UPSC Static Quiz – Economy : 27 November 2024

UPSC Static Quiz – Economy : 27 November 2024 We will post 5 questions daily on static topics mentioned in the UPSC civil services preliminary examination syllabus. Each week will focus on a specific topic from the syllabus, such as History of India and Indian National Movement, Indian and World Geography, and more.We are excited to bring you our daily UPSC Static Quiz, designed to help you prepare for the UPSC Civil Services Preliminary Examination. Each day, we will post 5 questions on static topics mentioned in the UPSC syllabus. This week, we are focusing on Indian and World Geography.

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• Question 1 of 5 1. Question Consider the following statements regarding RBI Retail Direct (RBI-RD) scheme. RBI Retail Direct (RBI-RD) scheme facilitates investment in Government Securities by Individual Investors. The scheme provides investors an opportunity to invest only in primary market and not in secondary market. Sovereign Gold Bonds (SGB) are kept out of the scheme. How many of the above statements are incorrect? a) Only one b) Only two c) All three d) None Correct Solution: b) Only Statement 1 is correct. Reserve Bank of India (RBI) Retail Direct Scheme. The scheme provides investors an opportunity to invest in government securities in a safe and hassle-free way, in the primary and secondary market. Government securities under this scheme, includes Government of India Treasury Bills (T-Bills), Government of India dated securities (dated G-Sec), State Development Loans (SDLs), Sovereign Gold Bonds (SGB). Retail Direct Scheme offers retail investors the opportunity to buy securities directly and free of charges. Individual retailers can open a Gilt Securities Account, called a Retail Direct Gilt (RDG) account with RBI to participate in the buying and selling of government securities. Incorrect Solution: b) Only Statement 1 is correct. Reserve Bank of India (RBI) Retail Direct Scheme. The scheme provides investors an opportunity to invest in government securities in a safe and hassle-free way, in the primary and secondary market. Government securities under this scheme, includes Government of India Treasury Bills (T-Bills), Government of India dated securities (dated G-Sec), State Development Loans (SDLs), Sovereign Gold Bonds (SGB). Retail Direct Scheme offers retail investors the opportunity to buy securities directly and free of charges. Individual retailers can open a Gilt Securities Account, called a Retail Direct Gilt (RDG) account with RBI to participate in the buying and selling of government securities.

#### 1. Question

Consider the following statements regarding RBI Retail Direct (RBI-RD) scheme.

• RBI Retail Direct (RBI-RD) scheme facilitates investment in Government Securities by Individual Investors.

• The scheme provides investors an opportunity to invest only in primary market and not in secondary market.

• Sovereign Gold Bonds (SGB) are kept out of the scheme.

How many of the above statements are incorrect?

• a) Only one

• b) Only two

• c) All three

Solution: b)

Only Statement 1 is correct.

Reserve Bank of India (RBI) Retail Direct Scheme. The scheme provides investors an opportunity to invest in government securities in a safe and hassle-free way, in the primary and secondary market. Government securities under this scheme, includes Government of India Treasury Bills (T-Bills), Government of India dated securities (dated G-Sec), State Development Loans (SDLs), Sovereign Gold Bonds (SGB).

Retail Direct Scheme offers retail investors the opportunity to buy securities directly and free of charges. Individual retailers can open a Gilt Securities Account, called a Retail Direct Gilt (RDG) account with RBI to participate in the buying and selling of government securities.

Solution: b)

Only Statement 1 is correct.

• Question 2 of 5 2. Question As per Classical Economic thought Markets function best without government interference If the buyers and sellers in each market take their decisions following only their own self-interest, markets will collapse. Which of the above statements is/are correct? a) 1 only b) 2 only c) Both 1 and 2 d) Neither 1 nor 2 Correct Solution: a) Classical thought is also known as the non-interventionist school. As per them, markets function best without government interference. Classical economists observe that markets generally regulate themselves, when free of coercion. Adam Smith referred to this as a metaphorical “invisible hand,” which moves markets toward their natural equilibrium. So, if everyone acts in their self-interest, there will be no market collapse. In contrast to classical economics, Keynesian economics supports policies such as government intervention, deficit spending, control of the money supply, and a progressive income tax to counter recession and income inequality. Most classical economists reject these ideas. They assert that state intervention makes situations of economic slowdown worse. Incorrect Solution: a) Classical thought is also known as the non-interventionist school. As per them, markets function best without government interference. Classical economists observe that markets generally regulate themselves, when free of coercion. Adam Smith referred to this as a metaphorical “invisible hand,” which moves markets toward their natural equilibrium. So, if everyone acts in their self-interest, there will be no market collapse. In contrast to classical economics, Keynesian economics supports policies such as government intervention, deficit spending, control of the money supply, and a progressive income tax to counter recession and income inequality. Most classical economists reject these ideas. They assert that state intervention makes situations of economic slowdown worse.

#### 2. Question

As per Classical Economic thought

• Markets function best without government interference

• If the buyers and sellers in each market take their decisions following only their own self-interest, markets will collapse.

Which of the above statements is/are correct?

• c) Both 1 and 2

• d) Neither 1 nor 2

Solution: a)

Classical thought is also known as the non-interventionist school.

As per them, markets function best without government interference.

Classical economists observe that markets generally regulate themselves, when free of coercion. Adam Smith referred to this as a metaphorical “invisible hand,” which moves markets toward their natural equilibrium. So, if everyone acts in their self-interest, there will be no market collapse.

In contrast to classical economics, Keynesian economics supports policies such as government intervention, deficit spending, control of the money supply, and a progressive income tax to counter recession and income inequality.

Most classical economists reject these ideas. They assert that state intervention makes situations of economic slowdown worse.

Solution: a)

Classical thought is also known as the non-interventionist school.

As per them, markets function best without government interference.

Most classical economists reject these ideas. They assert that state intervention makes situations of economic slowdown worse.

• Question 3 of 5 3. Question Consider the following statements. In a floating exchange rate system, market forces determine the value of a currency. The demand for rupees in the forex market depends on foreign demand for Indian exports. Currency appreciation encourages a country’s export activity as its products and services become cheaper to buy. Which of the above statements is/are correct? a) 1 only b) 1 and 2 only c) 1 and 3 only d) 1, 2 and 3 Correct Solution: b) In the forex market, the supply of rupees is determined by the demand for imports and various foreign assets. So, if there is high demand to import oil, it can lead to an increase in the supply of rupees in the forex market and cause the rupee’s value to drop. The demand for rupees in the forex market, on the other hand, depends on foreign demand for Indian exports and other domestic assets. So, for instance, when there is great enthusiasm among foreign investors to invest in India, it can lead to an increase in the supply of dollars in the forex market which in turn causes the rupee’s value to rise against the dollar. Appreciation Vs Depreciation: In a floating exchange rate system, market forces (based on demand and supply of a currency) determine the value of a currency. Currency Appreciation: It is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances and business cycles. Currency appreciation discourages a country’s export activity as its products and services become costlier to buy. Incorrect Solution: b) In the forex market, the supply of rupees is determined by the demand for imports and various foreign assets. So, if there is high demand to import oil, it can lead to an increase in the supply of rupees in the forex market and cause the rupee’s value to drop. The demand for rupees in the forex market, on the other hand, depends on foreign demand for Indian exports and other domestic assets. So, for instance, when there is great enthusiasm among foreign investors to invest in India, it can lead to an increase in the supply of dollars in the forex market which in turn causes the rupee’s value to rise against the dollar. Appreciation Vs Depreciation: In a floating exchange rate system, market forces (based on demand and supply of a currency) determine the value of a currency. Currency Appreciation: It is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances and business cycles. Currency appreciation discourages a country’s export activity as its products and services become costlier to buy.

#### 3. Question

Consider the following statements.

• In a floating exchange rate system, market forces determine the value of a currency.

• The demand for rupees in the forex market depends on foreign demand for Indian exports.

• Currency appreciation encourages a country’s export activity as its products and services become cheaper to buy.

Which of the above statements is/are correct?

• b) 1 and 2 only

• c) 1 and 3 only

• d) 1, 2 and 3

Solution: b)

In the forex market, the supply of rupees is determined by the demand for imports and various foreign assets. So, if there is high demand to import oil, it can lead to an increase in the supply of rupees in the forex market and cause the rupee’s value to drop. The demand for rupees in the forex market, on the other hand, depends on foreign demand for Indian exports and other domestic assets. So, for instance, when there is great enthusiasm among foreign investors to invest in India, it can lead to an increase in the supply of dollars in the forex market which in turn causes the rupee’s value to rise against the dollar.

Appreciation Vs Depreciation:

• In a floating exchange rate system, market forces (based on demand and supply of a currency) determine the value of a currency.

• Currency Appreciation: It is an increase in the value of one currency in relation to another currency.

• Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances and business cycles.

• Currency appreciation discourages a country’s export activity as its products and services become costlier to buy.

Solution: b)

Appreciation Vs Depreciation:

• In a floating exchange rate system, market forces (based on demand and supply of a currency) determine the value of a currency.

• Currency Appreciation: It is an increase in the value of one currency in relation to another currency.

• Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances and business cycles.

• Currency appreciation discourages a country’s export activity as its products and services become costlier to buy.

• Question 4 of 5 4. Question Consider the following statements regarding BSE SENSEX. The BSE SENSEX is a free-float market-weighted stock market index of 100 well-established and financially sound companies listed on the Bombay Stock Exchange. It is considered the benchmark index of the Indian stock market. DOLLEX-30, launched by BSE, is a dollar-linked version of the SENSEX. How many of the above statements is/are incorrect? a) Only one b) Only two c) All three d) None Correct Solution: a) Statement 1 is incorrect. Sensex is the benchmark index of the BSE in India. It was launched on January 1, 1986 as a basket of 30 stocks representing the country’s largest, financially-sound companies listed on the BSE. The Sensex reflects the movements in the Indian stock market. It is considered the benchmark index of the Indian stock market. In 2001 BSE launched DOLLEX-30, a dollar-linked version of the SENSEX. Incorrect Solution: a) Statement 1 is incorrect. Sensex is the benchmark index of the BSE in India. It was launched on January 1, 1986 as a basket of 30 stocks representing the country’s largest, financially-sound companies listed on the BSE. The Sensex reflects the movements in the Indian stock market. It is considered the benchmark index of the Indian stock market. In 2001 BSE launched DOLLEX-30, a dollar-linked version of the SENSEX.

#### 4. Question

Consider the following statements regarding BSE SENSEX.

• The BSE SENSEX is a free-float market-weighted stock market index of 100 well-established and financially sound companies listed on the Bombay Stock Exchange.

• It is considered the benchmark index of the Indian stock market.

• DOLLEX-30, launched by BSE, is a dollar-linked version of the SENSEX.

How many of the above statements is/are incorrect?

• a) Only one

• b) Only two

• c) All three

Solution: a)

Statement 1 is incorrect.

Sensex is the benchmark index of the BSE in India. It was launched on January 1, 1986 as a basket of 30 stocks representing the country’s largest, financially-sound companies listed on the BSE.

The Sensex reflects the movements in the Indian stock market. It is considered the benchmark index of the Indian stock market.

In 2001 BSE launched DOLLEX-30, a dollar-linked version of the SENSEX.

Solution: a)

Statement 1 is incorrect.

Sensex is the benchmark index of the BSE in India. It was launched on January 1, 1986 as a basket of 30 stocks representing the country’s largest, financially-sound companies listed on the BSE.

The Sensex reflects the movements in the Indian stock market. It is considered the benchmark index of the Indian stock market.

In 2001 BSE launched DOLLEX-30, a dollar-linked version of the SENSEX.

• Question 5 of 5 5. Question Hard currency is usually preferred because It is seen as politically and economically stable. It is not likely to depreciate or appreciate suddenly. It is widely accepted around the world as a form of payment for goods and services. Which of the above statements is/are correct? a) 2 and 3 only b) 1 and 2 only c) 1 and 3 only d) 1, 2 and 3 Correct Solution: d) Hard currency refers to money that is issued by a nation that is seen as politically and economically stable. Hard currencies are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic currency. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex or foreign exchange (FX) market. The most tradable currencies in the world are the U.S. dollar (USD), European euro (EUR) and Japanese yen (JPY). They are not generally prone to dramatic depreciation or appreciation. Incorrect Solution: d) Hard currency refers to money that is issued by a nation that is seen as politically and economically stable. Hard currencies are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic currency. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex or foreign exchange (FX) market. The most tradable currencies in the world are the U.S. dollar (USD), European euro (EUR) and Japanese yen (JPY). They are not generally prone to dramatic depreciation or appreciation.

#### 5. Question

Hard currency is usually preferred because

• It is seen as politically and economically stable.

• It is not likely to depreciate or appreciate suddenly.

• It is widely accepted around the world as a form of payment for goods and services.

Which of the above statements is/are correct?

• a) 2 and 3 only

• b) 1 and 2 only

• c) 1 and 3 only

• d) 1, 2 and 3

Solution: d)

Hard currency refers to money that is issued by a nation that is seen as politically and economically stable. Hard currencies are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic currency.

A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex or foreign exchange (FX) market. The most tradable currencies in the world are the U.S. dollar (USD), European euro (EUR) and Japanese yen (JPY). They are not generally prone to dramatic depreciation or appreciation.

Solution: d)

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