DAY – 3 Insta 75 Days Revision Plan-2024: Topic – ECONOMY, Subject-wise Test 25, Textbook-wise Test 3 and June 2023 CA

INSTA 75 Days REVISION PLAN 2024

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• Question 1 of 30 1. Question 1 points With reference to Desiccation-tolerant vascular (DT) plants, consider the following statements: They can revive themselves even after losing up their water content up to 95%. They are the predominant occupants of rock outcrops in the tropical regions. The tree trunks in partially shaded forests are crucial habitats for these species. Their habitat conditions can be matched only with the xerophytic environment. How many of the statements given above are correct? (a) Only one (b) Only two (c) Only three (d) All four Correct Answer: C Explanation: Statement 1 is correct: Desiccation-tolerant vascular (DT) plants are able to withstand extreme dehydration, losing up to 95% of their water content, and they revive themselves once water is available again. This unique ability allows them to survive in harsh, arid environments that would be uninhabitable for most other plants. DT plants have been studied for their possible applications in agriculture, particularly in areas with limited water resources. Statement 2 is correct: In tropical regions, they are the predominant occupants of rock outcrops. Statement 3 is correct: In addition to rock outcrops, tree trunks in the partially shaded forests are also found to be crucial habitats for DT species. Statement 4 is not correct: In the inventory of 62 DT species, 16 are Indian endemic, and 12 are exclusive to the Western Ghats outcrops, highlighting WG’s importance as a global DT hotspot. Western Ghats do not have a specific xerophytic environment still DT species thrive in this region. Nine genera of DT plants are reported as new, also in a global perspective, with Tripogon capillatus representing the first record of an epiphytic DT angiosperm. Besides, understanding the mechanisms by which DT plants can tolerate dehydration could lead to the development of crops that are more drought-resistant and require less water. Source: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1928967 Trend: Drought resistant properties of plants Approach: statement 4 can be eliminated as xerophytic environment is found in dry habitats, while statement 2 mentions tropical regions. Incorrect Answer: C Explanation: Statement 1 is correct: Desiccation-tolerant vascular (DT) plants are able to withstand extreme dehydration, losing up to 95% of their water content, and they revive themselves once water is available again. This unique ability allows them to survive in harsh, arid environments that would be uninhabitable for most other plants. DT plants have been studied for their possible applications in agriculture, particularly in areas with limited water resources. Statement 2 is correct: In tropical regions, they are the predominant occupants of rock outcrops. Statement 3 is correct: In addition to rock outcrops, tree trunks in the partially shaded forests are also found to be crucial habitats for DT species. Statement 4 is not correct: In the inventory of 62 DT species, 16 are Indian endemic, and 12 are exclusive to the Western Ghats outcrops, highlighting WG’s importance as a global DT hotspot. Western Ghats do not have a specific xerophytic environment still DT species thrive in this region. Nine genera of DT plants are reported as new, also in a global perspective, with Tripogon capillatus representing the first record of an epiphytic DT angiosperm. Besides, understanding the mechanisms by which DT plants can tolerate dehydration could lead to the development of crops that are more drought-resistant and require less water. Source: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1928967 Trend: Drought resistant properties of plants Approach: statement 4 can be eliminated as xerophytic environment is found in dry habitats, while statement 2 mentions tropical regions.

#### 1. Question

With reference to Desiccation-tolerant vascular (DT) plants, consider the following statements:

• They can revive themselves even after losing up their water content up to 95%.

• They are the predominant occupants of rock outcrops in the tropical regions.

• The tree trunks in partially shaded forests are crucial habitats for these species.

• Their habitat conditions can be matched only with the xerophytic environment.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) Only three

• (d) All four

Answer: C

Explanation:

Statement 1 is correct: Desiccation-tolerant vascular (DT) plants are able to withstand extreme dehydration, losing up to 95% of their water content, and they revive themselves once water is available again.

This unique ability allows them to survive in harsh, arid environments that would be uninhabitable for most other plants. DT plants have been studied for their possible applications in agriculture, particularly in areas with limited water resources.

Statement 2 is correct: In tropical regions, they are the predominant occupants of rock outcrops.

Statement 3 is correct: In addition to rock outcrops, tree trunks in the partially shaded forests are also found to be crucial habitats for DT species.

Statement 4 is not correct: In the inventory of 62 DT species, 16 are Indian endemic, and 12 are exclusive to the Western Ghats outcrops, highlighting WG’s importance as a global DT hotspot. Western Ghats do not have a specific xerophytic environment still DT species thrive in this region.

Nine genera of DT plants are reported as new, also in a global perspective, with Tripogon capillatus representing the first record of an epiphytic DT angiosperm.

Besides, understanding the mechanisms by which DT plants can tolerate dehydration could lead to the development of crops that are more drought-resistant and require less water.

Trend: Drought resistant properties of plants

Approach: statement 4 can be eliminated as xerophytic environment is found in dry habitats, while statement 2 mentions tropical regions.

Answer: C

Explanation:

Statement 2 is correct: In tropical regions, they are the predominant occupants of rock outcrops.

Statement 3 is correct: In addition to rock outcrops, tree trunks in the partially shaded forests are also found to be crucial habitats for DT species.

Nine genera of DT plants are reported as new, also in a global perspective, with Tripogon capillatus representing the first record of an epiphytic DT angiosperm.

Besides, understanding the mechanisms by which DT plants can tolerate dehydration could lead to the development of crops that are more drought-resistant and require less water.

Trend: Drought resistant properties of plants

Approach: statement 4 can be eliminated as xerophytic environment is found in dry habitats, while statement 2 mentions tropical regions.

• Question 2 of 30 2. Question 1 points Consider the following statements: The Mangroves cover less than one percent of the Earth’s surface but store more carbon per hectare than terrestrial forests. The total mangrove cover in India is about 7000 square kilometres with Odisha and Maharashtra having maximum cover. The MISHTI Scheme is a government initiative for mangrove plantations along the coastline and on saltpan lands in India. How many of the statements given above are *not correct? (a) Only one (b) Only two (c) All three (d) None Correct Answer: A Explanation: Statement 1 is correct: Mangroves cover only about 0.1 per cent of the planet’s surface. Yet, they can potentially store up to 10 times more carbon per hectare (ha) than terrestrial forests. Statement 2 is not correct: In India, the total mangrove cover is 4,992 square kilometres, according to the 2021 Forest Survey Report (FSR). These salt-tolerant trees store most of the carbon in their soil and sediments, they can stay locked for a millennium if left undisturbed. Statement 3 is correct: India recently announced a new initiative for mangrove plantations along the coastline and on saltpan lands in 2023. The MISHTI, ‘Mangrove Initiative for Shoreline Habitats & Tangible Incomes,’ comes after India joined the Mangrove Alliance for Climate launched during the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change. Source: Environment & Ecology Trend: Mangroves and their salt resistant properties Approach: statement 2 and 3 makes the question factual/knowledge based Incorrect Answer: A Explanation: Statement 1 is correct: Mangroves cover only about 0.1 per cent of the planet’s surface. Yet, they can potentially store up to 10 times more carbon per hectare (ha) than terrestrial forests. Statement 2 is not correct: In India, the total mangrove cover is 4,992 square kilometres, according to the 2021 Forest Survey Report (FSR). These salt-tolerant trees store most of the carbon in their soil and sediments, they can stay locked for a millennium if left undisturbed. Statement 3 is correct:* India recently announced a new initiative for mangrove plantations along the coastline and on saltpan lands in 2023. The MISHTI, ‘Mangrove Initiative for Shoreline Habitats & Tangible Incomes,’ comes after India joined the Mangrove Alliance for Climate launched during the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change. Source: Environment & Ecology Trend: Mangroves and their salt resistant properties Approach: statement 2 and 3 makes the question factual/knowledge based

#### 2. Question

Consider the following statements:

• The Mangroves cover less than one percent of the Earth’s surface but store more carbon per hectare than terrestrial forests.

• The total mangrove cover in India is about 7000 square kilometres with Odisha and Maharashtra having maximum cover.

• The MISHTI Scheme is a government initiative for mangrove plantations along the coastline and on saltpan lands in India.

How many of the statements given above are *not* correct?

• (a) Only one

• (b) Only two

• (c) All three

Answer: A

Explanation:

Statement 1 is correct: Mangroves cover only about 0.1 per cent of the planet’s surface. Yet, they can potentially store up to 10 times more carbon per hectare (ha) than terrestrial forests.

Statement 2 is not correct: In India, the total mangrove cover is 4,992 square kilometres, according to the 2021 Forest Survey Report (FSR).

These salt-tolerant trees store most of the carbon in their soil and sediments, they can stay locked for a millennium if left undisturbed.

Statement 3 is correct: India recently announced a new initiative for mangrove plantations along the coastline and on saltpan lands in 2023. The MISHTI, ‘Mangrove Initiative for Shoreline Habitats & Tangible Incomes,’ comes after India joined the Mangrove Alliance for Climate launched during the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change.

Trend: Mangroves and their salt resistant properties

Approach: statement 2 and 3 makes the question factual/knowledge based

Answer: A

Explanation:

Statement 1 is correct: Mangroves cover only about 0.1 per cent of the planet’s surface. Yet, they can potentially store up to 10 times more carbon per hectare (ha) than terrestrial forests.

Statement 2 is not correct: In India, the total mangrove cover is 4,992 square kilometres, according to the 2021 Forest Survey Report (FSR).

These salt-tolerant trees store most of the carbon in their soil and sediments, they can stay locked for a millennium if left undisturbed.

Trend: Mangroves and their salt resistant properties

Approach: statement 2 and 3 makes the question factual/knowledge based

• Question 3 of 30 3. Question 1 points With reference to Aspartame, consider the following statements: It is sweeter than table sugar and other artificial sweeteners like advantame and neotame. It is not suitable for people who are suffering from a rare inherited disorder called phenylketonuria. It has been certified as ‘carcinogenic’ by the Cancer Research Agency of the World health Organisation. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Correct Answer: B Explanation: Aspartame is one of the world’s most common artificial sweeteners and is used in a wide range of diet soft drinks, sugar-free chewing gum, sugar-free ice cream, sugar-free breakfast cereals, etc. Chemically, aspartame is a methyl ester of the dipeptide of two natural amino acids, L-aspartic acid and L-phenylalanine. Statement 1 is not correct: Aspartame is about 200 times sweeter than table sugar which makes aspartame far less sweet than other artificial sweeteners like advantame and neotame, but even then, 1 gram of aspartame has the sweetness intensity of roughly 2 teaspoons (about 8 g) of sugar. Statement 2 is correct: Aspartame is safe for all groups of people except one those suffering from phenylketonuria (PKU), a rare inherited disorder in which the patient does not have the enzyme that is needed to break down phenylalanine, one of the two amino acids in aspartame. Statement 3 is correct: The World Health Organization (WHO) recently declared aspartame, an artificial sweetener used in the food industry, as a possible carcinogen. Substances that potentially cause cancer are called carcinogens. The report in which aspartame was evaluated – and several such declarations that christen a substance as being carcinogenic – are authored by a committee of experts under the authority of the International Agency for Research on Cancer (IARC). The agency, headquartered in Lyon, France, was established under the WHO in 1965 with a mandate to study the causes of cancer. Source: Science & Technology Trend: Food adulterants and artificial additives in News Approach: Factual/knowledge based question Incorrect Answer: B Explanation: Aspartame is one of the world’s most common artificial sweeteners and is used in a wide range of diet soft drinks, sugar-free chewing gum, sugar-free ice cream, sugar-free breakfast cereals, etc. Chemically, aspartame is a methyl ester of the dipeptide of two natural amino acids, L-aspartic acid and L-phenylalanine. Statement 1 is not correct: Aspartame is about 200 times sweeter than table sugar which makes aspartame far less sweet than other artificial sweeteners like advantame and neotame, but even then, 1 gram of aspartame has the sweetness intensity of roughly 2 teaspoons (about 8 g) of sugar. Statement 2 is correct: Aspartame is safe for all groups of people except one those suffering from phenylketonuria (PKU), a rare inherited disorder in which the patient does not have the enzyme that is needed to break down phenylalanine, one of the two amino acids in aspartame. Statement 3 is correct: The World Health Organization (WHO) recently declared aspartame, an artificial sweetener used in the food industry, as a possible carcinogen. Substances that potentially cause cancer are called carcinogens. The report in which aspartame was evaluated – and several such declarations that christen a substance as being carcinogenic – are authored by a committee of experts under the authority of the International Agency for Research on Cancer (IARC). The agency, headquartered in Lyon, France, was established under the WHO in 1965 with a mandate to study the causes of cancer. Source: Science & Technology Trend: Food adulterants and artificial additives in News Approach: Factual/knowledge based question

#### 3. Question

With reference to Aspartame, consider the following statements:

• It is sweeter than table sugar and other artificial sweeteners like advantame and neotame.

• It is not suitable for people who are suffering from a rare inherited disorder called phenylketonuria.

• It has been certified as ‘carcinogenic’ by the Cancer Research Agency of the World health Organisation.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) All three

Answer: B

Explanation:

Aspartame is one of the world’s most common artificial sweeteners and is used in a wide range of diet soft drinks, sugar-free chewing gum, sugar-free ice cream, sugar-free breakfast cereals, etc.

Chemically, aspartame is a methyl ester of the dipeptide of two natural amino acids, L-aspartic acid and L-phenylalanine.

Statement 1 is not correct: Aspartame is about 200 times sweeter than table sugar which makes aspartame far less sweet than other artificial sweeteners like advantame and neotame, but even then, 1 gram of aspartame has the sweetness intensity of roughly 2 teaspoons (about 8 g) of sugar.

Statement 2 is correct: Aspartame is safe for all groups of people except one those suffering from phenylketonuria (PKU), a rare inherited disorder in which the patient does not have the enzyme that is needed to break down phenylalanine, one of the two amino acids in aspartame.

Statement 3 is correct: The World Health Organization (WHO) recently declared aspartame, an artificial sweetener used in the food industry, as a possible carcinogen. Substances that potentially cause cancer are called carcinogens.

The report in which aspartame was evaluated – and several such declarations that christen a substance as being carcinogenic – are authored by a committee of experts under the authority of the International Agency for Research on Cancer (IARC).

The agency, headquartered in Lyon, France, was established under the WHO in 1965 with a mandate to study the causes of cancer.

Trend: Food adulterants and artificial additives in News

Approach: Factual/knowledge based question

Answer: B

Explanation:

Aspartame is one of the world’s most common artificial sweeteners and is used in a wide range of diet soft drinks, sugar-free chewing gum, sugar-free ice cream, sugar-free breakfast cereals, etc.

Chemically, aspartame is a methyl ester of the dipeptide of two natural amino acids, L-aspartic acid and L-phenylalanine.

The agency, headquartered in Lyon, France, was established under the WHO in 1965 with a mandate to study the causes of cancer.

Trend: Food adulterants and artificial additives in News

Approach: Factual/knowledge based question

• Question 4 of 30 4. Question 1 points With reference to the European Union’s Carbon Border Adjustment Mechanism (CBAM), consider the following statements: It intends to achieve the target of a 55% reduction in greenhouse gas emissions by 2030. It intends to impose an import duty on carbon-intensive industries from Non-European Union countries. It was recently joined by India to complete its targets established under the Paris Agreement. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Correct Answer: B Explanation: Statement 1 is correct: The Carbon Border Adjustment Mechanism intends to achieve the target of a 55% reduction in greenhouse gas (GHG) emissions by 2030, compared to 1990 levels, under the European Green Deal. The CBAM is part of the package planned to achieve this. Second, there is a threat to EU products being replaced by carbon-intensive imports from other countries such as India or China. Statement 2 is correct: The EU argues that the higher standard of environmental compliance in its domestic industries will reduce their competitiveness. Thus, it intends to impose an import duty on carbon-intensive industries from non-EU countries to meet both these objectives. Statement 3 is not correct: India has just started working on its own carbon trading mechanism. In December 2022, it amended the Energy Conservation Act, 2001, to introduce the Carbon Credit Trading System (CCTS). India is reportedly among the top eight countries that will be adversely affected by the CBAM. India has limited options to navigate the CBAM framework. Source: Current Affairs Trend: Global initiatives on Carbon emission reduction and India’s role in it. Approach: Factual/knowledge based question Incorrect Answer: B Explanation: Statement 1 is correct: The Carbon Border Adjustment Mechanism intends to achieve the target of a 55% reduction in greenhouse gas (GHG) emissions by 2030, compared to 1990 levels, under the European Green Deal. The CBAM is part of the package planned to achieve this. Second, there is a threat to EU products being replaced by carbon-intensive imports from other countries such as India or China. Statement 2 is correct: The EU argues that the higher standard of environmental compliance in its domestic industries will reduce their competitiveness. Thus, it intends to impose an import duty on carbon-intensive industries from non-EU countries to meet both these objectives. Statement 3 is not correct: India has just started working on its own carbon trading mechanism. In December 2022, it amended the Energy Conservation Act, 2001, to introduce the Carbon Credit Trading System (CCTS). India is reportedly among the top eight countries that will be adversely affected by the CBAM. India has limited options to navigate the CBAM framework. Source: Current Affairs Trend: Global initiatives on Carbon emission reduction and India’s role in it. Approach: Factual/knowledge based question

#### 4. Question

With reference to the European Union’s Carbon Border Adjustment Mechanism (CBAM), consider the following statements:

• It intends to achieve the target of a 55% reduction in greenhouse gas emissions by 2030.

• It intends to impose an import duty on carbon-intensive industries from Non-European Union countries.

• It was recently joined by India to complete its targets established under the Paris Agreement.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) All three

Answer: B

Explanation:

Statement 1 is correct: The Carbon Border Adjustment Mechanism intends to achieve the target of a 55% reduction in greenhouse gas (GHG) emissions by 2030, compared to 1990 levels, under the European Green Deal.

The CBAM is part of the package planned to achieve this. Second, there is a threat to EU products being replaced by carbon-intensive imports from other countries such as India or China.

Statement 2 is correct: The EU argues that the higher standard of environmental compliance in its domestic industries will reduce their competitiveness. Thus, it intends to impose an import duty on carbon-intensive industries from non-EU countries to meet both these objectives.

Statement 3 is not correct: India has just started working on its own carbon trading mechanism. In December 2022, it amended the Energy Conservation Act, 2001, to introduce the Carbon Credit Trading System (CCTS).

India is reportedly among the top eight countries that will be adversely affected by the CBAM. India has limited options to navigate the CBAM framework.

Trend: Global initiatives on Carbon emission reduction and India’s role in it.

Approach: Factual/knowledge based question

Answer: B

Explanation:

The CBAM is part of the package planned to achieve this. Second, there is a threat to EU products being replaced by carbon-intensive imports from other countries such as India or China.

India is reportedly among the top eight countries that will be adversely affected by the CBAM. India has limited options to navigate the CBAM framework.

Trend: Global initiatives on Carbon emission reduction and India’s role in it.

Approach: Factual/knowledge based question

• Question 5 of 30 5. Question 1 points With reference to the Dudhwa National Park, consider the following statements: It is located in the Terai-Bhabhar region of India. Its northern edge lies along the Indo-Bangladesh border. Its southern boundary is marked by the river Mahanadi. How many of the statements given above is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Answer: A Explanation: Statement 1 is correct: The Dudhwa National Park in Lakhimpur Kheri district is located in the Terai-Bhabhar region bordering Nepal. Dudhwa Tiger Reserve is one of the finest few remaining examples of the exceedingly diverse and productive Tarai eco-system. Statement 2 is not correct: The northern edge of the reserve lies along the Indo-Nepal border. Statement 3 is not correct: The southern boundary of the Park is marked by the river Suheli. It is well known sanctuary of the swamp deer and is home to tigers, leopards, varieties of deer, antelopes, elephants, jackal, hyena etc, amid thick green forest and grassland. Source: Environment and Ecology Trend: National Parks and their geo-physical features Approach: Factual/knowledge based question Incorrect Answer: A Explanation: Statement 1 is correct: The Dudhwa National Park in Lakhimpur Kheri district is located in the Terai-Bhabhar region bordering Nepal. Dudhwa Tiger Reserve is one of the finest few remaining examples of the exceedingly diverse and productive Tarai eco-system. Statement 2 is not correct: The northern edge of the reserve lies along the Indo-Nepal border. Statement 3 is not correct: The southern boundary of the Park is marked by the river Suheli. It is well known sanctuary of the swamp deer and is home to tigers, leopards, varieties of deer, antelopes, elephants, jackal, hyena etc, amid thick green forest and grassland. Source: Environment and Ecology Trend: National Parks and their geo-physical features Approach: Factual/knowledge based question

#### 5. Question

With reference to the Dudhwa National Park, consider the following statements:

• It is located in the Terai-Bhabhar region of India.

• Its northern edge lies along the Indo-Bangladesh border.

• Its southern boundary is marked by the river Mahanadi.

How many of the statements given above is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Answer: A

Explanation:

Statement 1 is correct: The Dudhwa National Park in Lakhimpur Kheri district is located in the Terai-Bhabhar region bordering Nepal.

Dudhwa Tiger Reserve is one of the finest few remaining examples of the exceedingly diverse and productive Tarai eco-system.

Statement 2 is not correct: The northern edge of the reserve lies along the Indo-Nepal border.

Statement 3 is not correct: The southern boundary of the Park is marked by the river Suheli.

It is well known sanctuary of the swamp deer and is home to tigers, leopards, varieties of deer, antelopes, elephants, jackal, hyena etc, amid thick green forest and grassland.

Trend: National Parks and their geo-physical features

Approach: Factual/knowledge based question

Answer: A

Explanation:

Statement 1 is correct: The Dudhwa National Park in Lakhimpur Kheri district is located in the Terai-Bhabhar region bordering Nepal.

Dudhwa Tiger Reserve is one of the finest few remaining examples of the exceedingly diverse and productive Tarai eco-system.

Statement 2 is not correct: The northern edge of the reserve lies along the Indo-Nepal border.

Statement 3 is not correct: The southern boundary of the Park is marked by the river Suheli.

It is well known sanctuary of the swamp deer and is home to tigers, leopards, varieties of deer, antelopes, elephants, jackal, hyena etc, amid thick green forest and grassland.

Trend: National Parks and their geo-physical features

Approach: Factual/knowledge based question

• Question 6 of 30 6. Question 1 points With reference to Current Account, consider the following statements: Balance of Trade (BOT) is a record of a country’s export and import of visible items only. The trade in services includes both factor income and non-factor income. Grants given by a foreign government is recorded in the Current Account. Which of the above given statements is/are correct? a) 1 only b) 2 only c) 1 and 2 only d) 1,2 and 3 Correct Answer: d Explanation: Current Account is the record of trade in goods and services and transfer payments. Balance on Current Account has two components: Balance of Trade or Trade Balance Balance on Invisibles Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance. Trade in only visible items (goods) are recorded by BOT. Hence, statement 1 is correct. Trade in services also called invisible trade includes factor income and non-factor income transactions. . Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc. Factor Income: income earned by Indians from direct investment in abroad, interest, dividends, and property and labor income earned from abroad. (i.e., Indians go to foreign countries and earn from there). Non-factor income: Comprises shipment, passenger and other transport services, and travel etc. These include transactions with nonresidents by residents of a country. (i.e., Indians provide services to clients who are based in foreign countries). Hence, statement 2 is correct. Invisibles include Services and transfers payments. Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. They could be given by the government or by private citizens living abroad. Hence, statement 3 is correct. Source: Indian Economy Trend: External Sector- features of Current Account and Capital Account Approach: Applied knowledge Incorrect Answer: d Explanation: Current Account is the record of trade in goods and services and transfer payments. Balance on Current Account has two components: Balance of Trade or Trade Balance Balance on Invisibles Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance. Trade in only visible items (goods) are recorded by BOT. Hence, statement 1 is correct. Trade in services also called invisible trade includes factor income and non-factor income transactions. . Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc. Factor Income: income earned by Indians from direct investment in abroad, interest, dividends, and property and labor income earned from abroad. (i.e., Indians go to foreign countries and earn from there). Non-factor income: Comprises shipment, passenger and other transport services, and travel etc. These include transactions with nonresidents by residents of a country. (i.e., Indians provide services to clients who are based in foreign countries). Hence, statement 2 is correct. Invisibles include Services and transfers payments. Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. They could be given by the government or by private citizens living abroad. Hence, statement 3 is correct. Source: Indian Economy Trend: External Sector- features of Current Account and Capital Account Approach: Applied knowledge

#### 6. Question

With reference to Current Account, consider the following statements:

• Balance of Trade (BOT) is a record of a country’s export and import of visible items only.

• The trade in services includes both factor income and non-factor income.

• Grants given by a foreign government is recorded in the Current Account.

Which of the above given statements is/are correct?

• c) 1 and 2 only

• d) 1,2 and 3

Explanation:

• Current Account is the record of trade in goods and services and transfer payments.

• Balance on Current Account has two components:

• Balance of Trade or Trade Balance

• Balance on Invisibles

• Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance. Trade in only visible items (goods) are recorded by BOT. Hence, statement 1 is correct.

• Trade in services also called invisible trade includes factor income and non-factor income transactions. . Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc.

• Factor Income: income earned by Indians from direct investment in abroad, interest, dividends, and property and labor income earned from abroad. (i.e., Indians go to foreign countries and earn from there).

• Non-factor income: Comprises shipment, passenger and other transport services, and travel etc. These include transactions with nonresidents by residents of a country. (i.e., Indians provide services to clients who are based in foreign countries). Hence, statement 2 is correct.

• Invisibles include Services and transfers payments. Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. They could be given by the government or by private citizens living abroad. Hence, statement 3 is correct.

Trend: External Sector- features of Current Account and Capital Account

Approach: Applied knowledge

Explanation:

• Current Account is the record of trade in goods and services and transfer payments.

• Balance on Current Account has two components:

• Balance of Trade or Trade Balance

• Balance on Invisibles

Trend: External Sector- features of Current Account and Capital Account

Approach: Applied knowledge

• Question 7 of 30 7. Question 1 points Consider the following statements: Statement-I: A healthy foreign exchange (Forex) reserve builds investor confidence and may attract more foreign investment into a country. Statement-II: Foreign exchange reserves helps to limit any vulnerability because of a sudden disruption in international foreign exchange market. Which one of the following is correct in respect of the above statements? a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I c) Statement-I is correct but Statement-II is incorrect d) Statement-I is incorrect but Statement-II is correct Correct Answer: a Explanation: Foreign exchange reserves are assets held in reserve by a central bank. The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934. India’s foreign exchange reserves include: Foreign Currency Assets Gold Reserves Special Drawing Rights (SDR) Reserve position with International Monetary Fund (IMF). Main reasons why central banks have foreign currency reserves: To help keep the value of a domestic currency: They are needed to support, central bank’s exchange rate intervention to support the domestic currency. Too much of appreciation or too much of depreciation of a currency is not good for international trade. To maintain liquidity in case of an economic crisis. A central bank can step in and exchange its foreign currency for the local currency ensuring companies can continue to import and export competitively. To meet a country’s international finance obligations. These could include paying debts, financing imports and absorbing sudden capital movements. To reassure foreign investors: Wars or internal unrest can spook investors who may look to move their money out of the country. Holding forex reserves can project an air of confidence and calm investors’ fears. To diversify their portfolio: By holding different currencies and assets in reserve, a central bank can diversify its risk and provide protection should one investment decline. Hence, option (a) is correct. Source: Indian Economy Trend: External Sector Approach: Applied knowledge on properties of Forex. Incorrect Answer: a Explanation: Foreign exchange reserves are assets held in reserve by a central bank. The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934. India’s foreign exchange reserves include: Foreign Currency Assets Gold Reserves Special Drawing Rights (SDR) Reserve position with International Monetary Fund (IMF). Main reasons why central banks have foreign currency reserves: To help keep the value of a domestic currency: They are needed to support, central bank’s exchange rate intervention to support the domestic currency. Too much of appreciation or too much of depreciation of a currency is not good for international trade. To maintain liquidity in case of an economic crisis. A central bank can step in and exchange its foreign currency for the local currency ensuring companies can continue to import and export competitively. To meet a country’s international finance obligations. These could include paying debts, financing imports and absorbing sudden capital movements. To reassure foreign investors: Wars or internal unrest can spook investors who may look to move their money out of the country. Holding forex reserves can project an air of confidence and calm investors’ fears. To diversify their portfolio: By holding different currencies and assets in reserve, a central bank can diversify its risk and provide protection should one investment decline. Hence, option (a) is correct. Source: Indian Economy Trend: External Sector Approach: Applied knowledge on properties of Forex.

#### 7. Question

Consider the following statements:

Statement-I:

A healthy foreign exchange (Forex) reserve builds investor confidence and may attract more foreign investment into a country.

Statement-II:

Foreign exchange reserves helps to limit any vulnerability because of a sudden disruption in international foreign exchange market.

Which one of the following is correct in respect of the above statements?

• a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

• b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

• c) Statement-I is correct but Statement-II is incorrect

• d) Statement-I is incorrect but Statement-II is correct

Explanation:

• Foreign exchange reserves are assets held in reserve by a central bank. The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934.

• India’s foreign exchange reserves include:

• Foreign Currency Assets

• Gold Reserves

• Special Drawing Rights (SDR)

• Reserve position with International Monetary Fund (IMF).

• Main reasons why central banks have foreign currency reserves:

• To help keep the value of a domestic currency: They are needed to support, central bank’s exchange rate intervention to support the domestic currency. Too much of appreciation or too much of depreciation of a currency is not good for international trade.

• To maintain liquidity in case of an economic crisis. A central bank can step in and exchange its foreign currency for the local currency ensuring companies can continue to import and export competitively.

• To meet a country’s international finance obligations. These could include paying debts, financing imports and absorbing sudden capital movements.

• To reassure foreign investors: Wars or internal unrest can spook investors who may look to move their money out of the country. Holding forex reserves can project an air of confidence and calm investors’ fears.

• To diversify their portfolio: By holding different currencies and assets in reserve, a central bank can diversify its risk and provide protection should one investment decline.

• Hence, option (a) is correct.

Trend: External Sector

Approach: Applied knowledge on properties of Forex.

Explanation:

• India’s foreign exchange reserves include:

• Foreign Currency Assets

• Gold Reserves

• Special Drawing Rights (SDR)

• Reserve position with International Monetary Fund (IMF).

• Main reasons why central banks have foreign currency reserves:

• To meet a country’s international finance obligations. These could include paying debts, financing imports and absorbing sudden capital movements.

• To diversify their portfolio: By holding different currencies and assets in reserve, a central bank can diversify its risk and provide protection should one investment decline.

• Hence, option (a) is correct.

Trend: External Sector

Approach: Applied knowledge on properties of Forex.

• Question 8 of 30 8. Question 1 points What are the possible consequences of too much appreciation of India Rupee? Export of agricultural products may reduce. Demand for imported goods and services may increase. Foreign investment may increase. How many of the above statements are correct? a) Only one b) Only two c) All three d) None Correct Answer: b Explanation: In simplest terms, currency appreciation has to do with one particular currency rising in value as compared to other currencies. A currency appreciates when you need more of one currency to buy another currency. Exchange rates are bilateral, so the improvement in one currency means the decline of another. For example, to buy one US $, Indians have to give. approx. 80 Rs. If India Rupee appreciates, we will have to give less than 80 Rs. To get 1 US$. When a currency of a country appreciates : Exports becomes costlier Imports becomes cheaper So, if Rupee appreciates too much, Indian exports will become costly and lose their price competitiveness in the international market. Hence, statement 1 is correct. During high appreciation, imports will become cheaper as Indians have to pay less to buy the same amount of foreign goods and services. Hence, statement 2 is correct. High appreciation will make foreign investment costlier. The investor will have to invest more due to the appreciation in Indian currency. Therefore, very high appreciation often leads to reduction in foreign investments. Hence, statement 3 is incorrect. Due to the above said reasons, RBI intervenes in Forex market and ensures that Indian Rupee doesn’t appreciate or depreciate very drastically. Source: Indian Economy Trend: External sector- Appreciation, Devaluation and their effect on import, export etc Approach: Applied knowledge on effects of appreciation of currency Incorrect Answer: b Explanation: In simplest terms, currency appreciation has to do with one particular currency rising in value as compared to other currencies. A currency appreciates when you need more of one currency to buy another currency. Exchange rates are bilateral, so the improvement in one currency means the decline of another. For example, to buy one US $, Indians have to give. approx. 80 Rs. If India Rupee appreciates, we will have to give less than 80 Rs. To get 1 US$. When a currency of a country appreciates : Exports becomes costlier Imports becomes cheaper So, if Rupee appreciates too much, Indian exports will become costly and lose their price competitiveness in the international market. Hence, statement 1 is correct. During high appreciation, imports will become cheaper as Indians have to pay less to buy the same amount of foreign goods and services. Hence, statement 2 is correct. High appreciation will make foreign investment costlier. The investor will have to invest more due to the appreciation in Indian currency. Therefore, very high appreciation often leads to reduction in foreign investments. Hence, statement 3 is incorrect. Due to the above said reasons, RBI intervenes in Forex market and ensures that Indian Rupee doesn’t appreciate or depreciate very drastically. Source: Indian Economy Trend: External sector- Appreciation, Devaluation and their effect on import, export etc Approach: Applied knowledge on effects of appreciation of currency

#### 8. Question

What are the possible consequences of too much appreciation of India Rupee?

• Export of agricultural products may reduce.

• Demand for imported goods and services may increase.

• Foreign investment may increase.

How many of the above statements are correct?

• a) Only one

• b) Only two

• c) All three

Explanation:

• In simplest terms, currency appreciation has to do with one particular currency rising in value as compared to other currencies. A currency appreciates when you need more of one currency to buy another currency.

• Exchange rates are bilateral, so the improvement in one currency means the decline of another.

• For example, to buy one US $, Indians have to give. approx. 80 Rs. If India Rupee appreciates, we will have to give less than 80 Rs. To get 1 US$.

• When a currency of a country appreciates :

• Exports becomes costlier

• Imports becomes cheaper

• So, if Rupee appreciates too much, Indian exports will become costly and lose their price competitiveness in the international market. Hence, statement 1 is correct.

• During high appreciation, imports will become cheaper as Indians have to pay less to buy the same amount of foreign goods and services. Hence, statement 2 is correct.

• High appreciation will make foreign investment costlier. The investor will have to invest more due to the appreciation in Indian currency. Therefore, very high appreciation often leads to reduction in foreign investments. Hence, statement 3 is incorrect.

• Due to the above said reasons, RBI intervenes in Forex market and ensures that Indian Rupee doesn’t appreciate or depreciate very drastically.

Trend: External sector- Appreciation, Devaluation and their effect on import, export etc

Approach: Applied knowledge on effects of appreciation of currency

Explanation:

• Exchange rates are bilateral, so the improvement in one currency means the decline of another.

• For example, to buy one US $, Indians have to give. approx. 80 Rs. If India Rupee appreciates, we will have to give less than 80 Rs. To get 1 US$.

• When a currency of a country appreciates :

• Exports becomes costlier

• Imports becomes cheaper

• So, if Rupee appreciates too much, Indian exports will become costly and lose their price competitiveness in the international market. Hence, statement 1 is correct.

• During high appreciation, imports will become cheaper as Indians have to pay less to buy the same amount of foreign goods and services. Hence, statement 2 is correct.

• Due to the above said reasons, RBI intervenes in Forex market and ensures that Indian Rupee doesn’t appreciate or depreciate very drastically.

Trend: External sector- Appreciation, Devaluation and their effect on import, export etc

Approach: Applied knowledge on effects of appreciation of currency

• Question 9 of 30 9. Question 1 points Consider the following statements with reference to Liberalized Remittances Scheme (LRS), often seen in news: Under the scheme, all resident individuals are allowed to send up to USD 5, 00,000 to a foreign country in a financial year. Corporations and partnership firms are also eligible to send money under the scheme. Money can be sent for current or capital account transaction or a combination of both. How many of the above statements are correct? a) Only one b) Only two c) All three d) None Correct Answer: a Explanation: Liberalised Remittance Scheme is the scheme of the Reserve Bank of India, introduced in the year 2004. Under the scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2, 50,000 per financial year. Hence, statement 1 is incorrect. The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc. Hence, statement 2 is incorrect. Though there are no restrictions on the frequency of remittances under LRS, once a remittance is made for an amount up to USD 2, 50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme. The money can be remitted or any permissible current or capital account transaction or a combination of both. Hence, statement 3 is correct. Prohibited Transactions: Any purpose specifically prohibited under Schedule-I (like the purchase of lottery tickets, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000. Trading in foreign exchange abroad. Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time. Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks. Hence, option (a) is correct. Source: https://www.rbi.org.in/commonperson/english/scripts/FAQs.aspx?Id=1834 Trend: Schemes in News Approach: Factual/knowledge based question Incorrect Answer: a Explanation: Liberalised Remittance Scheme is the scheme of the Reserve Bank of India, introduced in the year 2004. Under the scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2, 50,000 per financial year. Hence, statement 1 is incorrect. The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc. Hence, statement 2 is incorrect. Though there are no restrictions on the frequency of remittances under LRS, once a remittance is made for an amount up to USD 2, 50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme. The money can be remitted or any permissible current or capital account transaction or a combination of both. Hence, statement 3 is correct. Prohibited Transactions: Any purpose specifically prohibited under Schedule-I (like the purchase of lottery tickets, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000. Trading in foreign exchange abroad. Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time. Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks. Hence, option (a) is correct. Source: https://www.rbi.org.in/commonperson/english/scripts/FAQs.aspx?Id=1834 Trend: Schemes in News Approach: Factual/knowledge based question

#### 9. Question

Consider the following statements with reference to Liberalized Remittances Scheme (LRS), often seen in news:

• Under the scheme, all resident individuals are allowed to send up to USD 5, 00,000 to a foreign country in a financial year.

• Corporations and partnership firms are also eligible to send money under the scheme.

• Money can be sent for current or capital account transaction or a combination of both.

How many of the above statements are correct?

• a) Only one

• b) Only two

• c) All three

Explanation:

• Liberalised Remittance Scheme is the scheme of the Reserve Bank of India, introduced in the year 2004.

• Under the scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2, 50,000 per financial year. Hence, statement 1 is incorrect.

• The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc. Hence, statement 2 is incorrect.

• Though there are no restrictions on the frequency of remittances under LRS, once a remittance is made for an amount up to USD 2, 50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme.

• The money can be remitted or any permissible current or capital account transaction or a combination of both. Hence, statement 3 is correct.

• Prohibited Transactions:

• Any purpose specifically prohibited under Schedule-I (like the purchase of lottery tickets, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

• Trading in foreign exchange abroad.

• Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.

• Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

• Hence, option (a) is correct.

Trend: Schemes in News

Approach: Factual/knowledge based question

Explanation:

• Liberalised Remittance Scheme is the scheme of the Reserve Bank of India, introduced in the year 2004.

• Under the scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2, 50,000 per financial year. Hence, statement 1 is incorrect.

• The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc. Hence, statement 2 is incorrect.

• The money can be remitted or any permissible current or capital account transaction or a combination of both. Hence, statement 3 is correct.

• Prohibited Transactions:

• Trading in foreign exchange abroad.

• Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.

• Hence, option (a) is correct.

Trend: Schemes in News

Approach: Factual/knowledge based question

• Question 10 of 30 10. Question 1 points Which of the following causes ‘imported inflation’? Increase in the crude oil prices Increase in gold prices Dollar depreciation Rupee depreciation Select the correct answer using the code given below: a) 1 and 2 only b) 1,2 and 3 only c) 1,2 and 4 only d) 1,2,3 and 4 Correct Answer: c Explanation: Imported Inflation: When the general price level rises in a country because of the rise in prices of imported commodities, inflation is termed as imported. Two key contributors to India’s imports are: Crude Oil and Gold. Rise in prices of these two products lead to rise in the import bill of the country. Inflation may also rise due to the depreciation of the domestic currency, which pushes up the rupee cost of imported items. For example, if the rupee depreciates by 20% against the US dollar in a particular period, the landed rupee cost of an imported product will also go up by the same proportion and will affect the price levels and inflation readings. On the other hand, depreciation of dollars will make imports cheaper and hence, will not lead to imported inflation. Hence, option (c) is correct. Source: Indian Economy Trend: Interrelationship between inflation and import Approach: Dollar Depreciation will make the imports cheaper which helps to reduce the inflation. It can be eliminated as it does not cause inflation. Incorrect Answer: c Explanation: Imported Inflation: When the general price level rises in a country because of the rise in prices of imported commodities, inflation is termed as imported. Two key contributors to India’s imports are: Crude Oil and Gold. Rise in prices of these two products lead to rise in the import bill of the country. Inflation may also rise due to the depreciation of the domestic currency, which pushes up the rupee cost of imported items. For example, if the rupee depreciates by 20% against the US dollar in a particular period, the landed rupee cost of an imported product will also go up by the same proportion and will affect the price levels and inflation readings. On the other hand, depreciation of dollars will make imports cheaper and hence, will not lead to imported inflation. Hence, option (c) is correct. Source: Indian Economy Trend: Interrelationship between inflation and import Approach: Dollar Depreciation will make the imports cheaper which helps to reduce the inflation. It can be eliminated as it does not cause inflation.

#### 10. Question

Which of the following causes ‘imported inflation’?

• Increase in the crude oil prices

• Increase in gold prices

• Dollar depreciation

• Rupee depreciation

Select the correct answer using the code given below:

• a) 1 and 2 only

• b) 1,2 and 3 only

• c) 1,2 and 4 only

• d) 1,2,3 and 4

Explanation:

• Imported Inflation: When the general price level rises in a country because of the rise in prices of imported commodities, inflation is termed as imported.

• Two key contributors to India’s imports are: Crude Oil and Gold. Rise in prices of these two products lead to rise in the import bill of the country.

• Inflation may also rise due to the depreciation of the domestic currency, which pushes up the rupee cost of imported items.

• For example, if the rupee depreciates by 20% against the US dollar in a particular period, the landed rupee cost of an imported product will also go up by the same proportion and will affect the price levels and inflation readings.

• On the other hand, depreciation of dollars will make imports cheaper and hence, will not lead to imported inflation.

• Hence, option (c) is correct.

Trend: Interrelationship between inflation and import

Approach: Dollar Depreciation will make the imports cheaper which helps to reduce the inflation. It can be eliminated as it does not cause inflation.

Explanation:

• Imported Inflation: When the general price level rises in a country because of the rise in prices of imported commodities, inflation is termed as imported.

• Two key contributors to India’s imports are: Crude Oil and Gold. Rise in prices of these two products lead to rise in the import bill of the country.

• Inflation may also rise due to the depreciation of the domestic currency, which pushes up the rupee cost of imported items.

• On the other hand, depreciation of dollars will make imports cheaper and hence, will not lead to imported inflation.

• Hence, option (c) is correct.

Trend: Interrelationship between inflation and import

Approach: Dollar Depreciation will make the imports cheaper which helps to reduce the inflation. It can be eliminated as it does not cause inflation.

• Question 11 of 30 11. Question 1 points SCORES, a web based centralized grievance redressal system belongs to which of the following organisations? a) BSE b) NSE c) SEBI d) SBI Correct Answer: c Explanation: SCORES is a web based centralized grievance redress system of SEBI that was launched in June 2011. SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere. All the activities starting from lodging of a complaint till its closure by SEBI would be online in an automated environment and the complainant can view the status of his complaint online. According to the regulatory authority, complaints can be lodged on SCORES for any issues covered under the Sebi Act, Securities Contract Regulation Act, Depositories Act, and rules and regulations and provisions of Companies Act, 2013. Entities against which complaints are handled by SEBI include: Listed companies / registrar & transfer agent Brokers / stock exchanges Depository participants / depository Mutual funds Portfolio Managers Other entities (KYC Collective investment scheme, Merchant banker, Credit rating, foreign institutional investor etc.) Hence, option (c) is correct. Source: Indian Economy Trend: Financial Bodies and their initiatives in News Approach: Factual/knowledge based question Incorrect Answer: c Explanation: SCORES is a web based centralized grievance redress system of SEBI that was launched in June 2011. SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere. All the activities starting from lodging of a complaint till its closure by SEBI would be online in an automated environment and the complainant can view the status of his complaint online. According to the regulatory authority, complaints can be lodged on SCORES for any issues covered under the Sebi Act, Securities Contract Regulation Act, Depositories Act, and rules and regulations and provisions of Companies Act, 2013. Entities against which complaints are handled by SEBI include: Listed companies / registrar & transfer agent Brokers / stock exchanges Depository participants / depository Mutual funds Portfolio Managers Other entities (KYC Collective investment scheme, Merchant banker, Credit rating, foreign institutional investor etc.) Hence, option (c) is correct. Source: Indian Economy Trend: Financial Bodies and their initiatives in News Approach: Factual/knowledge based question

#### 11. Question

SCORES, a web based centralized grievance redressal system belongs to which of the following organisations?

Explanation:

• SCORES is a web based centralized grievance redress system of SEBI that was launched in June 2011.

• SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere.

• All the activities starting from lodging of a complaint till its closure by SEBI would be online in an automated environment and the complainant can view the status of his complaint online.

• According to the regulatory authority, complaints can be lodged on SCORES for any issues covered under the Sebi Act, Securities Contract Regulation Act, Depositories Act, and rules and regulations and provisions of Companies Act, 2013.

• Entities against which complaints are handled by SEBI include:

• Listed companies / registrar & transfer agent

• Brokers / stock exchanges

• Depository participants / depository

• Mutual funds

• Portfolio Managers

• Other entities (KYC Collective investment scheme, Merchant banker, Credit rating, foreign institutional investor etc.)

• Hence, option (c) is correct.

Trend: Financial Bodies and their initiatives in News

Approach: Factual/knowledge based question

Explanation:

• SCORES is a web based centralized grievance redress system of SEBI that was launched in June 2011.

• SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere.

• All the activities starting from lodging of a complaint till its closure by SEBI would be online in an automated environment and the complainant can view the status of his complaint online.

• Entities against which complaints are handled by SEBI include:

• Listed companies / registrar & transfer agent

• Brokers / stock exchanges

• Depository participants / depository

• Mutual funds

• Portfolio Managers

• Other entities (KYC Collective investment scheme, Merchant banker, Credit rating, foreign institutional investor etc.)

• Hence, option (c) is correct.

Trend: Financial Bodies and their initiatives in News

Approach: Factual/knowledge based question

• Question 12 of 30 12. Question 1 points What does ‘Ltd. (Limited)’ seen after a company’s name mean? a) A company that has listed a limited number of its shares on a recognised stock exchange. b) A company where the maximum number of shareholders is restricted to 200. c) A company established with specific and limited domain of functioning. d) A company where owners have only limited responsibility to pay back the liabilities of the company. Correct Answer: d Explanation: is a standard abbreviation for “limited,” a form of corporate structure. The term appears as a suffix that follows the company name, indicating that it is a public or private limited company. In a limited company, owners’ and shareholders’ liabilities are limited to the capital they originally invested. If such a company becomes insolvent, the owners’ personal assets remain protected because the business is a legal entity and liable for its debts. A public limited company means a company that is listed on a recognised stock exchange and whose shares are publicly traded. A private limited company refers to a company that is not listed on a stock exchange and the shares are held privately by the members concerned. Hence, option (d) is correct. Source: Indian Economy Trend: Properties of Public/Private companies Approach: knowledge based question Incorrect Answer: d Explanation: is a standard abbreviation for “limited,” a form of corporate structure. The term appears as a suffix that follows the company name, indicating that it is a public or private limited company. In a limited company, owners’ and shareholders’ liabilities are limited to the capital they originally invested. If such a company becomes insolvent, the owners’ personal assets remain protected because the business is a legal entity and liable for its debts. A public limited company means a company that is listed on a recognised stock exchange and whose shares are publicly traded. A private limited company refers to a company that is not listed on a stock exchange and the shares are held privately by the members concerned. Hence, option (d) is correct. Source: Indian Economy Trend: Properties of Public/Private companies Approach: knowledge based question

#### 12. Question

What does ‘Ltd. (Limited)’ seen after a company’s name mean?

• a) A company that has listed a limited number of its shares on a recognised stock exchange.

• b) A company where the maximum number of shareholders is restricted to 200.

• c) A company established with specific and limited domain of functioning.

• d) A company where owners have only limited responsibility to pay back the liabilities of the company.

Explanation:

• is a standard abbreviation for “limited,” a form of corporate structure. The term appears as a suffix that follows the company name, indicating that it is a public or private limited company.

• In a limited company, owners’ and shareholders’ liabilities are limited to the capital they originally invested. If such a company becomes insolvent, the owners’ personal assets remain protected because the business is a legal entity and liable for its debts.

• A public limited company means a company that is listed on a recognised stock exchange and whose shares are publicly traded. A private limited company refers to a company that is not listed on a stock exchange and the shares are held privately by the members concerned.

• Hence, option (d) is correct.

Trend: Properties of Public/Private companies

Approach: knowledge based question

Explanation:

• Hence, option (d) is correct.

Trend: Properties of Public/Private companies

Approach: knowledge based question

• Question 13 of 30 13. Question 1 points Consider the following statements with regard to ‘Bad Bank’? A Bad Bank is similar to an Asset Reconstruction Company (ARC) as it takes over the Non-Performing Assets (NPAs) from banks. The National Asset Reconstruction Company Limited (NARCL) has been established as a bad bank. Which of the above statements is /are *incorrect? a) An entity that buys government securities directly from the government. b) An entity that buys securities directly from the primary market. c) Both (a) and (b) d) Neither (a) nor (b) Correct Answer: a Explanation: The system of Primary Dealers (PDs) in the Government Securities Market was introduced by Reserve Bank of India in 1995 to strengthen the market infrastructure of Government Securities and put in place an improved, efficient secondary market trading system. This was to encourage holding of Government Securities on large scale and make the market more vibrant and liquid. In 2006-07, RBI gave Banks the option to undertake Primary Dealership business departmentally. A primary dealer is an entity that buys government securities directly from a government, with the intention of reselling them to others. The following classes of institutions are eligible to apply for Primary Dealership: Subsidiary of scheduled commercial bank/s and all India financial institution/s dedicated predominantly to the securities business and in particular to the government securities market. Company incorporated under the Companies Act, 1956 and engaged predominantly in the securities business and in particular the government securities market. Subsidiaries/ joint ventures set up by entities incorporated abroad under the approval of Foreign Investment Promotion Board (FIPB). PDs are permitted to borrow, lend and trade in the money market including call money market and participate in Repos. PDs are not allowed to undertake broking in equity, trading / broking in commodities, gold and foreign exchange. Their total investment pattern should include minimum 50% in Government Securities. Hence, option (a) is correct. Source: Indian Economy Trend: RBI and its role in financial market Approach: knowledge based question Incorrect Answer: a Explanation: The system of Primary Dealers (PDs) in the Government Securities Market was introduced by Reserve Bank of India in 1995 to strengthen the market infrastructure of Government Securities and put in place an improved, efficient secondary market trading system. This was to encourage holding of Government Securities on large scale and make the market more vibrant and liquid. In 2006-07, RBI gave Banks the option to undertake Primary Dealership business departmentally. A primary dealer is an entity that buys government securities directly from a government, with the intention of reselling them to others. The following classes of institutions are eligible to apply for Primary Dealership: Subsidiary of scheduled commercial bank/s and all India financial institution/s dedicated predominantly to the securities business and in particular to the government securities market. Company incorporated under the Companies Act, 1956 and engaged predominantly in the securities business and in particular the government securities market. Subsidiaries/ joint ventures set up by entities incorporated abroad under the approval of Foreign Investment Promotion Board (FIPB). PDs are permitted to borrow, lend and trade in the money market including call money market and participate in Repos. PDs are not allowed to undertake broking in equity, trading / broking in commodities, gold and foreign exchange. Their total investment pattern should include minimum 50% in Government Securities. Hence, option (a) is correct. * Source: Indian Economy Trend: RBI and its role in financial market Approach: knowledge based question

#### 13. Question

Consider the following statements with regard to ‘Bad Bank’?

• A Bad Bank is similar to an Asset Reconstruction Company (ARC) as it takes over the Non-Performing Assets (NPAs) from banks.

• The National Asset Reconstruction Company Limited (NARCL) has been established as a bad bank.

Which of the above statements is /are *incorrect*?

• a) An entity that buys government securities directly from the government.

• b) An entity that buys securities directly from the primary market.

• c) Both (a) and (b)

• d) Neither (a) nor (b)

Explanation:

• The system of Primary Dealers (PDs) in the Government Securities Market was introduced by Reserve Bank of India in 1995 to strengthen the market infrastructure of Government Securities and put in place an improved, efficient secondary market trading system.

• This was to encourage holding of Government Securities on large scale and make the market more vibrant and liquid. In 2006-07, RBI gave Banks the option to undertake Primary Dealership business departmentally.

• A primary dealer is an entity that buys government securities directly from a government, with the intention of reselling them to others.

• The following classes of institutions are eligible to apply for Primary Dealership:

• Subsidiary of scheduled commercial bank/s and all India financial institution/s dedicated predominantly to the securities business and in particular to the government securities market.

• Company incorporated under the Companies Act, 1956 and engaged predominantly in the securities business and in particular the government securities market.

• Subsidiaries/ joint ventures set up by entities incorporated abroad under the approval of Foreign Investment Promotion Board (FIPB).

• PDs are permitted to borrow, lend and trade in the money market including call money market and participate in Repos.

• PDs are not allowed to undertake broking in equity, trading / broking in commodities, gold and foreign exchange. Their total investment pattern should include minimum 50% in Government Securities.

• Hence, option (a) is correct.

Trend: RBI and its role in financial market

Approach: knowledge based question

Explanation:

• A primary dealer is an entity that buys government securities directly from a government, with the intention of reselling them to others.

• The following classes of institutions are eligible to apply for Primary Dealership:

• Subsidiary of scheduled commercial bank/s and all India financial institution/s dedicated predominantly to the securities business and in particular to the government securities market.

• Company incorporated under the Companies Act, 1956 and engaged predominantly in the securities business and in particular the government securities market.

• Subsidiaries/ joint ventures set up by entities incorporated abroad under the approval of Foreign Investment Promotion Board (FIPB).

• PDs are permitted to borrow, lend and trade in the money market including call money market and participate in Repos.

• Hence, option (a) is correct.

Trend: RBI and its role in financial market

Approach: knowledge based question

• Question 14 of 30 14. Question 1 points Consider the following pairs: Term Money- Funds lent or borrowed over a span of 14 days and up to 1 year Notice Money – Funds lent or borrowed for 1 day. Cash Management Bills- Government securities issued for maturities of less than 91 days Certificates of Deposit- Issued by banks for more than 7 days and less than 1 year How many of the above pairs are correctly matched? (a) Only one (b) Only two c) Only three d) All four Correct Answer: c Explanation: Term Money: funds lent or borrowed over a span of 14 days and up to 1 year with or without any collateral protection. Hence, pair 1 is correctly matched. Call and Notice Money: In the context of Call Money, funds are borrowed and lent for one day, while they are borrowed and lent for up to 14 days on the Notice Market, with or without any collateral protection. Hence, pair 2 is incorrectly matched. Cash Management Bills (CMBs): In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days. Hence, pair 3 is correctly matched. Certificates of Deposits are financial instruments that commercial banks issue. CDs can be issued by (I) scheduled commercial banks and (ii) select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI. In 2021, RBI decided to permit Regional Rural Banks (RRBs) to issue Certificates of Deposit Certificates of Deposit (CDs) were introduced in India in 1989. Cooperative banks cannot issue CDs. The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. Hence, pair 4 is correctly matched. Hence, option (c) is correct. Source: Indian Economy Trend: Financial instruments Approach: knowledge based question Incorrect Answer: c Explanation: Term Money: funds lent or borrowed over a span of 14 days and up to 1 year with or without any collateral protection. Hence, pair 1 is correctly matched. Call and Notice Money: In the context of Call Money, funds are borrowed and lent for one day, while they are borrowed and lent for up to 14 days on the Notice Market, with or without any collateral protection. Hence, pair 2 is incorrectly matched. Cash Management Bills (CMBs): In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days. Hence, pair 3 is correctly matched. Certificates of Deposits are financial instruments that commercial banks issue. CDs can be issued by (I) scheduled commercial banks and (ii) select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI. In 2021, RBI decided to permit Regional Rural Banks (RRBs) to issue Certificates of Deposit Certificates of Deposit (CDs) were introduced in India in 1989. Cooperative banks cannot issue CDs. The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. Hence, pair 4 is correctly matched. Hence, option (c) is correct. Source: Indian Economy Trend: Financial instruments Approach: knowledge based question

#### 14. Question

Consider the following pairs:

• Term Money- Funds lent or borrowed over a span of 14 days and up to 1 year

• Notice Money – Funds lent or borrowed for 1 day.

• Cash Management Bills- Government securities issued for maturities of less than 91 days

• Certificates of Deposit- Issued by banks for more than 7 days and less than 1 year

How many of the above pairs are correctly matched?

• (a) Only one

• (b) Only two

• c) Only three

• d) All four

Explanation:

• Term Money: funds lent or borrowed over a span of 14 days and up to 1 year with or without any collateral protection. Hence, pair 1 is correctly matched.

• Call and Notice Money: In the context of Call Money, funds are borrowed and lent for one day, while they are borrowed and lent for up to 14 days on the Notice Market, with or without any collateral protection. Hence, pair 2 is incorrectly matched.

• Cash Management Bills (CMBs): In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government of India.

• The CMBs have the generic character of T-bills but are issued for maturities less than 91 days. Hence, pair 3 is correctly matched.

• Certificates of Deposits are financial instruments that commercial banks issue. CDs can be issued by (I) scheduled commercial banks and (ii) select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI.

• In 2021, RBI decided to permit Regional Rural Banks (RRBs) to issue Certificates of Deposit

• Certificates of Deposit (CDs) were introduced in India in 1989. Cooperative banks cannot issue CDs. The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. Hence, pair 4 is correctly matched.

• Hence, option (c) is correct.

Trend: Financial instruments

Approach: knowledge based question

Explanation:

• Term Money: funds lent or borrowed over a span of 14 days and up to 1 year with or without any collateral protection. Hence, pair 1 is correctly matched.

• The CMBs have the generic character of T-bills but are issued for maturities less than 91 days. Hence, pair 3 is correctly matched.

• In 2021, RBI decided to permit Regional Rural Banks (RRBs) to issue Certificates of Deposit

• Hence, option (c) is correct.

Trend: Financial instruments

Approach: knowledge based question

• Question 15 of 30 15. Question 1 points Consider the following: Repo operations are a part of Money market activities. The Negotiated Dealing System (NDS) is an electronic trading platform operated by the SEBI to facilitate the issuing and exchange of money market instruments. Which of the above given statements is/are correct? a) 1 only b) 2 only c) Both 1 and 2 d) Neither 1 nor 2 Correct Answer: a Explanation: Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to all commercial banks in the event of any shortfall of funds. Repo enables collateralized short term borrowing and lending through sale/purchase operations in debt instruments. The duration of Repo borrowing is generally available for overnight, 7 days and 14-days. The money market is a component of the economy that provides short term funds. The money market deals in short-term funds, generally for a period of a year or less. Hence, statement 1 is correct. The Negotiated Dealing System, or NDS, is an electronic trading platform operated by the Reserve Bank of India (RBI) to facilitate the issuing and exchange of government securities and other types of money market instruments. It was introduced in 2002.Hence, statement 2 is incorrect. Hence, option (a) is correct. Source: Indian Economy Trend: RBI and monetary policy instruments Approach: Applied knowledge Incorrect Answer: a Explanation: Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to all commercial banks in the event of any shortfall of funds. Repo enables collateralized short term borrowing and lending through sale/purchase operations in debt instruments. The duration of Repo borrowing is generally available for overnight, 7 days and 14-days. The money market is a component of the economy that provides short term funds. The money market deals in short-term funds, generally for a period of a year or less. Hence, statement 1 is correct. The Negotiated Dealing System, or NDS, is an electronic trading platform operated by the Reserve Bank of India (RBI) to facilitate the issuing and exchange of government securities and other types of money market instruments. It was introduced in 2002.Hence, statement 2 is incorrect. Hence, option (a) is correct. Source: Indian Economy Trend: RBI and monetary policy instruments Approach: Applied knowledge

#### 15. Question

Consider the following:

• Repo operations are a part of Money market activities.

• The Negotiated Dealing System (NDS) is an electronic trading platform operated by the SEBI to facilitate the issuing and exchange of money market instruments.

Which of the above given statements is/are correct?

• c) Both 1 and 2

• d) Neither 1 nor 2

Explanation:

• Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to all commercial banks in the event of any shortfall of funds. Repo enables collateralized short term borrowing and lending through sale/purchase operations in debt instruments.

• The duration of Repo borrowing is generally available for overnight, 7 days and 14-days. The money market is a component of the economy that provides short term funds. The money market deals in short-term funds, generally for a period of a year or less. Hence, statement 1 is correct.

• The Negotiated Dealing System, or NDS, is an electronic trading platform operated by the Reserve Bank of India (RBI) to facilitate the issuing and exchange of government securities and other types of money market instruments. It was introduced in 2002.Hence, statement 2 is incorrect.

• Hence, option (a) is correct.

Trend: RBI and monetary policy instruments

Approach: Applied knowledge

Explanation:

• Hence, option (a) is correct.

Trend: RBI and monetary policy instruments

Approach: Applied knowledge

• Question 16 of 30 16. Question 1 points Which of the following are the possible consequence/s of increasing Current account deficit? Demand for foreign currency will rise, leading to the depreciation of the home currency. Foreign exchange reserves will get depleted. Imported goods and services will become costlier Select the correct answer using the code given below: a) 1 only b) 2 only c) 1 and 2 only d) 1,2 and 3 Correct Answer: d Explanation: Current account Deficit occurs when current account income is less than current account outgoes. What happens if the current account deficit keeps worsening? Depreciation of Rupee: Due to the ballooning current account deficit, the demand for foreign currency will rise, leading to the depreciation of the home currency. For example; if the current account income is 100 $ and outgoing is 200 $, we will have to pay them 100$ more. This will lead to more demand for foreign currency which will appreciate in comparison to domestic currency. Hence, statement 1 is correct. Depleted foreign exchange reserves: When CAD increases, Rupee will depreciate. The Reserve Bank of India have to defend against the fall of the rupee and this depletes the forex reserves. Hence, statement 2 is correct. Costlier Imports: The depreciating rupee will make imports costlier, therefore, for a country like India, which imports costly items and commodities like crude oil, semiconductors, and electronic goods, the burden on the exchequer is rising and this is pushing the current account deficit higher. Hence, statement 3 is correct. Hence, option (d) is correct. Source: Indian Economy Trend: Interrelationship between current account deficit and import Approach: Applied knowledge Incorrect Answer: d Explanation: Current account Deficit occurs when current account income is less than current account outgoes. What happens if the current account deficit keeps worsening? Depreciation of Rupee: Due to the ballooning current account deficit, the demand for foreign currency will rise, leading to the depreciation of the home currency. For example; if the current account income is 100 $ and outgoing is 200 $, we will have to pay them 100$ more. This will lead to more demand for foreign currency which will appreciate in comparison to domestic currency. Hence, statement 1 is correct. Depleted foreign exchange reserves: When CAD increases, Rupee will depreciate. The Reserve Bank of India have to defend against the fall of the rupee and this depletes the forex reserves. Hence, statement 2 is correct. Costlier Imports: The depreciating rupee will make imports costlier, therefore, for a country like India, which imports costly items and commodities like crude oil, semiconductors, and electronic goods, the burden on the exchequer is rising and this is pushing the current account deficit higher. Hence, statement 3 is correct. Hence, option (d) is correct. Source: Indian Economy Trend: Interrelationship between current account deficit and import Approach: Applied knowledge

#### 16. Question

Which of the following are the possible consequence/s of increasing Current account deficit?

• Demand for foreign currency will rise, leading to the depreciation of the home currency.

• Foreign exchange reserves will get depleted.

• Imported goods and services will become costlier

Select the correct answer using the code given below:

• c) 1 and 2 only

• d) 1,2 and 3

Explanation:

• Current account Deficit occurs when current account income is less than current account outgoes. What happens if the current account deficit keeps worsening?

• Depreciation of Rupee: Due to the ballooning current account deficit, the demand for foreign currency will rise, leading to the depreciation of the home currency.

• For example; if the current account income is 100 $ and outgoing is 200 $, we will have to pay them 100$ more. This will lead to more demand for foreign currency which will appreciate in comparison to domestic currency. Hence, statement 1 is correct.

• Depleted foreign exchange reserves: When CAD increases, Rupee will depreciate. The Reserve Bank of India have to defend against the fall of the rupee and this depletes the forex reserves. Hence, statement 2 is correct.

• Costlier Imports: The depreciating rupee will make imports costlier, therefore, for a country like India, which imports costly items and commodities like crude oil, semiconductors, and electronic goods, the burden on the exchequer is rising and this is pushing the current account deficit higher. Hence, statement 3 is correct.

• Hence, option (d) is correct.

Trend: Interrelationship between current account deficit and import

Approach: Applied knowledge

Explanation:

• Current account Deficit occurs when current account income is less than current account outgoes. What happens if the current account deficit keeps worsening?

• Depreciation of Rupee: Due to the ballooning current account deficit, the demand for foreign currency will rise, leading to the depreciation of the home currency.

• Hence, option (d) is correct.

Trend: Interrelationship between current account deficit and import

Approach: Applied knowledge

• Question 17 of 30 17. Question 1 points With reference to shares, consider the following statements: Equity shares and Preference shares are the two most common kind of shares issued by the companies. While Equity share owners have the right to vote on various company matters, Preference share owners don’t. Risk of loss is more in Equity shares in comparison to preference shares. How many of the above statements are correct? a) Only one b) Only two c) All three d) None Correct Answers: b Explanation: Equity shares are also referred to as ordinary shares. They are one of the most common kinds of shares. Preference shares, also known as preferred stock, is an exclusive share option which enables shareholders to receive dividends announced by the company before the equity shareholders. Hence, statement 1 is incorrect. Owners of Equity shares have the right to vote on various company matters. Preference shareholders do not have the right to vote. Hence, statement 2 is correct. Preference shares provide the shareholders with the special right to claim dividends during the company lifetime, and also with the option to claim repayment of capital, in case of the wind up of the company. In Equity shares the dividend paid is a proportion of profit. Equity shareholders are not entitled to a fixed dividend. Hence, statement 3 is correct. Hence, option (b) is correct. Source: Indian Economy Trend: Types of shares of a company Approach: knowledge based question Incorrect Answers: b Explanation: Equity shares are also referred to as ordinary shares. They are one of the most common kinds of shares. Preference shares, also known as preferred stock, is an exclusive share option which enables shareholders to receive dividends announced by the company before the equity shareholders. Hence, statement 1 is incorrect. Owners of Equity shares have the right to vote on various company matters. Preference shareholders do not have the right to vote. Hence, statement 2 is correct. Preference shares provide the shareholders with the special right to claim dividends during the company lifetime, and also with the option to claim repayment of capital, in case of the wind up of the company. In Equity shares the dividend paid is a proportion of profit. Equity shareholders are not entitled to a fixed dividend. Hence, statement 3 is correct. Hence, option (b) is correct. Source: Indian Economy Trend: Types of shares of a company Approach: knowledge based question

#### 17. Question

With reference to shares, consider the following statements:

• Equity shares and Preference shares are the two most common kind of shares issued by the companies.

• While Equity share owners have the right to vote on various company matters, Preference share owners don’t.

• Risk of loss is more in Equity shares in comparison to preference shares.

How many of the above statements are correct?

• a) Only one

• b) Only two

• c) All three

Answers: b

Explanation:

• Equity shares are also referred to as ordinary shares. They are one of the most common kinds of shares. Preference shares, also known as preferred stock, is an exclusive share option which enables shareholders to receive dividends announced by the company before the equity shareholders. Hence, statement 1 is incorrect.

• Owners of Equity shares have the right to vote on various company matters. Preference shareholders do not have the right to vote. Hence, statement 2 is correct.

• Preference shares provide the shareholders with the special right to claim dividends during the company lifetime, and also with the option to claim repayment of capital, in case of the wind up of the company. In Equity shares the dividend paid is a proportion of profit. Equity shareholders are not entitled to a fixed dividend. Hence, statement 3 is correct.

• Hence, option (b) is correct.

Trend: Types of shares of a company

Approach: knowledge based question

Answers: b

Explanation:

• Owners of Equity shares have the right to vote on various company matters. Preference shareholders do not have the right to vote. Hence, statement 2 is correct.

• Hence, option (b) is correct.

Trend: Types of shares of a company

Approach: knowledge based question

• Question 18 of 30 18. Question 1 points Consider the following statements: Statement-I: The Nominal effective exchange rate (NEER) reflects the relative value of the domestic currency as compared to other foreign currencies. Statement-II: It is regarded as, a more accurate measure for assessing the value of a currency and the external competitiveness of an economy as it is adjusted for inflation. Which one of the following is correct in respect of the above statements? a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I c) Statement-I is correct but Statement-II is incorrect d) Statement-I is incorrect but Statement-II is correct Correct Answer: c Explanation: The Nominal effective exchange rate (NEER) is the unadjusted, weighted average rate at which one country’s currency is exchanged for a basket of foreign currencies. NEER is a weighted index in which countries with which India trades more are given greater weight in the index. To calculate the Nominal Effective Exchange Rate (NEER) of the rupee value of 6 currencies as well as 40 trading partners is taken in to account by the Reserve Bank of India. The 6 Currencies are: Dollars, the Euros, Pounds Japan, China (Renminbi), and the Special Administrative Region of Hong Kong (SAR).Hence, statement 1 is correct. Real effective exchange rate (REER) reflects the inflation-adjusted value of the domestic currency as compared to other major currencies being traded. It is regarded as a more accurate measure as it is adjusted for inflation. Hence, statement 2 is incorrect. Hence, option (c) is correct. Source: Indian Economy Trend: NEER and REER have been asked by UPSC Approach: Applied knowledge on basic concepts of NEER and REER Incorrect Answer: c Explanation: The Nominal effective exchange rate (NEER) is the unadjusted, weighted average rate at which one country’s currency is exchanged for a basket of foreign currencies. NEER is a weighted index in which countries with which India trades more are given greater weight in the index. To calculate the Nominal Effective Exchange Rate (NEER) of the rupee value of 6 currencies as well as 40 trading partners is taken in to account by the Reserve Bank of India. The 6 Currencies are: Dollars, the Euros, Pounds Japan, China (Renminbi), and the Special Administrative Region of Hong Kong (SAR).Hence, statement 1 is correct. Real effective exchange rate (REER) reflects the inflation-adjusted value of the domestic currency as compared to other major currencies being traded. It is regarded as a more accurate measure as it is adjusted for inflation. Hence, statement 2 is incorrect. Hence, option (c) is correct. Source: Indian Economy Trend: NEER and REER have been asked by UPSC Approach: Applied knowledge on basic concepts of NEER and REER

#### 18. Question

Consider the following statements:

Statement-I:

The Nominal effective exchange rate (NEER) reflects the relative value of the domestic currency as compared to other foreign currencies.

Statement-II:

It is regarded as, a more accurate measure for assessing the value of a currency and the external competitiveness of an economy as it is adjusted for inflation.

Which one of the following is correct in respect of the above statements?

• a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

• b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

• c) Statement-I is correct but Statement-II is incorrect

• d) Statement-I is incorrect but Statement-II is correct

Explanation:

• The Nominal effective exchange rate (NEER) is the unadjusted, weighted average rate at which one country’s currency is exchanged for a basket of foreign currencies.

• NEER is a weighted index in which countries with which India trades more are given greater weight in the index.

• To calculate the Nominal Effective Exchange Rate (NEER) of the rupee value of 6 currencies as well as 40 trading partners is taken in to account by the Reserve Bank of India.

• The 6 Currencies are: Dollars, the Euros, Pounds Japan, China (Renminbi), and the Special Administrative Region of Hong Kong (SAR).Hence, statement 1 is correct.

• Real effective exchange rate (REER) reflects the inflation-adjusted value of the domestic currency as compared to other major currencies being traded. It is regarded as a more accurate measure as it is adjusted for inflation. Hence, statement 2 is incorrect.

• Hence, option (c) is correct.

Trend: NEER and REER have been asked by UPSC

Approach: Applied knowledge on basic concepts of NEER and REER

Explanation:

• The Nominal effective exchange rate (NEER) is the unadjusted, weighted average rate at which one country’s currency is exchanged for a basket of foreign currencies.

• NEER is a weighted index in which countries with which India trades more are given greater weight in the index.

• To calculate the Nominal Effective Exchange Rate (NEER) of the rupee value of 6 currencies as well as 40 trading partners is taken in to account by the Reserve Bank of India.

• The 6 Currencies are: Dollars, the Euros, Pounds Japan, China (Renminbi), and the Special Administrative Region of Hong Kong (SAR).Hence, statement 1 is correct.

• Hence, option (c) is correct.

Trend: NEER and REER have been asked by UPSC

Approach: Applied knowledge on basic concepts of NEER and REER

• Question 19 of 30 19. Question 1 points An Investment grade bond should have a credit rating of at least: a) CCC b) BBB c) A+ d) AAA Correct Answer: b Explanation: Bonds are financial instruments that pay fixed income at regular intervals for a fixed tenor and repay the principal at the end of the tenor. Bonds may be secured to a specific asset, whereas unsecured bonds rely on the issuer’s creditworthiness and income-generating capacity. Credit rating agencies evaluate the risk of default associated with bonds and accordingly assign ratings. There are several credit rating agencies worldwide. Globally, Standards & Poor, Fitch, and Moody are some of the most prestigious credit rating agencies. There are six credit rating agencies registered under SEBI namely, CRISIL, ICRA, CARE, SMERA, Fitch India and Brickwork Ratings. Ratings range from AAA to C and D. Investment-grade bond refers to bonds with a relatively low default risk compared to other bonds, i.e., the credit risk ranges from lowest to moderate levels. Typically, investment-grade bonds include bonds with a rating of BBB or higher. Companies with reasonable debt levels, good earnings potential and decent debt-paying history are assigned investment-grade ratings. On the contrary, bonds with a lower credit rating, such as BB, B or CCC, are high-risk and low-credit quality bonds commonly referred to as junk bonds. Investment in junk bonds is highly speculative. Hence, option (b) is correct. Source: Indian Economy Trend: Terms in News Approach: Factual question Incorrect Answer: b Explanation: Bonds are financial instruments that pay fixed income at regular intervals for a fixed tenor and repay the principal at the end of the tenor. Bonds may be secured to a specific asset, whereas unsecured bonds rely on the issuer’s creditworthiness and income-generating capacity. Credit rating agencies evaluate the risk of default associated with bonds and accordingly assign ratings. There are several credit rating agencies worldwide. Globally, Standards & Poor, Fitch, and Moody are some of the most prestigious credit rating agencies. There are six credit rating agencies registered under SEBI namely, CRISIL, ICRA, CARE, SMERA, Fitch India and Brickwork Ratings. Ratings range from AAA to C and D. Investment-grade bond refers to bonds with a relatively low default risk compared to other bonds, i.e., the credit risk ranges from lowest to moderate levels. Typically, investment-grade bonds include bonds with a rating of BBB or higher. Companies with reasonable debt levels, good earnings potential and decent debt-paying history are assigned investment-grade ratings. On the contrary, bonds with a lower credit rating, such as BB, B or CCC, are high-risk and low-credit quality bonds commonly referred to as junk bonds. Investment in junk bonds is highly speculative. Hence, option (b) is correct. Source: Indian Economy Trend: Terms in News Approach: Factual question

#### 19. Question

An Investment grade bond should have a credit rating of at least:

Explanation:

• Bonds are financial instruments that pay fixed income at regular intervals for a fixed tenor and repay the principal at the end of the tenor. Bonds may be secured to a specific asset, whereas unsecured bonds rely on the issuer’s creditworthiness and income-generating capacity.

• Credit rating agencies evaluate the risk of default associated with bonds and accordingly assign ratings. There are several credit rating agencies worldwide. Globally, Standards & Poor, Fitch, and Moody are some of the most prestigious credit rating agencies.

• There are six credit rating agencies registered under SEBI namely, CRISIL, ICRA, CARE, SMERA, Fitch India and Brickwork Ratings.

• Ratings range from AAA to C and D.

• Investment-grade bond refers to bonds with a relatively low default risk compared to other bonds, i.e., the credit risk ranges from lowest to moderate levels. Typically, investment-grade bonds include bonds with a rating of BBB or higher. Companies with reasonable debt levels, good earnings potential and decent debt-paying history are assigned investment-grade ratings.

• On the contrary, bonds with a lower credit rating, such as BB, B or CCC, are high-risk and low-credit quality bonds commonly referred to as junk bonds. Investment in junk bonds is highly speculative.

• Hence, option (b) is correct.

Trend: Terms in News

Approach: Factual question

Explanation:

• There are six credit rating agencies registered under SEBI namely, CRISIL, ICRA, CARE, SMERA, Fitch India and Brickwork Ratings.

• Ratings range from AAA to C and D.

• Hence, option (b) is correct.

Trend: Terms in News

Approach: Factual question

• Question 20 of 30 20. Question 1 points Which of the following best describes ‘authorized share capital’? a) It is the maximum amount of capital for which shares can be issued by a company. b) It is the amount of money for which shares were issued to the shareholder for which payment was made by the shareholder. c) It is the value of a company according to the share market. d) It is the capital raised by issuance of additional shares by a company. Correct Answer: a Explanation: The authorized capital of a company is the maximum amount of share capital for which shares can be issued by a company. The initial authorized capital of the Company is mentioned in the Memorandum of Association of the Company and is usually Rs. 1 lakh. The company can increase the capital at any time with shareholders’ approval and by paying an additional fee to the Registrar of Companies. Illustration: If ABC Private Limited Company has an authorized capital of Rs.10 lakh, it means that ABC Private Limited Company can issue shares worth up to Rs.10 lakhs to its investors. ABC Private Limited Company cannot issue shares worth Rs.11 lakhs to its investors. However, the Company can still issue shares worth only Rs.5 lakh to its investors – as the company has not issued shares in excess of the authorized capital. Hence, option (a) is correct. Source: Indian Economy Trend: Nature and types of share capital Approach: Basic concepts Incorrect Answer: a Explanation: The authorized capital of a company is the maximum amount of share capital for which shares can be issued by a company. The initial authorized capital of the Company is mentioned in the Memorandum of Association of the Company and is usually Rs. 1 lakh. The company can increase the capital at any time with shareholders’ approval and by paying an additional fee to the Registrar of Companies. Illustration: If ABC Private Limited Company has an authorized capital of Rs.10 lakh, it means that ABC Private Limited Company can issue shares worth up to Rs.10 lakhs to its investors. ABC Private Limited Company cannot issue shares worth Rs.11 lakhs to its investors. However, the Company can still issue shares worth only Rs.5 lakh to its investors – as the company has not issued shares in excess of the authorized capital. Hence, option (a) is correct. Source: Indian Economy Trend: Nature and types of share capital Approach: Basic concepts

#### 20. Question

Which of the following best describes ‘authorized share capital’?

• a) It is the maximum amount of capital for which shares can be issued by a company.

• b) It is the amount of money for which shares were issued to the shareholder for which payment was made by the shareholder.

• c) It is the value of a company according to the share market.

• d) It is the capital raised by issuance of additional shares by a company.

Explanation:

• The authorized capital of a company is the maximum amount of share capital for which shares can be issued by a company.

• The initial authorized capital of the Company is mentioned in the Memorandum of Association of the Company and is usually Rs. 1 lakh.

• The company can increase the capital at any time with shareholders’ approval and by paying an additional fee to the Registrar of Companies.

• Illustration: If ABC Private Limited Company has an authorized capital of Rs.10 lakh, it means that ABC Private Limited Company can issue shares worth up to Rs.10 lakhs to its investors. ABC Private Limited Company cannot issue shares worth Rs.11 lakhs to its investors. However, the Company can still issue shares worth only Rs.5 lakh to its investors – as the company has not issued shares in excess of the authorized capital.

• Hence, option (a) is correct.

Trend: Nature and types of share capital

Approach: Basic concepts

Explanation:

• The authorized capital of a company is the maximum amount of share capital for which shares can be issued by a company.

• The initial authorized capital of the Company is mentioned in the Memorandum of Association of the Company and is usually Rs. 1 lakh.

• The company can increase the capital at any time with shareholders’ approval and by paying an additional fee to the Registrar of Companies.

• Hence, option (a) is correct.

Trend: Nature and types of share capital

Approach: Basic concepts

• Question 21 of 30 21. Question 1 points Earth’s history is characterised by several eons, such as Hadeon or Archean based on: the prevalence of certain species of human beings the use of types of tools the kinds of fossil and the classification of rock strata How many of the statements given above are correct? a) Only one b) Only two c) All three d) None Correct Solution: a) Justification: The geologic time scale is the calendar for events in Earth’s history. It subdivides all time into units of abstract time called (in descending order of duration) – eons (about a billion years), eras, periods, epochs, and ages. Each of these categories is further divided into sub-categories. For instance, Earth’s history is characterised by four eons, including ○ Hadeon (oldest), ○ Archean, ○ Proterozoic, and ○ Phanerozoic (youngest). The enumeration of these geologic time units is based on stratigraphy, which is the correlation and classification of rock strata – which contains different kinds of fossils characterising different intervals of time. Officially, we are in the Phanerozoic eon, Cenozoic era, Quaternary period, Holocene epoch and the Meghalayan age. Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf Trend: Basic concepts related to geological time scale Approach: Factual/knowledge based question Incorrect Solution: a) Justification: The geologic time scale is the calendar for events in Earth’s history. It subdivides all time into units of abstract time called (in descending order of duration) – eons (about a billion years), eras, periods, epochs, and ages. Each of these categories is further divided into sub-categories. For instance, Earth’s history is characterised by four eons, including ○ Hadeon (oldest), ○ Archean, ○ Proterozoic, and ○ Phanerozoic (youngest). The enumeration of these geologic time units is based on stratigraphy, which is the correlation and classification of rock strata – which contains different kinds of fossils characterising different intervals of time. Officially, we are in the Phanerozoic eon, Cenozoic era, Quaternary period, Holocene epoch and the Meghalayan age. Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf Trend: Basic concepts related to geological time scale Approach: Factual/knowledge based question

#### 21. Question

Earth’s history is characterised by several eons, such as Hadeon or Archean based on:

• the prevalence of certain species of human beings

• the use of types of tools

• the kinds of fossil and the classification of rock strata

How many of the statements given above are correct?

• a) Only one

• b) Only two

• c) All three

Solution: a)

Justification: The geologic time scale is the calendar for events in Earth’s history.

• It subdivides all time into units of abstract time called (in descending order of duration) – eons (about a billion years), eras, periods, epochs, and ages.

• Each of these categories is further divided into sub-categories. For instance, Earth’s history is characterised by four eons, including ○ Hadeon (oldest), ○ Archean, ○ Proterozoic, and ○ Phanerozoic (youngest).

• The enumeration of these geologic time units is based on stratigraphy, which is the correlation and classification of rock strata – which contains different kinds of fossils characterising different intervals of time.

• Officially, we are in the Phanerozoic eon, Cenozoic era, Quaternary period, Holocene epoch and the Meghalayan age.

Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf

Trend: Basic concepts related to geological time scale

Approach: Factual/knowledge based question

Solution: a)

Justification: The geologic time scale is the calendar for events in Earth’s history.

• It subdivides all time into units of abstract time called (in descending order of duration) – eons (about a billion years), eras, periods, epochs, and ages.

• Officially, we are in the Phanerozoic eon, Cenozoic era, Quaternary period, Holocene epoch and the Meghalayan age.

Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf

Trend: Basic concepts related to geological time scale

Approach: Factual/knowledge based question

• Question 22 of 30 22. Question 1 points The moon’s presence affects which of the following on earth or related to earth? Stabilizing Earth’s climate Regulating Earth’s rotation on its axis Affecting reproductive cycles of marine life Which of the statements given above is/are correct? a) 1 and 2 only b) 2 only c) 1 and 3 only d) 1, 2 and 3 Correct Solution: d) Justification: The moon has had a profound impact on the evolution of life on Earth: Water on Earth: The planet that collided with Earth, ‘Theia’ came from the outer solar system and delivered large quantities of water to Earth. Impact on Tectonic Plates: The moon’s pull of gravity might have set our tectonic plates. Impact of moon’s gravitational pull: Moon’s gravitational pull helps transport heat away from the equator and towards the poles, fundamentally shaping the earth’s climate. Impact on Earth’s rotation: Moon also stabilises the Earth’s rotation on its axis by slowing Earth’s rotation on its axis. The Moon’s presence helps stabilize Earth’s axial tilt and its climate. This stability has allowed for the development of seasons, which have had a significant impact on the distribution of water and the evolution of life. Impact on Earth: The moon’s presence stabilizes Earth’s climate, transports heat and helps regulate the Earth’s rotation on its axis. Impact of Tides: The regular movement of water that exposes the land at the edge of the ocean, could have encouraged life to adapt and move from the oceans to land. Impact on biological cycle: Lunar cycles affect the reproductive cycles of marine life and other animal behaviours. o The laying and hatching of turtles’ egg pend on the timings of tides o Moonlight affects the behaviour of nocturnal animals and triggers species-wide reproduction e.g., Corals. Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf Trend: Effect of Lunar cycle on Earth Approach: Factual/knowledge based question Incorrect Solution: d) Justification: The moon has had a profound impact on the evolution of life on Earth: Water on Earth: The planet that collided with Earth, ‘Theia’ came from the outer solar system and delivered large quantities of water to Earth. Impact on Tectonic Plates: The moon’s pull of gravity might have set our tectonic plates. Impact of moon’s gravitational pull: Moon’s gravitational pull helps transport heat away from the equator and towards the poles, fundamentally shaping the earth’s climate. Impact on Earth’s rotation: Moon also stabilises the Earth’s rotation on its axis by slowing Earth’s rotation on its axis. The Moon’s presence helps stabilize Earth’s axial tilt and its climate. This stability has allowed for the development of seasons, which have had a significant impact on the distribution of water and the evolution of life. Impact on Earth: The moon’s presence stabilizes Earth’s climate, transports heat and helps regulate the Earth’s rotation on its axis. Impact of Tides: The regular movement of water that exposes the land at the edge of the ocean, could have encouraged life to adapt and move from the oceans to land. Impact on biological cycle: Lunar cycles affect the reproductive cycles of marine life and other animal behaviours. o The laying and hatching of turtles’ egg pend on the timings of tides o Moonlight affects the behaviour of nocturnal animals and triggers species-wide reproduction e.g., Corals. Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf Trend: Effect of Lunar cycle on Earth Approach: Factual/knowledge based question

#### 22. Question

The moon’s presence affects which of the following on earth or related to earth?

• Stabilizing Earth’s climate

• Regulating Earth’s rotation on its axis

• Affecting reproductive cycles of marine life

Which of the statements given above is/are correct?

• a) 1 and 2 only

• c) 1 and 3 only

• d) 1, 2 and 3

Solution: d)

Justification: The moon has had a profound impact on the evolution of life on Earth:

• Water on Earth: The planet that collided with Earth, ‘Theia’ came from the outer solar system and delivered large quantities of water to Earth.

• Impact on Tectonic Plates: The moon’s pull of gravity might have set our tectonic plates.

• Impact of moon’s gravitational pull: Moon’s gravitational pull helps transport heat away from the equator and towards the poles, fundamentally shaping the earth’s climate.

• Impact on Earth’s rotation: Moon also stabilises the Earth’s rotation on its axis by slowing Earth’s rotation on its axis. The Moon’s presence helps stabilize Earth’s axial tilt and its climate. This stability has allowed for the development of seasons, which have had a significant impact on the distribution of water and the evolution of life.

• Impact on Earth: The moon’s presence stabilizes Earth’s climate, transports heat and helps regulate the Earth’s rotation on its axis.

• Impact of Tides: The regular movement of water that exposes the land at the edge of the ocean, could have encouraged life to adapt and move from the oceans to land.

• Impact on biological cycle: Lunar cycles affect the reproductive cycles of marine life and other animal behaviours. o The laying and hatching of turtles’ egg pend on the timings of tides

o Moonlight affects the behaviour of nocturnal animals and triggers species-wide reproduction e.g., Corals.

Q Source: https://www.insightsonindia.com/wp-content/uploads/2023/08/CA-30-JULY-2023-MONTHLY.pdf

Trend: Effect of Lunar cycle on Earth