UPSC 2021 Economy Previous Year Questions

Question 1

Consider the following statements: 1. Moringa (drumstick tree) is a leguminous evergreen tree. 2. Tamarind tree is endemic to South Asia. 3. In India, most of the tamarind is collected as minor forest produce. 4. India exports tamarind and seeds of moringa. 5. Seeds of moringa and tamarind can be used in the production of biofuels. Which of the statements given above are correct?

Accepted Answer

Correct Option: B. 1, 2, 4 and 5 | 3, 4 and 5 | 1, 3 and 4 | 1, 2, 3 and 5. Moringa is not a leguminous tree, and tamarind is not endemic to South Asia. Tamarind is collected as minor forest produce in India, India exports tamarind and moringa seeds, and both seeds can be used in biofuel contexts.

Question 2

The vegetation of savannah consists of grassland with scattered small trees, but extensive areas have no trees. The forest development in such areas is generally kept in check by one or more or a combination of some conditions. Which of the following are such conditions? 1. Burrowing animals and termites 2. Fire 3. Grazing herbivores 4. Seasonal rainfall 5. Soil properties Select the correct answer using the code given below.

Accepted Answer

Correct Option: C. 1 and 2 | 4 and 5 | 2, 3 and 4 | 1, 3 and 5. Savannah tree growth is kept in check mainly by fire, grazing herbivores and seasonal rainfall. These maintain grassland dominance and prevent closed forest development.

Question 3

How is permaculture farming different from conventional chemical farming? 1. Permaculture farming discourages monocultural practices but in conventional chemical farming, monoculture practices are predominant. 2. Conventional chemical farming can cause increase in soil salinity but the occurrence of such phenomenon is not observed in permaculture farming. 3. Conventional chemical farming is easily possible in semi-arid regions but permaculture farming is not so easily possible in such regions. 4. Practice of mulching is very important in permaculture farming but not necessarily so in conventional chemical farming. Select the correct answer using the code given below.

Accepted Answer

Correct Option: B. 1 and 3 | 1, 2 and 4 | 4 only | 2 and 3. Permaculture discourages monoculture, avoids chemical practices that can contribute to salinity, and relies heavily on mulching. It can be practised in semi-arid areas with suitable design, so statement 3 is wrong.

Question 4

With reference to 'WaterCredit', consider the following statements 1. It puts microfinance tools to work in the water and sanitation sector. 2. It is a global initiative launched under the aegis of the World Health Organization and the World Bank. 3. It aims to enable the poor people to meet their water needs without depending on subsidies. Which of the statements given above are correct?

Accepted Answer

Correct Option: C. 1 and 2 only | 2 and 3 only | 1 and 3 only | 1, 2 and 3. WaterCredit uses microfinance tools for water and sanitation and aims to help poor households access finance without relying only on subsidies. It is an initiative associated with Water.org, not WHO/World Bank aegis.

Question 5

With reference to India, consider the following statements 1. Retail investors through demat account can invest in 'Treasury Bills' and Government of India Debt Bonds' in primary market. 2. The Negotiated Dealing System- Order Matching' is a government securities trading platform of the Reserve Bank of India. 3. The 'Central Depository Services Ltd.' is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange. Which of the statements given above is/are correct?

Accepted Answer

Correct Option: B. 1 only | 1 and 2 | 3 only | 2 and 3. Retail investors can access T-bills/Government securities through demat/RBI retail platforms, and NDS-OM is an RBI government securities trading platform. CDSL was promoted by BSE and banks, not jointly by RBI and BSE.

Question 6

With reference to Indian economy, demand-pull inflation can be caused/ increased by which of the following? 1. Expansionary policies 2. Fiscal stimulus 3. Inflation-indexing wages 4. Higher purchasing power 5. Rising interest rates Select the correct answer using the code given below.

Accepted Answer

Correct Option: A. 1, 2 and 4 only | 3, 4 and 5 only | 1, 2, 3 and 5 only | 1, 2, 3, 4 and 5. Demand-pull inflation is caused by excess aggregate demand, which can come from expansionary policy, fiscal stimulus and higher purchasing power. Rising interest rates reduce demand, and wage indexation is more a propagation/cost factor.

Question 7

The money multiplier in an economy increases with which one of the following?

Accepted Answer

Correct Option: C. Increase in the Cash Reserve Ratio in the banks | Increase in the Statutory Liquidity Ratio in the banks | Increase in the banking habit of the people | Increase in the population of the country. A stronger banking habit means more money enters the deposit-credit system, increasing the deposit/money multiplier. Higher CRR/SLR reduces it.

Question 8

Which one of the following is likely to be the most inflationary in its effects?

Accepted Answer

Correct Option: D. Repayment of public debt | Borrowing from the public to finance a budget deficit | Borrowing from the banks to finance a budget deficit | Creation of new money to finance a budget deficit. Deficit financing through creation of new money directly expands money supply and is the most inflationary among the listed options.

Question 9

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

Accepted Answer

Correct Option: D. Diversion of resources to the purchase of real estate and investment in luxury housing | Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc. | Large donations to political parties and growth of regionalism | Loss of revenue to the State Exchequer due to tax evasion. The main fiscal concern from black money is loss of government revenue due to tax evasion.

Question 10

Consider the following statements: The effect of devaluation of a currency is that it necessarily 1. improves the competitiveness of the domestic exports in the foreign markets 2. increases the foreign value of domestic currency 3. improves the trade balance Which of the above statements is/are correct?

Accepted Answer

Correct Option: A. 1 only | 1 and 2 | 3 only | 2 and 3. Currency devaluation makes domestic exports cheaper in foreign currency terms and improves export competitiveness. It lowers, not increases, foreign value of the currency, and trade balance need not necessarily improve.

UPSC 2021 Economy PYQs with Answers