Day 22

IASbaba 60 Day Plan- Prelims Test 2016 ECONOMICS & CURRENT AFFAIRS [DAY 22]
Q. 1) Which of the following are correct w.r.t. Asset Reconstruction Companies?

1. It is set up to reconstruct or re-package assets to make them more saleable. The assets
in question here are loans from banks, card companies, financial institutions etc.
2. The word "asset reconstruction" in India was used in Narsimham I report where it
was envisaged for the setting up of a central Asset Reconstruction Fund with money
contributed by the Central Government.
3. ARCs focus on NPAs and allow the banking system to act as "clean bank".
Select the correct answer

a) 1 only
b) 2 only
c) 2 and 3 only
d) All of the above
Q.1) Solution (d)

ARC is in news for multiple reasons especially with NPAs being all time high. Hence we expect a
question. Here is the basic understanding about ARCs.
An Asset Reconstruction Company (ARC) is a company that is set up to do exactly what the
name suggests reconstruct or re-package assets to make them more saleable. The assets in
question here are loans from banks, card companies, financial institutions etc.
Why do we need ARCs? Bad loans are essentially of two types those that are a consequence
of routine banking operations and those that are a reflection of a greater systematic rot, as in
the Indian context where the bulk of non-performing assets (NPAs) are due to government
interference/loan waivers/difficulties in recovering dues etc. There are essentially two
approaches to tackling NPAs one, leave the banks to manage their own bad. Two, do the
same thing on a concerted, central level, through a centralized agency or agencies. ARCs are
centralised agencies for resolving bad loans created out of a systematic crisis. Non-performing
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assets (NPAs) can be assigned to ARCs by banks at a discounted price, enabling a one-time
clearing of the balance sheet of banks of sticky loans.
At the same time, the ARC can float bonds and recover dues from the borrowers directly. ARCs
can have several alternate structures. They can either be publicly or privately owned or a
combination of both, and can be either separately capitalised units or wholly-owned
subsidiaries.
Q.2) Which of the following are correct about Monetary Policy?

1. The strategy to influence money supply and interest rates to affect output and inflation.
2. Balancing savings and investments is a major objective along with generating
employment.
3. Exchange rate stabilization is achieved through monetary policy.
4. Monetary policy can be expansionary or contractionary depending on the status of the
macroeconomic parameters.
a) 1 and 3 only
b) 1 and 4 only
c) 3 and 4 only
d) All of the above
Q.2) Solution (d)

Monetary policy consists of the actions of a central bank, currency board or other regulatory
committee that determine the size and rate of growth of the money supply, which in turn
affects interest rates. Monetary policy is maintained through actions such as modifying the
interest rate, buying or selling government bonds, and changing the amount of money banks
are required to keep in the vault (bank reserves).
Further
reading:
http://www.yourarticlelibrary.com/policies/monetary-policy-meaning-
objectives-and-instruments-of-monetary-policy/11134/
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Q.3) Consider the following statements about Cash Reserve Ratio:

1. It is the ratio of deposits which banks have to keep with RBI as savings account.
2. Banks get a fixed interest on CRR from RBI.
3. With increase in CRR the lending capacity of banks will increase.
Which of the above statements are correct?
a)
b)
c)
d)
1 and 2
2 and 3
1 and 3
None of the above
Q.3) Solution (d)

It is the ratio of Deposits which banks have to keep with RBI. Under CRR a certain percentage of
the total bank deposits has to be kept in the current account with RBI. Banks dont earn
anything on that.
Banks will not have access to this amount. They cannot use this money for any of their
economic or commercial activities. Banks cant lend this portion of money to corporate or
individual borrowers. With increase in CRR the lending capacity of banks will decrease as they
will have less money to lend.
Q.4) Which of the following is incorrect about Bank rate?

a) It is rate at which RBI lends long term to commercial banks.
b) It requires collateral security like in case of repo-reverse repo rate.
c) It is a penal rate and is aligned with MSF in 2011.
d) Lower bank rates can help to expand the economy, when unemployment is high, by
lowering the cost of funds for borrowers.
Q.4) Solution (b)

Bank rate being long term lending rate doesnt require collaterals like the G-secs in case of Repo
or MSF.
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Bank rate is the rate charged by the central bank for lending funds to commercial banks. Bank
rates influence lending rates of commercial banks. Higher bank rate will translate to higher
lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the
bank rate and vice versa
Further reading: https://www.rbi.org.in/scripts/FAQView.aspx?Id=51
Q.5) Consider the following about ready forward contracts.

1. Its a transaction where 2 parties agree to sell and repurchase the same security.
2. Repo rate is the rate at which the central bank of a country (Reserve Bank of India in
case of India) lends money to commercial banks in the event of any shortfall of funds.
3. The difference between Repo and Reverse repo rate is always 100 basis points with the
latter being lower.
4. The difference between Repo and MSF is always 100 basis points with the latter being
higher.
Select the correct answer:
a) 1 and 3 only
b) 1 and 2 only
c) 2 and 3 only
d) 1, 3 and 4 only
Q.5) Solution (b)

Repurchase Options or in short Repo, is a money market instrument, which enables
collateralised short term borrowing and lending through sale/purchase operations in debt
instruments.
"repo" means an instrument for borrowing funds by selling securities with an agreement to
repurchase the securities on a mutually agreed future date at an agreed price which includes
interest for the funds borrowed; "reverse repo" means an instrument for lending
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funds by purchasing securities with an agreement to resell the securities on a mutually agreed
future date at an agreed price which includes interest for the funds lent."
This is the general definition of Repo and Reverse Repo in India. The securities transacted here
can be either government securities or corporate securities or any other securities which the
Central bank permits for transaction. Non-sovereign securities are used in many global markets
for repo operations. Unlike them, Indian repo market predominantly uses sovereign securities,
though repo is allowed on corporate bonds and debentures
The current repo, reverse repo and MSF are 6.5%, 6% and 7% respectively. Hence it is no
bound rule that there has to be a 100 basis points difference between them.
Q.6) Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank
of India in an emergency situation when inter-bank liquidity dries up completely. Which of
the following is incorrect about MSF?
a) MSF is a penal rate as the repo limit is exhausted and also SLR limit is breached at times.
b) MSF operations also become necessary as the repo operations are limited to a specific
period of the day.
c) Only scheduled commercial banks can use this route with government securities
including SLR as collateral.
d) If banks do not have excess SLR it cannot borrow under MSF.
Q.6) Solution (d)

Marginal Standing Facility (MSF) is a new scheme announced by the Reserve Bank of India (RBI)
in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money
from the central bank over and above what is available to them through the LAF window.
MSF, being a penal rate, is always fixed above the repo rate. The MSF would be the last resort
for banks once they exhaust all borrowing options including the liquidity adjustment facility by
pledging government securities, where the rates are lower in comparison with the MSF. The
MSF would be a penal rate for banks and the banks can borrow funds by pledging government
securities within the limits of the statutory liquidity ratio. The scheme has been introduced by
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RBI with the main aim of reducing volatility in the overnight lending rates in the inter-bank
market and to enable smooth monetary transmission in the financial system.
To balance the liquidity, RBI uses the sole independent "policy rate" which is the repo rate (in
the LAF window) and the MSF rate automatically gets adjusted to a fixed per cent above the
repo rate (MSF was originally intended to be 1% above the repo rate). MSF is at present aligned
with the Bank rate.
Even if the Banks do not have excess SLR they still can opt for MSF and it is allowed within
certain limits. The other statements are true.
Q.7) Consider the following about SLR. Which of the following are correct?
1. The ratio of liquid assets to net demand and time liabilities (NDTL) that they should keep
in designated liquid assets is called statutory liquidity ratio (SLR).
2. To control expansion of bank credit and ensure solvency of commercial banks is major
objective.
3. Banks hold public sector bonds, current account balances with other banks and gold as
SLR.
4. Banks can also hold multilateral bonds and foreign exchange as part of SLR

a) 1 only
b) 1 and 2 only
c) 1, 2 and 3 only
d) All of the above.
Q.7) Solution (c)

The Statutory Liquidity Ratio (SLR) is a prudential measure under which (as per the Banking
Regulations Act 1949) all Scheduled Commercial Banks in India must maintain an amount in one
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of the following forms as a percentage of their total Demand and Time Liabilities (DTL) / Net
DTL (NDTL);
[i] Cash.
[ii] Gold; or
[iii] Investments in un-encumbered Instruments that include;
(a) Treasury-Bills of the Government of India.
(b) Dated securities including those issued by the Government of India from time to time
under the market borrowings programme and the Market Stabilization Scheme (MSS).
(c) State Development Loans (SDLs) issued by State Governments under their market
borrowings programme.
(d) Other instruments as notified by the RBI.
Traditionally the amount to be held thus was stipulated to be no lower than 25 percent and not
exceeding 40 percent of the banks total DTL. However, effective from January, 2007 the floor
of 25 percent on the SLR was removed following an amendment of the Banking Regulation Act,
1949.
Further reading: http://www.arthapedia.in/index.php?title=Statutory_Liquidity_Ratio
Q.8) Consider the following about SLR and CRR.

1. SLR restricts the banks leverage in pumping more money into the economy while CRR is
the portion of deposits that banks have to maintain within central bank.
2. CRR is allowed only in Cash and Government securities while SLR is allowed in multiple
other designated forms.
a) 1 only
b) 2 only
c) Both 1 and 2
d) None of the above
Q.8) Solution (a)
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The question tries to catch the aspirant on reading and attention to detail. CRR is allowed only
in Cash is a known fact.
Cash Reserve Ratio (CRR): Each bank has to keep a certain percentage of its total deposits with
RBI as cash reserves.
Statutory Liquidity Ratio (SLR): Amount of liquid assets such as precious metals(Gold) or other
approved securities, that a financial institution must maintain as reserves other than the cash.
Formula: SLR rate = (liquid assets / (demand + time liabilities)) 100%
Time liabilities are liabilities which the banks are liable to pay after a certain period of time. E.g.
A 1 year fixed deposit. Demand liabilities are liabilities which the banks are liable to pay on
being demanded by the customer. E.g. A savings account
CRR limits the ability of the banks to pump more money into the economy. SLR is used to limit
the expansion of bank credit, for ensuring the solvency of banks (even if all the loans by the
bank go bad, the bank can still retrieve a part of it by selling the gold/govt securities.
Further reading: http://www.livemint.com/Money/VLvbh3hAk9sSOCvYdqd7SI/DYK-Differencebetween-CRR-and-SLR.html
Q.9) Which of the following is incorrect about qualitative and quantitative methods used by
RBI to control credit supply?
a) Qualitative method controls the manner of channelizing cash and credit in the economy.
b) Qualitative method restricts credit for certain section and expands for others depending
on the erstwhile situation
c) Marginal requirement is increased for those business activities where the flow of credit
is to be restricted and hence a quantitative method.
d) Under rationing of credit RBI fixes ceiling of credit setting a limit to the loans and
advances that can be made to particular sector is a qualitative method.
Q.9) Solution (c)

Some of the methods employed by the RBI to control credit creation are: I. Quantitative
Method II. Qualitative Method.
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The various methods employed by the RBI to control credit creation power of the commercial
banks can be classified in two groups, viz., quantitative controls and qualitative controls.
Quantitative controls are designed to regulate the volume of credit created by the banking
system qualitative measures or selective methods are designed to regulate the flow of credit in
specific uses.
Quantitative or traditional methods of credit control include banks rate policy, open market
operations and variable reserve ratio. Qualitative or selective methods of credit control include
regulation of margin requirement, credit rationing, regulation of consumer credit and direct
action.
Marginal requirement by the name sounds quantitative but is a qualitative method. So be
careful.
Further reading: http://www.yourarticlelibrary.com/banking/important-methods-adapted-byrbi-to-control-credit-creation/23490/
Q.10) Consider the following about Market Stabilization scheme.

1. MSS (Market Stabilisation Scheme) securities are issued with the objective of providing
the RBI with a stock of securities with which it can intervene in the market for managing
liquidity.
2. These securities are issued not to meet the government's expenditure.
3. The amounts raised under the MSS will be held in a separate identifiable cash account
titled the Market Stabilization Scheme Account (MSS Account) to be maintained and
operated by the RBI.
a) 1 only
b) 2 only
c) 1 and 3 only
d) All of the above
Q.10) Solution (d)

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This scheme came into existence following a MoU between the Reserve Bank of India (RBI) and
the Government of India (GoI) with the primary aim of aiding the sterilization operations of the
RBI. Historically, the RBI had been sterilizing the effects of significant capital inflows on
domestic liquidity by offloading parts of the stock of Government Securities held by it. It is
pertinent to recall, in this context, that the assets side of the RBIs Balance Sheet (July 1 to June
30) includes Foreign Exchange Reserves and Government Securities while liabilities are
primarily in the form of High Powered Money (consisting of Currency with the public and
Reserves held in the RBI by the Banking System). Thus, any rise in Foreign Exchange Reserves
resulting from the intervention of the RBI in the Foreign Exchange Markets (with the intention,
say, to maintain the exchange rate on the face of huge capital inflows) entails a corresponding
rise in High Powered Money. The Money Supply in the economy is linked to High Powered
Money via the money multiplier. Therefore, on the face of large capital inflows, to keep the
liabilities side constant so as to not raise the Supply of Money, corresponding reduction in the
stock of Government Securities by the RBI is necessary.
Q.11) Consider the following about fixed and floating interest rates.
1. A floating interest rate is an interest rate that is allowed to move up and down with the
rest of the market or along with an index but linked to an underlying benchmark rate.
2. A fixed interest rate is an interest rate on a liability, such as a loan or mortgage, that
remains fixed either for the entire term of the loan or for part of this term.
a) 1 only
b) 2 only
c) Both 1 and 2
Q.11) Solution (c)
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A floating interest rate, also known as a variable or adjustable rate, refers to any type
of debt instrument, such as a loan, bond, mortgage, or credit, that does not have a fixed
rate of interest over the life of the instrument.
Floating interest rates typically change based on a reference rate (a benchmark of any financial
factor, such as the Consumer Price Index). One of the most common reference rates to use as
the basis for applying floating interest rates is the London Inter-bank Offered Rate,
or LIBOR (the rates at which large banks lend to each other)
A fixed interest rate is an interest rate on a liability, such as a loan or mortgage, that remains
fixed either for the entire term of the loan or for part of this term. A fixed interest rate may be
attractive to a borrower who feels that the interest rate might rise over the term of the loan,
which would increase his or her interest expense. A fixed interest rate, therefore, avoids
the interest rate risk that comes with a floating or variable interest rate, wherein the interest
rate payable on a debt obligation depends on a benchmark interest rate or index.
The UPSC trend of asking questions is coming down to fundamentals of the current and
trending topics. This is relevant w.r.t Chinas devaluation and after effects.
Q.12) The Reserve Bank of India (RBI) constituted and Expert Committee to Revise and
Strengthen the Monetary Policy Framework under the Chairmanship of Dr. Urjit R.Patel.
Consider the following.
1. It has suggested that the apex bank should adopt the new CPI (consumer price index) as
the measure of the nominal anchor for policy communication.
2. The committee asked the Central Government to ensure that the fiscal deficit as a ratio
to GDP (gross domestic product) is brought down to 3.0 per cent by 2016-17.
3. The Patel panel felt that the monetary policy decision-making should be vested with a
monetary policy committee (MPC) which has participation of both government and RBI.
4. The FSLRC under Justice (retd) B N Srikrishna had also suggested for the formation of an
MPC.
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a) 1 and 2 only
b) 1 and 3 only
c) 1, 2 and 3 only
d) 1, 2 and 4 only
Q.12) Solution (d)

Urjit patel Committee is avery important committee of RBI. It suggested only RBI members in
the MPC with no government nominees. This was point of conflict even.
Further reading:
http://www.thehindu.com/business/Economy/urjit-panel-suggests-4-cpi-
inflation-target/article5602626.ece
https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=743
Q.13) What is common for all the following?

1. S S Tarapore Committee of 2006
2. Percy Mistry Committee on 2007
3. Jahangir Aziz working group of 2008
4. Dr. Raghuram Rajan Committee of 2009
5. Justice B N Srikrishnas FSLRC of 2013
Select the correct answer.
a) Capital and Current account convertibility.

b) Poverty alleviation
c) Public Debt management Agency
d) Categorisation of states for discretionary grants.
Q.13) Solution (c)

There were multiple committees that suggested PDMA. Especially with the agency formation
becoming point of tussle between Ministry of Finance and RBI, we expect a question this time.
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These committees have been reffered in government documents repeatedly especially post
2015 budget.
Further reading:
http://www.arthapedia.in/index.php?title=Public_Debt_Management_Agency_(PDMA)
Q.14) Which of the following is incorrect about Public Debt Management Agency the
government intends to set up?
a) Public Debt Management Agency (PDMA) is a specialized independent agency that
manages the internal and external liabilities of the Central Government in a holistic
manner and advises on such matters in return for a fee.
b) PDMA is considered to be set up with the objective of "maximising the cost of raising
and servicing public debt over the long-term within an acceptable level of risk at all
times, under the general superintendence of the central government".
c) An autonomous PDMA can be the catalyst for wider institutional reform, including
building a government securities market, and bring in transparency about public debt.
d) Genesis of the thinking on an independent debt management office is traced back to
the Committee on Capital Account Convertibility (1997) and the Review Group of
Standing Committee on International Financial Standards & Codes (2004).
Q. 14) Solution (b)

Public Debt Management Agency (PDMA) is a specialized independent agency that manages the
internal and external liabilities of the Central Government in a holistic manner and advises on
such matters in return for a fee. In other words, PDMA is the Investment Banker or Merchant
Banker to the Government. PDMA manages the issue, reissue and trading of Government
securities, manages and advises the Central Government on its contingent liabilities and
undertakes cash management for the central government including issuing and redeeming of
short term securities and advising on its cash management.
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PDMA is considered to be set up with the objective of "minimising the cost of raising and
servicing public debt over the long-term within an acceptable level of risk at all times, under the
general superintendence of the central government". This will guide all of its key functions,
which include managing the public debt, cash and contingent liabilities of Central Government,
and related activities.
Further reading:
http://www.arthapedia.in/index.php?title=Public_Debt_Management_Agency_(PDMA)
Q.15) Which of the following is not correctly matched?

a) Lakadwala Poverty estimation
b) Justice R V Eshwar Taxation
c) Kirit Parikh Disinvestment
d) Urjit patel Monetary Policy
Q.15) Solution (c)

The Kirit Parikh panel was set up by the Petroleum and Natural Gas Ministry to suggest a
methodology for pricing of diesel and cooking fuel.
The panel has said that the Government should take steps to pass on the impact of rise in price
of diesel to consumers, and move rapidly towards making the price of diesel marketdetermined. The expert group recommends that in view of high under-recovery of Rs. 10.51
per litre on diesel, HSD prices be raised by Rs. 5 per litre with immediate effect. The balance
under-recovery should be made up through a subsidy of Rs. 6 per litre to public sector oil
marketing companies (OMCs). The subsidy on diesel should be capped at Rs. 6 per litre litre.
This will imply freeing of price of diesel beyond this cap, the panel has said.
Q.16) Consider the following about Phillips Curve.

1. The Phillips curve represents the relationship between the rate of inflation and
the unemployment rate.
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2. Phillips found a consistent inverse relationship: when unemployment was high, wages
increased slowly; when unemployment was low, wages rose rapidly.
3. It showed the rate of wage inflation that would result if a particular level of
unemployment persisted for some time.
4. Price stability has a trade-off against unemployment and some level of inflation could be
considered desirable in order to minimize unemployment, is the core argument.
a) 1 and 2 only
b) 1 and 4 only
c) 2, 3 and 4 only
d) 1, 2, 3 and 4 only
Q.16) Solution (d)

The Phillips curve is an economic concept developed by A. W. Phillips stating
that inflation and unemployment have a stable and inverse relationship. According to the
Phillips curve, the lower an economy's rate of unemployment, the more rapidly wages paid to
labor increase in that economy.
Further reading: http://www.econlib.org/library/Enc/PhillipsCurve.html
Q.17) Consider the following.

1. Deflation is used to describe instances when the inflation rate has reduced marginally
over the short term
2. Disinflation is a general decline in prices, often caused by a reduction in the supply of
money or credit.
a) 1 only
b) 2 only
c) Both 1 and 2
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Q.17) Solution (d)

Deflation and disinflation are used with reference to change in general price levels in an
economy. While these two terms sound similar, they have very different meanings. As we
know, inflation refers to the rise in price levels in an economy, and deflation is the opposite, a
fall in price levels. Disinflation, on the other hand, refers to a slower rate of inflation.
Further
reading:
http://www.livemint.com/Money/rmR2KGnzn18ltvP6zBgpsO/Dejargoned-
deflation-and-disinflation.html
Q.18) If deflation is general decline in prices caused by a reduction in the supply of money
then which of the following is not the possible consequence of the same?
a) Demand from businesses and consumers to buy products falls
b) Employment growth rate stabilizes and is upward in trend
c) Debt servicing becomes more expensive
d) Governments can resort to tax cuts to boost demand from consumers and businesses
Q.18) Solution (b)

Deflation is when prices actually fall. Such a situation does seem favorable but in reality its not
a position that any economy would like to be in. Deflation usually moves hand in hand with
economic slowdown, lower productivity and loss of jobs. Just like how inflation decreases the
value of money, deflation increases its value. This incentivizes people to save money to buy
later when goods are cheaper, which, in turn, leads to further slowing of economic growth.
During deflation, value of money increases and goods are cheaper but you may end up earning
less thanks to slowing growth.
During the Great Depression, there was severe deflation; it had moved into double digits. Japan
has been struggling with deflation for the past two decades. Only recently did its Prime
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Minister, Shinzo Abe, declare that the period of deflation has come to an end and that
economic recovery is on its way.
A positive impact of deflation is increased export competitiveness as most other economies are
in an inflationary trend. Japan has benefited from competitive exports in the past decade or so.
Q.19) Consider the following about inflation.

1. When the government doesnt attempt to curb price rise allowing the free market
mechanism to function it is said to be open inflation.
2. When international bodies interrupts a price rise in a country through price control
measures and subsidies it is said to be internationally controlled inflation.
a) 1 only
b) 2 only
c) Both 1 and 2
Q.19) Solution (a)

Inflation is often open and suppressed. Inflation is open when markets for goods or factors of
production are allowed to function freely, setting prices of goods and factors without normal
interference by the authorities. Thus open inflation is the result of the uninterrupted
operation of the market mechanism.
There are no checks or controls on the distribution of commodities by the government.
Increase in demand and shortage of supplies persists which tend to lead to open inflation.
Unchecked open inflation ultimately leads to hyper-inflation.
Suppressed Inflation: On the contrary when the government imposes physical and monetary
controls to check open inflation, it is known as repressed or suppressed inflation. The market
mechanism is not allowed to function normally by the use of licensing, price controls and
rationing in order to suppress extensive rise in prices.
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Q.20) Suppressed inflation adversely affects the economy. What are the probable
consequences?
1. When the distribution of commodities is controlled, the prices of uncontrolled
commodities rise very high.
2. Suppressed inflation reduces the incentive to work because people do not get the
commodities which they want to have.
3. Suppressed inflation leads to black marketing, corruption, hoarding and profiteering. It
invites extralegal powers of control.
a) 1 and 2 only
b) 1 and 3 only
c) 2 and 3 only
d) 1, 2 and 3 only
Q.20) Solution (d)

Suppressed inflation results when efforts are made to increase domestic production and reduce
import demand by tariffs, import restrictions, limits on foreign loans, voluntary import
agreements, etc. So long as such controls exist, the present demand is postponed and there is
diversion of demand from controlled to uncontrolled commodities. But as soon as these
controls are removed, there is open inflation. Its Effects:
(1) When the distribution of commodities is controlled, the prices of uncontrolled commodities
rise very high.
(2) Suppressed inflation reduces the incentive to work because people do not get the
commodities which they want to have.
(3) Controlled distribution of goods also leads to misallocation of resources. This results in the
diversion of productive resources from essential to non-essential industries.
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(4) Frictions increase in the labour market when high inflation is associated with higher
unemployment.
(5) Suppressed inflation leads to black marketing, corruption, hoarding and profiteering. It
invites extralegal powers of control.
Q.21) The Nairobi Package was adopted at the WTO's Tenth Ministerial Conference, held in
Nairobi, Kenya. It contains a series of Ministerial Decisions on
1.
2.
3.
4.
5.
Special Safeguard Mechanism for Developed Countries

Issues of Least Developed Countries
Export Competition
Export of Cotton, Pulses and Rice and its by products
Public Stockholdings
Select the correct code

a)
b)
c)
d)
1, 2, 3 and 5
2, 3, 4 and 5
1, 2, 3 and 4
2, 3 and 5
Q.21) Solution (d)

The Nairobi Package was adopted at the WTO's Tenth Ministerial Conference, held in Nairobi,
Kenya, from 15 to 19 December 2015. It contains a series of six Ministerial Decisions on
agriculture, cotton and issues related to least-developed countries (LDCs). A Ministerial
Declaration outlining the Package and the future work of the WTO was adopted at the end of
the five-day Conference.
https://www.wto.org/english/thewto_e/minist_e/mc10_e/nairobipackage_e.htm
http://www.firstpost.com/business/nothing-at-nairobi-wto-ministerial-leaves-india-anddeveloping-countries-in-the-lurch-2553428.html
http://www.thehindu.com/business/Industry/wto-nairobi-meeting-government-to-respond-towtos-nairobi-package-in-parliament/article8011127.ece
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Q.22) Consider the following statements regarding Channapatana handcraft

1.
2.
3.
4.
Channapatana toys are special type of wooden toys

They are protected by GI tag
Channapatana handcraft can be traced back to the reign of Tipu Sultan
It flourished with the assistance of Persian Art form

a)
b)
c)
d)
1, 2 , 3 and 4
Only 1
1, 3 and 4
1, 2 and 3
Q.22) Solution (a)

http://www.thehindu.com/news/cities/bangalore/bid-to-restore-channapatna-craft-to-itsoriginal-glory/article7941995.ece
Q.23) In a major boost to the sustainable development of the Eastern Ghats, with special
focus on its fragile environment, the United Nations University has sanctioned one more
Regional Centre of Expertise (RCE) to India. What are the RCEs in India?
1.
2.
3.
4.
5.
6.
RCE-Srinagar, working on western Himalayas

RCE-Guwahati on Eastern Himalayas
RCE-Gujarat on wetland ecosystems
RCE-TERI (Mumbai) on Youth empowerment and energy
RCE-Kodagu on traditional knowledge and tribal communities of Western Ghats.
RCE-Tirupati will work on Eastern Ghats, coastal communities, marine ecosystem,
biodiversity and sustainable development.

a) 1, 2, 3, 4 and 6
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Page 20
b) 1, 2, 5 and 6
c) 2, 4 and 6
d) 1, 3, 4 and 5
Q.23) Solution (b)

RCE- Chandigarh on Wetland ecosystems
RCE- TERI (Goa)on Youth empowerment and energy
http://www.thehindu.com/news/national/andhra-pradesh/rcetirupati-to-focus-on-easternghats/article7983642.ece
Q.24) Consider the following with respect to Ganges River Dolphin

1. Ganges river dolphin is the national aquatic animal of India
2. Ganges river dolphin is Vulnerable as per IUCN red list
3. Vikramshila Gangetic dolphin sanctuary is the only protected area for the endangered
Gangetic dolphins in Asia
Select the correct answer using the codes given below

a)
b)
c)
d)
1 and 2 only
2 and 3 only
1 and 3 only
All
Q.24) Solution (c)
It is endangered as per IUCN red list

Vikramshila Gangetic dolphin sanctuary is the only protected area for the endangered
Gangetic dolphins in Asia
It is located in Bhagalpur District of Bihar, India. Only a few hundred dolphins remain in
India, of which half are found here. WWF-India and Aaranyak a NGO has been working
closely with various government departments to protect these blind river Dolphins of
India.
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Q.25) Consider the following lakes

1.
2.
3.
4.
5.
Lake Erie
Huron
Michigen
Ontario
Superior
Arrange the above lakes from West to East

a)
b)
c)
d)
53124
53134
53214
53241
Q.25) Solution (c)
Q.26) Consider the following countries

1. Liechtenstein
2. Norway
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3. Switzerland
Which of the above is a Non EU country?

a)
b)
c)
d)
1 and 2 only
2 and 3 only
3 only
All
Q.26) Solution (d)

European countries that are not part of the European Union include Norway,
Iceland, Liechtenstein, Albania, Switzerland, Turkey, Russia, Macedonia andMontenegro.
Of
these, two countries, Russia and Turkey, straddle Europe and Asia.
Q.27) Consider the following statement with respect to SHILP SAMPADA

1. The objective of this scheme is to upgrade the technical and entrepreneurial skill of
Backward Classes by way of providing training and financial assistance
2. The maximum loan limit under this scheme is Rs.1 Lakh.
3. The scheme is spearheaded by Ministry of Social justice and empowerment

a)
b)
c)
d)
1 and 2 only
2 and 3 only
1 and 3 only
All
Q.27) Solution (c)

Self explanatory
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Page 23
Q.28) Which of the following properties of light is observed in the phenomena of Rainbow
Formation?
1.
2.
3.
4.
Dispersion
Refraction
Total internal reflection
Reflection
Select the correct answer using the options given below

a)
b)
c)
d)
1,2,3 only
2, 3, 4 only
3 only
All of these
Q.28) Solution (d)
A rainbow is a natural spectrum appearing in the sky after a rain shower

It is caused by dispersion of sunlight by tiny water droplets, present in the atmosphere.
A rainbow is always formed in a direction opposite to that of the Sun.
The water droplets act like small prisms. They refract and disperse the incident sunlight,
then reflect it internally, and finally refract it again when it comes out of the raindrop
Due to the dispersion of light and internal reflection; different colours reach the
observers eye.
Source Ncert 10th std in 10 chap
Q.29) According to RBI guidelines, Basel III norms are to be implemented by all banks till
2019. Consider the following statements:
1. Capital to Risk weighted Assets Ratio (CRAR) is the percentage of banks risk weighted
credit exposures.
2. RBI has fixed CRAR as 9%.
3. Capital Adequacy Ratio (CAR) is expressed as CRAR.
4. Higher the CAR, higher is the risk.
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Page 24
a)
b)
c)
d)
1,2 and 3
2,3 and 4
1,3 and 4
All of the above
Q.29) Solution (a)

The capital adequacy ratio (CAR) is a measure of a bank's capital. It is expressed as a percentage
of a bank's risk weighted credit exposures. Also known as capital-to-risk weighted assets ratio
(CRAR), it is used to protect depositors and promote the stability and efficiency of financial
systems around the world.
In simple terms Capital Adequacy Ratio is Capital/risk. Lower the CAR, higher is the risk.
Q.30) Consider the following statements:

1. When Repo Rate increases, borrowing from RBI becomes more expensive.
2. Increase in Reverse Repo decreases the liquidity in the market.
3. Reverse Repo is fixed .5 percent points more than Repo.
a)
b)
c)
d)
1 and 2
2 and 3
1 and 3
All of the above
Q.30) Solution (a)

Reverse Repo is fixed .5 percentage points less than Repo.
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IASbaba 60 Day Plan- Prelims Test 2016 ECONOMICS & CURRENT AFFAIRS [DAY 22]

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Q.3) Consider the following statements about Cash Reserve Ratio:

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Q.6) Solution (d)

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Select the correct answer.

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Q.13) Solution (c)

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Q.15) Which of the following is not correctly matched?

Q.15) Solution (c)

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Q.16) Solution (d)

Q.17) Consider the following.

Q.17) Solution (d)

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Q.19) Solution (a)

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Special Safeguard Mechanism for Developed Countries

Select the correct code

Q.21) Solution (d)

Q.22) Consider the following statements regarding Channapatana handcraft

Channapatana toys are special type of wooden toys

Select the correct code

Q.22) Solution (a)

RCE-Srinagar, working on western Himalayas

Select the correct code

Q.23) Solution (b)

Q.24) Consider the following with respect to Ganges River Dolphin

Select the correct answer using the codes given below

Q.24) Solution (c)

It is endangered as per IUCN red list

Q.25) Consider the following lakes

Arrange the above lakes from West to East

Q.25) Solution (c)

Q.26) Consider the following countries

Which of the above is a Non EU country?

Q.26) Solution (d)