Quiz 58, Mission 2016, 11 May 2


1. Which of the following statement/s regarding fiat
money is/are correct?
1. Currency notes are called fiat money
because they don’t have intrinsic value like a
gold or silver coin.
2. They cannot be refused by any citizen of the
country for settlement of any kind of
transaction.
3. Cheques and Demand deposits are the
example of fiat money.
Select the correct answer using codes given below.
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

 
2. Consider the following statements with regards
to SONAR (Sound navigation and Ranging) and
RADAR (Radio detection and Ranging):
1. SONAR uses sound waves because sound
waves have high penetration in water
2. If radio waves are used instead of sound
waves, range of SONAR will decrease
3. If sound waves are used instead of radio
waves, range of RADAR will increase
Which of the statements given above is/are correct?
(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2 and 3 only

 
3. Which of the following International Conventions
deals with wildlife conservation?
1. Bonn Convention
2. World Heritage Convention
3. IUCN
4. CITES
Select the correct answer from the codes given
below:
(a) 1, 2 and 4 only
(b) 3 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4

 
4. Consider the following statements regarding the
impact of market rate of interest:
1. Price of a bond is inversely related to the
market rate of interest.
2. Speculative demand for money is inversely
related to the market rate of interest.
Which of the statements given above is/are
incorrect?
(a) 1 only
(b) 2 only
(c) Both 1 and 2

(d) Neither 1 nor 2

 
5. Consider the following statements with respect
to ‘Waste-to-energy’ technologies:
1. Biomethanation is more suitable for wet
biodegradable waste
2. Gasification is incomplete combustion of dry
waste and it produces CO and H2
3. Pyrolysis is costlier than Biomethanation
4. Incineration produces dioxins which are POPs
(Persistent Organic Pollutants)
Which of the statements given above is/are correct?
(a) 1, 2 and 3 only
(b) 2, 3 and 4 only
(c) 1, 3 and 4 only
(d) 1, 2, 3 and 4 only

 
6. Which of the following statements reflects the
limitations of National Income Estimation in India?
1. Output of agriculture involved in barter trade
is not included in the estimation.
2. Non-availability of data about the income of
household enterprises.
3. Black money.
Select the correct answer using codes given below.
(a) 1 and 2 only (b) 2 and 3 only
(c) 1 and 3 only (d) 1, 2 and 3

 
7. In April 2015, a new central scheme, namely
Merchandise Exports from India Scheme (MEIS) was
unveiled as a part of five year plan for lifting India’s
exports to the mark of $900 billion by 2019-20. MEIS
is set to replace which of the following Schemes
1. Focus Product Scheme (FPS)
2. Niryat Bandhu Scheme (NBS)
3. Vishesh Krishi Gramin Udhyog Yojana
(VKGUY)
4. Focus Market Scheme (FMS)
Select the correct answer using the code given
below
(a) 1, 3 and 4 only
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1, 2 and 4 only

 
8. Consider the following statements with regards
to Global Innovation Index (GII) 2014:
1. The theme of 2014 GII is ‘Human factor in
innovation’
2. Political environment and infrastructure are
one the parameters used by GII
3. India is ranked lowest among the BRICS
countries on GII
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

 
9. With reference to Special National Investment
Fund (SNIF), consider the following statements-
1. Like National Investment Fund, SNIF is also
maintained outside the Consolidated Fund of
India.
2. SNIF is aimed only at loss making central
public sector enterprises (CPSEs).
3. SNIF is managed by independent
professional fund managers.
4. The funds realized from the sale of shares
would be used for the redevelopment of loss
making CPSEs.
Which of the statements given above is/are
incorrect:
(a) 1 and 2 only
(b) 2 and 4 only
(c) 2 and 3 only
(d) 1 and 4 only

 
10. Which of the following is incorrect?
(a) Cash Reserve Ratio and Statutory Liquidity Ratios
are inversely related to base rate
(b) Repo rate is directly related to base rate
(c) Open market operations are related to selling

government bonds by RBI
(d) Cut in repo rate may or may not lead to
monetary transmission

 

Explanation:

 

Q.1 :a
Currency notes and coins are therefore called fiat
money. They do not have intrinsic value like a gold
or silver coin. They are also called legal tendersas
they cannot be refused by any citizen of the country
for settlement of any kind of transaction. Cheques
drawn on savings or current accounts, however , can
be refused by anyone as a mode of payment. Hence,
demand deposits are not legal tenders.
Currency that a government has declared to be legal tender,
but is not backed by a physical commodity. The value of fiat
money is derived from the relationship between supply and
demand rather than the value of the material that the money
is made of.

 
Q.2 :c
Sonar and Radar work on the same
principle of detecting an object through echo.
SONAR (Sound Navigation and Ranging) uses
sound waves as in water radio waves are
easily absorbed but sound waves can travel
far.
RADAR (Radio detection and ranging) is
used for aerial detection as radio waves have
high penetration in air whereas sound waves
have low penetration in air.
Hence, statement 1 is correct. Statement 2 is correct
as range of SONAR will decrease as radio waves are
absorbed more easily. Statement 3 is incorrect as
sound waves are reading absorbed in air

 
Q.3 :d
· Convention on International Trade in
Endangered Species of Fauna and Flora (CITES):
In order to regulate international trade in
endangered species of Wild Life, the Convention on
International Trade in Endangered Species of wild
fauna and flora (CITES) was signed in March 1973.
· World Heritage Convention:
India is a member of World Heritage Convention
responsible for listing of World Heritage Sites, which
include both Cultural and natural sites. The World
Heritage Convention is a Convention under the aegis
of the United Nations Educational, Scientific and
Cultural Organization (UNESCO). Wild Life wing of
the Ministry of Environment and Forests is
associated with the conservation of the Natural
World Heritage sites.
· The Convention on Conservation of Migratory
Species (CMS) or Bonn Convention aims to conserve
migratory species throughout their range. The
Convention came into force in 1979. India is a
signatory to the convention since 1983.
· International Union for Conservation of Nature
and Natural Resources – The IUCN Red List of
Threatened Species (also known as the IUCN Red
List or Red Data List), conservation status of plant
and animal species

 
Q.4 :d
speculative demand for money can be written as
M=(Rmax-R)/(R-Rmin)
where R is the market rate of interest and Rmax and
Rmin are the upper and lower limits of R, both
positive constants. It is evident from equation that
as R decreases from Rmax to Rmin, the value of M
increases from 0 to ∞.
Hence 2nd statement is correct.
Similarly 1st statement is also correct. Another way
to understnd is –
to grasp why bond prices move opposite to interest
rates is to consider zero-coupon bonds, which don’t
pay coupons but derive their value from the
difference between the purchase price and the par
value paid at maturity.
if a zero-coupon bond is trading at $950 and has a
par value of $1,000 (paid at maturity in one year),
the bond’s rate of return at the present time is
approximately 5.26% ((1000-950) / 950 = 5.26%).
If current interest rates were to rise, giving newly
issued bonds a yield of 10%, then the zero-coupon
bond yielding 5.26% would not only be less
attractive, it wouldn’t be in demand at all. Who
wants a 5.26% yield when they can get 10%? To
attract demand, the price of the pre-existing zerocoupon
bond would have to decrease enough to
match the same return yielded by prevailing interest
rates.

 

 

Q.5 :d
· Biomethanation is anaerobic
digestion of organic materials which is
converted into biogas, a gaseous
combustible mixture, of methane (CH4).
Biomethanation is a biological treatment
method that can be used to recover both
nutrients and energy contained in wet
biodegradable municipal waste.
· Gasification is incomplete
combustion which produces combustible gas
such as hydrogen, synthetic fuels and is a
process that converts dry organic or fossil
based carbonaceous materials into carbon
monoxide, hydrogen and carbon dioxide at
elevated temperature (500-1800C)
· Pyrolysis uses heat to break down
combustible polymeric materials in the
absence of oxygen, producing a mixture of
combustible gases (primarily methane,
complex hydrocarbons, hydrogen, and
carbon monoxide), liquids and solid residues.
The products of pyrolysis process are: (i) a
gas mixture; (ii) a liquid (bio-oil/tar); (iii) a
solid residue (carbon black).
· Incineration technology is complete
combustion of waste with the recovery of
heat to produce steam that in turn produces
power through steam turbines. But
Incineration produces dioxins which are POPs
(Persistent Organic Pollutants)

 
Q.6 :d
All the statements are correct.
While calculating national output ,the assumption
made is that the bulk of the commodities and
services produced are exchanged for
money.India,where agriculture is carried on a
subsistence basis ,a considerable portion of the
output does not come to the market for sale.At
present ,there is no proper method of finding out the
amount consumed at home or bartered away with
producers.So 1st statement is correct.
A very large number of producers carry on
production at family level or on a very small
scale.They are so illiterate that they dont maintain
regular accounts.As relatively high proportion of the
economy being in Unorganised sector,margin of
error in the estimation increases.So statement 2nd is
correct.
A significant part of the economy operates as hidden
or subterranean economy and the income generated
in it goes as unreported income .so statement 3rd is
also correct.

 
Q.7 :a
The MEIS has replaced five existing schemes: Focus
Products Scheme, Market-linked Focus Products
Scheme, Focus Market Scheme, Agriculture
Infrastructure Incentive Scrips and Vishesh Krishi
Grameen Udyog Yojana (VKGUY).

 
Q.8 :d
The Global Innovation Index 2014 (GII), in its 7th
edition this year, is co-published by Cornell
University, INSEAD, and the World Intellectual
Property Organization (WIPO, an agency of the
United Nations, UN)
The theme of the 2014 GII, the ‘Human
Factor in Innovation’, explores the role of the
individuals and teams behind the innovation
process. Statistically capturing this human
contribution to innovation is a daunting
challenge.
India slipped off 10 places to 76th place. India
is worst performer among BRICS countries.
China -29, Russia 49, SA – 53, Brazil 61 (each
country is moving up places except India

 
Q.9 :d
Unlike National Investment Fund (NIF), Special
National Investment Fund is a fund maintained
outside the Consolidated Fund of India to transfer
the shares of certain listed loss making central
public sector enterprises (CPSEs) which were found
to be non-compliant with the Rule that minimum
10% of the shares issued be held by the public
(which means non-promoter entities) to be eligible
to remain listed on stock exchanges of the country.
Presently, NIF is part of public accounts. Hence
statement 1 is incorrect.
In structure, it mimics the original concept of
National Investment Fund(NIF) created for receiving
the disinvestment proceeds of central public sector
enterprises. The difference stems from the fact that
only shares are transferred here and not receipts

from the sale of shares of CPSEs. Further special NIF
is aimed only at loss making CPSEs. Hence
statement 2 is correct.
The Special NIF would be managed by independent
professional fund managers as was originally the
case with NIF. Hence statement 3 is correct. The
shares so transferred to the fund will be sold in the
capital market gradually over a period of 5 years by
the fund managers. The funds realized from the sale
of shares would be used for social sector schemes of
the Government. Hence statement 4 is incorrect.
Hence option d is correct.

 
Q.10 :a
Cut in CRR and SLR affects the supply side of the
banks, thus leading to decrease in base rate. Hence
they are directly related to base rate. Hence option
(a) is incorrect.
Cut in repo rate affects the demand side and thus
lead to decrease in base rate. Thus, it is also directly
proportional to base rate.
Open market operations are carried out by RBI for
selling and re-selling of government bonds to
monitor liquidity.
Cut in repo rate will lead to monetary transmission
only if bank decreases the base rate.

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  • Amit Rewri

    thanks onlyias

  • Vijay Karthik

    Thanks sir