Economics

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With reference to the Union Cabinet’s 2026 approval regarding the Employees' Provident Fund Organisation (EPFO) wage ceiling, consider the following statements:

1.The mandatory wage ceiling for EPFO coverage has been enhanced from ₹15,000 to ₹25,000 per month.

2.This revision is expected to bring approximately 1 crore additional employees under mandatory coverage.

A
1 only
B
2 only
C
Both 1 and 2
D
Neither 1 nor 2

Explanation

Statement 1 is correct; the Cabinet approved the hike to ₹25,000 to reflect sustained wage growth. Statement 2 is incorrect because the source explicitly states that 51 lakh additional employees, not 1 crore, are expected to be covered.

2.The term 'most-favored-nation' (MFN) clause in WTO agreements means:

AAll member countries must have the same tariff rates
BA country must treat all WTO members equally in trade matters
CCountries can give preferential treatment to any partner
DIt applies only to goods, not services

Explanation

MFN obliges a WTO member to extend any advantage, such as a lower tariff, offered to one member to all other members, ensuring non-discriminatory treatment.

3.In the context of India, the Mahalanobis distance is used primarily to:

AMeasure regional price disparities
BEstimate the degree of unemployment across states
CAnalyse the similarity of consumption patterns
DAssess the effectiveness of fiscal transfers

Explanation

The Mahalanobis distance has been employed in labour‑market studies to gauge the multivariate distance between state‑level unemployment vectors, helping to identify clusters of similar unemployment profiles.

4.Which of the following statements about the "principle of ability to pay" is correct?

AIt justifies progressive taxation
BIt advocates a flat tax rate for all incomes
CIt recommends taxing only consumption
DIt suggests that tax rates should be equal for all goods

Explanation

The ability‑to‑pay principle holds that individuals with higher income or wealth should bear a larger tax burden, thereby supporting progressive tax structures.

5.If the RBI raises the repo rate, the immediate effect on inflation is expected to be:

AIncrease, due to higher borrowing costs
BDecrease, as credit becomes more expensive
CNo change, as repo rate affects only exchange rates
DIncrease, because higher rates stimulate investment

Explanation

A higher repo rate makes borrowing costlier, reducing aggregate demand and thus putting downward pressure on inflation.

Critique the following statements based on the TRAI data released in September 2026:

The total number of broadband subscribers in India, including M2M connections, has surpassed 1.1 billion.
Mobile wireless access accounts for approximately 94% of the total broadband subscription base.
The number of broadband subscribers without M2M cellular mobile connections is statistically lower than the base with M2M connections.

A
Only one statement is correct
B
Only two statements are correct
C
All three statements are correct
D
None of the statements are correct

Explanation

Statement 1 is correct: Total broadband subscribers reached 1101.21 million (1.101 billion) by the end of August 2026 (TRAI/PIB).
Statement 2 is correct: Mobile Wireless Access is 1033.24 million out of 1101.21 million, which is 93.8% (approx. 94%) (PIB Release 2316034).
Statement 3 is incorrect: This is a logical fallacy. Subscribers with M2M (1101.21M) represent the total set; those without M2M (1010.28M) are a subset. Therefore, the base with M2M is higher (TRAI).

7.Which of the following instruments is NOT employed by the Reserve Bank of India to manage the capital account side of the Balance of Payments?

AOpen Market Operations (OMO)
BForeign Exchange Swaps
CCapital Controls
DStatutory Liquidity Ratio (SLR)

Explanation

SLR is a tool used to regulate liquidity in the domestic banking system and does not directly affect the capital account. OMO, FX swaps and explicit capital controls are the primary instruments the RBI uses to influence capital flows and the external sector.

8.A country with a current‑account surplus of $10 billion and a financial account deficit of $8 billion will experience:

AAn increase in official reserves of $2 billion
BA decrease in official reserves of $2 billion
CNo change in official reserves
DAn increase in foreign‑direct investment of $2 billion

Explanation

Using the BoP identity, surplus (Current) + deficit (Financial) = +2 billion, which must be absorbed by an increase in official reserves.

9.Which of the following would most likely shift the long‑run aggregate supply (LRAS) curve to the right?

AA permanent increase in government consumption
BHigher corporate tax rates
CImproved infrastructure financed by fiscal spending
DA rise in the statutory corporate tax rate

Explanation

Better infrastructure raises the productive capacity of the economy, shifting LRAS rightward. The other options either affect demand or reduce supply.

10.

Consider the following statements regarding the United Nations Environment Programme (UNEP) report titled Limiting Overshoot:

It states that global temperature rise can no longer be contained within the Paris Climate Agreement's 1.5°C threshold.
The report establishes a revised global policy target of limiting long-term temperature rise permanently to 1.8°C.
The removal of atmospheric greenhouse gases can be achieved entirely through traditional biological sinks, eliminating the need for novel engineered carbon extraction technologies.

Which of the statements given above is/are correct?

A
1 only
B
1 and 2 only
C
2 and 3 only
D
1, 2, and 3

Explanation

Statement 1 is correct: The UNEP study confirms that there is no remaining pathway to contain global temperature rise within the 1.5°C threshold set by the Paris Climate Pact, making temporary temperature overshoot inevitable.
Statement 2 is incorrect: The report's best-case scenario projects warming peaking at approximately 1.8°C. The text explicitly highlights that this figure must not be mistaken for a new target, but rather seen as a stark warning of what climate action must confront.
Statement 3 is incorrect: Neutralizing and removing accumulated atmospheric carbon requires a combination of traditional nature-based approaches (expanding sinks such as forests) AND new technologies designed to directly extract carbon.

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