Dear Friends,<\/p>\n
We are releasing the answer key for UPSC Prelims 2022 GS Paper 1 Set A. We have given only the answer key in the PDF given below and the typed question along with the answer below that.<\/p>\n
Download Prelims 2022 Question Paper PDF with Answer Key\u00a0<\/strong><\/a><\/p>\n UPSC Prelims 2022 Answer Key For Set A | B | C | D\u00a0\u00a0<\/a><\/strong><\/p>\n Q.1) “Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following? Ans) b The Rapid Financing Instrument (RFI)\u202fprovides rapid financial assistance, which is available to all member countries of IMF facing an urgent balance of payments need<\/strong>. The RFI was created by the International Monetary Fund (IMF).<\/p>\n The Rapid Credit Facility (RCF) provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments (BoP) need<\/strong>. The RCF was created under the IMF\u2019s Poverty Reduction and Growth Trust (PRGT).<\/p>\n Sources: <\/strong>https:\/\/www.imf.org\/en\/About\/Factsheets\/Sheets\/2016\/08\/02\/19\/55\/Rapid-Financing-Instrument<\/p>\n https:\/\/www.imf.org\/en\/About\/Factsheets\/Sheets\/2016\/08\/02\/21\/08\/Rapid-Credit-Facility<\/p>\n Q.2) With reference to the Indian economy, consider the following statements: Ans) c The indices of Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) are used as indicators of external competitiveness.<\/p>\n Statement 1 is correct: <\/strong>NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.<\/p>\n Statement 2 is incorrect: <\/strong>REER is the weighted average of nominal exchange rates adjusted for relative price differential between the domestic and foreign countries.<\/p>\n An increase in a nation’s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. Means, it is losing its trade competitiveness.<\/strong><\/p>\n Statement 3 is correct: <\/strong>A real effective exchange rate (REER) is the NEER adjusted by relative prices or costs, typically captured in inflation differentials between the home economy and trading partners. A nation’s nominal effective exchange rate (NEER) when adjusted for inflation in the home country, equals its real effective exchange rate (REER).<\/strong> Higher the inflation higher will be divergence (difference between) NEER and REER.<\/strong><\/p>\n Source) https:\/\/www.rbi.org.in\/Scripts\/BS_ViewBulletin.aspx?Id=20020<\/strong><\/p>\n https:\/\/www.indiabudget.gov.in\/budget_archive\/es2007-08\/chapt2008\/chap611.pdf<\/strong><\/a><\/p>\n https:\/\/www.investopedia.com\/terms\/r\/reer.asp<\/strong><\/p>\n Q.3) With reference to the Indian economy, consider the following statements: Ans) B Statement 1 is incorrect:<\/strong> If the inflation is too high, Reserve Bank of India (RBI) is likely to reduce the money supply in the economy to control inflation. Thus, RBI sells the government securities so as to suck the excess of money supply from the economy and to control the inflation.<\/strong><\/p>\n Statement 2 is correct:<\/strong> The Reserve Bank of India intervenes in the currency market to support the rupee as a weak domestic unit can increase a country\u2019s import bill. There are a variety of methods by which RBI intervenes. It can intervene directly in the currency market by buying and selling dollars. If RBI wishes to prop up rupee value, then it can sell dollar<\/strong> and when it needs to bring down rupee value, it can buy dollars.<\/strong><\/p>\n Statement 3 is correct:<\/strong> When the\u202fUS raises its domestic interest rates, this tends to make India less attractive for the currency trade. As a result, some of the money may be expected to move out of the Indian markets and flow back to the US, therefore decreasing the value of India\u2019s currency against the US dollar. Thus, if interest rates in the USA or European Union were to fall, the value of rupee against the dollar increases and that is likely to induce RBI to buy dollars.<\/strong><\/p>\n Source) https:\/\/economictimes.indiatimes.com\/markets\/forex\/so-how-can-a-rbi-rate-hike-help-stem-the-rupee-slide\/articleshow\/66071179.cms?from=mdr<\/strong><\/a><\/p>\n https:\/\/intueriglobal.com\/effect-of-the-us-federal-reserves-interest-rate-hike-on-indian-economy\/<\/p>\n Q.4) With reference to the “G20 Common Framework”, consider the following statements: Ans) C To address the problem of unsustainable debt levels, the G20 reached agreement in November 2020 on a Common Framework for Debt Treatments.<\/p>\n Statement 1 is correct: <\/strong>The Common Framework for debt treatment beyond the DSSI (Common Framework) is an initiative endorsed by the G20, together with the Paris Club.<\/p>\n Statement 2 is correct:<\/strong> The\u202fCommon Framework for debt treatment beyond the DSSI (Common Framework)\u202fis an initiative to support<\/strong>, in a structural manner, Low Income Countries with unsustainable debt. <\/strong>The Common Framework considers debt treatment, on a case-by-case basis, driven by requests from eligible debtor countries. In response to a request for debt treatment, a Creditor Committee is convened. Negotiations are supported by the IMF and the World Bank, including through their Debt Sustainability Analysis.<\/p>\n Source) https:\/\/www.cgdev.org\/blog\/fix-common-framework-debt-it-too-late<\/a><\/p>\n https:\/\/www.mef.gov.it\/en\/G20-Italy\/common-framework.html<\/p>\n The G20 Common Framework for Debt Treatments Must Be Stepped Up<\/a><\/p><\/blockquote>\nUPSC Prelims 2022 – GS Paper 1 Questions with Answer Key (SET A)<\/strong><\/span><\/h4>\n
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\na) Asian Development Bank
\nb) International Monetary Fund
\nc) United Nations Environment Programme Finance Initiative
\nd) World Bank<\/p>\n
\n<\/strong><\/span>Exp)<\/strong> Option b is the correct answer.<\/strong><\/p>\n
\n1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
\n2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
\n3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
\nWhich of the above statements are correct?
\na) 1 and 2 only
\nb) 2 and 3 only
\nc) 1 and 3 only
\nd) 1, 2 and 3<\/p>\n
\n<\/strong><\/span>Exp)<\/strong> Option c is the correct answer.<\/strong><\/p>\n
\n1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
\n2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
\n3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
\nWhich of the statements given above are correct?
\na) 1 and 2 only
\nb) 2 and 3 only
\nc) 1 and 3 only
\nd) 1, 2 and 3<\/p>\n
\n<\/strong><\/span>Exp) Option b is the correct answer.<\/strong>\u00a0<\/strong><\/p>\n
\n1. It is an initiative endorsed by the G20 together with the Paris Club.
\n2. It is an initiative to support Low Income Countries with unsustainable debt.
\nWhich of the statements given above is\/are correct?
\na) 1 only
\nb) 2 only
\nc) Both 1 and 2
\nd) Neither 1 nor 2<\/p>\n
\n<\/strong><\/span>Exp) Option c is the correct answer.<\/strong><\/p>\n