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INSTA 75 Days REVISION PLAN 2022
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About Insta 75 days revision plan 2022
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Question 1 of 30
1 points
Depreciation in the value of the national currency will likely benefit which of these in the short run?
- Importers from the country
- Exporters from the country
- Foreign borrowers who owe the debt from a domestic bank in domestic currency (exact value repaid)
Select the correct answer using the codes below.
CorrectSolution: d)
Justification: Imports become expensive because now the same value of local currency and can buy less of foreign currency.
Exports become more competitive (beneficial to domestic exporters) because now foreign buyers will find it easy to buy domestic goods.
Foreign borrowers who owe the debt from a domestic bank in domestic currency will benefit because now they need to pay less in terms of their original borrowing which was in foreign currency.
Q Source: Basics: external sector
IncorrectSolution: d)
Justification: Imports become expensive because now the same value of local currency and can buy less of foreign currency.
Exports become more competitive (beneficial to domestic exporters) because now foreign buyers will find it easy to buy domestic goods.
Foreign borrowers who owe the debt from a domestic bank in domestic currency will benefit because now they need to pay less in terms of their original borrowing which was in foreign currency.
Q Source: Basics: external sector
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Question 2 of 30
1 points
Consider the following about Indian Depository Receipts (IDRs).
- An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a custodian of securities registered with the Securities and Exchange Board of India.
- There is no minimum size limit for an IDR so long as it complies with the requirements of the national regulator.
Select the correct answer using the codes below.
CorrectSolution: a)
Justification: Statement 1: An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets.
Statement 2: The foreign company IDRs will deposit shares to an Indian depository. The depository would issue receipts to investors in India against these shares. The benefit of the underlying shares (like bonus, dividends etc.) would accrue to the depository receipt holders in India.
The size of an IDR issue shall not be less than Rs. 50 crores. Read more https://www.sebi.gov.in/sebi_data/commondocs/foreigncos1_p.pdf
Q Source: AR: Chapter on Security Market in India: Ramesh Singh: Indian Economy
IncorrectSolution: a)
Justification: Statement 1: An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets.
Statement 2: The foreign company IDRs will deposit shares to an Indian depository. The depository would issue receipts to investors in India against these shares. The benefit of the underlying shares (like bonus, dividends etc.) would accrue to the depository receipt holders in India.
The size of an IDR issue shall not be less than Rs. 50 crores. Read more https://www.sebi.gov.in/sebi_data/commondocs/foreigncos1_p.pdf
Q Source: AR: Chapter on Security Market in India: Ramesh Singh: Indian Economy
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Question 3 of 30
1 points
The balance of payments includes both the current account and capital account. Consider the following about it.
- The current account includes a nation’s net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments.
- The capital account is included in calculations of national output, while the current account is not.
Which of the above is/are correct?
CorrectSolution: a)
Justification: The balance of payments (BOP) transactions consist of imports and exports of goods, services, and capital, as well as transfer payments, such as foreign aid and remittances. A country’s balance of payments and its net international investment position together constitute its international accounts.
The balance of payments divides transactions into two accounts: the current account and the capital account. Sometimes the capital account is called the financial account, with a separate, usually very small, capital account listed separately. The current account includes transactions in goods, services, investment income, and current transfers.
The capital account, broadly defined, includes transactions in financial instruments and central bank reserves. Narrowly defined, it includes only transactions in financial instruments. The current account is included in calculations of national output, while the capital account is not.
Q Source: Investopedia – BoP
IncorrectSolution: a)
Justification: The balance of payments (BOP) transactions consist of imports and exports of goods, services, and capital, as well as transfer payments, such as foreign aid and remittances. A country’s balance of payments and its net international investment position together constitute its international accounts.
The balance of payments divides transactions into two accounts: the current account and the capital account. Sometimes the capital account is called the financial account, with a separate, usually very small, capital account listed separately. The current account includes transactions in goods, services, investment income, and current transfers.
The capital account, broadly defined, includes transactions in financial instruments and central bank reserves. Narrowly defined, it includes only transactions in financial instruments. The current account is included in calculations of national output, while the capital account is not.
Q Source: Investopedia – BoP
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Question 4 of 30
1 points
With respect to RBI’s Open Market Operations (OMOs), consider the following statements.
- They are to mandatorily be conducted once every year to adjust liquidity in the security markets.
- No intermediaries such as commercial banks are involved in OMOs.
- OMOs can be used to tame short-term inflation in the economy.
Select the correct answer using the codes below.
CorrectSolution: d)
Justification: They are conducted by the RBI by way of sale or purchase of government securities (g-secs) to adjust money supply conditions.
RBI carries out the OMO through commercial banks and does not directly deal with the public.
The central bank sells g-secs to suck out liquidity from the system and buys back g-secs to infuse liquidity into the system.
These operations are often conducted on a day-to-day basis in a manner that balances inflation while helping banks continue to lend.
The RBI uses OMO along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.
When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.
Q Source: Basics: Economy
IncorrectSolution: d)
Justification: They are conducted by the RBI by way of sale or purchase of government securities (g-secs) to adjust money supply conditions.
RBI carries out the OMO through commercial banks and does not directly deal with the public.
The central bank sells g-secs to suck out liquidity from the system and buys back g-secs to infuse liquidity into the system.
These operations are often conducted on a day-to-day basis in a manner that balances inflation while helping banks continue to lend.
The RBI uses OMO along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.
When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.
Q Source: Basics: Economy
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Question 5 of 30
1 points
In a managed exchange rate regime, which of the following usually hold true?
- The central bank regularly intervenes in the foreign exchange markets to ensure that the national currency does not face much volatility.
- The central bank does not need to keep any foreign exchange reserves.
Which of the above is/are correct?
CorrectSolution: a)
Justification: Exchange rate (foreign exchange rate) is the rate at which domestic currency is traded for a foreign currency.
There are basically three types of exchange rate systems globally: flexible or floating exchange rate system, fixed exchange rate system and managed floating (intermediate exchange rate system).
In a managed exchange rate system, the exchange rate is basically determined in the foreign exchange market through the operation of market forces. Market forces mean the selling and buying activities by various individuals and institutions.
So far, the managed floating exchange rate system is similar to the flexible exchange rate system.
But during extreme fluctuations, the central bank under a managed floating exchange rate system (like the RBI) intervenes in the foreign exchange market through forex reserves. So, 2 is wrong.
Objective of this intervention is to minimise the fluctuation in the exchange rate of rupee.
Q Source: Chapter on External Sector of India: Indian Economy: Ramesh Singh
IncorrectSolution: a)
Justification: Exchange rate (foreign exchange rate) is the rate at which domestic currency is traded for a foreign currency.
There are basically three types of exchange rate systems globally: flexible or floating exchange rate system, fixed exchange rate system and managed floating (intermediate exchange rate system).
In a managed exchange rate system, the exchange rate is basically determined in the foreign exchange market through the operation of market forces. Market forces mean the selling and buying activities by various individuals and institutions.
So far, the managed floating exchange rate system is similar to the flexible exchange rate system.
But during extreme fluctuations, the central bank under a managed floating exchange rate system (like the RBI) intervenes in the foreign exchange market through forex reserves. So, 2 is wrong.
Objective of this intervention is to minimise the fluctuation in the exchange rate of rupee.
Q Source: Chapter on External Sector of India: Indian Economy: Ramesh Singh
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Question 6 of 30
1 points
Consider the following statements regarding
- Inflation is more likely to have a significant positive effect on a currency’s value and foreign exchange rate.
- Inflation is independent to interest rates.
Which of the statements given above is/are correct?
CorrectSolution: D
The rate of inflation in a country can have a major impact on the value of the country’s currency and the rates of foreign exchange it has with the currencies of other nations. However, inflation is just one factor among many that combine to influence a country’s exchange rate.
Inflation is more likely to have a significant negative effect, rather than a significant positive effect, on a currency’s value and foreign exchange rate.
A very low rate of inflation does not guarantee a favorable exchange rate for a country, but an extremely high inflation rate is very likely to impact the country’s exchange rates with other nations negatively.
Inflation and Interest Rates
Inflation is closely related to interest rates, which can influence exchange rates. Countries attempt to balance interest rates and inflation, but the interrelationship between the two is complex and often difficult to manage. Low interest rates spur consumer spending and economic growth, and generally positive influences on currency value. If consumer spending increases to the point where demand exceeds supply, inflation may ensue, which is not necessarily a bad outcome. But low interest rates do not commonly attract foreign investment. Higher interest rates tend to attract foreign investment, which is likely to increase the demand for a country’s currency.
IncorrectSolution: D
The rate of inflation in a country can have a major impact on the value of the country’s currency and the rates of foreign exchange it has with the currencies of other nations. However, inflation is just one factor among many that combine to influence a country’s exchange rate.
Inflation is more likely to have a significant negative effect, rather than a significant positive effect, on a currency’s value and foreign exchange rate.
A very low rate of inflation does not guarantee a favorable exchange rate for a country, but an extremely high inflation rate is very likely to impact the country’s exchange rates with other nations negatively.
Inflation and Interest Rates
Inflation is closely related to interest rates, which can influence exchange rates. Countries attempt to balance interest rates and inflation, but the interrelationship between the two is complex and often difficult to manage. Low interest rates spur consumer spending and economic growth, and generally positive influences on currency value. If consumer spending increases to the point where demand exceeds supply, inflation may ensue, which is not necessarily a bad outcome. But low interest rates do not commonly attract foreign investment. Higher interest rates tend to attract foreign investment, which is likely to increase the demand for a country’s currency.
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Question 7 of 30
1 points
Which of the following are Non-Standard Monetary Policy?
- Quantitative easing
- Negative interest rates
- Forward guidance
- Collateral adjustments
Select the correct answer using the code given below:
CorrectSolution: D
- Non-standard monetary policies came to prominence during the 2008 global financial crisis when traditional monetary policies were not enough to pull up the economies of developed nations.
- Traditional monetary policies include the adjustment of interest rates, open market operations, and setting bank reserve requirements.
- Non-standard monetary policies include quantitative easing, forward guidance, collateral adjustments, and negative interest rates.
- With the implementation of both traditional and non-standard monetary policies, governments were able to pull their countries out of the recession.
IncorrectSolution: D
- Non-standard monetary policies came to prominence during the 2008 global financial crisis when traditional monetary policies were not enough to pull up the economies of developed nations.
- Traditional monetary policies include the adjustment of interest rates, open market operations, and setting bank reserve requirements.
- Non-standard monetary policies include quantitative easing, forward guidance, collateral adjustments, and negative interest rates.
- With the implementation of both traditional and non-standard monetary policies, governments were able to pull their countries out of the recession.
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Question 8 of 30
1 points
Consider the following statements regarding Exchange Rate
- The nominal effective exchange rate (NEER) is the amount of domestic currency needed to purchase foreign currency.
- The real effective exchange rate (REER) compares a nation’s currency value against the weighted average of a basket of other major currencies.
Which of the statements given above is/are correct?
CorrectSolution: B
What Is the Nominal Effective Exchange Rate (NEER)?
The nominal effective exchange rate (NEER) is an unadjusted weighted average rate at which one country’s currency exchanges for a basket of multiple foreign currencies. The nominal exchange rate is the amount of domestic currency needed to purchase foreign currency.
In economics, the NEER is an indicator of a country’s international competitiveness in terms of the foreign exchange (forex) market. Forex traders sometimes refer to the NEER as the trade-weighted currency index.
The NEER may be adjusted to compensate for the inflation rate of the home country relative to the inflation rate of its trading partners. The resulting figure is the real effective exchange rate (REER). Unlike the relationships in a nominal exchange rate, NEER is not determined for each currency separately. Instead, one individual number, typically an index, expresses how a domestic currency’s value compares against multiple foreign currencies at once.
If a domestic currency increases against a basket of other currencies inside a floating exchange rate regime, NEER is said to appreciate. If the domestic currency falls against the basket, the NEER depreciates.
The real effective exchange rate (REER)
- The real effective exchange rate (REER) compares a nation’s currency value against the weighted average of a basket of other major currencies.
- Countries with the largest trading relationships would typically have the largest weightings in this comparative index, while countries with small trading relationships would have smaller weightings in the basket of currencies.
- REER is used to evaluate how a currency is fluctuating against many others at once, and is also used in international trade assessments.
IncorrectSolution: B
What Is the Nominal Effective Exchange Rate (NEER)?
The nominal effective exchange rate (NEER) is an unadjusted weighted average rate at which one country’s currency exchanges for a basket of multiple foreign currencies. The nominal exchange rate is the amount of domestic currency needed to purchase foreign currency.
In economics, the NEER is an indicator of a country’s international competitiveness in terms of the foreign exchange (forex) market. Forex traders sometimes refer to the NEER as the trade-weighted currency index.
The NEER may be adjusted to compensate for the inflation rate of the home country relative to the inflation rate of its trading partners. The resulting figure is the real effective exchange rate (REER). Unlike the relationships in a nominal exchange rate, NEER is not determined for each currency separately. Instead, one individual number, typically an index, expresses how a domestic currency’s value compares against multiple foreign currencies at once.
If a domestic currency increases against a basket of other currencies inside a floating exchange rate regime, NEER is said to appreciate. If the domestic currency falls against the basket, the NEER depreciates.
The real effective exchange rate (REER)
- The real effective exchange rate (REER) compares a nation’s currency value against the weighted average of a basket of other major currencies.
- Countries with the largest trading relationships would typically have the largest weightings in this comparative index, while countries with small trading relationships would have smaller weightings in the basket of currencies.
- REER is used to evaluate how a currency is fluctuating against many others at once, and is also used in international trade assessments.
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Question 9 of 30
1 points
Consider the following statements regarding Unified Payments Interface (UPI)
- It is a system that powers multiple bank accounts into a single mobile application, merging several banking features, seamless fund routing & merchant payments into one hood.
- It caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
- The security feature involves a Single Click 4 Factor Authentication.
Which of the statements given above are correct?
CorrectSolution: A
Unified Payments Interface (UPI)
Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
With the above context in mind, NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards.
How is it unique?
- Immediate money transfer through mobile device round the clock 24*7 and 365 days.
- Single mobile application for accessing different bank accounts.
- Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
- Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.
- Bill Sharing with friends.
- Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.
- Merchant Payment with Single Application or In-App Payments.
- Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based payments.
- Donations, Collections, Disbursements Scalable.
- Raising Complaint from Mobile App directly.
IncorrectSolution: A
Unified Payments Interface (UPI)
Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
With the above context in mind, NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards.
How is it unique?
- Immediate money transfer through mobile device round the clock 24*7 and 365 days.
- Single mobile application for accessing different bank accounts.
- Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
- Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.
- Bill Sharing with friends.
- Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.
- Merchant Payment with Single Application or In-App Payments.
- Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based payments.
- Donations, Collections, Disbursements Scalable.
- Raising Complaint from Mobile App directly.
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Question 10 of 30
1 points
Consider the following statements regarding Securities Transaction Tax
- STT is governed by the Income-tax Act, 1961.
- The term ‘securities’ is defined in Securities Contracts (Regulation) Act, 1956.
Which of the statements given above is/are correct?
CorrectSolution: B
What is Securities Transaction Tax?
STT is a kind of financial transaction tax which is similar to tax collected at source (TCS). STT is a direct tax levied on every purchase and sale of securities that are listed on the recognized stock exchanges in India. STT is governed by Securities Transaction Tax Act (STT Act) and STT Act has specifically listed down various taxable securities transaction i.e., transaction on which STT is leviable.
Taxable securities include equity, derivatives, unit of equity oriented mutual fund. It also includes unlisted shares sold under an offer for sale to the public included in IPO and where such shares are subsequently listed in stock exchanges. STT is an amount to be paid over and above transaction value and hence, increases transaction value.
Scope of the term ‘securities’ liable for STT
While the term ‘securities’ is not defined under STT Act, STT Act specifically allows borrowing of definition of such terms not defined in STT Act but defined in Securities Contracts (Regulation) Act, 1956 or Income-tax Act, 1961.
IncorrectSolution: B
What is Securities Transaction Tax?
STT is a kind of financial transaction tax which is similar to tax collected at source (TCS). STT is a direct tax levied on every purchase and sale of securities that are listed on the recognized stock exchanges in India. STT is governed by Securities Transaction Tax Act (STT Act) and STT Act has specifically listed down various taxable securities transaction i.e., transaction on which STT is leviable.
Taxable securities include equity, derivatives, unit of equity oriented mutual fund. It also includes unlisted shares sold under an offer for sale to the public included in IPO and where such shares are subsequently listed in stock exchanges. STT is an amount to be paid over and above transaction value and hence, increases transaction value.
Scope of the term ‘securities’ liable for STT
While the term ‘securities’ is not defined under STT Act, STT Act specifically allows borrowing of definition of such terms not defined in STT Act but defined in Securities Contracts (Regulation) Act, 1956 or Income-tax Act, 1961.
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Question 11 of 30
1 points
Consider the following statements regarding Bharat Bond ETF
- It will provide retail investors easy and low-cost access to bond markets, with smaller amount as low as Rs1,00,000.
- It will have a fixed maturity of three and ten years and will trade on the stock exchanges.
Which of the statements given above is/are correct?
CorrectSolution: B
Bharat Bond ETF
Context: The government has approved the launch of Bharat Bond ETF, India’s first corporate bond exchange traded fund, comprising debt of state-run companies.
Significance:
- This move will allow retail investors to buy government debt.
- It will provide retail investors easy and low-cost access to bond markets, with smaller amount as low as ₹1,000.
- They will provide tax efficiency as compared to bonds, as coupons (interest) from the bonds are taxed depending on the investor’s tax slab.
Key features of Bharat Bond ETF:
- It is a basket of bonds issued by central public sector enterprises/undertakings or any other government organization bonds.
- It will have a fixed maturity of three and ten years and will trade on the stock exchanges.
- It will invest in a portfolio of bonds of state-run companies and other government entities.
- It will track an underlying index on risk replication basis, matching credit quality and average maturity of the index.
- The index will be constructed by an independent index provider, National Stock Exchange.
IncorrectSolution: B
Bharat Bond ETF
Context: The government has approved the launch of Bharat Bond ETF, India’s first corporate bond exchange traded fund, comprising debt of state-run companies.
Significance:
- This move will allow retail investors to buy government debt.
- It will provide retail investors easy and low-cost access to bond markets, with smaller amount as low as ₹1,000.
- They will provide tax efficiency as compared to bonds, as coupons (interest) from the bonds are taxed depending on the investor’s tax slab.
Key features of Bharat Bond ETF:
- It is a basket of bonds issued by central public sector enterprises/undertakings or any other government organization bonds.
- It will have a fixed maturity of three and ten years and will trade on the stock exchanges.
- It will invest in a portfolio of bonds of state-run companies and other government entities.
- It will track an underlying index on risk replication basis, matching credit quality and average maturity of the index.
- The index will be constructed by an independent index provider, National Stock Exchange.
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Question 12 of 30
1 points
Which of the following is/are part of Balance on Invisibles under Current Account?
- Services trade, including both factor and non-factor income
- Value of exports and imports of goods
- Sale of service products like shipping and tourism
Which of the statements given above is/are correct?
CorrectSolution: C
Balance on Current Account has two components:
- ·Balance of Trade or Trade Balance
- ·Balance on Invisibles
Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time.
Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance.
BOT is said to be in balance when exports of goods are equal to the imports of goods. Surplus BOT or Trade surplus will arise if country exports more goods than what it imports. Whereas, Deficit BOT or Trade deficit will arise if a country imports more goods than what it exports.
Net Invisibles is the difference between the value of exports and value of imports of invisibles of a country in a given period of time. Invisibles include services, transfers and flows of income that take place between different countries. Services trade includes both factor and non-factor income. Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc.
IncorrectSolution: C
Balance on Current Account has two components:
- ·Balance of Trade or Trade Balance
- ·Balance on Invisibles
Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time.
Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance.
BOT is said to be in balance when exports of goods are equal to the imports of goods. Surplus BOT or Trade surplus will arise if country exports more goods than what it imports. Whereas, Deficit BOT or Trade deficit will arise if a country imports more goods than what it exports.
Net Invisibles is the difference between the value of exports and value of imports of invisibles of a country in a given period of time. Invisibles include services, transfers and flows of income that take place between different countries. Services trade includes both factor and non-factor income. Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc.
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Question 13 of 30
1 points
Which of the following is/are part of the Capital Account?
- If an Indian buy a UK Car Company.
- Sale of share of an Indian company to a Chinese customer.
- Receipt of loans from abroad
Which of the statements given above are correct?
CorrectSolution: D
All the above are correct.
Capital Account
Capital Account records all international transactions of assets. An asset is any one of the forms in which wealth can be held, for example: money, stocks, bonds, Government debt, etc. Purchase of assets is a debit item on the capital account. If an Indian buy a UK Car Company, it enters capital account transactions as a debit item (as foreign exchange is flowing out of India). On the other hand, sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account. Fig. 6.2 classifies the items which are a part of capital account transactions. These items are Foreign Direct Investments (FDIs), Foreign Institutional Investments (FIIs), external borrowings and assistance.
Balance on Capital Account
Capital account is in balance when capital inflows (like receipt of loans from abroad, sale of assets or shares in foreign companies) are equal to capital outflows (like repayment of loans, purchase of assets or shares in foreign countries). Surplus in capital account arises when capital inflows are greater than capital outflows, whereas deficit in capital account arises when capital inflows are lesser than capital outflows.
IncorrectSolution: D
All the above are correct.
Capital Account
Capital Account records all international transactions of assets. An asset is any one of the forms in which wealth can be held, for example: money, stocks, bonds, Government debt, etc. Purchase of assets is a debit item on the capital account. If an Indian buy a UK Car Company, it enters capital account transactions as a debit item (as foreign exchange is flowing out of India). On the other hand, sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account. Fig. 6.2 classifies the items which are a part of capital account transactions. These items are Foreign Direct Investments (FDIs), Foreign Institutional Investments (FIIs), external borrowings and assistance.
Balance on Capital Account
Capital account is in balance when capital inflows (like receipt of loans from abroad, sale of assets or shares in foreign companies) are equal to capital outflows (like repayment of loans, purchase of assets or shares in foreign countries). Surplus in capital account arises when capital inflows are greater than capital outflows, whereas deficit in capital account arises when capital inflows are lesser than capital outflows.
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Question 14 of 30
1 points
Consider the following statements regarding Nirbhaya Fund
- It is a non-lapsable corpus fund.
- The Fund is administered by Empowered Committee of Officers under Secretary of Women and Child Development Ministry.
Which of the statements given above is / are correct?
CorrectSolution: A
Nirbhaya fund:
- The Rs 1,000 crore Nirbhaya Fund was announced in Union Budget 2013.
- The corpus was to be utilised for upholding safety and dignity of women.
- It is a non-lapsable corpus fund.
- Ministry of Women and Child Development is the nodal Ministry to appraise schemes under Nirbhaya Fund and also to review and monitor the progress of sanctioned Schemes in conjunction with the line Ministries/Departments.
- The Fund is administered by Department of Economic Affairs of the finance ministry.
IncorrectSolution: A
Nirbhaya fund:
- The Rs 1,000 crore Nirbhaya Fund was announced in Union Budget 2013.
- The corpus was to be utilised for upholding safety and dignity of women.
- It is a non-lapsable corpus fund.
- Ministry of Women and Child Development is the nodal Ministry to appraise schemes under Nirbhaya Fund and also to review and monitor the progress of sanctioned Schemes in conjunction with the line Ministries/Departments.
- The Fund is administered by Department of Economic Affairs of the finance ministry.
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Question 15 of 30
1 points
With reference to the Finance Commission, which of the following statements is/are correct?
- It is a constitutional body.
- The Finance Commission is constituted by the Parliament every five years.
- The Recommendations made by the Finance commission are binding on the Government.
Select the correct answer using the code given below:
CorrectSolution: B
Finance Commission:
- The Finance Commission is a constitutionally mandated body that is at the centre of fiscal federalism.
- Finance Commission is a statuary, independent, non-political body set up by President of India every five years (or earlier) under Article 280 of the Constitution.
- Two distinctive features of the Commission’s work involve redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the centre and the States respectively and equalization of all public services across the States.
What are the functions of the Finance Commission?
It is the duty of the Commission to make recommendations to the President as to:
- the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds;
- the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
- the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
- any other matter referred to the Commission by the President in the interests of sound finance.
The Commission determines its procedure and have such powers in the performance of their functions as Parliament may by law confer on them.
The Recommendations made by the Finance commission are only advisory in nature and hence, not binding on the government
IncorrectSolution: B
Finance Commission:
- The Finance Commission is a constitutionally mandated body that is at the centre of fiscal federalism.
- Finance Commission is a statuary, independent, non-political body set up by President of India every five years (or earlier) under Article 280 of the Constitution.
- Two distinctive features of the Commission’s work involve redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the centre and the States respectively and equalization of all public services across the States.
What are the functions of the Finance Commission?
It is the duty of the Commission to make recommendations to the President as to:
- the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds;
- the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
- the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
- any other matter referred to the Commission by the President in the interests of sound finance.
The Commission determines its procedure and have such powers in the performance of their functions as Parliament may by law confer on them.
The Recommendations made by the Finance commission are only advisory in nature and hence, not binding on the government
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Question 16 of 30
1 points
Which of the following constitute India’s Forex Reserves?
- Foreign Currency Assets
- Gold
- Special Drawing Rights
- Reserve Tranche Position
Select the correct answer using the codes given below.
CorrectSolution: D
Foreign Exchange Reserves:
Foreign exchange reserves are assets held on reserve by a central bank in foreign currencies, which can include bonds, treasury bills and other government securities. These assets serve many purposes but are most significantly held to ensure that the central bank has backup funds if the national currency rapidly devalues or becomes altogether insolvent.
India has large foreign-exchange reserves; holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than India’s national currency, the Indian rupee. The reserves are managed by the Reserve Bank of India for the Indian government and the main component is foreign currency assets.
The Foreign exchange reserves of India consists of below four categories:
- Foreign Currency Assets
- Gold
- Special Drawing Rights (SDRs)
- Reserve Tranche Position
IncorrectSolution: D
Foreign Exchange Reserves:
Foreign exchange reserves are assets held on reserve by a central bank in foreign currencies, which can include bonds, treasury bills and other government securities. These assets serve many purposes but are most significantly held to ensure that the central bank has backup funds if the national currency rapidly devalues or becomes altogether insolvent.
India has large foreign-exchange reserves; holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than India’s national currency, the Indian rupee. The reserves are managed by the Reserve Bank of India for the Indian government and the main component is foreign currency assets.
The Foreign exchange reserves of India consists of below four categories:
- Foreign Currency Assets
- Gold
- Special Drawing Rights (SDRs)
- Reserve Tranche Position
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Question 17 of 30
1 points
Consider the following statements regarding Official Secrets Act
- Originally it was enacted by Lord Curzon.
- OSA exclusively defines the meaning of secret information.
Which of the statements given above is/are correct?
CorrectSolution: A
Official Secrets Act:
The law meant for ensuring secrecy and confidentiality in governance, mostly on national security and espionage issues.
- The Indian Official Secrets Act, 1904 was enacted during the time of Lord Curzon, Viceroy of India from 1899 to 1905.
- One of the main purposes of the Act was to muzzle the voice of nationalist publications.
- The Indian Official Secrets Act (Act No XIX of 1923) replaced the earlier Act, and was extended to all matters of secrecy and confidentiality in governance in the country.
Ambit of the Act:
The secrecy law broadly deals with two aspects — spying or espionage, which is dealt with in Section 3 of the Act, and disclosure of other secret information of the government, which is dealt with in Section 5. The secret information can be any official code, password, sketch, plan, model, article, note, document or information. However, the OSA does not define the secret information, the government follows the Manual of Departmental Security Instructions, 1994 for classifying a document as secret.
IncorrectSolution: A
Official Secrets Act:
The law meant for ensuring secrecy and confidentiality in governance, mostly on national security and espionage issues.
- The Indian Official Secrets Act, 1904 was enacted during the time of Lord Curzon, Viceroy of India from 1899 to 1905.
- One of the main purposes of the Act was to muzzle the voice of nationalist publications.
- The Indian Official Secrets Act (Act No XIX of 1923) replaced the earlier Act, and was extended to all matters of secrecy and confidentiality in governance in the country.
Ambit of the Act:
The secrecy law broadly deals with two aspects — spying or espionage, which is dealt with in Section 3 of the Act, and disclosure of other secret information of the government, which is dealt with in Section 5. The secret information can be any official code, password, sketch, plan, model, article, note, document or information. However, the OSA does not define the secret information, the government follows the Manual of Departmental Security Instructions, 1994 for classifying a document as secret.
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Question 18 of 30
1 points
With reference to Zero Hour, consider the following statements
- It is mentioned in the parliamentary rules book.
- During this hour, MPs can raise matters without any prior notice.
Which of the statements given above is/are correct?
CorrectSolution: B
Zero Hour:
- Zero Hour is an Indian parliamentary innovation. It is not mentioned in the parliamentary rules book.
- Under this, MPs can raise matters without any prior notice.
- The zero hour starts immediately after the question hour and lasts until the agenda for the day (i.e., regular business of the House) is taken up.
- In other words, the time gap between the question hour and the agenda is known as zero hour.
IncorrectSolution: B
Zero Hour:
- Zero Hour is an Indian parliamentary innovation. It is not mentioned in the parliamentary rules book.
- Under this, MPs can raise matters without any prior notice.
- The zero hour starts immediately after the question hour and lasts until the agenda for the day (i.e., regular business of the House) is taken up.
- In other words, the time gap between the question hour and the agenda is known as zero hour.
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Question 19 of 30
1 points
Global Innovation Index is published by
CorrectSolution: D
Recently, the Global Innovation Index 2020 was released by the World Intellectual Property Organisation (WIPO). India is at the 48th position in the list of top 50 innovative countries.
IncorrectSolution: D
Recently, the Global Innovation Index 2020 was released by the World Intellectual Property Organisation (WIPO). India is at the 48th position in the list of top 50 innovative countries.
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Question 20 of 30
1 points
With reference to Djibouti Code of Conduct, consider the following statements
- It was established under the International Maritime Organization (IMO).
- It is a grouping on maritime matters comprising 18 member states adjoining the Red Sea, Gulf of Aden, the East coast of Africa and Island countries in the IOR.
- Recently India joined the Djibouti Code of Conduct as an observer state.
Which of the statements given above is/are correct?
CorrectSolution: D
Djibouti Code of Conduct:
- India joins the Djibouti Code of Conduct as Observer
- DCOC/JA is a grouping on maritime matters comprising 18 member states adjoining the Red Sea, Gulf of Aden, the East coast of Africa and Island countries in the IOR.
-
- India joins Japan, Norway, the UK and the US as Observers to the DCOC/JA.
- The DCOC, established in January 2009, is aimed at repression of piracy and armed robbery against ships in the Western Indian Ocean Region, the Gulf of Aden and the Red Sea.
- It was established under the International Maritime Organization (IMO).
- Under the code, the signatories agreed to co-operate to the fullest possible extent in the repression of piracy and armed robbery against ships.
IncorrectSolution: D
Djibouti Code of Conduct:
- India joins the Djibouti Code of Conduct as Observer
- DCOC/JA is a grouping on maritime matters comprising 18 member states adjoining the Red Sea, Gulf of Aden, the East coast of Africa and Island countries in the IOR.
-
- India joins Japan, Norway, the UK and the US as Observers to the DCOC/JA.
- The DCOC, established in January 2009, is aimed at repression of piracy and armed robbery against ships in the Western Indian Ocean Region, the Gulf of Aden and the Red Sea.
- It was established under the International Maritime Organization (IMO).
- Under the code, the signatories agreed to co-operate to the fullest possible extent in the repression of piracy and armed robbery against ships.
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Question 21 of 30
1 points
Consider the followings:
- Ukraine
- Romania
- Turkey
- Georgia
- Iran
- Russia
Which of the following countries has /have shared borders with the Black Sea?
CorrectSolution : B
Russia-Ukraine controversy:
- The Black Sea, also known as the Euxine Sea, is one of the major water bodies and a famous inland sea of the world.
- It is bordered by Ukraine to the north, Russia to the northeast, Georgia to the east, Turkey to the south, and Bulgaria and Romania to the west.
- The roughly oval-shaped Black Sea occupies a large basin strategically situated at the southeastern extremity of Europe but connected to the distant waters of the Atlantic Ocean by the Bosporus, the Sea of Marmara, the Dardanelles, the Aegean Sea, and the Mediterranean Sea.
- The Crimean Peninsula thrusts into the Black Sea from the north, and just to its east the narrow Kerch Strait links the sea to the smaller Sea of Azo
IncorrectSolution : B
Russia-Ukraine controversy:
- The Black Sea, also known as the Euxine Sea, is one of the major water bodies and a famous inland sea of the world.
- It is bordered by Ukraine to the north, Russia to the northeast, Georgia to the east, Turkey to the south, and Bulgaria and Romania to the west.
- The roughly oval-shaped Black Sea occupies a large basin strategically situated at the southeastern extremity of Europe but connected to the distant waters of the Atlantic Ocean by the Bosporus, the Sea of Marmara, the Dardanelles, the Aegean Sea, and the Mediterranean Sea.
- The Crimean Peninsula thrusts into the Black Sea from the north, and just to its east the narrow Kerch Strait links the sea to the smaller Sea of Azo
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Question 22 of 30
1 points
Baihetan Dam was seen in the news recently, it is located in:
CorrectSolution : C
China operationalises Baihetan hydro project of 16GW capacity, biggest since Three Gorges. It is located on the Border of the southwestern provinces of Yunnan and Sichuan. Constructed on: Jinsha, the upstream section of the Yangtze River. The Yangtze is the longest in Asia and the third-longest river in the world. It rises in the northern part of the Tibetan Plateau and flows in a generally easterly direction to the East China Sea
IncorrectSolution : C
China operationalises Baihetan hydro project of 16GW capacity, biggest since Three Gorges. It is located on the Border of the southwestern provinces of Yunnan and Sichuan. Constructed on: Jinsha, the upstream section of the Yangtze River. The Yangtze is the longest in Asia and the third-longest river in the world. It rises in the northern part of the Tibetan Plateau and flows in a generally easterly direction to the East China Sea
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Question 23 of 30
1 points
With reference to “Kadaknath chicken ”, which was seen in the news recently, consider the following statements:
- Kadaknath breed is especially famous in Maharashtra and was accorded Geographical Tag in 2017.
- The breed is black in color and reared by mainly Jhabua tribes.
- It has a very high level of protein and fats along with other nutrients.
Select the correct answer using the code given below:
CorrectSolution: B
Kadaknath chicken is a local breed of chicken that is completely black in color: feathers, flesh and even bones. The chicken, traditionally reared by Jhabua’s Adivasi communities, was granted a Geographical Indication (GI) tag by the government registry in 2017. This chicken is mostly famous in Madhya Pradesh adjoining areas of Gujarat. Kadaknath chicken has more protein and iron content, with lower levels of fat and cholesterol.
IncorrectSolution: B
Kadaknath chicken is a local breed of chicken that is completely black in color: feathers, flesh and even bones. The chicken, traditionally reared by Jhabua’s Adivasi communities, was granted a Geographical Indication (GI) tag by the government registry in 2017. This chicken is mostly famous in Madhya Pradesh adjoining areas of Gujarat. Kadaknath chicken has more protein and iron content, with lower levels of fat and cholesterol.
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Question 24 of 30
1 points
Ambergris, recently seen in the news, is a solid waxy substance which is extensively used in perfume making. It is produced by?
CorrectSolution : C
Ambergris is generally referred to as whale vomit. It is a solid waxy substance originating in the intestine of the Sperm Whales (Physeter catodon). It floats around the surface of the water body and at times settles on the coast. It is referred to as floating gold as a kilogram of ambergris is estimated to be around Rs. 1 crore in the international market. It is used in the perfume market to create fragrances which are in high demand in countries like Dubai. Ancient Egyptians used it as incense and is also believed to be used in some traditional medicines.
IncorrectSolution : C
Ambergris is generally referred to as whale vomit. It is a solid waxy substance originating in the intestine of the Sperm Whales (Physeter catodon). It floats around the surface of the water body and at times settles on the coast. It is referred to as floating gold as a kilogram of ambergris is estimated to be around Rs. 1 crore in the international market. It is used in the perfume market to create fragrances which are in high demand in countries like Dubai. Ancient Egyptians used it as incense and is also believed to be used in some traditional medicines.
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Question 25 of 30
1 points
Yellow Gold 48, recently seen in the news, is a variety of?
CorrectSolution : A
Bayer (German agrochemicals major) has launched the first-ever yellow watermelon variety Yellow Gold 48 under Seminis brand in India. Yellow Gold 48 is a yellow watermelon variety. It has been developed from superior germplasm and is best suited for cultivation from October to February and for harvest from April onwards and will be available in the market until mid-July. It has been commercially introduced in India following two years of local trials. It has high yield and income potential and will empower watermelon growers to diversify into new categories and meet the growing demand for exotic fruits.
IncorrectSolution : A
Bayer (German agrochemicals major) has launched the first-ever yellow watermelon variety Yellow Gold 48 under Seminis brand in India. Yellow Gold 48 is a yellow watermelon variety. It has been developed from superior germplasm and is best suited for cultivation from October to February and for harvest from April onwards and will be available in the market until mid-July. It has been commercially introduced in India following two years of local trials. It has high yield and income potential and will empower watermelon growers to diversify into new categories and meet the growing demand for exotic fruits.
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Question 26 of 30
1 points
A student got twice as many sums wrong as he got right. If he attempted 48 sums in all, how many did he solve correctly?
CorrectAns: b
Suppose the boy got x sums right and 2x sums wrong. Then,
x+2x = 48 ⇔3x = 48 ⇔ x= 16.
IncorrectAns: b
Suppose the boy got x sums right and 2x sums wrong. Then,
x+2x = 48 ⇔3x = 48 ⇔ x= 16.
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Question 27 of 30
1 points
The number of boys in a class is three times the number of girls. Which one of the following numbers cannot represent the total number of children in the class?
CorrectAnswer : c
Let number of girls =X and number of boys = 3x
Then, 3x +x = 4x = total number of students.
Thus, to find exact value of x, the total number of students must be divisible by 4.
IncorrectAnswer : c
Let number of girls =X and number of boys = 3x
Then, 3x +x = 4x = total number of students.
Thus, to find exact value of x, the total number of students must be divisible by 4.
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Question 28 of 30
1 points
A placed three sheets with two carbons to get two extra copies of the original. Then he decided to get more carbon copies and folded the paper in such a way that the upper half of the sheets were on top of the lower half. Then he typed. How many carbon copies did he get?
CorrectAnswer : b
Since the number of carbons is 2, only two copies can be obtained.
IncorrectAnswer : b
Since the number of carbons is 2, only two copies can be obtained.
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Question 29 of 30
1 points
A motorist knows four different routes from Bristol to Birmingham. From Birmingham to Sheffield he knows three different routes and from Sheffield to Carlisle he knows two different routes. How many routes does he know from Bristol to Carlisle ?
CorrectAnswer : d
Total number of routes from Bristol to Carlisle
= (4 x 3 x 2)= 24
IncorrectAnswer : d
Total number of routes from Bristol to Carlisle
= (4 x 3 x 2)= 24
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Question 30 of 30
1 points
Passage
The current imbroglio over the farm laws highlights the Centre’s growing intrusion into what are constitutionally state subjects. But they also highlight another uncomfortable reality. Many of the most serious economic afflictions facing the country — agriculture, water, power, land, health and education — are state subjects. And the failures of the states to do justice on subjects that are well within their constitutional obligations have created space for an activist Centre to weigh in.
In reference to the above passage, Which of the following assumptions is/are valid?
- Centre sometimes pushes in the state subjects.
- At times, States are inadequately prepared in dealing with the state subjects.
CorrectAnswer : c
Both the statements are correct as passage talks about Centre’s growing intrusion into state subjects and in the last two lines, passage is talking about failure of states in doing justice to state subjects.
IncorrectAnswer : c
Both the statements are correct as passage talks about Centre’s growing intrusion into state subjects and in the last two lines, passage is talking about failure of states in doing justice to state subjects.
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