The first ever Industrial Policy Resolution of India was announced in the year ______.

The correct answer is A, Most people will expect the interest rate to rise in the future. When the rate of interest is already very low, people believe it can hardly fall further and must rise, so they hold cash instead of bonds. Keynes called this the speculative demand for money, and the extreme case, in which everyone prefers cash at a very low rate, is the liquidity trap. The reason lies in the link between bond prices and interest: when the rate rises, the price of existing bonds falls, so anyone holding bonds would suffer a capital loss. Option B is wrong because people avoid bonds at such a time for exactly that fear of loss. Option C is wrong because a further fall is what people stop expecting once the rate is near its floor. Option D is wrong because in a liquidity trap extra money is simply held as cash and leaves the interest rate unchanged. Exam tip: a very low interest rate means high speculative demand for money, which is the liquidity trap.

The correct answer is D, money. Consumer theory studies how a household decides to spend its money among the goods and services available to it.

The idea rests on three things: the wants of the consumer, the prices of goods, and the income in hand, which is the budget constraint. Since income is limited, the consumer chooses the basket that gives the greatest satisfaction, or utility, from the money spent, and is said to be in equilibrium when no rearrangement of spending can raise that satisfaction. The law of diminishing marginal utility, indifference curves and the law of demand all belong to this branch of microeconomics.

Option A is wrong because the use of time is studied separately as the labour-leisure choice. Option B is wrong because relations are social, not economic, choices. Option C is wrong because energy here has no economic meaning as a thing the consumer allocates.

Exam tip: consumer theory joins three things - wants, prices and income - and explains the demand curve.

The correct answer is D, price stability. The Reserve Bank Of India Act, as amended in 2016, states that the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Under the inflation targeting framework the government, in consultation with the RBI, sets the target for consumer price inflation at four per cent with a band of two per cent on either side. A six member Monetary Policy Committee, three from the RBI including the Governor, who has the casting vote, and three appointed by the government, decides the policy repo rate, usually every two months. Option A is wrong because creating wealth is not a task of monetary policy. Option B is wrong because the RBI manages the exchange rate under FEMA, but only to curb sharp volatility, not as its main aim. Option C is wrong because growth is an objective the RBI must keep in mind, yet it comes after price stability in the law. Exam tip: price stability first, growth kept in mind, four per cent inflation target with a two per cent band.

The correct answer is A, Russia. India took the idea of five-year plans from the erstwhile Soviet Union, which began its first plan in 1928 under Stalin. Along with it India borrowed Fundamental Duties and the ideal of justice, social, economic and political, in the Preamble, all from the Soviet constitution. India's own First Five Year Plan ran from 1951 to 1956 and focused on agriculture and irrigation; the Planning Commission set up in 1950 prepared the plans, and the Prime Minister was its chairman. The Twelfth Plan, which ended in 2017, was the last, and NITI Aayog replaced the Planning Commission in 2015. Option B is wrong because England gave the parliamentary system, rule of law and single citizenship. Option C is wrong because the United States gave Fundamental Rights and judicial review. Option D is wrong because Germany, that is the Weimar constitution, gave the suspension of Fundamental Rights during an emergency. Exam tip: from the Soviet Union came Fundamental Duties, five-year plans and the ideal of justice in the Preamble.

The correct answer is D, gross domestic product. Gross domestic product, or GDP, is the money value of all final goods and services produced inside the borders of a country in one year. Two words in the definition matter. Domestic means the output is counted where it is produced, no matter who owns the factor of production, so the earnings of a foreign company working in India are inside India's GDP. Gross means depreciation, the wear and tear of machines and buildings, has not been deducted. In India the National Statistical Office estimates GDP and releases it every quarter. Option A is wrong because per capita income is national income divided by population, an average per person. Option B is wrong because net domestic product is GDP minus depreciation. Option C is wrong because national income, or net national product at factor cost, counts the output of the residents of a country wherever they earn it. Exam tip: domestic means inside the borders, national means by the residents; gross keeps depreciation, net removes it.