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UPSC CSE Prelims 2014 — Economy Questions with Answers

All 12 Economy previous-year questions from UPSC CSE Prelims 2014, each with the correct answer and a full explanation. Practise them as a free, timed mock test with instant scoring.

1. Q1.Public Finance

   The sales tax you pay while purchasing a toothpaste is a

   • a)Tax imposed by the Central Government
   • b)Tax imposed by the Central Government but collected by the State Government
   • c)Tax imposed by the State Government but collected by the Central Government
   • d)Tax imposed and collected by the State Government

   Explanation: Sales tax on goods like toothpaste is imposed and collected by the State Government.

2. Q2.Financial Markets

   What does venture capital mean?

   • a)Short-term capital provided to industries
   • b)Long-term initial capital provided to new entrepreneurs
   • c)Funds made available to industries during losses
   • d)Funds made available for replacement and modernization of industries

   Explanation: Venture capital is long-term start-up capital provided to new entrepreneurs.

3. Q3.Planning

   The main objective of the 12th Five-Year Plan is

   • a)Inclusive development and poverty reduction
   • b)Inclusive and sustainable development
   • c)Sustainable and inclusive development for reducing unemployment
   • d)Faster, sustainable and more inclusive development

   Explanation: The 12th Five-Year Plan aimed at faster, sustainable and more inclusive growth.

4. Q4.External Sector

   With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? 1. Balance of trade 2. Foreign assets 3. Balance of invisibles 4. Special Drawing Rights

   • a)1 only
   • b)2 and 3
   • c)1 and 3
   • d)1, 2 and 4

   Explanation: The Current Account of the Balance of Payments comprises the balance of trade and the balance of invisibles.

5. Q5.Banking

   The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities', sometimes appearing in news, are used in relation to

   • a)Banking operations
   • b)Communication networking
   • c)War strategy
   • d)Supply and demand of agricultural products

   Explanation: MSF rate and NDTL are terms used in banking operations.

6. Q6.Financial Inclusion

   What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?

   • a)1 only
   • b)2 only
   • c)Both 1 and 2
   • d)Neither 1 nor 2

   Explanation: Business Correspondents (Bank Saathi) let beneficiaries draw subsidies/benefits and make deposits and withdrawals in their villages, so both apply.

7. Q7.Banking

   In the context of Indian economy, which of the following is/are the purpose/purposes of 'Statutory Reserve Requirements'?

   • a)1 only
   • b)1 and 2 only
   • c)2 and 3 only
   • d)1, 2, 3 and 4

   Explanation: Statutory reserve requirements primarily enable the central bank to control the volume of advances banks can create, so only statement 1 is the intended purpose.

8. Q8.Agriculture

   In India, cluster bean (Guar) is traditionally used as a vegetable or animal feed, but recently the cultivation of this has assumed significance. Which one of the following statements is correct in this context?

   • a)The oil extracted from its seeds is used in the manufacture of biodegradable plastics.
   • b)The gum made from its seeds is used in the extraction of shale gas.
   • c)This plant has the property of a good pesticide.
   • d)It is a source of high-quality biodiesel.

   Explanation: Guar gum made from cluster bean seeds is used in hydraulic fracturing for shale gas extraction.

9. Q9.Macroeconomics

   If the interest rate is decreased in an economy, it will

   • a)reduce consumption expenditure in the economy
   • b)increase government tax collection
   • c)increase investment expenditure in the economy
   • d)increase total savings in the economy

   Explanation: A lower interest rate raises investment expenditure in the economy.

10. Q10.Agriculture

    In the context of food and nutritional security of India, enhancing the 'Seed Replacement Rates' of various crops helps in achieving the food production targets of the future. But what is/are the constraint/constraints in its wider/greater implementation?

    • a)1 and 2
    • b)2 only
    • c)3 only
    • d)None

    Explanation: The main constraint to higher Seed Replacement Rates is the demand-supply gap for quality seeds in low-value, high-volume crops, so only statement 3 is correct.

11. Q11.International Organizations

    Which of the following organizations brings out the publication known as 'World Economic Outlook'?

    • a)International Monetary Fund
    • b)United Nations Development Programme
    • c)World Economic Forum
    • d)World Bank

    Explanation: The 'World Economic Outlook' is published by the International Monetary Fund.

12. Q12.Public Finance

    With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? 1. Defence expenditure 2. Interest payments 3. Salaries and pensions 4. Subsidies

    • a)1 only
    • b)2 and 3 only
    • c)1, 2 and 3 only
    • d)1, 2, 3 and 4

    Explanation: Defence expenditure, interest payments, salaries/pensions and subsidies are all covered under Non-Plan Expenditure, so all four are correct.