[Answerkey] UPSC CSAT GS Prelim 2016: Economy MCQs solved for all SETS (A,B,C,D) with explanations

1. Economy: Compared to last year’s Prelim
2. Road Ahead Economy for Prelims GS
3. Pillar#1: Banking-Finance
4. Pillar#2: Budget, Fiscal Policy
5. Pillar#3: Balance of Payment (BoP), International Economics
6. Pillar#4: Sectors of Economy
7. Pillar#5: Infrastructure
8. Pillar#6: HRD/ Assorted Yearbook

Economy: Compared to last year’s Prelim

2015	2016
Meaning of BASEL norms.	Meaning/purpose of Core banking, BEPS, MCLR
Nothing from Microeconomics.	Same
Nothing from rail budget.	Same.
UPSC gave three terms- AoA, Peace Clause, SPS- and asked aspirants to identify the associated org (Ans. WTO).	MCQ with Same theme and same answer- asked this year as well- Amber box, blue box, green box associated with (Ans. Again WTO)
Question on PM Jan Dhhan Yojana	PM-Prem continues and intensifies. This year PM Mudra, PM fasal bima, Startup standup, Atal pension and so..
48. There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit? 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalizing subsidies 4. Expanding industries Select the correct answer using the code given below. (a) 1 and 3 only (b) 2 and 3 only (c) 1 only (d) 1,2,3 and 4	Similar MCQ: 78. There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit? 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalizing subsidies 4. Reducing import duty Select the correct answer using the code given below. (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2, 3 and 4Only code changed otherwise here also “ONLY 1 and 3”.
Economy related Org: Too easy question on NITI Ayog origin (that it was setup to replace planning commission).	This time obscure or relatively low-profile organizations asked such as IMFC, FSDC.
Economy focused on first three pillars- banking, budget, BoP.	Less focus on Budget, more on BoP (11 MCQ); and atleast one MCQ from each of the six pillars. Within fourth pillar (sectors)- emphasis on startup (2 MCQs)
An MCQ on GI	There was sudden craze among aspirants to prepare GI-indicators, but nothing from here.
Vs. CAPF-2016	While WTO, Paris summit prem continues but thankfully, nothing hardcore Yearbook like KVIC, Silk production ranking. CAPF they asked India’s first defense industrial park, in prelims, they asked India’s first NIMZ.
Vs. EPFO/APFC-2016	IMF- Free trade agreement prem continues. But thankfully nothing from microeconomics, or hardcore Macroeconomics/obscure GDP related terms.

Road Ahead Economy for Prelims GS

• With nearly 30 MCQs- the Economy segment has reached / will soon reach its peak. Then, its fall should commence- just like environment- it may fall back to 20-ish region.
• May be 3-4 years down the line, economy may end up like science tech- below 10 MCQ range. Who knows!? The only way to fight uncertainty, is to prepare all subjects diligently.
• Since good number of questions, can be directly solved from the BES16 series, ipso facto good number of questions came from ‘economic survey’ and allied topics. Therefore, you should keep habit of following the survey and doing backend self-study on allied topics/terms mentioned in the survey.
• For economy, no secret/expensive coaching material required. While my videos and PowerPoints are good as base material for economy. But after they’re published, you’ve to keep updating them with Hindu/Indianexpress. (Atleast for Economy, Indian express also works just fine).
• In Banking-Finance, international economy- new developments keep happening. Similarly, in Modi Government – they announce scheme with catchy abbreviation first, and later on design its salient features, cost sharing and jurisdiction. So, you’ve to update the PowerPoints/notes- to keep the same material relevant for mains, interview and next prelims.
• To an extent, some of the MCQs- may seem “pro-senior player” e.g. BEPS, RCEP, New development banks, net metering, Gadgil-Kasturirangan, Ganga authority, OPCW, Belt-road initiative, Bitcoin etc. terms that have been making rounds since last 1.5-2 years esp. in the mains exam.
• But all in all, such MCQs were either too tough for everyone, (or too easy through elimination/guestimation)- thereby, not creating heavy favour to any group of serious aspirants. Besides, we can’t expect UPSC to give 100% soft-glove treatment to anyone. It is meant to be a cruel, competitive, unpredictable exam.

Anyways, here comes the stupid Answerkey:

Pillar#1: Banking-Finance Answerkey

18. What is/are the purpose/purposes of the `Marginal Cost of Funds based Lending Rate (MCLR)’ announced by RBI?
1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Both right. Verbatim lifted from RBI’s press statement first paragraph. More details on MCLR mechanism available under Mrunal’s lecture BES161/P8

79. The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?
1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.
2. Payment Banks can issue both credit cards and debit cards.
3. Payment Banks cannot undertake lending activities.
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 only
(d) 1, 2 and 3

Verbatim covered in Mrunal’s lecture BES161/P10.
Mobile phone companies and supermarket walla eligible. But, Payment banks can’t issue credit card or give loans. Go by eliminating all options with “2”, and you’re left with (B) 1 and 3 only.

4. The term ‘Core Banking Solutions’ is sometimes seen in the news. Which of the following statements best describes/describe this term?
1. It is a networking of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
2. It is an effort to increase RBI’s control over commercial banks through computerization.
3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

3 Is definitely not the purpose, so by elimination the answer is (A). However, just to be sure first statement is right – given verbatim in Mrunal’s summary note Economic survey 2012:
Although, one can’t be expected to have gone through such old material/article.
So let’s check, one of the standard reference books on the Banking topics- “Principles and practices of Banking for JAIIB by Macmillan” page 274-75. Yes answer is A) only 1 correct.

31. With reference to ‘Financial Stability and Development Council’, consider the following statements :
1. It is an organ of NITI Aayog.
2. It is headed by the Union Finance Minister.
3. It monitors macroprudential supervision of the economy.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Mrunal’s lecture L2/P8 : It falls under Dep. Of economic affairs and FM is the chairman. So, 1 is wrong and 2 is right. By elimination, we are left with answer “C”.
Crosscheck with Finmin website also confirms:

41. With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct?
1. Bitcoins are tracked by the Central Banks of the countries.
2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
3. Online payments can be sent without either side knowing the identity of the other.
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3

Mrunal’s bitcoin lecture L3/P8: They’re not tracked by any central bank or authority. And Both 2 and 3 are right.

51. Regarding ‘Atal Pension Yojana’, which of the following statements is/are correct?
1. It is a minimum guaranteed pension scheme mainly targeted at unorganized sector workers.
2. Only one member of a family can join the scheme.
3. Same amount of pension is guaranteed for the spouse for life after subscriber’s death.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

First statement is right as per Mrunal’s lecture L2/P10.
Remaining statements can be eliminated correctly by mere guess work- that all adult family members eligible, and after death of husband, wife ought to get pension.
But Just for crosschecking- here is the FAQ on IBA (Indian Bank’s association) and it proves that no. 2 is wrong and 3 is right. Accordingly, Answer C: 1 and 3.

Pillar#2: Budget, Fiscal Policy

35. The term ‘Base Erosion and Profit Shifting’ is sometimes seen in the news in the context of
(a) mining operation by multinational companies in resource-rich but backward areas
(b) curbing of the tax evasion by multinational companies
(c) exploitation of genetic resources of a country by multinational companies
(d) lack of consideration of environmental costs in the planning and implementation of developmental projects

Directly given in Mrunal’s lecture BES162/P4

78. There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Reducing import duty
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, 3 and 4

Just by applying logic i.e. to reduce deficit, we’ve to increase income and reduce Expenditure.

Option	Does it increase income	Does it reduce Expenditure
1. Reducing revenue expenditure	–	YES
2. Introducing new welfare schemes	–	NO
3. Rationalizing subsidies	–	YES
4. Reducing import duty	NO	–

Answer is only 1 and 3. More details at Mrunal’s lecture BES162/P19: fiscal deficit

87. Which of the following is/are included in the capital budget of the Government of India?
1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.
2. Loans received from foreign governments
3. Loans and advances granted to the States and Union Territories
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Verbatim given in Mrunal’s lecture BES162/P9. Finally, I can die in peace knowing that atleast my majoori of explaining the classification/parts of budget since last half decade, is not gone to waste. All three statements are correct.

Pillar#3: Balance of Payment (BoP), International Economics

16. With reference to the ‘Trans-Pacific Partnership’, consider the following statements:
1. It is an agreement among all the Pacific Rim countries except China and Russia.
2. It is a strategic alliance for the purpose of maritime security ONLY
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

TPP is meant for free trade. So second statement is wrong. We’ve to cross check the list of Pacific rim countries against TPP nations. The Pacific Rim includes countries bordering the Pacific Ocean [Ref#1 and Ref#2] On that logic, North Korea and Columbia  also Pacific rim countries. But not in TPP list of countries (https://ustr.gov/tpp/) similarly Columbia absent. Therefore, answer D. neither 1 nor 2 correct.

Also possible to get answer through gut-feeling, because in both statements they’ve used “Absolute terms”- “all countries”, “only maritime security”….whenever UPSC uses absolute terms, often, they’re wrong statements.

57. ‘European Stability Mechanism’, sometimes seen in the news, is an
(a) agency created by EU to deal with the impact of millions of refugees arriving from Middle East
(b) agency of EU that provides financial assistance to eurozone countries
(c) agency of EU to deal with all the bilateral and multilateral agreements on trade
(d) agency of EU to deal with the conflicts arising among the member countries

European Stability Mechanism is a European Union agency that provides financial assistance, in the form of loans, to eurozone countries. Says Indianexpress July 2015

52. The term ‘Regional Comprehensive Economic Partnership’ often appears in the news in the context of the affairs of a group of countries known as
(a) G20
(b) ASEAN
(c) SCO
(d) SAARC

Mrunal’s lecture L6/P2: Foreign trade– RCEP associated with ASEAN.

86. In the context of which of the following do you sometimes find the terms `amber box, blue box and green box’ in the news?
(a) WTO affairs
(b) SAARC affairs
(c) UNFCCC affairs
(d) India-EU negotiations on FTA

Mrunal’s Lecture L3/P6: WTO– they’re associated with WTO. Similar question UPSC asked last year- Peace clause, agreement on Agricultre etc are associated with which organization?
89. Recently, which one of the following currencies has been proposed to be added to the basket of IMF’s SDR?
(a) Ruble
(b) Rand
(c) Indian Rupee
(d) Renminbi

Mrunal’s Lecture BES163-P4: IMF Reforms , as well as last year’s ML5/P4 lecture- where specifically the word Renminbi was used.

83. With reference to `IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct?
1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.
Select the correct answer using the code given below.
(a) 1 only
(h) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Mrunal’s Lecture BES163/P3: First statement is right and Second statement initial part is also, correct- they’re rupee denominated and ‘debt’ type of instrument.
We’ve to check whether public sector firms also use it. answer is yes- Indianexpress confirms in October 2015. Hence, both correct. Although Difficult in exam hall- due to public and private.

42. Consider the following statements :
1. New Development Bank has been set up by APEC.
2. The headquarters of New Development Bank is in Shanghai.
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
Mrunal’s Article: : First is wrong- its BRICS nations. 2nd is right – HQ is Shanghai. Ref
Easy for senior players who appeared in last two mains. Easy to Medium difficulty for first timers.

46. What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?
1. To bring the idle gold lying with Indian households into the economy
2. To promote FDI in the gold and jewellery sector
3. To reduce India’s dependence on gold imports
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Mrunal’s BES163/P1: FDI is not the purpose – so all options involving 2 are wrong. 1 and 3 are right. Economic Survey Vol.2 Page 18 confirms.

50. ‘Global Financial Stability Report’ is prepared by the
(a) European Central Bank
(b) International Monetary Fund
(c) International Bank for Reconstruction and Development
(d) Organization for Economic Cooperation and Development

In this year’s lecture series, I had covered nearly dozen “Who prepares which report”  Salaa ek yehi reh gyaa. This is classic case of “Haath aayaa par moonh naa lagaa”.
Anyways, it’s IMF, says thehindu April 2016.

90. With reference to the International Monetary and Financial Committee (IMFC), consider the following statements :
1. IMFC discusses matters of concern affecting the global economy, and advises the International Monetary Fund (IMF) on the direction of its work.
2. The World Bank participates as observer in IMFC’s meetings.
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

Jaitley attended its meeting in April 2016 says IndianExpress
But newspapers didn’t cover theoretical portion. Upon looking at official IMF page–
Yes, both statements are correct. लेकिन साला इतना डिटेल में कोन प्रिपेर करता है?? especially for a low-profile organization like this.

93. Which of the following best describes the term ‘import cover’, sometimes seen in the news?
(a) It is the ratio of value of imports to the Gross Domestic Product of a country
(b) It is the total value of imports of a country in a year
(c) It is the ratio between the value of exports and that of imports between two countries
(d) It is the number of months of imports that could be paid for by  a country’s international reserves

Through gutfeeling, answer seems to be “D”. TheEconomist confirms

Pillar#4: Sectors of Economy

1. With reference to ‘stand up India scheme’, which of the following statement is/are correct?
1. Its purpose is to promote entrepreneurship among SC/ST and women entrepreneurs.
2. It provides for refinance through SIDBI.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Mrunal’s Lecture BES164/P5 – Startups: both correct. PIB also confirms
48. Pradhan Mantri MUDRA Yojana is aimed at
(a) bringing the small entrepreneurs into formal financial system
(b) providing loans to poor farmers for cultivating particular crops
(c) providing pensions to old and destitute persons
(d) funding the voluntary organizations involved in the promotion of skill development and employment generation

Mrunal’s lecture L5/P3. We saw hardly 4% of MSME walla getting loans from formal system, hence MUDRA bank and Scheme.
PIB also confirms

12. India’s ranking in the ‘Ease of Doing Business Index’ is sometimes seen in the news. Which of the following has declared that ranking?
(a) Organization for Economic Cooperation and Development (OECD)
(b) World Economic Forum
(c) World Bank
(d) World Trade Organization (WTO)

Yet another question on “Who prepares which report. Thankfully, this time Khudaa mehrbaan toh….answer is C as per Mrunal’s Lecture BES165/P7. And, my Economy Survey 2012 summary note also confirms.
36. Recently, India’s first ‘National Investment and Manufacturing Zone’ was proposed to be set up in
(a) Andhra Pradesh
(b) Gujarat
(c) Maharashtra
(d) Uttar Pradesh

In CAPF-2016, they asked first defense SEZ. Here, they asked first NIMZ.
Andhra Pradesh is set to house India’s first national investment and manufacturing zone, says Economic Times in September 2015

Pillar#5: Infrastructure

82. Which one of the following is a purpose of `UDAY’, a scheme of the Government?
(a) Providing technical and financial assistance to start-up entrepreneurs in the field of renewable sources of energy
(b) Providing electricity to every household in the country by 2018
(c) Replacing the coal-based power plants with natural gas, nuclear, solar, wind and tidal power plants over a period of time
(d) Providing for financial turnaround and revival of power distribution companies

Mrunal’s Lecture BES165/P4– UDAY is meant for discom debt problem. Hence “D” is the answer.
Economic Survey Vol.2, page 125 confirms.

37. What is/are the purpose/purposes of `District Mineral Foundations’ in India?
1. Promoting mineral exploration activities in mineral-rich districts
2. Protecting the interests of the persons affected by mining operations
3. Authorizing State Governments to issue licences for mineral exploration
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3

Mrunal’s Lecture BES165/P4: thermal energy lecture. Only 2nd statement is right.
Economic Survey Vol.2, page 141 confirms.

Pillar#6: HRD/ Assorted Yearbook

38. `SWAYAM’, an initiative of the Government of India, aims at
(a) promoting the Self Help Groups in rural areas
(b) providing financial and technical assistance to young start-up entrepreneurs
(c) promoting the education and health of adolescent girls
(d) providing affordable and quality education to the citizens for free

Mrunal’s lecture BES166/P2– education policy- slide on higher education and MOOC. PIB also confirms

59. Regarding DigiLocker, sometimes seen in the news, which of the following statements is/are correct?
1 It is a digital locker system offered by the Government under Digital India Programme.
2. It allows you to access your e-documents irrespective of your physical location.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Mrunal’s Lecture ML4/P3: E-Governance. Both right.
Some aspirants may find second statement debatable, that digilocker is not like ‘kindle ebook repository’. But as per Indianexpress 2015, November – 2nd statement verbatim correct. Hence answer both 1 and 2.

77. Which of the following is/are the indicator/indicators used by IFPRI to compute the Global Hunger Index Report?
1. Undernourishment
2. Child stunting
3. Child mortality
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 , 2 and 3
(d) 1 and 3 only

Man, isn’t one HDI-calculation enough of headache to explain and memorize? Now comes Hunger index “theory”. For this, we’ve to goto official site of IFPRI.
They use four indicators to count GHI- and above three are included.  Hence answer “C”-all of them.
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Shale gas, Paris Summit, and many other topics- too I had covered under BES16 Lecture series. But their MCQs will be solved under the Environment-Agriculture-Geography segment – which is coming soon. Besides it doesn’t look good to falsely portray that entire GS-paper is economy only- especially when I’m not running Economics optional coaching :P
PS: Any correction, post in the comment with reference link.