Economy & Govt. Schemes

Q.1 – With reference to Ayushman Bharat Digital Mission, consider the following statements :

1. Private and public hospitals must adopt it.
2. As it aims to achieve universal health coverage, every citizen of India should be part of it ultimately.
3. It has seamless portability across the country.

Which of the statements given above is/are correct ?

(a) 1 and 2 only
(b) 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (b) is correct:

Statement 1 is incorrect: Ayushman Bharat Digital Mission Sandbox, created as a part of the Mission, will act as a framework for technology and product testing that will help organizations, including private players, intending to be a part of National Digital Health Ecosystem become a Health Information Provider or Health Information User or efficiently link with building blocks of Ayushman Bharat Digital Mission.

Statement 2 is incorrect: The Ayushman Bharat Digital Mission (ABDM) aims to develop the backbone necessary to support the integrated digital health infrastructure of the country.

Statement 3 is correct: It has seamless portability across the country. It will bridge the existing gap amongst different stakeholders of Healthcare ecosystem through digital highways.

Q.2 – “Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following ?

(a) Asian Development Bank
(b) International Monetary Fund
(c) United Nations Environment Programme Finance Initiative
(d) World Bank

Option (b) is correct: The Rapid Financing Instrument (RFI) provides rapid financial assistance, which is available to all member countries facing an urgent balance of payments need. The RFI was created as part of a broader reform to make the IMF’s financial support more flexible to address the diverse needs of member countries.

The Rapid Credit Facility (RCF) provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments (BoP) need with no ex post conditionality where a full-fledged economic program is neither necessary nor feasible.

Q.3 – With reference to the Indian economy, consider the following statements :

1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.

Which of the above statements are correct ?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (c) is correct:

Statement 1 is correct: In economics, the NEER is an indicator of a country’s international competitiveness in terms of the foreign exchange (forex) market.
An increase in NEER indicates an appreciation of the local currency against the weighted basket of currencies of its trading partners.

Statement 2 is incorrect: The real effective exchange rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other major currencies. An increase in a nation’s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. It is losing its trade competitiveness.

Statement 3 is correct: An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.

Q.4 – With reference to the Indian economy, consider the following statements :

1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
Which of the statements given above are correct ?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (b) is correct:

Statement 1 is incorrect: The Reserve Bank of India (RBI) buys government bonds from the market and pays back money to the bondholders, thus injecting more money into the economy.

Statement 2 is correct: To soften the rupee’s fall, the RBI would sell in the market some of the dollars it has in its forex reserves.

Statement 3 is correct: If the interest rate in US and EU falls, there will be an inflow of dollars in the Indian market, leading to appreciation of the rupee. To reduce the supply of dollar in the economy, RBI will like to buy the dollars from the market.

Q.5 – With reference to the “G20 Common Framework”, consider the following statements:
1. It is an initiative endorsed by the G20 together with the Paris Club.
2. It is an initiative to support Low Income Countries with unsustainable debt.

Which of the statements given above is/are correct ?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Option (c) is correct:

Statement 1 and Statement 2 are correct
The Common Framework for Debt Treatments beyond the DSSI is an agreement of the G20 and Paris Club countries to coordinate and cooperate on debt treatments for up to 73 low income countries that are eligible for the Debt Service Suspension Initiative (DSSI).

For countries with sustainable debt but liquidity issues, it can provide a deferral of a portion of debt service payments for a number of years that can ease financing pressures. This type of treatment is often referred to as a rescheduling or reprofiling. Such a debt treatment can also benefit countries where high debt service payments are a source of debt vulnerability.

Q.6 – With reference to the Indian economy, what are the advantages of “Inflation-Indexed Bonds (IIBs)” ?

1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
Which of the statements given above are correct ?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (a) is correct:

Statement 1 is correct: Inflation Indexed Bonds (IIBs) – IIBs are bonds wherein both coupon flows and Principal amounts are protected against inflation. The inflation index used in IIBs may be Whole Sale Price Index (WPI) or Consumer Price Index (CPI). Globally, IIBs were first issued in 1981 in UK. In India, Government of India through RBI issued IIBs (linked to WPI) in June 2013. Government can reduce the coupon rates on its borrowing by way of IIBs.

Statement 2 is correct: Inflation indexed bonds (IIBs) provide insurance to investors from inflation and cost savings for the Government on account of reduction in coupon payments with lowering inflation rate, elimination of uncertainty risk premium, and containing inflationary expectations.

Statement 3 is incorrect: Extant tax provisions will be applicable on interest payment and capital gains on IIBs. There will be no special tax treatment for these bonds.

Q.7 – With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ?

1. They can sell their own goods in addition to offering their platforms as market-places.
2. The degree to which they can own big sellers on their platforms is limited.

Select the correct answer using the code given below :

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Option (b) is correct:

Statement 1 is incorrect: As FDI in inventory model is prohibited.

Statement 2 is correct: Any big sellers can not have more than the 25% of the total sales on e-commerce platform.

Q.8 – Which of the following activities constitute real sector in the economy ?

1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas

Select the correct answer using the code given below :

(a) 1 and 2 only
(b) 2, 3 and 4 only
(c) 1, 3 and 4 only
(d) 1, 2, 3 and 4

Option (a) is correct: The real sector of the economy deals with the production side, while the nominal economy deals with the financial side. Financial activities majorly support real(production) activity, (Hence Statement 1 and 2 are correct) but does not contribute itself too much except the factor incomer it generates (Hence statement 3 and 4 are not correct).

Q.9 – Which one of the following situations best reflects “Indirect Transfers” often talked about in media recently with reference to India ?

(a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
(b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
(c) An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
(d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

Option (d) is correct:
Indirect transfers refer to situations where foreign entities own shares or assets in India, the shares of such foreign entities are transferred instead of a direct transfer of the underlying assets in India.

Q.10 – With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct ?

1. Acquiring new technology is capital expenditure.
2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.

Select the correct answer using the code given below :

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Option (a) is correct:

Statement 1 is correct: Capital expenditures are incurred when a business uses collateral or takes on debt to buy a new asset or add value to an existing asset. Capital expenses include the cost of fixed assets and the acquisition of intangible assets. CapEx spending is important for companies to maintain existing property and equipment, and invest in new technology and other assets for growth.

Capital expenditures (CapEx) are used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

Statement 2 is incorrect: A revenue expenditure occurs when a company spends money on a short-term benefit (i.e., less than one year). Typically, these expenditures are used to fund ongoing operations – which, when they are expensed, are known as operating expenses.

Debt financing means borrowing money from an outside source and promising to pay it back with interest by a set date in the future. Equity financing means someone is putting money or assets into the business in exchange for some percentage of ownership.

Q.11 – With reference to the Indian economy, consider the following statements :

1. A share of the household financial savings goes towards government borrowings.
2. Dated securities issued at market-related rates in auctions form a large component of internal debt.

Which of the above statements is/are correct ?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Option (c) is correct:

Both statements are correct.:
Acquiring new technology is considered as capital expenditure as it will generate profit in the future time and helps in creation of new assets. Debt Financing being long term in nature are considered as capital expenditure and equity financing being short term is considered under revenue expenditure.

Q.12 – Consider the following statements :

1. Tight monetary policy of US Federal Reserve could lead to capital flight.
2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs).
3. Devaluation of domestic currency decreases the currency risk associated with ECBs.

Which of the statements given above are correct ?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (a) is correct:

• Statement 1 is correct: Tight monetary policy of the US federal Reserve could lead to capital flight. It is also called ‘Taper Tantrum’.
• Statement 2 is correct: Interest risk associated with capital flight: capital flight increases the interest rate on firms with Existing borrowings.
• Statement 3 is incorrect: Capital Risk associated with capital flight: Devaluation of domestic currency will increase the risk with external commercial borrowings.
• It will increase the liability of domestic firms in terms of domestic currency

Q.13 – Consider the following statements :

1. In India, credit rating agencies are regulated by Reserve Bank of India.
2. The rating agency popularly known as ICRA is a public limited company.
3. Brickwork Ratings is an Indian credit rating agency.

Which of the statements given above are correct ?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (b) is correct:

Statement 1 is incorrect: All the credit rating agencies in India are regulated by SEBI (Credit Rating Agencies) Regulations, 1999 of the Securities and Exchange Board of India Act, 1992.

Statement 2 is correct: ICRA Limited is a public limited company that was set up in 1991 in Gurugram. The company was formerly known as Investment Information and Credit Rating Agency of India Limited.

Statement 3 is correct: Brickwork Ratings is recognised as external credit assessment agency (ECAI) by Reserve Bank of India (RBI) to carry out credit ratings in India.

Q.14 – With reference to the ‘Banks Board Bureau (BBB)’, which of the following statements are correct ?

1. The Governor of RBI is the Chairman of BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.

Select the correct answer using the code given below :

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Option (b) is correct:

Statement 1 is incorrect: Banks Board Bureau comprises the Chairman, three ex-officio members i.e. Secretary, Department of Public Enterprises, Secretary of the Department of Financial Services, and Deputy Governor of the Reserve Bank of India, and five expert members, two of which are from the private sector. The Chairman is selected by the central government and the RBI governor does not head it.

Statements 2 and 3 are correct: Banks Board Bureau recommends the selection of head for Public Sector Banks and other key personnel if required. As it was based on the P J Nayak Committee recommendations it develops strategies for raising capital and improving the performance of PSBs.

Q.15 – With reference to Convertible Bonds, consider the following statements :

1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.

Which of the statements given above is/are correct ?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Option (c) is correct:

Both the statements are correct:
convertible bonds tend to offer a lower coupon rate or rate of return in exchange for the value of the option to convert the bond into common stock.
The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.

Q.16 – Consider the following :

1. Asian Infrastructure Investment Bank
2. Missile Technology Control Regime
3. Shanghai Cooperation Organisation
India is a member of which of the above ?

(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Option (d) is correct: The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that aims to improve economic and social outcomes in Asia. India became a member in 2016.

The Missile Technology Control Regime (MTCR) is a multilateral export control regime whose members have an informal political understanding to limit the proliferation of missiles and missile technology. India became a member of the MTCR in 2016.

The Shanghai Cooperation Organisation (SCO) is a permanent intergovernmental international organization, created on 15 June 2001 in Shanghai (China). India became its member in 2017.

Q. 17 – Consider the following statements :

1. Vietnam has been one of the fastest growing economies in the world in the recent years.
2. Vietnam is led by a multi-party political system.
3. Vietnam’s economic growth is linked to its integration with global supply chains and focus on exports.
4. For a long time Vietnam’s low labour costs and stable exchange rates have attracted global manufacturers.
5. Vietnam has the most productive e-service sector in the Indo-Pacific region.

Which of the statements given above are correct ?

(a) 2 and 4
(b) 3 and 5
(c) 1, 3 and 4
(d) 1 and 2

Option (c) is correct:

Statement 1 is correct: According to a February 2017 prediction by PricewaterhouseCoopers, Vietnam’s economy could be the fastest-growing in the world, with a potential annual GDP growth rate of roughly 5.1 percent, making it the world’s 10th-largest by 2050.

Statement 2 is incorrect: Vietnam is a one-party communist state, not a parliamentary democracy. The ruling Communist Party treats the National Assembly as a rubber stamp and the electoral process is neither free nor fair.

Statement 3 is correct: Vietnam’s economic development is dependent on its integration into global supply chains and its export-oriented strategy.

Statement 4 is correct: Low labour costs and stable exchange rates attract foreign investment to Vietnam.

Q.18 – With reference to Non-Fungible Tokens (NFTs), consider the following statements :

1. They enable the digital representation of physical assets.
2. They are unique cryptographic tokens that exist on a blockchain.
3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions.

Which of the statements given above are correct ?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only ‘
(d) 1, 2 and 3

Option (a) is correct: Statement 3 may be wrong since the word Non-fungible itself insinuate that it cannot be used as a medium of exchange because it will not be divisible easily and its individual parts value will not equal to each other. So mutual substitution will difficult therefore number3 is wrong and by elimination answer should be “A”.

Statement 1 is correct: The distinct construction of each NFT has the potential for several use cases. For example, they are an ideal vehicle to digitally represent physical assets like real estate and artwork.

Statement 2 is correct: Non-fungible tokens (NFTs) are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.

Q.19 – In India, which one of the following compiles information on industrial disputes, closures, retrenchments and lay-offs in factories employing workers?

(a) Central Statistics Office
(b) Department for Promotion of Industry and Internal Trade
(c) Labour Bureau
(d) National Technical Manpower Information System

Option (c) is correct: The present edition on Statistics of “Industrial Disputes, Closures, Retrenchments and Lay-offs in India during 2006” is based on the voluntary returns received every month from the Labour Departments of the States and the Regional Labour Commissioner (Central). The statistics of Industrial Disputes resulted in the temporary stoppage of work either by the employees of an establishment who resorted to Strikes to express a grievance, to enforce a demand or by an employer (or a group of employers) who withhold work from the employees in an establishment in connection with matters relating to employment or non-employment or terms and conditions of employment. Thus, both types of work stoppages known as Strikes and Lockouts take place as and when there is a lack of mutual understanding, a difference of opinion and a failure to settle the disputes between the management and the workers/labour trade unions. The conflicts between the management and workers are inevitable as both rationalize their gains and losses in economic activities.