(c) EXPLANATION : ■ In a centrally planned economy, the government or the central authority plans all the important activities in the economy. All important decisions regarding production, exchange and consumption of goods and services are made by the government. ■ The central authority may try to achieve particular allocation of resources and consequent distribution of the final combination of goods and services which is thought to be desirable for society as a whole. ■ The arrangements which allow people to buy and sell commodities freely are the defining features of a market. This can exist both in free market economy and a centrally planned economy. ■ In contrast to a centrally planned economy, in a market economy, all economic activities are organised through the market. A market, as studied in economics, is an institution which organises the free interaction of individuals pursuing their respective economic activities. ■ The term ‘market’ as used in economics is quite different from the common sense understanding of a market. In particular, it has nothing as such to do with the marketplace as you might tend to think of. For buying and selling commodities, individuals may or may not meet each other in an actual physical location. ■ Interaction between buyers and sellers can take place in a variety of situations such as a village chowk or a super bazaar in a city, or alternatively, buyers and sellers can interact with each other through telephone or internet and conduct the exchange of commodities.

(a) EXPLANATION : ■ In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income and wealth (payment) made without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. ■ For the purposes of calculating gross domestic product (GDP), government spending does not include transfer payments – the reallocation of money from one party to another – which includes Social Security, Medicare, unemployment insurance, welfare programs and subsidies. Because these are not payments for goods or services, they do not represent a form of final demand, or GDP. ■ Examples of transfer payments include welfare, financial aid, social security, and government making subsidies for certain businesses (firms). ■ Transfer payments, however, do not include subsidies that are paid to domestic farmers, manufacturers and exporters, even though they are technically a one-way payment to a person on behalf of the government.

(d) EXPLANATION : ■ Govt. announces MSP which is at least 50% over “All-India weighted average Cost of Production”. (MSP for all over India is same). Cost of production can be calculated in 3 ways: ■ First way – A2: (Average of actual paid out costs): It will include expenses on purchase of inputs, electricity, fertilizers, etc. If someone has taken land/equipment on lease and he is paying rent that will also be included. And if a farmer has hired labour then that cost will also be included. But if someone is using family labour then since the farmer is not actually paying from his pocket, so it will not be included in cost. That is why the term says actual paid out costs. ■ Second way – A2 + FL (Covers actual paid out cost + imputed or assumed value of family labour): In this case, if the farmer is using family labour ,then what we calculate as, if the farmer will have to hire the same labour from the market then how much he will have to pay and then it is added in A2. This is called imputed value of family labour. ■ Third way – C2 (More comprehensive and includes for the rentals and interest foregone on owned land and fixed capital assets on top of A2 + FL): This means that if a person has his own land then of course he is not paying rentals and there will be no cost included in either “A2” or “A2+FL”. But here in “C2” we will add the cost assuming that if the farmer has to take the same land on rent then what would be the cost, even if he is actually not paying any rent. ■ Govt. provides MSP of at least 50% above the “A2 + FL” cost. ■ The cost of equipment is part of “A2”. Because it is the cost incurred (actual paid out) by the farmer. But all the cost is not subtracted in one particular year rather its cost is uniformly distributed over the entire life of the equipment and that cost is called DEPRECIATION (cost).

(d) EXPLANATION : ■ A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. ■ A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. ■ Ownership control is always with the members/farmers and management is through the representatives of the members. ■ The main aim of PO is to ensure better income for the producers through an organization of their own. ■ Farmers Producer Organization (FPO) is one type of PO where the members are farmers. ■ Small Farmers’ Agribusiness Consortium (SFAC) and NABARD is providing support for promotion of FPOs.

(d) EXPLANATION: ■ This is a market situation wherein sellers are outnumbered by buyers by a big margin and the quantity of goods available for sale becomes far less than the quantity demanded. ■ Such a market condition leads to shortage in the quantity of goods/securities available for sale. ■ As a result, sellers are able to increase the prices and obtain better sale conditions. Thus, the situation becomes favourable for sellers. ■ Statement 1: Since goods are in short supply, it leads to a spike in prices. Thus Statement 1 is wrong. ■ Statement 2: This is opposite of the market situation. Thus statement 2 is wrong.

(a) EXPLANATION: ■ Public Key Infrastructure (PKI) is a technology for authenticating users and devices in the digital world. ■ The basic idea is to have one or more trusted parties digitally sign documents certifying that a particular cryptographic key belongs to a particular user or device.

(a) EXPLANATION: ■ If a global financial crisis happens in the future, lesser exposure to the foreign financial markets is likely to give some immunity to India. ■ Statement 1 is correct: Short-term borrowings would lead to the burden of paying back the debt, and could result in stressful conditions for the borrowing economy/ India. ■ Statement 2 is not correct: Opening up to more foreign banks would lead to an enhanced exposure to the global economy, and hence an increased risk. ■ Statement 3 is not correct: Currency convertibility refers to a situation in which a currency can be converted into a foreign currency, and vice-versa at the prevailing exchange rate without any government intervention. It increases the vulnerability of the domestic economy to external economic shocks.

(a) EXPLANATION : ■ Balance of Payments records the transactions in goods, services, and assets between residents of a country with the rest of the world for a specified time period.

(c) Explanation: ■ Pair 1 is incorrectly matched : Flexible Exchange Rate – Market Driven ■ Pair 2 is incorrectly matched : Managed Exchange Rate – Interventions by Government

(c) EXPLANATION : ■ Statement 2 is incorrect: The Regional Rural Banks were owned by the Central Government, the State Government and the Sponsor Bank (Any commercial bank can sponsor the regional rural banks) who holds shares in the ratios as follows : Central Government – 50%, State Government – 15% and Sponsor Banks – 35%.