5th June Static Quiz 2021
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5th June Static Quiz 2021 for UPSC Prelims
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- Question 1 of 5
1. Question
With reference to India’s public debt, consider the following statements:
1. About 70 per cent of the total public debt is held by the Central government.
2. Most of the India’s public debt has been contracted at fixed interest rate.
3. In India, the Central Government debt faces high exchange rate risk due to high external liability.
4. In India, General Government Debt-to-GDP steadily increased from 2014-15 to 2018-19.
Which of the statements given above is/are correct?CorrectAnswer: B
Statement 3 is incorrect: External liability is less than 6 percent of central government debt. This limits the
exposure of public debt to exchange rate volatility.IncorrectAnswer: B
Statement 3 is incorrect: External liability is less than 6 percent of central government debt. This limits the
exposure of public debt to exchange rate volatility. - Question 2 of 5
2. Question
Among the following statements, which is/are the components of an “accommodative monetary policy” of the RBI?
1. Maintaining low repo and reverse repo rates.
2. Bulk purchase of gilt-edged securities from the market.
3. Putting restrictions on bank credit operations.
Select the correct answer from the options given below.CorrectAnswer: A
Option 3 is incorrect. Restricting bank credit or lending operations would pull back liquidity from the market which would be counter to accommodative monetary policy stance.
IncorrectAnswer: A
Option 3 is incorrect. Restricting bank credit or lending operations would pull back liquidity from the market which would be counter to accommodative monetary policy stance.
- Question 3 of 5
3. Question
With regard to the operations of bond vigilantes, which of the following statements is/are correct?
1. It can help ease the liquidity constraints of an economy.
2. It may lead to increase in the real income of common man.
Select the correct answer from the options given below:CorrectAnswer: B
Statement 1 is incorrect. Bond vigilantes increase the supply of bonds in the economy by selling large stock of bonds. This takes out liquidity from the economy in to private hands increasing the liquidity constraint in the economy.
IncorrectAnswer: B
Statement 1 is incorrect. Bond vigilantes increase the supply of bonds in the economy by selling large stock of bonds. This takes out liquidity from the economy in to private hands increasing the liquidity constraint in the economy.
- Question 4 of 5
4. Question
With reference to negative yield bonds, which of the following is incorrect?
CorrectAnswer: C
Option c incorrect: Investors may choose to invest in negative-yielding bonds when there is deflation, or a
sustained drop in the price level for goods and services. For instance, consider a one-year bond that yields
minus 5% but at the same time inflation is expected to be minus 10% over the same period. That means the investor
in the bond would have more purchasing power at the end of the year because prices for goods and services would have
declined far more than the value of the investment in the fixed-income security.IncorrectAnswer: C
Option c incorrect: Investors may choose to invest in negative-yielding bonds when there is deflation, or a
sustained drop in the price level for goods and services. For instance, consider a one-year bond that yields
minus 5% but at the same time inflation is expected to be minus 10% over the same period. That means the investor
in the bond would have more purchasing power at the end of the year because prices for goods and services would have
declined far more than the value of the investment in the fixed-income security. - Question 5 of 5
5. Question
Recently, the Reserve Bank of India (RBI) has recommended conversion of large Non- Banking Financial Company (NBFCs) into banks. With reference to the consequences on NBFCs that convert into banks, which of the following is incorrect?
CorrectAnswer: A
Option a is incorrect: Banks have access to current and savings account while NBFCs do not. The conversion to banks would therefore, increase access to cheap funds.
IncorrectAnswer: A
Option a is incorrect: Banks have access to current and savings account while NBFCs do not. The conversion to banks would therefore, increase access to cheap funds.
