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SOLUTIONS Insights Revision Test For Prelims 2018 - DAY 2
SOLUTIONS Insights Revision Test For Prelims 2018 - DAY 2
SOLUTIONS Insights Revision Test For Prelims 2018 - DAY 2
DAY – 2
insightsonindia.com/2018/03/24/solutions-insights-revision-test-for-prelims-2018-day-2
SOLUTIONS
It refers to the process by which a central bank’s monetary policy decisions are
passed on to the financial markets
Rising Non-Performing Assets (NPAs) and higher returns on small savings schemes
may hinder effective monetary transmission.
Lowering of CRR and SLR requirements may help ensure effective monetary
transmission
(a) 1 only
(d) 1, 2 and 3
Solution:d
The monetary transmission mechanism is the process by which asset prices and general
economic conditions are affected as a result of monetary policy decisions. Such decisions
are intended to influence the aggregate demand, interest rates, and amounts of money and
credit in order to affect overall economic performance. The traditional monetary
transmission mechanism occurs through interest rate channels, which affect interest rates,
costs of borrowing, levels of physical investment, and aggregate demand. Additionally,
aggregate demand can be affected through friction in the credit markets, known as the
credit view. In short, the monetary transmission mechanism can be defined as the link
between monetary policy and aggregate demand.
2)Which of the following services are accounted in the Gross Domestic Product of a
country?
(d) 1, 2, 3 and 4
Solution:d
3). With reference to Effective Revenue Deficit; consider the following statements:
(a) 1 only
(c) 3 only
(d) None
Solution: d
Effective Revenue Deficit is the difference between revenue deficit and grants for the
creation of capital assets. In other words, the Effective Revenue Deficit excludes
those revenue expenditures which were done in the form of grants for the creation of
capital assets
Assertion (A): In the agricultural lending mechanism of India, moneylenders despite their
usurious rates of interest are still predominant.
Reason (R): Most often the commercial banks could not meet the target of 18% of their
total lending for the agricultural sector in the country.
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Select the appropriate answer using the codes below:
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Solution: a
Solution:b
In economics, the monetary base (also base money, money base, high-powered money,
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reserve money, outside money, central bank money or, in the UK, narrow money) in a
country is defined as the portion of a commercial bank’s reserves that consist of the
commercial bank’s accounts with its central bank plus the total currency circulating in the
public, plus the currency, also known as vault cash, that is physically held in the bank’s
vault. Thus reserve money is not a debt obligation for the government.
Codes:
a b c d
(A) 2 1 3 4
(B) 3 2 4 1
(C) 2 3 1 4
(D) 1 3 4 2
Solution:c
7). What is the relationship between savings, investments and growth as enumerated
in the economic survey?
c) Saving and investment are always equal and directly related to growth
Solution: b
The economic survey says that investment rate is much more significant for growth. The
savings rate correlation to economic growth is not that significant. It says that growth
slowdowns have been preceded by investment slowdowns.
8) The File cover chosen for 2018 economic survey report was pink because
Solution: b
9). Which of the following doesn’t belong to the 10 facts pointed by Economic Survey
2017:
b) States prosperity positively correlated with their international and inter-state trade
Solution: d
Solution: c
The Credit/Loan provided by the nationalised banks to the FCI (Food Corporation of India)
is known as food credit. It is used for procurement of food grains by FCI and is a part of the
Gross Bank Credit
11). Special Safeguard mechanisms were put into place to get rid of NPAs in which
sector:
Steel
Power
Construction
Ship Building
a) Only 1
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b) 1 and 2
c) 1,2 and 3
Solution: a
Special safeguard mechanism includes dumping, infant industry and countervailing duties.
They are a mechanism under WTO and were used largely in the steel sector. It was also
primarily targeted at cheap imports from China.
12). What was response of Public Sector Banks in wake of Twin Balance Sheet
problem?
a) 1 only
b) 2 only
c) Both
Solution: c
Banks faced shortage of capital to give adequate credit and also high cost of operations
and stress assets led to higher costs for all sections of the society.
13). Which of following constitute future fiscal challenges for the states?
a) 1 & 2 only
b) 1, 2 & 3 only
Solution: b
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Flexi funding is a good thing and not a challenge but an opportunity for states. Rest will put
additional fiscal burden on the performance of state governments.
14). Which factors provided impetus to the impressive fiscal performance by the
states?
a) 1 & 2 only
b) 2 & 3 only
c) All
d) None
Solution: c
All of them improved fiscal performance by state governments. Perhaps it is high time state
governments use these opportunities to enable a better living standard for their population
in terms of health, education and other schemes.
India like several other countries, embarked in the mid-2000s on an ambitious project
of fiscal consolidation.
Fiscal Responsibility and Budget Management (FRBM) Act was adopted by the
centre in 2003.
a) 1 only
b) 2 only
c) Both
Solution: c
This was done to avoid high debt service ratios and greater revenue deficits. Also the
interest burdens was becoming too much to bear.
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Assertion (A): After Fiscal Responsibility legislations were passed, states expanded more
discretionary spending.
Reason (R) : It would be easier to scale back discretionary spending, if needed to achieve
the deficit targets.
Solution: a
States could role back discretionary spending when needed and therefore failed to go for
long term improvements in health and education policies.
Reason: The period witnessed high growth rates of economy with increasing
investment-GDP ratio and overseas spending.
Solution:a
Indian companies expanded aggressively before the recession and got stuck with surplus
capacity and slowing global economy. The financial crises also made access to working
capital tougher.
a) He is part of the search cum selection committee for members of Monetary Policy
Committee
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Solution: c
Solution: c
It was introduced by SEBI to check for fraudulent practices. It also issued a notification that
if such price movements were found the companies would be classified as shell companies
and money laundering provisions could be initiated against such companies.
NBFCs can outsource various functions such as treasury, cash management etc
NBFCs do not form part of the payment and settlement system and cannot issue
cheques drawn on itself
Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is
not available to depositors of NBFCs, unlike in case of banks
a) 2 and 3
b) 1 and 3
c) Only 3
Solution:d
NBFCs cannot outsource core management functions only. But they are allowed to
outsource other aspects. Deposit insurance has been discussed under FRDI bill but still not
passed in the parliament.
21) After Doklam stand-off between India and China, other than Nathu La Pass the most
favourable route for Indian piligrims to Kailash-Mansarovar is
a) Shipki La
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b) Bomdila
d) Niti La
Solution : c)
Lipu Lekh pass is high altitude mountain pass in Uttarakhand suitable for accessing
Kailash-Manasarovar from Western Side.
a) 1 and 3
b) 2 and 3
c) 3 only
Solution: d)
Any offence punishable for one or above years is qualified for extradition.
India requested extradition of warren Anderson and Ottavio Quattrocchi who were
foreign nationals.
India-has extradition treaty with 42 countries.
a) 1 Only
b) 2 Only
c) Both 1 and 2
Solution b)
Bt-cotton was the first GM crop approved but it’s not food crop. Bt-brinjal was the first
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gm-food crop approved by GEAC
Dhara Mustard Hybrid -11 is herbicide tolerant GM Mustard crop approved by GEAC,
but not yet approved by Environment Ministry.
a) 1 only.
b) 2 only
c) Both 1 and 2
Solution-d)
Maharaj Sri NAgendra Singh was first Indian Judge elected to ICJ.
Judges are elected for a term of 9 years.
The accession to TIR convention is part of India’s multi-modal transport strategy for
global economic integration.
It also includes maritime transport which will be helpful in boosting trade with Central
Asian Republics through Chabahar Port.
a) 1 only
b) 2 only
c) Both 1 and 2
Solution-c)
TIR convention will boost Indian trade with Central Asian countries and neighboring
countries. It is considered as India’s counter to China’s OBOR project. It also includes
maritime transport but at least a part of transport should be through roadways
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