UPSC CDS-1

1. Exchange rates state the value of one currency in terms of other curre

Exchange rates state the value of one currency in terms of other currencies. Which one of the following statements with respect to the exchange rate of currency is correct ?

Floating exchange rates are rates in which the Governments interfere by buying or selling their currencies.
Fixed exchange rates are rates set by Government decisions and maintained by Government actions.
Under the Bretton Woods System, the exchange rates are floated in terms of rise or fall in price of gold.
Under the classical gold standard, the exchange rates are fixed in terms of price of dollar.
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The correct answer is B) Fixed exchange rates are rates set by Government decisions and maintained by Government actions.
Under a fixed exchange rate system, the government or central bank officially sets the value of its currency against another currency or a basket of currencies and intervenes in the foreign exchange market (buying or selling its own currency) to maintain this parity.
A) Floating exchange rates are primarily determined by market forces (supply and demand) with minimal or no government intervention. Managed float systems involve occasional intervention, but are distinct from purely floating rates. C) The Bretton Woods System involved fixed exchange rates pegged to the US dollar, which was convertible into gold. Exchange rates were not floated in terms of the rise or fall in the price of gold, but changes could occur through agreed-upon devaluations or revaluations (adjustable peg). D) Under the classical gold standard, exchange rates were fixed based on the relative gold content of each currency, not in terms of the price of the dollar specifically, as the dollar was just one currency whose value was defined by gold.

2. The excess of total expenditure of Government over its total receipts,

The excess of total expenditure of Government over its total receipts, excluding borrowings, is known as

Primary deficit
Fiscal deficit
Current deficit
Capital deficit
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The correct answer is B) Fiscal deficit.
Fiscal deficit is defined as the difference between the government’s total expenditure and its total receipts, excluding borrowings. It indicates the total borrowing requirement of the government.
Primary deficit is calculated as fiscal deficit minus interest payments. Current deficit and Capital deficit are not standard terms for the overall deficit measure described; government finances are typically divided into Revenue account (leading to Revenue deficit) and Capital account (leading to Capital deficit), and Fiscal deficit combines these, representing the total gap covered by borrowing.

3. The situation where the equilibrium level of real GDP falls short of p

The situation where the equilibrium level of real GDP falls short of potential GDP is known as

Recessionary gap
Inflationary gap
Demand-side inflation
Supply-side inflation
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The correct answer is A) Recessionary gap.
A recessionary gap occurs when the equilibrium level of real GDP is below the potential GDP. This indicates that the economy is operating below its full capacity, often leading to unemployment.
Potential GDP represents the maximum sustainable output an economy can produce without triggering inflation. An inflationary gap, conversely, occurs when equilibrium real GDP exceeds potential GDP, leading to upward pressure on prices. Demand-side and Supply-side inflation refer to the causes of inflation, not the gap between actual and potential output.

4. Which one of the following is not a function of money ?

Which one of the following is not a function of money ?

Acts as an intermediate in the exchange process
Acts as a store of value
Used as the unit of account
Used for regulating consumption
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The correct answer is D) Used for regulating consumption.
Money performs three main functions: acting as a medium of exchange (intermediate in the exchange process), a unit of account (measuring value), and a store of value (holding wealth). Regulating consumption is not a fundamental function of money itself, although the availability of money, prices, and economic policies can influence consumption patterns.
The primary functions of money are widely accepted as Medium of Exchange, Unit of Account, and Store of Value. Some texts also mention a fourth function, Standard of Deferred Payment. Regulating consumption is a macro-economic or individual economic activity influenced by income, prices, and other factors, but it is not a function inherent to money’s definition or role as an economic tool.

5. Which one of the following sea ports gained significance for handling

Which one of the following sea ports gained significance for handling iron-ore exports to Japan ?

Kandla
Ennore
Kochi
Mormugao
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The correct answer is D) Mormugao.
Mormugao Port in Goa is historically renowned as a major hub for exporting iron ore, particularly to countries like Japan. Its location and infrastructure were developed significantly for this purpose, serving the iron ore mines in its hinterland.
While other ports handle various cargoes, Mormugao’s economic significance has been strongly tied to iron ore exports for decades. Kandla is a major port in Western India handling various imports and exports, Ennore (Chennai Port) is an artificial port specializing in coal and other bulk cargoes, and Kochi is a significant port on the southwestern coast handling containers and other diverse cargo. None of these are as primarily associated with large-scale iron ore exports to Japan as Mormugao has been historically.

6. Aluminium is manufactured from

Aluminium is manufactured from

Copper ore
Bauxite ore
Mica ore
Manganese ore
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The correct answer is B) Bauxite ore. Aluminium is primarily manufactured from bauxite, which is an aluminium ore rich in aluminium oxides. The process involves refining bauxite into alumina (aluminium oxide) and then smelting alumina using electrolysis (Hall-Héroult process) to produce aluminium metal.
Bauxite is the principal ore from which aluminium is extracted globally.
India has significant reserves of bauxite, mainly found in Odisha, Gujarat, Jharkhand, Maharashtra, and Chhattisgarh. Other ores listed (Copper ore, Mica ore, Manganese ore) are sources for Copper, Mica, and Manganese respectively, not Aluminium.

7. Arabica, Robusta and Liberica are varieties of

Arabica, Robusta and Liberica are varieties of

Coffee
Tea
Sugarcane
Cotton
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The correct answer is A) Coffee. Arabica, Robusta, and Liberica are the major commercially cultivated species or varieties of the coffee plant (Coffea).
Arabica and Robusta are the two main species that dominate global coffee production, known for their distinct flavour profiles and growing conditions. Liberica is a minor species.
Arabica is known for its complex flavour and aroma, typically grown in high altitudes, and accounts for about 60% of world production. Robusta is hardier, has a stronger, more bitter taste with higher caffeine content, and is often used in espresso blends and instant coffee.

8. Identify the type of soil on the basis of the given characteristics :

Identify the type of soil on the basis of the given characteristics :
1. They are rich in lime, iron, magnesia and alumina.
2. They are generally clayey, deep and impermeable.
3. They are mainly found in Maharashtra, Madhya Pradesh and Gujarat.

Laterite soil
Red and yellow soil
Saline soil
Black soil
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The correct answer is D) Black soil. The characteristics provided – richness in lime, iron, magnesia, and alumina; generally clayey, deep, and impermeable nature; and prominent presence in regions like Maharashtra, Madhya Pradesh, and Gujarat – are definitive features of Black soils (also known as Regur soils), which are largely derived from Deccan Trap lava rocks.
Black soil is characterized by its high clay content, moisture-retentive capacity, and common occurrence in the Deccan Plateau region of India, particularly Maharashtra, MP, Gujarat, and parts of Karnataka and Andhra Pradesh.
Black soil is highly suitable for growing cotton, hence also called ‘black cotton soil’. It develops deep cracks during the dry season, aiding in aeration, a phenomenon called ‘self- ploughing’.

9. Which one of the following is a cold ocean current ?

Which one of the following is a cold ocean current ?

Brazilian Current
Gulf Stream
North Equatorial Current
California Current
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The correct answer is D) California Current. The California Current is a cold ocean current flowing southward along the west coast of North America. The other options, Brazilian Current, Gulf Stream, and North Equatorial Current, are all warm ocean currents.
Ocean currents are classified as warm or cold based on whether they carry water from warmer regions to colder regions or vice-versa. The California Current originates in cooler northern waters and flows towards the equator.
Cold currents typically flow towards the equator along the western coasts of continents in tropical and subtropical latitudes, while warm currents flow towards the poles, often along the eastern coasts of continents.

10. India’s territorial limit extends towards the sea up to

India’s territorial limit extends towards the sea up to

10 nautical miles
12 nautical miles
14 nautical miles
15 nautical miles
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The correct answer is B) 12 nautical miles. According to the United Nations Convention on the Law of the Sea (UNCLOS), which India has ratified, the territorial sea of a coastal state extends up to a limit not exceeding 12 nautical miles measured from baselines determined in accordance with the Convention.
The standard width of the territorial sea as defined by international law is 12 nautical miles from the coastal baseline.
Beyond the territorial sea is the contiguous zone (up to 24 nautical miles from the baseline) and the exclusive economic zone (EEZ) which extends up to 200 nautical miles from the baseline, where the coastal state has sovereign rights over resources.
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