UPSC Prelims 2020 · GS Paper I
Question 70: Economy and Social Development
With reference to the Indian economy, consider the following statements :
- 1.‘Commercial Paper’ is a short-term unsecured promissory note.
- 2.‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.
- 3.‘Call Money’ is a short-term finance used for interbank transactions.
- 4.‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.
Which of the statements given above is/are correct ?
AnswerUPSC’s answer is (c).
Commercial paper is a short-term unsecured promissory note issued by companies, so statement 1 is right. Call money is very short-term borrowing between banks, so statement 3 is right. A certificate of deposit is issued by banks and financial institutions, not by the RBI to a corporation. Zero-coupon bonds pay no interest and are sold at a discount to their face value.
- 1. Commercial paper is a short-term unsecured promissory note.
- 2. Certificates of deposit are issued by banks, not by the RBI to a corporation.
- 3. Call money is short-term interbank finance.
- 4. Zero-coupon bonds pay no interest; they are issued at a discount.
How you could have got this
- If you were sure statement 1 is correct, (b) and (d) go: each of them leaves 1 out.
What you needed to know: Commercial paper is a short-term unsecured promissory note.
- Then, if you were sure statement 2 is not correct, (a) goes: it includes 2.
What you needed to know: Certificates of deposit are issued by banks, not by the RBI to a corporation.
Only (c) is left. You didn’t need statements 3 or 4.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Wrong: statement 2 is false; certificates of deposit are issued by banks, not by the RBI.
- (b) Wrong: zero-coupon bonds carry no interest.
- (c) Right: statements 1 and 3.
- (d) Wrong: statements 2 and 4 are false.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2020, General Studies Paper I, Series A. The paper on upsc.gov.in.