UPSC Essentials | Daily subject-wise quiz : Economy (Week 15)

Each day, we will cover one new subject. Attempt today’s subject quiz on Economy to check your progress. Come back tomorrow to solve the MCQs on International Relations. Don’t miss checking the answers and explanations at the end of the quiz.

QUESTION 1

Which of the following is/are the effect of the depreciation of the rupee?

1. Import of goods and services becomes cheaper.

2. Export of goods and services becomes competitive.

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 2

With reference to the Standing Deposit Facility (SDF), consider the following statements:

1. It is an additional tool for absorbing liquidity without any collateral.

2. Fixed rate reverse repo (FRRR) has replaced the Standing Deposit Facility as the floor of the LAF (liquidity adjustment facility) corridor.

Which of the statement(s) given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 3

Consider the following statements:

1. The Ministry of Statistics and Programme Implementation compiles the CPI-based inflation data.

2. The WPI-based inflation data is compiled by the Department for Promotion of Industry and Internal Trade.

3. CPI is dominated by the prices of manufactured goods while WPI is dominated by prices of food articles.

4. WPI takes into account the change in the price of services.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) Only three

(d) All four

QUESTION 4

With reference to the Raising and Accelerating MSME Performance (RAMP), consider the following statements:

1. It is a central sector scheme assisted by Asian Development Bank.

2. The programme aims at improving access to market and credit, strengthening institutions and governance at the Centre and State.

3. The programme will not address issues of delayed payments and the greening of MSMEs.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

QUESTION 5

With reference to the Digital Banking Units (DBU), consider the following statements:

1. It is a specialised fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services.

2. Regional Rural Banks (RRBs) and Payment Banks are allowed to open DBU.

Which of the statement(s) given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

ANSWERS TO MCQs

1. (b)

FYI:

— The rupee’s exchange rate vis-à-vis the dollar is essentially the number of rupees one needs to buy $1. Depreciation of the Rupee is defined as the rupee becoming less valuable compared to the United States dollar.

— When the rupee depreciates, importing goods and services becomes costlier. Hence, statement 1 is not correct.

— Export of goods and services, especially in the United States, exports become more competitive because depreciation makes these products cheaper for foreign buyers. Hence, statement 2 is correct.

Therefore, option (b) is the correct answer.

2. (a)

FYI:

— In 2018, the amended Section 17 of the RBI Act empowered the central bank to introduce the SDF — an additional tool for absorbing liquidity without any collateral. Hence, statement 1 is correct.

— By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy.

— The SDF is also a financial stability tool in addition to its role in liquidity management.

— The objective is to restore the size of the liquidity surplus in the system to a level consistent with prevailing stance of monetary policy.

— The SDF will replace the fixed rate reverse repo (FRRR) as the floor of the LAF (liquidity adjustment facility) corridor. Hence, statement 2 is not correct.

Therefore, option (a) is the correct answer.

3. (b)

FYI:

— The two most-often used inflation rates in the country are the year-on-year

Wholesale price index (WPI) based inflation rate

— The WPI-based inflation data is put together by the Department for Promotion of Industry and Internal Trade (or DPIIT). Hence, statement 2 is correct.

— The WPI is dominated by the prices of manufactured goods. Hence, statement 3 is not correct.

Consumer price index (CPI) based inflation rate

— The Ministry of Statistics and Programme Implementation (or MoSPI) compiles the CPI-based inflation data. Hence, statement 1 is correct.

— CPI is dominated by the prices of food articles. Hence, statement 3 is not correct.

— These are two different baskets of goods and services. The government assigns different weights to different goods and services based on what is relevant for those two types of consumers.

— A key difference that must not be missed is that the WPI does not take into account the change in prices of services. Hence, statement 4 is not correct.

Therefore, option (b) is the correct answer.

4. (a)

FYI:

— Raising and Accelerating MSME Performance (RAMP) is a World Bank assisted Central Sector Scheme, supporting various Corona Virus Disease 2019 (COVID) Resilience and Recovery interventions of the Ministry of Micro, Small and Medium Enterprises (MoMSME). Hence, statement 1 is not correct.

— The initiative aims to improve market and credit access, develop institutions and governance at the centre and state levels, strengthen centre-state linkages and collaborations, manage late payments, and green MSMEs. Hence, statement 2 is correct and statement 3 is not correct.

— The funds would flow through RAMP into the Ministry’s budget against Disbursement Linked Indicators (DLIs) to support ongoing MoMSME programmes, focusing on improving market access and competitiveness.

Objectives of the Programme

— Strengthening coordination and institutions at the National and State level.

— Enhancing guarantee products towards increased greening and gender participation.

— Strengthening the receivables financing markets.

— Building and integrating technology platforms.

— Expanding access to Online Dispute Resolution Mechanism (ODR).

— Enhancing firm capabilities and access to markets.

Therefore, option (a) is the correct answer.

(Source: ramp.msme.gov.in)

5. (a)

FYI:

— In the Budget for 2022-23, the Finance Minister said: In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks.

— A digital banking unit is a specialised fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time. Hence, statement 1 is correct.

— Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case. Hence, statement 2 is not correct.

— The services include saving bank accounts under various schemes, current accounts, fixed deposit and recurring deposit accounts, digital kits for customers, mobile banking, Internet banking, debit cards, credit cards, and mass transit system cardss, digital kits for merchants, UPI QR codes, BHIM Aadhaar and point of sale (PoS).

— Currently, fintechs operating as neobanks offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs). Some of the neobanks offering services in India are Jupiter, Fi Money, Niyo, Razorpay X.

Therefore, option (a) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily subject-wise quiz — Polity and Governance (Week 15)

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 15)

Daily subject-wise quiz — Environment, Geography, Science and Technology (Week 15)

Daily subject-wise quiz — Economy (Week 14)

Daily subject-wise quiz – International Relations (Week 14)

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