Static Quiz 21 December 2022
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Static Quiz 21 December 2022 for UPSC Prelims
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- Question 1 of 5
1. Question
Consider the following statements:
1. Decrease in the Cash Reserve Ratio results in a decline in the borrowing cost of funds.
2. Increase in Reverse Repo Rate will discourage banks from depositing surplus with the Central Bank.
3. Decrease in Statutory Liquidity Ratio leads to a decline in interest rate.
4. Selling of government securities by the Central Bank results in inflation in the economy.
Which of the statements given above are correct?CorrectAnswer: A
• Reverse Repo Rate is the interest rate at which the RBI borrows money from banks for
the short term. RBI increases the reverse repo rate to provide incentive to the banks
to deposit surplus funds with it to earn higher interest on them. In this manner it
reduces the supply of money in the system, thus controlling inflation. Similarly, RBI
cuts the reverse repo rate to increase the money supply. So, statement 2 is not
correct.• Open market operations involve the sale and purchase of government securities and
treasury bills by the Reserve Bank of India (RBI) to regulate the money supply in the
economy. The purchase of the government securities from the market leads to an
increase in money supply in the economy. On the contrary, when RBI sells
government securities, it decreases money supply in the economy thereby
controlling inflation. So, statement 4 is not correct.IncorrectAnswer: A
• Reverse Repo Rate is the interest rate at which the RBI borrows money from banks for
the short term. RBI increases the reverse repo rate to provide incentive to the banks
to deposit surplus funds with it to earn higher interest on them. In this manner it
reduces the supply of money in the system, thus controlling inflation. Similarly, RBI
cuts the reverse repo rate to increase the money supply. So, statement 2 is not
correct.• Open market operations involve the sale and purchase of government securities and
treasury bills by the Reserve Bank of India (RBI) to regulate the money supply in the
economy. The purchase of the government securities from the market leads to an
increase in money supply in the economy. On the contrary, when RBI sells
government securities, it decreases money supply in the economy thereby
controlling inflation. So, statement 4 is not correct. - Question 2 of 5
2. Question
Which of the following about types of Non-Performing Assets are incorrect?
1. Substandard Assets = If the asset is in the substandard category for a period of 12 months
2. Doubtful Assets = These assets are of little value, it can no longer continue as a bankable asset, there could be some recovery value.
3. Loss Assets = These are the assets which have remained NPA for a period of less than or equal to 12 monthsCorrectAns;- d) All of the above
Explanation;-
• As question asked to choose incorrect statement all are incorrectly matched.
• Based on different parameters the Non Performing Assets are classified into different types.
• The below table gives the different classification of Non Performing Assets:-
IncorrectAns;- d) All of the above
Explanation;-
• As question asked to choose incorrect statement all are incorrectly matched.
• Based on different parameters the Non Performing Assets are classified into different types.
• The below table gives the different classification of Non Performing Assets:- - Question 3 of 5
3. Question
With reference to the Essential Commodities Act, 1955, consider the following statements:
1. It can be used to regulate or prohibit the supply and distribution as well as the production of a commodity.
2. It empowers only State Governments to declare a commodity as ‘essential’ in public interest.
3. It classifies only food grains and pharmaceutical drugs as essential commodities.
Which of the statements given above is/are correct?CorrectAnswer: A
• The Act empowers the Central Government to control the production, supply,
distribution, trade, and commerce in certain commodities. It can be done if the Central
Government is of the opinion that it is necessary or expedient to do so to maintain or
increase supplies of any essential commodity or to secure their equitable distribution
and availability at fair prices. So, statement 2 is not correct.• At present, the “Schedule” contains 9 commodities — drugs; fertilisers, whether
inorganic, organic or mixed; foodstuffs, including edible oils; hank yarn made wholly
from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of
food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton
seed; face masks; and hand sanitisers. So, statement 3 is not correct.IncorrectAnswer: A
• The Act empowers the Central Government to control the production, supply,
distribution, trade, and commerce in certain commodities. It can be done if the Central
Government is of the opinion that it is necessary or expedient to do so to maintain or
increase supplies of any essential commodity or to secure their equitable distribution
and availability at fair prices. So, statement 2 is not correct.• At present, the “Schedule” contains 9 commodities — drugs; fertilisers, whether
inorganic, organic or mixed; foodstuffs, including edible oils; hank yarn made wholly
from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of
food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton
seed; face masks; and hand sanitisers. So, statement 3 is not correct. - Question 4 of 5
4. Question
Which of the following are the initiatives taken by Government of India and RBI to control Non-Performing Assests?
1. Debt Recovery Tribunal (DRT)
2. Asset Reconstruction Companies
3. Credit Information BureauCorrect• All the above initiatives are taken to control NPA
Incorrect• All the above initiatives are taken to control NPA
- Question 5 of 5
5. Question
Consider the following statements with reference to tax buoyancy:
1. It measures tax revenues with respect to changes in Gross Domestic Production (GDP).
2. Higher tax buoyancy rate indicates lesser tax collection.
Which of the statements given above is/are correct?CorrectAnswer: A
Tax revenues are closely related to economic activity, rising during periods of faster
economic growth and declining during recessions. The higher tax buoyancy rate
means surplus tax revenue by way of tax collection. So, statement 2 is not correct.IncorrectAnswer: A
Tax revenues are closely related to economic activity, rising during periods of faster
economic growth and declining during recessions. The higher tax buoyancy rate
means surplus tax revenue by way of tax collection. So, statement 2 is not correct.
