Answer: (A)

Explanation: CPI may differ from GDP deflator because: 1. The goods purchased by consumers do not represent all the goods which are produced in a country. GDP deflator takes into account all such goods and services.
2. CPI includes prices of goods consumed by the representative consumer; hence it includes prices of imported goods. GDP deflator does not include prices of imported goods.
3. The weights are constant in CPI – but they differ according to production level of each good in GDP deflator.
Ministry of Statistics and Programme Implementation (MOSPI) comes out with GDP deflator in National Accounts Statistics as price indices. Hence, only statement 2 is correct.

Answer: (B)

Explanation: Real GDP, which is the GDP after taking away the effect of inflation, is a derived metric. All Budget calculations start with the nominal GDP.
Real GDP = Nominal GDP — Inflation Rate
However, from the perspective of the common people, real GDP is what matters. The difference between the real and nominal GDP shows the levels of inflation in the year. Hence, statement 1 is not correct.

Answer: (D)

Explanation: Market Stabilisation Scheme (MSS): This instrument for monetary management was introduced in 2004. Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills. The cash so mobilised is held in a separate government account with the Reserve Bank.
Open Market Operations (OMOs): These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.
Marginal Standing Facility (MSF): A facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system.
Hence, both statements are not correct.

Answer: (D)

Explanation: Tools for inflation targeting:
Liquidity Adjustment Facility: With this RBI controls the money supply in the economy. These interest rates and inflation rates tend to move in opposite directions.
Open Market Operations: RBI buys or sells short-term securities in the open market, thus impacting money available with the public.
Variable Reserve Requirement: Cash Reserve Ratio (CLR) and the Statutory Liquidity Ratio (SLR) are increased or decreased in accordance with inflation or deflation respectively.
Bank rate: It is the rate at which RBI lends money to commercial banks without any security. When bank rate is increased interest rate also increases leading to inflation.
Moral Suasion: If there is a need RBI can urge the banks to exercise credit control at times to maintain the balance of funds in the market.

Answer: (A)

Explanation: The Special Drawing Right (SDR) is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries. The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi. It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members. The value of the SDR is not directly determined by supply and demand in the market, but is set daily by the IMF on the basis of market exchange rates between the currencies included in the SDR basket. It can be held and used by member countries, the IMF, and certain designated official entities called “prescribed holders”—but it cannot be held, for example, by private entities or individuals. Its status as a reserve asset derives from the commitments of members to hold, accept, and honor obligations denominated in SDR. The SDR also serves as the unit of account of the IMF and some other international organizations. Hence, only statement 1 is correct.