[Answerkey] CAPF-2014 Economy MCQs with explanation, Difficulty level, Span of Current Affairs

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  1. CAPF: Internal Breakup
    1. Economy in all recent exams of UPSC
    2. Economy: Internal breakup in CAPF
    3. Economy: Span of current affairs
    4. Economy Difficulty level of MCQs in CAPF-2014?
  2. Micro economics
    1. #1: Elasticity of Demand
    2. #2: Commodity Demand
    3. #3: Substitution rate
  3. Budget, Taxation, Subsidies
    1. #1: MSP
    2. #2: WTO Bali conference
    3. #3: GAAR
    4. #4: Interim budget
  4. Banking and finance related
    1. B1: PSU Bank ownership
    2. B2: Banking POS
    3. B3: SEBI norms corporate governance

CAPF: Topicwise Breakup

UPSC CAPF 2014 Analysis
To download scanned CAPF 2014 question paper Booklet “D” click me

Topic MCQs in CAPF-2013 Weightage
Geography & Environment 22 18%
Polity 20 16%
Aptitude 20 16%
History & Culture 19 15%
Science 15 12%
Economy 10 8%
IR & defense related 10 8%
PIN, Sports, Books 9 7%
Total 125 100%

Economy in all recent exams of UPSC

Drastic decline in economy segment!
Economy CAPF-2014 CAPF-2013 CSAT-2013 CDS1-2014
Economy 10 21 18 9
total MCQs 125 125 100 120
% 8% 17% 18% 8%

Economy: Internal breakup in CAPF

Internal breakup MCQ weightage
Micro economics 3 30%
Fiscal Policy (budget, taxation, subsidies) 4 40%
Banking and finance 3 30%
total 10 100%

Compared to last year, Number of questions decreased and difficulty level increased. But still, there is continuity in the trend of MCQs- for example

topic CAPF-2013 CAPF-2014
Question that requires you to do “data interpretation of Annual financial statement” ascending descending  of taxes which deficit increased between BE-2013 and RE-2013
WTO related latest nation to join food subsidies in Bali summit

Economy: Span of current affairs

date topic asked in CAPF-2013
11-Nov-13 PSU bank ownership
24-Nov-13 SBI  POS terminal
6-Dec-13 Bali summit WTO
17-Feb-14 Interim budget
17-Apr-14 SEBI norms
13-Jul-14 Exam conducted

Moral of the story:

  1. at least last 6-8 months’ current should be prepared before CAPF exam
  2. overall 5 current + 2 contemporary (GAAR, Wheat) + 3 static micro = 10 MCQ

Economy Difficulty level of MCQs in CAPF-2014?

Debatable, depends on preparation level of a person. But in my opinion all questions were difficult, due to following reasons:

  1. Three MCQs on micro-economics because most candidates ignore it for CAPF.
  2. Bali conference food subsidies, old topic from last year. Many would have downplayed given that exam taken >6 months after it.
  3. Government stakes in bank ownership- again old topic from last year. Many would have forgotten that number 58 to 51. (because who has time for such trivial data memorization)
  4. GAAR: as such easy but due to term “Overseas investors” some candidates may become 50:50. Because IT commissioner can send notices even to Indians and NRIs under GAAR.
  5. Interim budget= who studies annual financial statement in such minute detail to see that ERD increased from 1.8% to 2%!
  6. Banking PoS terminal=> such banking GK not seen in earlier UPSC exams so candidates would have ignored while preparing.
  7. SEBI norms. Most candidates downplay the capital market / corporate sector part.
  8. MSP: it was easy to tell that second statement is wrong but still you were required to mug up an exact data that wheat MSP=1700, only then final answer could be ticked.

Lessons for CSAT-2014

  1. questions look tough yes, but they’re not “falling” from sky. The correct / incorrect statements are lifted verbatim from Hindu, Indian express etc. It again highlights the importance of making notes.
  2. Economic Survey is useful (observe MSP question).
  3. Microeconomics should be revised (only if you’ve read it already. Otherwise there is no time to start afresh, at this junction.)
  4. Never tick MCQ unless you’re absolutely sure. for example that interim budget question, many would have ticked fiscal deficit etc. by “gut feeling”.
  5. It is upto UPSC to replicate this model from CAPF to CSAT (i.e. economy section with less question and more difficulty) but nonetheless one should keepup the momentum because economy important for GS2 and GS3.

Conspiracy theory: TR Jain:
It seems all the micro economics questions were framed by T R Jain (or his fan) because all statements verbatim lifted from various books authored by T R Jain.
Anyways, without further ado, let’s begin solving.

Micro economics

total three questions

#1: Elasticity of Demand

37. When a fall in price of a commodity reduces total expenditure and a rise—in price-increases it, price, elasticity of demand will be :

  1. 1
  2. <1
  3. >1
  4. Infinity

Answer B <1.
Introductory Microeconomics and Macroeconomics By TR Jain, VK Ohri. Page  92
Less than unitary elastic demand (Ed<1), when:

  1. Total Expenditure increases when price increases
  2. Total Expenditure decreases when price falls

NCERT class12 microeconomics page32 tells same story but via a complicated mathematical equation.

#2: Commodity Demand

85.Which of the following factors affects individual’s demand for a commodity?

  1. Price of the commodity
  2. Income of the consumer
  3. Prices of related goods

Select the answer using the code given below:

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1, 2 and 3
  4. 1 only

Business Economics by TR Jain, OP Khanna, Page 42
Determinants of individual demand for a commodity (DX)

  1. Price of the commodity
  2. Prices of other related goods
  3. consumers income
  4. tastes and preferences
  5. expectations

Therefore answer is C all 1,2 and 3 correct.

#3: Substitution rate

111.The rate at which the consumer is willing to substitute one good for another without changing the level of satisfaction is known as:

  1. Marginal rate of substitution
  2. Marginal rate of technical substitution
  3. Diminishing marginal utility
  4. Equi-marginal utility

Marginal rate of substitution (MRS) is the rate at which which the consumer is willing to substitute one good for another without changing the level of satisfaction therefore answer (A)
NCERT Class12 microeconomics chapter 2, page 14 also mentions this topic but without giving the verbatim definition.

Budget, Taxation, Subsidies

four questions from this segment

#1: MSP

104.Which of the statements given below is/are correct?

  1. For the marketing year 2014-2015, the minimum support price (MSP) for wheat in India has been fixed at Rs. 1,400/quintal. (right)
  2. MSP is the rate at which the government sells the grains through the fair price shops (wrong)

Select the correct answer using the code given below:

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

Statement 1 is right as per table 8.8 on Economic Survey 2013, Page 148.
1450: was “proposed” by Agri ministry (October 2013). But I’m unable to locate source where it says government accepted / announced 1450.

July, 2014 Financial express says
” government had announced a Rs 50 hike in the minimum support price (MSP) to Rs 1,400 per quintal for wheat procurement for 2014-15 marketing season.”

Statement 2 is wrong by common knowledge. But still if you want reference: Ramesh Singh Page 8.12 (6th edition), MSP is the Is the minimum price at which the government will purchase farmers crops – irrespective of whatever may be the market price for that crop.
Therefore, answer A only 1 correct.

#2: WTO Bali conference

119.As per the latest trade agreement in Bali Ministerial Conference of WTO, India and other developing and under developed countries can launch food security programs:

  1. Forever without any penalty under WTO rules
  2. Till an alternative mechanism is developed
  3. For four calendar years
  4. Only if subsidy component under such programmes is less than 10 per cent

Ref: TheGuardian, December 6, 2013
The negotiators in Bali finally came to a provisional agreement, where Countries agreed to a four-year peace clause, meaning that they won’t challenge India’s food security measures before December 2017.
Therefore, answer (C) For four calendar years.
Ref: Hindu’s businessline, Dec18, 2013
Sharma had said in his statement that the Bali outcome provided for an interim mechanism to be put in place and to negotiate for an agreement for a permanent solution for adoption by the 11th Ministerial Conference of the WTO, which will be held in 2017. (until then) members will be protected against challenge in the WTO.
Therefore answer (C) four calendar years.

#3: GAAR

110.Which of the statements given below is/are correct?

  1. In India, the provisions of General Anti-Avoidance (GAAR) will be implemented with the effect from 1 April 2015
  2. The provisions of GAAR were aimed at checking tax avoidance by overseas investors

Select the correct answer using the code given below:

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

1 is right. “As per the existing proposal, GAAR is scheduled to roll out from April 1, 2015, for the assessment year 2016-17.” Ref:  Indianexpress
Statement #2 is right Ref: Businessline. (some people may debate over the word “overseas” because IT commissioner is empowered to send notices even to Indians and NRIs. but since statement is verbatim is given in businessline hence correct.
Answer (C) Both 1 and 2 correct.

#4: Interim budget

125.Data presented in Interim Budget for 2014-2015 reveal that for the financial year 2013-2014, the revised estimates do not show a decline in :

  1. Revenue deficit
  2. Effective revenue deficit
  3. Fiscal deficit
  4. Primary deficit

I’ve discussed this question in my recent lecture on Economic survey: L1/P3 at 30:37 minutes
Answer is B Effective revenue deficit.
For “official” reference, you’ve to collect data from Annual financial statement from interim budget 2014

Interim Budget: Annual financial statement
DeficitBE-2013RE-2013BE-2014
Fiscal Deficit 542499 524539 531177
GDP% 4.8 4.6 4.1
Primary Deficit 171814 144473 104166
GDP% 1.5 1.3 0.8
Revenue Deficit 379838 370288 378348
GDP% 3.3 3.3 2.9
Eff. Revenue Deficit 205205 232060 210244
GDP% 1.8 2 1.6

लेकिन यार इतना डिटेल में कोन प्रिपेर करता है? (who prepares in this much detail!?)

Banking and finance related

Three questions here too.

B1: PSU Bank ownership

107.The Economic Advisory Council to the Prime Minister (PMEAC) in India has recommended phased dilution of Government stake in Public Sector Banks from:

  1. 74% to 56%
  2. 58% to 51%
  3. 58% to 49%
  4. 51% to 49%

Rediff Date 11th November 2013
Prime Minister’s Economic Advisory Council has recommended phased dilution of government stake in public-sector banks, from 58 per cent to 51 per cent, and introduction of on-tap licensing of new banks.
Therefore answer (B)

B2: Banking POS

113.Recently a leading public sector bank of India allowed withdrawal of upto Rs.1000 from any shop/trader with a point-of-sale (PoS) terminal. Identify the bank from below:

  1. Bank of Maharashtra
  2. Punjab National Bank
  3. State Bank of India
  4. Bank of Baroda

Answer is State bank of India. Ref Hindu Businessline dated 24th November 2013.

B3: SEBI norms corporate governance

5. Which of the following statements about the detailed corporate governance norms for listed companies issued in April 2014 by SEBI is/are correct ?

  1. It provides for stricter disclosures and protection of investor rights, including equitable treatment for minority and foreign shareholders
  2. Under the new norms listed companies are required to provide the option of facility of e-voting to shareholders on all resolutions proposed to be passed at general meetings.

Select the correct answer using the code given below:

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

Answer C Both 1 and 2 Correct
Both statements lifted from Indianexpress 17th April 2014
Remaining parts coming soon. Corrections post in comments with reference.
Visit Mrunal.org/answerkeys for more answer keys with explanations.

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183 Comments on “[Answerkey] CAPF-2014 Economy MCQs with explanation, Difficulty level, Span of Current Affairs”

  1. Sir please can you suggest on which part we have to stress in UPSC prelims this year, as UPSC changing its questioning patterns

  2. What is your Message? Search before asking questions & confine discussions to exams related matter only.

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