09 September 2024

Q1. Consider the following statements regarding International Space Station (ISS):

1. The ISS is the first space station to be built and operated.
2. ISS is not entirely in zero-gravity space and it does encounter a little bit of gravity.
3. Thrusters must be sent periodically, that attach themselves to the ISS for keeping it in orbit.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Ans: (b)

Explanation

• Only Statements 2 and 3 are correct.
• The ISS is not the first space station to be built and operated. Several smaller space stations have been used earlier, the most famous of which have been the Russian Mir space station that operated in the 1980s, and the American Skylab.
• ISS is not entirely in zero-gravity space. It does encounter a little bit of gravity. Also, it loses a bit of energy as it moves around the earth. Left to itself, the ISS would fall down. The Russians periodically send thrusters that attach themselves to the ISS and impart the required momentum to keep it going.

Q2. Which of the following activities constitute a real sector in the economy?

1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2, 3 and 4 only

(c) 1, 3 and 4 only

(d) 1, 2, 3 and 4

Ans: (a)

Explanation:

• The nominal economy handles the financial part of the economy, whereas the real sector handles the production side. Financial activity primarily supports actual (production) activity; aside from the factor income it creates, it does not contribute significantly on its own.

Q3. Which one of the following situations best reflects “Indirect Transfers” often talked about in the media recently with reference to India?

(a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment

(b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment

(c) An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India

(d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

Ans: (d)

Explanation:

• When foreign entities own shares or assets in India, the shares of those foreign entities are transferred rather than the underlying assets in India being transferred directly. This is referred to as an indirect transfer.

Q4. With reference to the expenditure made by an organization or a company, which of the following statements is/are correct?

1. Acquiring new technology is capital expenditure.
2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.

Select the correct answer using the code given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ans: (a)

Explanation:

• S1: Since acquiring new technology creates new assets and will yield profits in the future, it is regarded as a capital expenditure.
• S2: Capital expenditures encompass both debt and equity finance.

Q5. With reference to the Indian economy, consider the following statements:

1. A share of the household financial savings goes towards government borrowings.
2. Dated securities issued at market-related rates in auctions form a large component of internal debt.

Which of the above statements is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ans: (c)

Explanation:

• S1: According to India’s public accounts, a portion of household savings go toward government borrowing. It is primarily made up of provident funds.
• S2: Regular government bonds are referred to as “dated securities,” while T-bills are treated differently. A significant portion of internal debt is made up of dated securities issued at rates linked to the market.