QUES 1 . With reference to the “Tea Board” in India, consider the following statements:
1 . The Tea Board is a statutory body.
2 . It is a regulatory body attached to the Ministry of Agriculture and Farmers Welfare.
3 . The Tea Board’s Head Office is situated in Bengaluru.
4 . The Board has overseas offices at Dubai and Moscow.
Which of the statements given above are correct?
(a) 1 and 3
(b) 2 and 4
(c) 3 and 4
(d) 1 and 4
Answer: (d)
Explanation:
The Tea Board is a statutory body set up under section 4 of the Tea Act, 1953 was constituted
on 1st April 1954. Hence, statement 1 is correct.
The present Tea Board is functioning as a statutory body of the Central Government under the
Ministry of Commerce. Hence , statement 2 is not correct.
The head office of the Tea board is in Kolkata. Hence , statement 3 is not correct
Currently, the Tea Board has two overseas offices located at Dubai and Moscow. Hence , statement 4 is correct.
QUES 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
Answer: (b)
Explanation: https://fotisedu.com/lending-instruments-of-imf/
The Rapid Financing Instrument (RFI) is a lending facility of the International Monetary Fund (IMF) which provides rapid financial assistance. It is available to all member countries facing an urgent balance of payments need.
IMF’s 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.
QUES 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
Answer: c
Explanation: https://fotisedu.com/neer-and-reer-appreciation-and-depreciation/
The nominal effective exchange rate (NEER) is an unadjusted weighted average rate at which one country’s currency exchanges for a basket of multiple foreign currencies. The nominal exchange rate is the amount of domestic currency needed to purchase foreign currency. If a domestic currency increases against a basket of other currencies inside a floating exchange rate regime, NEER is said to appreciate. If the domestic currency falls against the basket, the NEER depreciates. Hence , statement 1 is correct.
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. The weights are determined by comparing the relative trade balance of a country’s currency against that of each country in the index. An increase in a nation’s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. This results in losing its trade competitiveness. Hence , statement 2 is not correct.
An increase in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER. Hence , statement 3 is correct.
QUES 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
Answer: (b)
Explanation:
Open market operations, or OMOs, are the purchase and sale of government securities by Reserve Bank of India (RBI) on the Centre’s behalf to streamline money supply and interest rates. OMOs aim to control the supply of money or existing liquidity in the economy.
In case of an inflationary situation, RBI adopts a contractionary monetary policy i.e., it sells government securities and absorbs the excess money from the financial flow.
Amid a recessionary trend, RBI is keen to boost money supply in the market and ensure adequate credit availability for investment and production. So, it buys securities, increasing the money supply. Hence , statement 1 is not correct.
Interest rate movements in a foreign economy can stimulate action on the part of RBI. If the Federal Reserve reduces money supply in the US, interest rates there will increase. This will reduce Financial Institutional Investments (FII) into India, because US debt investments would have become more attractive. The reduced demand for the rupee due to less interest on the part of global institutional investors, will cause the rupee to depreciate. In response, RBI can sell dollars from its reserves to prop up the Indian currency. Hence , statement 2 is correct.
On the other hand, if interest rates in the US or the EU were to fall, FIIs will ramp up investments in India. The resultant demand for rupees will cause the rupee to appreciate. In response, RBI will buy dollars and inject rupees into the system. Hence , statement 3 is correct.
QUES 5 . 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
Answer: (a)
Explanation:
Inflation-Indexed bonds, or IIBs, are securities designed to help protect investors from inflation. IIBs are indexed to inflation so that the principal and interest payments rise and fall with the rate of inflation. Government can reduce coupon rates on its borrowing by way of IIBs. Hence , statement 1 is correct.
An inflation-indexed bond protects both investors and issuers from the uncertainty of inflation
over the life of the bond. Hence , statement 2 is correct.
Extant tax provisions will be applicable on interest payment and capital gains on IIBs. There will
be no special tax treatment for these bonds. Hence , statement 3 is not correct.
QUES 6 . 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
Answer: (b)
Explanation:
The FDI Policy prohibits retail trading in any form through e-commerce for the companies with FDI engaging in the activities of multi-brand retail trading. Multi-brand retail trading means selling different products of various brands through one platform. India has not allowed FDI in inventory-driven models of e-commerce.
The inventory model, which Walmart and Amazon use in the United States, is where the goods and services are owned by an e-commerce firm that sells directly to retail customers. The restriction is aimed largely at protecting India’s vast unorganized retail sector that does not have the clout to purchase at scale and offer big discounts. Hence , statement 1 is not correct.
India amended its FDI policy in e-commerce market places in 2018 to classify any vendor accounting for more than 25% of the platform’s total sales as “controlled” by the marketplace operator. So, no seller should exceed 25 per cent of the total business on any foreign ecommerce platform. Hence , statement 2 is correct.
QUES 7. 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
Answer: (a)
Explanation:
The real sector of an economy is the key sector as activities of this sector persuade economic output and is represented by those economic segments that are essential for the progress of GDP of the economy. So, in this sense, farmers harvesting their crops and textile mills converting raw cotton into fabrics are included under real sector of an economy.
The real sector of the economy consists of enterprises (nonfinancial corporations), households and nonprofit institutions serving households. From the point of view of monetary and financial statistics the households and nonprofit institutions serving households are in some cases combined into one subsector named “Other resident sectors”.
A commercial bank lending money to a trading company and a corporate body issuing Rupee denominated Bonds overseas does not constitute the real sector.
QUES 8. 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.
Answer: (d)
Explanation:
Indirect transfers refer to situations where when 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.
When shares of foreign company or interest in any entity incorporated or registered outside India is transferred and if such shares or interest derives its substantial value from assets located in India directly or indirectly, then such transfer is commonly referred to as ‘Indirect Transfer’. In case of such indirect transfer, the income shall be deemed to accrue or arise in India and would be taxable for all including not ordinarily residents as well as non-residents.
QUES 9. With reference to the expenditure made by an organization 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
Answer: (a)
Explanation:
Capital expenditures are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. It is often used to undertake new projects or investments by a company. Types of capital expenditures can include purchases of property, equipment, land, computers, furniture, and software. Hence , statement 1 is correct.
Debt financing occurs when a firm raises money for working capital or capital expenditures by selling debt instruments to individuals and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.
The other way to raise capital in debt markets is to issue shares of stock in a public offering; this is called equity financing. Both debt financing and equity financing are considered as capital expenditures. Revenue expenditures are the ongoing operating expenses, which are short-term expenses used to run the daily business operations. Hence , statement 2 is not correct.
QUES 10 . 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 are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (c)
Explanation:
50.8% of households’ savings in FY18 were in financial assets, followed by physical assets (48.1%) and gold/silver ornaments (1.1%). Deposits with banks are the single largest form of households’ financial assets, followed by insurance funds, mutual funds and currency. As insurance companies and mutual/provident funds are key investors in government securities, a share of the household financial savings goes towards government borrowings. Hence , statement 1 is correct.
Internal Debt comprises loans raised in the open market, compensation and other bonds, etc. It also includes borrowings through treasury bills including treasury bills issued to State Governments, Commercial Banks and other Investors, as well as non negotiable, non-interest bearing dated securities issued to International Financial Institutions. Hence , statement 2 is correct.
QUES 11. 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
Answer: (a)
Explanation:
Tight monetary policy is a course of action undertaken by a central bank to slow down overheated economic growth. It aims to constrict spending in an economy that is seen to be accelerating too quickly or to curb inflation when it is rising too fast.
When the US Federal Reserve adopts a tight monetary policy, India may see foreign capital flowing out. This is due to higher interest rates offered in the US which could attract investors. Hence , statement 1 is
correct.
Capital flight destabilizes interest rates and exchange rates and also reduces monetary control. It drives up the marginal costs of foreign borrowing. Thus, capital flight may increase the interest cost of firms with existing external commercial borrowings. Hence , statement 2 is correct.
The devaluation of currency increases the cost of borrowing of the firms that denominate debt in foreign currency and thus adversely affect the investment and net worth of the firms. Thus, devaluation of domestic currency increases the currency risk associated with External commercial borrowings. Hence , statement 3 is not correct.
QUES 12 . 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
Answer: (b)
Explanation:
A credit rating agency is an entity which assesses the ability and willingness of the issuer company for timely payment of interest and principal on a debt instrument. Credit rating agencies are regulated by the Securities and Exchange Board of India (SEBI). Hence , statement 1 is not correct.
ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency. ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. Hence , statement 2 is correct.
Brickwork Ratings (BWR) is an Indian Credit Rating Agency that offers rating services on Bank Loans, NCD, Commercial Paper, Fixed deposits, Securitised paper, Security receipts etc. Brickwork Ratings founded by bankers, credit rating professionals, former regulators as well as professors, is committed to promoting Financial Literacy. BWR has its corporate office in Bengaluru. Hence , statement 3 is correct.
QUES 13 . 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
Answer: (b)
Explanation:
The Governor of RBI is not the Chairman of the Bank Board Bureau (BBB). The Appointments Committee of the Cabinet in its discretion appoints the Chairman and members of the BBB. Hence , statement 1 is not correct.
The BBB advises the Government on matters relating to appointments, confirmation or extension of tenure and termination of services of the Board of Directors in Public Sector Banks (PSBs) and financial institutions (FIs). It is responsible for the selection and appointment of Board of Directors of PSBs and FIs. Hence , statement 2 is correct.
One of the functions of the BBB is to help Public Sector Banks in terms of developing business strategies and capital raising plan etc. Hence , statement 3 is correct.
QUES 14 . 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
Answer: (c)
Explanation:
A convertible bond gives the holder the option to convert or exchange it for a predetermined number of shares in the issuing company. When issued, they act just like regular corporate bonds, albeit with a slightly lower interest rate. Because convertibles can be changed into stock and, thus, benefit from a rise in the price of the underlying stock, companies offer lower yields on convertibles. Hence , statement 1 is correct.
One of the advantages of convertible bonds is that the option to convert to equity affords the bondholder a degree of indexation to rising consumer prices. Hence , statement 2 is correct.
QUES 15 . In India, which one of the following is responsible for maintaining price stability by controlling inflation?
(a) Department of Consumer Affairs
(b) Expenditure Management Commission
(c) Financial Stability and Development Council
(d) Reserve Bank of India
Answer: (d)
Explanation:
In India, the Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act,1934.
The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework. The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years.
QUES 16 . 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
Answer: a
Explanation:
Anything that can be converted into a digital form can be an NFT. Everything from one’s drawings, photos, videos, GIF, music, in-game items, selfies, and even a tweet can be turned into an NFT.
Non-Fungible Tokens (NFT) enable digital representation of physical assets. An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. Hence , statement 1 is correct.
They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos. They are generally built using the same kind of programming as cryptocurrency, like Bitcoin. NFTs exist on a blockchain, which is a distributed public ledger that records transactions. Hence , statement 2 is correct.
Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. Crypto’s fungibility makes it a trusted means of conducting transactions on the blockchain.
NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, nonfungible). Hence , statement 3 is not correct.
QUES 17. In India, which one of the following compiles information on industrial disputes, closures, entrenchments 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
Answer: (c)
Explanation:
Labour Bureau has been engaged in collection, compilation , analysis and dissemination of labour statistics at All India and State level on different facets of labour since its inception in the year 1920.
It releases annual publication titled, ‘Industrial Disputes, Closures, Retrenchments and Lay-Offs in industries in India’.
It provides statistics on work-stoppages, closures, retrenchments and lockouts which is useful in making policies for maintaining cordial and harmonious relations between the management and the worker.
This report is also aimed at meeting the demand for historical data and information on industrial conflicts and their causes by the planners, policy makers and decision makers in industry and government.
QUES 18 . In India, what is the role of the Coal Controller’s Organization (CCO)?
1 . CCO is the major source of Coal Statistics in Government of India.
2 . It monitors progress of development of Captive Coal/Lignite blocks.
3 . It hears any objection to the Government’s notification relating to acquisition of coal-bearing areas.
4 . It ensures that coal mining companies deliver the coal to end users in the prescribed time.
Select the correct answer using the code given below:
(a) 1, 2 and 3
(b) 3 and 4 only
(c) 1 and 2 only
(d) 1, 2 and 4
Answer: (a)
Explanation:
Coal controller organization (earlier Coal Commissioner), established in 1916, is one of the oldest offices in Indian Coal sector. Main aim behind setting up this office was to have Government control to adequately meet the coal requirement during First World War.
Under Collection of Statistics Act, 2008 – Coal Controller’s Organization (CCO) has been made the statistical authority with respect to coal and lignite statistics. Entrusted the responsibility of carrying out Annual Coal & Lignite survey and publishing of Provisional Coal Statistics and Coal Directory of India. Hence , statement 1 is correct.
It monitors progress of development of Captive Coal/Lignite blocks. Hence , statement 2 is correct.
Under Coal Bearing Area (Acquisition and Development) Act, 1957- CCO is the competent authority under this act to hear any objection to the Central Government’s Notification relating to acquisition of coal bearing land and to furnish his reports to Central Govt. Hence , statement 3 is correct.
CCO is not mandated to ensure that coal mining companies deliver the coal to end users in the prescribed time. Hence , statement 4 is not correct.
