1. In a simple economy, which of the following is not included in the circular flow of income?
(A) Goods and services
(B) Factor payments
(C) Spending
(D) Depreciation
Answer: (D) Depreciation
Explanation: In a simple circular-flow model,
households provide factors of production to firms and receive factor payments,
while firms produce goods and services and receive expenditure from households.
(A) Goods and services: Included because firms
produce goods and services that flow from producers to consumers.
(B) Factor payments: Included because wages, rent,
interest and profits flow from firms to households as payments for factors of
production.
(C) Spending: Included because household expenditure
on goods and services constitutes an important flow in the economy.
(D) Depreciation: Correct. Depreciation is an
accounting adjustment representing the loss in value of fixed capital; it is
not a basic flow in the simple circular-flow model.
2. Which of the following statements correctly defines Core Inflation?
(A) An inflation measure excluding volatile and transitory price changes
(B) An inflation measure of short-term price changes
(C) Price changes in the core sector industries
(D) Inflation in fuel and food commodities
Answer: (A) An inflation measure excluding
volatile and transitory price changes
Explanation: Core inflation attempts to measure the
underlying or persistent trend in prices by excluding highly volatile
components, traditionally food and energy in many measures.
3. Net National Product at Market Price is:
(A) Gross National Product at Market Price − Depreciation
(B) Gross National Product at Market Price − Net Income from Abroad
(C) Gross National Product at Market Price − Transfer Payments
(D) Gross National Product at Market Price − Subsidies
Answer: (A) Gross National Product at Market
Price − Depreciation
Explanation: NNP at Market Price is obtained by
deducting depreciation, also called consumption of fixed capital, from GNP at
Market Price.
(A) Gross National Product at Market Price −
Depreciation: Correct. NNP = GNP − Depreciation.
(B) Gross National Product at Market Price − Net Income
from Abroad: Incorrect. Net factor income from abroad is used to move from
GDP to GNP, not from GNP to NNP.
(C) Gross National Product at Market Price − Transfer
Payments: Incorrect. Transfer payments are not deducted to calculate NNP.
(D) Gross National Product at Market Price − Subsidies:
Incorrect. Subsidies are not deducted directly to arrive at NNP at market
prices.
4. 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
Answer: (D) Neither exports nor imports take
place
Explanation: A closed economy does not participate in
international trade.
(A) The money supply is fully controlled: Incorrect.
Control of money supply is related to monetary policy, not the definition of a
closed economy.
(B) Deficit financing takes place: Incorrect. Deficit
financing can occur in both open and closed economies.
(C) Only exports take place: Incorrect. An economy
that exports but does not import would not fit the standard definition of a
closed economy.
(D) Neither exports nor imports take place: Correct.
A closed economy has no international trade.
5. Demand deposits include:
(A) Savings account deposits and fixed deposits
(B) Savings account deposits and current account deposits
(C) Current account deposits and fixed deposits
(D) All types of deposits
Answer: (B) Savings account deposits and current
account deposits
Explanation: Demand deposits are deposits that can
generally be withdrawn on demand without a fixed maturity period.
(A) Savings account deposits and fixed deposits:
Incorrect. Savings deposits are generally demand deposits, but fixed deposits
are time deposits.
(B) Savings account deposits and current account
deposits: Correct. Both are generally classified as demand deposits.
(C) Current account deposits and fixed deposits:
Incorrect. Current account deposits are demand deposits, but fixed deposits are
time deposits.
(D) All types of deposits: Incorrect. Not all
deposits are demand deposits because fixed and other term deposits have a
maturity period.
6. Bank Money is money which is:
(A) Printed by the Reserve Bank of India
(B) Generated in the form of credit creation
(C) Printed by the Government
(D) Legally earned but unaccounted money
Answer: (B) Generated in the form of credit
creation
Explanation: Bank money refers mainly to deposits
created by commercial banks through lending and credit creation.
(A) Printed by the Reserve Bank of India: Incorrect.
Currency notes issued by the RBI are not the same as bank money created through
commercial-bank credit.
(B) Generated in the form of credit creation: Correct.
Commercial banks create deposits when they extend credit.
(C) Printed by the Government: Incorrect. Government
printing of currency is not the definition of bank money.
(D) Legally earned but unaccounted money: Incorrect.
Unaccounted money is not the meaning of bank money.
7. MICR code printed on a bank cheque represents:
(A) A 9-digit Magnetic Iron Character Recognition
(B) A 9-digit Magnetic Ink Character Recognition
(C) An 11-digit Magnetic Indian Character Recognition
(D) An 11-digit Magnetic Ink Character Recognition
Answer: (B) A 9-digit Magnetic Ink Character
Recognition
Explanation: MICR stands for Magnetic Ink Character
Recognition. The traditional Indian banking MICR code consists of nine digits.
8. When the RBI decreases the Cash Reserve Ratio (CRR), it will:
(A) Decrease money supply in the economy
(B) Increase money supply in the economy
(C) Increase supply initially but decrease automatically later on
(D) Have no impact on money supply in the economy
Answer: (B) Increase money supply in the economy
Explanation: A reduction in CRR increases the funds
available with commercial banks for lending, which can increase credit creation
and money supply.
9. Which among the following is not a pillar of the Basel II Accord?
(A) Minimum Capital
(B) Supervisory Review Process
(C) Market Discipline
(D) Exchange Control
Answer: (D) Exchange Control
Explanation: Basel II is based on three pillars.
(A) Minimum Capital: Correct pillar. Pillar 1 deals
with minimum capital requirements.
(B) Supervisory Review Process: Correct pillar.
Pillar 2 deals with supervisory review of capital adequacy and risk management.
(D) Exchange Control: Correct answer. Exchange
control is not a pillar of Basel II.
10. What is a characteristic of a public good?
i. Non-excludability
ii. Rival consumption
iii. Rejectability
(A) i only
(B) i and ii only
(C) ii and iii only
(D) i, ii and iii
Answer: (A) i only
Explanation: The two standard characteristics of a
pure public good are non-excludability and non-rivalry.
i. Non-excludability: Correct. It is difficult or
impossible to prevent people from benefiting from a pure public good.
ii. Rival consumption: Incorrect. Public goods are
generally non-rivalrous, meaning one person’s consumption does not reduce
availability to others.
iii. Rejectability: Incorrect. Rejectability is not a
standard defining characteristic of public goods.
11. What is the process called when the total revenue of the Government without borrowing is less than the total expenditure?
(A) Fiscal Deficit
(B) Monetary Deficit
(C) Deficit Financing
(D) Budget Shortfall
Answer: (A) Fiscal Deficit
Explanation: Fiscal deficit represents the excess of
total government expenditure over total receipts excluding borrowings.
(A) Fiscal Deficit: Correct. Fiscal Deficit = Total
Expenditure − Total Receipts excluding Borrowings.
(B) Monetary Deficit: Incorrect. It is not the
standard term for this budgetary measure.
(C) Deficit Financing: Incorrect. Deficit financing
refers to the methods used to finance a government deficit.
(D) Budget Shortfall: Incorrect. It is a general
expression rather than the standard fiscal indicator.
12. What is the difference between a Vote-on-Account and an Interim Budget?
i. The provision of a Vote-on-Account is used by a regular government, while an Interim Budget is a provision used by a caretaker government.
ii. A Vote-on-Account only deals with expenditure in the government budget, while an Interim Budget includes both expenditure and receipts.
(A) i only
(B) Both i and ii
(C) ii only
(D) Neither i nor ii
Answer: (C) ii only
Explanation: Statement i is incorrect because an
Interim Budget is not restricted to a caretaker government. Statement ii is
correct because a Vote-on-Account primarily authorizes expenditure for a
limited period, while an Interim Budget present estimates of both receipts and
expenditure.
13. As per the 2021 report published by NITI Aayog on the Sustainable Development Goals, which among the following districts in Meghalaya scored the lowest?
(A) East Khasi Hills
(B) West Khasi Hills
(C) North Garo Hills
(D) South Garo Hills
Answer: (D) South Garo Hills
Explanation: According to the assessment referred to
in the question, South Garo Hills recorded the lowest score among the given
Meghalaya districts.
Exam Note: District-level SDG rankings can vary between editions, so the specific year of the report should be checked.
14. The Lorenz Curve measures:
(A) Inequality of income or wealth
(B) Demographics
(C) Unemployment
(D) Relationship between income and unemployment
Answer: (A) Inequality of income or wealth
Explanation: The Lorenz Curve shows the distribution
of income or wealth across a population and is used to illustrate inequality.
(A) Inequality of income or wealth: Correct.
(B) Demographics: Incorrect. Demography deals with
population characteristics such as population size, age, fertility and
mortality.
(C) Unemployment: Incorrect. Unemployment is measured
through labour-market indicators such as the unemployment rate.
(D) Relationship between income and unemployment: Incorrect.
The Lorenz Curve focuses on distributional inequality rather than the
relationship between income and unemployment.
Exam Note: The Lorenz Curve is closely associated
with the Gini coefficient, a numerical measure of inequality.
15. In 2011–12, the poverty line was defined as ₹_____ as consumption per person per month for rural areas and ₹_____ for urban areas.
(A) ₹816 and ₹1,000
(B) ₹1,012 and ₹1,210
(C) ₹550 and ₹860
(D) ₹860 and ₹673
Answer: (A) ₹816 and ₹1,000
Explanation: Under the Tendulkar Committee
methodology, the 2011–12 poverty lines were approximately ₹816 per person per
month in rural areas and ₹1,000 in urban areas.
(A) ₹816 and ₹1,000: Correct.
(B) ₹1,012 and ₹1,210: Incorrect. These are not the
standard 2011–12 Tendulkar poverty-line figures.
(C) ₹550 and ₹860: Incorrect. These figures do not
represent the standard 2011–12 rural and urban poverty lines.
(D) ₹860 and ₹673: Incorrect. The figures are not the
correct rural and urban combination for 2011–12.
17. Which of the following organizations conducts the Periodic Labour Force Survey (PLFS)?
(A) Central Statistical Office
(B) National Sample Survey Office (NSSO)
(C) NITI Aayog
(D) Ministry of Labour
Answer: (B) National Sample Survey Office (NSSO)
Explanation: The PLFS is conducted by the National
Statistical Office (NSO) under the Ministry of Statistics and Programme
Implementation. The question uses the older institutional terminology.
(A) Central Statistical Office: Incorrect as the
current institutional name for the organization conducting PLFS.
(B) National Sample Survey Office (NSSO): Correct in
the context of the older terminology used in the question.
(C) NITI Aayog: Incorrect. NITI Aayog uses
labour-market data but does not conduct PLFS.
(D) Ministry of Labour: Incorrect. It deals with
labour policy and employment matters but does not conduct the PLFS.
Exam Note: For current examinations, remember: PLFS
→ National Statistical Office (NSO), MoSPI.
18. The Minimum Needs Programme (MNP) was introduced in which Five-Year Plan?
(A) Fourth Five-Year Plan
(B) Fifth Five-Year Plan
(C) Sixth Five-Year Plan
(D) Seventh Five-Year Plan
Answer: (B) Fifth Five-Year Plan
Explanation: The Minimum Needs Programme was
introduced during the Fifth Five-Year Plan (1974–79) to improve access to basic
services.
(A) Fourth Five-Year Plan: Incorrect. The programme
was not formally introduced during this plan.
(B) Fifth Five-Year Plan: Correct. The MNP was
introduced in 1974 during the Fifth Plan.
(C) Sixth Five-Year Plan: Incorrect. The programme
continued during later plans but was introduced earlier.
(D) Seventh Five-Year Plan: Incorrect. The programme
continued in later planning periods but did not originate in the Seventh Plan.
19. With reference to the Balance of Payments (BOP), import of machinery and equipment is recorded under the _____ of the _____ account.
(A) Credit side, Capital
(B) Debit side, Capital
(C) Debit side, Current
(D) Credit side, Current
Answer: (C) Debit side, Current
Explanation: Imports of goods are recorded in the
current account of the Balance of Payments.
(A) Credit side, Capital: Incorrect. Imports are
recorded as debits and machinery is a goods import.
(B) Debit side, Capital: Incorrect. Although
machinery is a capital good, its import is recorded as a goods transaction in
the current account under the conventional BOP classification.
(C) Debit side, Current: Correct. Import of machinery
and equipment is a goods import and is recorded as a debit in the current
account.
(D) Credit side, Current: Incorrect. Imports are
debits because they involve payments to foreign countries.
20. The Foreign Exchange Management Act (FEMA) was introduced in which year?
(A) 1998
(B) 1989
(C) 1999
(D) 2000
Answer: (C) 1999
Explanation: FEMA was enacted in 1999 to replace
FERA, 1973. It came into force on 1 June 2000.
21. Arrange the following core industries in descending order of their weight in the Index of Industrial Production (IIP):
i. Cement
ii. Steel
iii. Refinery products
iv. Coal
(A) ii-i-iii-iv
(B) iv-iii-ii-i
(C) iii-ii-iv-i
(D) i-ii-iii-iv
Answer: (C) iii-ii-iv-i
Explanation: The descending order among the given
industries is Refinery Products → Steel → Coal → Cement.
Exam Note: The eight core industries are Coal, Crude
Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and
Electricity.
22. In June 2021, a firm was providing 5,000 kg of sugar at a market price of ₹30 per kg. In June 2022, the supply of sugar decreased to 4,500 kg at a market price of ₹20 per kg. This change shows that the supply of sugar is:
(A) More elastic
(B) Less elastic
(C) Perfectly inelastic
(D) Perfectly elastic
Economics and Banking (MCS 2023)
1. In a simple economy, which of the following is not included in the circular flow of income?
(A) Goods and services
(B) Factor payments
(C) Spending
(D) Depreciation
Answer: (D) Depreciation
Explanation: In a simple circular-flow model,
households provide factors of production to firms and receive factor payments,
while firms produce goods and services and receive expenditure from households.
(A) Goods and services: Included because firms
produce goods and services that flow from producers to consumers.
(B) Factor payments: Included because wages, rent,
interest and profits flow from firms to households as payments for factors of
production.
(C) Spending: Included because household expenditure
on goods and services constitutes an important flow in the economy.
(D) Depreciation: Correct. Depreciation is an
accounting adjustment representing the loss in value of fixed capital; it is
not a basic flow in the simple circular-flow model.
2. Which of the following statements correctly defines Core Inflation?
(A) An inflation measure excluding volatile and transitory price changes
(B) An inflation measure of short-term price changes
(C) Price changes in the core sector industries
(D) Inflation in fuel and food commodities
Answer: (A) An inflation measure excluding
volatile and transitory price changes
Explanation: Core inflation attempts to measure the
underlying or persistent trend in prices by excluding highly volatile
components, traditionally food and energy in many measures.
3. Net National Product at Market Price is:
(A) Gross National Product at Market Price − Depreciation
(B) Gross National Product at Market Price − Net Income from Abroad
(C) Gross National Product at Market Price − Transfer Payments
(D) Gross National Product at Market Price − Subsidies
Answer: (A) Gross National Product at Market
Price − Depreciation
Explanation: NNP at Market Price is obtained by
deducting depreciation, also called consumption of fixed capital, from GNP at
Market Price.
(A) Gross National Product at Market Price −
Depreciation: Correct. NNP = GNP − Depreciation.
(B) Gross National Product at Market Price − Net Income
from Abroad: Incorrect. Net factor income from abroad is used to move from
GDP to GNP, not from GNP to NNP.
(C) Gross National Product at Market Price − Transfer
Payments: Incorrect. Transfer payments are not deducted to calculate NNP.
(D) Gross National Product at Market Price − Subsidies:
Incorrect. Subsidies are not deducted directly to arrive at NNP at market
prices.
4. 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
Answer: (D) Neither exports nor imports take
place
Explanation: A closed economy does not participate in
international trade.
(A) The money supply is fully controlled: Incorrect.
Control of money supply is related to monetary policy, not the definition of a
closed economy.
(B) Deficit financing takes place: Incorrect. Deficit
financing can occur in both open and closed economies.
(C) Only exports take place: Incorrect. An economy
that exports but does not import would not fit the standard definition of a
closed economy.
(D) Neither exports nor imports take place: Correct.
A closed economy has no international trade.
5. Demand deposits include:
(A) Savings account deposits and fixed deposits
(B) Savings account deposits and current account deposits
(C) Current account deposits and fixed deposits
(D) All types of deposits
Answer: (B) Savings account deposits and current
account deposits
Explanation: Demand deposits are deposits that can
generally be withdrawn on demand without a fixed maturity period.
(A) Savings account deposits and fixed deposits:
Incorrect. Savings deposits are generally demand deposits, but fixed deposits
are time deposits.
(B) Savings account deposits and current account
deposits: Correct. Both are generally classified as demand deposits.
(C) Current account deposits and fixed deposits:
Incorrect. Current account deposits are demand deposits, but fixed deposits are
time deposits.
(D) All types of deposits: Incorrect. Not all
deposits are demand deposits because fixed and other term deposits have a
maturity period.
6. Bank Money is money which is:
(A) Printed by the Reserve Bank of India
(B) Generated in the form of credit creation
(C) Printed by the Government
(D) Legally earned but unaccounted money
Answer: (B) Generated in the form of credit
creation
Explanation: Bank money refers mainly to deposits
created by commercial banks through lending and credit creation.
(A) Printed by the Reserve Bank of India: Incorrect.
Currency notes issued by the RBI are not the same as bank money created through
commercial-bank credit.
(B) Generated in the form of credit creation: Correct.
Commercial banks create deposits when they extend credit.
(C) Printed by the Government: Incorrect. Government
printing of currency is not the definition of bank money.
(D) Legally earned but unaccounted money: Incorrect.
Unaccounted money is not the meaning of bank money.
7. MICR code printed on a bank cheque represents:
(A) A 9-digit Magnetic Iron Character Recognition
(B) A 9-digit Magnetic Ink Character Recognition
(C) An 11-digit Magnetic Indian Character Recognition
(D) An 11-digit Magnetic Ink Character Recognition
Answer: (B) A 9-digit Magnetic Ink Character
Recognition
Explanation: MICR stands for Magnetic Ink Character
Recognition. The traditional Indian banking MICR code consists of nine digits.
8. When the RBI decreases the Cash Reserve Ratio (CRR), it will:
(A) Decrease money supply in the economy
(B) Increase money supply in the economy
(C) Increase supply initially but decrease automatically later on
(D) Have no impact on money supply in the economy
Answer: (B) Increase money supply in the economy
Explanation: A reduction in CRR increases the funds
available with commercial banks for lending, which can increase credit creation
and money supply.
9. Which among the following is not a pillar of the Basel II Accord?
(A) Minimum Capital
(B) Supervisory Review Process
(C) Market Discipline
(D) Exchange Control
Answer: (D) Exchange Control
Explanation: Basel II is based on three pillars.
(A) Minimum Capital: Correct pillar. Pillar 1 deals
with minimum capital requirements.
(B) Supervisory Review Process: Correct pillar.
Pillar 2 deals with supervisory review of capital adequacy and risk management.
(D) Exchange Control: Correct answer. Exchange
control is not a pillar of Basel II.
10. What is a characteristic of a public good?
i. Non-excludability
ii. Rival consumption
iii. Rejectability
(A) i only
(B) i and ii only
(C) ii and iii only
(D) i, ii and iii
Answer: (A) i only
Explanation: The two standard characteristics of a
pure public good are non-excludability and non-rivalry.
i. Non-excludability: Correct. It is difficult or
impossible to prevent people from benefiting from a pure public good.
ii. Rival consumption: Incorrect. Public goods are
generally non-rivalrous, meaning one person’s consumption does not reduce
availability to others.
iii. Rejectability: Incorrect. Rejectability is not a
standard defining characteristic of public goods.
11. What is the process called when the total revenue of the Government without borrowing is less than the total expenditure?
(A) Fiscal Deficit
(B) Monetary Deficit
(C) Deficit Financing
(D) Budget Shortfall
Answer: (A) Fiscal Deficit
Explanation: Fiscal deficit represents the excess of
total government expenditure over total receipts excluding borrowings.
(A) Fiscal Deficit: Correct. Fiscal Deficit = Total
Expenditure − Total Receipts excluding Borrowings.
(B) Monetary Deficit: Incorrect. It is not the
standard term for this budgetary measure.
(C) Deficit Financing: Incorrect. Deficit financing
refers to the methods used to finance a government deficit.
(D) Budget Shortfall: Incorrect. It is a general
expression rather than the standard fiscal indicator.
12. What is the difference between a Vote-on-Account and an Interim Budget?
i. The provision of a Vote-on-Account is used by a regular government, while an Interim Budget is a provision used by a caretaker government.
ii. A Vote-on-Account only deals with expenditure in the government budget, while an Interim Budget includes both expenditure and receipts.
(A) i only
(B) Both i and ii
(C) ii only
(D) Neither i nor ii
Answer: (C) ii only
Explanation: Statement i is incorrect because an
Interim Budget is not restricted to a caretaker government. Statement ii is
correct because a Vote-on-Account primarily authorizes expenditure for a
limited period, while an Interim Budget present estimates of both receipts and
expenditure.
13. As per the 2021 report published by NITI Aayog on the Sustainable Development Goals, which among the following districts in Meghalaya scored the lowest?
(A) East Khasi Hills
(B) West Khasi Hills
(C) North Garo Hills
(D) South Garo Hills
Answer: (D) South Garo Hills
Explanation: According to the assessment referred to
in the question, South Garo Hills recorded the lowest score among the given
Meghalaya districts.
Exam Note: District-level SDG rankings can vary between editions, so the specific year of the report should be checked.
14. The Lorenz Curve measures:
(A) Inequality of income or wealth
(B) Demographics
(C) Unemployment
(D) Relationship between income and unemployment
Answer: (A) Inequality of income or wealth
Explanation: The Lorenz Curve shows the distribution
of income or wealth across a population and is used to illustrate inequality.
(A) Inequality of income or wealth: Correct.
(B) Demographics: Incorrect. Demography deals with
population characteristics such as population size, age, fertility and
mortality.
(C) Unemployment: Incorrect. Unemployment is measured
through labour-market indicators such as the unemployment rate.
(D) Relationship between income and unemployment: Incorrect.
The Lorenz Curve focuses on distributional inequality rather than the
relationship between income and unemployment.
Exam Note: The Lorenz Curve is closely associated
with the Gini coefficient, a numerical measure of inequality.
15. In 2011–12, the poverty line was defined as ₹_____ as consumption per person per month for rural areas and ₹_____ for urban areas.
(A) ₹816 and ₹1,000
(B) ₹1,012 and ₹1,210
(C) ₹550 and ₹860
(D) ₹860 and ₹673
Answer: (A) ₹816 and ₹1,000
Explanation: Under the Tendulkar Committee
methodology, the 2011–12 poverty lines were approximately ₹816 per person per
month in rural areas and ₹1,000 in urban areas.
(A) ₹816 and ₹1,000: Correct.
(B) ₹1,012 and ₹1,210: Incorrect. These are not the
standard 2011–12 Tendulkar poverty-line figures.
(C) ₹550 and ₹860: Incorrect. These figures do not
represent the standard 2011–12 rural and urban poverty lines.
(D) ₹860 and ₹673: Incorrect. The figures are not the
correct rural and urban combination for 2011–12.
17. Which of the following organizations conducts the Periodic Labour Force Survey (PLFS)?
(A) Central Statistical Office
(B) National Sample Survey Office (NSSO)
(C) NITI Aayog
(D) Ministry of Labour
Answer: (B) National Sample Survey Office (NSSO)
Explanation: The PLFS is conducted by the National
Statistical Office (NSO) under the Ministry of Statistics and Programme
Implementation. The question uses the older institutional terminology.
(A) Central Statistical Office: Incorrect as the
current institutional name for the organization conducting PLFS.
(B) National Sample Survey Office (NSSO): Correct in
the context of the older terminology used in the question.
(C) NITI Aayog: Incorrect. NITI Aayog uses
labour-market data but does not conduct PLFS.
(D) Ministry of Labour: Incorrect. It deals with
labour policy and employment matters but does not conduct the PLFS.
Exam Note: For current examinations, remember: PLFS
→ National Statistical Office (NSO), MoSPI.
18. The Minimum Needs Programme (MNP) was introduced in which Five-Year Plan?
(A) Fourth Five-Year Plan
(B) Fifth Five-Year Plan
(C) Sixth Five-Year Plan
(D) Seventh Five-Year Plan
Answer: (B) Fifth Five-Year Plan
Explanation: The Minimum Needs Programme was
introduced during the Fifth Five-Year Plan (1974–79) to improve access to basic
services.
(A) Fourth Five-Year Plan: Incorrect. The programme
was not formally introduced during this plan.
(B) Fifth Five-Year Plan: Correct. The MNP was
introduced in 1974 during the Fifth Plan.
(C) Sixth Five-Year Plan: Incorrect. The programme
continued during later plans but was introduced earlier.
(D) Seventh Five-Year Plan: Incorrect. The programme
continued in later planning periods but did not originate in the Seventh Plan.
19. With reference to the Balance of Payments (BOP), import of machinery and equipment is recorded under the _____ of the _____ account.
(A) Credit side, Capital
(B) Debit side, Capital
(C) Debit side, Current
(D) Credit side, Current
Answer: (C) Debit side, Current
Explanation: Imports of goods are recorded in the
current account of the Balance of Payments.
(A) Credit side, Capital: Incorrect. Imports are
recorded as debits and machinery is a goods import.
(B) Debit side, Capital: Incorrect. Although
machinery is a capital good, its import is recorded as a goods transaction in
the current account under the conventional BOP classification.
(C) Debit side, Current: Correct. Import of machinery
and equipment is a goods import and is recorded as a debit in the current
account.
(D) Credit side, Current: Incorrect. Imports are
debits because they involve payments to foreign countries.
20. The Foreign Exchange Management Act (FEMA) was introduced in which year?
(A) 1998
(B) 1989
(C) 1999
(D) 2000
Answer: (C) 1999
Explanation: FEMA was enacted in 1999 to replace
FERA, 1973. It came into force on 1 June 2000.
21. Arrange the following core industries in descending order of their weight in the Index of Industrial Production (IIP):
i. Cement
ii. Steel
iii. Refinery products
iv. Coal
(A) ii-i-iii-iv
(B) iv-iii-ii-i
(C) iii-ii-iv-i
(D) i-ii-iii-iv
Answer: (C) iii-ii-iv-i
Explanation: The descending order among the given
industries is Refinery Products → Steel → Coal → Cement.
Exam Note: The eight core industries are Coal, Crude
Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and
Electricity.
22. In June 2021, a firm was providing 5,000 kg of sugar at a market price of ₹30 per kg. In June 2022, the supply of sugar decreased to 4,500 kg at a market price of ₹20 per kg. This change shows that the supply of sugar is:
(A) More elastic
(B) Less elastic
(C) Perfectly inelastic
(D) Perfectly elastic
Answer: (B) Less elastic
Explanation: Price decreased from ₹30 to ₹20, a decrease of approximately 33.3%, while quantity supplied decreased from 5,000 kg to 4,500 kg, a decrease of 10%. Therefore, elasticity of supply is approximately 10 ÷ 33.3 = 0.30, which is less than 1. Hence, supply is inelastic or less elastic.
(A) More elastic: Incorrect because the percentage change in quantity supplied is smaller than the percentage change in price.
(B) Less elastic: Correct because elasticity of supply is less than 1.
(C) Perfectly inelastic: Incorrect. Perfectly inelastic supply has elasticity equal to zero, meaning quantity supplied does not change when price changes.
(D) Perfectly elastic: Incorrect. Perfectly elastic supply has elasticity approaching infinity, meaning quantity supplied responds extremely strongly to price changes.
Exam Note: Es > 1 means elastic supply, Es < 1 means inelastic supply, Es = 1 means unitary elastic supply, Es = 0 means perfectly inelastic supply, and Es = ∞ means perfectly elastic supply.[/answer]Answer: (B) Less elastic
Explanation: Price decreased from ₹30 to ₹20, a decrease of approximately 33.3%, while quantity supplied decreased from 5,000 kg to 4,500 kg, a decrease of 10%. Therefore, elasticity of supply is approximately 10 ÷ 33.3 = 0.30, which is less than 1. Hence, supply is inelastic or less elastic.
(A) More elastic: Incorrect because the percentage change in quantity supplied is smaller than the percentage change in price.
(B) Less elastic: Correct because elasticity of supply is less than 1.
(C) Perfectly inelastic: Incorrect. Perfectly inelastic supply has elasticity equal to zero, meaning quantity supplied does not change when price changes.
(D) Perfectly elastic: Incorrect. Perfectly elastic supply has elasticity approaching infinity, meaning quantity supplied responds extremely strongly to price changes.
Exam Note: Es > 1 means elastic supply, Es < 1 means inelastic supply, Es = 1 means unitary elastic supply, Es = 0 means perfectly inelastic supply, and Es = ∞ means perfectly elastic supply. [/answer]
