UPSC 2012 Economy Previous Year Questions

Question 1

The basic aim of Lead Bank Scheme is that

Accepted Answer

Correct Option: C. big banks should try to open offices in each district | there should be stiff competition among the various nationalized banks | individual banks should adopt particular districts for intensive development | all the banks should make intensive efforts to mobilize deposits. The Lead Bank Scheme assigns individual banks lead responsibility for particular districts so that credit planning and banking development can be pursued intensively at district level.

Question 2

Consider the following statements: The price of any currency in international market is decided by the 1. World Bank 2. demand for goods/services provided by the country concerned 3. stability of the government of the concerned country 4. economic potential of the country in question Which of the statements given above are correct?

Accepted Answer

Correct Option: B. 1, 2, 3 and 4 | 2 and 3 only | 3 and 4 only | 1 and 4 only. Currency value is influenced by demand for a country's goods and services and confidence in its political/government stability. The World Bank does not set currency prices, and the official option excludes the broad economic-potential statement.

Question 3

Which of the following would include Foreign Direct Investment in India? 1. Subsidiaries of foreign companies in India 2. Majority foreign equity holding in Indian companies 3. Companies exclusively financed by foreign companies 4. Portfolio investment Select the correct answer using the codes given below:

Accepted Answer

Correct Option: D. 1, 2, 3 and 4 | 2 and 4 only | 1 and 3 only | 1, 2 and 3 only. FDI involves lasting ownership/control through subsidiaries, majority foreign equity or wholly foreign-financed companies. Portfolio investment is investment in securities without lasting control, so it is not FDI.

Question 4

Which of the following measures would result in an increase in the money supply in the economy? 1. Purchase of government securities from the public by the Central Bank. 2. Deposit of currency in commercial banks by the public. 3. Borrowing by the government from the Central Bank. 4. Sale of government securities to the public by the Central Bank. Select the correct answer using the codes given below:

Accepted Answer

Correct Option: C. 1 only | 2 and 4 only | 1 and 3 | 2, 3 and 4. When the central bank buys government securities from the public, it injects money into the economy. Government borrowing from the central bank also creates/increases money supply. Depositing currency in banks only changes the form of money, and central bank sale of securities withdraws liquidity.

Question 5

Under which of the following circumstances may capital gains arise? 1. When there is an increase in the sales of a product 2. When there is a natural increase in the value of the property owned 3. When you purchase a painting and there is a growth in its value due to increase in its popularity Select the correct answer using the codes given below:

Accepted Answer

Correct Option: B. 1 only | 2 and 3 only | 2 only | 1, 2 and 3. Capital gains arise from appreciation in the value of a capital asset such as property or a painting when transferred/sold. Increased sales of a product are business income, not capital gains.

Question 6

The Reserve Bank of India (RBI) acts as a bankers' bank. This would imply which of the following? 1. Other banks retain their deposits with the RBI. 2. The RBI lends funds to the commercial banks in times of need. 3. The RBI advises the commercial banks on monetary matters. Select the correct answer using the codes given below:

Accepted Answer

Correct Option: D. 2 and 3 only | 1 and 2 only | 1 and 3 only | 1, 2 and 3. As bankers' bank, RBI holds bank reserves/deposits, lends to banks as lender of last resort and guides/advises banks on monetary and banking matters. Hence all three statements are correct.

Question 7

How do District Rural Development Agencies (DRDAs) help in the reduction of rural poverty in India? 1. DRDAs act as Panchayati Raj Institutions in certain specified backward regions of the country. 2. DRDAs undertake area-specific scientific study of the causes of poverty and malnutrition and prepare detailed remedial measures. 3. DRDAs secure inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programmes. 4. DRDAs watch over and ensure effective utilization of the funds intended for anti-poverty programmes. Which of the statements given above is/are correct?

Accepted Answer

Correct Option: B. 1, 2 and 3 only | 3 and 4 only | 4 only | 1, 2, 3 and 4. DRDAs coordinate departments and sectors for anti-poverty programme implementation and monitor proper fund use. They are not PRIs and do not primarily conduct scientific poverty/malnutrition studies as described.

Question 8

In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following are among those Eight Core Industries? 1. Cement. 2. Fertilizers. 3. Natural gas. 4. Refinery products. 5. Textiles. Select the correct answer using the codes given below:

Accepted Answer

Correct Option: C. 1 and 5 only | 2, 3 and 4 only | 1, 2, 3 and 4 only | 1, 2, 3, 4 and 5. The eight core industries include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity. Textiles are not one of the eight core industries.

Question 9

With reference to Ryotwari Settlement, consider the following statements: 1. The rent was paid directly by the peasants to the Government. 2. The Government gave Pattas to the Ryots. 3. The lands were surveyed and assessed before being taxed. Which of the statements given above is/are correct?

Accepted Answer

Correct Option: C. 1 only | 1 and 2 only | 1, 2 and 3 | None. In Ryotwari settlement, peasants paid revenue directly to the government, pattas were issued to ryots and land was surveyed/assessed before taxation. Hence all three statements are correct.

Question 10

What is/are the recent policy initiative(s) of Government of India to promote the growth of manufacturing sector? 1. Setting up of National Investment and Manufacturing Zones. 2. Providing the benefit of 'single window clearance'. 3. Establishing the Technology Acquisition and Development Fund. Select the correct answer using the codes given below:

Accepted Answer

Correct Option: D. 1 only | 2 and 3 only | 1 and 3 only | 1, 2 and 3. The National Manufacturing Policy proposed National Investment and Manufacturing Zones, single-window clearances and a Technology Acquisition and Development Fund. All three are manufacturing-sector policy initiatives.

UPSC 2012 Economy PYQs with Answers