1.

Que-1
With reference to high powered money, consider the following statements:
1. Suppose India has 800 million currency units circulating in the public and RBI
has 10 billion currency units in reserve, then the high powered money for
India is still 800 million currency units.
2. As per the RBI denotation, High powered money is denoted by M0.
3. High Powered Money is also known as Monetary base.
Which of the above statements is/are correct?  
1.  a) 1 and 2 only
2.  b) 2 and 3 only
3.  c) 1 and 3 only
4.  d) 1, 2 and 3

Correct

Answer:
Option B is correct
1. Suppose India has 800 million currency units circulating in the public and RBI
has 10 billion currency units in reserve, then the high powered money for India is 10.8
billion currency units.
Enrich Your Learning:
High Powered Money:
2. The total liability of the monetary authority of the country, RBI, is called the
monetary base or high powered money.
3. It consists of currency (notes and coins in circulation with the public and vault
cash of commercial banks) and deposits held by the Government of India and
commercial banks with RBI.
4. If a member of the public produces a currency note to RBI, the latter must pay
her value equal to the figure printed on the note.
5. Similarly, the deposits are also refundable by RBI on demand from deposit-
holders.
6. These items are claims which the general public, government or banks have on
RBI and hence are considered to be the liability of RBI.
7. RBI acquires assets against these liabilities.
8. If RBI wishes to increase the money supply. It will then inject additional high
powered money into the economy.
 2 points
Que-2
Consider the following pairs:
  Rivers Relevant Fact
1. Pampa river Snake Boat race
2. Betwa River Integral part of the medieval city of Orchha
3. Periyar River Longest river in Kerala
Which of the pairs given above is/are correctly matched?
1.  a) 1 and 2 only
2.  b) 2 and 3 only
3.  c) 3 only
4.  d) 1, 2 and 3
 Incorrect

Solution:
Option A is correct
5. Periyar river is the second longest river in Kerala after Bharathapuzha river.
Enrich Your Learning:
Penganga River:
6. The Painganga River is the chief river of the Maharashtra state in India and
flows along the south east boundaries of the district in a winding, meandering course.
7. It originates in the Ajantha ranges in Aurangabad district in Maharashtra.
8. The total length of the river is 676 km.
9. The tributaries are Adan River, Kas river, Arunavati river, Kayadhu river, Pus
river.
10. It flows along the state border between Maharashtra and Telangana.
11. It is a part of Pranhita river basin which is part of Godavari river basin.
12. The river gets flooded in rainy and winter season and partially flooded in
summer. There is a proposal of making a huge dam on the Painganga River.
Betwa River:
13. The Betwa is a river in Northern India, and a tributary of the Yamuna.
14. It originates in the Vindhya Range just north of Hoshangabad in Madhya
Pradesh and flows north-east through Madhya Pradesh and Orchha to Uttar Pradesh.
15. It is an integral part of the medieval city of Orchha.
16. The total length of the river from its origin to its confluence with Yamuna is
590 km, out of which 232 km lies in Madhya Pradesh and the balance of 358 km in
Uttar Pradesh.
17. The main tributaries of the Betwa River are Jamni and Dhasan Rivers.
18. There are two dams constructed across the river at Dukwan and Deogarh.
Future Projects on Betwa River:
19. The Betwa River is being linked with the Ken River as a part of the river
linking project in Madhya Pradesh.
20. Another noteworthy project on the Betwa River is the construction of the
Matatila Dam, an undertaking project between the states of Madhya Pradesh and Uttar
Pradesh.
21. The region is important for migratory water birds.
Pennar River:
22. Penna River is a river of Southern India flows in Karnataka and Andhra
Pradesh.
23. It originates in Nandi Hills in Chikballapur District of Karnataka, and runs
north and east through the states of Karnataka and Andhra Pradesh to empty into the
Bay of Bengal.
24. Its main tributaries are the Jayamangali, Kunderu and Sagileru from the north
and Chitravathi, Papagni and Cheyyeru from the south.
25. It starts in Nandi Hills in of Karnataka, flows for 597km in north and east
directions through several mountains and plains, and joins the Bay of Bengal in
Nellore district of Andhra Pradesh.
26. It is 597 kilometres long, with a drainage basin covering 55,213 sqkm in
Karnataka and 48,276 sqkm in Andhra Pradesh.
27. The river basin lies in the rain shadow region of Eastern Ghats.
Pennar River Basin:
28. The watershed of the Penna River and its tributaries covers part of the
southern Deccan plateau.
29. The Kolar Plateau forms the divide between the Penna watershed and those of
the Kaveri, Ponnaiyar and Palar rivers to the south.
Estuary of Penna River:
30. The estuary of the Penna River extends 7 km upstream from the Bay of
Bengal.
31. Upputeru tidal creek and Isakapalli lagoon form the main coastal wetlands in
the Penna River.
Periyar River:
32. The Periyar originates in the Western Ghats of Tamil Nadu and then flows in
the north direction to the Periyar National Park into the Periyar Lake, which is a man-
made reservoir created in 1895.
33. In its course it also meets the Veembanad Lake and ultimately ends up in the
Arabian Sea.
34. The major tributaries of Periyar are the Muthirapuzha River, Mullayar River,
Cheruthoni River, Perinjankutti River and the Edamala River.
35. The Periyar River plays a major role in generating hydro-electricity.
36. The Periyar has a total length of approximately 244 km is in Kerala and 114
square km is in Tamil Nadu.
37. It is the second longest river in Kerala after Bharathapuzha.
38. The Thattekadu Bird Sanctuary is situated on the banks of this river.
39. Beside the Mullaperiyar Dam there is a well-known wildlife sanctuary and
tourist place, Thekkady.
Pamba River:
40. Pamba River is also known as Pampa river.
41. It is the third longest river in the South Indian state of Kerala after Periyar
River and Bharathappuzha River.
42. It has a length of about 176 km.
43. It originates at Pulachimalai hill in the Peerumedu plateau in the Western
Ghats at an altitude of 1650 metres and empties into the Vembanad Lake.
44. After traversing a distance of 176 km, the river joins the Arabian Sea through
a number of channels.
45. The Sabarimala temple dedicated to Lord Ayyappa is located on the banks of
the River Pamba. A famous Anjana temple is also situated near this bank.
Snake Boat Race at Pamba River:
46. The snake boat race is one of the important “Traditional Game” in Kerala on
the bank of pampa river.
47. The races are being conducted at Aranmula in the River Pampa. Aranmula
Boat festival is connected to the Annual Onam Festival of Kerala.
Tungabhadra River:
48. Tungabhadra River is a major river in the south Indian peninsula which is a
chief confluent of the Krishna River.
49. The tributaries of the Tungabhadra are Varada River and Hagari (Vedathy)
River.
50. It originates at Sringeri and ends at Kurnool, just few kilometres from its
mouth.
51. The merging of the two rivers, the Tunga River and the Bhadra River at
Koodli in Shimoga district of Karnataka, gives birth to the Tungabhadra River.
52. The river meanders through the plains to a distance of 531 km and merges
with the Krishna River in Telangana.
53. The locked land that lies in the north of Tungabhadra River between the
Tungabhadra and the Krishna River is called the ‘Raichur Doab’.
54. On the banks of the Tungabhadra River, Harihara-a temple dedicated to
Harihareshwara.
 2 points
Que-3
With reference to Coastal Employment Zones (CEZs), consider the following
statements:
1. CEZs were proposed by Ministry of Shipping.
2. Initially, there will be only two coastal zones, one in Gujarat and the other in
Odisha.
3. Each CEZ will be an agglomeration of multiple coastal districts instead of
focusing on single area.
4. CEZs are part of the Sagarmala project.
Which of the above statements is/are correct?  
1.  a) 1, 2 and 4 only
2.  b) 3 and 4 only
3.  c) 1 and 3 only
4.  d) 1, 2, 3 and 4

Incorrect

Answer:
Option B is correct
1. CEZs were proposed by NITI Aayog.
2. Initially, there will be only two coastal zones, one in Gujarat and the other
in Andhra Pradesh.
Enrich Your Learning:
‘Coastal Employment Zones’:
3. In recent years, India has seen jobless growth whereby the employment
growth was around 2 lakhs per year, much below the desired value. NITI Aayog has
proposed Coastal Employment Zones (CEZ) – one on eastern coast and other on
western.
4. CEZs are part of the Sagarmala project which aim at reducing logistics cost
for EXIM and domestic trade with minimal infrastructure investment.
The key features of these zones are as follows:
5. Each CEZ will be an agglomeration of multiple coastal districts, spread over a
wide geographical area of 500 square kilometres or more.
6. Flexible land conversion rules would help accommodate numerous inter-
related economic activities on large scale, thereby generating economies of scale.
7. They will be provided with swift decisions on application of environmental
clearance and speedy water and electricity connection.
8. CEZs are expected to have liberal labour laws and other tax incentives such as
limited period tax holiday etc.
9. They would seek to boost growth through export and employment intensive
manufacturing.
10. Each Coastal Economic Zone would create urban spaces as residential
provision for those employed in the zone.
11. Social subsidies would be re-oriented in such a way that beneficiaries become
independent.
Benefits:
12. It would attract large firms which would bring with them technology, capital,
good management and links to the world markets.
13. With the reduction of clearance time and normalization of duties, these zones
would help in frictionless movement of imports and exports with the creation of
bonded free-trade zones in the long term.
14. Cluster approach would help reap the benefit of economies of scale and
agglomeration economy.
15. Location of manufacturing units make exports from India competitive due to
decrease in logistics cost.
Challenges:
16. Non-availability of land parcels with the states along with huge acquisition
and compensation costs can delay the execution of such projects.
17. Previous attempt to generate jobs through Special economic zones has failed
and is being seen as land grabbing exercise by farmers.
18. Land acquisition for such a large project would be a major hurdle.
19. Slow world economic growth is suppressing growth of exports and export
market already dominated by China and East Asian economies.
20. Designing of zones need to keep in mind efficient waste management or else
can lead to rise of marine pollution.
21. Manufacturing units along coast may have greater risk of exposure to natural
disasters like cyclone especially along eastern coast.
22. Success of these zones would depend on their ability to attract large
investments from manufacturing firms and export competitiveness of product which
would require policies that.
 2 points
Que-4
In which of the following country ‘Mount Soputan volcano’ is located?
1.  a) Iceland
2.  b) Colombia
3.  c) Indonesia
4.  d) Japan

Incorrect

Solution:
Option C is correct
Enrich Your Learning:
Mount Soputan volcano:
5. Mount Soputan located on the northern part of Sulawesi Island in Indonesia.
6. Mount Soputan is one of Indonesia’s more than 120 active volcanoes.
7. Indonesia is an archipelago of more than 260 million people, is prone to
earthquakes and volcanic eruptions due to its location on the Pacific “Ring of Fire.”
 2 points
Que-5
Which of the following economic theory suggests that when a government tries to
stimulate an economy by increasing debt-financed government spending, demand
remains unchanged?
 1.  a) Hiding hand principle
2.  b) Ricardian equivalence
3.  c) Dahrendorf hypothesis
4.  d) Hubbert peak theory

Incorrect

Answer:
Option B is correct
Answer & Enrich Your Learning:
Ricardian Equivalence:
5. Ricardian equivalence is an economic theory that suggests that when a
government tries to stimulate an economy by increasing debt-financed government
spending, demand remains unchanged.
6. This is due to the fact that the public saves its excess money to pay for
expected future tax increases that will be used to pay off the debt.
7. This theory was developed by David Ricardo in the 19th century but was
revised by Harvard professor Robert Barro into a more elaborate version of the same
concept.
8. It stipulates that a person’s consumption is determined by the lifetime present
value of his after-tax income. Therefore, the Ricardian equivalence says a government
cannot stimulate consumer spending since people assume that whatever is gained now
will be offset by higher taxes due in the future.
9. Thus, the underlying idea behind Ricardo’s theory is that no matter how a
government chooses to increase spending, whether with debt financing or tax
financing, the outcome is the same and demand remains unchanged.
10. The theory espoused by Ricardo goes against the more popular theories
provided by Keynesian economics.
 2 points
Que-6
A type of soil in India has following characteristics:
1. It contain considerable amount of soluble salts.
2. It is deficient in potash and phosphate.
3. It is found in Kerala, Coastal track of Orissa and Sunderban area of West
Bengal.
Which one of the following soils has all of the above characteristics?
1.  a) Alluvial soil
2.  b) Red Soil
3.  c) Peaty Soil
4.  d) Lateritic soil

Incorrect

Solution:
Option C is correct
Enrich Your Learning:
Peaty soils:
1. Peaty soils are found in the areas of heavy rainfall and high humidity, where
there is a good growth of vegetation.
2. These soils contain considerable amount of soluble salts and 10-40 per cent of
organic matter.
3. It occurs widely in the northern part of Bihar, southern part of Uttarakhand
and the coastal areas of West Bengal, Odisha and Tamil Nadu, kerala (in Kerala
where it is called kari).
4. The peaty soils are black, heavy and highly acidic.
5. They are deficient in potash and phosphate.
6. Most of the peaty soils are under water during the rainy season but as soon the
rains cease, they are put under paddy cultivation.
7. When properly drained and fertilized, these soils produce good crops of rice.
Laterite soils:
8. Laterite soils are red in colour because of the presence of iron oxides.
9. These soils are poor in organic matter, nitrogen, phosphate and calcium.
Moisture content is least in the soil.
10. These soils can be found in tropical regions of India and those regions which
receive heavy rainfall. These are the result of intense leaching due to tropical rains.
11. Laterites are not suitable for cultivation; however, application of manures and
fertilisers are required for making the soils fertile for cultivation.
12. They are well developed in south Maharashtra, parts of Karnataka, Andhra
Pradesh, Orissa, West Bengal, Kerala, Jharkhand, Assam and Meghalaya.
 2 points
Que-7
Consider the following facts:
1. The government can use Revenue from main taxes for any purposes while it
can use tax revenue from Cess after due appropriation made by Parliament
only.
2. Cess is not shareable with state governments while surcharge can be shared
with state governments.
3. The Usual taxes and Surcharges, both goes to the consolidated fund of India
and can be spend for any purposes.
Which of the above statements is/are correct?  
1.  a) 1 and 2 only
2.  b) 2 and 3 only
3.  c) 1 and 3 only
4.  d) 1, 2 and 3

Incorrect

Answer:
Option C is correct
1. Surcharge and Cess are not shareable with state governments.
Enrich Your Learning:
How Cess differs from Surcharge:
2. A cess imposed by the central government is a tax on tax, levied by the
government for a specific purpose.
3. Generally, cess is expected to be levied till the time the government gets
enough money for that purpose.
4. Another difference between cess and the usual tax is the way in which tax
revenue from cess is kept.
5. Revenue from main taxes like Personal Income taxes are kept at Consolidated
Fund of India (CFI). The government can use it for any purposes.
6. But the tax revenue from Cess are first credited to the CFI and the Central
Government may, after due appropriation made by Parliament, utilise the money for
the specified purposes.
7. Another major feature of cess like surcharges is that the Centre need not share
it with states. But regarding all other major taxes they come under the divisible pool
and hence they shall be shared with the states with the recommendations of the
Finance Commission.
8. At present, the main cess are: education cess, road cess or (fuel cess),
infrastructure cess, clean energy cess, krishi kalyan cess and swachh bharat cess.
9. A common feature of both surcharge and cess is that the centre need not share
it with states.
10. The main difference between surcharge and cess is that despite they are not
shareable with state governments, surcharge can be kept with the CFI and spent like
any other taxes, and the cess should be kept as a separate fund after allocating to CFI
and can be spent only for a specific purpose.
11. This means cess can be spent only for the specific purpose for which it is
created. If the purpose for which the cess is created is fulfilled, it should be
eliminated.
Following are the difference between the usual taxes, surcharge and cess.
12. The usual taxes goes to the consolidated fund of India and can be spend for
any purposes.
13. Surcharge also goes to the consolidated fund of India and can be spent for any
purposes.
14. Cess goes to Consolidated Fund of India but can be spend only for the specific
purposes.
 2 points
Que-8
Which of the following statements is/are correct regarding Terrace farming in India?
1. Western and central Himalayas have well developed terrace farming.
2. It is easy and less labour intensive.
3. These methods can cause the overflow of water during the rainy season.
Select the correct answer using the codes given below:
1.  a) 1 and 2 only
2.  b) 2 and 3 only
3.  c) 1 and 3 only
4.  d) 1, 2 and 3

Incorrect

Answer:
Option C is correct
1. Terrace farming enables the land fertile but requires a lot of complicated
engineering and design and is labour intensive.
Enrich Your Learning:
2. Terrace Farming are made on the steep slopes so that flat surfaces are
available to grow crops.
3. They can reduce surface run-off and soil erosion.
4. Western and central Himalayas have well developed terrace farming.
 How Does It Work?
5. Terrace farming is a method of farming whereby “steps” known as terraces are
built onto the slopes of hills and mountains.
6. When it rains, instead of rain carrying away the soil nutrients and plants down
the slope, they flow to the next terrace.
7. Every step has an outlet which channels water to the next step. This helps in
keeping some areas dry and others wet.
8. On very high altitudes, other crops apart from rice can be grown. This is
because rice does not do well on high altitudes.
9. There are two types of terracing known as graded terracing and level
terracing. A graded terrace may have either constant or variable grades along its
length. On the contrary, the level terraces follow a contour line and are best suited for
permeable soil.
Advantages:
10. It prevents the washing away of soil nutrients by the rains. This leads to the
growth of healthy crops.
11. It prevents the carrying away of plants by the heavy flowing rivers of water.
12. Its help in reduction of soil erosion and water loss.
13. It has made the idle hillside land become productive.
14. Terraces trap rainwater allowing the people to engage in cultivation of water-
intensive crops such as rice.
15. It is able to turn the moist idle land into productive farms leading to high food
security in the world.
16. It also helps in retaining the soil nutrients in the farms.
Disadvantages:
17. It can lead to rainwater saturation.
18. This is dangerous since it causes the overflow of water during the rainy
season.
19. The consequence of overflowing water is that it causes more dangerous water
runoffs.
20. Terraces may also result in mudslides if not well managed.
21. There’s need for huge inputs of labour to construct and maintain the terraces.
Hence it is expensive as it is labour intensive.
22. It also leads to the reduction in soil quality due to the leaching process.
 2 points
Que-9
With reference to capital receipts, consider the following statements:
1. Those receipts of the government which create liability or reduce financial
assets are termed as capital receipts.
2. Unlike revenue receipts, these receipts occur again and again in a financial
year.
3. Several types of Gifts and loans are the types of the capital receipts that are
tax-free.
Which of the above statements is/are correct?  
1.  a) 1 and 2 only
2.  b) 2 and 3 only
3.  c) 1 and 3 only
4.  d) 1, 2 and 3
 Correct

Answer:
Option C is correct
1. Capital receipts are non-recurring and non-routine in nature.
Enrich Your Learning:
Capital Receipts:
2. The Capital Budget is an account of the assets as well as liabilities of the
central government, which takes into consideration changes in capital.
3. It consists of capital receipts and capital expenditure of the government.
4. This shows the capital requirements of the government and the pattern of their
financing.
5. All those receipts of the government which create liability or reduce financial
assets are termed as capital receipts.
6. The main items of capital receipts are loans raised by the government from the
public which are called market borrowings, borrowing by the government from the
Reserve Bank and commercial banks and other financial institutions through the sale
of treasury bills, loans received from foreign governments and international
organisations, and recoveries of loans granted by the central government.
7. Other items include small savings (Post-Office Savings Accounts, National
Savings Certificates, etc.), provident funds and net receipts obtained from the sale of
shares in Public Sector Undertakings (PSUs) (This is referred to as PSU
disinvestment).
Key components of capital receipts
8. Recovery of loans and advances:
 Loans offered by government to others are government assets because
it owns money that it lends. We know that Central Government grants loans to (i)
States, Union territories, (ii) public sector enterprises, other parties and (Hi) foreign
governments. Recovery of such loans is treated as capital receipts because it causes
reduction in assets of the government.
9. Government raises funds from disinvestment also. Disinvestment means
selling whole or a part of the shares (i.e., equity) of selected public sector enterprises.
10. Funds raised by government from borrowing are treated as capital receipts
because they create liability of returning loans. These funds are borrowed from (i)
open market, (ii) Reserve Bank of India, {Hi) foreign governments and international
organisations.
11. Government receipts also include small savings like Post Office deposits.
Public Provident Fund deposits, National Saving Certificate deposits, Kisan Vikas
Patras, etc.
 2 points
Que-10
Consider the following:
1. It flows entirely through the district of Uttara Kannada.
2. It joins the Arabian sea.
3. Kodasali dam is built on this river.
Which of the following river is described by above facts?
1.  a) Gangavalli River
2.  b) Harangi River
3.  c) Kali River
4.  d) Sharavati River
 Incorrect

Solution:
Option C is correct
Enrich Your Learning:
River Kalinadi:
1. The Kali River or Kalinadi is a river flowing in Karnataka state in India.
2. It originates from Belgaum district and falls in the Karwar Bay.
3. The Kali River has its origin near the village of Kushavali of Joida Taluka, in
the Western Ghats and flows eastwards into the Supa Dam Reservoir, where it is
joined by the Pandri River from the left (north).
4. The river runs 184 kilometers before joining Arabian Sea.
5. After joining the Kaneri river the Kali is flows south-southwest into Kodasalli
Reservoir.
6. Kodasali dam is built on Kali river in Joida taluka of Kannada district.