2013 GS Paper I, all questions

UPSC Prelims 2013 · GS Paper I

Question 74: Economy and Social Development

Consider the following liquid assets :

  1. 1.Demand deposits with the banks
  2. 2.Time deposits with the banks
  3. 3.Savings deposits with the banks
  4. 4.Currency

The correct sequence of these assets in the decreasing order of liquidity is

a1–4–3–2
b4–3–2–1
c2–3–1–4
d4–1–3–2

AnswerUPSC’s answer is (d).

Liquidity is the ease of turning an asset into cash without loss. Currency is cash itself and the most liquid. Demand deposits can be withdrawn at any time on demand by cheque, savings deposits can be withdrawn but with some limits on withdrawals, and time deposits are locked in for a fixed term. The order is currency, demand deposits, savings deposits, time deposits: 4-1-3-2.

  • 4. Currency is cash itself, so it ranks first in liquidity.
  • 1. Demand deposits can be withdrawn at any time by cheque, so they rank second.
  • 3. Savings deposits are withdrawable with some limits, so they rank third.
  • 2. Time deposits are locked in for a fixed term, so they rank last.
Why each option is right or wrong
  • (a) Wrong. Currency is more liquid than demand deposits.
  • (b) Wrong. Demand deposits are more liquid than savings deposits.
  • (c) Wrong. This reverses the correct order.
  • (d) Correct. Currency, demand, savings, then time deposits.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2013, General Studies Paper I, Series A. The paper on upsc.gov.in.