Ten MCQs on current International and national events - 73

PRERNA FOR IAS

(ASSOCIATE OF SAMKALP)

         A-Category MCQs -73

Q1. With reference to Foreign Institutional Investor (FII) investment in government bonds, consider the following statements:

1. Reduction in tax burden can increase the attractiveness of domestic debt markets.
2. Portfolio investment is generally more stable than Foreign Direct Investment (FDI).
3. Higher foreign investment in government bonds may support the domestic currency.

Which of the statements given above are correct?

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

Answer: B. 1 and 3 only

Explanation: Lower taxes improve post-tax returns and can attract foreign investors to government securities. Increased foreign capital inflows may support the rupee by increasing foreign exchange availability. However, Statement 2 is incorrect because portfolio investments are generally more volatile than FDI and can exit rapidly during global uncertainty. UPSC often tests understanding of capital flows and external-sector stability rather than factual tax rates.

Q2. Which one of the following best explains the concept of “strategic autonomy” in foreign policy?

A. Maintaining military neutrality in all conflicts
B. Refusing to participate in international organisations
C. Making foreign policy decisions based primarily on national interests
D. Aligning equally with all major powers

Answer: C. Making foreign policy decisions based primarily on national interests