Archive for category: Mock Test

Gender indexes such as the Global Gender Gap Index of the World Economic Forum (WEF) or the Gender Inequality Index (GII) of the United Nations Development Program (UNDP) rank countries in chronological time.

Reduction in the reverse repo rate encourages commercial banks to lend more instead of keeping money with the RBI as the return from it (reverse repo rate) is falling. It will inject more money / liquidity into the system. It is part of easy / soft money policy.

The Securities and Exchange Board of India is the regulator of the securities and commodity market in India owned by the Government of India. It was established on 12 April 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992.

Mankombu Sambasivan Swaminathan is an Indian geneticist and international administrator, renowned for his leading role in India’s Green Revolution.

The 1st statement is NOT Correct. Agriculture also matters for economic reasons because it still accounts for a substantial part of GDP (16 percent) and employment (49 percent) not 30 percent.

Sale of securities by RBI absorbs excess liquidity from the market / fall in the cash reserves of commercial banks.

Central Bank fixes credit amount to be granted. Credit is rationed by limiting the amount available for each commercial bank. This method controls even bill rediscounting. For certain purpose, upper limit of credit can be fixed and banks are told to stick to this limit. This can help in lowering banks credit exposure to unwanted sectors.

Reverse Repo Rate: The rate at which the RBI is willing to borrow from the commercial banks is called reverse repo rate. If the RBI increases the reverse repo rate, it means that the RBI is willing to offer lucrative interest rate to commercial banks to park their money with the RBI. This results in a reduction in the amount of money available for the bank’s customers as banks prefer to park their money with the RBI as it involves higher safety. This naturally leads to a higher rate of interest which the banks will demand from their customers for lending money to them, thereby causing reduction in liquidity.

The most liquid asset, and what everything else is compared to, is cash or currency. This is because it can always be used easily and immediately.

When the number of poor is estimated as the proportion of people below the poverty line, it is known as ‘Head Count Ratio’.

Various methods used by central bank to control creation can be divided into quantitative and qualitative methods.
Qualitative methods are:
Margin Requirements
Regulation of consumer Credit
Credit Rationing Policy
Direct Action
Moral Suasion / Persuasion
While quantitative methods include the following:
Open Market Operation
Repo Rate
Variable Reserve Ratio
Bank Rate Policy.

The primary sector of the economy is the sector of an economy making direct use of natural resources. This includes agriculture including animal husbandry, forestry, fishing and mining. In contrast, the secondary sector produces manufactured goods, and the tertiary sector produces services. The primary sector is usually most important in less-developed countries, and typically less important in industrial countries.

Foreign exchange reserve is consisting of foreign currency assets, gold, Special Drawing Rights (SDR), and reserve position in the IMF. India’s foreign exchange reserves rose $7.78 billion to touch a record high of $568.5 billion in the week ended Nov. 6, 2020

Recession is a mild form of depression, the major traits of which are:
General fall in demand as economic activities take a down turn.
Low inflation, showing further signs of falling down.
Fall in employment rate.
Price cuts by industries to sustain their business.

The official data on poverty released in India is estimated on the basis of consumption expenditure data collected by National Sample Survey Organisation (NSSO).

D: Reverse repo is the rate offered by the central bank to banks for parking funds with it. This instrument was started in November 1996 as part of LAF by the RBI.

CRR is the percentage of cash deposits that banks need to keep with the RBI on a fortnightly basis. Commercial banks can invest in the government securities for meeting SLR requirements. Government securities are actively involved in the operations of OMOs and repo. Visibly, short-term volatile liquidity should be addressed through Repo auctions, medium-term liquidity management through OMOs and long-term liquidity management through CRR.

Bank rate is the rate of interest charged by the central banks while providing financial accommodation to commercial banks. It has direct impact on the long-term lending activities.

Inflation – RBI sells govt. securities and mops up excess liquidity. Deflation – RBI purchases govt. securities and injecting liquidity into the system.

Both the statements are wrong. During the period of boom, RBI hikes CRR and during the period of crisis, RBI cuts CRR and revive the economic activities.

OMOs refers to the sale and purchase of government securities and other credit instruments in the open market by the central bank.

Buying of government securities by RBI is a part of ‘quantitative easing policy’ or ‘soft money policy’ and adopted during the crisis period.

The cheap money policy indicates cut in the bank rate during crisis period and dear money policy is a part of hike in the bank rate during inflationary period.

Marginal Standing Facility, Commenced from 09/5/2011 and now MSF = Bank Rate.

Cut in SLR rate enhances the liquidity to the banking system and cut the lending rate.

Scarcity is associated with the limited resources and unlimited wants. As we know resources are not only scarce but also alternative uses. The attitude of helping others is not associated with the scarcity.

As we know the price of the commodity will increase when its cost of production increases or its demand enhanced or both. Here the wage of the labourers (part of cost of production) increased and demand also increased as its consumption is effective to reduce the chances of cancer. The option B and C – fall in the prices as cost of production will fall with low wage rate and good technology.

Economics deals with the optimum utilization of the available resources. How to manage the scarce resources? And not with unlimited resources.

Market economy is based on price mechanism. Price of the product is decided by market forces, that is, demand and supply.

Microeconomics studies the economic actions and behaviour of individual units and small groups of individual units.

Macroeconomics is a study of aggregates.

The options A, B, and D are macroeconomic variables. Option C is microeconomic statement as it considers the price movement of rice only and not the general price level.

Samuelson’s definition analyses the costs and the benefits of improving patterns of resource allocation.

As we know the crucial determinant of economic growth of a country is capital formation. It will generate job opportunities and enhances purchasing power among the people. Population growth will not directly contribute into the growth of the country. Option B and D are positive factors but occurred at world level and not associated with the particular nation, say X. So option A is right.

UNDP – United Nations Development Programme, head quartered at New York.