Economic Development

121. With reference to ‘Urban Cooperative Banks’ in India, consider the fol

With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:

  • They are supervised and regulated by local boards set up by the State Governments.
  • They can issue equity shares and preference shares.
  • They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.

Which of the statements given above is/are correct?

[amp_mcq option1=”1 only” option2=”2 and 3 only” option3=”1 and 3 only” option4=”1, 2 and 3″ correct=”option2″]

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The correct option is B. Statements 2 and 3 are correct, while statement 1 is incorrect.
– Urban Cooperative Banks (UCBs) are regulated and supervised by both the Reserve Bank of India (RBI) (for banking functions) and the Registrar of Co-operative Societies (RCS) of the concerned State (or Central RCS if multi-state) (for registration and management). They are not solely supervised and regulated by local boards set up by State Governments. Statement 1 is incorrect.
– UCBs are permitted to raise capital through various means, including the issue of equity shares to their members and other forms of capital instruments akin to preference shares or long-term deposits with equity features, as per regulations issued by RBI and the Registrar. Recent amendments to the Banking Regulation Act have enhanced their ability to raise capital. Statement 2 is correct.
– Certain provisions of the Banking Regulation Act, 1949, were extended to cooperative banks, including UCBs, through the Banking Laws (Application to Co-operative Societies) Act, 1965, which came into effect on March 1, 1966. This brought their banking operations under the purview of the RBI. Statement 3 is correct.
The dual regulation structure (RBI and RCS) has historically posed some challenges. The Banking Regulation (Amendment) Act, 2020, sought to bring UCBs more directly under RBI supervision concerning banking-related matters, while cooperative administration remains with the RCS.

122. Consider the following statements: Other things remaining unchanged, m

Consider the following statements:
Other things remaining unchanged, market demand for a good might increase if

  • price of its substitute increases
  • price of its complement increases
  • the good is an inferior good and income of the consumers increases
  • its price falls

Which of the above statements are correct?

[amp_mcq option1=”1 and 4 only” option2=”2, 3 and 4″ option3=”1, 3 and 4″ option4=”1, 2 and 3″ correct=”option1″]

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The correct option is A. Market demand for a good might increase if the price of its substitute increases or if its own price falls.
– 1. Price of its substitute increases: If the price of a substitute good (e.g., tea vs. coffee) increases, consumers will switch from the substitute to the original good (coffee), increasing the demand for the original good at every price. This causes a rightward shift in the demand curve. Statement 1 is correct.
– 2. Price of its complement increases: If the price of a complementary good (e.g., cars vs. petrol) increases, the total cost of consuming the bundle increases. This typically leads to a decrease in demand for both the complement and the original good (cars). This causes a leftward shift in the demand curve. Statement 2 is incorrect.
– 3. The good is an inferior good and income of the consumers increases: For an inferior good (e.g., cheap noodles), as consumer income increases, demand for that good decreases (consumers switch to normal goods). This causes a leftward shift in the demand curve. Statement 3 is incorrect.
– 4. Its price falls: According to the law of demand, if the price of a good falls, the quantity demanded increases. While this is technically a movement *along* the demand curve (not a shift of the curve which is typically meant by “increase in market demand”), in the context of competitive multiple-choice questions, “market demand… increase” is sometimes used more broadly to include factors that lead to more of the good being bought, which includes a price reduction. Given the options, this interpretation is likely intended. Statement 4 leads to an increase in the quantity demanded.
Factors causing a rightward shift in the demand curve (increase in demand) include increased price of substitutes, decreased price of complements, increase in consumer income (for normal goods), decrease in consumer income (for inferior goods), change in tastes favouring the good, increase in population, expectations of future price increases. A fall in the good’s own price increases the quantity demanded, representing a movement along the existing demand curve. However, option A which includes 1 and 4 is the only combination where both factors lead to more of the good being demanded/bought.

123. Which among the following steps is most likely to be taken at the time

Which among the following steps is most likely to be taken at the time of an economic recession?

[amp_mcq option1=”Cut in tax rates accompanied by increase in interest rate” option2=”Increase in expenditure on public projects” option3=”Increase in tax rates accompanied by reduction of interest rate” option4=”Reduction of expenditure on public projects” correct=”option2″]

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The correct option is B. Increasing expenditure on public projects is an expansionary fiscal policy typically used to stimulate the economy during a recession.
– During an economic recession, there is a decrease in aggregate demand. Governments employ expansionary policies to boost demand.
– Increasing expenditure on public projects (like infrastructure) directly injects money into the economy, creates jobs, increases income, and stimulates further spending through the multiplier effect. This is an expansionary fiscal policy.
– Cutting tax rates is also an expansionary fiscal policy, as it increases disposable income, potentially leading to increased consumption and investment. Increasing tax rates is contractionary.
– Reducing interest rates is an expansionary monetary policy aimed at making borrowing cheaper to encourage investment and consumption. Increasing interest rates is contractionary.
– To combat a recession, expansionary policies are needed. Options A, C, and D involve either contractionary elements or exclusively contractionary policies (D). Option B is a clear expansionary fiscal policy.
Typical counter-cyclical measures during a recession include increasing government spending (fiscal stimulus) and lowering interest rates (monetary stimulus).

124. In India, the central bank’s function as the ‘lender of last resort’ u

In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following?

  • 1. Lending to trade and industry bodies when they fail to borrow from other sources
  • 2. Providing liquidity to the banks having a temporary crisis
  • 3. Lending to governments to finance budgetary deficits

Select the correct answer using the code given below.

[amp_mcq option1=”1 and 2″ option2=”2 only” option3=”2 and 3″ option4=”3 only” correct=”option2″]

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The central bank’s function as the ‘lender of last resort’ usually refers to providing liquidity to the banks having a temporary crisis.
The ‘lender of last resort’ is a function of the central bank where it provides emergency liquidity to financial institutions (primarily commercial banks) that are experiencing severe financial difficulties but are considered solvent. The purpose is to prevent bank runs and the collapse of the banking system, thereby maintaining financial stability.
Statement 1 is incorrect: The lender of last resort facility is primarily for banks and sometimes other critical financial institutions, not individual trade or industry bodies. Statement 3 is incorrect: Lending to the government to finance deficits is a fiscal operation or part of monetary policy implementation (e.g., buying government bonds), distinct from the emergency liquidity provision to illiquid banks in times of crisis.

125. With reference to India, consider the following statements: Retail i

With reference to India, consider the following statements:

  • Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Bonds’ in primary market.
  • The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India.
  • The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.

Which of the statements given above is/are correct?

[amp_mcq option1=”1 only” option2=”1 and 2″ option3=”3 only” option4=”2 and 3″ correct=”option2″]

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Statements 1 and 2 are correct.
Statement 1 is correct: The Reserve Bank of India (RBI) has launched the ‘RBI Retail Direct’ scheme, which allows retail investors to open a ‘Retail Direct Gilt Account’ with the RBI and invest in Government Securities (G-Secs), including Treasury Bills, GoI Bonds, etc., in both the primary auctions and the secondary market through an online portal.
Statement 2 is correct: Negotiated Dealing System-Order Matching (NDS-OM) is the main electronic trading platform for G-Secs in India, operated by the Reserve Bank of India.
Statement 3 is incorrect: Central Depository Services Ltd. (CDSL) is one of the two central securities depositories in India (the other being NSDL). CDSL was promoted by the Bombay Stock Exchange (BSE) along with several banks (Bank of India, Bank of Baroda, State Bank of India, HDFC Bank, Standard Chartered Bank, Union Bank of India). The Reserve Bank of India is not a promoter of CDSL.
RBI Retail Direct scheme aims to deepen the bond market by allowing direct participation of retail investors. Depositories like CDSL and NSDL hold securities in electronic form and facilitate trading and settlement.

126. With reference to Indian economy, demand-pull inflation can be caused/

With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following?

  • Expansionary policies
  • Fiscal stimulus
  • Inflation-indexing wages
  • Higher purchasing power
  • Rising interest rates

Select the correct answer using the code given below.

[amp_mcq option1=”1, 2 and 4 only” option2=”3, 4 and 5 only” option3=”1, 2, 3 and 5 only” option4=”1, 2, 3, 4 and 5″ correct=”option1″]

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Demand-pull inflation can be caused/increased by Expansionary policies, Fiscal stimulus, and Higher purchasing power.
Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply.
1. Expansionary policies (monetary or fiscal) increase the money supply or government spending/reduce taxes, leading to higher aggregate demand.
2. Fiscal stimulus is a type of expansionary fiscal policy specifically aimed at boosting demand.
4. Higher purchasing power means consumers and businesses have more ability and willingness to spend, directly increasing aggregate demand.
3. Inflation-indexing wages can contribute to persistent inflation by maintaining demand and fueling a wage-price spiral, but it’s often discussed in the context of cost-push or inertial inflation as well. However, maintaining purchasing power supports demand.
5. Rising interest rates reduce borrowing and spending, thus decreasing aggregate demand, which is the opposite of what causes demand-pull inflation.
Given the options, {1, 2, 4} represent the most direct and clear drivers of demand-pull inflation. Statement 3 is debatable in its primary classification but does support demand. Statement 5 directly reduces demand.
The typical causes of demand-pull inflation include increased consumer spending, increased investment spending, increased government spending, and increased net exports. These are often stimulated by expansionary government policies or positive economic sentiment leading to higher purchasing power.

127. The money multiplier in an economy increases with which one of the

The money multiplier in an economy increases with which one of the following?

[amp_mcq option1=”Increase in the Cash Reserve Ratio in the banks” option2=”Increase in the Statutory Liquidity Ratio in the banks” option3=”Increase in the banking habit of the people” option4=”Increase in the population of the country” correct=”option3″]

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The money multiplier in an economy increases with an increase in the banking habit of the people.
The money multiplier is the ratio of the money supply to the monetary base. It is influenced by the reserve requirements (CRR, SLR) and the public’s preference for holding currency versus deposits. The formula for the money multiplier is approximately (1 + Currency Ratio) / (Reserve Ratio + Currency Ratio). The Currency Ratio is the ratio of currency held by the public to demand deposits.
An increase in the banking habit of people means they prefer to hold less cash and deposit more money in banks, leading to a decrease in the Currency Ratio. A lower Currency Ratio in the money multiplier formula results in a higher money multiplier.
Increase in CRR (A) increases the Reserve Ratio, decreasing the money multiplier. Increase in SLR (B) also increases the Reserve Ratio, decreasing the money multiplier. Increase in population (D) does not directly determine the money multiplier, though it can affect the total volume of money and economic activity.

128. If you withdraw ₹ 1,00,000 in cash from your Demand Deposit Account at

If you withdraw ₹ 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

[amp_mcq option1=”to reduce it by ₹ 1,00,000″ option2=”to increase it by ₹ 1,00,000″ option3=”to increase it by more than ₹ 1,00,000″ option4=”to leave it unchanged” correct=”option4″]

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Money supply (specifically M1) is defined as the sum of currency in circulation (C) and demand deposits (DD) held by the public. When you withdraw ₹1,00,000 in cash from your demand deposit account, there is a decrease in the demand deposits component by ₹1,00,000 and a corresponding increase in the currency in circulation component by ₹1,00,000.
The total amount of money defined as M1 (Currency + Demand Deposits) remains unchanged; only the form in which the money is held by the public changes from demand deposits to physical currency.
The transaction is a transfer of funds between two components of the money supply (M1). If the definition of money supply included broader measures like M2, M3 etc., which include time deposits or other assets, the effect might be different depending on the nature of the withdrawal account and what the money is subsequently used for (e.g., if it shifts into a different asset type). However, in the context of a simple cash withdrawal from a demand deposit account affecting aggregate money supply (M1), the net effect is zero.

129. In India, under cyber insurance for individuals, which of the followin

In India, under cyber insurance for individuals, which of the following benefits are generally covered, in addition to payment for the loss of funds and other benefits ?

  • 1. Cost of restoration of the computer system in case of malware disrupting access to one’s computer
  • 2. Cost of a new computer if some miscreant willfully damages it, if proved so
  • 3. Cost of hiring a specialized consultant to minimize the loss in case of cyber extortion
  • 4. Cost of defence in the Court of Law if any third party files a suit

Select the correct answer using the code given below :

[amp_mcq option1=”1, 2 and 4 only” option2=”1, 3 and 4 only” option3=”2 and 3 only” option4=”1, 2, 3 and 4″ correct=”option2″]

This question was previously asked in
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Statements 1, 3, and 4 generally describe benefits covered under cyber insurance for individuals.
Statement 1: Cyber insurance policies for individuals typically cover costs associated with restoring one’s computer system, removing malware, or recovering data compromised by cyber attacks or infections. This is a standard coverage. Correct.
Statement 2: While some comprehensive policies or riders might exist, the primary focus of cyber insurance is not on covering the cost of replacing hardware that is physically damaged, even if the damage is caused by a miscreant. Physical damage is usually covered by standard property or home insurance. Cyber insurance focuses on financial losses, data loss/recovery, system restoration, cyber extortion, identity theft, and associated legal costs resulting from cyber events. This is generally *not* a standard cyber insurance benefit. Incorrect.
Statement 3: Cyber extortion, such as ransomware attacks, is a key risk covered by individual cyber insurance. This coverage often includes the cost of hiring specialists (like cybersecurity consultants or negotiators) to help resolve the extortion demand and minimize loss. Correct.
Statement 4: If a cyber incident originating from an individual’s system (e.g., spreading malware, involvement in a botnet) causes harm to a third party, leading to a lawsuit, cyber insurance can cover the legal costs for defence in court. This falls under the liability aspect of cyber insurance. Correct.
Cyber insurance for individuals is a relatively new but growing area, providing financial protection against various cyber risks such as online fraud, identity theft, cyber bullying, data breaches, and system damage from malware or hacking. The specific coverages can vary depending on the policy provider and plan.

130. Consider the following statements : 1. In terms of short-term credit

Consider the following statements :

  • 1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.
  • 2. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.

Which of the statements given above is/are correct ?

[amp_mcq option1=”1 only” option2=”2 only” option3=”Both 1 and 2″ option4=”Neither 1 nor 2″ correct=”option2″]

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Statement 2 is correct, while Statement 1 is incorrect.
Statement 1: District Central Cooperative Banks (DCCBs) are an important part of the short-term cooperative credit structure. However, Scheduled Commercial Banks (SCBs) typically account for the largest share of total agricultural credit disbursed in India, including short-term credit, followed by Regional Rural Banks (RRBs) and then the cooperative sector (which includes State Cooperative Banks, DCCBs, and PACS). Therefore, the statement that DCCBs deliver more credit than SCBs and RRBs is incorrect.
Statement 2: The short-term cooperative credit structure is a three-tiered system: State Cooperative Banks (SCBs) at the state level, District Central Cooperative Banks (DCCBs) at the district level, and Primary Agricultural Credit Societies (PACS) at the village level. DCCBs act as a link between SCBs and PACS. A crucial function of DCCBs is indeed to channel funds received from SCBs (or refinanced by NABARD) to the PACS, which then provide credit directly to the farmers. This statement is correct.
The cooperative credit structure plays a vital role in providing financial services to rural areas, especially to small and marginal farmers. However, the cooperative sector has faced challenges related to governance, financial health, and competition from commercial banks and RRBs over the years. Recapitalization and reforms have been undertaken to strengthen the cooperative credit institutions.
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