CAPF (AC) 2024 (Paper-1) (Questions 101-125)

Total Questions: 25

1. Consider the following statements regarding instruments of Monetary Policy:

1. The Central Bank can increase the money supply by increasing the bank rate.

2. The Central Bank can increase the money supply by purchasing securities from the public.

3. The Central Bank can decrease the money supply by increasing the cash reserve ratio.

Which of the statements given above is/are correct?

Correct Answer: (b) 2 and 3 only
Solution:The Reserve Bank of India (RBI) can increase the money supply through several tools:
  • Lowering the Repo Rate: Reducing borrowing costs for banks, encouraging them to lend more and circulate more money.
  • Open Market Operations (OMO): By buying government securities, the RBI injects liquidity into the economy.
  • Reducing the Cash Reserve Ratio (CRR): Banks hold less with the RBI, freeing funds for lending.
  • Quantitative Easing: RBI buys financial assets, increasing liquidity.
  • Money supply can be decreased by reversing these actions.

2. Which of the following statements with regard to National Logistics Policy (NLP) is NOT correct?

Correct Answer: (d) NLP would provide an opportunity for deleveraging balance sheets and providing fiscal space for investment in new infrastructure assets.
Solution:The National Logistics Policy (NLP) was indeed launched in 2022 to improve the competitiveness of Indian goods and enhance economic growth and employment opportunities. The policy focuses on reducing logistics costs, improving efficiency in the logistics sector, and enhancing India's global trade competitiveness. It aims to create a unified logistics interface platform, ease of logistics services, and human resource development in the logistics sector, rather than directly addressing fiscal or balance sheet issues.

3. Consider the following statements regarding Public Goods and Externalities:

Correct Answer: (a) 1 only
Solution:
  • Non-rivalry and non-excludability are indeed two key characteristics of public goods. Non-rivalry means one person's consumption doesn't reduce availability for others, while non-excludability means it's difficult to prevent non-payers from consuming the good.
  • Externalities can be both positive and negative. They exist when the actions of one person or entity affect the existence and well-being of another. Positive externalities generally have a positive effect, while negative ones have the opposite impact. But how do these economic factors affect market prices and market failure is unpredictable and can only be controlled partially. So saying presence Externalities help in maintaining optimal amount of goods in market is partially wrong.

4. Population of the year 2011 was first introduced in the tax devolution formula for sharing Union tax revenue with the States by

Correct Answer: (c) Fourteenth Finance Commission
Solution:The Fourteenth Finance Commission, which submitted its report in 2014 for the period 2015-2020, was the first to use the population data of 2011 in its tax devolution formula. This was a significant shift from the previous practice of using 1971 population data. The change was controversial as it potentially benefited states with higher population growth rates.

This decision reflected the commission's attempt to balance the need for using more recent demographic data with concerns about penalizing states that had successfully controlled population growth. It marked a crucial change in the approach to fiscal federalism in India.

5. Which of the following statements is NOT correct for Pradhan Mantri Mudra Yojana (PMMY)?

Correct Answer: (b) It grants loans of up to 15 lakhs for income generating manufacturing, trading and services sectors.
Solution:The Pradhan Mantri Mudra Yojana (PMMY). PMMY, launched in 2015, provides loans up to 10 lakhs to non-corporate, non-farm small/micro enterprises. It covers both term loans and working capital requirements. The scheme has three categories: Shishu (up to ₹50,000), Kishore (₹50,000 to 5 lakhs), and Tarun (5 lakhs to 10 lakhs). PMMY aims to promote entrepreneurship by providing easy access to funding for small businesses. The scheme doesn't insist on collateral for loan sanction, making it accessible to a wider range of entrepreneurs, particularly those from underprivileged backgrounds.

6. What were the main reforms undertaken under the New Economic Policy of the early 1990s?

Economic Policy of the early 1990s?

1. Trade liberalization

2. Public Sector Disinvestment

3. Poverty Alleviation

4. Rapid industrialization

Select the answer using the code given below:

Correct Answer: (c) 1 and 2
Solution:The New Economic Policy of 1991 focused on privatization, liberalization, and globalization.
  • Privatization involved selling public sector shares, disinvestment, and encouraging private sector control for industrial growth.
  • Liberalization abolished license requirements for businesses, allowed banks to set interest rates, and enabled industries to import raw materials and expand production freely.
  • Globalization aimed at integrating India with the global economy by reducing import-export duties, easing foreign trade restrictions, and allowing partial currency convertibility to attract foreign investments and foster international trade.

7. Consider the following statements:

1. National Monetisation Pipeline estimates that for the period 2022-2025, the top three sectors in terms of monetisation potential are roads, railways, and oil and gas pipelines.

2. Under the National Monetisation Pipeline, the instruments to be used for asset monetisation include Public-Private Partnership concessions and Infrastructure Investment Trusts.

Which of the statements given above is/are correct?

Correct Answer: (c) Both 1 and 2
Solution:The National Monetisation Pipeline (NMP) aims to unlock the value of brownfield public sector assets by attracting institutional and long-term patient capital, which can be used for further public investments.

NMP targets 6 lakh crore through leasing core assets in sectors like roads, railways, power, oil and gas pipelines, telecom, and civil aviation over FY 2021-22 to 2024-25. The focus is on core assets, excluding non-core asset disinvestment.

Monetisation will involve instruments like public-private partnership concessions and Infrastructure Investment Trusts (InvIT), depending on sector, asset type, and investor profiles.

8. Retail core inflation is calculated excluding which of the following?

1. Food and beverages

2. Fuel and light

3. Transport and communication

4. Clothing and Education

Select the answer using the code given below:

Correct Answer: (a) 1 and 2 only
Solution:Core inflation is the change in the costs of goods and services, but it does not include those from the food and energy sectors. This measure of inflation excludes these items because their prices are much more volatile.

9. Which of the following is a part of the capital receipt of the Government of India?

1. Disinvestment receipts

2. Interest receipts

3. Small savings

4. Net market borrowing

Select the answer using the code given below:

Correct Answer: (d) 1, 3 and 4 only
Solution:Capital receipts are government receipts that either create liabilities or reduce asset value, primarily sourced from loans to meet long-term development needs. They are non-recurring in nature.
  • Debt Capital Receipts: These include market loans, securities issued to public sector banks, treasury bills, small savings, state pension schemes, external debt, and more. The government is liable to repay these debt receipts.
  • Non-debt Capital Receipts: These do not create future liabilities and include loan recovery, disinvestment, and issuance of bonus shares.
  • Non-debt receipts typically constitute over 75% of total budget receipts.

10. Arrange the following sources of revenue of the Central Government in ascending manner in terms of percentage contribution to the total revenues of the Central Government in 2023-24

Correct Answer: (c) Custom, Union Excise Duty, Corporation Tax, GST
Solution:Source of income of the Indian Government in 2023-24
RankSource of IncomePercentage
1.Borrowing and other Liabilities34%
2.GST and other tax17%
3.Corporation tax15%
4.Income Tax15%
5.Union Excise Duties7%
6.Non Tax Receipt6%
7.Custom4%
8.Non Dept Capital Receipt2%