UPPCS Prelims 2017 Important Questions on Indian Economy

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UPPCS Prelims 2017 Important Questions on Indian Economy

UPPCS Prelims 2017 Important Questions on Indian Economy: Previously, Uttar Pradesh Public Service Commission, also known as UPPSC officially released UPPSC Recruitment 2017 notification for Combined state/ Upper subordinate services examination. UPPSC has announced 251 vacancies for Combined Service posts all over the state for the year 2017. 

Most candidates have already started preparing for the preliminary examination and here is our take on UPPCS Prelims 2017 Important Questions on Indian Economy. To facilitate your exam preparation for UPPSC Recruitment, here are some of the most essential questions (MCQs) from Indian Economy section.

 

UPPCS Prelims 2017 Important Questions on Indian Economy

Here’s a list of important questions from Indian Economy which can be expected in the actual paper that can help UPPCS aspirants to score more in the Prelims:

Important Indian Economy Question for UPPCS-2017

  1. As per the revised methodology of CSO, economic growth in India is measured by GDP at:

(a) Constant market prices

(b) Current market prices

(c) Factor Cost at constant prices

(d) Factor Cost at market prices

Ans. a

  1. If a country is experiencing recession, then which of the following shall be true:

(a) Decrease in real GDP

(b) Decrease in nominal GDP

(c) Decrease in rate of growth of GDP

(d) All of the above

Ans. a

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3 The National Income of a country (India) is equal to which of the following:

(a) Gross National Product (GNP)

(b) Net National Product at Market Prices

(c) Net National Product at Factor Cost

(d) Income going to the household sector

Ans. (b)

Explanation: National Income and Net National Income are same terms and used interchangeably. Net National Income = Net National Product (NNP). Earlier (before January 2015) CSO was using factor cost to calculate NNP but now it uses Market Prices to calculate NNP.

  1. Investment in the economy is decreasing, which of the following will increase:

(a) GDP

(b) Rate of growth of GDP

(c) Inflation

(d) Imports

Ans. (a)

Explanation: Investment in the economy means production of capital goods. When the economy produces all consumption goods and no capital goods (investment) then its GDP shall remain constant i.e. it will not grow. But till the time there is net production of capital goods i.e. investment in the economy, the production of goods and services (GDP) will increase and rate of increase of GDP may decrease.

  1. Which of the following is a common measure of degree of ‘opneness of an economy’:

(a) Exports and imports share in world GDP

(b) Balance of Payments as a percentage of GDP

(c) Trade balance as a percentage of GDP

(d) Exports and imports of goods and services as a percentage of GDP

Ans. (d)

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Explanation: Openness is measured as Exports + Imports of goods and services of a country as a percentage of its GDP. So (d) is correct Trade balance means Exports – Imports, so statement (c) is incorrect.

  1. Which of the following exchange rate system is being followed in India?

(a) Fixed Exchange Rate with gold standard

(b) Fixed but adjustable

(c) Managed/ Dirt Float

(d) Free Float

Ans. c

  1. The Indian exchange rate system is termed as “managed float” because:

(a) RBI fixes the exchange rate

(b) RBI fixes the exchange rate and keeps adjusting depending on the economic situation

(c) RBI participates in the market to keep the exchange rate in a particular range and to prevent volatility

(d) None of the above

Ans. c

  1. Which of the following statements is correct?

(a) An overvalued currency will boost exports from the country

(b) An undervalued currency will boost exports from the country

(c) Overvaluation/ undervaluation of currency does not impact exports

(d) None of the above

Ans. (b)

Explanation: Suppose (Nominal) exchange rate is $1 = Rs. 60 Now if an Indian exporter exported a particular commodity (1 unit) in the international market whose price is $8, then in India after conversion he will get ultimately Rs. 480. But if the rupee is undervalued (means depreciated) i.e. $1 = Rs. 64 then he can sell his product in the international market at a price of $7.5 and can earn the same Rs. 480. So the Indian exporters can sell their product more competitively in the international market, just because rupee is undervalued or depreciated.

  1. The export competitiveness of a country can be best measured through which of the following exchange rates:

(a) Nominal Exchange Rate

(b) Real Exchange Rate

(c) Nominal Effective Exchange Rate

(d) Real Effective Exchange Rate

Ans. d

  1. The Scheduled Commercial Banks (SCB) are required to maintain CRR with RBI as per the regulation:

(a) Reserve Bank of India Act 1934

(b) The Banking Regulation Act 1949

(c) Securities Contract (Regulation) 1956

(d) None of the above

Ans. a

  1. How many times RBI reviews the Monetary Policy in a Financial Year?

(a) Quarterly

(b) Quarterly and Mid Quarterly

(c) Bimonthly

(d) Six Monthly

Ans. c

Explanation: RBI reviews the monetary policy once in every two months i.e. 6 times in a year.

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  1. As per the new Monetary Policy Framework signed between Govt. of India and RBI, the primary objective/s of monetary policy is:

(a) Price Stability

(b) Economic Growth

(c) Financial Stability

(d) All of the above

Ans. a

  1. RBI is using which of the following inflation indices as anchors for “Inflation Targeting”:

(a) WPI

(b) GDP Deflator

(c) CPI combined

(d) CPI-Industrial Workers

Ans. c

  1. As per the new Monetary Policy Framework, who will determine the inflation target?

(a) Government of India (GoI)

(b) Reserve Bank of India (RBI)

(c) GoI in consultation with RBI

(d) Monetary Policy Committee

Ans. c

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  1. Which of the following rates is used by RBI as the penal rate in case banks are not meeting their reserve requirements?

(a) Bank Rate

(b) Discount Rate

(c) Marginal Standing Facility Rate

(d) Weighted Average of Retail and Wholesale inflation

Ans. (a)

Explanation: All penal interest rates on shortfall in reserve requirements are linked to the Bank Rate.

Rev. Repo Rate = Repo Rate – 0.5%

MSF Rate = Repo Rate + 0.5%

Bank Rate = Marginal Standing Facility (MSF) Rate

  1. Which of the following agencies conducts ‘inflation expectation survey’ of households in India?

(a) Central Statistical Organization

(b) National Sample Survey Organization

(c) Reserve Bank of India

(d) Ministry of Finance

Ans. c

Explanation: RBI conducts quarterly ‘inflation expectation survey’ of households.

 

  1. Foreign Direct Investment through government approval route requires approval of which of the following government agency?

(a) Department of Industrial Policy and Promotion (DIPP)

(b) Foreign Investment and Promotion Board (FIPB)

(c) Securities and Exchange Board of India (SEBI)

(d) Reserve Bank of India (RBI)

Ans. b

Explanation: The Foreign Investment Promotion Board (FIPB) under Department of Economic Affairs, Ministry of Finance offers a single window clearance for applications on Foreign Direct Investment (FDI) in India that are under the approval route. The sectors under automatic route do not require any prior approval from FIPB and are subject to only sectoral laws. As per the regulations under Foreign Exchange Management Act (FEMA) 1999, an Indian company receiving FDI does not require any prior approval of the Reserve Bank of India at any stage. It is only required to report the capital inflow and subsequently the issue of shares to the RBI in prescribed formats under both the routes.

  1. The people of a country are willing to deposit/ save money in the commercial banks. This behavior in the economy may be caused due to:

(a) Higher inflation rate

(b) Higher nominal interest rate

(c) Higher real interest rate

(d) Higher money supply

Ans. (c)

Explanation:  Higher nominal interest rate (deposit rate) may not lead to higher savings. For example if the deposit rate is 10% and inflation is also 10% then people may not be interested in depositing money in banks as the real interest rate is zero. It is the real interest rate which people look while depositing money in banks.

  1. The decrease in Cash Reserve Ratio (CRR) requirement by RBI will impact the Base Rate of banks in which of the following manner:

(a) It may lead to increase in Base Rate

(b) It may lead to decrease in Base Rate

(c) It may lead to increase or decrease in Base Rate

(d) It will have no impact on Base Rate

Ans. b

  1. As per the new methodology, the lending rate is calculated by the banks based on:

(a) Average Cost of Funds

(b) Marginal Cost of Funds

(c) Repo Rate

(d) Inflation Rate

Ans. b

  1. If a country is experiencing inflation then what must decrease:

(a) Wage level

(b) The output of goods and services

(c) The amount of money needed to purchase a given quantity of goods and services

(d) Purchasing Power

Ans. (d)

Explanation: When a country faces inflation, we require more money to purchase a given quantity of goods and services and the purchasing power of rupee decreases. In case of inflation generally wages increases but nothing can be said about the output. So, (d) option is true.

  1. To reduce the rate of inflation, the Government should:

(a) Increase public expenditure

(b) Encourage consumer expenditure

(c) Increase Income tax

(d) Reduce Interest Rate

Ans. (c)

Explanation.  To reduce the rate of inflation government should reduce the money supply which it can do through increase in income tax. So, (c) option is true. All the other options increases money supply.

  1. The amount of Money Supply in the economy affects the following macroeconomic variables:

(a) Rate of Interest

(b) Price level

(c) Output

(d) All of the above

Ans. d

Explanation: The amount of money supply in the economy impacts prices i.e. when money supply increases inflation increases and when money supply decreases inflation decreases. Money supply impacts GDP also, as more money is required to increase the output. When the demand for money increases, rate of interest goes up in the economy. So, when money supply increases then rate of interest may decrease in the economy and vice versa. So, all statements are correct

  1. The visit of foreigners in India to see the various places/events in the country, amounts to which of the following in terms of economy:

(a) Production

(b) Consumption

(c) Import

(d) Export

Ans. d

Explanation: Exports means produced within the country and sold to foreigners (or non-residents). If a foreigner is coming to India and then purchasing wheat then it is a case of exports. In the same way, if a foreigner is coming to India for medical treatment or tourism then the foreigner is basically purchasing medical and tourism services produced in our country. So, the best possible answer is exports.

  1. The Grants-in-aid given by the Central Government to the State Governments and local bodies for creation of capital assets are classified in the Union budget under?

(a) Revenue expenditure

(b) Capital Expenditure

(c) Both Revenue and Capital expenditure

(d) None of the above

Ans. a

  1. The money accruing from the sale of “National Savings Certificates” goes to which account of the Government of India?

(a) Consolidated Fund of India

(b) Prime Minister National Relief Fund

(c) Public Account of India

(d) Contingency Fund of India

Ans. c

  1. Fiscal Deficit of the Government of India is equal to which of the following:

(a) Debt creating capital receipts

(b) Non Debt capital receipts

(c) Debt and non-debt capital receipts

(d) Capital receipts less of revenue receipts

Ans. a

Explanation: Fiscal Deficit is equal to total borrowing and the borrowing is part of capital receipts which create debt. So fiscal deficit is equal to debt creating capital receipts.

  1. When the central government is not able to meet the targets as mentioned in Fiscal Responsibility and Budget Management (FRBM) Act 2003, then it introduces amendments in the Act through which of the following bills in the parliament:

(a) FRBM Amendment Bill

(b) Appropriation Bill

(c) Finance Bill

(d) No such amendment is required

Ans. c

  1. Which of the following statement is not true regarding “Outcome Budget”:

(a) It is not presented in parliament

(b) It measures development outcomes of govt. programmes

(c) It helps in better service delivery

(d) It reduces unnecessary expenses

Ans. a

  1. What does “Revenue Neutral Tax Rate” means in reference to the Goods and Services Tax”:

(a) The rate at which tax revenues for States and Centre will remain the same as before GST

(b) The tax rate will be same for the Centre and State

(c) The tax rate at which Central and States revenues will be same

(d) All of the above

Ans. a

  1. Which of the following is not a parameter for horizontal distribution of central tax proceeds within the states as per the Fourteenth Finance Commission report?

(a) Population & Demographic change

(b) Fiscal Discipline

(c) Area & Forest Cover

(d) Income Distance

Ans. b

  1. If a factory is running at peak production with certain number of labourers then the marginal productivity of labour will be:

(a) Positive

(b) Negative

(c) Zero

(d) One

Ans. c

Explanation: When a factory is running at peak production, then its production cannot be increased even by adding more labourers. Marginal productivity of labour means how much extra production will increase by adding one more labour. So, marginal productivity of labour will be zero.

  1. As per the ‘Food Security Act 2013’, the beneficiaries will get rice,wheat & coarse grains at Rs. 3/kg, Rs. 2/kg & Rs. 1/kg respectively from the Fair Price Shops. The Centre will transfer the food grains to the States for distribution at which of the following prices:

(a) At the same price

(b) Above the mentioned price

(c) Below the mentioned price

(d) At zero prices or free

Ans. a

  1. Unemployment rate is defined as:

(a) Number of people not in job as a ratio of total population

(b) Number of people not in job as a ratio of labour force

(c) Number of people not in job but actively looking for job as a ratio of labour force

(d) Number of people not in job but actively looking for job as a ratio of total population

Ans. c

  1. The unemployment caused due to the workers living far from the regions and are unable to move to the locations where jobs are available is an example of:

(a) Cyclical

(b) Frictional

(c) Structural

(d) Disguised

Ans. c

  1. The unemployment caused due to the workers lacking the requisite job skills is an example of:

(a) Cyclical

(b) Structural

(c) Frictional

(d) Disguised

Ans. b

  1. In a country, jobs are available but still people are unemployed as there is a serious mismatch between what companies need and what workers can offer. This kind of unemployment is referred as:

(a) Cyclical

(b) Structural

(c) Seasonal

(d) Frictional

Ans. b

  1. A person has left his current job and is looking for another job. He/she is facing which type of unemployment:

(a) Structural

(b) Cyclical

(c) Frictional

(d) He/ she will not be considered as unemployed

Ans. c

Explanation: Frictional unemployment arises due to people moving between jobs, career or location or people entering and exiting the labour force or workers and employers having inconsistence or incomplete information. Actually people first leave job and then they try to find a new job according to their choice and this process takes some time to apply for new jobs and for employers to make a selection and hence they remain unemployed for this transition period. That is why frictional unemployment is also called as transitional unemployment and it is always present in the economy.

  1. In India, the agricultural ‘Crop Year’ period is from:

(a) 1st January – 31st December

(b) 1st April – 31st March

(c) 1st July – 30th June

(d) 1st October – 30th September

Ans. c

  1. Rural Infrastructure Development Fund (RIDF) is a fund under which of the following institutions:

(a) SIDBI

(b) NABARD

(c) India Infrastructure Finance Company Limited

(d) Regional Rural Banks (RRBs)

Ans. b

Explanation: Rural Infrastructure Development Fund (RIDF) was created in NABARD with an announcement in the Union Budget 1995-96 with the sole objective of giving low cost fund support to State Governments and State Owned Corporations for quick completion of ongoing projects relating to medium and minor irrigation, soil conservation, watershed management and other forms of rural infrastructure.

  1. The National Census is conducted by which of the following offices/ agencies:

(a) Central Statistical Office (CSO)

(b) National Sample Survey Office (NSSO)

(c) Registrar General and Census Commissioner, Ministry of Home Affairs

(d) Census Bureau of India

Ans. c

  1. Which of the following issues the “World Development Report” periodically?

(a) World Bank

(b) International Monetary Fund

(c) European Bank for Reconstruction and Development

(d) Asian Development Bank

Ans. a

  1. The “Consumer Confidence Survey” in India is conducted by which of the following:

(a) Reserve Bank of India

(b) National Sample Survey Organization (NSSO)

(c) Department of Consumer Affairs

(d) Ministry of Labour & Employment

Ans. (a)

Explanation: The Reserve Bank has been conducting Consumer Confidence Survey (CCS) on a quarterly basis since June 2010.The survey captures qualitative responses on questions pertaining to economic conditions, household circumstances, income, spending, prices and employment prospects. The survey results are based on the views of the respondents and are not necessarily shared by the Reserve Bank of India.

  1. Consider the following statements regarding National Investment Infrastructure Fund (NIIF):

(a) It is a company registered under Company’s Act 2013

(b) It is a trust registered under Indian Trust Act 1882

(c)It is a cooperative established under Multi-State Cooperative Society Act 2002

(d) None of the above

Ans. (b)

Explanation: Salient features of National Investment and Infrastructure Fund (NIIF) are:

  • It is registered as a (Category II, Alternative Investment Fund) Trust under SEBI.
  • Initial corpus of the fund will be 40,000 crore and Govt’s share will always be maintained to 49%. Govt will be investing up to 20,000 crore per anum.
  • It would be like a Sovereign Fund and would solicit equity participation from overseas sovereign/ quasi-sovereign/multilateral and bilateral investors. Cash rich central PSU, provident funds, insurance funds can also invest in NIIF over and above GoI share. NIIF would also invite market borrowings.
  • It will fund as equity/debt to infrastructure projects and as equity to infrastructure financing companies.

 

  1. The various state governments imposed stockholding limits on traders to curb the rising prices of pulses. This is done under which of the following acts:

(a) Essential Commodities Act 1955

(b) Agricultural Produce Marketing Committee Act enacted by States

(c) The Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980

(d) Food Products Order 1956

Ans. (a)

Explanation: The Essential Commodities Act 1955 provides for the regulation and control of production, distribution and pricing of commodities which are declared as essential for maintaining or increasing supplies or for securing their equitable distribution and availability at fair prices. Exercising powers under the Act, various Ministries/Departments of the Central Government and under the delegated powers, the State Governments/UT Administrations can issue orders for regulating production, distribution, pricing and other aspects of trading in respect of the commodities declared as essential.

  1. Recently the government regulated (notified MRP) the price of which of the following commodity in consideration of the high royalty value charged from the consumers?

(a) Bt cotton seeds

(b) Bt Brinjal seeds

(c) Pulses

(d) Onions

Ans. a

  1. Recently the central government regulated (notified MRP) the price of Bt cotton seeds under which of the following acts?

(a) Essential Commodities Act 1955

(b) Agricultural Produce Marketing Committee Act enacted by States

(c) The Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980

(d) Food Products Order 1956

Ans. a

  1. Special Safeguard Mechanism (SSM) discussed in the recent WTO Ministerial Conference is linked to which of the following:

(a) A mechanism to protect the exporters of a country

(b)A mechanism to protect the importers of a country

(c)A mechanism to protect the domestic producers against surge in cheap imports

(d)A mechanism to protect the world trade from surge in bilateral/multilateral trade agreements

Ans. (c)

Explanation: The Special Safeguard Mechanism (SSM) discussed in Nairobi Ministerial Conference, embodies the right to impose trade barriers if there is a surge in agricultural imports into India because of price volatility in the international market.

  1. ‘Forward Market Commission’ has been merged with which of the following institutions:

(a) Securities and Exchange Board of India

(b) Reserve Bank of India

(c) Commission for Agricultural Cost and Prices

(d) Insurance Regulator and Development Authority of India

Ans. a

  1. As per the Mines and Mineral (Development & Regulation) Amendment Act 2015, the mine lease holders need to establish a body/ entity, for the benefit of persons affected by mining related operations, the name of which is:

(a) District Mineral Foundation

(b) Mine Development Fund

(c) District Mining Trust

(d) Area Development Fund

Ans. (a)

Explanation: Mines and Mineral (Development & Regulation) Amendment Act 2015 provides for the creation of District Mineral Foundation (DMF) by the state governments in the districts where mining takes place. This is for the benefit of the persons in districts affected by mining related operations. Mining Lease holders will contribute to DMF by payment of 30% and 10% of royalty for existing and new mining leases respectively.

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