Test 11 Solutions

Insights Mock Tests 2015 Test 11 Solutions

http://www.insightsonindia.com INSIGHTS Page 1

1. Solution: d)

At one level, colonialism simply means the establishment of rule by one country over

another. In the modern period western colonialism has had the greatest impact. Every policy

of the British was geared towards the strengthening and expansion of British capitalism. For

instance it changed the very laws of the land. It changed not just land ownership laws but

decided even what crops ought to be grown and what ought not to be.

It meddled with the manufacturing sector. It altered the way production and distribution of

goods took place. It entered into the forests. It cleared trees and started tea plantations. It

brought in Forest Acts that changed the lives of pastoralists. They were prevented from

entering many forests that had earlier provided valuable forage for their cattle.

Moreover, the Indian police was established to suppress popular revolts via the Indian

Police Act 1861 which is in force even till date.

On the positive front, the British rule also inculcated a spirit of rationality and scientific

temper in the masses by their education, literature etc.

2. Solution: d)

Rihla is written by Ibn Battuta, not Al Biruni.

Al-Biruni was born in 973, in Khwarizm in presentday Uzbekistan. Khwarizm was an

important centre of learning, and Al-Biruni received the best education available at the time.

He was well versed in several languages: Syriac, Arabic, Persian, Hebrew and Sanskrit.

Although he did not know Greek, he was familiar with the works of Plato and other Greek

philosophers, having read them in Arabic translations. In 1017, when Sultan Mahmud

invaded Khwarizm, he took several scholars and poets back to his capital, Ghazni; Al-Biruni

was one of them.

He arrived in Ghazni as a hostage, but gradually developed a liking for the city, where he

spent the rest of his life until his death at the age of 70. It was in Ghazni that Al-Biruni

developed an interest in India. This was not unusual. Sanskrit works on astronomy,

mathematics and medicine had been translated into Arabic from the eighth century

onwards. When the Punjab became a part of the Ghaznavid empire, contacts with the local

population helped create an environment of mutual trust and understanding. Al-Biruni

spent years in the company of Brahmana priests and scholars, learning Sanskrit, and

studying religious and philosophical texts. While his itinerary is not clear, it is likely that he

travelled widely in the Punjab and parts of northern India.

Ibn Battutas book of travels, called Rihla, written in Arabic, provides extremely rich and

interesting details about the social and cultural life in the subcontinent in the fourteenth

century. This Moroccan traveller was born in Tangier into one of the most respectable and

educated families known for their expertise in Islamic religious law or sharia. True to the



tradition of his family, Ibn Battuta received literary and scholastic education when he was

quite young.

3. Solution: a)

In the short run, another factor that is important in determining exchange rate movements is

the interest rate differential i.e. the difference between interest rates between countries.

There are huge funds owned by banks, multinational corporations and wealthy individuals

which move around the world in search of the highest interest rates. If we assume that

government bonds in country A pay 8 per cent rate of interest whereas equally safe bonds in

country B yield 10 per cent, the interest rate diferential is 2 per cent.

Investors from country A will be attracted by the high interest rates in country B and will

buy the currency of country B selling their own currency. At the same time investors in

country B will also find investing in their own country more attractive and will therefore

demand less of country As currency. This means that the demand curve for country As

currency will shift to the left and the supply curve will shift to the right causing a

depreciation of country As currency and an appreciation of country Bs currency. Thus, a

rise in the interest rates at home often leads to an appreciation of the domestic currency. Here, the

implicit assumption is that no restrictions exist in buying bonds issued by foreign

governments.

4. Solution: d)

A lot of social evils had plagued Indian society. The wellknown issues are that of sati,child

marriage, widow remarriage and caste discrimination. It is not that attempts were not made

to fight social discrimination in pre-colonial India. They were central to Buddhism, to Bhakti

and Sufi movements. Going ahead, what marked the post-colonial 19th century social reform

attempts was the modern context and mix of ideas. It was a creative combination of modern

ideas of western liberalism and a new look on traditional literature.

5. Solution: d)

Within India, social reformers from Punjab and Bengal exchanged ideas with reformers from

Madras and Maharashtra. Keshav Chandra Sen of Bengal visited Madras in 1864. Pandita

Ramabai travelled to different corners of the country. Some of them went to other countries.

Modern social organisations like the Brahmo Samaj in Bengal and Arya Samaj in Punjab were

set up. The All-India Muslim Ladies Conference (Anjuman-E-Khawatn-E-Islam) was founded

in 1914. Indian reformers debated not just in public meetings but through public media like

newspapers and journals. Translations of writings of social reformers from one Indian

language to another took place.



6. Solution: c)

Both the concepts of participatory democracy and decentralised governance have thus become

popular. Participatory democracy is a system of democracy in which the members of a

group or community participate collectively in the taking of major decisions. Panchayati raj

is a major example where participatory democracy is being practiced. For e.g. in MGNREGA

major project decisions, approvals, social audit etc. are done by the local community. In

other bodies like State LA or DPC, it is an indirect or representative democracy.

7. Solution: a)

Broadly speaking, revenue expenditure consists of all those expenditures of the government

which do not result in creation of physical or financial assets. It relates to those expenses

incurred for the normal functioning of the government departments and various services,

interest payments on debt incurred by the government, and grants given to state

governments and other parties (even though some of the grants may be meant for creation

of assets).

8. Solution: a)

Among the renewable energy sources, onshore wind had the maximum contribution of 51.2

billion kWh, which comprised of one-third of the renewable energy contribution to the

energy mix. Gross electricity contribution of solar photovoltaic increased maximum, by 4.2

billion kWh, contributing 22.4 per cent of the renewable energy mix. Except for hydro

power, contribution from all renewable energy sources increased during 2014. Off-shore

wind has also seen rapid scale-up with energy production increasing by 37 per cent as

compared to 2013. Geo-thermal energy has also contributed to the renewable energy mix but

its share has been only about 0.1 per cent.

http://www.downtoearth.org.in/content/renewable-energy-share-germany-crosses-25-

2014

9. Solution: c)

Muhammad bin Tughlaq

Unlike most other members of his class, Ibn Battuta considered experience gained through

travels to be a more important source of knowledge than books. He just loved travelling,

and went to far-off places, exploring new worlds and peoples. Before he set off for India in

1332-33, he had made pilgrimage trips to Mecca, and had already travelled extensively in

Syria, Iraq, Persia, Yemen, Oman and a few trading ports on the coast of East Africa.



Travelling overland through Central Asia, Ibn Battuta reached Sind in 1333. He had heard

about Muhammad bin Tughlaq, the Sultan of Delhi, and lured by his reputation as a

generous patron of arts and letters, set off for Delhi, passing through Multan and Uch. The

Sultan was impressed by his scholarship, and appointed him the qazi or judge of Delhi. He

remained in that position for several years, until he fell out of favour and was thrown into

prison. Once the misunderstanding between him and the Sultan was cleared, he was

restored to imperial service, and was ordered in 1342 to proceed to China as the Sultans

envoy to the Mongol ruler.

10. Solution: b)

Since a country interacts with many countries, we may want to see the movement of the

domestic currency relative to all other currencies in a single number rather than by looking

at bilateral rates. That is, we would want an index for the exchange rate against other

currencies, just as we use a price index to show how the prices of goods in general have

changed.

This is calculated as the Nominal Effective Exchange Rate (NEER) which is a multilateral

rate representing the price of a representative basket of foreign currencies, each weighted by

its importance to the domestic country in international trade (the average of export and

import shares is taken as an indicator of this).

The Real Effective Exchange Rate (REER) is calculated as the weighted average of the real

exchange rates of all its trade partners, the weights being the shares of the respective

countries in its foreign trade. It is interpreted as the quantity of domestic goods required to

purchase one unit of a given basket of foreign goods.

11. Solution: c)

Even as India fought for its independence from British colonialism a vision of what Indian

democracy ought to look like emerged. As far back as in 1928, Motilal Nehru and eight other

Congress leaders drafted a constitution for India. In 1931, the resolution at the Karachi

session of the Indian National Congress dwelt on how independent Indias constitution

should look like. The Karachi Resolution reflects a vision of democracy that meant not just

formal holding of elections but a substantive reworking of the Indian social structure in

order to have a genuine democratic society.

The Karachi Resolution clearly spells out the vision of democracy that the nationalist

movement in India had. It articulates the values that were further given full expression in

the Indian Constitution.

Cabinet mission plan was about the post-independent political and territorial reorganization

of India.



Lucknow pact was the merger of the league and Congress and the acceptance of separate

electorates (which is not at all a core value of the constitution).

12. Solution: a)

When the constitution was being drafted panchayats did not find a mention in it. At this

juncture, a number of members expressed their sorrow, anger and disappointment over this

issue. At the same time, drawing on his own rural experience Dr. Ambedkar argued that

local elites and upper castes were so well entrenched in society that local self-government

only meant a continuing exploitation of the downtrodden masses of Indian society. The

upper castes would no doubt silence this segment of the population further.

The concept of local government was dear to Gandhiji too. He envisaged each village as a

self-sufficient unit conducting its own affairs and saw gram-swarajya to be an ideal model to

be continued after independence.

13. Solution: c)

The budget provides for the capital expenditure of the government.

Since Independence, with the launching of the Five-Year Plans, it has also become a

significant national policy statement. The budget, it has been argued, reflects and shapes,

and is, in turn, shaped by the countrys economic life. Along with the budget, three policy

statements are mandated by the Fiscal Responsibility and Budget Management Act, 2003

(FRBMA). The Medium-term Fiscal Policy Statement sets a three-year rolling target for

specific fiscal indicators and examines whether revenue expenditure can be financed

through revenue receipts on a sustainable basis and how productively capital receipts

including market borrowings are being utilised.

RBI can not regulate governments fiscal policy, nor can any international treaty.

14. Solution: a)

http://en.wikipedia.org/wiki/Panna_National_Park

http://www.downtoearth.org.in/content/public-hearings-ken-betwa-river-link-project-

sham-complain-activists

http://indiatoday.intoday.in/story/dam-in-panna-tiger-reserve-a-great-dream-with-some-

deceit/1/383926.html

15. Solution: d)



Once the Portuguese arrived in India in about 1500, a number of them wrote detailed

accounts regarding Indian social customs and religious practices. A few of them, such as the

Jesuit Roberto Nobili, even translated Indian texts into European languages. Among the best

known of the Portuguese writers is Duarte Barbosa, who wrote a detailed account of trade

and society in south India.

Later, after 1600, we find growing numbers of Dutch, English and French travellers coming

to India. One of the most famous was the French jeweller Jean-Baptiste Tavernier, who

travelled to India at least six times. He was particularly fascinated with the trading

conditions in India, and compared India to Iran and the Ottoman empire. Some of these

travellers, like the Italian doctor Manucci, never returned to Europe, and settled down in

India.

Franois Bernier, a Frenchman, was a doctor, political philosopher and historian. Like many

others, he came to the Mughal Empire in search of opportunities. He was in India for twelve

years, from 1656 to 1668, and was closely associated with the Mughal court, as a physician to

Prince Dara Shukoh, the eldest son of Emperor Shah Jahan, and later as an intellectual and

scientist, with Danishmand Khan, an Armenian noble at the Mughal court.

16. Solution: d)

Agricultural land is the single most important resource and form of property in rural

society. But it is not equally distributed among people living in a particular village or region.

Nor does everyone have access to land. In fact, the distribution of landholdings in most

regions is highly unequal among households. In some parts of India the majority of rural

households own at least some land usually very small plots. In other areas as much as 40

to 50 per cent of families do not own any land at all. This means that they are dependent on

agricultural labour or other kinds of work for their livelihoods. This of course means that a

few families are well-to-do. The majority live just above or below the poverty line.

In most regions of India, women are usually excluded from ownership of land, because of

the prevailing patrilineal kinship system and mode of inheritance. By law women are

supposed to have an equal share of family property. In reality they only have limited rights

and some access to land only as part of a household headed by a man.

Access to land largely determines what role one plays in the process of agricultural

production. Medium and large landowners are usually able to earn sufficient or even large

incomes from cultivation (although this depends on agricultural prices, which can fluctuate

greatly, as well as other factors such as the monsoon). But agricultural labourers are more

often than not paid below the statutory minimum wage and earn very little. Their incomes

are low. Their employment is insecure.

Most agricultural labourers are daily-wage workers. And do not have work for many days

of the year. This is known as underemployment. Similarly, tenants (cultivators who lease

their land from landowners) have lower incomes than owner-cultivators. Because they have



to pay a substantial rent to the landowner often as much as 50 to 75 per cent of the income

from the crop.

17. Solution: a)

That part of our final output that comprises of capital goods constitutes gross investment of

an economy. These may be machines, tools and implements; buildings, office spaces,

storehouses or infrastructure like roads, bridges, airports or jetties. But all the capital goods

produced in a year do not constitute an addition to the capital stock already existing.

A significant part of current output of capital goods goes in maintaining or replacing part of

the existing stock of capital goods. This is because the already existing capital stock suffers

wear and tear and needs maintenance and replacement.

18. Solution: a)

Land ceiling act fixed the amount of land that can be owned by a particular family. The

ceiling varies from region to region, depending on the kind of land, its productivity, and

other such factors.

Very productive land has a low ceiling while unproductive dry land has a higher ceiling

limit. According to these acts, the state is supposed to identify and take possession of

surplus land (above the ceiling limit) held by each household, and redistribute it to landless

families and households in other specified categories, such as SCs and STs. But in most of

the states these acts proved to be toothless. There were many loopholes and other strategies

through which most landowners were able to escape from having their surplus land taken

over by the state.

While some very large estates were broken up, in most cases landowners managed to divide

the land among relatives and others, including servants, in so-called benami transfers

which allowed them to keep control over the land (in fact if not in name). In some places,

some rich farmers actually divorced their wives (but continued to live with them) in order to

avoid the provisions of the Land Ceiling Act, which allowed a separate share for unmarried

women but not for wives.

19. Solution: a)

The basic equation representing the economy is:

I + G + X M S + T

In other words



(I S) + (G T) M X (2.8)

In the equation, G T measures by what amount the government expenditure exceeds the

tax revenue earned by it. This is referred to as budget deficit. M X is known as the trade

deficit it measures the excess of import expenditure over the export revenue earned by the

economy (M is the outflow from the country, X is the inflow into the country).

If there is no government, no foreign trade then G = T = M = X = 0.

Hence the equation yields I S, which means investments equal to savings.

20. Solution: b)

If Ibn Battuta chose to describe everything that impressed and excited him because of its

novelty, Franois Bernier belonged to a different intellectual tradition. He was far more

preoccupied with comparing and contrasting what he saw in India with the situation in

Europe in general and France in particular, focusing on situations which he considered

depressing. His idea seems to have been to influence policy-makers and the intelligentsia to

ensure that they made what he considered to be the right decisions.

Berniers Travels in the Mughal Empire is marked by detailed observations, critical insights

and reflection. His account contains discussions trying to place the history of the Mughals

within some sort of a universal framework. He constantly compared Mughal India with

contemporary Europe, generally emphasising the superiority of the latter. His

representation of India works on the model of binary opposition, where India is presented

as the inverse of Europe. He also ordered the perceived differences hierarchically, so that

India appeared to be inferior to the Western world.

According to Bernier, one of the fundamental differences between Mughal India and Europe

was the lack of private property in land in the former. He was a firm believer in the virtues

of private property, and saw crown ownership of land as being harmful for both the state

and its people. He thought that in the Mughal Empire the emperor owned all the land and

distributed it among his nobles, and that this had disastrous consequences for the economy

and society.

This perception was not unique to Bernier, but is found in most travellers accounts of the

sixteenth and seventeenth centuries. Owing to crown ownership of land, argued Bernier,

landholders could not pass on their land to their children. So they were averse to any long-

term investment in the sustenance and expansion of production. The absence of private

property in land had, therefore, prevented the emergence of the class of improving

landlords (as in Western Europe) with a concern to maintain or improve the land. It had led

to the uniform ruination of agriculture, excessive oppression of the peasantry and a

continuous decline in the living standards of all sections of society, except the ruling

aristocracy.



21. Solution: a)

The Reserve Deposit Ratio: Banks hold a part of the money people keep in their bank

deposits as reserve money and loan out the rest to various investment projects. Reserve

money consists of two things vault cash in banks and deposits of commercial banks with

RBI. Banks use this reserve to meet the demand for cash by account holders. Reserve deposit

ratio (rdr) is the proportion of the total deposits commercial banks keep as reserves.

Keeping reserves is costly for banks, as, otherwise, they could lend this balance to interest

earning investment projects. However, RBI requires commercial banks to keep reserves in

order to ensure that banks have a safe cushion of assets to draw on when account holders

want to be paid. RBI uses various policy instruments to bring forth a healthy rdr in

commercial banks. The first instrument is the Cash Reserve Ratio which specifies the

fraction of their deposits that banks must keep with RBI. There is another tool called

Statutory Liquidity Ratio which requires the banks to maintain a given fraction of their total

demand and time deposits in the form of specified liquid assets.

Apart from these ratios RBI uses a certain interest rate called the Bank Rate to control the value of

rdr. Commercial banks can borrow money from RBI at the bank rate when they run short of reserves.

A high bank rate makes such borrowing from RBI costly and, in effect, encourages the commercial

banks to maintain a healthy rdr.

22. Solution: a)

Gharials once thrived in all the major river systems of the Indian Subcontinent, spanning the

rivers of its northern part from the Indus River in Pakistan across the Gangetic floodplain to

theIrrawaddy River in Myanmar. Today, they are extinct in the Indus River, in

the Brahmaputra ofBhutan and Bangladesh, and in the Irrawaddy River. Their distribution

is now limited to only 2% of their former range.

In India, small populations are present and increasing in the rivers of the National Chambal

Sanctuary, Katarniaghat Wildlife Sanctuary, Son River Sanctuary and

the rainforest biome ofMahanadi in Satkosia Gorge Sanctuary, Odisha, where they

apparently do not breed.

Gharials do not kill and eat humans. Jewellery found in their stomachs may have been the

reason for the myth that gharials are man-eaters. They may have swallowed this jewellery

as gastroliths used to aid digestion or buoyancy management.

As the population has declined drastically in the past 70 years, the gharial is listed

as Critically Endangered by the IUCN.

http://www.downtoearth.org.in/content/science-technology-bytes-1

23. Solution: d)



In most of the Green Revolution areas, it was primarily the medium and large farmers who were

able to benefit from the new technology. This was because inputs were expensive, and small and

marginal farmers could not afford to spend as much as large farmers to purchase these

inputs. When agriculturists produce primarily for themselves and are unable to produce for

the market, it is known as subsistence agriculture and they are usually termed peasants.

Agriculturists or farmers are those who are able to produce surplus, over and above the

needs of the family, and so are linked to the market. It was the farmers who were able to produce

a surplus for the market who were able to reap the most benefits from the Green Revolution and

from the commercialisation of agriculture that followed.

24. Solution: d)

The largescale circulation of labour has had several significant effects on rural society, in

both the receiving and the supplying regions. For instance, in poor areas where male family

members spend much of the year working outside of their villages, cultivation has become

primarily a female task. Women are also emerging as the main source of agricultural labour,

leading to the feminisation of agricultural labour force. The insecurity of women is greater

because they earn lower wages than men for similar work. Until recently, women were

hardly visible in official statistics as earners and workers. While women toil on the land as

landless labourers and as cultivators, the prevailing patrilineal kinship system, and other

cultural practices that privilege male rights, largely exclude women from land ownership.

25. Solution: c)

In some regions such as Punjab and Karnataka, farmers enter into contracts with

multinational companies (such as PepsiCo) to grow certain crops (such as tomatoes and

potatoes), which the companies then buy from them for processing or export. In such

contract farming systems, the company identifies the crop to be grown, provides the seeds

and other inputs, as well as the knowhow and often also the working capital.

In return, the farmer is assured of a market because the company guarantees that it will

purchase the produce at a predetermined fixed price. Contract farming is very common now

in the production of specialised items such as cut flowers, fruits such as grapes, figs and

pomegranates, cotton, and oilseeds.

While contract farming appears to provide financial security to farmers, it can also lead to

greater insecurity as farmers become dependent on these companies for their livelihoods.

Contract farming of export-oriented products such as flowers and gherkins also means that

agricultural land is diverted away from food grain production.

Contract farming has sociological significance in that it disengages many people from the

production process and makes their own indigenous knowledge of agriculture irrelevant. In

addition, contract farming caters primarily to the production of elite items, and because it



usually requires high doses of fertilisers and pesticides, it is often not ecologically

sustainable.

26. Solution: a)

In a system of flexible exchange rates (also known as floating exchange rates), the exchange

rate is determined by the forces of market demand and supply. In a completely flexible

system, the central banks follow a simple set of rules they do nothing to directly affect the

level of the exchange rate, in other words they do not intervene in the foreign exchange

market (and therefore, there are no official reserve transactions).

In a fixed system, the Central bank completely determines the exchange rates.

In a managed system, the Central bank allows the currency to be affected by market forces.

At few times, the Bank intervenes directly in the forex market to buy and sell foreign

currencies in an attempt to moderate exchange rate movements whenever they feel that such

actions are appropriate. Official reserve transactions are, therefore, not equal to zero.

27. Solution: d)

All of these somewhat divergent and even disparate beliefs and practices would come to be

classified as Hindu over the course of the next millennium. The divergence is perhaps most

stark if we compare Vedic and Puranic traditions. The principal deities of the Vedic

pantheon, Agni, Indra and Soma, become marginal figures, rarely visible in textual or visual

representations. And while we can catch a glimpse of Vishnu, Shiva and the goddess in

Vedic mantras, these have little in common with the elaborate Puranic mythologies.

However, in spite of these obvious discrepancies, the Vedas continued to be revered as

authoritative. Not surprisingly, there were sometimes conflicts as well those who valued

the Vedic tradition often condemned practices that went beyond the closely regulated

contact with the divine through the performance of sacrifices or precisely chanted mantras.

On the other hand those engaged in Tantric practices frequently ignored the authority of the

Vedas. Also, devotees often tended to project their chosen deity, either Vishnu or Shiva, as

supreme. Relations with other traditions, such as Buddhism or Jainism, were also often

fraught with tension if not open conflict.

The traditions of devotion or bhakti need to be located within this context. Devotional

worship had a long history of almost a thousand years before the period we are considering.

During this time, expressions of devotion ranged from the routine worship of deities within

temples to ecstatic adoration where devotees attained a trance-like state. The singing and

chanting of devotional compositions was often a part of such modes of worship. This was

particularly true of the Vaishnava and Shaiva sects.



28. Solution: a)

A major point of difference between developing and developed countries is the number of

people in regular salaried employment. In developed countries, the majority are formally

employed. In India, over 50% of the population is selfemployed, only about 14% are in

regular salaried employment, while approximately 30% are in casual labour (Anant 2005:

239). Economists and others often make a distinction between the organised or formal and

unorganised or informal sector.

29. Solution: d)

After mining has finished in an area, the company is supposed to cover up the open holes

and restore the area to its earlier condition. But they dont do this.

Workers in underground mines face very dangerous conditions, due to flooding, fire, the

collapse of roofs and sides, the emission of gases and ventilation failures. Many workers

develop breathing problems and diseases like tuberculosis and silicosis. Those working in

overground mines have to work in both hot sun and rain, and face injuries due to mine

blasting, falling objects etc. The rate of mining accidents in India is very high compared to

other countries.

30. Solution: d)

Former Prime Minister Atal Bihari Vajpayee and late educationist Madan Mohan Malviya

(posthumously) have been chosen for Bharat Ratna- countrys highest civilian award.

It was announced by the press communique from Rashtrapati Bhavan.

About Madan Mohan Malviya

He was born on December 25, 1861 and was an educationist and politician notable

for his role in Indias freedom struggle. He was popularly known Mahaman.

He is founder of Asias largest residential university Banaras Hindu University.

He was President of Indian National Congress in 1909 and 1918.

He is also remembered for his stellar role in the Independence movement and his

espousal of Hindu nationalism.

He is considered as one of the initial leaders of the right-wing Hindu Mahasabha and

died in 1946.



31. Solution: d)

Panchayats should be given powers and authority to function as institutions of self-

government. It, thus, requires all state governments to revitalise local representative

institutions.

The following powers and responsibility were delegated to the Panchayats:

to prepare plans and schemes for economic development

to promote schemes that will enhance social justice

to levy, collect and appropriate taxes, duties, tolls and fees

help in the devolution of governmental responsibilities, especially that of finances to

local authorities

Social welfare responsibilities of the Panchayats include the maintenance of burning and

burial grounds, recording statistics of births and deaths, establishment of child welfare and

maternity centres, control of cattle etc.

32. Solution: c)

It IS known that nitrite-rich food, such as beetroot, improve blood flow and are good for the

heart. But how this happens was not clear. A study shows that nitrite works as a signal to

haemoglobin, found in red blood cells, to form nitric oxide. This reduces platelet activation

which causes blood clots. Researchers now aim to enhance this ability of haemoglobin to

treat conditions such as hypertension, sickle cell disease and stroke.

http://www.downtoearth.org.in/content/science-technology-bytes-1

33. Solution: d)

Argument A is more about the idea of a welfare state. A liberalised state too can look after

welfare needs of citizens.

Argument C strengthens the case for liberalisation.

Argument D is more complete and clear than Argument B. It is self-explanatory as to why

liberalisation may not be taken in an economy. Hence the answer is D.

34. Solution: d)

Refer to the section THE DIFFERENT DIMENSIONS OF GLOBALISATION in the

chapter 6 of Social Change and Development in India XII NCERT.



It has been explained comprehensively there. This topic is important for Mains too. So lot of

points can be lifted for use in answers.

35. Solution: d)

This question is in the background of - UN Security Council (UNSC) has rejected a

resolution demanding an end to the Israeli occupation of the Palestinian territories within

three years i.e. 2017.

In this regard, Jordan earlier had submitted the motion in UN after it was agreed and backed

by 22 Arab states and the Palestinian Authority.

Eight members of the 15-strong Security Council voted for it

Russia, China, France, Argentina, Chad, Chile, Jordan and Luxembourg voted in

favour the resolution.

US and Australia voted against it.

UK, Lithuania, Nigeria, the Republic of Korea and Rwanda remained abstained.

This resolution failed to get support of at least nine members in order to pass.

36. Solution: b)

Russia and four ex-Soviet nations have finalized the formation of a new economic alliance-

Eurasian Economic Union (EEU). Four ex-Soviet nations are Belarus, Kazakhstan, Armenia

and Kyrgyzstan.

It was finalized in EEU summit held in Moscow, Russia.

EEU will come into existence on 1 January 2015. It seeks to bolster integration of member

nations which includes Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan primarily

located in northern Eurasia.

It aims to provide free trade among member countries without any barriers.

In addition, it will co-ordinate the financial systems and regulates industrial and

agricultural policies along with labour markets and transportation networks of

member nations.

EEU will bring together around 170 million people from 5 member nations and will

have a combined economic output of $4.5 trillion.



37. Solution: c)

At a different level, historians of religion often classify bhakti traditions into two broad

categories: saguna (with attributes) and nirguna (without attributes). The former included

traditions that focused on the worship of specific deities such as Shiva, Vishnu and his

avatars (incarnations) and forms of the goddess or Devi, all often conceptualised in

anthropomorphic forms. Nirguna bhakti on the other hand was worship of an abstract form

of god.

38. Solution: b)

Camouflage NEED not always be visual. Filefish use a cologne they prepare from the corals

they eat to hide from the nose of predators. A study in Australia found that crabs were

unable to smell filefish because they smelled like the corals. Insects are known to use the

technique but this is the first time that a vertebrate has been found to use chemical

camouflage. The find indicates that there could be more species which use it

39. Solution: c)

Government has launched Mission Indradhanush to immunise kids against 7 vaccine-

preventable diseases.

Mission Indradhanush depicts 7 colours of the rainbow which aims to cover all those

children by 2020 who are either unvaccinated, or are partially vaccinated against 7 vaccine

preventable diseases.



7 preventable diseases: diphtheria, whooping cough, tetanus, polio, tuberculosis,

measles and hepatitis B.

40. Solution: d)

This landmark treaty has officially became binding international law, which aims to regulate

around the USD 85 billion global arms trade.

It came into force after 60 nations ratified it, as of December 23 among the 130 signatories of

the treaty. In order to come in force, the treaty in total needed 50 nations ratification.

It is the first legally-binding multilateral agreement that prohibits nations from

exporting conventional weapons to countries that may use it for genocide, crimes

against humanity or war crimes.

It adds a new chapter in collective efforts of nations to bring responsibility,

accountability and transparency to the global arms trade.

It set robust global standards for cross-border transfers of conventional weapons

ranging from small firearms to tanks and attack helicopters.

It creates binding requirements for states to review cross-border contracts to ensure

weapons will not be used in human rights abuses, violations of humanitarian law or

organised crime

41. Solution: d)

Joint production would involve sharing and transfer or money and other resources across

nations.

Transfer of technology would also involve money and transfer of other resources. It is

essentially an external sector transaction of the economy.

Investment in treasury bills or government bonds of a country is a kind of FII. So an external

sector transaction.

42. Solution: a)

What makes countries rich or poor?

These are some of the central questions of economics. It is not that countries which are

endowed with a bounty of natural wealth minerals or forests or the most fertile lands are

naturally the richest countries. In fact the resource rich Africa and Latin America have some



of the poorest countries in the world, whereas many prosperous countries have scarcely any

natural wealth.

There was a time when possession of natural resources was the most important

consideration but even then the resource had to be transformed through a production

process.

The economic wealth, or well-being, of a country thus does not necessarily depend on the

mere possession of resources; the point is how these resources are used in generating a flow

of production and how, as a consequence, income and wealth are generated from that

process.

43. Solution: a)

Some of the earliest bhakti movements (c. sixth century) were led by the Alvars (literally,

those who are immersed in devotion to Vishnu) and Nayanars (literally, leaders who were

devotees of Shiva). They travelled from place to place singing hymns in Tamil in praise of

their gods.

Some historians suggest that the Alvars and Nayanars initiated a movement of protest

against the caste system and the dominance of Brahmanas or at least attempted to reform

the system. To some extent this is corroborated by the fact that bhaktas hailed from diverse

social backgrounds ranging from Brahmanas to artisans and cultivators and even from

castes considered untouchable.

The importance of the traditions of the Alvars and Nayanars was sometimes indicated by

the claim that their compositions were as important as the Vedas. For instance, one of the

major anthologies of compositions by the Alvars, the Nalayira Divyaprabandham, was

frequently described as the Tamil Veda, thus claiming that the text was as significant as the

four Vedas in Sanskrit that were cherished by the Brahmanas.

44. Solution: a)

Nyaya Panchayats have been constituted in some states. They possess the authority to hear

some petty, civil and criminal cases. They can impose fines but cannot award a sentence.

These village courts have often been successful in bringing about an agreement amongst

contending parties. They have been particularly effective in punishing men who harass

women for dowry and perpetrate violence against them.

45. Solution: a)

Of the final goods, we can distinguish between consumption goods and capital goods.

Goods like food and clothing, and services like recreation that are consumed when



purchased by their ultimate consumers are called consumption goods or consumer goods.

(This also includes services which are consumed but for convenience we may refer to them

as consumer goods.)

Then there are other goods that are of durable character which are used in the production

process. These are tools, implements and machines. While they make production of other

commodities feasible, they themselves dont get transformed in the production process.

They are also final goods yet they are not final goods to be ultimately consumed. They are

called capital goods.

Of the total production taking place in the economy a large number of products dont end

up in final consumption and are not capital goods either.

Such goods may be used by other producers as material inputs. Examples are steel sheets

used for making automobiles and copper used for making utensils. These are intermediate

goods, mostly used as raw material or inputs for production of other commodities. These are

not final goods.

46. Solution: d)

Several profound transformations in the nature of social relations in rural areas took place in

the post-Independence period, especially in those regions that underwent the Green

Revolution. These included:

an increase in the use of agricultural labour as cultivation became more intensive;

a shift from payment in kind (grain) to payment in cash;

a loosening of traditional bonds or hereditary relationships between farmers or

landowners and agricultural workers (known as bonded labour);

and the rise of a class of free wage labourers.

The change in the nature of the relationship between landlords (who usually belonged to the

dominant castes) and agricultural workers (usually low caste), was described by the

sociologist Jan Breman as a shift from patronage to exploitation.

47. Solution: a)

A part of the capital goods produced this year goes for replacement of existing capital goods

and is not an addition to the stock of capital goods already existing and its value needs to be

subtracted from gross investment for arriving at the measure for net investment. This

deletion, which is made from the value of gross investment in order to accommodate regular

wear and tear of capital, is called depreciation.



So new addition to capital stock in an economy is measured by net investment or new

capital formation, which is expressed as

Net Investment = Gross investment Depreciation

So higher the depreciation, lower the net investment will be.

Depreciation is thus an annual allowance for wear and tear of a capital good. But it is NOT

related only to the wear and tear of a capital good.

Depreciation does not take into account unexpected or sudden destruction or disuse of

capital as can happen with accidents, natural calamities or other such extraneous

circumstances.

We are making a rather simple assumption here that there is a constant rate of depreciation

based on the original value of the asset. There can be other methods to calculate depreciation

in actual practice.

48. Solution: c)

Present Constitutional provisions for Vidarbha

Article 371 of Constitution says that President may provide governor of Maharashtra with

following special responsibility

Establish separate development boards for regions of Maharashtra like Vidarbha,

Marathwada and rest.

Every year, working reports of these boards will be placed before State Legislative

assembly.

Development expenditure funds must be equitable allocated for these regions.

These areas must be provided with equitable and adequate facilities for technical

education and vocational training. Even adequate employment opportunities in state

services must be provided to these regions.

Key Recommendations of Vijay Kelkar committee

Autonomous status must be granted to Vidarbha-eastern region of Maharashtra, as

people of this region feels neglected.

This region should get autonomous status on the lines of Meghalaya as it was

granted an autonomous status in 1969, when it was a part of Assam, by the 24th

constitutional amendment.

The people of Vidarbha feel that issues of the region are neglected by the Mumbai-

headquartered government.



Shift the state secretariat (Mantralaya) to Nagpur- states second capital, for the

month i.e. from December 1 to 31 every year as a part of Nagpur pact (whereby

Vidarbha leaders agreed to merger of the region within Maharashtra in 1960)

All the important finance-related portfolios should be allocated to the leaders from

Vidarbha.

Some of the major directorates should be shifted to Aurangabad and Nagpur

districts.

Pending irrigation projects in Vidarbha should be completed on a priority basis.

Financial outlay of state: It should be classified into two categories- divisible and

non-divisible. The divisible outlay will be divided among three regions of Vidarbha,

Marathwada, and Rest of Maharashtra (RoM), excluding Mumbai. 45 per cent

divisible outlay for RoM, 33.24 per cent for Vidarbha and 25.31 per cent for

Marathwada.

49. Solution: c)

While Buddhism and Jainism had been prevalent in this region for several centuries,

drawing support from merchant and artisan communities, these religious traditions received

occasional royal patronage. Interestingly, one of the major themes in Tamil bhakti hymns is

the poets opposition to Buddhism and Jainism. This is particularly marked in the

compositions of the Nayanars. Historians have attempted to explain this hostility by

suggesting that it was due to competition between members of other religious traditions for

royal patronage. What is evident is that the powerful Chola rulers (ninth to thirteenth

centuries) supported Brahmanical and bhakti traditions, making land grants and

constructing temples for Vishnu and Shiva.

50. Solution: d)

There is output of consumer goods and services and output of capital goods. The consumer

goods sustain the consumption of the entire population of the economy. Purchase of

consumer goods depends on the capacity of the people to spend on these goods which, in

turn, depends on their income.

The other part of the final goods, the capital goods, are purchased by business enterprises

either for maintenance or addition to their capital stock so that they can continue to maintain

or expand the flow of their production. In a specific time period, say in a year, the total

production of final goods can thus be either in the form of consumption or investment and



there is thus a trade-off. If an economy, out of its current production of final goods,

produces more of consumer goods, it is producing less of investment goods and vice-versa.

For the options B and C, If you apply common logic, you can understand that the more

intermediate goods are produced, the more capital and consumer goods can be produced.

For e.g. steel is an intermediate good machine is a capital good and car is a final

consumer good. There need not be a trade off in these pairs.

51. Solution: d)

GNP GDP + Factor income earned by the domestic factors of production employed in the

rest of the world Factor income earned by the factors of production of the rest of the world

employed in the domestic economy

Hence, GNP GDP + Net factor income from abroad

Remittances sent means Indian domestic labour being employed abroad.

Reliance and BMW outlet are domestic and foreign factors of production employed in

abroad and domestic country respectively.

52. Solution: a)

http://www.bbc.com/news/science-environment-30587002

http://en.wikipedia.org/wiki/NuSTAR

53. Solution: d)

NNP GNP Depreciation

It is to be noted that all these variables are evaluated at market prices.

Through the expression given above, we get the value of NNP evaluated at market prices.

But market price includes indirect taxes. When indirect taxes are imposed on goods and

services, their prices go up. Indirect taxes accrue to the government. We have to deduct

them from NNP evaluated at market prices in order to calculate that part of NNP which

actually accrues to the factors of production.

Similarly, there may be subsidies granted by the government on the prices of some

commodities (in India petrol is heavily taxed by the government, whereas cooking gas is



subsidised). So we need to add subsidies to the NNP evaluated at market prices. The

measure that we obtain by doing so is called Net National Product at factor cost or National

Income.

Thus, NNP at factor cost National Income (NI ) NNP at market prices (Indirect taxes

Subsidies) NNP at market prices Net indirect taxes (Net indirect taxes Indirect taxes

Subsidies) .

54. Solution: a)

If prices change, then there may be difficulties in comparing GDPs. If we measure the GDP

of a country in two consecutive years and see that the figure for GDP of the latter year is

twice that of the previous year, we may conclude that the volume of production of the

country has doubled. But it is possible that only prices of all goods and services have

doubled between the two years whereas the production has remained constant.

Therefore, in order to compare the GDP figures (and other macroeconomic variables) of

different countries or to compare the GDP figures of the same country at different points of

time, we cannot rely on GDPs evaluated at current market prices. For comparison we take

the help of real GDP. Real GDP is calculated in a way such that the goods and services are

evaluated at some constant set of prices (or constant prices). Since these prices remain

fixed, if the Real GDP changes we can be sure that it is the volume of production which is

undergoing changes. Nominal GDP, on the other hand, is simply the value of GDP at the

current prevailing prices.

55. Solution: d)

The ratio of nominal GDP to real GDP gives us an idea of how the prices have moved from

the base year (the year whose prices are being used to calculate the real GDP) to the current

year. In the calculation of real and nominal GDP of the current year, the volume of

production is fixed. Therefore, if these measures differ it is only due to change in the price

level between the base year and the current year. The ratio of nominal to real GDP is a well

known index of prices. This is called GDP Deflator. Thus if GDP stands for nominal GDP

and gdp stands for real GDP then, GDP deflator = GDP/Gdp

There is another way to measure change of prices in an economy which is known as the

Consumer Price Index (CPI). This is the index of prices of a given basket of commodities

which are bought by the representative consumer. CPI is generally expressed in percentage

terms.



56. Solution: a)

An individual may hold her wealth in the form of landed property, bullion, bonds, money

etc. For simplicity, let us club all forms of assets other than money together into a single

category called bonds. Typically, bonds are papers bearing the promise of a future stream

of monetary returns over a certain period of time. These papers are issued by governments

or firms for borrowing money from the public and they are tradable in the market. This

demand for money is speculative demand for money.

57. Solution: b)

If interest rates increase, more people would want to save in banks; and less people would

hold bonds. This would reduce the demand for bonds and their value. People holdings

bonds would suffer a loss.

For a deposit holder, lower inflation means better returns on deposit. Because inflation

erodes value of interest accrued to the holder.

58. Solution: a)

The value of the currency notes and coins is derived from the guarantee provided by the

issuing authority of these items. Every currency note bears on its face a promise from the

Governor of RBI that if someone produces the note to RBI, or any other commercial bank,

RBI will be responsible for giving the person purchasing power equal to the value printed

on the note. The same is also true of coins. 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 tenders

as 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.

59. Solution: c)

The twelfth century witnessed the emergence of a new movement in Karnataka, led by a

Brahmana named Basavanna (1106-68) who was initially a Jaina and a minister in the court

of a Chalukya king. His followers were known as Virashaivas (heroes of Shiva) or Lingayats

(wearers of the linga). Lingayats continue to be an important community in the region to

date. They worship Shiva in his manifestation as a linga, and men usually wear a small linga

in a silver case on a loop strung over the left shoulder. Those who are revered include the

jangama or wandering monks.



Lingayats believe that on death the devotee will be united with Shiva and will not return to

this world. Therefore they do not practise funerary rites such as cremation, prescribed in the

Dharmashastras. Instead, they ceremonially bury their dead. The Lingayats challenged the

idea of caste and the pollution attributed to certain groups by Brahmanas. They also

questioned the theory of rebirth. These won them followers amongst those who were

marginalised within the Brahmanical social order. The Lingayats also encouraged certain

practices disapproved in the Dharmashastras, such as post-puberty marriage and the

remarriage of widows.

60. Solution: d)

Money supply, like money demand, is a stock variable. The total stock of money in

circulation among the public at a particular point of time is called money supply. RBI

publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4.

They are defined as follows

M1 = CU + DD

M2 = M1 + Savings deposits with Post Office savings banks

M3 = M1 + Net time deposits of commercial banks

M4 = M3 + Total deposits with Post Office savings organisations (excluding National

Savings Certificates)

where, CU is currency (notes plus coins) held by the public and DD is net demand deposits

held by commercial banks. The word net implies that only deposits of the public held by

the banks are to be included in money supply. The interbank deposits, which a commercial

bank holds in other commercial banks, are not to be regarded as part of money supply.

M1 and M2 are known as narrow money. M3 and M4 are known as broad money. These

gradations are in decreasing order of liquidity. M1 is most liquid and easiest for transactions

whereas M4 is least liquid of all. M3 is the most commonly used measure of money supply.

It is also known as aggregate monetary resources.

61. Solution: b)

The concept will be difficult to explain in limited words here. You can best refer to the

section 3.3.2 Chapter 3 12th Macroeconomics NCERT.

It has been explained with the help of a numerical example there.

62. Solution: c)



High CRR would mean banks would park more funds with RBI. Hence they can lend less to

the public. This would reduce the overall money supply. It will also lower demand and

tackle short-term inflation.

It has no immediate coorelation with reducing fiscal deficit in the short-run. That is

something best tackled by a prudent fiscal policy.

63. Solution: c)

Open Market Operations: RBI purchases (or sells) government securities to the general

public in a bid to increase (or decrease) the stock of high powered money in the economy.

Suppose RBI purchases Rs 100 worth government securities from the bond market. It will

issue a cheque of Rs 100 on itself to the seller of the bond. The seller will deposit the cheque

in her bank, which, in turn, will credit the sellers account with a balance of Rs 100. The

banks deposits go up by Rs 100 which is a liability to the bank. However, its assets also go

up by Rs 100 by the possession of this cheque, which is a claim on RBI. The bank will deposit

this cheque to RBI which, in turn, will credit the banks account with RBI with Rs 100.

64. Solution: a)

Sterilisation by RBI: RBI often uses its instruments of money creation for stabilising the stock

of money in the economy from external shocks. Suppose due to future growth prospects in

India investors from across the world increase their investments in Indian bonds which

under such circumstances, are likely to yield a high rate of return. They will buy these bonds

with foreign currency. Since one cannot purchase goods in the domestic market with foreign

currency, a person who sells these bonds to foreign investors will exchange her foreign

currency holding into rupee at a commercial bank. The bank, in turn, will submit this

foreign currency to RBI and its deposits with RBI will be credited with equivalent sum of

money.

This increased money supply may not altogether be good for the economys health. If the

volume of goods and services produced in the economy remains unchanged, the extra

money will lead to increase in prices of all commodities RBI often intervenes with its

instruments to prevent such an outcome. In the above example, RBI will undertake an open

market sale of government securities of an amount equal to the amount of foreign exchange

inflow in the economy, thereby keeping the stock of high powered money and total money

supply unchanged. Thus it sterilises the economy against adverse external shocks. This

operation of RBI is known as sterilisation.

65. Solution: d)



First, certain goods, referred to as public goods (such as national defence, roads,

government administration), as distinct from private goods (like clothes, cars, food items),

cannot be provided through the market mechanism, i.e. by transactions between individual

consumers and producers and must be provided by the government. This is the allocation

function.

Second, through its tax and expenditure policy, the government attempts to bring about a

distribution of income that is considered fair by society. The government affects the

personal disposable income of households by making transfer payments and collecting taxes

and, therefore, can alter the income distribution. This is the distribution function.

Third, the economy tends to be subject to substantial fluctuations and may suffer from

prolonged periods of unemployment or inflation. The overall level of employment and

prices in the economy depends upon the level of aggregate demand which is a function of

the spending decisions of millions of private economic agents apart from the government.

66. Solution: d)

Revenue receipts are divided into tax and non-tax revenues.

Tax revenues consist of the proceeds of taxes and other duties levied by the central

government. Tax revenues, an important component of revenue receipts, comprise of direct

taxes which fall directly on individuals (personal income tax) and firms (corporation tax),

and indirect taxes like excise taxes (duties levied on goods produced within the country),

customs duties (taxes imposed on goods imported into and exported out of India) and

service tax.

Non-tax revenue of the central government mainly consists of interest receipts (on account

of loans by the central government which constitutes the single largest item of non-tax

revenue), dividends and profits on investments made by the government, fees and other

receipts for services rendered by the government. Cash grants-in-aid from foreign countries

and international organisations are also included.

67. Solution: a)

By the eleventh century Sufism evolved into a welldeveloped movement with a body of

literature on Quranic studies and sufi practices. Institutionally, the sufis began to organise

communities around the hospice or khanqah (Persian) controlled by a teaching master

known as shaikh (in Arabic), pir or murshid (in Persian). He enrolled disciples (murids) and

appointed a successor (khalifa). He established rules for spiritual conduct and interaction

between inmates as well as between laypersons and the master.

Sufi silsilas began to crystallise in different parts of the Islamic world around the twelfth

century. The word silsila literally means a chain, signifying a continuous link between



master and disciple, stretching as an unbroken spiritual genealogy to the Prophet

Muhammad. It was through this channel that spiritual power and blessings were

transmitted to devotees. Special rituals of initiation were developed in which initiates took

an oath of allegiance, wore a patched garment, and shaved their hair

68. PSolution: d)

Budget documents classify total revenue expenditure into plan and non-plan expenditure.

Plan revenue expenditure relates to central Plans (the Five-Year Plans) and central assistance

for State and Union Territory Plans. Non-plan expenditure, the more important component

of revenue expenditure, covers a vast range of general, economic and social services of the

government.

The main items of non-plan expenditure are interest payments, defence services, subsidies,

salaries and pensions.

69. Solution: d)

The main items of capital receipts are loans raised by the government from the public which

are called market borrowings, borrowing by the government from the Reserve Bank and

commercial banks and other financial institutions through the sale of treasury bills, loans

received from foreign governments and international organisations, and recoveries of loans

granted by the central government. Other items include small savings (Post-Office Savings

Accounts, National Savings Certificates, etc), provident funds and net receipts obtained

from the sale of shares in Public Sector Undertakings (PSUs).

70. Solution: a)

The process of liberalisation also involved the taking of loans from international institutions

such as the International Monetary Fund (IMF). These loans are given on certain conditions.

The government makes commitments to pursue certain kind of economic measures that

involve a policy of structural adjustments. These adjustments usually mean cuts in state

expenditure on the social sector such as health, education and social security. There is also a

greater say by international institutions such as the World Trade Organisation (WTO).

71. Solution: d)

Take the following example It depends on the levels of the following

Primary Deficit = 2(a+b+c) + 5 - 1-4 - 2(a) = (2(a+b+c) 1 ) or RD (5-1-4)

Revenue Deficit (RD) = 2 (a+b+c) 1

If (5-1-4) is positive, i.e. if the capital expenditure in a particular year is high, then PDRD.



72. Solution: b)

http://www.downtoearth.org.in/content/india-high-alert-after-massive-oil-spill-threatens-

sunderbans-ecology

http://en.wikipedia.org/wiki/2014_Sundarbans_oil_spill

73. Solutions: d)

Kabir (c. fourteenth-fifteenth centuries) is perhaps one of the most outstanding examples of

a poet-saint who emerged within this context. Historians have painstakingly tried to

reconstruct his life and times through a study of compositions attributed to him as well as

later hagiographies. Such exercises have proved to be challenging on a number of counts.

Verses ascribed to Kabir have been compiled in three distinct but overlapping traditions.

The Kabir Bijak is preserved by the Kabirpanth (the path or sect of Kabir) in Varanasi and

elsewhere in Uttar Pradesh; the Kabir Granthavali is associated with the Dadupanth in

Rajasthan, and many of his compositions are found in the Adi Granth Sahib (see Section 8.2).

All these manuscript compilations were made long after the death of Kabir. By the

nineteenth century, anthologies of verses attributed to him circulated in print in regions as

far apart as Bengal, Gujarat and Maharashtra

74. Solution: d)

The government directly affects the level of equilibrium income in two specific ways

government purchases of goods and services (G) increase aggregate demand and taxes, and



transfers affect the relation between income (Y) and disposable income (YD) the income

available for consumption and saving with the households.

A liberal FDI policy will bring more investment and increase the output of the economy.

75. Solution: d)

The options are self-explanatory. Investment abroad will be used to avoid excess spending

in domestic economy that would have caused extra demand. Moreover, returns can be

generated from abroad which will be used to bridge fiscal deficit.

76. Solution: a)

It has been argued that there is a decrease in investment due to a reduction in the amount of

savings available to the private sector. This is because if the government decides to borrow

from private citizens by issuing bonds to finance its deficits, these bonds will compete with

corporate bonds and other financial instruments for the available supply of funds. If some

private savers decide to buy bonds, the funds remaining to be invested in private hands will

be smaller. Thus, some private borrowers will get crowded out of the financial markets as

the government claims an increasing share of the economys total savings.

77. Solution: d)



78. Solution: d)

This movement marked the first major anti British reaction and its

new political order initiated in 1849 among the people in the Punjab in 1857.

The Namdhari Movement, aftermath of the Kuka Movement was the most important

phase as it aimed at overthrowing the British rule and played important role in

freedom struggle.

It had evoked the strong feelings of self-respect and sacrifice for the countrys

freedom struggle.

This movement actively propagated the principles of boycott and non-co-operation

given by Guru Ram Singh (founded the Namdhari sect) for the Namdharis.

Gurus Non-co-operation Movement actively propagated few things such as boycott

of education institutions of British and laws established by them.

At the time of movement, the Kuka followers were rigid in their clothing and wore

only hand-spun white attire in order not to reveal their identity as large number of

followers were in the police as well as army.

79. Solution: d)

Refer to the section GDP and WELFARE in chapter 2- 12th Macroeconomics NCERT. It has

been explained comprehensively.

80. Solution: c)

In 1565 Rama Raya, the chief minister of Vijayanagara, led the army into battle at Rakshasi-

Tangadi (also known as Talikota), where his forces were routed by the combined armies of

Bijapur, Ahmadnagar and Golconda. The victorious armies sacked the city of Vijayanagara.

The city was totally abandoned within a few years. Now the focus of the empire shifted to

the east where the Aravidu dynasty ruled from Penukonda and later from Chandragiri (near

Tirupati).

Although the armies of the Sultans were responsible for the destruction of the city of

Vijayanagara, relations between the Sultans and the rayas were not always or inevitably

hostile, in spite of religious differences. Krishnadeva Raya, for example, supported some

claimants to power in the Sultanates and took pride in the title establisher of the Yavana

kingdom. Similarly, the Sultan of Bijapur intervened to resolve succession disputes in

Vijayanagara following the death of Krishnadeva Raya. In fact the Vijayanagara kings were

keen to ensure the stability of the Sultanates and vice versa. It was the adventurous policy of



Rama Raya who tried to play off one Sultan against another that led the Sultans to combine

together and decisively defeat him.

81. Solution: d)

Rajasthan Governor has approved the Rajasthan Panchayati Raj (Second Amendment)

Ordinance-2014 after it was notified by the state government.

This ordinance will amend the Rajasthan Panchayati Raj Act 1994.

Key Provisions of Ordinance

Contestant for Zila Parishad or Panchayat Samiti elections should have the

minimum qualification of secondary education i.e. Class 10 from the state board or

any approved institution or board.

Contestant for the Sarpanch elections, must have passed Class VIII from any school

in case of general category. In case of the scheduled area of panchayat, the contestant

should have passed Class 5 from a school to become a Sarpanch.

82. Solution: d)

These sub-schemes and their allocations are:-

i. Bringing Green Revolution to Eastern Region: - This programme was initiated in

2010-11 targeting the improvement in the rice based cropping system of Assam, West

Bengal, Orissa, Bihar, Jharkhand, Eastern Uttar Pradesh and Chhattisgarh. Allocation for

this scheme in 2010-11 & 2011-12 was Rs. 400 crore each, which has been enhanced to Rs.

1000.00 crore in 2012-13 & 2013-14. The allocation for the year 2014-15 is Rs.1000.00 crore.

ii. Initiative on Vegetable Clusters: - Growing demand for vegetables was proposed to

be met by a robust increase in the productivity and market linkage. For the purpose, an

efficient supply chain needed to be established, to provide quality vegetables at competitive

prices. The allocation for this sub-scheme was Rs.300.00 crore each in 2011-12 & 2012-13. The

allocation for the year 2013-14 was Rs. 200.00 crore and 2014-15 is Rs. 175.00 crore.

iii. National Mission for Protein Supplements: - National Mission for Protein

Supplements was launched with an allocation of Rs.300 crore during 2011-12 to take up

activities to promote animal based protein production through livestock development, dairy

farming, piggery, goat rearing and fisheries in selected blocks. During 2012-13 & 2013-14 an

amount of Rs. 500 crore & Rs. 400.00 crore were allocated for 2014-15, Rs. 300.00 crore has

been earmarked for this scheme.

iv. Saffron Mission: - The Scheme was initiated in 2010-11 with an overall Government of

India budgetary support of Rs.288.06 crore over four years. Allocation has been Rs. 39.44



crore in 2010-11, Rs.50.00 crore each in 2011-12 & 2012-13. The mission was meant to bring

economic revival of J&K Saffron. Outlay for the year 2013-14 was Rs. 100.00 crore. An

amount of Rs.100.00 crore is earmarked for 2014-15.

v. Vidharbha Intensive Irrigation Development Programme: - The Scheme was initiated

in 2012-13 which seeks to bring in more farming areas under protective irrigation. The

allocation for the year 2012-13 & 2013-14 was Rs. 300.00 crore each. For 2014-15 Rs. 150.00

crore has been allocated for VIIDP.

vi. Crop Diversification: - The original Green Revolution States have the problem of

stagnating yields and over-exploitation of water resources. The answer lies in crop

diversification. An amount of Rs.500.00 Crore was allocated for 2013-2014 to the start a

programme of crop diversification that would promote technological innovation and

encourage farmers to choose crop alternatives. For 2014-15 Rs. 250.00 crore has been

allocated for this scheme.

From PIB features.

83. Solution: a)

The current account records exports and imports in goods and services and transfer

payments. Trade in services denoted as invisible trade (because they are not seen to cross

national borders) includes both factor income (payment for inputs-investment income, that

is, the interest, profits and dividends on our assets abroad minus the income foreigners earn

on assets they own in India) and non-factor income (shipping, banking, insurance, tourism,

software services, etc.). Transfer payments are receipts which the residents of a country

receive for free, without having to make any present or future payments in return. They

consist of remittances, gifts and grants. They could be official or private.

84. Solution: b)



85. Solution: d)

High CAD results in currency devaluation directly. Currency devaluation can directly feed

into inflation.

Thus a high CAD fuels directly into the domestic economy. Along with fiscal deficit (which

combinedly is called twin deficits), it leads to high inflation in the economy.

An overall consequence is that FII and other investors will not find the domestic market

worthy enough to invest and pull off from it.

86. Solution: a)

For e.g. If one wants to plan a trip to London, she needs to know how expensive British

goods are relative to goods at home.

The measure that captures this is the real exchange rate the ratio of foreign to domestic

prices, measured in the same currency. It is defined as

Real exchange rate = ePf/P

where P and Pf are the price levels here and abroad, respectively, and e is the rupee price of

foreign exchange (the nominal exchange rate). The numerator expresses prices abroad



measured in rupees, the denominator gives the domestic price level measured in rupees, so

the real exchange rate measures prices abroad relative to those at home. If the real exchange

rate is equal to one, currencies are at purchasing power parity.

87. Solution: c)

Most of the tea gardens were situated in Assam. In 1903, the industry employed 4,79,000

permanent and 93,000 temporary employees. Since Assam was sparsely populated and the

tea plantations were often located on uninhabited hillsides, bulk of the sorely needed labour

had to be imported from other provinces. But to bring thousands of people every year from

their far-off homes into strange lands, possessing an unhealthy climate and infected with

strange fevers, required the provision of financial and other incentives, which the tea-

planters of Assam were unwilling to offer. Instead, they had recourse to fraud and coercion;

and they persuaded the government to aid and abet them in this unholy task by passing

penal laws.

88. Solution: a)

The consumer can be concerned about future generations because they are the children and

grandchildren of the present generation and the family which is the relevant decision

making unit, continues living. They would increase savings now, which will fully offset the

increased government dissaving so that national savings do not change. This view is called

Ricardian equivalence after one of the greatest nineteenth century economists, David

Ricardo, who first argued that in the face of high deficits, people save more.

It is called equivalence because it argues that taxation and borrowing are equivalent means

of financing expenditure. When the government increases spending by borrowing today,

which will be repaid by taxes in the future, it will have the same impact on the economy as

an increase in government expenditure that is financed by a tax increase today.

It has often been argued that debt does not matter because we owe it to ourselves. This is

because although there is a transfer of resources between generations, purchasing power

remains within the nation. However, any debt that is owed to foreigners involves a burden

since we have to send goods abroad corresponding to the interest payments.

89. Solution: a)

eighteenth-century records tell us of zamindars in Bengal who remunerated blacksmiths,

carpenters, even goldsmiths for their work by paying them a small daily allowance and

diet money. This later came to be described as the jajmani system, though the term was not

in vogue in the sixteenth and seventeenth centuries.



http://en.wikipedia.org/wiki/Jajmani_system

90. Solution: c)

If Indians travel abroad more often, the reverse will happen. The demand for foreign

currency will increase at the expense of Indian currency. So there will be depreciation, not

appreciation.

If more investment or export occurs, then domestic currency will appreciate. Because it will

bridge the CAD, and even make it positive at times.

91. Solution: c)

Change in Prices: Consider the effects of changes in prices, assuming the exchange rate to be

fixed. If prices of domestic products fall, while say foreign prices remain constant, domestic

exports will rise, adding to aggregate demand, and hence will raise our output and income.

Analogously, a rise in prices of a countrys exports will decrease that countrys net exports

and output and income. Similarly, a price increase abroad will make foreign products more

expensive and hence again raise net exports and domestic output and income. Price

decreases abroad have the opposite effects.

Exchange Rate Changes: Changes in nominal exchange rates would change the real

exchange rate and hence international relative prices. A depreciation of the rupee will raise

the cost of buying foreign goods and make domestic goods less costly. This will raise net

exports and therefore increase aggregate demand. Conversely, a currency appreciation

would reduce net exports and, therefore, decrease aggregate demand. However, we must

note that international trade patterns take time to respond to changes in exchange rates. A

considerable period of time may elapse before any improvement in net exports is apparent.

92. Solution: b)

Unlike Britain where the impact of industrialisation led to more people moving into urban

areas, in India the initial impact of the same British industrialisation led to more people

moving into agriculture. The Census of India Report shows this clearly.

The extensive importation of cheap European piece goods and utensils, and the

establishment in India itself of numerous factories of the Western type, have more or less

destroyed many village industries. The high prices of agricultural produce have also led

many village artisans to abandon their hereditary craft in favour of agriculture .

People started buying and wearing imported or domestically manufactured western wears.

This led to the decline of traditional cottage based cotton enterprises.



93. Solution: d)

The spate of farmers suicides that has been occurring in the different parts of the country

since 1997-98 can be linked to the agrarian distress caused by structural changes in

agriculture and changes in economic and agricultural policies. These include: the changed

pattern of landholdings; changing cropping patterns especially due to the shift to cash crops;

liberalisation policies that have exposed Indian agriculture to the forces of globalisation;

heavy dependence on high-cost inputs; the withdrawal of the state from agricultural

extension activities to be replaced by multinational seed and fertiliser companies; decline in

state support for agriculture; and individualisation of agricultural operations. According to

official statistics, there have been 8,900 suicides by farmers between 2001 and 2006 in

Andhra Pradesh, Karnataka, Kera

Test 11 Solutions

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