UPSC Static Quiz – Economy : 29 July 2024

UPSC Static Quiz – Economy : 29 July 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 Tampon tax is a tax applied on a) Electrical Vehicles b) Sin goods c) Luxury products d) Menstrual products Correct Solution: d) Concern about “period poverty” has fuelled campaigns globally calling for the end of the so-called tampon tax, which refers to consumption levies such as value-added tax (VAT) that most countries charge on items such as sanitary pads, tampons, panty liners and menstrual cups. Since Kenya became the first country to scrap VAT on sanitary pads and tampons in 2004, at least 17 countries have followed suit. Incorrect Solution: d) Concern about “period poverty” has fuelled campaigns globally calling for the end of the so-called tampon tax, which refers to consumption levies such as value-added tax (VAT) that most countries charge on items such as sanitary pads, tampons, panty liners and menstrual cups. Since Kenya became the first country to scrap VAT on sanitary pads and tampons in 2004, at least 17 countries have followed suit.

#### 1. Question

Tampon tax is a tax applied on

• a) Electrical Vehicles

• b) Sin goods

• c) Luxury products

• d) Menstrual products

Solution: d)

Concern about “period poverty” has fuelled campaigns globally calling for the end of the so-called tampon tax, which refers to consumption levies such as value-added tax (VAT) that most countries charge on items such as sanitary pads, tampons, panty liners and menstrual cups.

Since Kenya became the first country to scrap VAT on sanitary pads and tampons in 2004, at least 17 countries have followed suit.

Solution: d)

Concern about “period poverty” has fuelled campaigns globally calling for the end of the so-called tampon tax, which refers to consumption levies such as value-added tax (VAT) that most countries charge on items such as sanitary pads, tampons, panty liners and menstrual cups.

Since Kenya became the first country to scrap VAT on sanitary pads and tampons in 2004, at least 17 countries have followed suit.

• Question 2 of 5 2. 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.

#### 2. 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.

• 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.

• Question 3 of 5 3. Question Consider the following statements. A loan turns into a nonperforming asset (NPA), if the interest or instalment remains unpaid for a period of more than 60 days. To avoid classifying a loan as an NPA, banks adopt the evergreening of loans. An accommodative monetary policy strictly restrict banks from indulging in evergreening of loans. How many of the above statements are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: a) Only statement 2 is correct. The process of evergreening of loans, a form of zombie lending, is typically a temporary fix for a bank. If an account turns into a non-performing asset (NPA), banks are required to make higher provisions which will impact their profitability. A loan turns into a nonperforming asset, or NPA, if the interest or instalment remains unpaid even after the due date — and remains unpaid for a period of more than 90 days. So, to avoid classifying a loan as an NPA, banks adopt the evergreening of loans. In the past, many banks had indulged in dressing up bad loans and given additional funds to companies who didn’t have the capacity to repay. An accommodative monetary policy creates an enabling environment for weak banks to evergreen loans to zombies and keeps them alive. Incorrect Solution: a) Only statement 2 is correct. The process of evergreening of loans, a form of zombie lending, is typically a temporary fix for a bank. If an account turns into a non-performing asset (NPA), banks are required to make higher provisions which will impact their profitability. A loan turns into a nonperforming asset, or NPA, if the interest or instalment remains unpaid even after the due date — and remains unpaid for a period of more than 90 days. So, to avoid classifying a loan as an NPA, banks adopt the evergreening of loans. In the past, many banks had indulged in dressing up bad loans and given additional funds to companies who didn’t have the capacity to repay. An accommodative monetary policy creates an enabling environment for weak banks to evergreen loans to zombies and keeps them alive.

#### 3. Question

Consider the following statements.

• A loan turns into a nonperforming asset (NPA), if the interest or instalment remains unpaid for a period of more than 60 days.

• To avoid classifying a loan as an NPA, banks adopt the evergreening of loans.

• An accommodative monetary policy strictly restrict banks from indulging in evergreening of loans.

How many of the above statements are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: a)

Only statement 2 is correct.

The process of evergreening of loans, a form of zombie lending, is typically a temporary fix for a bank. If an account turns into a non-performing asset (NPA), banks are required to make higher provisions which will impact their profitability. A loan turns into a nonperforming asset, or NPA, if the interest or instalment remains unpaid even after the due date — and remains unpaid for a period of more than 90 days.

So, to avoid classifying a loan as an NPA, banks adopt the evergreening of loans. In the past, many banks had indulged in dressing up bad loans and given additional funds to companies who didn’t have the capacity to repay.

An accommodative monetary policy creates an enabling environment for weak banks to evergreen loans to zombies and keeps them alive.

Solution: a)

Only statement 2 is correct.

The process of evergreening of loans, a form of zombie lending, is typically a temporary fix for a bank. If an account turns into a non-performing asset (NPA), banks are required to make higher provisions which will impact their profitability. A loan turns into a nonperforming asset, or NPA, if the interest or instalment remains unpaid even after the due date — and remains unpaid for a period of more than 90 days.

So, to avoid classifying a loan as an NPA, banks adopt the evergreening of loans. In the past, many banks had indulged in dressing up bad loans and given additional funds to companies who didn’t have the capacity to repay.

An accommodative monetary policy creates an enabling environment for weak banks to evergreen loans to zombies and keeps them alive.

• Question 4 of 5 4. Question Consider the following statements regarding CIBIL score. CIBIL score is a 3-digit numeric summary of one’s credit history, that ranges from 100 to 900. It involves credit history across loan types and credit institutions over a period of time. CIBIL score is provided by the Credit Information Bureau (India) Ltd., which is authorized by the Reserve Bank of India (RBI). How many of the above statements are incorrect? a) Only one b) Only two c) All three d) None Correct Solution: a) Statement 1 is incorrect. A Credit Information Bureau (India) Limited (CIBIL) score is a three-digit numerical summary of one’s credit history, which involves an individual’s credit payment history across loan types and credit institutions over a period of time. Ranging from 300 to 900, the CIBIL score is provided by the Credit Information Bureau (India) Ltd., a credit rating agency which is authorized by the Reserve Bank of India (RBI). Incorrect Solution: a) Statement 1 is incorrect. A Credit Information Bureau (India) Limited (CIBIL) score is a three-digit numerical summary of one’s credit history, which involves an individual’s credit payment history across loan types and credit institutions over a period of time. Ranging from 300 to 900, the CIBIL score is provided by the Credit Information Bureau (India) Ltd., a credit rating agency which is authorized by the Reserve Bank of India (RBI).

#### 4. Question

Consider the following statements regarding CIBIL score.

• CIBIL score is a 3-digit numeric summary of one’s credit history, that ranges from 100 to 900.

• It involves credit history across loan types and credit institutions over a period of time.

• CIBIL score is provided by the Credit Information Bureau (India) Ltd., which is authorized by the Reserve Bank of India (RBI).

How many of the above statements are incorrect?

• a) Only one

• b) Only two

• c) All three

Solution: a)

Statement 1 is incorrect.

A Credit Information Bureau (India) Limited (CIBIL) score is a three-digit numerical summary of one’s credit history, which involves an individual’s credit payment history across loan types and credit institutions over a period of time. Ranging from 300 to 900, the CIBIL score is provided by the Credit Information Bureau (India) Ltd., a credit rating agency which is authorized by the Reserve Bank of India (RBI).

Solution: a)

Statement 1 is incorrect.

A Credit Information Bureau (India) Limited (CIBIL) score is a three-digit numerical summary of one’s credit history, which involves an individual’s credit payment history across loan types and credit institutions over a period of time. Ranging from 300 to 900, the CIBIL score is provided by the Credit Information Bureau (India) Ltd., a credit rating agency which is authorized by the Reserve Bank of India (RBI).

• Question 5 of 5 5. Question Typically, GDP is calculated by adding up all expenditures in the economy. Arrange the following components in the decreasing order in terms of their contribution to India’s annual GDP. Private Final Consumption Expenditure (PFCE). Government Final Consumption Expenditure (GFCE) Gross Fixed Capital Formation (GFCF) Net exports Select the correct answer code: a) 1-3-4-2 b) 3-1-2-4 c) 1-3-2-4 d) 1-2-3-4 Correct Solution: c) Typically, GDP is calculated by adding up all expenditures in the economy. These expenditures are broadly categorised in four groups: All the money Indians spend in their personal capacity— from buying an ice cream to watching a movie to buying a TV or car. This is called thePFCE. Such expenditures account for 55%-60% of India’s annual GDP. All the money thegovernments spendon their daily uses — paying salaries etc. This is called Government Final Consumption Expenditure (GFCE) and this accounts for 10% of India’s GDP. All the money spent by private companies and governments towards building productive capacitiesin the economy. Say a firm buying desktops for its employees or the government spending money on building a road. This is called the Gross Fixed Capital Formation (GFCF)and this accounts for 30%-32% of the GDP. Net exportsor the net of all the money that Indians received by exporting goods and services and minus all the money they spent on importing goods and services. More often than not, India’s imports are more than its exports. As such the Net Exports component is negative and drags down overall GDP. Incorrect Solution: c) Typically, GDP is calculated by adding up all expenditures in the economy. These expenditures are broadly categorised in four groups: All the money Indians spend in their personal capacity— from buying an ice cream to watching a movie to buying a TV or car. This is called thePFCE. Such expenditures account for 55%-60% of India’s annual GDP. All the money thegovernments spendon their daily uses — paying salaries etc. This is called Government Final Consumption Expenditure (GFCE) and this accounts for 10% of India’s GDP. All the money spent by private companies and governments towards building productive capacitiesin the economy. Say a firm buying desktops for its employees or the government spending money on building a road. This is called the Gross Fixed Capital Formation (GFCF)and this accounts for 30%-32% of the GDP. Net exportsor the net of all the money that Indians received by exporting goods and services and minus all the money they spent on importing goods and services. More often than not, India’s imports are more than its exports. As such the Net Exports component is negative and drags down overall GDP.

#### 5. Question

Typically, GDP is calculated by adding up all expenditures in the economy. Arrange the following components in the decreasing order in terms of their contribution to India’s annual GDP.

• Private Final Consumption Expenditure (PFCE).

• Government Final Consumption Expenditure (GFCE)

• Gross Fixed Capital Formation (GFCF)

• Net exports

Select the correct answer code:

• a) 1-3-4-2

• b) 3-1-2-4

• c) 1-3-2-4

• d) 1-2-3-4

Solution: c)

Typically, GDP is calculated by adding up all expenditures in the economy. These expenditures are broadly categorised in four groups:

• All the money Indians spend in their personal capacity— from buying an ice cream to watching a movie to buying a TV or car. This is called thePFCE. Such expenditures account for 55%-60% of India’s annual GDP.

• All the money thegovernments spendon their daily uses — paying salaries etc. This is called Government Final Consumption Expenditure (GFCE) and this accounts for 10% of India’s GDP.

• All the money spent by private companies and governments towards building productive capacitiesin the economy. Say a firm buying desktops for its employees or the government spending money on building a road. This is called the Gross Fixed Capital Formation (GFCF)and this accounts for 30%-32% of the GDP.

• Net exportsor the net of all the money that Indians received by exporting goods and services and minus all the money they spent on importing goods and services. More often than not, India’s imports are more than its exports. As such the Net Exports component is negative and drags down overall GDP.

Solution: c)

Typically, GDP is calculated by adding up all expenditures in the economy. These expenditures are broadly categorised in four groups:

• All the money Indians spend in their personal capacity— from buying an ice cream to watching a movie to buying a TV or car. This is called thePFCE. Such expenditures account for 55%-60% of India’s annual GDP.

• All the money thegovernments spendon their daily uses — paying salaries etc. This is called Government Final Consumption Expenditure (GFCE) and this accounts for 10% of India’s GDP.

• All the money spent by private companies and governments towards building productive capacitiesin the economy. Say a firm buying desktops for its employees or the government spending money on building a road. This is called the Gross Fixed Capital Formation (GFCF)and this accounts for 30%-32% of the GDP.

• Net exportsor the net of all the money that Indians received by exporting goods and services and minus all the money they spent on importing goods and services. More often than not, India’s imports are more than its exports. As such the Net Exports component is negative and drags down overall GDP.

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