The water requirements of coastal cities with inadequate alternative source of water will be met by adopting appropriate technologies that allow for the use of ocean water.
Therefore, the correct answer is 1 and 2 only.

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38.

Consider the following kinds of organisms:1. Bacteria2. Fungi3. Flowering PlantsSome species of which of the above kinds of organisms are employed as bio-pesticides?
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
D. 1, 2 and 3

Explanation
Bacteria, fungi, and flowering plants can all be employed as bio-pesticides. Bacteria such as Bacillus thuringiensis produce toxins that can kill certain pests. Fungi like Beauveria bassiana and Metarhizium anisopliae can infect and kill insects. Flowering plants, specifically certain species of plants like Chrysanthemum and Neem, produce natural compounds that have insecticidal properties. Therefore, all three kinds of organisms can be utilized as bio-pesticides.

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39.

Biomass gasification is considered to be one of the sustainable solutions to the power crisis in India.In this context, which of the following statements is/are correct?1. Coconut shells, groundnut shells and rice husk can be used in biomass gasification.2. The combustible gases generated from biomass gasification consist of hydrogen and carbon dioxide only.3. The combustible gases generated from biomass gasification can be used for direct heat generation but not in internal combustion engines.Select the correct answer using the codes given below:
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
C. 1 and 3 only

Explanation
Coconut shells, groundnut shells, and rice husk can be used in biomass gasification, making statement 1 correct. The combustible gases generated from biomass gasification can be used for direct heat generation, but not in internal combustion engines, making statement 3 correct. However, statement 2 is incorrect because the combustible gases generated from biomass gasification consist of a mixture of gases including hydrogen, carbon dioxide, carbon monoxide, and methane, among others. Therefore, the correct answer is 1 and 3 only.

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40.

To meet its rapidly growing energy demand, some opine that India should pursue research and development on thorium as the future fuel of nuclear energy. In this context, what advantage does thorium hold over uranium?
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
D. 1, 2 and 3

Explanation
Thorium holds several advantages over uranium as a future fuel for nuclear energy. Firstly, thorium is more abundant in nature compared to uranium, making it a more sustainable and easily accessible resource. Secondly, thorium reactors produce less long-lived radioactive waste, reducing the environmental impact and disposal challenges associated with uranium reactors. Lastly, thorium reactors have a higher fuel efficiency and can generate more energy per unit of fuel, making them more economically viable and efficient in meeting India's growing energy demand.

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41.

India has experienced persistent and high food inflation in the recent past, what could be the reasons?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.The food supply chain has structural constraints,Which of the statements given above are correct?
- A.
  
  1 and 2 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
B. 2 and 3 only

Explanation
The correct answer is 2 and 3 only. The statement in option 1 is incorrect. It states that the area under the cultivation of food grains has steadily decreased in the last five years by about 30% due to a switchover to the cultivation of commercial crops. However, there is no information given in the question about the decrease in the area under cultivation. Option 2 is correct as increasing incomes can lead to changes in consumption patterns, which can contribute to food inflation. Option 3 is also correct as structural constraints in the food supply chain can lead to persistent and high food inflation.

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42.

Which one of the following statements appropriately describes the "fiscal stimulus"?
- 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
Correct Answer
B. It is an intense affirmative action of the Government to boost economic activity in the country

Explanation
The correct answer is "It is an intense affirmative action of the Government to boost economic activity in the country." This statement accurately describes fiscal stimulus as a measure taken by the government to stimulate economic activity. It implies that the government takes affirmative action, such as increasing spending or cutting taxes, to boost economic growth and stimulate demand in the country. This can be done to counteract a slowdown in the economy or to promote overall economic development.

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43.

A rapid increase in the rate of inflation is sometimes attributed to the "base effect", What is "base effect”?
- 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
Correct Answer
C. It is the impact of the price levels of previous year on the calculation of inflation rate

Explanation
The base effect refers to the impact of the price levels of the previous year on the calculation of the inflation rate. It means that when the current year's inflation rate is compared to the previous year's low price levels, it may appear to be higher due to the low base. This can happen even if there is no actual increase in prices, leading to a rapid increase in the rate of inflation.

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44.

Which one of the following is not a feature of "Value Added Tax”?
- 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
Correct Answer
D. It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation

Explanation
Value Added Tax (VAT) is a multi-point destination-based system of taxation, which means that tax is levied at each stage of the production-distribution chain. It is a tax on the value addition made at each stage of the transaction. It is also a tax on the final consumption of goods or services, meaning that ultimately the consumer bears the burden of the tax. However, the statement that it is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation is incorrect. VAT is implemented and administered by both the Central Government and the State Governments, with each having their own jurisdiction and control over the tax.

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45.

A "closed economy" is an economy in which
- A.
  
  The money supply is fully controlled
- B.
  
  Deficit financing takes place
- C.
  
  Only exports take place
- D.
  
  Neither exports nor imports take place
Correct Answer
D. Neither exports nor imports take place

Explanation
A "closed economy" refers to an economic system where there are no international trade activities, meaning that neither exports nor imports take place. In this type of economy, all economic activities, including production, consumption, and investment, are limited to the domestic market. As a result, there is no interaction with foreign economies, and the economy is self-sufficient, relying solely on its internal resources and capabilities.

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46.

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?
- 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
Correct Answer
B. FII helps in increasing capital availability in general, while FDI only targets specific sectors.

Explanation
FII helps in increasing capital availability in general, while FDI only targets specific sectors. FII refers to investments made by institutional investors, such as mutual funds and pension funds, in the financial markets of a foreign country. This helps to increase the overall capital availability in the country and contributes to its economic growth. On the other hand, FDI involves direct investments made by foreign companies in specific sectors of a country's economy. These investments focus on long-term projects and contribute to the development of specific industries or sectors. Therefore, the statement accurately highlights the difference between FII and FDI in terms of their impact on capital availability and sector targeting.

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47.

With reference to "Aam Admi Bima Yojana", consider the following statements:1. The member insured under the scheme must be the head of the family or an. earning member of the family in a rural landless house- hold.2. The Member insured must be in the age group of 30 to 65 years.3. There is a provision for free scholarship for up to two children of the insured who are studying between classes 9 and 12.Which of the statements given above is/ are correct?
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
C. 1 and 3 only

Explanation
The correct answer is 1 and 3 only. Statement 1 is correct as the member insured under the scheme must be the head of the family or an earning member of the family in a rural landless household. Statement 2 is incorrect as there is no age restriction mentioned for the member insured. Statement 3 is correct as there is a provision for free scholarship for up to two children of the insured who are studying between classes 9 and 12.

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48.

In the context of global oil prices. "Brent crude oil" is frequently referred to in the news. What does this term imply?1. it is a major classification of crude oil.2. It is sourced from north sea.3. It does not contain Sulphur.Which of the statements given above is/are correct?
- A.
  
  2 only
- B.
  
  1 and 2 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
B. 1 and 2 only

Explanation
The term "Brent crude oil" implies that it is a major classification of crude oil and it is sourced from the North Sea. It does not imply that it does not contain Sulphur.

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49.

India is home to lakhs of persons with disabilities. What are the benefits available to' them under the law?1. Free schooling till the age of 18 years in government-run schools.2. Preferential allotment of land for setting up business.3. Ramps in public buildings.Which of the statements given above is/are correct?
- A.
  
  1 only
- B.
  
  2 and 3 only
- C.
  
  1 and 3 only
- D.
  
  1, 2 and 3
Correct Answer
D. 1, 2 and 3

Explanation
The correct answer is 1, 2 and 3. Persons with disabilities in India are entitled to several benefits under the law. Firstly, they have the right to free schooling till the age of 18 years in government-run schools. This ensures that they have access to education without any financial burden. Secondly, they are given preferential allotment of land for setting up a business. This helps in promoting entrepreneurship and economic empowerment among persons with disabilities. Lastly, ramps in public buildings are provided to ensure accessibility and ease of movement for individuals with disabilities. These benefits aim to promote inclusivity and equal opportunities for persons with disabilities in India.

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50.

With what purpose is the Government of India promoting the concept of "Mega Food Parks”? 1. To provide good infrastructure facilities for the food processing industry. 2. To increase the processing of perishable items and reduce wastage.3. To provide emerging and eco-friendly food processing technologies to entrepreneurs.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
Correct Answer
D. 1, 2 and 3

Explanation
The Government of India is promoting the concept of "Mega Food Parks" with the purpose of providing good infrastructure facilities for the food processing industry, increasing the processing of perishable items, reducing wastage, and providing emerging and eco-friendly food processing technologies to entrepreneurs. This initiative aims to support the growth of the food processing sector in India by creating a conducive environment for food processing activities and ensuring the efficient utilization of resources.

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Current Version
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Jun 18, 2014

Quiz Created by
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IAS Prelims 2014: Gs Paper I: Economic And Social Development: Previous Year Questions

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Which of the following constitute Capital Account?1. Foreign Loans2. Foreign Direct Investment3. Private Remittances4. Portfolio InvestmentSelect the correct answer using the codes given below.

Consider the following statements: 1. Inflation benefits the debtors.2. Inflation benefits the bond-holders.Which of the statements given above is/are correct?

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Which one of the following groups of items is included in India's foreign-exchange reserves?

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The national income of a country for a given period is equal to the

Which of the following grants/ grant direct credit assistance to rural households?1. Regional Rural Banks2. National Bank for Agriculture and Rural Development3. Land Development BanksSelect the correct answer using the codes given below:

Which one among the following industries is the maximum consumer of water in India?

Consider the following specific stages of demographic transition associated with economic development:1. Low birthrate with low death rate2. High birthrate with high death rate3. High birthrate with low death rateSelect the correct order of the above stages using the codes given below:

The endeavor of 'Janani Suraksha Yojana' Programme is1. to promote deliveries institutional2. to provide monetary assistance to the mother to meet the cost of delivery3. to provide for wage loss due to pregnancy and confinementWhich of the statements given above is / are correct?

Consider the following:1. Hotels and restaurants2. Motor transport undertakings3. Newspaper establishments4. Private medical institutionsThe employees of which of the above can have the 'Social Security' coverage under Employees' State Insurance Scheme?

Which of the following would include Foreign Direct Investment in India?1. Subsidiaries of foreign companies in India2. Majority foreign equity holding Indian companies3. Companies exclusively financed by foreign companies4. Portfolio investmentSelect the correct answer using the codes given below:

The basic aim of Lead Bank Scheme is that

Consider the following kinds of organisms:1. Bacteria2. Fungi3. Flowering PlantsSome species of which of the above kinds of organisms are employed as bio-pesticides?

To meet its rapidly growing energy demand, some opine that India should pursue research and development on thorium as the future fuel of nuclear energy. In this context, what advantage does thorium hold over uranium?

Which one of the following statements appropriately describes the "fiscal stimulus"?

A rapid increase in the rate of inflation is sometimes attributed to the "base effect", What is "base effect”?

Which one of the following is not a feature of "Value Added Tax”?

A "closed economy" is an economy in which

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?

In the context of global oil prices. "Brent crude oil" is frequently referred to in the news. What does this term imply?1. it is a major classification of crude oil.2. It is sourced from north sea.3. It does not contain Sulphur.Which of the statements given above is/are correct?