-Statements 1 and 3 are correct.

-The big landlords challenged the
land-ceiling legislation in the courts, delaying its implementation. They used
this delay to register their lands in the name of close relatives,

Thereby escaping from the legislation.

-the poorest of the agricultural labourers
(such as sharecroppers and landless

labourers) did not benefit from land
reforms since they did not have any formal agreement with the Zamindar instead
it was the permanent or middle tenant who benefitted the most from the land
reforms as they had a formal agreement with the Zamindar.

Source: Chapter 2 class 11th NCERT

If the real exchange rate is equal to
one, currencies are at purchasing power parity.

á This means that goods cost the same in
two countries when measured in the same currency

á If the real exchange rises above one,
this means that goods abroad have become more expensive than goods at home.

á The real exchange rate is often taken as
a measure of a countryªs international competitiveness.

Reference : page no 79 macro economics
class XII

– The reform policies led to the
establishment of private sector banks, Indian as well as foreign. Foreign
investment limit in banks was raised to around 50 per cent. Thus statement 1 is
wrong.

– One of the major aims of financial sector
reforms was to reduce the role of RBI from regulator to facilitator of
financial sector. This means that the financial sector was allowed to take
decisions on many matters without consulting the RBI. Thus statement 2 was
wrong.

Source: chapter3 Class 11th NCERT

M4 is least liquid of all.

M3 is the most commonly used measure of
money supply. It is also known as aggregate monetary resources.

REFERENCE :page no 39 MACROECONOMICS CLASS
XII

The price of foreign currency in
terms of domestic currency.

This is the bilateral nominal exchange rate
Ò bilateral in the sense that they are exchange rates for one currency against
another and they are nominal because they quote the exchange rate in money
terms Eg. so many rupees per dollar or per pound

The measure that captures this is the real
exchange rate Ò the ratio of foreign to domestic prices, measured in the same
currency.

Reference : page no 78 macroeconomics class
XII

-Only statement 1 is correct.

– The restrictive policies of commodity
production, trade and tariff pursued affected the structure, composition and
volume of Indiaªs foreign trade consequently India became an exporter of
primary products such as raw silk, cotton, wool, sugar, indigo, jute etc. and
an importer of finished consumer goods like cotton, silk and woollen clothes
and capital goods like

Light machinery produced in the factories
of Britain. Thus statement 2 is wrong.

– Balance of trade of India was in surplus
throughout the colonial period thus statement 3 is wrong also.

Real exchange rate is the ratio of a foreign price level and the domestic price level multiplied by the nominal exchange rate.

Real exchange rate = e*Pf/ 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.

Reference : page no 79 macro economics
class XII

Changes in the price of foreign
exchange under flexible exchange rates are referred to as currency depreciation
or appreciation.

á The domestic currency (rupee) depreciates
when it becomes less expensive in terms of foreign currency.

á The currency appreciates when it becomes
more expensive in terms of foreign currency.

á Exchange rates in the market depend not
only on the demand and supply of exports and imports, and investment in assets,
but also on foreign exchange speculation where foreign exchange is demanded for
the possible gains from appreciation of the currency.

Reference: page 81 macro economics class
XII

Tikdam: Be careful about words liek all,
only, excluding etc. These are usually the hints given to reach at the correct
answer. Statement 3 which states that Exchange rates in the market depend only
on the demand and supply of exports and imports and not other factors is wrong.
This leaves c as wrong.

Income and the Exchange Rate:

á When income increases, consumer spending
increases. Spending on imported goods is also likely to increase. When imports
increase, the demand curve for foreign exchange shifts to the right. There is a
depreciation of the domestic currency.

á If there is an increase in income abroad
as well, domestic exports will rise and the supply curve of foreign exchange
shifts outward.

á On balance, the domestic currency may or
may not depreciate. What happens will depend on whether exports are growing
faster than imports.

á In general, other things remaining equal,
a country whose aggregate demand grows faster than the rest of the worldªs
normally finds its currency depreciating because its imports grow faster than
its exports. Its demand curve for foreign currency shifts faster than its
supply curve.

Reference :page no 82, macro economics
class XII

When the number of poor is estimated
as the proportion of people below the poverty line, it is known as Head Count
Ratioª.

Financial Stability Board (FSB) refers Systemically Important Financial Institutions (SIFIs) as institutions Ïwhose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity

SIFIs reflect how risks are distributed across the financial system at any particular point of time (i.e. cross-section aspect of systemic risk).

At global level, based on the suggestion of G-20 Leaders in Pittsburgh summit in 2009, financial stability Board spearheads the efforts of formulating a framework for assessing and regulating SIFIs.

Source: http://www.arthapedia.in

-Fiscal deficit means Government need to borrow from the market which leads to crowding-out of funding for private players.

Withdrawals from cash balance held in RBI and borrowing from RBI leads to increase in money supply. This increase in money supply may lead to rise in prices.

Borrowing from public has no effect on money supply in the country. When government borrows, money gets transferred from the public to the government. The net effect on total money supply in the country is nil.

-Deficit financing may lead to inflation depending upon the mode of operation of deficit financing.

All those receipts of the government which create liability or reduce financial assets are termed as capital receipts.

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) (This is referred to as PSU disinvestment).

Reference : page no 63 Macroeconomics, Class XII

á A rise in the interest rates at home
often leads to an appreciation of the domestic currency. The implicit
assumption is that no restrictions exist in buying bonds issued by foreign
governments.

Reference page no 81 macro economics class
XII

-The aggregate consumption by the
households of the economy is equal to the aggregate expenditure on goods and
services produced by the firms in the economy.

-The entire income of the economy,
therefore, comes back to the producers in the form of sales revenue.

-There is no leakage from the system Ò
there is no difference between the amount that the firms had distributed in the
form of factor payments (which is the sum total of remunerations earned by the
four factors of production) and the aggregate consumption expenditure that they
receive as sales revenue.

REFERENCE page no 15 macroeconomics class
XII

An increase in nominal GDP implies
an increase in the total value of transactions and hence a greater transaction
demand for money.

Transaction demand for money is
positively related to the real income of an economy and also to its average
price level.

Increase in nominal GDP implies a higher
transaction demand for money.

REFERENCE : page 36 MACROECONOMICS CLASS
XII

If all the people of the economy
increase the proportion of income they save (i.e. if the mps of the economy
increases) the total value of savings in the economy will not increase Ò it
will either decline or remain unchanged. This result is known as the Paradox of
Thrift Ò which states that as people become more thrifty they end up saving
less or same as before. This result, though sounds apparently impossible, is
actually a simple application of the model we have learnt.

– The increment in equilibrium value of
total output thus exceeds the initial increment in autonomous expenditure. The
ratio of the total increment in equilibrium value of final goods output to the
initial increment in autonomous expenditure is called the output multiplier of
the economy.

Reference : page no 71, macro economics

very easy self-explanatory question.
UPSC 2013 question

UPSC 2011 question.

UPSC 2013 previous year question. Mark as all is correct.