Q6 · UPSC Prelims 2021 · Set A · Economy

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Indian Government Bond Yields are influenced by which of the following?1.Actions of the United States Federal Reserve2.Actions of the Reserve bank of India3.Inflation and short-term interest ratesSelect the correct answer using the code given below

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

Correct answer: (d) 1, 2 and 3

Explanation

  1. A

    1 and 2 only

    1 and 2 only. Inflation and short rates also move the G-sec curve.

  2. B

    2 only

    2 only. Fed action and inflation are in the same yield story.

  3. C

    3 only

    3 only. Under-counts policy rates at home and abroad.

  4. D

    1, 2 and 3

    All three. Fed, RBI, and inflation/short rates all price Indian government bonds.

Summary. Official key is (d) 1, 2 and 3. Indian G-sec yields move with RBI policy, with US Fed spillovers, and with inflation and short-term rates. None of the three is idle.

Same topic · past papers

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  1. 2022 · Q61 · General Studies · 2 marks

    Consider the following statements: 1. Tight monetary policy of US Federal Reserve could lead to capital flight. 2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs). 3. Devaluation of domestic currency decreases the currency risk associated with ECBs. Which of the statements given above are correct? Official key: .

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