Insights Static Quiz -58, 2018 –Economics

Answer – b

1. Global Innovation Policy Centre (GIPC) of US Chambers of Commerce had released the International Intellectual Property Index (IIPI). It is an annual Index which examines a country’s Intellectual Property (IP) framework across eight categories of indicators – patents, copyrights, trademarks, trade secrets and market access, enforcement, commercialisation of IP assets, systemic efficiencies and ratification of international treaties.
2. India has been ranked 44 out of 50 countries up from 43 out of 45 in 5th edition. India’s score has improved from 25% (8.75 out of 35) of total score in 5th edition to 30% (12.03 out of 40) in the sixth edition which is the highest improvement of any country measured

Answer – c

• The current account defcit has also widened in 2017-18 and is expected to average about 1.5-2 percent of GDP for the year as a whole. In the frst half of 2017-18, the oil and gold balance has improved (smaller defcit of $47 billion) but this has been offset by a higher trade defcit ($18 billion) and a reduced services surplus ($37 billion), the latter two reflecting a deterioration in the economy’s competitiveness.

Answer – c

1. When oil prices rises, the trade deficit for India increases as India imports most of its oil requirements. The trade deficit induces more supply of Indian Rupee which in turn makes it fall in value. Hence 1 is correct.
2. Increasing bond yields from the dollar means that investment in dollar is giving higher returns. Therefore investors will pull out the money from the Indian market, which means increasing supply of Rupee and thus depreciation. Hence 2 is also correct.

Answer – a

• Cash Reserve ratio is the amount of bank capital which is reserved by the banks with RBI to deter unforeseen circumstances, say people flogging for their deposits.
• If CRR increases, banks will have lesser money to lend and hence interest rates may rise.
• As the interest rates rise, there will be more people putting in their money in the banks.
• This will decrease the supply of money in the open market and therefore inflation will decrease.

Answer – c

• Money supply, like money demand, is a stock variable. The total stock of money in circulation among thepublic at a particular point of time is called money supply.
• RBI publishes figures for four alternativemeasures of money supply, viz. M1, M2, M3 and M4.
• They are defined as follows:

Narrow money

1. M1 = CU (currency (notes plus coins) held by the public) + DD (net demand deposits held by commercialbanks) The word ‘net’ implies that only deposits of the public held bythe banks are to be included in money supply. The interbank deposits, which a commercial bank holds inother commercial banks, are not to be regarded as part of money supply.
2. M2 = M1 + Savings deposits with Post Office savings banks

Broad money

1. M3 = M1 + Net time deposits of commercial banks
2. M4 = M3 +Total deposits with Post Office savings organizations (excluding National Savings Certificates)

• These gradations are in decreasing order of liquidity. M1 is mostliquid and easiest for transactions whereas M4 is least liquid of all. M3 is the most commonly usedmeasure of money supply. It is also known as aggregate monetary resources.