Rural Development Programmes

S.No.	Rural Development Programme	Year of Beginning	Objective/Description
1	Community Development Programme (CDP)	1952	Over-all development of rural areas with people's participation.
2	Rural Electrification Corporation	1969	Electrification in rural areas
3	Accelerated Rural Water Supply Programme(ARWSP)	1972-73	For providing drinking water in villages
4	Crash Scheme for Rural Employment	1972-73	For rural employment
5	National Institution for Rural Development	1977	Training, investigation and advisory organization for rural development
6	National Rural Employment Programme (NREP)	1980	To provide profitable employment opportunities to the rural poor
7	Development of Women and Children in Rural Areas (DWCRA)	1982	To provide suitable opportunities of self-employment to the women belonging to the rural families who are living below the poverty line.
8	Rural Landless Employment Guarantee Programme (RLEGP)	1983	For providing employment to landless farmers and laborers
9	National Fund for Rural Development (NFRD)	1984	To grant 100% tax rebate to donors and also to provide financial assistance for rural development projects.
10	Council for Advancement of People's Actions and Rural Technology (CAPART)	1986	To provide assistance for rural prosperity.

Securities and Exchange Board of India

 

Securities and Exchange Board of India (SEBI) was initially constituted on April 12, 1988 as a non-statutory body through a resolution of Government for dealing with all matters relating to development and regulation of securities market and investor protection and to advice the Government on all these matters. SEBI was given statutory status and powers through an ordinance promulgated on January 30, 1992.

The statutory powers and functions of SEBI were strengthened through the promulgation of the Securities Laws (Amendment) ordinance on January 25, 1995 which was subsequently replaced by an Act of Parliament. In terms of this Act, SEBI has been vested with regulatory powers over corporate in the issuance of capital, the transfer of securities, and other related matters. Besides, SEBI has also been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violation.

SEBI is managed by six members ~ one chairman (nominated by Central Government), two members (Officials of central ministries), one member from RBI, and remaining two members are also nominated by Central Government. The office of SEBI is situated in Mumbai with its regional offices in Kolkata, Delhi and Channai. In 1988 the initial capital of SEBI was 7.5 crore which was provided by its promoters (IDBI, ICICI, and IFCI). This amount was invested and its its interest amount day-to-day expenses of SEBI are met.

All statutory powers for regulating Indian capital market are vested with SEBI itself.

Functions of SEBI

1. To safeguard the interests of investors and to regulate capital market with suitable measures.
2. To regulate the business of stock exchanges and other securities market.
3. To regulate the working Stock Brokers, Sub-brokers, Share Transfer Agents, Trustees, Merchant Bankers, Underwriters, Portfolio Managers etc and also to make their registration.
4. To register and regulate collective investment plans of mutual funds.
5. To encourage self-regulatory organisation.
6. To eliminate malpractices of security markets.
7. To train the persons associated with security markets and also to encourage investors' education.
8. To check inside trading of securities.
9. To supervise the working of various organisations trading in security market and also to ensure systematic dealing.
10. To promote research and investigations for ensuring the attainment of above objectives.

Finance Commission

Financial Commission is constituted to define financial relations between the Center and the States. Under the provision of Article 280 of the constitution, the President appoints a Financial Commission for the specific purpose of devolution of non-plan revenues resources. The functions of the commission are to make recommendations to the President in respect of:

1. The distribution of net proceeds of taxes to be shared between the Union and the States and the allocation of share of such proceeds among the States.
2. The principles which should govern the payment of grant-in-aid by the Center to the States.
3. Any other matter concerning financial relations between the Center and the States.

In above context so far 11 Financial Commissions have been appointed which are as follows:

Finance Commission	Year of Establishment	Chairman	Operational Duration	Year of Submitting Report
I	1951	K.C.Niyogi	1952-1957	1952
II	1956	K. Santhanam	1957-1962	1956* and 1957
III	1960	A. K. Chanda	1962-1966	1961
IV	1964	P. V. Rajamannar	1966-1969	1965
V	1968	Mahavir Tyagi	1969-1974	1968* and 1969
VI	1972	Brahma Nand Reddy	1974-1979	1973
VII	1977	J. M. Shellet	1979-1984	1978
VIII	1983	Y.V. Chawan	1984-1989	1983* and 1984
IX	1987	N.K.P. Salve	1989-1995	1989
X	1992	K.C. Pant	1995-2000	Nov 26, 1994
XI	1998	A.M. Khusro	2000-2005	Jan 15, 2000*; July 7, 2000 and Aug 31, 2000
XII	2003	C. Rangarajan	2005-2010	Nov 30, 2004
XIII	2007	Vijay L. Kelkar	2010-2015	Constitued in Nov 2007

* Interim Report

All the above 11 Commissions have submitted their report in the year mentioned above. The recommendation of the various commissions can be divided in three heads

A. Division and distribution of income tax and other taxes.

B. Grants-in-aids

C. Loans to the state by the center

Reserve Bank of India

 

It is the Central Bank of the country. The Reserve Bank of India was established in 1935 with a capital of Rs. 5 crore. This capital of Rs. 5 crore was divided into 5 lakh equity shares of 100 each. In the beginning the ownership of almost all the share capital was with the non-government share holders. In order to prevent the centralisation of equity shares in hand of a few people The Reserve Bank of India was nationalised on January 1, 1949.

The general administration and direction of RBI is managed by a Central Board of Directors consiting of 20 members which includes one Governor, four Deputy Governors, one Government Official appointed by the Union Government of India to give representation to important strata in economic life of the country besides four directors are nominated by the Union Government to represent local boards. Apart from the central board there are four local boards also and their head offices are situated in Mumbai, Chennai, Kolkata and New Delhi. Five members of local boards are appointed by the Union Government for a period of four years. The local boards work according to the instructions and orders given by Board of Directors, and from time to time they also tender useful advice on important matter. The office of RBI is in Mumbai. At present Dr. D. Subbarao is the Governor of Reserve Bank of India.

Functions of Reserve Bank of India

1. Issue of Notes - The Reserve Bank has the monopoly of note issue in the country it has the sole right to issue currency notes of various denominations except one rupees notes. The Reserve Bank act as a only source of legal tender money because the one rupee note issued by the Ministry of Finance are also circulated through it. The Reserve Bank has adopted the Minimum Reserve System for note issue. Since 1957, it maintains the gold and foreign reserve of Rs. 200 crore, of which at least Rs. 115 crore should be in gold.
2. Banker to the Government - The second important function of the Reserve Bank of India is to act as the banker, agent, and adviser to the Government. It performs all the banking functions of the State and the Central Government and it also tenders useful advice to the Government on matters related to economic and monetary policy. It also manages the public debt for the Government.
3. Bankers' Bank - The Reserve Bank performs the same function for the other banks ordinarily perform for their customers. It is not only banker to the commercial bank, but it is the lender of the last resort.
4. Controller of Credit - The Reserve Bank undertakes the responsibility of controlling credit created by the commercial banks. To achieve this objective it makes extensive use of quantitative and qualitative techniques to control and regulate the credit effectively in the country.
5. Custodian of Foreign Reserves - For the purpose of keeping the foreign exchange rates stable the Reserve Bank buy and sells the foreign currencies and also protect the country's foreign exchange funds.
6. Other Functions - The bank performs a number of other developmental works. These works include the function of clearing house arranging  credit for agriculture (which has been transferred to NABARD), collecting and publishing the economic data, buying and selling of Government Securities and Trade Bill, giving loans to the Government, buying and selling of valuable commodities etc. It also act as representative of Government in IMF and represents the membership of India.

National Income of India

According to National Income Committee (1945), "A national income estimates measures and volume of commodities and services turned out during a given period counted without duplication." Thus national income measures the net value of goods and services produced in a country during a year and it also includes net earned foreign income. In other words, a total of national income measures the flow of goods and services in economy. National income is a flow not a stock. As contrasted with national wealth which measures the stock of commodities held by nationals of a country at a point of time, national income measures the productivity power of an economy in a given period to turn out goods and services to final consumption.

In India, National income estimates are related with the financial year (April 1 - March 31).

Concept of National Income

The various concepts of national income are as follows -

1. Gross National Product (GNP) -  Gross National Product refers to the money value of total output or production of the final goods and services produced by the nationals of a country during a given period of time, generally a year.
   As we include all final goods and services, produced by nationals of the country during a year, in the calculations of GNP, we include money value of goods and services produced by nationals outside of country in calculating GNP. Hence, income produced and received by nationals of a country within the boundaries of foreign countries should be added in Gross Domestic Product (GDP) of the country. Similarly income received by foreign nationals within the boundary of country should be excluded from GDP.
   In equation form:
   GNP = GDP + X - M
   where,
   X = Income earned and received by the nationals within the boundaries of foreign country.
   M= Income received by the foreign nationals within the country.
   If X = M then GDP = GNP
   Similarly in closed economy X = M = 0 then also GDP = GNP
   Gross Domestic Product is the total money value of all final goods and services within the geographical boundaries of the country during a given period of time. As a conclusion it must be understood, while domestic product emphasises the total output which is raised within the geographical boundaries of the country, national product focuses attention not only on goods and services produced out side the boundaries of nation. Besides, any part of GDP which is produced by nationals of a country should be included in GNP.
2. Net National Product - NNP is obtained by subtracting depreciation value (i.e. capital stock consumption) from GNP.
   In equation form: NNP = GNP - Depreciation
3. National Income - GNP, explained above, is based on market prices of produced goods which includes indirect taxes and subsidies. NNP can be calculated in two ways -
   i) at market prices of goods and services
   ii) at factor cost
   When NNP is obtained at factor cost, it is known as National Income. National Income is calculated by subtracting net indirect taxes (i.e. total indirect tax-subsidy) from NNP at market prices. The obtained value is known as NNP at factor cost or National Income.
   In equation form: 
   National Income or NNP at factor cost = NNP at Market Price - (Indirect Taxes - Subsidy)
   National Income = NNPMP - Indirect Tax + Subsidy
4. Personal Income - Personal income is that income which is actually obtained by subtracting corporate taxes and payments made for social securities provisions from national income and adding to it government transfer payment and net interest paid by the government.
   In equation form:
   Personal Income = National Income - undistributed profit of corporation - payment for social security provisions - corporate taxes + Government transfer payments + Business transfer payments + Net interest paid by Government
   It should always be kept in mind that National Income is a Flow Concept
5. Disposable Personal Income - When personal direct taxes are subtracted from personal income, the obtained value is called disposable personal income (DPI)
   In equation form: DPI = Personal Income - Direct Taxes

Development of Indian Banking

 

In order to make the Reserve Bank of India more Powerful, the Government of India nationalised it on January 1, 1949. With a view to have the coordinated regulation of Indian banking. the Indian Banking Act was passed in 1949. According to this Act, the Reserve Bank of India was granted extended powers for the inspection of non-scheduled banks. For the development of the banking facilities in the rural areas the Imperial Bank of India was partially nationalised on July 1, 1955 and it was renamed as the State Bank of India. Along with it other 8 (at present 5) banks were converted as its associate banks which form what is named as the State Bank Group. They are as follows -

1.  The State Bank of Bikaner and Jaipur (in the beginning State Bank of Bikaner and State Bank of Jaipur were merged and named as the Stat Bank of Bikaner and Jaipur)
2. The State Bank of Hyderabad
3. The State Bank of Indore (merged with SBI)
4. The State Bank of Mysore
5. The State Bank of Saurashtra (merged with SBI)
6. The State Bank of Patiala
7. The State Bank of Travancore

In order to have more control over banks, 14 large commercial banks whose reserves were more than Rs. 50 crore each were nationalised on July 19, 1969. The nationalised banks are as follows -

1. The Central Bank of India
2. Bank of India
3. Punjab National Bank
4. Canara Bank
5. United Commercial Bank
6. Syndicate Bank
7. Bank of Baroda
8. United Bank of India
9. Union Bank of India
10. Dena Bank
11. Allahabad Bank
12. Indian Bank
13. Indian Overseas Bank
14. Bank of Maharashtra

After a decade, on April 15, 1980, those 6 private sector banks whose reserves were more than Rs. 200 crore each were nationalised. These banks are -

Andhra Bank

1. Punjab and Sindh Bank
2. New Bank of India
3. Vijaya Bank
4. Corporation Bank
5. Oriental Bank of Commerce 

On Septemeber 4, 1993 the Government merged the New Bank of India with Punjab National Bank and a result of this the total number of nationalised banks reduced from 20 to 19.

With the transition of the national economy to a higher growth trajectory, the provision of adequate and timely availability of bank credit to the productive sectors of the economy has acquired importance. As public sector banks still own about 71 percent of the assets of the banking system they continue to play an important role in responding to the change in economic environment. As the banking regulator and supervisor and as a monetary policy authority, the Reserve Bank of India (RBI) continues to guide the banking system, including foreign, private sectors and public sector banks, to meet emerging economic challenges.

As certain rigidity and weaknesses were found to have developed banking system during the late eighties, the Government felt that the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high level committee under the Chairmanship of Shri M. Narasimham on the Financial System (CFS), was setup on August 14, 1991 to examine all aspects relating to the structure, organisation, functions and procedure of the financial systems. Based on the recommendations of the Committee a comprehensive reform of the banking system was introduced in 1992-93.

A high level committee under Chairmanship of Shri M. Narasimham was again constituted by the Government of India in December 1997 to review the record of implementation of financial reforms recommended by CFS in 1991 and chart the reforms necessary in the year ahead. The Committee submitted its report to the Government in April 1998.

UPSC 2008 Civils Prelims Economics

1.

The shift in the SS curve to S’S’ is due to an imposition of a tax.
Which of the following areas in the diagram shows excess burden of the tax?
(a) ODIY
(b) SDA
(c) FGA
(d) CAD
Ans. (c)
2. Consider the following statements:
A. The number of firms is large both under perfect competition and monopolistic competition.
B. There is freedom of entry and exit in both perfect competition and monopolistic competition.
C. In both perfect competition and monopolistic competition, every firm is a price taker and quantity adjuster.
Which of the statements given above are correct?
(a) A, B and C
(b) B and C
(c) A and C
(d) A and B
Ans. (d)
3. Match List I (Market Type) with List-II (Implication) and select the correct answer using the codes given below the lists:
List-I                                                                     List-II
(Market Type)                                                        (Implication)
A. Perfect competition                                        1. Collusion of firms
B. Monopoly                                                       2. Excess capacity
C. Monopolistic competition                              3. Uniform price
D. Oligopoly                                                       4. Blocked entry
Code:
A B C D
(a) 2 4 3 1
(b) 3 1 2 4
(c) 2 1 3 4
(d) 3 4 2 1
Ans. (d)
4. In the Kinked Demand Curve Model, suppose MC curve shifts upward in the discontinuous range of MR curve.
Which one of the following is correct? At equilibrium,
(a) price rises but quantity remains the same
(b) price and quantity both remain the same
(c) quantify rises but price remains the same
(d) price and quantity both rise
Ans. (b)
5. Consider the following statements:
Short run profit is maximum under perfect competition when
A. second order condition is satisfied.
B. MC curve cuts MR curve from below.
C. MC curve cuts MR curve from above.
Which of the statements given above is/are correct?
(a) A and C
(b) A and B
(c) A only
(d) B only
Ans. (b)
6. Which of the following is not a necessary condition of perfect competition?
(a) Large number of firms in the industry producing homogeneous products
(b) Free entry and free exit of firms
(c) Need for incurring selling costs to attract consumers
(d) Absence of artificial restrictions by the government
Ans. (c)
7. Consider the following statements:
A. The shape of a unitary elastic demand curve is a rectangular hyperbola.
B. The shape of a perfectly elastic demand curve is a rectangular hyperbola.
C. Perfectly inelastic demand curve is parallel to the price axis.
D. Perfectly elastic demand curve is parallel to the quantity axis.
Which of the statements given above are correct?
(a) A and B
(b) A, C and D
(c) B and C
(d) B and D
Ans (b)
8. Which one of the following statements is correct?
A straight line demand curve (cutting both the axis) is elastic
(a) throughout the length of the demand curve
(b) at the mid-point
(c) below the mid-point towards the demand axis
(d) above the mid-point towards the price axis
Ans. (d)
9. Under perfect competition, supply curve is identified as which one of the following?
(a) Rising portion of marginal cost curve
(b) Rising portion of average total cost curve
(c) Rising portion of average variable cost curve
(d) Portion of marginal cost above the average variable cost curve
Ans. (d)
10. Which one of the following is the correct sequence of magnitude of minima in ascending order in marginal cost (MC) curve, average cost (AC) curve and average variable cost (AVC) curve?
(a) MC, AVC, AC
(b) AVC, AC, MC
(c) MC, AC. AVC
(d) AC, MC, AVC
Ans. (a)
11. Consider the following statements:
A. The vertical distance from average cost (AC) curve to average variable cost (%&VC) curve is average fixed cost (AEC).
B. AVC curve, AC curve and marginal cost (MC) curve are ‘U shaped.
C. AFC curve is horizontal to ‘X’ axis.
Which of the statements given above are correct?
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) 1, 2 and 3
Ans. (a)
12. Short-run marginal cost of a firm does not contain any element of which of the following?
(a) Costs of raw materials
(b) Salaries of the managerial staff
(c) Wages of labour engaged on daily basis
(d) Cost of fuel for operating machines engaged in production.
Ans. (c)
13. Suppose a fisherman has a fishing net and a boat. He alone hunts fish in sea for which he has to pay no license fee etc. Fish, caught by him, will have which one of the following?
(a) Zero economic cost of production as he makes no out-of-pocket payment to anybody and is working of his own
(b) Negative economic cost of production because he enjoys fishing and has to make no payment
(c) Positive cost of production due to his sacrificing the opportunity of working elsewhere and renting out fishing net and boat etc
(d) Infinite cost of production
Ans. (a)
14. Income consumption line of the ‘Consumer Theory’ is analogous in ‘Production Theory’ to which one of the following?
(a) Expansion path
(b) Isoquant line
(c) Ridge line
(d) Isocost line
Ans. (a)
15. Which of the following is not correct in respect of Cobb-Douglas production function?
(a) It was originally based on the empirical study of US manufacturing industry.
(b) It is a linearly homogeneous production function, taking into account two factors, labour and capital, for the entire output of the manufacturing industry.
(c) It tells us that output depends upon labour and capital, and that part of output which cannot be explained by labour and capital, is attributed to the residual.
(d) It is based on the assumption of operation of law of diminishing returns.
Ans. (d)
16. Which one of the following statements is correct? If the elasticity of substitution between two factors X and Y be zero, then it implies that for a given change in outputs,
(a) X and Y will always change by the same proportion
(b)Y changes but X remains the same
(c) X changes but Y remains the same
(d) X and Y both change necessarily by different proportion
Ans. (a)
17. Consider the following statements:
According to the law of variable proportions; total product is maximum when
A. marginal product becomes zero.
B. marginal product curve cuts average product curve from above.
C. slope of marginal product curve is zero.
D. tangent of the total product curve is parallel to the horizontal axis.
Which of the statements given above are correct?
(a) A and D
(b) C and D
(c) A and C
(d) B and C
Ans. (c)
18. Assertion (A): The monopolist never operates on the portion of the demand curve which is inelastic. Reason (R) When elasticity of demand is less than unity MR is negative.
Ans (a)
19. Assertion (A): The Revealed Preference Hypothesis excludes the study of Giffin Paradox
Reason (R) Revealed Preference Hypothesis considers only negative income elasticity of demand whereas Giffin Paradox  relates to positive elasticity of demand.
Ans. (c)
20. Assertion (A): Indifference curve for perfect substitute goods is a downward sloping straight line. Reason (R): For perfect substitute goods, MRS is falling.
Ans. (a)
21. Assertion (A): There is no excess capacity under monopolistic competition in the long run. Reason (R): The demand curve under monopolistic competition is downward sloping.
Ans. (d)
22. Assertion (A): M curve lies below the VMP curve under imperfect competition.
Reason (R): Under imperfect competition MR < P.
Ans. (a)
23. Which of the following statements about Pareto Optimum are correct?
A. It changes with changes in the distribution of income.
B. At the Pareto Optimum, MRS in consumption = MRT in production.
C. It is not unique.
D. It is obtained under imperfect competition.
Select the correct answer using the codes given below:
(a) A and B
(b) A, B and C
(c) A, C and D
(d) B and C
Ans. (b)
24. Match List- I (Economist) with List -II (Concept) and select the correct answer using the codes given below the lists:
List- I                                          List -II
(Economist)                                   (Concept)
A. Pareto                                 1. Compensation Principle
B. Hicks-Kaldor                      2. Social Welfare Function
C. Bergson                              3. Social Optimum
D. Scitovsky                           4. Double Criterion Compensation
Code:
A  B C D
(a) 3 1 2 4
(b) 2 4 3 1
(c) 3 4 2 1
(d) 2 1 3 4
Ans. (a)
25. Which one of the following statements is correct?
In a production process with two factors, land and labour, if the marginal productivity of land is negative, then it is in
(a) the stage I for land and stage II for labour
(b) the stage II for land and labour
(c) the stage I for land and stage III for labour
(d) the stage I for labour and stage III for land
Ans. (b)
26. Which one of the following statements is correct?
The Engel Curve for Giffen goods is
(a) positively sloped
(b) negatively sloped
(c) vertical
(d) horizontal
Ans. (b)
27. Which one of the following statements is correct? According to the classical economists, the existence of unemployment at any time is only of temporary nature and can be considered as
(a) structural unemployment
(b) cyclical unemployment
(c) frictional unemployment
(d) disguised unemployment
Ans. (c)
28. Which one of the following statements is correct?
Creeping inflation is a situation in which the rate at
which price level rises is:
(a) very high
(b) high
(c) moderately high
(d) slow
Ans. (d)
29. Which of the following groups are adversely affected by inflation?
A. Wage earners in the informal sector.
B. Profit earners.
C. Salary earners with salaries indexed to inflation
D. Pensioners with fixed pensions.
Select the correct answer using the codes given below:
(a) A and B
(b) C and D
(c) A and D
(d) B and C
Ans. (a)
30. Which one of the following is a qualitative credit control method?
(a) Open market operations
(b) Bank-rate
(c) Variable cash reserve ratio
(d) Moral suasion
Ans. (d)
31. What kind of change is to be made in (i) Cash reserve ratio, and (ii) Bank rate, to control inflation?
(a) (i) should increase but (ii) should decrease
(b) (ii) should increase but (ii) should decrease
(c) Both should increase
(d) Both should decrease
Ans. (c)
32. Which one of the following pairs is called an open market operation?
(a) Selling and buying of securities or bills by the central bank
(b) Selling and buying of foreign exchange
(c) Selling and buying of shares by the foreign institutional investors
(d) Selling and buying of gold in the open market by commercial banks
Ans. (a)
33. The money multiplier in an economy increases with which one of the following?
(a) Increase in the cash reserve ratio
(b) Increase in the statutory liquidity ratio
(c) Increase in the banking habit of the population
(d) Increase in the population of the country
Ans. (c)
34.

In the context of the figure above which of the following statements is/are correct?
A. Investment is autonomous.
B. Saving is autonomous.
C. Investment is dependent on income.
D Saving is dependent on income.
Select the correct answer using the codes given below:
(a) B and C
(b) A and D
(c) B only
(d) A only
Ans. (b)
35. consider the following consumption saving functions:
A. C = 200+0.8Y
B. S = 200+0.2Y
C. C = 150+0.8Y
D. S = -150+0.2Y
Which of the above are consistent pairs of functions?
(a) A and B
(b) A and D
(c) B and C
(d) C and D
Ans. (d)
36. There are 2 assets A and B in which one can invest his savings of Rs. 1,000/. Assume that there is no risk and interest rate is 10%.
Asset A gives a return of Rs. 100/- in perpetuity
Asset B gives Rs. 200/. at the end of year 1 and Rs. 900/- at-the end of the year 2.
Which one of the following statements is correct?
(a) Present value of A and B are the same.
(b) Present value of B is higher than that of A.
(c) Present value of A is higher than that of B.
(d) Information is inadequate to determine the present value of A and B
Ans. (c)
37. Which one of the following statements is correct?
Value of output and value-added can be distinguished if we know
(a) the value of intermediate inputs
(b) the value of net indirect taxes
(c) the value of imports
(d) the value of consumption of fixed capital
Ans. (a)
38. Given:
% Change in nominal GNP = 1.8
% change in population = 0.5
% change in price level = 1.3
What is the approximate percentage change in real per -capita GNP?
(a) Zero
(b) 0.5
(c) 1.0
(d) 1.3
Ans. (a)
39. Match List- I (Concept) with List -II (Economist) and select the correct answer using the codes given below the lists:
List I                                                          List II
(Concept)                                                 (Economist)
A. Liquidity trap                                      1. M. Friedman
B. Demonstration effect                           2. A.C. Pigou
C. Permanent income hypothesis             3. J. Duesenberry
D. Wealth effect                                       4. J.M. Keynes
Code:
A B C D
(a) 4 3 1 2
(b) 1 2 4 3
(c) 4 2 1 3
(d) 1 3 4 2
Ans. (a)
40. Which one of the following statements is correct?
To derive disposable income from national income, one has to
(a) deduct income taxes and add transfer payments.
(b) deduct income taxes and deduct transfer payments
(c) add income taxes and add transfer payments
(d) add income taxes and deduct transfer payments
Ans. (a)
41. Approach paper to 11^th five plan, issued by the Planning Commission refers to the merger of which one of the following pairs of government programmes?
(a) Sarva Shiksha Abhiyan with Mid-day Meal Programme
(b) Jawahar Rojgar Yojana with Mid-day Meal Programme
(c) Sarva Shiksha Abhiyan with National Rural Employment Guarantee Programme
(d) Shram Shakti Yojana with Jawahar Rojgar Yojana
Ans. (a)
42. Which one of the following statements is correct? J.M. Keynes assumed that supply of money as a function of rate of interest is
(a) perfect elastic
(b) highly elastic
(c) unitary elastic
(d) perfectly inelastic
Ans. (a)
43. Who developed the Time Preference Theory of interest?
(a) Irving Fisher
(b) N. Senior
(c) J.R. Hicks
(d) J.M. Keynes
Ans. (a)
44.

In the graph given above, what does the point B indicate?
(a) Excess supply in the goods market and excess demand in the money market
(b) Excess demand in the goods market and excess supply in the money market
(c) Excess supply in both goods and money market
(d) Excess demand in both goods and money market
Ans. (b)
45. Which one of the following is the most important determinant of speculative demand for money?
(a) Income
(b) Interest rate
(c) Profits
(d) Prices
Ans. (b)
46. Which one of the following equations was used by Fischer to exp the Quantity Theory of Money ?
(Symbols have their usual meanings)
(a) MV= PT
(b) MP = VT
(c) MP = PT
(d) PV = MT
Ans. (a)
47. If Y is the total money income of the community M is the money supply and P is the price level, than how is Vy (The income velocity of money) defined as?
(a) Vy = M/Y
(b) Vy = Y/M
(c) Vy = Y/ (MP)
(d) Vy = PY/M
Ans. (d)
48. When shall an increase in money supply have a small effect on nominal Gross Domestic Product?
(a) If the velocity is decreasing
(b) If the velocity is unchanged
(c) If the velocity is increasing
(d) If the Government spending is also increasing
Ans. (d)
49. There are a number of banks in a market. The initial total primary deposit is Rs. 1,000. Every bank is required to maintain a 10% reserve legally The transactions are completely made through cheque and no transaction is made in cash. W1{at will be the total credit creation in the market?
(a) Rs. 1,000
(b) Rs 5,000
(c) Rs. 10,000
(d) None of these
Ans. (c)
50. Which one of the following is a source of non-tax revenue for governments?
(a) Import duty on cars
(b) Octroi at cheek points on roads.
(c) Entrance fee to museums,
(d) Excise duty or beverages
Ans. (c)

Punjab National Bank Agriculture Officers Exam., 2009

Professional Knowledge (Economics) (EXAM Held on 16-8-2009)


1. Say’s Law of Markets states that—
(A) Demand creates its own supply
(B) Supply creates its own demand
(C) Demand creates its own demand
(D) Supply creates its own supply
(E) None of these
Ans : (D)

2. Malthusian theory of population is based on—
(A) Harmonic progression of population
(B) Geometric progression of food production
(C) Arithmetic progression of population
(D) Geometric progression of population
(E) All of the above
Ans : (D)

3. Gresham’s Law states that—
(A) Good money drives bad money out of circulation
(B) Bad money drives good money out of circulation
(C) Both good money and bad money may co-exist
(D) Neither bad money nor good money may be long in circulation
(E) None of these
Ans : (B)


4. The on-going melt down had its origin in—
(A) The real sector
(B) The financial sector
(C) The service sector
(D) The textile sector
(E) None of these
Ans : (A)

5. A competitive firm maximizes its profit when—
(A) MR = AR
(B) MR = MC
(C) MC = AC
(D) MC = AR
(E) None of these
Ans : (B)

6. ‘Supernormal’ profit may exist in a market due to—
(A) Asymmetry of information
(B) Restriction of information
(C) Quantity restriction
(D) Price restriction
(E) All the above
Ans : (A)

7. Profit is caused by—
(A) Dynamic element in the economy
(B) Innovation
(C) Windfall
(D) All of the above
(E) None of these
Ans : (D)

8. Interest is paid—
(A) To compensate for inflation
(B) Due to superiority of present over future goods
(C) Because demand for money outstrips its supply
(D) To ensure the growth of the real sector
(E) All the above
Ans : (B)

9. Investment is defined as a—
(A) Deployment of a sum in business operations
(B) Purchasing an interest bearing bond
(C) Change in the stock of capital
(D) All the above
(E) None of these
Ans : (C)

10. The unproductive expenditure of the rich is—
(A) Necessary to the employment of the poor
(B) An impediment to the growth of an economy
(C) Having no bearing on the economy
(D) Having bearing only on the economy of the rich
(E) None of these
Ans : (A)

11. Heckscher-Ohlin theory explains—
(A) Pattern of trade in terms of relative factor endowments of countries
(B) Why a country may import products which use extensively the country’s scarce factor
(C) The law of comparative cost
(D) The concept of reciprocal demand
(E) All the above
Ans : (A)

12. ‘Quasi-rents’—
(A) Are in the nature of free gifts
(B) May be applicable to all factors of production
(C) Comprise of all the returns to the firm in excess of the returns of the marginal firm
(D) All the above
(E) None of these
Ans : (C)

13. The indifference curve technique is essentially—
(A) A cardinal approach
(B) An ordinal approach
(C) A quasi-ordinal approach
(D) All the above
(E) None of these
Ans : (B)

14. The slope of an indifference curve expresses—
(A) The marginal rate of substitution of two goods
(B) A ratio of marginal utility of one good to another
(C) Both (A) and (B)
(D) A ratio of total utility of one good to another
(E) None of these
Ans : (A)

15. ‘Pass through’ effect in international trade theory refers to—
(A) The proportion of an exchange rate change that is reflected in export and import price change
(B) Exports and imports not facing any tariff barrier
(C) Exports and imports not facing any technical barrier
(D) All of the above
(E) None of these
Ans : (A)

16. Uruguay Round of multilateral trade negotiations—
(A) Started in 1986 and completed at the end of 1993
(B) Aimed at reversing the rising trend of non-tariff trade barriers
(C) Replaced the GATT with WTO
(D) Brought services and agriculture into WTO
(E) All of the above
Ans : (E)

17. Product Cycle Model in international trade theory (Vernon, 1966)—
(A) Is an extension of technological gap model
(B) Is an extension of Heckscher-Ohlin model
(C) Explains dynamic comparative advantage of new products and new processes of production
(D) All of the above
(E) None of these
Ans : (E)

18. Hedging and speculation in forex markets—
(A) Are opposite activities
(B) Parallel activities
(C) Same activities
(D) All of the above
(E) None of these
Ans : (A)

19. A currency swap refer to—
(A) A spot sale of currency combined with a forward repurchase of the same currency—as part of single transaction
(B) A forward sale of currency combined with a forward repurchase of the same currency—as part of a single transaction
(C) A forward sale of currency combined with a forward repurchase of the same currency—in two different transactions
(D) All of the above
(E) None of these
Ans : (A)

20. Public-Private Partnership projects in India are mostly related to—
(A) Airports
(B) Ports
(C) Railways
(D) Roads
(E) Urban development
Ans : (D)

21. The largest share in the short term money market of India in recent times belonged to the segment—
(A) Collaterised Borrowing and Lending Obligation (CBLO)
(B) Traditional repo
(C) Clearcorp Repo Over Matching System (CROMS)
(D) Call
(E) Others
Ans : (D)

22. As per the revised estimate of CSO, the GDP in India at factor cost during 2008-09 was—
(A) Rs. 28,71,120 crore
(B) Rs. 31,29,717 crore
(C) Rs. 33, 39,375 crore
(D) Rs. 44,82,436 crore
(E) None of these
Ans : (C)

23. Mid Day Meal Scheme—
(A) Is a centrally funded and largest school meal scheme in the world
(B) Provides each child in government and government aided school a minimum of 300 calories and 8–12 gm of protein each day of school for a minimum of 200 days
(C) Provides lunch to about 120 million children
(D) All of the above
(E) None of these
Ans : (C)

24. Insurance penetration is defined as the—
(A) Ratio of premium underwritten in a year to GDP
(B) Ratio of premium underwritten in a year to total population
(C) Ratio of insurance subscribers in a year to total population
(D) Ratio of total number of policy holders in a year to total population
(E) None of these
Ans : (A)

25. Insurance density is defined as the—
(A) Ratio of premium underwritten in a year to GDP
(B) Ratio of premium underwritten in a year to total population
(C) Ratio of insurance subscribers in a year to total population
(D) Ratio of total number of policy holders in a year to total population
(E) None of these
Ans : (B)

26. Minimum Support Prices of crops are recommended by—
(A) Planning Commission of India
(B) Commission for Agricultural Costs and Prices (CACP)
(C) Finance Commission of India
(D) Farmers’ Commission of India
(E) None of these
Ans : (B)

27. The Electricity (Amendment) Act 2007—
(A) Dispensed with licence requirement for sale from captive units
(B) Provided for joint effort by the Central and State governments for providing access to all areas including villages and markets
(C) Expanded the definition of theft to cover the use of tampered meters
(D) All of the above
(E) None of these
Ans : (D)

28. In times of slowdown of the economy, the fiscal policy influences aggregate demand through—
(A) Discretionary element
(B) Non-discretionary element
(C) Lowering of tax rates
(D) All of the above
(E) None of these
Ans : (C)

29. Thirteenth Finance Commission is headed by—
(A) Dr. Rangarajan
(B) Dr. Vijay L. Kelkar
(C) Dr. Suresh Tendulkar
(D) Dr. C. H. Hanumantha Rao
(E) None of these
Ans : (B)

30. A constitutionally recognized body is—
(A) Planning Commission
(B) Finance Commission
(C) Forward Commission
(D) Farmers Commission
(E) None of these
Ans : (B)

31. Rashtriya Krishi Vikas Yojana was launched by GOI in August 2007 with the objective(s) of—
(A) To incentivise the states to increase public investment in agriculture and allied sectors
(B) To ensure that local needs/crops/priorities are better reflected
(C) To achieve the goal of reducing the yield gaps in important crops
(D) All of the above
(E) None of these
Ans : (D)

32. The Buffer Stock of foodgrains at the beginning of February 2009 stood at—
(A) 16•2 million tonnes
(B) 20•0 million tonnes
(C) 37•4 million tonnes
(D) 36•2 million tonnes
(E) None of these
Ans : (D)

33. Public Private Partnership came to be introduced in India to—
(A) Mitigate the financial burden of the governments
(B) Respond to the technological change that allow unbundling of infrastructure
(C) Alter the character of goods and services from pure public to private ones
(D) All of the above
(E) None of these
Ans : (A)

34. Heteroscedasticity in econometric analysis means—
(A) The variance for each disturbance term (Vi) is the same for all i’s
(B) The variance for each disturbance term (Vi) is not the same for all i’s
(C) The co-variance for each pair of disturbance term is the same
(D) The co-variance for each pair of disturbance term is not the same
(E) None of these
Ans : (B)

35. Autocorrelation in econometric analysis refers to—
(A) The correlation between the values of different variables
(B) The correlation between the values of alternative variables
(C) The correlation between successive values of the same variable
(D) All of the above
(E) None of these
Ans : (A)

36. Durbin-Watson Test is applied in econometric models to test—
(A) Presence of heteroscedasticity in a model
(B) For autocorrelated errors in the sample data
(C) For multicorrelinearity
(D) For autoregressive disturbances
(E) None of these
Ans : (B)

37. A weakly stationary stochastic process is so called, if—
(A) Its mean and variance are constant over time
(B) The value of covariance between two time periods depends only on lag between two time periods
(C) The value of covariance does not depend on the actual time at which the covariance is computed
(D) All the above
(E) None of these
Ans : (D)

38. Dummy variables are used in regression models—
(A) To represent important variables that are not qualitatively measurable
(B) To capture the effect of specific attributes
(C) As binary variables
(D) To distinguish between two groups of population
(E) All of the above
Ans : (C)

39. Principal components in econometric analysis—
(A) Are linear combinations
(B) Help to increase the degrees of freedom
(C) Help to reduce high degree of multicorrelinearity
(D) All of the above
(E) None of these
Ans : (A)

40. If world population grows at 2•6 per cent, then it will double in—
(A) 44•34 years
(B) 36•92 years
(C) 29•32 years
(D) 26•66 years
(E) None of these
Ans : (E)