UPSC Prelims 2015 Economics Questions: Check Out the Article to Gain Insights!

1. The substitution of steel for wooden ploughs in agricultural production is
an example of

(a) labour-augmenting technological progress

(b) capital-augmenting technological progress

(d) None of the above

Ans. (b)

Explanation:
Capital-augmenting technological progress results in the more productive
use of existing capital goods; for example, the substitution of steel from
wooden ploughs in agricultural production.

2. Which one of the following best describes the main objective of Seed
Village Concept?

(a) Encouraging the farmers to use their own farm seeds and discouraging
them to buy the seeds from others

(b) Involving the farmers for training in quality seed production and
thereby to make available quality seeds to others at appropriate time and
affordable cost

(d) Identifying the entrepreneurs in villages and providing them technology
and finance to set up seed companies

Ans. (b)

Explanation:
Seed village concept is to promote the quality seed production of foundation
and certified seed classes. The area which is suitable for raising a particular
crop will be selected, and raised with single variety of a kind. Suitable area
for seed production will be identified by the Scientists. The foundation/
certified seeds or University labelled seeds will be supplied by the
University through Krishi Vigyan Kendras (KVKs) and Research Stations
at 50% subsidy cost to the identified farmers in the area. The farmers will
use these quality seeds and take up their own seed production in a small
area (1 acre) for their own use. The crops are Rice, Pulses and Oilseeds.

3. The Fair and Remunerative Price (FRP) of sugarcane is approved by the

(a) Cabinet Committee on Economic Affairs

(b) Commission for Agricultural Costs and Prices

(d) Agricultural Produce Marketing Committee

Ans. (a)

Fair and Remunerative Price (FRP) is the minimum price to be paid to
sugarcane farmers by the Sugar Mills; and is announced each year by the
Centre, under the Sugarcane Control Order. It is recommended by the
Commission for Agricultural Costs and Prices (CACP) and approved by
the Cabinet Committee on Economic Affairs (CCEA).

4. In the ‘Index of Eight Core Industries’

, which one of the following is

given the highest weight?

(a) Coal production

(b) Electricity generation

(d) Steel production

Ans. (b)

Explanation

Electricity has 10.32% weightage; steel 4.9%; coal 4.38%; fertilizers
1.25%. |

5. Which of the following brings out the ‘Consumer Price Index Number
for Industrial Workers?

(a) The Reserve Bank of India

(b) The Department of Economic Affairs

(d) The Department of Personnel and Training

Ans. (c)

CPI (IW) is released by the Labour Bureau.

6. Which one of the following issues the ‘Global Economic Prospects’ report
periodically?

(a) The Asian Development Bank

(b) The European Bank for Reconstruction and Development

(d) The World Bank

Ans. (d)

Explanation

“Global Economic Prospects” report is issued by World Bank

7. The terms ‘Agreement on Agriculture’
,
‘Agreement on the Application of
Sanitary and Phyto-sanitary Measures’ and ‘Peace Clause’ appear in the
news frequently in the context of affairs of the

(a) Food and Agriculture Organization

(b) United Nations Framework Conference on Climate Change

(d) United Nations Environment Programme

Ans. (c)

Explanation:
‘Agreement on Agriculture’
,
‘Agreement on the Application of Sanitary and
Phytosanitary Measures’ and ‘Peace Clause’ are related to World Trade
Organisation.

8. ‘Basel III Accord’ or simply ‘Basel III’

, often seen in the news, seeks to

(a) develop national strategies for the conservation and sustainable use of
biological diversity

(b) improve banking sector’s ability to deal with financial and econo-mic
stress and improve risk management

(d) transfer technology from developed countries to poor countries to
enable them to replace the use of chlorofluorocarbons in refrigeration with
harmless chemicals

Ans. (b)

Explanation

Basel Ill is a global, voluntary regulatory framework on bank capital
adequacy, stress testing and market liquidity risk.

Also Read: Economics Questions for UPSC Prelims 2010 : Let’s crack UPSC Exam!

9. Convertibility of rupee implies:

(a) being able to convert rupee notes into gold

(b) allowing the value of rupee to be fixed by market forces

(d) developing an international market for currencies in India

Ans. (c)

Explanation

Rupee convertibility means the system where any amount of rupee can be
converted into any other currency without any question asked about the
purpose for which the foreign exchange is to be used.

10. There has been a persistent deficit budget year after year. Which of the
following actions can be taken by the government to reduce the deficit?

1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Expanding industries

Select the correct answer using the code given below:

(a) 1 and 3 only

(b) 2 and 3 only

(d) 1, 2, 3 and 4

Ans. (a)

Explanation:
Self explanatory

11. With reference to inflation in India, which of the following statements is
correct?

(a) Controlling the inflation in India is the responsibility of the Government
of India only

(b) The Reserve Bank of India has no role in controlling the inflation

(d) Increased money circulation helps in controlling the inflation

Ans. (c)

Explanation

Decreased money circulation leads to less money in the hands of people to
spend. Hence, lower demand (given the same supply) leads to falling prices
and reduced inflation.

12. The problem of international liquidity is related to the non-availability
of

(a) goods and services

(b) gold and silver

(d) exportable surplus

Ans. (c)

Explanation:
Dollars and hard currencies are used for payments in international trade,
investment and liquidation of international debt. So if there is shortage of
liquidity, this means scarcity of Dollars and hard currencies to carry on the
above transactions. That is why even SDR was introduced by IMF.

13. With reference to the Fourteenth Finance Commission, which of the
following statements is/are correct?

1. It has increased the share of States in the central divisible pool from
32 percent to 42 percent.
2. It has made recommendations concerning sector-specific grants.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (a)

Explanation

Statement 1 is correct: 14th FC has recommended states’ share in net
proceeds of tax revenues be 42%, a huge jump from the 32% recommended
by the 13th FC.

Statement 2 is wrong: No sector specific grant recommendations were
made.

14. With reference to Indian economy, consider the following statements:

1. The rate of growth of Real Gross Domestic Product has steadily
increased in the last decade.

2. The Gross Domestic Product at market prices (in rupees) has steadily
increased in the last decade.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (b)

Explanation

Statement 1 is wrong: Due to recession in 2008, the growth rate of the
Indian economy had declined for the next few years from 8-9% to 5-6%.

Statement 2 is correct: Even though the growth rate declined, it never
became negative. So, the GDP at market prices has always increased year
on year since last one decade.

15. A decrease in tax to GDP ratio of a country indicates which of the
following?

1. Slowing economic growth rate
2. Less equitable distribution of national income

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (a)

Explanation

This question is controversial.

the ideal answer should be (d).

But the official answer key of UPSC gives the answer as option (a).

16. With reference to ‘Pradhan Mantri Fasal Bima Yojana’

, consider the

following statements:

1. Under this scheme, farmers will have to pay a uniform premium of
two percent for any crop they cultivate in any season of the year.
2. This scheme covers post-harvest losses arising out of cyclones and
unseasonal rains.

Which of the statements given above is/ are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (b)

Explanation:
Pradhan Mantri Fasal Bima Yojana (PMFBY) is the new crop damage
insurance scheme that has been approved by the Union Cabinet in January
2016. It will replace the existing two crop insurance schemes National
Agricultural Insurance Scheme (NAIS) and Modified NAIS. The new
scheme will come into force from the Kharif season starting in June this
year.

One of the highlights included there will be a uniform premium of only 2%
to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In
case of annual commercial and horticultural crops, the premium to be paid
by farmers will be only 5%. Also POST-HARVEST LOSSES includes
(individual farm basis): Coverage is available upto a maximum period of 14
days from harvesting for those crops which are kept in “cut & spread”
condition to dry in the field after harvesting, against specific perils of
cyclone / cyclonic rains, unseasonal rains throughout the country.

Hence only statement 2 is correct.

17. Pradhan Mantri Jan-Dhan Yojana’ has been launched for

(a) providing housing loan to poor people at cheaper interest rates

(b) promoting women’s Self-Help Groups in backward areas

(d) providing financial help to the marginalized communities

Ans. (c)

Explanation:
The scheme was launched in 2014; 1.5 crore schemes were opened on the
first day under this scheme. It was launched to enable people access to
banks and financial institutions

18. Consider the following statements:

1. The Accelerated Irrigation Benefits Programme was launched during
1996-97 to provide loan assistance to poor farmers.
2. The Command Area Development Programme was launched in
1974-75 for the development of water-use efficiency,

Which of the statements given above is/ are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (b)

Statement 2 is correct.

Accelerated Irrigation Benefits Program (AIBP) was launched in 1996-97.
This program was launched to give loan assistance to the states to help
them with a few major irrigation projects which were in the advanced stage
of completion.

The Command Area Development Programme was launched as a
Centrally-sponsored scheme in 1974-75 with the main objectives of
improving utilization of irrigation potential and optimizing agricultural
productivity and production from the irrigated areas by integrating all
functions related with irrigated agriculture

19. In India, markets in agricultural products are regulated under the

(a) Essential Commodities Act, 1955

(b) Agricultural Produce Market Committee Act enacted by States

(d) Food Products Order, 1956 and Meat and Food Products Order, 1973

Ans. (b)

Explanation:
The correct answer is the Agricultural Produce Market Committee Act
enacted by States. Agricultural Produce Market Committee: Agricultural
Produce Market Committee (APMC) under the State Government
regulates the notified agricultural produce and livestock.

20. The Government of India has established NITI Aayog to replace the

(a) Human Rights Commission

(b) Finance Commission

(d) Planning Commission

Ans. (d)

Explanation:
Self explained

21. When the Reserve Bank of India reduces the Statutory Liquidity Ratio
by 50 basis points which of the following is likely to happen?

(a) India’s GDP growth rate increases drastically

(b) Foreign Institutional Investors may bring more capital into our country

(d) It may drastically reduce the liquidity to the banking system

Ans. (c)

Explanation

If SLR is reduced, banks have to park lesser money with RBI in form of
securities, cash etc. So, they have more money to lend and the return on
lending is also greater than what they get in SLR. Hence, the scheduled
commercial banks may cut their lending rates.

22. With reference to Indian economy, consider the following:

1. Bank rate
2. Open market operations
3. Public debt
4. Public Revenue

Which of the above is/are component/components of Monetary Policy?

(a) 1 only

(b) 2, 3 and 4

(d) 1, 3 and 4

Ans. (c)

Explanation

Public debt and Public revenue are matters falling under Fiscal policy. The
Ministry of Finance handles these subjects.

Bank rate and OMOs fall within the jurisdiction of RBI’s monetary policy.

23. With reference to inflation in India, which of the following statements is
correct?

(a) Controlling the inflation in India is the responsibility of the Government
of India only

(b) The Reserve Bank of India has no role in controlling the inflation

(d) Increased money circulation helps in controlling the inflation

Ans. (c)

Explanation:

Methods to control money inflation-1.monetry policy. 2.control of money
supply. 3.supply side policy. 4.Fiscal policy . 5.wage control

24. With reference to the Indian Renewable Energy Development Agency
Limited (IREDA), which of the following statements is/are correct?

1. It is a Public Limited Government Company.
2. It is a Non-Banking Financial Company.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (c)
Explanation:
IREDA is a Public Limited Government Company which was established
as a Non-Banking Financial Institution in 1987 under the administrative
control of MNRE to promote, develop and extend financial assistance for
renewable energy and energy efficiency/conservation projects with the
motto: “ENERGY FOR EVER”.

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