UPPSC 2020 — Economy Questions with Answers
All 14 Economy previous-year questions from UPPSC 2020, each with the correct answer and a full explanation. Practise them as a free, timed mock test with instant scoring.
Practice Economy as a timed test →- Q1.Government Budgeting
Along with the Budget, the Finance Minister also places other documents before the Parliament which include 'The Macro-Economic Framework Statement'. The aforesaid document is presented because this is mandated by
- a)Long-standing parliamentary convention
- b)Article 112 and Article 110(1) of the Constitution of India
- c)Article 113 of the Constitution of India
- d)Provisions of the Fiscal Responsibility and Budget Management Act, 2003
Explanation: The Macro-Economic Framework Statement is one of the documents mandated by the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 to be laid before Parliament with the Budget.
- Q2.International Economic Institutions
'Gold Tranche' (Reserve Tranche) refers to
- a)a loan system of the World Bank
- b)one of the operations of a Central Bank
- c)a credit system granted by WTO to its members
- d)a credit system granted by IMF to its members
Explanation: The Gold Tranche (Reserve Tranche) is the portion of a member's IMF quota that it can draw automatically without conditions, hence a credit facility of the IMF.
- Q3.International Finance
If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India?
- a)1 only
- b)1 and 2 only
- c)2 only
- d)1, 2 and 3
Explanation: Reducing reliance on short-term foreign borrowings insulates India from sudden capital flight; opening more to foreign banks and full capital account convertibility would increase vulnerability, so only statement 1 gives immunity.
- Q4.Money and Banking
If you withdraw Rs. 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be
- a)To reduce it by Rs. 1,00,000
- b)To increase it by Rs. 1,00,000
- c)To increase it by more than Rs. 1,00,000
- d)To leave it unchanged
Explanation: Both currency with the public and demand deposits are components of money supply (M1), so converting a deposit into cash merely shifts the form of money without changing the aggregate money supply.
- Q5.External Sector
With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
- a)It is the investment through capital instruments essentially in a listed company.
- b)It is a largely non-debt creating capital flow.
- c)It is the investment which involves debt-servicing.
- d)It is the investment made by foreign institutional investors in the Government securities.
Explanation: FDI is a long-term, largely non-debt-creating capital flow, distinguishing it from portfolio and debt flows.
- Q6.External Sector
With reference to the international trade of India at present, which of the following statements is/are correct?
- a)1 and 2 only
- b)2 and 4 only
- c)3 only
- d)1, 3 and 4 only
Explanation: India has a merchandise trade deficit, a services trade surplus and an overall current account deficit, so statements 1, 3 and 4 are correct; imports of iron, steel and machinery have not consistently decreased, so statement 2 is wrong.
- Q7.Commodities
The term 'West Texas Intermediate', sometimes found in news, refers to a grade of
- a)Crude oil
- b)Bullion
- c)Rare earth elements
- d)Uranium
Explanation: West Texas Intermediate (WTI) is a benchmark grade of crude oil used in pricing.
- Q8.Public Finance
In the context of the Indian economy, non-financial debt includes which of the following?
- a)1 only
- b)1 and 2 only
- c)3 only
- d)1, 2 and 3
Explanation: Non-financial debt covers borrowings by households, businesses and government, so housing loans, credit card dues and Treasury bills are all included.
- Q9.WTO
With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?
- a)1 and 2 only
- b)2 only
- c)1 and 3 only
- d)1, 2 and 3
Explanation: TRIMS prohibits quantitative import restrictions on foreign investors and is not directly about regulating foreign investment itself; it applies only to trade in goods, not services, so statement 2 is wrong and the answer is 1 and 3 only.
- Q10.Monetary Policy
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?
- a)1 and 2 only
- b)2 only
- c)1 and 3 only
- d)1, 2 and 3
Explanation: An expansionist policy involves cutting the SLR, bank rate and repo rate, so the RBI would do 1 and 3; increasing the MSF rate is contractionary, so the action it would NOT do is statement 2 only.
- Q11.Indian Economic Development
With reference to the Indian economy after the 1991 economic liberalization, consider the following statements. Which of the statements given above is/are correct?
- a)1 and 2 only
- b)3 and 4 only
- c)3 only
- d)1, 2 and 4 only
Explanation: After 1991 the rural non-farm economy grew while the rate of rural employment growth declined, so statements 3 and 4 are correct; worker productivity rose in both areas and the rural share of the workforce did not steadily increase, so 1 and 2 are wrong.
- Q12.Banking
Consider the following statements about cooperative banks. Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Explanation: DCCBs do not deliver more short-term agricultural credit than commercial banks, so statement 1 is wrong, but financing Primary Agricultural Credit Societies is indeed a key DCCB function, so only statement 2 is correct.
- Q13.Insurance
In India, under cyber insurance for individuals, which of the following benefits are generally covered, in addition to payment for the loss of funds and other benefits?
- a)1, 2 and 4 only
- b)1, 3 and 4 only
- c)2 and 3 only
- d)1, 2, 3 and 4
Explanation: Cyber insurance typically covers system restoration, consultant costs during cyber extortion and legal defence against third-party suits, but not the cost of a brand-new computer for physical damage, so statement 2 is excluded and the answer is 1, 3 and 4 only.
- Q14.Agriculture
In India, which of the following can be considered as public investment in agriculture?
- a)1, 2 and 5 only
- b)1, 2, 4 and 5 only
- c)2, 3 and 6 only
- d)1, 2, 3, 4, 5 and 6
Explanation: Public investment in agriculture creates durable assets and capacity, such as computerizing PACS, developing social capital and building cold storage; MSP, free electricity and loan waivers are subsidies/revenue expenditure, so the answer is 2, 3 and 6 only.
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