Challenge Prelims V1.0 – Day 64 – GS Paper (Indian Economy)

1. Which of the following components forms part of Reserve Money (M0) in India?

1. Balances in the accounts of foreign Central banks and Governments
2. Banker’s deposit with the RBI
3. Accounts of international agencies such as the International Monetary Fund
4. Net RBI credit to the Government

Select the correct answer using the code given below.

2. With reference to Consumer Price Index (CPI), consider the following statements:

1. The CPI takes into account the prices of only goods and includes the prices of imported goods.
2. It is measured by the Ministry of Statistics and Programme Implementation with base year 2012.
3. The weightage of food and beverages in the CPI is close to 50%.

How many of the statements given above are correct?

3. In the context of core inflation, consider the following statements:

1. It takes into account changes in the price of food and energy.
2. When core inflation rises, the Reserve Bank of India (RBI) increases its key policy rates to suck excess liquidity from the market.

Which of the statements given above is/are correct?

4. How many of the following are the likely impacts of inflation on the Indian economy?

1. Increase in fiscal deficit
2. Recession in some sectors
3. Increase in current account deficit
4. Appreciation of Indian currency

Select the correct answer using the code given below.

5. Consider the following statements with respect to Headline Inflation:

1. It is the measure of total inflation within an economy.
2. It is less volatile than core inflation.

Which of the statements given above is/are correct?

6. Which of the following statements best describes the term inflationary gap?

7. Consider the following statements regarding the inflation targeting in Indian economy:

1. Inflation targeting is a statutory and institutionalised framework under the RBI Act, 1934.
2. The RBI in consultation with the government decides the inflation target in terms of the Consumer Price Index.
3. If average inflation remains higher than the upper tolerance level for two consecutive quarters, it constitutes a failure to achieve the inflation target.
4. The Inflation target and tolerance band have to be reviewed every five years.

How many of the statements given above is/are correct?

8. How many of the following situations can lead to demand-pull inflation in an economy?

1. Changing consumption patterns
2. Increase in administered prices
3. Government providing tax rebates
4. An increase in black money
5. Surge in Exports

Select the correct answer using the code given below.

9. With reference to the inflation, consider the following statements:

1. Deflation is the decrease in the level of inflation.
2. Disinflation is a general decline in prices for goods and services.
3. Stagflation is a scenario of combination of high inflation and low growth.

How many of the statements given above is/are correct?

10. Which one of the following best describes the term ‘money multiplier’?

11. With reference to money supply in India, consider the following statements:

1. M3 is known as narrow money.
2. M1 is the least liquid while M4 is the most liquid money measure.
3. M1 is the most commonly used measure of money supply and is known as aggregate monetary resources.

How many of the statements given above is/are not correct?

12. Consider the following statements with reference to legal tender:

1. One-rupee coin shall be legal tender for any sum not exceeding one thousand rupees.
2. Cheques drawn on savings or current accounts are not legal tenders.

Which of the statements given above is/are correct?

13. Consider the following statements regarding call money and notice money:

1. Under the notice money market, funds are transacted on an overnight basis.
2. The Reserve Bank of India decides the interest rates in the call money markets.

Which of the statements given above is/are correct?

14. How many of the following is/are the components of high-powered money?

1. Currency held by public
2. Currency held by commercial banks
3. Foreign Exchange reserves held by RBI

Select the correct answer using the code given below.

15. Consider the following statements with reference to the cost-push inflation:

1. It is inflation caused by an increase in prices of inputs like labor and raw material.
2. This inflation is always a strong indicator of an expanding economy.

Which of the statements given above is/are correct?