1. Consider the following statements:

(1) A high foreign exchange rate may increase the export of a country.

(2) A Trade surplus in an economy may help to appreciate its currency.

(3) A rise in interest rates in a country is often accompanied with depreciation of domestic currency.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Answer: (a) Explanation: Statement 1 is correct. A rise in price of foreign exchange will reduce the foreigner’s cost (in terms of USD) while purchasing products from a country. This increases the export of country. Statement 2 is correct. A Trade surplus means that the export of a country is greater than its imports. The export of a country helps in bringing foreign currency. So surplus trade of balance trade surplus will bring more foreign currency. As a result of which the domestic currency will appreciate. Statement 3 is incorrect.

The rise in the interest rates at home often leads to shortage of money/currency supply in an economy due to more demand of the domestic currency (both from the domestic and foreign players) in expectation of higher returns in private market, thereby leads to an appreciation of the domestic currency.

Source: NCERT XII, Macroeconomics, PG- 91, 92, 93

2. Which of the following is the best description of the term 'deficit financing', which was in the news recently?

(a) It is the excess of government's current expenditure over its current revenue.

(b) It is the difference of borrowing from external and internal resources.

(c) It is an excess of government's total expenditure over its total revenue.

(d) It is the capital expenditure on items of public contractions and public borrowings.

Answer: (c) Explanation: Deficit financing is the budgetary situation where expenditure is higher than the revenue. It is a practice adopted for financing the excess expenditure with outside resources. The expenditure-revenue gap is financed by either printing of currency or through borrowing. Nowadays most governments, both in the developed and developing world, are having deficit budgets and these deficits are often financed through borrowing. Hence the fiscal deficit is the ideal indicator of deficit financing.

Source: https://www.indianeconomy.net/splclassroom/what-is-deficit-financing- what-are-the-different-types-of-deficits-in-the-budget/

3. Consider the following statements regarding options:

(1) Under call options, the option writer has the obligation to buy the underlying asset at the specified price

(2) Under call options, the option holder has the right to buy the underlying asset at the specified price.

(3) Under the put options, option seller has the obligation to sell the underlying asset at the specified price

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

Answer: (b) Explanation: Under Call options, the option writer/option seller has the obligation to sell the underlying asset (to the option holder) at the specified price. Thus statement 1 is incorrect. Under call options, the option holder/option buyer has the right to buy the underlying asset at the specified price. Thus statement 2 is correct.

Under the Put options, option seller/option writer has the obligation to buy the underlying asset (from the option holder) at the specified price. Thus statement 3 is also incorrect.

Source: https://www.investopedia.com/terms/c/calloption.asp

4. Consider the following statements:

(1) The Indian Strategic Petroleum Reserve (ISPR) is an emergency fuel store of total 5 MMT (million metric tons) of strategic crude oil enough to provide 10 days of consumption.

(2) India’s strategic crude oil storages are located at Vishakhapatnam, Mangalore and Padur, and two more will be set up in Odisha and Rajasthan as part of the second phase.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (c) Explanation: Statement 1 is correct. The Indian Strategic Petroleum Reserve (ISPR) is an emergency fuel store of total 5 MMT (million metric tons) of strategic crude oil enough to provide 10 days of consumption. The historic first cargo of crude oil from the Abu Dhabi National Oil Company (ADNOC), destined for the Indian Strategic Petroleum Reserves Ltd (ISPRL) has been loaded and is En-route to India. Statement 2 is correct. India’s strategic crude oil storages are located at Vizag (1.33 million tonnes), Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes). The reserves are maintained by the Indian Strategic Petroleum Reserves Limited. In the 2017-18 budget, it was announced that two more such caverns will be set up Chandikhole in Jajpur district of Odisha and Bikaner in Rajasthan as part of the second phase.

Source: Vajiram and Ravi Current Affairs for May 2018; Economic Growth and Development; page-79.

5. With reference to the National Anti-profiteering Authority (NAA), consider the following statements:

1. It is to be headed by a senior officer of the level of Secretary to the Government of India with four Technical Members from the Centre and/or the States.

2. The Authority shall cease to exist after the expiry of two years from the date on which the Chairman enters upon his office unless the GST Council recommends otherwise.

3. The Additional Director General of Safeguards under the Central Board of Excise and Customs (CBEC) shall be the Secretary to the Authority.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 3 only

(d) 1, 2 and 3

Answer (d) Explanation :

✓ National Anti-profiteering Authority (NAA) is an institutional mechanism to ensure that the full benefits of input tax credits and reduced GST rates on supply of goods or services flow to the consumers.

✓ NAA is to be headed by a senior officer of the level of Secretary to the Government of

India with four Technical Members from the Centre and/or the States

✓ This institutional framework comprises the NAA, a Standing Committee, Screening Committees in every State and the Directorate General of Safeguards in the Central Board of Excise & Customs (CBEC).

✓ The Additional Director General of Safeguards under the CBEC (Board) shall be the

Secretary to the Authority.

✓ The Authority shall cease to exist after the expiry of two years from the date on

which the Chairman enters upon his office unless the Council recommends otherwise.