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Part 042 – Macro Economics Previous Year Questions

Q1. On the administered price of which of the following articles no subsidy is given ?
(a) DAP (b) ATF
(c) LPG (d) Kerosene oil
Ans: (b) In India, no subsidy is given to Aviation Turbine Fuel (ATF). Indian Oil Aviation Service is a leading aviation fuel solution provider in India and the mostpreferred supplier of jet fuel to major international and domestic airlines. Jet fuel is a colorless, combustible, straight-run petroleum distillate liquid. The highly punitive fiscal regime in India is the primary problem for the aviation sector. The cost of Aviation Turbine Fuel in India is almost 60% higher than international benchmarks. Combined with a high base price, fuel now represents 45-55% of a carrier’s operating costs.

Q2. Which among the following has the least possibility of globalisation ?

(a) selection of labour force
(b) location of capital works
(c) to manage resources for investment
(d) increase in infrastructure
Ans: (b) Globalization can affect the labor market by increasing capacity of developing countries to create new opportunities for work and production following the alleviation of price distortions with respect to both labor and capital. Globalization on business management is interconnection of international markets and managing businesses in a global industry. This includes management of resources for foreign investments whereby a company expands its business and invests in foreign countries. Globalization means inter-linkage among the countries of the globe. This can only happen when infrastructure is in proper shape. A well-developed infrastructure is an indispensable condition for faster globalization.

Q3. Agricultural Technology is hard to spread because :

(a) it has to be adopted to local conditions.
(b) rural people are not receptive
(c) farmers are afraid to experiment on land for fear of failure.
(d) all of the above.
Ans: (d) There are many benefits of using technology in agriculture system, but there are also negative aspects. Technology transfer is most difficult in agriculture because of the differences in natural conditions, such as weather, geographical features, plant ecology, and irrigation, which overlap social and institutional restrictions. When an agricultural technology is stable as a result of the limitations imposed by the existing national conditions and social system, the limits of production are empirically foreseeable.

Q4. Structural unemployment arises due to :

(a) deflationary conditions
(b) heavy industry bias
(c) shortage of raw materials
(d) inadequate productive capacity
Ans: (d) Structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Structural unemployment is a result of the dynamics of the labor market, such as agricultural workers being displaced by mechanized agriculture, unskilled laborers displaced by both mechanization and automation, or industries with declining employment. Many of these displaced workers are “left behind” due to costs of training and moving (e.g., the cost of selling one’s house in a depressed local economy), inefficiencies in the labor markets, such as discrimination or monopoly power, or because they are unsuited for work in growing sectors such as health care or high technology.

Q5. What is “book-building” ?

(a) Preparing the income and expenditure ledgers of a company (book-keeping)
(b) Manipulating the profit and loss statements of a company
(c) A process of inviting subscriptions to a public offer of securities, essentially through a tendering process
(d) Publishers’ activity
Ans: (c) Book building refers to the process of generating, capturing, and recording investor demand for shares during an IPO (or other securities during their issuance process) in order to support efficient price discovery. Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner. The “book” is the offmarket col lation of investor demand by the bookrunner and is confidential to the bookrunner, issuer, and underwriter. Book-building is a process of price discovery used in public offers. The issuer sets a base price and a band within which the investor is allowed to bid for shares.

Q6. Which natioalised bank of India has a shining star as its emblem?

(a) Syndicate Bank
(b) Indian Bank
(c) Bank of India
(d) Bank of Baroda
Ans: (c) The new logo of the Bank of Baroda is a unique representation of a universal symbol. It comprises dual ‘B’ letterforms that hold the rays of the rising sun. It is known as the ‘Baroda Sun’ which is the single most powerful source of light and energy – its far reaching rays dispel darkness to illuminate everything they touch. With this logo, Bank of Baroda seeks to be the source that will help all its stakeholders realise their goals. To customers, the bank seeks to be a one-stop, reliable partner who will help them address different financial needs. To employees, the bank offers rewarding careers and to our investors and business partners, maximum return on their investment.

Q7. Which one of the following taxes is collected and utilized by the State Governments ?

(a) Personal income tax
(b) Corporation tax
(c) Land revenue
(d) Custom duties
Ans: (c) The Constitution allocates the taxation of agricultural income to states. Lan revenue is a major source of revenue for states in India. For purpose of revenue management, a State is divided into various districts, each in the charge of a Deputy Commissioner, also known as Collector indicating his responsibility for the realization of all Government revenues.

Q8. Which amidst the following is not a credit rating agency ?

(a) CRISIL (b) CARE
(c) ICRA (d) IFCI
Ans: (d) A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In some cases, the servicers of the underlying debt are also given ratings. CRISIL is the most influential and largest credit rating agency among all the credit rating agencies in India. ICRA Limited (ICRA) is one of India’s premier financial information services company. It offers credit rating information and professional financial consulting services across India, as well as in the Asia-Pacific region through its subsidiaries. CARE Ratings commenced operations in April 1993 and over nearly two decades, it has established itself as the second-largest credit rating agency in India. The government established The Industrial Finance Corporation of India (IFCI) on July 1, 1948, as the first Development Financial Institution in the country to cater to the long-term finance needs of the industrial sector.

Q9. NIFTY is associated with

(a) Cloth Market Price Index
(b) Consumer Price Index
(c) BSE Index
(d) NSE Index
Ans: (d) The NSE’s key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. Nifty Fifty was an informal term used to refer to 50 popular large cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks. NIFTY means National Index for Fifty.

Q10. The data collection for national income estimation is conducted in India by—

(a) The Finance Ministry of the Government of India
(b) The RBI
(c) The NSSO (National Sample Survey Organi-sation)
(d) None of these
Ans: (c) The National Sample Survey Office(NSSO) in India is a unique setup to carry out surveys on socioeconomic, demographic, agricultural and industrial subjects for collecting data from households and from enterprises located in villages and in the towns. It is a focal agency of the Government of India for collection of statistical data in the areas which are vital for developmental planning.

Q11. Scheduled Banks have to be registered with

(a) SEBI (b) RBI
(c) Finance Ministry
(d) SBI
Ans: (b) The scheduled primary (urban) cooperative banks are required to maintain with the Reserve Bank of India an average daily balance, the amount of which should not be less than 5 per cent of their net demand and time liabilities in India in terms of Section 42 of the Reserve Bank of India Act, 1934. Non-scheduled (urban) cooperative banks, under the provision of Section 18 of Banking Regulation Act, 1949 (As Applicable to Cooperative Societies) should maintain a sum equivalent to at least 3 per cent of their total demand and time liabilities in India on day-to-day basis.

Q12. Which organisation collects data for the unorganised sector ?

(a) NSSO (b) CSO
(c) ASI (d) RBI
Ans: (a) The National Sample Survey Office(NSSO) in India is a unique setup to carry out surveys on socioeconomic, demographic, agricultural and industrial subjects for collecting data from households and from enterprises located in villages and in the towns. The unregistered manufacturing sub-sector, a complement set to the registered manufacturing sub-sector, covers all the residual units which are not covered under the registered manufacturing sector. Thus, the unregistered manufacturing sector covers all the manufacturing, processing, repair & maintenance services units employing less than 10 workers and using power or less than 20 workers and not using power. The data on unorganised sector is collected through periodic surveys by the NSSO.

Q13. The definition of ‘small-scale industry’ in India is based on

(a) sales by the unit
(b) investment in machines and equipments
(c) market coverage
(d) export capacity
Ans: (b) Generally, small-scale sector is defined in terms of investment ceilings on the original value of the installed plant and machinery. As per the Ministry of Micro, Small & Medium Enterprises of India, a small scale industry is an industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs 10 million. Fixed capital investment in a unit has been adopted as criteria to make a distinction between small-scale and largescale industries. This limit is being continuously raised up wards by government.

Q14. ‘NABARD’ is associated with the development of

(a) agricultural sector and rural areas
(b) heavy industries
(c) banking sector
(d) real estates
Ans: (a) National Bank for Agriculture and Rural Development (NABARD) has been accredited with “matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India”. It serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas.

Q15. Government takes ‘ways and means advances’ from

(a) RBI (b) IDBI
(c) SBI (d) ICICI
Ans: (a) Ways and means advances (WMA) is a mechanism used by Reserve Bank of India (RBI) under its credit policy by which provides to the States banking with it to help them to tide over temporary mismatches in the cash flow of their receipts and payments. These are temporary advances (overdrafts) extended by RBI to the government. Section 17(5) of RBI Act allows RBI to make WMA both to the Central and State governments. It aims to bridge the interval between expenditure and receipts.

Q16. Kisan Credit Card scheme was introduced in

(a) 1991 (b) 1996
(c) 1998 (d) 2000
Ans: (c) Kisan Credit Card Scheme (KCC) aims at providing adequate and timely support from the banking system to the farmers for their short-term credit needs for cultivation of crops. This mainly helps farmer for purchase of inputs etc., during the cropping season. Credit card scheme proposed to introduce flexibility to the system and improve cost efficiency. It was introduced in August 1998.

Q17. Compared to the rich the poor save

(a) A larger part of their income
(b) An equal part of their income
(c) A smaller part of their income
(d) All of their incomes
Ans: (c) A “subsistence” or necessary level of consumption produces differences in consumption growth rates across income levels. This implies that poor households have lower saving rates because they cannot “afford to save” after buying the necessities. Institutional and behavioral mechanism also leads to low levels of saving among the poor.

Q18. One of the main factors that led to rapid expansion of Indian exports is

(a) Imposition of import duties
(b) Liberalisation of the economy
(c) Recession in other countries
(d) Diversification of exports
Ans: (d) India has rapidly diversified its exports markets from the traditional export partners towards emerging and developing economies. This has played a crucial role in cushioning India’s exports growth during the recent years, which has remained fairly steady despite global economic slowdown. The rapid diversification of India’s export destinations is encouraging. The widely spreading export markets can be noted from the narrowing dependence on selected economies for exports.

Q19. The gradation and standardisation of agricultural products are conducted through

(a) Food Corporation of India
(b) Directorate of Marketing and Inspection
(c) Indian Standards Institution
(d) Central Statistical Organisation
Ans: (b) The Directorate of Marketing and Inspection (DMI) is an attached Office of the Ministry of Agriculture. It was set up in the year 1935 to implement the agricultural marketing policies and programmes of the Central Government. It aims at bringing integrated development of marketing of agricultural and allied produce in the country. It is entrusted with promotion of standardisation and grading of agricultural and allied produce.

Q20. According to the Employment Outlook 2007 reports of the Organisation for Economic Cooperation and Develop-ment
(OECD), the number of new jobs created in India every year from 2000 to 2005 is

(a) 5 million (b) 8 million
(c) 11 million (d) 13 million
Ans: (c) Over the period 2000-05, India generated 11.3 million net new jobs per year, on average. The figure was 7 million in China, 2.7 million in Brazil and 0.7 million jobs in the Russian Federation, compared with an average of 3.7 million net new jobs generated in the OECD area as a whole each year over the same period.

Q21. Which of the following items is a major item of Indian export?

(a) Computer chips
(b) Potato chips
(c) Textile garments
(d) Car engines
Ans: (d) India exports were worth 23698 Million USD in September of 2012. Historically, from 1994 until 2012, India Exports averaged 8603.18 Million USD reaching an all time high of 30418.00 Million USD in March of 2011 and a record low of 1805.00 Million USD in May of 1994. Exports amount to 22% of India’s GDP. Gems and jewelry constitute the single largest export item, accounting for 16 percent of exports. India is also leading exporter of textile goods, engineering goods, chemicals, leather manufactures and services. India’s main export partners are European Union, United States, United Arab Emirates and China.

Q22. Indian agriculture is typically characterised as

(a) land surplus, labour scarce economy
(b) land surplus, labour surplus economy
(c) land scarce, labour surplus economy
(d) land scarce, labour scarce economy
Ans: (c) The labor surplus economy model has as its basic premise the inability of unskilled agricultural labor markets to clear in countries with high man/land ratios. In such situations, the marginal product of labor is likely to fall below a bargaining wage, related to the average rather than the marginal product. Most of the East Asian economies such as Japan, South Korea, and Taiwan are similar to India in being land scarce and labor surplus.

Q23. Open market operations of RBI refer to buying and selling of

(a) Commercial bills
(b) Foreign exchange
(c) Gold
(d) Government bonds
Ans: (d) OMOs are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the RBI feels there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market.

Q24. A situation where we have people whose level of income is not sufficient to meet the minimum consumption expenditure is considered as

(a) Absolute Poverty
(b) Relative Poverty
(c) Urban Poverty
(d) Rural Poverty
Ans: (a) Absolute poverty is defined as a situation in which the individual’s basic needs are not covered, in other words, there is a lack of basic goods and services (normally related to food, housing and clothes). This concept of poverty is strongly linked to destitution which is an inability to meet the minimum consumption expenditure. It is a level of poverty as defined in terms of the minimal requirements necessary to afford minimal standards of food, clothing, health care and shelter. According to a UN declaration that resulted from the World Summit on Social Development in Copenhagen in 1995, absolute poverty is “a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.”

Q25. Nature of unemployment in agriculture in India is

(a) only seasonal
(b) only disguised
(c) Both (a) and (b)
(d) None of the above
Ans: (c) Seasonal employment refers to a situation where a number of persons are not able to find jobs during some months of the year. Example: Agriculture is a seasonal activity. There is an increased demand for labour at the time of sowing, harvesting, weeding and threshing. In between there is little or no demand for labour. Besides, disguised unemployment is also seen in agriculture in India.

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