DAY – 45 (InstaTest-45): Insta 75 Days Revision Plan-2022: Topic – Economy, Tests 31, June 2021 CA – INSIGHTSIAS

Solution: C

Seigniorage is the difference between the value of currency/money and the cost of producing it. It is essentially the profit earned by the government by printing currency.

Solution: D

The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship.

The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate Laffer’s argument that sometimes-cutting tax rates can increase total tax revenue.

Solution: C

Inflation redistributes wealth from creditors to debtors, i.e., lenders suffer and borrowers benefit out of inflation. The opposite effect takes place when inflation falls (i.e., deflation).

Holding money does not remain an intelligent economic decision (because money loses value with every increase in inflation) that is why people visit banks more frequently and try to hold least money with themselves and put maximum with the banks in their saving accounts..

With every inflation the currency of the economy depreciates (loses its exchange value in front of a foreign currency) provided it follows the flexible currency regime. Though it is a comparative matter, there might be inflationary pressure on the foreign currency against which the exchange rate is compared.

Solution: B

The first index number of wholesale prices commenced in India for the week January 10, 1942. It was having the base week ending August 19, 1939 = 100, which was published by the office of the Economic Adviser to the Government of India (Ministry of Industry). Independent India followed the same series with more number of commodities included in the index. Several changes regarding inclusion of commodities, assigning them the logical weights took place in the coming times including revisions in the base years for the WPI. The WPI base year has been revised five times till date.

The Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade is releasing index numbers of wholesale price in India. Current base year: 2011–12 Base Year (697 Commodities) released in May 2017.

Revised WPI

The new series of the WPI was released by the Government with the revised base year as 2011-12. The existing base year was 2004-05. The new base year aligns with the base year of other indicators like the Gross Domestic Product (GDP) and Index of Industrial Production (IIP).

Key highlights of the revised series are as given below:

• WPI continues to constitute three major groups—Primary Articles, Fuel and
• Power, and Manufactured Products. The number of items has been increased from 676 to 697—in all 199 new items have been added and 146 old items have been dropped.
• It is more representative with increase in number of quotations from 5482 to 8331—an increase by 2849 quotations (52 per cent).
• The prices used for compilation do not include indirect taxes in order to remove impact of fiscal policy. This is in consonance with international practices and will make the new WPI conceptually closer to Producer Price Index (PPI).
• Item level aggregates for new WPI have been compiled using Geometric Mean (GM) following international best practice and as is currently used for compilation of the CPI-C.
• The major changes in weights, number of items and quotations between WPI 2004-05 and WPI 2011-12 are given in the Table

Solution: A

This is somewhat similar to the phase of ‘depression’ — we may call it a mild form of depression — fatal for economies as this may lead to depression if not handled with care and in time. The financial crises which followed the US ‘sub-prime crisis’ in almost the whole Euro-American economies has basically brought in ‘severe recessionary’ trends there. Major traits of recession, to a great extent, are similar to that of ‘depression’—may be summed up as follows:

(i) there is a general fall in demand as economic activities takes a downturn;

(ii) inflation remains lower or/and shows further signs of falling down;

(iii) employment rate falls/unemployment rate grows;

(iv) Industries resort to ‘price cuts’ to sustain their business.

In the financial year 1996–97, the Indian economy was taken up by the cycle of recession— basically due to a general downturn in domestic as well as foreign demands, initiated by the South East Asian Currency Crisis of mid-1990s. The whole plan of economic reforms in India was derailed and it was only by the end of 2001–02 that the economy was able to recover.

Solution: D

Banks, especially government-owned lenders are reeling under pile of bad loans, thanks to economic downturn and Reserve Bank of India’s (RBI) fiat to accelerate recognition and provisioning for weak assets.

Most companies and individuals that fail to pay up, do so due to slowdown and things going horribly wrong for factors beyond their control.

However, there are some truant borrowers — corporate and individuals — who, despite having the capability to repay money, do not cough up money. They are alleged to be doing it wilfully. For lenders, getting money from them is often a long legal battle.

How does a company or individual become declared as a ‘wilful defaulter’ and what is its impact? Here‘s a quick tutorial on the scope and meaning of what it means to be identified as a wilful defaulter.

According to the RBI, a wilful default is deemed to have occurred in any of the following four circumstances:

1. When there is a default in repayment obligations by the unit (company/individual) to the lender even when it has the capacity to honour the said obligations. There is deliberate intention of not repaying the loan.
2. The funds are not utilised for the specific purpose for which finance was availed but have been diverted for other purposes.
3. When the funds have been siphoned off and not been utilised for the purpose for which it was availed. Further, no assets are available which justify the usage of funds.

4. When the asset bought by the lenders’ funds have been sold off without the knowledge of the bank/lender.

Solution: C

The automated teller machine (ATM) entered India by late 1980s and have evolved into three of its types by now—

(i) Bank’s own ATMs: These are owned and operated by the concerned bank and carry the bank’s ‘logo’. They are the costliest way to provide such service to bank’s customers.

(ii) Brown Label ATMs (BLAs): These are owned by third party (a non-banking firm). The concerned banks only handle part of the process that is ‘cash handling’ and ‘back-end server’ connectivity. They carry ‘logo’ of the bank which outsources their service.

(iii) White Label ATMs (WLAs): These are ‘owned’ and ‘operated’ by a third party (a non-banking firm). They do not bear ‘logo’ of the banks they serve (that is why such a name). In place, they carry logo of the firm which own them. They serve customers of all banks and are interconnected with the entire ATM network in the country. The role of the concerned bank is only limited to provide account information and back-end money transfers to the third parties managing these ATM machines. These entities have a mandate to deploy 67 per cent of ATMs in rural locations (Tier III-VI) and 33 per cent in urban locations (Tier I and II cities).

Solution: B

Every security market has two complementary markets—primary and the secondary. The market in which the instruments of security market are traded (procured) directly between the capital raiser and the instrument purchaser is known as the primary market.

As for example, a share being directly purchased by anybody from the issuer which may be the company itself. The person is known as the primary shareholder. The market where the instruments of security market are traded among the primary instrument holders is known as the secondary market. Such transactions need an institutionalized floor for their trading which is made available by the stock exchanges.

World’s first stock exchange was established in Antwerp, Belgium (then part of the Netherlands) in 1631, the London Stock Exchange opened in 1773 and then Philadelphia Stock Exchange (the first in the New World) opened in 1790. The first stock exchange in India, the Bombay Stock Exchange known as The Native Share and Stock Brokers’ Association was set up in 1870 (under a tree!).

The Bombay Stock Exchange Ltd. (BSE), earlier a regional stock exchange, converted into a national one in 2002. The biggest in India, it accounts for almost 75 per cent of total stocks traded in India and is the fifth largest in the world (on the basis of market capitalisation).

Solution: B

Financial Stability and Development Council (FSDC)

About FSDC:

• The Financial Stability and Development Council (FSDC) was constituted in December, 2010. The FSDC was set up to strengthen and institutionalise the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.

An apex-level FSDC is not a statutory body.

Composition:

The Council is chaired by the Union Finance Minister and its members are Governor, Reserve Bank of India; Finance Secretary and/or Secretary, Department of Economic Affairs; Secretary, Department of Financial Services; Chief Economic Adviser, Ministry of Finance; Chairman, Securities and Exchange Board of India; Chairman, Insurance Regulatory and Development Authority and Chairman, Pension Fund Regulatory and Development Authority. It also includes the chairman of the Insolvency and Bankruptcy Board (IBBI).

Recently, the government through a gazette notification, had included ministry of electronics and information technology (MeitY) secretary in the FSDC in view of the increased focus of the government on digital economy.

Solution: A

An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return. InvITs work like mutual funds or real estate investment trusts (REITs) in features. InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.

InvITS are like mutual funds in structure. InvITs can be established as a trust and registered with Sebi.

Solution: B

Article 363-A was inserted in the Constitution (Twenty-sixth Amendment) Act, 1971. This amendment is best known for abolition of Privy Purse.

Solution: C

The Reserve Bank announced the creation of a Payments Infrastructure Development Fund (PIDF) to encourage acquirers to deploy Points of Sale (PoS) infrastructure (both physical and digital modes) in tier-3 to tier-6 centers and north eastern states.

The PIDF will be governed through an Advisory Council and managed and administered by Reserve Bank.

Solution: A

The core idea of OCEN (pronounced as O-Ken) is to put in place a set of frameworks and protocols that can enable the democratization of credit for segments that need it the most.

It has been developed by technology think tank iSPIRT.

As per technology think tank iSPIRT, OCEN is a common language for lenders and marketplaces to utilise and create innovative, financial credit products at scale. In this new credit paradigm, the marketplaces/aggregators using these APIs to embed credit offerings in their applications are called ‘Loan Service Providers’ (LSPs).

Solution: B

The Ministry of Skill Development and Entrepreneurship (MSDE) has launched ‘Aatmanirbhar Skilled Employee Employer Mapping’ (ASEEM) portal to help skilled people find sustainable livelihood opportunities.

The Artificial Intelligence-based ASEEM will provide employers a platform to assess the availability of skilled workforce and formulate their hiring plans.

Solution: D

Once deficit financing became an established part of public finance around the world, the means of going for it were also evolved by that time. These means, basically are the ways in which the government may utilise the amount of money created as the deficit to sustain its budget for developmental or political needs. These means are given below in order of their suggested and tried preferences.

(i) External Aids are the best money as a means to fulfil a government’s deficit requirements even if it is coming with soft interest. If they are coming without interest nothing could be better.

(ii) External Borrowings are the next best way to manage fiscal deficit with the condition that the external loans are comparatively cheaper and long-term.

(iii) Internal Borrowings come as the third preferred route of fiscal deficit management. But going for it in a huge way hampers the investment prospects of the public and the corporate sector. It has the same impact on the expenditure pattern in the economy.

(iv) Printing Currency is the last resort for the government in managing its deficit. But it has the biggest handicap that with it the government cannot go for the expenditures which are to be made in the foreign currency.

Solution: D

Solution:

• India and the majority of the members of OECD-G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) have joined a new two-pillar plan to reform international taxation rules.

The two-pillar plan – inclusive framework tax deal on Base Erosion and Profit Shifting (BEPS)- seeks to reform international tax rules and ensure that multinational enterprises pay their fair share wherever they operate.

Solution: B

Solution:

• Kaleshwaram Lift Irrigation Project (KLIP) is a multi-purpose irrigation project on the Godavari River in Kaleshwaram, Bhupalpally, Telangana, India.[2] Currently the world’s largest multi-stage lift irrigation project,[3] its farthest upstream influence is at the confluence of the Pranhita and Godavari rivers.

Solution: D

Solution:

The 17th Lok Sabha was formed by the members elected in the 2019 Indian general election

Solution: A

Solution:

In a major boost to its defence export plans, India has signed a $375 million deal to export the BrahMos supersonic cruise missile to the Philippines. According to the Philippines Defence Secretary, Delfin Lorenzana, they had sent a written request to the BrahMos Aerospace Private Limited “to accept a proposal to buy three batteries of the supersonic missile system for $375 million”.

Solution: C

The International Monetary Fund (IMF) has urged El Salvador to reverse its decision to make Bitcoin legal tender.El Salvador became the first country to allow consumers to use the cryptocurrency in all transactions, alongside the US dollar.

Solution : A 

Solution : The saffron bowl of India, so far confined to parts of Kashmir, has now spread its wings to parts of the North East through the efforts of the North East Centre for Technology Application & Reach (NECTAR). Cultivation of saffron was successful  in Yangang village of South Sikkim. It is now being expanded to Twang, Arunachal Pradesh and Barapani, Meghalaya.  

Solution : D

Solution :  ‘Laxmi Asu Making Machine’ is developed with National Innovation Foundation (NIF) – India, an autonomous body of the Department of Science and Technology (DST) to make Pochampalli silk saris.

Pochampalli village in Telangana has been recognised as the world’s best tourism village by the United Nations World Tourism Organization.

Solution: C

Green hydrogen – produced by splitting water molecule by electrolysis.

Pink hydrogen – produced by electrolysis with the help of nuclear energy.

Brown hydrogen – obtained from Coal gasification or petroleum coke.

White hydrogen – naturally – occurring geological hydrogen found in underground deposits.

Solution : C

Solution: Pongamia is a legume tree with seeds containing oils and fatty acids suitable for biodiesel production. It is one of the few nitrogen fixing trees (NFTS) to produce seeds containing 30-42% oil. Pongamia Pinnata grows almost anywhere along coasts and river banks in India and Myanmar. It is a water resistant & drought resistant plant.

Solution : B

Solution : They are financial institutions that provide financial services with digital presence only and no physical branches. Also called “Neo banks” because they emerged as a challenger to traditional banking system.These Banks don’t have a bank licence of their own but provide services by tie ups with licensed banks

Correct Answer : C

Explanation:

Let the number of boys be x.

Then, number of girls = 2x.

x + 2x = 60 or 3x = 60 or x = 20.

So, number of boys = 20 and number of girls = 40. Number of students behind Kamal in rank (60 – 17) =43. Number of girls ahead of Kamal in rank = 9.

Number of girls behind Kamal in rank = (40 – 9) = 31 Number of boys behind Kamal in rank = (43 – 31) = 12.

Correct Answer : B

Explanation: Clearly, every member except one (i.e., the winner) must lose one game to decide the winner. Thus, minimum number of matches to be played = 30 – 1 = 29.

Correct answer : D

Explanation:

Number of cuts made to cut a roll into 10 pieces = 9. Therefore, required number of rolls = (45 × 24)/9 = 120

Correct Answer : D

Explanation:

N= 6

P= 4

T= 9

difference between P & T is 5 i.e., T = 5 + 4 = 9

difference between N & T is 3 i.e., N = 9 – 3 = 6 So, integer assigned to N = 6

Correct Answer : B

Explanation:

When we want to be inwardly rich, we should give up unnecessary things like fame. This is given clearly, also outward richness is linked to fame. Thus, it does not matter for a person who is inwardly rich whether they are known or unknown.

So, B is correct.

A is absurd and not implied in anyway by the passage.

C is also irrelevant and misleading here rich does not mean money power nor is fame buyable with money as per passage

D is also not relevant since nowhere fame and success are compared. Thus, answer is B.