1 DO NOT OPEN THIS BOOKLET UNTIL YOU COMPLETE THE TEST ANSWER BOOKLET GENERAL STUDIES PAPER-I Free Mock Test-1 Answer Key 1. A 35. B 69. A 2. C 36. A 70. D 3. B 37. B 71. D 4. D 38. B 72. A 5. D 39. C 73. D 6. B 40. B 74. B 7. C 41. A 75. C 8. B 42. A 76. B 9. D 43. D 77. A 10. D 44. A 78. D 11. B 45. C 79. B 12. D 46. B 80. A 13. A 47. A 81. A 14. A 48. C 82. A 15. A 49. C 83. A 16. B 50. A 84. B 17. B 51. A 85. A 18. D 52. B 86. B 19. A 53. D 87. C 20. D 54. C 88. D 21. D 55. D 89. A 22. A 56. C 90. C 23. A 57. C 91. B 24. C 58. C 92. C 25. D 59. D 93. D 26. B 60. A 94. D 27. C 61. A 95. B 28. B 62. A 96. C 29. A 63. B 97. B 30. D 64. A 98. A 31. C 65. C 99. A 32. A 66. B 100. B 33. D 67. D 34. C 68. A OBJECTIVE IAS www.objectiveias.in OAS Prelims-2020 OBJECTIVE IAS 2 Q1. Implicit Cost: An implicit cost is proportion with production output. any cost that has already occurred but Variable costs increase or decrease is not necessarily shown or reported as depending on a company’s production a separate expense. It represents an volume; they rise as production opportunity cost that arises when a increases and fall as production company allocates internal resources decreases toward a project without any explicit compensation for the utilization of Q2. Escrow Account: Escrow is a legal resources. This means that when a concept in which a financial instrument company allocates its resources, it or an asset is held by a third party on always forgoes the ability to earn behalf of two other parties that are in money off the use of the resources the process of completing a elsewhere. transaction. The funds or assets are held by the escrow agent until it Explicit Cost: An explicit cost is a cost receives the appropriate instructions or that occurs, is easily identified, and is until predetermined contractual accounted for in business documents obligations have been fulfilled. Money, or financial statements. It represents securities, funds and other assets can clear, obvious cash outflows that all be held in escrow. reduce a business’s bottom-line profitability. Q3. Philips Curve: The Phillips curve is an economic concept developed by A. Examples of explicit costs would be W. Phillips stating that inflation and items such as wage expenses, rent, or unemployment have a stable and lease costs; it is easy to identify the inverse relationship. The theory claims sources of those cash outflows and the that with economic growth comes business activities to which the inflation, which in turn should lead to expenses are attributed. more jobs and less unemployment. However, the original concept has been Fixed Cost: A fixed cost is an expense somewhat disproven empirically due to or cost that does not change with an the occurrence of stagflation in the increase or decrease in the number of 1970s, when there were high levels of goods or services produced or sold. both inflation and unemployment. Fixed costs are expenses that have to be paid by a company, independent of The concept behind the Phillips curve any business activity. It is one of the states the change in unemployment two components of the total cost of within an economy has a predictable running a business, the other being effect on price inflation. The inverse variable costs. relationship between unemployment Variable Cost: A variable cost is a and inflation is depicted as a downward corporate expense that changes in sloping, concave curve, with inflation OAS Prelims-2020 OBJECTIVE IAS 3 on the Y-axis and unemployment on the partners and beneficiaries of X-axis. Increasing inflation decreases economic growth. It should unemployment, and vice versa. diversify livelihood for the tribal Alternatively, a focus on decreasing population. unemployment also increases inflation, c) The Inclusive growth addresses and vice versa. the constraints of the excluded and the marginalised. It has to Potential output i.e. natural Gross open up opportunities for them Domestic Product is an important to be partners in growth. concept in relation to inflation. It is the d) Inclusive growth should be level of GDP where the economy is at nondiscriminatory and its optimal level of production, given favourable for the excluded. This various constraints- institutional and implies that inclusive growth has natural. This level of output to be broad-based in terms of corresponds to the Non-Accelerating coverage of regions, and labour- Inflation Rate of Unemployment intensive in terms of creating (NAIRU). large-scale productive employment opportunities in the Q4. Inclusive Growth: The growth is economy. inclusive growth when it is socially e) Inclusive growth is expected to inclusive, regionally balanced, which reduce poverty among enables every state to do better than in Backward Classes faster in the the past, which narrows the gap sense that it has to have a higher between different communities, which elasticity of poverty reduction. also brings in our concern for gender f) Inclusive growth has to ensure equality, upliftment of women, access of people to basic improving their educational condition infrastructure and basic and social status. services/ capabilities such as basic health and education. This The key features of Inclusive growth access should include not only are as follows: the quantity, but also the quality a) Economic growth is a of these basic services. precondition for inclusive g) Inclusive growth should reduce growth, though the nature and vertical as well as horizontal composition of growth has to be inequalities in incomes and conducive to inclusion. assets. b) Inclusive growth is to include the poor and lagging socio- Q5. Tier II Capital of the Bank Includes: economic groups such as ethnic a) Undisclosed reserves and / tribal groups, weaker sections cumulative perpetual preference as well as lagging regions as shares. OAS Prelims-2020 OBJECTIVE IAS 4 b) Revaluation Reserves as value Total stock of money is the broader of building. term which includes all the money held c) A typical example of this is by the public as well as the suppliers of building owned by the bank money such as the Government and d) Hybrid debt capital instruments RBI. Current account deposits held by such as bonds. the public in commercial banks come e) Long term unsecured loans. under the concept of money as it can be f) General Provisions and loss used in transactions. reserves. g) Debt Capital Instruments. Q7. Inflation: Inflation means a h) Redeemable cumulative sustained increase in the general price Preference shares level. However, this increase in the cost i) Perpetual cumulative preference of living can be caused by different shares. factors. a) Creeping or mild inflation is Q6. Money: Anything that can be when prices rise 3 percent a year generally acceptable as payment for or less. goods and services or settlement of b) Trotting Inflation is when debts is Money. It is the element of inflation rises to 10 percent or confidence that others will accept it as more. a payment is what gives the purchasing c) Core inflation is a measure of power to money. The major functions inflation that excludes certain of money are: items that face volatile price a) It is a medium of exchange movements (like food and b) It is a unit of account energy) because in finding out c) It is a store of a value the legitimate long run inflation, short-term price volatility and Double coincidence of wants is a transitory changes in price must prerequisite for the barter system. In be removed. Core inflation case of money use no such thing is reflects the long term trend in a required. particular price level. d) Disinflation is a decrease in the Currency and money are not the same rate of inflation – a slowdown in thing. Currency is a form of money and the rate of increase of the it has some value which can increase general price level of goods and and decrease day by day.Money is services in a nation’s gross something used for Medium of domestic product over time. It is Exchange. Value of money can't be the opposite of reflation. counted. Value of currency can be Disinflation occurs when the counted. increase in the “consumer price level” slows down from the OAS Prelims-2020 OBJECTIVE IAS 5 previous period when the prices g) It can also issue other prepaid were rising. payment instruments. h) It can also distribute non-risk Q8. Increase in CRR will reduce the sharing simple financial money supply as banks will have less products like mutual funds and money to lend thus reducing liquidity insurance products. and inflation. On similar lines, sale of securities in the open market will prune Q10. Functions of the IMF: The the excess liquidity in the market and International Monetary Fund is an thus reducing money supply and organization of 189 member countries. inflation. It stabilizes the global economy in three ways. Q9. Indian Post Payment Bank (IPPB): a) First, it monitors global economy IPPB has been set up as Public Limited conditions and identifies risks. Company under Department of Posts b) Second, it advises its members (DoP) with 100% Government of India on how to improve their (GOI) equity.