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Question 1 of 10
1. Question
2 points
In which one of the following types of unemployment, the marginal product of employed people is zero?
Correct
Answer: D Explanation:
Disguised unemployment is when too many people are employed than what is required to produce efficiently. This kind of employment is not at all productive. It is not productive in a sense that production does not suffer even if some of the employed people are withdrawn. The key point to remember is that the marginal productivity of labourers under disguised unemployment is zero. The labourers are employed physically, but not economically. So, option (d) is correct.
Incorrect
Answer: D Explanation:
Disguised unemployment is when too many people are employed than what is required to produce efficiently. This kind of employment is not at all productive. It is not productive in a sense that production does not suffer even if some of the employed people are withdrawn. The key point to remember is that the marginal productivity of labourers under disguised unemployment is zero. The labourers are employed physically, but not economically. So, option (d) is correct.
Question 2 of 10
2. Question
2 points
RBI acts as a banker to the Government of India. Consider the following statements in this context:
RBI makes appointments to Public Sector Banks on behalf of the
RBI handles financial accounts of the
RBI supervises the annual budget presented in the Parliament. Which of the statements given above is/are correct?
Correct
Answer: C Explanation:
Banks Board Bureau (BBB), a professional body was set up 2016 for selection of CEOs and other top level executives of public sector banks (PSBs). The Appointments Committee of Cabinet headed by Prime Minister takes the final decision in this regard. So, Statement 1 is not correct
As a banker to the Government, the Reserve Bank receives and pays money on behalf of the various Government departments. The Reserve Bank also undertakes to float loans and manage them on behalf of the Government thus handling government financial accounts. So, Statement 2 is correct
RBI is the independent authority for conducting monetary policy in the best interests of the economy whereas annual budgeting falls under the fiscal policy of the government. So, Statement 3 is not correct.
Incorrect
Answer: C Explanation:
Banks Board Bureau (BBB), a professional body was set up 2016 for selection of CEOs and other top level executives of public sector banks (PSBs). The Appointments Committee of Cabinet headed by Prime Minister takes the final decision in this regard. So, Statement 1 is not correct
As a banker to the Government, the Reserve Bank receives and pays money on behalf of the various Government departments. The Reserve Bank also undertakes to float loans and manage them on behalf of the Government thus handling government financial accounts. So, Statement 2 is correct
RBI is the independent authority for conducting monetary policy in the best interests of the economy whereas annual budgeting falls under the fiscal policy of the government. So, Statement 3 is not correct.
Question 3 of 10
3. Question
2 points
Consider the following statements about the “GDP Deflator”:
It is a measure of the level of prices of goods and services produced in an economy
It helps in comparing the level of real economic activities from one year to another
It is of limited use as it covers lesser goods and services vis a vis Consumer Price Index
Which of the statements given above are correct?
Correct
Answer: C Explanation:
The GDP deflator, is a measure of inflation giving the ratio of nominal to real GDP. Thus it measures the level of prices of goods and services produced in an economy. So Statement 1 is correct in the calculation of real and nominal GDP of the current year, the volume of production is fixed. Therefore, if these measures differ it is only due to change in the price level between the base year and the current year. Hence bringing out the real economic activity year on year. So Statement 2 is correct
The goods purchased by consumers according to the CPI do not represent all the goods which are produced in a country. GDP deflator takes into account all such goods and services. So Statement 3 is not correct
Incorrect
Answer: C Explanation:
The GDP deflator, is a measure of inflation giving the ratio of nominal to real GDP. Thus it measures the level of prices of goods and services produced in an economy. So Statement 1 is correct in the calculation of real and nominal GDP of the current year, the volume of production is fixed. Therefore, if these measures differ it is only due to change in the price level between the base year and the current year. Hence bringing out the real economic activity year on year. So Statement 2 is correct
The goods purchased by consumers according to the CPI do not represent all the goods which are produced in a country. GDP deflator takes into account all such goods and services. So Statement 3 is not correct
Question 4 of 10
4. Question
2 points
Consider the following about the Stock Exchanges in India:
It is an organization where buyers and sellers come together to trade financial
They trade both money market and capital market
The shares of even unlisted companies may be traded. Which of the statements given above is/are correct?
Correct
Answer: A Explanation:
Both the buying and the selling of financial instruments can take place on the stock exchange. So Statement 1 is correct
stock exchanges come under capital markets. The main instruments traded in the capital market are –equity shares, debentures, bonds, preference shares etc. The main instruments traded in the money market are short term debt instruments such as T-bills, trade bills report, commercial paper and certificates of deposit. So Statement 2 is not correct Listing provides an exclusive privilege to securities in the stock exchange. Only listed shares are quoted on the stock exchange. Stock exchange facilitates transparency in transactions of listed securities in perfect equality and competitive conditions. So Statement 3 is not correct.
Incorrect
Answer: A Explanation:
Both the buying and the selling of financial instruments can take place on the stock exchange. So Statement 1 is correct
stock exchanges come under capital markets. The main instruments traded in the capital market are –equity shares, debentures, bonds, preference shares etc. The main instruments traded in the money market are short term debt instruments such as T-bills, trade bills report, commercial paper and certificates of deposit. So Statement 2 is not correct Listing provides an exclusive privilege to securities in the stock exchange. Only listed shares are quoted on the stock exchange. Stock exchange facilitates transparency in transactions of listed securities in perfect equality and competitive conditions. So Statement 3 is not correct.
Question 5 of 10
5. Question
2 points
Consider the following statements about the “Non-Banking Financial Companies” (NBFC):
They are companies registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/ debentures/securities.
They are not part of the payment and settlement system of RBI.
Chit fund companies are not classified under the NBFC category. Which of the statements given above is/are correct?
Correct
Answer: B Explanation:
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. So, statement 1 is correct.
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. So, statement 2 is correct.
Chit fund companies are classified under NBFC category but not regulated by the RBI. Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act. So, statement 3 is not correct.
Incorrect
Answer: B Explanation:
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. So, statement 1 is correct.
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. So, statement 2 is correct.
Chit fund companies are classified under NBFC category but not regulated by the RBI. Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act. So, statement 3 is not correct.
Question 6 of 10
6. Question
2 points
Which of the following functions can be performed by the Payment Banks in India?
Sell mutual funds, insurance, pensions
Offer bill payment service for customers
Accept NRI deposits
Function as Business Correspondent of another bank
Handle cross border remittances
Select the correct answer using the code given below.
Correct
Answer: B Explanation:
Payments bank with approval from RBI, can work as a partner with other commercial banks and also can sell mutual funds, pension products, and insurance products. So, statement 1 is correct.
Payment banks can provide the Facility of utility bill payments to its customers and the general public. So, statement 2 is correct.
Payments banks cannot accept deposits from the Non-Resident Indians (NRIs). It means that the people of Indian origin who have settled abroad cannot deposit their money in the payment banks. So, statement 3 is not correct.
Payments banks can become a business representative of any other bank, but it will have to comply with the guidelines of the Reserve Bank of India. So, statement 4 is correct. The payments banks can accept remittances to be sent to or receive remittances from multiple banks through payment mechanism approved by RBI, such as RTGS / NEFT / IMPS. So, statement 5 is correct.
Incorrect
Answer: B Explanation:
Payments bank with approval from RBI, can work as a partner with other commercial banks and also can sell mutual funds, pension products, and insurance products. So, statement 1 is correct.
Payment banks can provide the Facility of utility bill payments to its customers and the general public. So, statement 2 is correct.
Payments banks cannot accept deposits from the Non-Resident Indians (NRIs). It means that the people of Indian origin who have settled abroad cannot deposit their money in the payment banks. So, statement 3 is not correct.
Payments banks can become a business representative of any other bank, but it will have to comply with the guidelines of the Reserve Bank of India. So, statement 4 is correct. The payments banks can accept remittances to be sent to or receive remittances from multiple banks through payment mechanism approved by RBI, such as RTGS / NEFT / IMPS. So, statement 5 is correct.
Question 7 of 10
7. Question
2 points
Consider the following statements about the “Merchant Discount Rate” (MDR) in India:
It is the discount which merchant gets for transactions done through credit or debit card to promote the digital
Recently, RBI has allowed Regional Rural Banks to act as merchant acquirer
Which of the statements given above is/are correct?
Correct
Answer: B Explanation:
Merchant Discount Rate (alternatively referred to as the Transaction Discount Rate or TDR) is the sum total of all the charges and taxes that a digital payment entails. For instance, the MDR includes bank charges, which a bank charges customers and merchants for allowing payments to be made digitally. So, statement 1 is not correct. To promote digital banking in rural areas, regional rural banks (RRBs) will now be allowed to act as merchant acquiring banks using Aadhaar Pay, the BHIM app and point of sale (PoS) terminals. So, statement 2 is correct.
Incorrect
Answer: B Explanation:
Merchant Discount Rate (alternatively referred to as the Transaction Discount Rate or TDR) is the sum total of all the charges and taxes that a digital payment entails. For instance, the MDR includes bank charges, which a bank charges customers and merchants for allowing payments to be made digitally. So, statement 1 is not correct. To promote digital banking in rural areas, regional rural banks (RRBs) will now be allowed to act as merchant acquiring banks using Aadhaar Pay, the BHIM app and point of sale (PoS) terminals. So, statement 2 is correct.
Question 8 of 10
8. Question
2 points
Consider the following statements:
Inflation is always undesirable for the economy.
Disinflation is the reduction in the rate of inflation.
Stagflation makes the application of monetary policy ineffective. Which of the statements given above is/are?
correct?
Correct
Answer: b Explanation:
Inflation is good when it makes the economy to seek demand thereby fueling production and increased output with need for labor. Management of inflation is
necessary to ward off the ill effects of extreme future inflation. So, statement 1 is not correct.
Disinflation is rate of inflation at a slower rate than expected due to lag in growth indicators of the economy which prolongs the boom in the economy awaited. So, statement 2 is correct.
Monetary policy tries to resolve economic problems (by high interest rates) or reduce inflation (by cutting rates) but can’t solve both the problems at the same time.
Stagflation occurs when rise in inflation and unemployment occurs at the same time which can’t be tackled by monetary policy at once. So, statement 3 is correct.
Incorrect
Answer: b Explanation:
Inflation is good when it makes the economy to seek demand thereby fueling production and increased output with need for labor. Management of inflation is
necessary to ward off the ill effects of extreme future inflation. So, statement 1 is not correct.
Disinflation is rate of inflation at a slower rate than expected due to lag in growth indicators of the economy which prolongs the boom in the economy awaited. So, statement 2 is correct.
Monetary policy tries to resolve economic problems (by high interest rates) or reduce inflation (by cutting rates) but can’t solve both the problems at the same time.
Stagflation occurs when rise in inflation and unemployment occurs at the same time which can’t be tackled by monetary policy at once. So, statement 3 is correct.
Question 9 of 10
9. Question
2 points
Consider the following statements:
All direct taxes are progressive in
All indirect taxes are proportional in
Income tax in India is progressive in nature. Which of the statements given above is/are correct?
Correct
Answer: B
Explanation:
Corporate tax, a division of income tax on corporate profits is a direct tax which is proportional in nature as fixed taxation would provide stability in their business. So, statement 1 is not correct.GST on goods and services is an indirect tax which is regressive in nature having same effect on people of different income levels. So, statement 2 is not correct. Income tax in India is progressively increasing with increasing income level as the economic unit moves up the income slab rates on earning more profits as people with increasing income should contribute to the poor So, statement 3 is correct.
Incorrect
Answer: B
Explanation:
Corporate tax, a division of income tax on corporate profits is a direct tax which is proportional in nature as fixed taxation would provide stability in their business. So, statement 1 is not correct.GST on goods and services is an indirect tax which is regressive in nature having same effect on people of different income levels. So, statement 2 is not correct. Income tax in India is progressively increasing with increasing income level as the economic unit moves up the income slab rates on earning more profits as people with increasing income should contribute to the poor So, statement 3 is correct.
Question 10 of 10
10. Question
2 points
Which one of the following will help in deriving “core inflation”?
Correct
Answer: C Explanation:
Core inflation is generally derived from WPI which does not include services. So, Option (a) is not correct.
Estimating the cost at whole sale prices would not exhibit with the final end value needed for true estimation of core inflation. So, Option (b) is not correct.
Core inflation is derived from detecting food and fuel item group from the WPI basket. So, Option (c) is correct.
Core inflation is achieved by retaining the manufacturing items alone in the headline inflation. So, Option (d) is not correct.
Incorrect
Answer: C Explanation:
Core inflation is generally derived from WPI which does not include services. So, Option (a) is not correct.
Estimating the cost at whole sale prices would not exhibit with the final end value needed for true estimation of core inflation. So, Option (b) is not correct.
Core inflation is derived from detecting food and fuel item group from the WPI basket. So, Option (c) is correct.
Core inflation is achieved by retaining the manufacturing items alone in the headline inflation. So, Option (d) is not correct.
