Daily Static MCQs Quiz for UPSC, IAS, UPPSC/UPPCS, MPPSC. BPSC, RPSC & All State PSC Exams
Subject : Economy (21 December 2023)
1. With reference to Central Bank Digital Currency (CBDC), consider the following statements:
1. CBDCs are a digital form of a paper currency and are legal tenders issued and backed by a central bank.
2. Unlike Mobile money, CBDC cannot be used by the consumers for performing retail payments.
3. CBDCs are similar to stablecoins, except that their value is fixed by the central bank and equivalent to the country's fiat currency.
How many of the above statements is/are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer: (B)
Explanation: Recently, the Reserve Bank of India (RBI) Governor has highlighted the potential of Central Bank Digital Currency (CBDC) or E-rupee in improving cross-border payments' efficiency. CBDCs are a digital form of a paper currency and unlike crypto currencies that operate in a regulatory vacuum, these are legal tenders issued and backed by a central bank. CBDCs possess unique attributes that can revolutionize cross-border transactions. Instant settlement feature of CBDCs as a significant advantage, making cross-border payments cheaper, faster, and more secure. Hence, statement 1 is correct.
CBDC is a digital version of fiat currency issued by the central bank, and mobile money is a digital payment system that allows users to perform financial transactions using their mobile devices, both are designed to facilitate digital payments within a country’s domestic economy. Both CBDC and mobile money wallets are meant to facilitate domestic retail payments. Hence, statement 2 is not correct.
CBDCs are similar to stablecoins, except that their value is fixed by the central bank and equivalent to the country's fiat currency. Stablecoins are crypto currencies backed by a reserve asset like fiat currency or a commodity. Their value is based on people’s trust in the company holding collateral assets. Hence, statement 3 is correct.
2. Consider the following statements:
1. Inclusion promotes equal opportunities for individuals, regardless of their background.
2. Demographics include information on the size and growth rate of a population.
3. Fiscal Policy is a static framework that remains unchanged over time.
4. Social issues encompass only economic challenges faced by individuals.
How many of the above statements are correct?
(a) Only one
(b) Only two
(c) Only three
(d) All four
Answer: (B)
Explanation: Inclusion is a critical concept that aims to create a society where everyone has a sense of belonging and equal access to opportunities, regardless of their background characteristics. This includes factors such as: Race and ethnicity, Gender and sexual orientation, Disability, Socioeconomic status, Religion and beliefs, Age, National origin. Hence, statement 1 is correct.
Demographics encompass a broad range of data about a population, including its size, age structure, ethnicity, education level, income, and more. This data can be used to understand population trends, make informed decisions, and allocate resources. Hence, statement 2 is correct.
Fiscal policy is a dynamic tool used by governments to influence the economy through taxes and spending. It is constantly evolving and adapted to address changing economic conditions and priorities. Hence, statement 3 is not correct.
Social issues are far more complex than just economic challenges faced by individuals. While economic concerns are certainly a significant aspect of many social issues, they are only one piece of the puzzle. Hence, statement 4 is not correct.
3. With reference to Special Drawing Right (SDR), consider the following statements:
1. The SDR is neither a currency nor a claim on the IMF.
2. International Monetary Fund (IMF) gives equal weightage to the basket of currencies to determine SDR value.
3. It can be held and used by member countries, private entities or individuals.
How many of the above statements is/are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer: (A)
Explanation: The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies. The SDR serves as the unit of account of the IMF and some other international organizations. Hence, statement 1 is correct.
All the five currencies (Chinese yuan, US dollar, euro, Japanese yen, and British pound sterling) have different weightage with the US dollar having the highest weightage. Hence, statement 2 is not correct.
Individuals and private entities cannot hold SDRs. IMF members – and the IMF itself – hold SDRs and the IMF has the authority to approve other holders, such as central banks and multilateral development banks, while individuals and private entities cannot hold SDRs. Hence, statement 3 is not correct.
4. With reference to Cash Reserve Ratio (CRR), consider the following statements:
Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash.
2. CRR applies to scheduled commercial banks, regional rural banks and NBFCs.
Which of the above statements is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (A)
Explanation: Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash. The bank cannot use this amount for lending and investment purposes and does not get any interest from the RBI.
CRR applies to scheduled commercial banks, while the regional rural banks and NBFCs are excluded. CRR helps control inflation. In a high-inflation environment, RBI can increase CRR to prevent banks from lending more. Hence, statement 2 is not correct.
5. With reference to Purple Economy, consider the following statements:
1. It is an economic model that recognizes the importance of care work and the empowerment of women to the functioning of economies, the well-being of societies, and the sustainability of life.
2. The examples of the purple economy include Digital, Tourism, Luxury goods, and Housing.
Which of the above statements is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (C)
Explanation: Shanti Raghavan, the recipient of the Business Line Changemakers Award in 2020, leads the organization EnAble India. They are working on creating a ‘purple economy,’ which promotes disability inclusion and job opportunities on a large scale. Care Economy refers to the economic activities related to providing care and support services, often in healthcare, childcare, elderly care, and other areas aimed at improving people’s well-being. It encompasses both paid and unpaid care work and is a critical aspect of social and economic development. The purple economy is an economic order that focuses on the sustainability of caring labour. It’s an alternative vision that complements the green economy. The purple economy aims to:
• Organize the system around the sustainability of caring labour
• Address the inequalities created by the disproportionate reliance on women’s unpaid and underpaid labour
• Contribute to sustainable development by promoting the cultural potential of goods and services
• Contribute to a richer and more diverse cultural environment
Examples of the purple economy include Digital, Tourism, Luxury goods, and Housing. Hence, both statements are correct.
