Q11. The money multiplier in an economy increases with which one of the following?
(a) Increase in the Cash Reserve Ratio in the banks
(b) Increase in the Statutory Liquidity Ratio in the banks
(c) Increase in the banking habit of the people
(d) Increase in the population of the country
Solution C
The money multiplier in an economy refers to how an initial deposit can lead to a greater total increase in the money supply.
(a) Increase in the Cash Reserve Ratio (CRR) in the banks: CRR is the percentage of deposits that banks must hold as reserves. An increase in CRR means banks would have less money to lend, leading to a decrease in the money multiplier, not an increase.
(b) Increase in the Statutory Liquidity Ratio (SLR) in the banks: Like CRR, an increase in SLR means that banks must hold more reserves in liquid assets, which reduces their ability to lend, decreasing the money multiplier.
Option (c) is correct: Increase in the banking habit of the people: If more people are utilizing banking services, this means more deposits are being made, and banks have more money to lend. This increases the money multiplier, as the banks can create more money through loans.
(d) Increase in the population of the country: While an increase in population may lead to more potential bank customers, it doesn’t necessarily mean an increase in the banking habit or an immediate effect on the money multiplier.
Q12. With reference to the Indian economy, demand-pull inflation can be caused/increased by which of the following?
1.Expansionary policies
2.Fiscal stimulus
3.Inflation-indexing wages
4.Higher purchasing power
5.Rising interest rates
Select the correct answer using the code given below.
(a) 1, 2, and 4 only
(b) 3, 4, and 5 only
(c) 1, 2, 3, and 5 only
(d) 1, 2, 3, 4, and 5
Solution A
1. Expansionary policies: These are designed to stimulate the economy by increasing the supply of money and encouraging spending. Since they can lead to increased demand, this statement is correct in the context of demand-pull inflation.
2. Fiscal stimulus: Similar to expansionary policies, fiscal stimuli like tax rebates and incentives can boost demand in the economy, thereby contributing to demand-pull inflation. This statement is also correct.
3. Inflation-indexing wages: By linking wages to inflation, any increase in inflation leads to a corresponding increase in wages, maintaining purchasing power. This doesn’t necessarily increase demand but rather maintains it. This statement is incorrect for demand-pull inflation.
4. Higher purchasing power: An increase in purchasing power means consumers have more money to spend on goods and services. This increase in demand can lead to demand-pull inflation, so this statement is correct.
5. Rising interest rates: Higher interest rates make borrowing more expensive and typically reduce spending and demand in the economy. This would not lead to demand-pull inflation, so this statement is incorrect.
Q13. With reference to India, consider the following statements:
1.Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in the primary market.
2.The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India.
3.The ‘Central Depository Services Ltd’ is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2
(c) 3 only
(d) 2 and 3
Solution B
1.Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in the primary market: Retail investors can invest in government securities, including Treasury Bills and Government of India Debt Bonds, through demat accounts. The Reserve Bank of India (RBI) has taken steps to enable this accessibility. So, this statement is correct.
2.The ‘Negotiated Dealing System-Order Matching’ (NDS-OM) is a government securities trading platform of the Reserve Bank of India: The NDS-OM is indeed a system introduced by the RBI for the electronic trading of government securities. This statement is correct.
3.The ‘Central Depository Services Ltd’ (CDSL) is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange (BSE): CDSL is one of the two depositories in India, but it is not jointly promoted by the Reserve Bank of India. It was promoted by BSE along with several banks, but not the RBI. Thus, this statement is incorrect.
Q14. With reference to ‘Water Credit’, consider the following statements:
1. It puts microfinance tools to work in the water and sanitation sector.
2. It is a global initiative launched under the aegis of the World Health Organization and the World Bank.
3. It aims to enable the poor people to meet their water need without depending on subsidies.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution C
Water.org is a global nonprofit organization working to bring water and sanitation to the world. It started the initiative of WaterCredit loan program to address the barrier of affordable financing for safe water and sanitation.
Statement 1: Water Credit is indeed an innovative approach that applies microfinance tools to the water and sanitation sector. By working with microfinance institutions to provide small and affordable loans, Water Credit empowers individuals and families to access essential water and sanitation facilities. This statement is correct.
Statement 2: Water Credit is not a global initiative launched under the World Health Organization and the World Bank. Instead, it is an initiative of Water.org, a nonprofit organization dedicated to providing water and sanitation worldwide. Therefore, this statement is incorrect.
Statement 3: The objective of Water Credit is to allow poor households to meet their water and sanitation needs without relying on subsidies. By offering access to affordable financing and resources, Water Credit makes household water and toilet solutions attainable for those in need. This statement is correct.
Q15. In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following?
1. Lending to trade and industry bodies when they fail to borrow from other sources
2. Providing liquidity to the banks having a temporary crisis
3. Lending to governments to finance budgetary deficits
Select the correct answer using the code given below.
(a) 1 and 2
(b) 2 only
(c) 2 and 3
(d) 3 only
Solution B
As a Banker to Banks, the Reserve Bank also acts as the ‘lender of the last resort’. It can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much-needed liquidity when no one else is willing to extend credit to that bank.
The Reserve Bank of India was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
The functions of the Reserve Bank can be categorized as follows:
1. Formulation of Monetary policy
2. Regulation and supervision of the banking and non-banking financial institutions, including credit information companies
3. Regulation of money, forex, and government securities markets as also certain financial derivatives
4. Debt and cash management for Central and State Governments
5. Management of foreign exchange reserves
6. Foreign exchange management — current and capital account management
7. Banker to banks
8. Banker to the Central and State Governments
9. Oversight of the payment and settlement systems
10. Currency management
11. Developmental role
12. Research and statistics
Q16. ‘R2 Code of Practices’ constitutes a tool available for promoting the adoption of:
(a) environmentally responsible practices in electronics recycling industry
(b) ecological management of ‘Wetlands of International Importance’ under the Ramsar Convention
(c) sustainable practices in the cultivation of agricultural crops in degraded lands
(d) ‘Environmental Impact Assessment’ in the exploitation of natural resources
Option (a) is correct. R2 stands for Responsible Recycling and is a standard specifically created for the electronics recycling industry by Sustainable Electronics Recycling International (SERI).
SERI is the housing body and ANSI-accredited Standards Development Organization for the R2 Standard: Responsible Recycling Practices for Use in Accredited Certifications Programs.
Stakeholders who contributed to the creation of these standards include the U.S. Environmental Protection Agency (the EPA was responsible for a study of the implementation of the R2 standards); regulators from state agencies; electronics recyclers, refurbishers, and their trade associations; OEMs/customers of electronics recycling services; and non-governmental organizations.
Q17. Why is there a concern about copper smelting plants?
1. They may release lethal quantities of carbon monoxide into the environment.
2. The copper slag can cause the leaching of some heavy metals into the environment.
3. They may release sulphur dioxide as a pollutant.
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
Solution B
Copper smelting is a complex process that involves the use of heat to extract the base metal from its ore. This process has a significant environmental impact, particularly concerning air pollution and the leaching of heavy metals.
1. Concerning the release of carbon monoxide, the information provided doesn’t specifically mention that lethal quantities of carbon monoxide are released in the copper smelting process. While carbon monoxide might be present, the statement that lethal quantities are released is not supported by the information given. Therefore, statement 1 is incorrect.
2. The copper slag produced during the smelting process can contain heavy metals such as cobalt, zinc, arsenic, lead, cadmium, and barium. This slag has the potential to release these elements into the environment, causing pollution of soil, surface water, and groundwater. Statement 2 is therefore correct.
3. Copper smelting does involve the release of sulfur dioxide, along with other pollutants like hydrogen fluoride, oxides of nitrogen, and various offensive and noxious substances. The emission of sulfur dioxide is directly related to the smelting process. Hence statement 3 correct.
Q18. With reference to furnace oil, consider the following statements:
1. It is a product of oil refineries.
2. Some industries use it to generate power.
3. Its use causes sulphur emissions into the environment.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Solution D
Furnace oil, also known as heavy oil or marine fuel, is a byproduct obtained from the distillation of petroleum. Hence statement 1 is correct.
Some industrial power plants, such as the Basin Bridge Diesel Generator Power Plant in Tamil Nadu, utilize furnace oil in the generation of power. Hence statement 2 is correct.
Additionally, the combustion of furnace oil leads to the emission of sulfur oxides (SOx), including sulfur dioxide (SO2) and a small fraction of sulfur trioxide (SO3). This results from the oxidation of the sulfur content in the fuel oil during combustion. Hence statement 3 is correct.
Q19. What is blue carbon?
(a) Carbon captured by oceans and coastal ecosystems
(b) Carbon sequestered in forest biomass and agricultural soils
(c) Carbon contained in petroleum and natural gas
(d) Carbon present in atmosphere
Solution A
Blue carbon is the term for carbon captured by the world’s ocean and coastal ecosystems.
Sea grasses, mangroves, and salt marshes along our coast “capture and hold” carbon, acting as something called a carbon sink. These coastal systems, though much smaller in size than the planet’s forests, sequester this carbon at a much faster rate, and can continue to do so for millions of years.
Q20. In nature, which of the following is/are most likely to be found surviving on a surface without soil?
1. Fern
2. Lichen
3. Moss
4. Mushroom
Select the correct answer using the code given below.
(a) 1 and 4 only
(b) 2 only
(c) 2 and 3
(d) 1, 3 and 4
Solution C
Ferns are vascular plants that reproduce through spores, and they typically require a moist environment with good drainage and organic content in the soil. They are not usually found on surfaces without soil, so option 1 is incorrect.
Lichens, on the other hand, are a symbiotic combination of a fungus and an alga, and they can grow on a wide variety of undisturbed surfaces, including bark, rock, metal, and even plastic. They only require clean air and time to grow. So option 2 correct.
Mosses are non-flowering plants that produce spores, and they do not have true roots. They are very low maintenance and can thrive on surfaces without soil as long as there is moisture and shade. So option 3 correct.