Which one of the following would be considered as Foreign Direct Investment?

The correct answer is A, SMILE. SMILE stands for Support for Marginalised Individuals for Livelihood and Enterprise, the central scheme that covers the welfare of transgender persons and of people engaged in begging. The Ministry of Social Justice and Empowerment launched it in 2022, bringing both groups under one umbrella scheme with a separate sub-scheme for each. It provides scholarships, skill training and health cover, the shelter homes called Garima Greh for transgender persons, and survey, rehabilitation, education and livelihood support for those found begging, and the work is carried out through state governments, urban local bodies and voluntary organisations. B is wrong because SHINE is not the name under which this scheme was notified. C is wrong because SHRI is not a scheme of the Ministry of Social Justice and Empowerment for these two groups. D is wrong because RISE is not this scheme either; the three wrong options are built to look like the right one. Exam tip: SMILE, 2022, Ministry of Social Justice and Empowerment, with Garima Greh as its shelter homes.

The correct answer is D, seasonal unemployment. Seasonal unemployment is the kind in which people find work only in certain months and sit idle in the rest. It is common in rural India because farming needs many hands at sowing, transplanting and harvest but very few in between, so labourers either stay without work or migrate to towns for part of the year. Sugar mills, brick kilns and the tourist trade show the same pattern. Programmes such as the rural employment guarantee scheme, which promises a hundred days of wage work to a rural household, were designed mainly for these slack months. Option A is wrong because educated unemployment means qualified young people not finding work that matches their degrees, largely an urban problem. Option B is wrong because disguised unemployment means more people working on a job than it needs, as on a family farm. Option C is wrong because frictional unemployment is the short gap while changing jobs. Exam tip: seasonal means idle months, disguised means surplus hands.

The correct answer is C, reverse repo rate. The reverse repo rate is the rate at which the Reserve Bank of India borrows from commercial banks, that is, the rate it pays banks for parking their surplus money with it for a short term. The RBI raises this rate when it wants to pull extra cash out of the banking system, because banks then find it worthwhile to lend to the central bank rather than to the market. Both the repo and the reverse repo belong to the liquidity adjustment facility, and the reverse repo rate is always kept below the repo rate. A is wrong because there is no policy rate called the liquidity rate. B is wrong because the exchange rate is the price of one currency in terms of another. D is wrong because the repo rate works the other way round: banks borrow from the RBI at that rate against government securities. Exam tip: repo means banks borrow, reverse repo means the RBI borrows.

The correct answer is B, Stage 3. The law of variable proportions divides short run production into three stages. In stage one, increasing returns, both total and marginal product rise because the fixed factor is still under used. In stage two, diminishing returns, marginal product falls but stays positive, so total product keeps rising and reaches its maximum at the end of this stage, where marginal product is zero. In stage three, negative returns, extra units of the variable factor crowd the fixed factor, marginal product turns negative and total product actually falls. A sensible producer therefore works in stage two and never enters stage three. A is wrong because marginal product in stage two is falling but still positive. C is wrong because marginal product in stage one is rising. D is wrong because the law has only three stages, so there is no stage four. Exam tip: total product is highest exactly where marginal product is zero.

The correct answer is A, Marginal product curve. The marginal product of a variable factor first rises, reaches a peak and then falls, so the curve traced out is an inverted U. This is the law of variable proportions at work. In the first stage the extra units of labour get plenty of the fixed factor to work with and each one adds more to output than the last; at the peak the fixed factor is being used best; after that each extra worker has too little of the fixed factor, so the addition to output keeps shrinking and can even turn negative. B is wrong because the short run marginal cost curve is U-shaped, falling and then rising, as cost moves opposite to product. C is wrong because the average variable cost curve is U-shaped for the same reason. D is wrong because the long run average cost curve is a flatter U-shaped envelope of the short run curves. Exam tip: product curves are inverted U, cost curves are U.