UPSC Static Quiz – Economy : 3 July 2025

UPSC Static Quiz – Economy : 3 July 2025 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 With reference to the Minimum Support Price (MSP) in India, consider the following statements: MSP is legally binding on private traders, requiring them to purchase crops at or above this price. The Commission for Agricultural Costs and Prices (CACP) has statutory powers to fix and enforce MSPs. MSP is announced for all major agricultural crops grown in India, including all fruits and vegetables. How many of the above statements is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: D Statement 1 is incorrect: MSP is primarily a price at which the government (through its agencies like FCI) offers to procure crops from farmers. It is not legally binding on private traders to purchase at or above MSP, although MSPs can influence market prices. Farmers are free to sell in the open market if they get a better price. Statement 2 is incorrect: The Commission for Agricultural Costs and Prices (CACP) is an advisory body that recommends MSPs to the government. It does not have statutory powers to fix or enforce these prices. The final decision on MSP levels is taken by the Government of India, specifically the Cabinet Committee on Economic Affairs (CCEA). Statement 3 is incorrect: MSP is announced for a select list of crops (currently 22 mandated crops and Fair and Remunerative Price for sugarcane). It does not cover all major agricultural crops, and notably, it does not include most fruits and vegetables, for which market intervention schemes might operate differently. Incorrect Solution: D Statement 1 is incorrect: MSP is primarily a price at which the government (through its agencies like FCI) offers to procure crops from farmers. It is not legally binding on private traders to purchase at or above MSP, although MSPs can influence market prices. Farmers are free to sell in the open market if they get a better price. Statement 2 is incorrect: The Commission for Agricultural Costs and Prices (CACP) is an advisory body that recommends MSPs to the government. It does not have statutory powers to fix or enforce these prices. The final decision on MSP levels is taken by the Government of India, specifically the Cabinet Committee on Economic Affairs (CCEA). Statement 3 is incorrect: MSP is announced for a select list of crops (currently 22 mandated crops and Fair and Remunerative Price for sugarcane). It does not cover all major agricultural crops, and notably, it does not include most fruits and vegetables, for which market intervention schemes might operate differently.

#### 1. Question

With reference to the Minimum Support Price (MSP) in India, consider the following statements:

• MSP is legally binding on private traders, requiring them to purchase crops at or above this price.

• The Commission for Agricultural Costs and Prices (CACP) has statutory powers to fix and enforce MSPs.

• MSP is announced for all major agricultural crops grown in India, including all fruits and vegetables.

How many of the above statements is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: D

• Statement 1 is incorrect: MSP is primarily a price at which the government (through its agencies like FCI) offers to procure crops from farmers. It is not legally binding on private traders to purchase at or above MSP, although MSPs can influence market prices. Farmers are free to sell in the open market if they get a better price.

• Statement 2 is incorrect: The Commission for Agricultural Costs and Prices (CACP) is an advisory body that recommends MSPs to the government. It does not have statutory powers to fix or enforce these prices. The final decision on MSP levels is taken by the Government of India, specifically the Cabinet Committee on Economic Affairs (CCEA).

• Statement 3 is incorrect: MSP is announced for a select list of crops (currently 22 mandated crops and Fair and Remunerative Price for sugarcane). It does not cover all major agricultural crops, and notably, it does not include most fruits and vegetables, for which market intervention schemes might operate differently.

Solution: D

• Question 2 of 5 2. Question Consider the following regarding the impact of depreciation of the Indian Rupee: It makes Indian exports cheaper for foreign buyers. It makes imports more expensive for Indian consumers and businesses. It reduces the burden of servicing external commercial borrowings denominated in foreign currency. How many of the above statements is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: B Statement 1 is correct: When the Indian Rupee depreciates, it means that more rupees are needed to buy one unit of foreign currency (e.g., US dollar). This makes Indian goods and services cheaper for foreign buyers who are paying in foreign currency, potentially boosting exports. Statement 2 is correct: Conversely, depreciation makes imported goods and services more expensive for Indian consumers and businesses, as they need to pay more rupees for the same amount of foreign currency to purchase these imports. Statement 3 is incorrect: Depreciation of the rupee increases the burden of servicing external commercial borrowings (ECBs) that are denominated in foreign currency. This is because more rupees will be required to make the same amount of interest and principal payments in foreign currency terms. Incorrect Solution: B Statement 1 is correct: When the Indian Rupee depreciates, it means that more rupees are needed to buy one unit of foreign currency (e.g., US dollar). This makes Indian goods and services cheaper for foreign buyers who are paying in foreign currency, potentially boosting exports. Statement 2 is correct: Conversely, depreciation makes imported goods and services more expensive for Indian consumers and businesses, as they need to pay more rupees for the same amount of foreign currency to purchase these imports. Statement 3 is incorrect: Depreciation of the rupee increases the burden of servicing external commercial borrowings (ECBs) that are denominated in foreign currency. This is because more rupees will be required to make the same amount of interest and principal payments in foreign currency terms.

#### 2. Question

Consider the following regarding the impact of depreciation of the Indian Rupee:

• It makes Indian exports cheaper for foreign buyers.

• It makes imports more expensive for Indian consumers and businesses.

• It reduces the burden of servicing external commercial borrowings denominated in foreign currency.

How many of the above statements is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

• Statement 1 is correct: When the Indian Rupee depreciates, it means that more rupees are needed to buy one unit of foreign currency (e.g., US dollar). This makes Indian goods and services cheaper for foreign buyers who are paying in foreign currency, potentially boosting exports.

• Statement 2 is correct: Conversely, depreciation makes imported goods and services more expensive for Indian consumers and businesses, as they need to pay more rupees for the same amount of foreign currency to purchase these imports.

Statement 3 is incorrect: Depreciation of the rupee increases the burden of servicing external commercial borrowings (ECBs) that are denominated in foreign currency. This is because more rupees will be required to make the same amount of interest and principal payments in foreign currency terms.

Solution: B

• Question 3 of 5 3. Question Which of the following can be considered as measures to control inflation in an economy? Increasing the Cash Reserve Ratio (CRR) by the central bank. Reducing direct tax rates by the government. The central bank selling government securities in the open market. Increasing government expenditure on infrastructure projects. How many of the above are correct measures to control inflation? (a) Only one (b) Only two (c) Only three (d) All four Correct Solution: B Increasing the Cash Reserve Ratio (CRR) is a measure to control inflation. A higher CRR means commercial banks have to keep a larger portion of their deposits with the central bank, reducing their lending capacity, which in turn reduces money supply and curbs demand. (Correct) Reducing direct tax rates by the government generally increases disposable income, leading to higher demand and potentially fueling inflation. This is an expansionary fiscal policy, not a measure to control inflation. (Incorrect) The central bank selling government securities in the open market (Open Market Operations – OMO) absorbs liquidity from the banking system. This reduces the money supply and helps control inflation. (Correct) Increasing government expenditure on infrastructure projects is an expansionary fiscal policy that boosts aggregate demand. While good for long-term growth, in the short term, if the economy is already facing inflationary pressures, this can exacerbate inflation. (Incorrect) Incorrect Solution: B Increasing the Cash Reserve Ratio (CRR) is a measure to control inflation. A higher CRR means commercial banks have to keep a larger portion of their deposits with the central bank, reducing their lending capacity, which in turn reduces money supply and curbs demand. (Correct) Reducing direct tax rates by the government generally increases disposable income, leading to higher demand and potentially fueling inflation. This is an expansionary fiscal policy, not a measure to control inflation. (Incorrect) The central bank selling government securities in the open market (Open Market Operations – OMO) absorbs liquidity from the banking system. This reduces the money supply and helps control inflation. (Correct) Increasing government expenditure on infrastructure projects is an expansionary fiscal policy that boosts aggregate demand. While good for long-term growth, in the short term, if the economy is already facing inflationary pressures, this can exacerbate inflation. (Incorrect)

#### 3. Question

Which of the following can be considered as measures to control inflation in an economy?

• Increasing the Cash Reserve Ratio (CRR) by the central bank.

• Reducing direct tax rates by the government.

• The central bank selling government securities in the open market.

• Increasing government expenditure on infrastructure projects.

How many of the above are correct measures to control inflation?

• (a) Only one

• (b) Only two

• (c) Only three

• (d) All four

Solution: B

• Increasing the Cash Reserve Ratio (CRR) is a measure to control inflation. A higher CRR means commercial banks have to keep a larger portion of their deposits with the central bank, reducing their lending capacity, which in turn reduces money supply and curbs demand. (Correct)

• Reducing direct tax rates by the government generally increases disposable income, leading to higher demand and potentially fueling inflation. This is an expansionary fiscal policy, not a measure to control inflation. (Incorrect)

• The central bank selling government securities in the open market (Open Market Operations – OMO) absorbs liquidity from the banking system. This reduces the money supply and helps control inflation. (Correct)

• Increasing government expenditure on infrastructure projects is an expansionary fiscal policy that boosts aggregate demand. While good for long-term growth, in the short term, if the economy is already facing inflationary pressures, this can exacerbate inflation. (Incorrect)

Solution: B

• Question 4 of 5 4. Question Consider the following statements about the World Bank Group: The International Bank for Reconstruction and Development (IBRD) primarily lends to middle-income and creditworthy low-income countries. The International Development Association (IDA) provides interest-free loans and grants to the poorest developing countries. The Multilateral Investment Guarantee Agency (MIGA) promotes foreign direct investment into developing countries by offering political risk insurance. The International Centre for Settlement of Investment Disputes (ICSID) provides facilities for conciliation and arbitration of international investment disputes. How many of the above statements are correct? (a) Only one (b) Only two (c) Only three (d) All four Correct Solution: D Statement 1 is correct: The International Bank for Reconstruction and Development (IBRD) is one of the five institutions of the World Bank Group. It provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries. Statement 2 is correct: The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. IDA provides highly concessional financing (interest-free loans, known as credits, and grants) for development projects and programs. Statement 3 is correct: The Multilateral Investment Guarantee Agency (MIGA) aims to promote foreign direct investment (FDI) into developing countries by offering political risk insurance (guarantees) to investors and lenders. Statement 4 is correct: The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes between contracting states and nationals of other contracting states. Incorrect Solution: D Statement 1 is correct: The International Bank for Reconstruction and Development (IBRD) is one of the five institutions of the World Bank Group. It provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries. Statement 2 is correct: The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. IDA provides highly concessional financing (interest-free loans, known as credits, and grants) for development projects and programs. Statement 3 is correct: The Multilateral Investment Guarantee Agency (MIGA) aims to promote foreign direct investment (FDI) into developing countries by offering political risk insurance (guarantees) to investors and lenders. Statement 4 is correct: The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes between contracting states and nationals of other contracting states.

#### 4. Question

Consider the following statements about the World Bank Group:

• The International Bank for Reconstruction and Development (IBRD) primarily lends to middle-income and creditworthy low-income countries.

• The International Development Association (IDA) provides interest-free loans and grants to the poorest developing countries.

• The Multilateral Investment Guarantee Agency (MIGA) promotes foreign direct investment into developing countries by offering political risk insurance.

• The International Centre for Settlement of Investment Disputes (ICSID) provides facilities for conciliation and arbitration of international investment disputes.

How many of the above statements are correct?

• (a) Only one

• (b) Only two

• (c) Only three

• (d) All four

Solution: D

• Statement 1 is correct: The International Bank for Reconstruction and Development (IBRD) is one of the five institutions of the World Bank Group. It provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries.

• Statement 2 is correct: The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. IDA provides highly concessional financing (interest-free loans, known as credits, and grants) for development projects and programs.

• Statement 3 is correct: The Multilateral Investment Guarantee Agency (MIGA) aims to promote foreign direct investment (FDI) into developing countries by offering political risk insurance (guarantees) to investors and lenders.

• Statement 4 is correct: The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes between contracting states and nationals of other contracting states.

Solution: D

• Question 5 of 5 5. Question With regard to India’s agricultural credit system, consider the following statements: Regional Rural Banks (RRBs) were established with the objective of providing credit and other facilities primarily to small and marginal farmers, agricultural labourers, and rural artisans. The Kisan Credit Card (KCC) scheme aims to provide adequate and timely credit support from the banking system to farmers for their cultivation and other needs. Primary Agricultural Credit Societies (PACS) operate at the village level and are part of the short-term cooperative credit structure. The National Bank for Agriculture and Rural Development (NABARD) is directly involved in lending to individual farmers. How many of the above statements are correct? (a) Only one (b) Only two (c) Only three (d) All four Correct Solution: C Statement 1 is correct: Regional Rural Banks (RRBs) were set up with the specific objective of catering to the credit needs of the rural poor, including small and marginal farmers, agricultural labourers, artisans, and small entrepreneurs in rural areas. Statement 2 is correct: The Kisan Credit Card (KCC) scheme was introduced to enable farmers to easily purchase agricultural inputs such as seeds, fertilizers, pesticides, and also to meet their short-term credit requirements for cultivation and other allied activities in a timely and hassle-free manner. Statement 3 is correct: Primary Agricultural Credit Societies (PACS) form the base tier of the short-term cooperative credit structure in India. They operate at the village level, dealing directly with rural borrowers, providing short-term and medium-term agricultural credit. Statement 4 is incorrect: NABARD is an apex development financial institution in India that provides refinance facilities to banks and financial institutions for agricultural and rural development. It does not directly lend to individual farmers; its role is primarily refinancing, supervision of cooperative banks and RRBs, and promoting rural development. Incorrect Solution: C Statement 1 is correct: Regional Rural Banks (RRBs) were set up with the specific objective of catering to the credit needs of the rural poor, including small and marginal farmers, agricultural labourers, artisans, and small entrepreneurs in rural areas. Statement 2 is correct: The Kisan Credit Card (KCC) scheme was introduced to enable farmers to easily purchase agricultural inputs such as seeds, fertilizers, pesticides, and also to meet their short-term credit requirements for cultivation and other allied activities in a timely and hassle-free manner. Statement 3 is correct: Primary Agricultural Credit Societies (PACS) form the base tier of the short-term cooperative credit structure in India. They operate at the village level, dealing directly with rural borrowers, providing short-term and medium-term agricultural credit. Statement 4 is incorrect: NABARD is an apex development financial institution in India that provides refinance facilities to banks and financial institutions for agricultural and rural development. It does not directly lend to individual farmers; its role is primarily refinancing, supervision of cooperative banks and RRBs, and promoting rural development.

#### 5. Question

With regard to India’s agricultural credit system, consider the following statements:

• Regional Rural Banks (RRBs) were established with the objective of providing credit and other facilities primarily to small and marginal farmers, agricultural labourers, and rural artisans.

• The Kisan Credit Card (KCC) scheme aims to provide adequate and timely credit support from the banking system to farmers for their cultivation and other needs.

• Primary Agricultural Credit Societies (PACS) operate at the village level and are part of the short-term cooperative credit structure.

• The National Bank for Agriculture and Rural Development (NABARD) is directly involved in lending to individual farmers.

How many of the above statements are correct?

• (a) Only one

• (b) Only two

• (c) Only three

• (d) All four

Solution: C

• Statement 1 is correct: Regional Rural Banks (RRBs) were set up with the specific objective of catering to the credit needs of the rural poor, including small and marginal farmers, agricultural labourers, artisans, and small entrepreneurs in rural areas.

• Statement 2 is correct: The Kisan Credit Card (KCC) scheme was introduced to enable farmers to easily purchase agricultural inputs such as seeds, fertilizers, pesticides, and also to meet their short-term credit requirements for cultivation and other allied activities in a timely and hassle-free manner.

• Statement 3 is correct: Primary Agricultural Credit Societies (PACS) form the base tier of the short-term cooperative credit structure in India. They operate at the village level, dealing directly with rural borrowers, providing short-term and medium-term agricultural credit.

• Statement 4 is incorrect: NABARD is an apex development financial institution in India that provides refinance facilities to banks and financial institutions for agricultural and rural development. It does not directly lend to individual farmers; its role is primarily refinancing, supervision of cooperative banks and RRBs, and promoting rural development.

Solution: C

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