Daily Static MCQs for UPSC & State PSC Exams - Economy (17 August 2023)

   

Daily Static MCQs Quiz for UPSC, IAS, UPPSC/UPPCS, MPPSC. BPSC, RPSC & All State PSC Exams

Subject : Economy

1. Consider the following statements:

1. T-Bills are debt instruments that pay periodic coupons to the investors.
2. Foreign Portfolio Investors (FPIs) are not allowed to purchase the T-Bills.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (D)

Explanation:

  • Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Hence, statement 1 is incorrect.
  • Foreign Portfolio Investors (FPIs) are allowed to invest in the T-Bills subject to the limits prescribed by the RBI. Hence, statement 2 is incorrect.

2. Which of the following factors can lead to cyclical slowdown in the Indian Economy?

1. Over-investment in capital assets and in inventory.
2. The production of final goods is not absorbed leading to lower prices and lower economic activity.
3. Changing demographics and change in consumer behaviour.

How many of the above statements are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (B)

Explanation: Typically, a cyclical slowdown is caused by an excess of investment demand—over-investment in capital assets (residential and non-residential) and in inventory. The production of final goods generated by excess investment is not absorbed, leading to inventory reduction, lower prices, lower economic activity, and some loss in employment. When this is accompanied by excess debt, the cyclical slowdown can be prolonged or it may become structural. A structural slowdown, on the other hand, is a more deep-rooted phenomenon that occurs due to a one-off shift from an existing paradigm. The changes, which last over a long-term, are driven by disruptive technologies, changing demographics, and/or change in consumer behaviour. Hence, statement 3 is incorrect.

3. Stressed Assets is a powerful indicator of the health of the banking system. It includes:

1. Non-performing Assets
2. Restructured Loans
3. Written off Assets

How many of the above statements are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (C)

Explanation:

  • The most important scale of asset quality is Non-Performing Assets (NPA). But NPA alone doesn’t tell the whole story of bad asset quality of loans given by banks. Hence a new classification is made in the form of stressed assets that comprises restructured loans and written off assets besides NPAs.
  • Restructured asset or loan are that assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures.
    Written off assets are those the bank or lender doesn’t count the money borrower owes to it. The financial statement of the bank will indicate that the written off loans are compensated through some other way.

Hence, all are correct.

4. Keki Mistry committee that was recently in news was related to:

(a) Armed Forces Special Powers Act
(b) GM crops in India
(c) Review the share buyback regulations
(d) Reforms in the criminal Justice System.

Answer: (C)

Explanation: Keki Mistry-headed committee was set up by SEBI to review the share buyback regulations. Hence, option (c) is correct.

5. In India, Microcredit is delivered through which of the following channels?

1. Microfinance institutions (MFIs) registered as NBFCs
2. Non-banking financial companies (NBFCs)
3. Scheduled commercial banks including small finance banks (SFBs).
4. Cooperative banks

Select the correct answer uing the code given below:

(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4

Answer: (D)

Explanation:

  • Microfinance is a form of financial service which provides small loans and other financial services to poor and low-income households.
  • Microcredit is delivered through a variety of institutional channels viz., (i) scheduled commercial banks (SCBs) (including small finance banks (SFBs) and regional rural banks (RRBs)) lending both directly as well as through business correspondents (BCs) and self-help groups (SHGs), (ii) cooperative banks, (iii) non-banking financial companies (NBFCs), and (iv) microfinance institutions (MFIs) registered as NBFCs as well as in other forms.

Hence, all are correct.