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All questions of Nature of Indian Economy for BPSC (Bihar) Exam

What among the following is NOT an example of 'public goods'?
  • a)
    National defense
  • b)
    Light Houses
  • c)
    Electricity
  • d)
    Public Parks
Correct answer is option 'C'. Can you explain this answer?

A public good is a commodity or a service provided to the Citizen without any intention of making a profit out of it. Electricity is not provided free. People pay for the service or the unit of electricity they consume. National Defence, Light House, and Public Parks are an example of Public goods as people are not charged for it by the government. Correct answer is C.



Consider the following statements regarding the sectors of Indian economy. 
1. Agriculture provides direct employment to more than 50 % people of the country.
2. The service sector is the biggest contributor to India’s economy.
3. Manufacturing activities contribute more to Indian economy than the primary sector.
4. Mining comes under primary sector.
Which of the above given statements is/ are correct? 
  • a)
    1 and 2
  • b)
    2 and 4
  • c)
    2 ,3 and 4
  • d)
    1 , 2 and 4
Correct answer is option 'B'. Can you explain this answer?

Sahil Khanna answered
Correct Answer:-  B (2,4)
Explanation: The economy is divided into three broad categories—agriculture (which includes broader activities such as mining, utilities, and construction), manufacturing, and services. Services has been, by far, the biggest contributor to GDP, accounting for over 68 percent in 2018.
The Primary sector of the economy includes any industry involved in the extraction and production of raw materials, such as farming, logging, hunting, fishing, and mining. The primary sector tends to make up a larger portion of the economy in developing countries than it does in developed countries.

The deliberate action of the government to stabilize the economy, as opposed to the inherent automatic stabilizing properties of the fiscal system, is known as
  • a)
    Forced fiscal policy
  • b)
    Manual fiscal policy
  • c)
    Discretionary fiscal policy
  • d)
    Automatic fiscal policy
Correct answer is option 'C'. Can you explain this answer?

The correct answer is option C - Discretionary fiscal policy.

Explanation:
Discretionary fiscal policy refers to the deliberate actions taken by the government to adjust its spending levels and tax rates with the goal of stabilizing the economy. Unlike automatic stabilizers, which are built into the fiscal system and automatically respond to changes in economic conditions, discretionary fiscal policy requires conscious decisions and actions by policymakers.

Here is a detailed explanation of discretionary fiscal policy:

1. Definition:
- Discretionary fiscal policy refers to the use of government spending and taxation measures to influence the overall state of the economy.
- It involves active decision-making and policy implementation by the government to counteract economic fluctuations.

2. Purpose:
- The primary goal of discretionary fiscal policy is to stabilize the economy during periods of recession or inflation.
- It aims to influence aggregate demand, employment levels, and overall economic growth.

3. Tools of Discretionary Fiscal Policy:
- Government spending: The government can increase or decrease its spending on various sectors, such as infrastructure, healthcare, education, etc., to stimulate or restrain economic activity.
- Taxation: The government can adjust tax rates, exemptions, and deductions to encourage or discourage consumer spending and business investment.

4. Expansionary Fiscal Policy:
- During a recession or economic downturn, the government can implement expansionary fiscal policy.
- This involves increasing government spending and/or reducing taxes to boost aggregate demand and stimulate economic growth.
- By increasing spending, the government creates jobs, increases consumer purchasing power, and encourages investment.

5. Contractionary Fiscal Policy:
- During periods of high inflation or economic overheating, the government can implement contractionary fiscal policy.
- This involves reducing government spending and/or increasing taxes to reduce aggregate demand and control inflationary pressures.
- By reducing spending and increasing taxes, the government aims to slow down the economy and reduce inflationary pressures.

6. Limitations of Discretionary Fiscal Policy:
- Time lags: Implementing discretionary fiscal policy measures takes time, and their impact may not be immediate.
- Political constraints: The effectiveness of discretionary fiscal policy can be influenced by political considerations and the ability to gain consensus.
- Economic forecasting challenges: Accurately predicting the state of the economy and determining the appropriate policy measures can be challenging.

In conclusion, discretionary fiscal policy refers to the deliberate actions taken by the government to stabilize the economy by adjusting its spending levels and tax rates. It is an active approach that requires conscious decision-making and policy implementation to counteract economic fluctuations.

Loans raised by the government from the public are known as:
  • a)
    Corporate borrowings
  • b)
    Common borrowings
  • c)
    Market borrowings
  • d)
    Private borrowings
Correct answer is option 'C'. Can you explain this answer?

Pooja Shah answered
The capital receipts are loans raised by the Government from the general public. The loan thus raised is termed as market loans, or borrowings by the Government from the Reserve Bank of India and other parties through the sale of Treasury Bills.

 Exchange rates for one currency against another currency, are known as:
  • a)
    Real exchange rate
  • b)
    Nominal exchange rate
  • c)
    Superfluous exchange rate
  • d)
    None of the above
Correct answer is option 'B'. Can you explain this answer?

Garima Tiwari answered
The correct answer is option 'B': Nominal exchange rate.

Explanation:
Exchange rates refer to the value of one currency in terms of another currency. They are used to determine the relative value of different currencies in international trade and investment. Exchange rates fluctuate constantly due to various factors such as supply and demand, interest rates, inflation, and government policies.

There are two types of exchange rates:
1. Nominal Exchange Rate: The nominal exchange rate is the rate at which one currency can be exchanged for another currency. It represents the current market value of one currency in terms of another. For example, if the nominal exchange rate between the US dollar and the euro is 1.20, it means that 1 US dollar can be exchanged for 1.20 euros.

2. Real Exchange Rate: The real exchange rate takes into account the differences in inflation rates between two countries. It is calculated by adjusting the nominal exchange rate for the relative price levels of the two countries. The real exchange rate reflects the purchasing power of a currency in terms of another currency. It is used to compare the cost of goods and services between countries.

The real exchange rate is influenced by factors such as inflation differentials, productivity levels, terms of trade, and non-tradable goods. It is an important indicator of a country's competitiveness in international trade. A higher real exchange rate indicates a relatively higher cost of goods and services in a country compared to its trading partners, making its exports more expensive and imports cheaper.

In summary, exchange rates for one currency against another currency are known as nominal exchange rates. Real exchange rates, on the other hand, take into account differences in inflation rates and reflect the purchasing power of a currency. Both nominal and real exchange rates play a crucial role in international trade and investment.

Consider the following statements
1. The word economics is derived from Latin words ‘Oikos” and ‘Nomos”.
2. British economist J.M.Keynes called economics a science of scarcity.
Which of the above given statements is/are incorrect? 
  • a)
    1 Only
  • b)
    Both 
  • c)
    2 Only
  • d)
    Neither 
Correct answer is option 'C'. Can you explain this answer?

Incorrect statement is 2 only.
Lionel Robbins called economics a science of scarcity not J.M.Keynes. In his landmark essay on the nature of economics, Lionel Robbins defined economics as. “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” 

Which method is usually used for calculating the purchasing power parity by the IMF?
  • a)
    Gross Domestic Product
  • b)
    Net domestic product
  • c)
    Net National Product
  • d)
    Gross National Product 
Correct answer is option 'A'. Can you explain this answer?

Deepa Iyer answered
 
  • GNP is the 'national income' according to which the IMF ranks the nations of the world in terms of the volumes—at purchasing power parity (PPP). 
  • India is ranked as the 3rd largest economy of the world (after China and the USA), while as per the nominal/ prevailing exchange rate of the rupee, India is the 7th largest economy (IMF, April 2016). Now such comparisons are done using the GDP, too.

The function of a government by which it seeks to seek a balance of employment, demand-supply, and inflation, is known as:
  • a)
    Distribution function
  • b)
    Allocation function 
  • c)
    Stabilization
  • d)
    Protection 
Correct answer is option 'C'. Can you explain this answer?

Alok Verma answered
The correct option is Option C. 
Stabilization policy is a strategy enacted by a government or its central bank that is aimed at maintaining a healthy level of economic growth and minimal price changes. In the language of business news, a stabilization policy is designed to prevent the economy from excessive "over-heating" or "slowing down."

The function of a government to provide goods that cannot normally be provided by market mechanisms between individual customers and producers, is known as:
  • a)
    Distribution function
  • b)
    Allocation function
  • c)
    Stabilization
  • d)
    Protection
Correct answer is option 'B'. Can you explain this answer?

Alok Verma answered
The allocation function is that part of government tax and expenditure policy which is concerned with influencing the provision of goods and services in the economy. 4.  This means creating conditions to promote competition among producers, as well as the welfare of consumers.

Which among the following could be said to be an 'Open Economy'?
  • a)
    A nation that follows the doctrine of Free-market and Laissez-faire economics
  • b)
    A nation that trades with other nations in goods and services and financial assets
  • c)
    An economy that operates without government intervention
  • d)
    None of the above
Correct answer is option 'B'. Can you explain this answer?

Aditya Kumar answered
An open economy refers to a country that engages in international trade, including the exchange of goods, services, and financial assets with other nations. This type of economy is characterized by its openness to global markets and competition, allowing for the movement of resources, products, and investments across borders. In an open economy, businesses and individuals can import and export goods and services, invest in foreign markets, and borrow or lend capital with other countries.

Option 1, which refers to free-market and laissez-faire economics, describes an economic system with minimal government intervention, but it does not necessarily imply that the economy is open to international trade. Option 3, an economy without government intervention, is also not necessarily an open economy, as it does not directly address international trade.

Identify the incorrect statement/s
1. Capitalism allows private property
2. Communism allows for free market
3. Capitalism, in theory, spreads wealth evenly
4. Communism encourages entrepreneurship 
Options:
  • a)
    Only 3
  • b)
    2 and 4 only
  • c)
    2 , 3 and 4
  • d)
    Only 4 
Correct answer is option 'C'. Can you explain this answer?

Manoj Nair answered
Incorrect Statements about Capitalism and Communism

Capitalism and communism are two different economic systems that have been widely debated and compared. They have different principles and objectives that affect the way businesses and individuals operate within the economy. The incorrect statements about capitalism and communism are:

2. Communism allows for free market
3. Capitalism, in theory, spreads wealth evenly
4. Communism encourages entrepreneurship

Explanation:

1. Capitalism allows private property:
- Private property is the foundation of capitalism. In a capitalist economy, individuals have the right to own and control property, including businesses, factories, and land. This right to private property is protected by law and is essential for the functioning of a market economy.

2. Communism allows for free market:
- This statement is incorrect. Communism is a type of economic system where the government owns and controls all property and resources. There is no private ownership, and the government decides what gets produced and how it is distributed. There is no free market in communism.

3. Capitalism, in theory, spreads wealth evenly:
- This statement is incorrect. Capitalism is based on the principle of individualism, where the pursuit of self-interest drives economic activity. While capitalism can generate wealth, it does not guarantee that this wealth will be distributed evenly. In fact, capitalism often results in income inequality, where a small percentage of the population holds a significant portion of the wealth.

4. Communism encourages entrepreneurship:
- This statement is incorrect. In communism, the government controls all economic activity, including entrepreneurship. There is no incentive for individuals to start their own businesses or innovate since the government controls all resources and production.

Conclusion:

In conclusion, while capitalism and communism are two different economic systems, they both have their strengths and weaknesses. It is essential to understand the fundamental principles of both systems to make informed decisions about economic policies and strategies.

Whenever the government spends more than it collects through revenue, the resulting imbalance is known as :
  • a)
    Public deficit
  • b)
    Market deficit
  • c)
    Government deficit
  • d)
    Budget deficit
Correct answer is option 'D'. Can you explain this answer?

Alok Verma answered
 A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals.

What among the following is NOT an example of 'private goods'?
  • a)
    Clothes
  • b)
    Cars
  • c)
    Military
  • d)
    Food items 
Correct answer is option 'C'. Can you explain this answer?

Private Goods and Military

Private goods are those that are both excludable and rivalrous in consumption. Excludable means that the good can be restricted to a particular group of people. Rivalrous means that the consumption of the good by one person reduces the availability of the same good for others. Here, military is not an example of a private good because it is a public good. Public goods are those goods that are non-excludable and non-rivalrous.

Explanatory Points

- Private goods are those goods that are both excludable and rivalrous in consumption.
- Excludable means that the good can be restricted to a particular group of people.
- Rivalrous means that the consumption of the good by one person reduces the availability of the same good for others.
- Examples of private goods include clothes, cars, and food items.
- Military is not an example of a private good because it is a public good.
- Public goods are those goods that are non-excludable and non-rivalrous.
- Examples of public goods include national defense, public parks, and street lighting.

Conclusion

In conclusion, military is not an example of a private good because it is a public good. Private goods are excludable and rivalrous, while public goods are non-excludable and non-rivalrous. It is important to understand the distinction between private and public goods in order to make informed decisions about resource allocation and public policy.

Which of the following is not a feature of capitalism?
1. Limited role of the government in economic activities.
2. Freedom of competition
3. Efficiency, innovation and creativity
4. Classless society
  • a)
    2 and 3
  • b)
    1 and 4
  • c)
    0nly 3
  • d)
    Only 4 
Correct answer is option 'D'. Can you explain this answer?

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. It is characterized by features such as limited role of the government in economic activities, freedom of competition, efficiency, innovation, and creativity. However, a classless society is not a feature of capitalism as it is characterized by a hierarchical social structure based on income and wealth.

Features of Capitalism:

1. Limited role of the government in economic activities: In a capitalist economy, the government's role is limited to providing a legal framework, protecting property rights, and enforcing contracts. The government does not intervene in economic activities such as production, distribution, and pricing.

2. Freedom of competition: Capitalism is characterized by the freedom of competition, which means that businesses are free to operate in a competitive market, and consumers have the freedom to choose the products and services they want to buy.

3. Efficiency, innovation, and creativity: Capitalism encourages efficiency, innovation, and creativity as businesses compete to produce goods and services that are better and cheaper than their competitors. This competition drives innovation and efficiency, leading to economic growth and development.

4. Private ownership of the means of production: In a capitalist economy, the means of production are owned and controlled by private individuals or businesses. This includes land, factories, and other resources used to produce goods and services.

Conclusion:

In conclusion, a classless society is not a feature of capitalism, as it is characterized by income and wealth inequality. Capitalism is an economic system based on the private ownership of the means of production, limited role of the government in economic activities, freedom of competition, and efficiency, innovation, and creativity.

 When was the Fiscal Responsibility and Budget Management Act implemented?
  • a)
    1950
  • b)
    1970
  • c)
    1993
  • d)
    2003
Correct answer is option 'D'. Can you explain this answer?

It was enacted in August 2003 that made it obligatory for the government to pursue a prudent fiscal policy through the institutional framework. The rules under FRBMA, 2003 were notified with effect from July, 2004 
The Act includes several provisions such as ensuring greater transparency in fiscal operations.

Which of the following is/are not included in the GDP? 
1. Pensions
2. Scholarships
3. Subsidies
4. Remittances
Select the correct answer from the options given below:
  • a)
    1, 2 and 3
  • b)
    2, 3 and 4
  • c)
    1, 2 and 4
  • d)
    1, 2, 3 and 4 
Correct answer is option 'D'. Can you explain this answer?

Sandeep Iyer answered
Transfer payments such as pensions, scholarships, subsidies etc are excluded from GDP calculations because there is no production of any goods or services in exchange of such payments. Remittances (Money sent home from emigrants working abroad) are also not included in the GDP. This is because, in GDP estimations, only those goods and services produced within a country are included. 

Consider the following statements:
Statement-I:
A mixed economic system emerged in the late 1930s with market economies adopting policies from non-market economies to recover from the Depression.
Statement-II:
The World Bank recognized the necessity of state intervention in the economy, deviating from its previous stance in support of free market principles.
Which one of the following is correct in respect of the above statements?
  • a)
    Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • b)
    Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • c)
    Statement-I is correct, but Statement-II is incorrect
  • d)
    Statement-I is incorrect, but Statement-II is correct
Correct answer is option 'A'. Can you explain this answer?

Vandana Kumari answered
Overview of the Statements
The question revolves around the emergence of mixed economies and the evolving stance of the World Bank regarding state intervention in the economy.

Statement-I Analysis
- **Mixed Economic System**:
- The late 1930s saw the rise of mixed economic systems, primarily as a response to the Great Depression.
- Market economies adopted various policies inspired by non-market economies (e.g., socialism) to stabilize and recover from severe economic downturns.
- This blend aimed to combine the efficiency of market mechanisms with social welfare principles.

Statement-II Analysis
- **World Bank's Shift**:
- The World Bank initially promoted free market principles as the primary means for economic development.
- However, recognizing the complexities of economic realities, it gradually acknowledged the necessity of state intervention.
- This shift reflected an understanding that government involvement could play a crucial role in economic stabilization and growth, especially in developing nations.

Conclusion
- **Correctness of Statements**:
- Both statements are accurate. Statement-I describes the historical context of mixed economies emerging to address the Great Depression.
- Statement-II explains the World Bank's evolving perspective, which aligns with the trends in economic policy during that era.
- **Explanation Link**:
- Statement-II elucidates the rationale behind the emergence of mixed economies in Statement-I, as both reflect a broader recognition of the need for state intervention in economic affairs to ensure recovery and stability.
In summary, the correct answer is option 'A' as both statements are correct, and Statement-II effectively explains the context of Statement-I.

Consider the following two statements:
Statement-I: GDP serves as a widely-used metric for comparing global economies, with the IMF ranking nations based on GDP sizes.
Statement-II: India presently ranks as the world's fifth-largest economy at exchange rates and third-largest at purchasing power parity (PPP).
Which one of the following is correct in respect of the above statements?
  • a)
    a. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • b)
    b. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • c)
    c. Statement-I is correct, but Statement-II is incorrect
  • d)
    d. Statement-I is incorrect, but Statement-II is correct
Correct answer is option 'B'. Can you explain this answer?

Shivani Singh answered
Explanation:

Statement-I:
- GDP serves as a widely-used metric for comparing global economies.
- The IMF ranks nations based on GDP sizes.
- It is a commonly accepted practice to use GDP as a measure of economic size and strength.

Statement-II:
- India presently ranks as the world's fifth-largest economy at exchange rates and third-largest at purchasing power parity (PPP).
- This indicates that India's economic size and strength are significant on a global scale.
- The ranking based on GDP at exchange rates and PPP provides different perspectives on India's economic standing.

Conclusion:
- Both Statement-I and Statement-II are correct, as they provide insights into the significance of GDP in comparing global economies and India's current economic ranking.
- However, Statement-II does not directly explain Statement-I, as it focuses on India's specific position in the global economy rather than the general use of GDP as a metric.

The Economist who developed Human Development Index (HDI) is
  • a)
    Simon Kuznets
  • b)
    David Ricardo
  • c)
    Joseph Schumpeter
  • d)
    Mahbub Ul Haq
Correct answer is option 'D'. Can you explain this answer?

The Economist who developed Human Development Index (HDI) is Mahbub Ul Haq.

Mahbub Ul Haq was a Pakistani economist who served as the Finance Minister of Pakistan in the 1980s. He was a strong advocate of human development and believed that GDP alone was not a sufficient measure of development. He developed the Human Development Index (HDI) in collaboration with Amartya Sen, an Indian economist, in 1990.

What is Human Development Index (HDI)?

The Human Development Index (HDI) is a composite statistic of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development. It was developed as an alternative to the traditional economic measures of Gross Domestic Product (GDP) and Gross National Product (GNP), which only measure economic progress and do not take into account the social and human aspects of development.

How is HDI calculated?

The HDI is calculated using three dimensions of human development: health, education, and income. It takes into account the following indicators:

1. Life expectancy at birth
2. Mean years of schooling
3. Expected years of schooling
4. Gross national income (GNI) per capita

These indicators are combined to create a single index value ranging from 0 to 1, with a higher value indicating higher human development.

Conclusion:

Mahbub Ul Haq's contribution to the field of economics and development is significant. His work on human development and the creation of HDI has helped shift the focus of development policies from economic growth to a more holistic approach that considers the social and human aspects of development. The HDI is now widely used by governments, international organizations, and researchers as a measure of development and progress.

Which of the following is not an intermediate good?
  • a)
    Flour used to make cake
  • b)
    Wood used to make a chair
  • c)
    Steel used in manufacturing a car
  • d)
    Car tyre sold in a retail showroom 
Correct answer is option 'D'. Can you explain this answer?

Suresh Reddy answered
Intermediate goods refer to those goods which are used either for resale or for further production. Final goods refer to those goods which are used for final consumption.
Options a, b and c are intermediate goods where as option d is a final good as it is directly consumed by the user. 

The records of exports and imports in goods and services and transfer payments is known as
  • a)
    Current account
  • b)
    Budget surplus
  • c)
    Economic leakage
  • d)
    degree of openness
Correct answer is option 'A'. Can you explain this answer?

Kaavya Ahuja answered
The current account records a nation's transactions with the rest of the world—specifically its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments—over a defined period of time, such as a year or a quarter.

The function of a government to fairly share the public's resources is known as
  • a)
    Distribution function
  • b)
    Allocation function 
  • c)
    Stabilization
  • d)
    Protection 
Correct answer is option 'A'. Can you explain this answer?

Distribution Function of Government

The distribution function of government refers to the role of a government to fairly share the public's resources among its citizens. It is a fundamental responsibility of a government to ensure that its citizens have access to the basic necessities of life such as food, shelter, clothing, and healthcare.

Importance of Distribution Function

The distribution function is important for ensuring social justice and reducing inequality in society. It ensures that the benefits of economic growth are shared by all citizens, not just a privileged few. It also helps to reduce poverty and improve the standard of living of the most vulnerable sections of society.

Methods of Distribution Function

The government can perform the distribution function through various methods such as:

1. Progressive taxation: The government can use a progressive tax system, where those with higher incomes pay a higher percentage of their income in taxes. The revenue generated from taxes can be used to fund social welfare programs that benefit the less fortunate members of society.

2. Subsidies: The government can provide subsidies to support low-income households with basic necessities such as food, housing, and healthcare.

3. Public services: The government can provide free or subsidized public services such as education, healthcare, and transportation to ensure that everyone has access to these services regardless of their income.

4. Social welfare programs: The government can implement social welfare programs such as unemployment benefits, old-age pensions, and disability allowances to support those who are unable to work or earn a livelihood.

Conclusion

In conclusion, the distribution function of government is a crucial role that ensures the equitable distribution of resources among its citizens. It is important for reducing poverty, promoting social justice, and improving the standard of living of the most vulnerable members of society.

‘Remittances’ are included in
  • a)
    G.N.P and G.D.P
  • b)
    G.N.P only
  • c)
    G.D.P only
  • d)
    None of the above
Correct answer is option 'B'. Can you explain this answer?

Zara Khan answered
Remittances are money sent home from emigrants working abroad. It is included in GNP and not GDP because GDP takes in to account the value of only those goods and services which are produced within the country. 

Which type of economy is also called ‘dual economy’?
  • a)
    Free market economy
  • b)
    Socialist economy
  • c)
    Communist economy
  • d)
    Mixed economy 
Correct answer is option 'D'. Can you explain this answer?

Alok Sengupta answered
A dual economy refers to the existence of two distinct types of economic segments within an economy.
Mixed Economy = Market economy + Command economy. 

Which statements about Gross Domestic Product (GDP) are /are correct?
1. GDP is the total value of all final goods and services that are sold in a given year.
2. In GDP estimates, the value of intermediary goods is not included at all.
3. GDP is a quantitative concept.
4. GDP measures growth but not progress.
Select the correct answer from the options given below: 
  • a)
    1 and 4 only
  • b)
    1, 2 and 3 only
  • c)
    2, 3 and 4 only
  • d)
    1, 2, 3 and 4 
Correct answer is option 'C'. Can you explain this answer?

Nisha Tiwari answered
GDP is the total value of all goods and services produced in a country in a given year irrespective of them being sold or not. 
Intermediate goods are not included in the calculation of a country's GDP. The reason for not including them in the GDP is because it will lead to counting the value of the goods twice, and the norm is to count the price of final goods only once.
GDP is a measure of growth and not progress: GDP indicates growth that is quantitative. Qualitative aspects such as development, progress and well being are not taken in to account.

The concept of ‘collective ownership ‘of means of production is associated with which of the following? ​
  • a)
    Only communism
  • b)
    Only socialism
  • c)
    Both a and b
  • d)
    Neither
Correct answer is option 'B'. Can you explain this answer?

Isha Tiwari answered
"concept" refers to a general idea or understanding of something, often in the form of an abstract or mental construct. It can be a theoretical or practical notion that helps people to categorize, understand, or explain different aspects of the world around them. Concepts can be used to create models, theories, or frameworks that describe the relationships among different phenomena or objects. They can be applied in various fields such as philosophy, psychology, linguistics, biology, mathematics, and many others. Overall, the concept of "concept" plays a crucial role in human cognition and communication by providing a shared language and understanding of the world.

Consider the following statements: 
1. If the national income is being derived at ‘Factor Cost', the indirect taxes do not need to be deducted from it.
2. In this case, the government does not have to add their income accruing from indirect taxes to the national income.
Which of these statements is/ are correct?
  • a)
    1 Only
  • b)
    Both 1 and 2
  • c)
    2 Only
  • d)
    None of the above
Correct answer is option 'C'. Can you explain this answer?

Kajal Chopra answered
Explanation:
1. Statement 1:
- When national income is calculated at 'Factor Cost', it means that indirect taxes are not included in the calculation.
- Therefore, there is no need to deduct indirect taxes from the national income as they are not a part of it.
2. Statement 2:
- Since the national income is being derived at 'Factor Cost', the government's income from indirect taxes is not added to the national income.
- This is because indirect taxes are not considered as a part of the national income when calculated at 'Factor Cost'.
Therefore, Statement 2 is correct. The government does not have to add their income accruing from indirect taxes to the national income when it is being derived at 'Factor Cost'.

The concept of Gross National Happiness (GNH) was first introduced in
  • a)
    Bhutan
  • b)
    Tibet
  • c)
    Nepal
  • d)
    India
Correct answer is option 'A'. Can you explain this answer?

Zara Khan answered
The phrase ‘gross national happiness’ was first coined by the 4th King of Bhutan, King Jigme Singye Wangchuck, in 1972 when he declared, “Gross National Happiness is more important than Gross Domestic Product.”
The following 4 parameters are used to measure the happiness,
1. Higher per capita income
2. Good Governance
3. Environmental protection
4. Cultural promotion (i.e., inculcation of ethics and spiritual values in life without which, progress may become curse rather than a blessing). 

Consider the following statements.
1. The concept of economic growth is quantitative whereas economic development is qualitative.
2. The concept of inclusive growth is associated with economic development.
Identify the correct statement/s.
  • a)
    1 only
  • b)
    2 only
  • c)
    Both
  • d)
    Neither
Correct answer is option 'C'. Can you explain this answer?

C is the correct option. Both Are correct.
  • Growth is the expansion of some object, institution or population which is measurable and is always quantitative whereas development is related to qualitative improvement,” said the Reader of the department of Economics, Mangalore University Prof Shripathi Kalluraya.
  • Inclusive growth is a concept that advances equitable opportunities for economic participants during economic growth with benefits incurred by every section of society. The definition of inclusive growth implies direct links between the macroeconomic and microeconomic determinants of the economy and economic growth.
     

Which is considered as the official GDP of India?
  • a)
    GDP at factor cost in constant prices
  • b)
    GDP at factor cost in current prices
  • c)
    GDP at market cost in constant prices
  • d)
    GDP at market cost in current prices
Correct answer is option 'C'. Can you explain this answer?

Disha Yadav answered
GDP at market cost in constant prices is considered as the official GDP of India

Explanation:

Gross Domestic Product (GDP) is the total value of all final goods and services produced within the domestic territory of a country in a given period of time. GDP is an important indicator of the economic health of a country. In India, the Central Statistical Office (CSO) under the Ministry of Statistics and Programme Implementation (MOSPI) is responsible for estimating GDP.

There are two methods of calculating GDP - the factor cost method and the market cost method. The factor cost method measures the value of goods and services at the production stage, while the market cost method measures the value of goods and services at the market prices.

In India, the official GDP is calculated using the market cost method in constant prices. Constant prices refer to a base year, against which the prices of goods and services in the current year are compared. This is done to remove the effect of inflation on GDP.

The use of market cost method in constant prices gives a more accurate picture of the real growth of the economy, as it takes into account the changes in both prices and production levels. This method also allows for international comparisons of GDP, as it provides a standard measure of economic output across countries.

In conclusion, the official GDP of India is calculated using the market cost method in constant prices. This method provides a more accurate picture of the real growth of the economy and allows for international comparisons of GDP.

The ratio of foreign rates to domestic rates measured in the 'same' currency is known as:
  • a)
    Real exchange rate
  • b)
    Nominal exchange rate
  • c)
    Superfluous exchange rate
  • d)
    None of the above
Correct answer is option 'A'. Can you explain this answer?

Gauri Shah answered
The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies. The weights are determined by comparing the relative trade balance of a country's currency against each country within the index.

Consider the following statements about HDI rankings of 2019.
1. The HDI rank of India has slightly improved in 2019.
2. India is the best performing country in the south Asian region.
3. African nation Niger is the worst performing country in 2019.
4. India is the worst performing country among BRICS grouping.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 ,3 and 4
  • c)
    2 and 3 only
  • d)
    1 ,2 and 4
Correct answer is option 'B'. Can you explain this answer?

Shivani Dey answered
India is ranked 129 out of 189 countries on the 2019 Human Development Index (HDI) improving from the 130th position in 2018.
Sri Lanka (71) is the best performing country in South Asian region.
Niger is ranked 189th (Last ranked country)
Position of BRICS countries in the HDI 2019: 
Brazil -79.
Russia- 49.
China-85
South Africa- 113
India-129

Consider the following pairs:
1. Market Economy - Laissez-faire policy
2. Non-Market Economy - Emphasis on wealth exchange
3. Socialist Model - State control of natural resources
4. Communist Model - State control of labor and resources
How many pairs given above are correctly matched?
  • a)
    Only one pair
  • b)
    Only two pairs
  • c)
    Only three pairs
  • d)
    All four pairs
Correct answer is option 'C'. Can you explain this answer?

1. Market Economy - Laissez-faire policy: Correct. A market economy operates on the principles of laissez-faire, emphasizing minimal government intervention and relying on market forces to regulate economic activities.
2. Non-Market Economy - Emphasis on wealth exchange: Incorrect. A non-market economy, such as socialism or communism, does not emphasize wealth exchange. Instead, it focuses on state control of resources and production, aiming for the well-being of all citizens and preventing economic inequality through state ownership and planning.
3. Socialist Model - State control of natural resources: Correct. In a socialist model, the state controls natural resources, which are utilized for the benefit of society as a whole.
4. Communist Model - State control of labor and resources: Correct. In a communist model, the state controls both labor and resources, ensuring that production and distribution are managed centrally by the state to achieve a classless society.
Thus, three pairs are correctly matched: 1, 3, and 4.

Consider the following statements:
Statement-I:
Economics is the study of how societies use resources to produce valuable commodities and distribute them among different people.
Statement-II:
Economics studies how individuals, firms, governments, and organizations make choices that determine a society's resource utilization.
Which one of the following is correct in respect of the above statements?
  • a)
    Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • b)
    Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • c)
    Statement-I is correct, but Statement-II is incorrect
  • d)
    Statement-I is incorrect, but Statement-II is correct
Correct answer is option 'A'. Can you explain this answer?


Both Statement-I and Statement-II are accurate in describing the field of economics. Statement-I emphasizes the essence of economics in terms of resource utilization and distribution among individuals, while Statement-II elaborates on the decision-making processes involving various entities that influence how resources are utilized within a society. Statement-II further elucidates how the choices made by individuals, firms, governments, and organizations impact the overall resource allocation and utilization within a community. Thus, both statements are correct, and Statement-II logically explains Statement-I in the context of economic studies.

Which of the following statement/s about Gender Inequality Index is not true? 
  • a)
    It was introduced in 2010.
  • b)
    It measures gender inequalities in three important aspects of human Development namely, reproductive health, empowerment, economic status.
  • c)
    India’s rank is 122 out of 162 countries in the 2019 GII.
  • d)
    None of the above 
Correct answer is option 'D'. Can you explain this answer?

Kaavya Tiwari answered
D is the correct option. None of the statements are true.The GII is built on the same framework as the IHDI—to better expose differences in the distribution of achievements between women and men. It measures the human development costs of gender inequality. Thus the higher the GII value the more disparities between females and males and the more loss to human development. 

How many countries are covered in the Human Development Index (HDI) of 2019?
  • a)
    154
  • b)
    178
  • c)
    189
  • d)
    193 
Correct answer is option 'C'. Can you explain this answer?

Shalini Datta answered
The Human Development Index (HDI) is a composite index developed by the United Nations Development Programme (UNDP). It measures the average achievements of countries in three dimensions of human development: a long and healthy life, access to education, and a decent standard of living. The HDI is released annually, with the latest report being the 2019 edition.

The number of countries covered in the HDI of 2019 is 189. This means that the HDI covers a vast majority of the world's nations. The report provides a snapshot of the state of human development across the globe and highlights areas where progress has been made and where more work is needed.

The HDI is a valuable tool for policymakers, researchers, and development practitioners as it provides insights into the factors that contribute to human development and helps identify areas where interventions can be most effective. The index also serves as a benchmark against which countries can measure their progress over time.

In conclusion, the HDI of 2019 covers 189 countries and provides a comprehensive picture of human development across the globe. It is an important tool for shaping policies and interventions aimed at improving the lives of people around the world.

Which economic system led to increase in inequality, class conflicts and economic depressions?
  • a)
    Capitalism
  • b)
    Communism
  • c)
    Mixed economy
  • d)
    Both a and b
Correct answer is option 'A'. Can you explain this answer?

Capitalism is the economic system that led to an increase in inequality, class conflicts, and economic depressions.

Explanation:

Capitalism is an economic system in which private individuals or businesses own and control the means of production and distribution of goods and services. The main goal of capitalism is to maximize profits and accumulate wealth. This system has been criticized for its negative effects on society, including the following:

1. Inequality: Capitalism often leads to a widening gap between the rich and the poor. The wealthy individuals or businesses have more resources and opportunities to accumulate wealth, while the poor struggle to make ends meet. This results in unequal access to resources, education, healthcare, and other basic needs.

2. Class conflicts: The unequal distribution of wealth and resources often leads to class conflicts between the rich and the poor. The rich use their power and influence to maintain their position and protect their interests, while the poor struggle to gain equal rights and opportunities.

3. Economic depressions: Capitalism is prone to economic cycles of growth and recession. During economic booms, businesses and individuals accumulate wealth and invest in new projects. However, during economic downturns, businesses may fail, jobs may be lost, and the economy may contract. This results in economic depressions that can have severe impacts on society.

In conclusion, capitalism is an economic system that has led to an increase in inequality, class conflicts, and economic depressions. While it has some benefits, such as promoting innovation and entrepreneurship, it also has negative effects on society that need to be addressed.

Gross value added (GVA) at basic prices
  • a)
    Includes production taxes and excludes production subsidies
  • b)
    Includes product taxes and excludes product subsidies 
  • c)
    Includes only production taxes and product taxes
  • d)
    Includes only production subsides and product subsidies 
Correct answer is option 'A'. Can you explain this answer?

Zara Khan answered
GVA at basic prices = factor cost + (Production taxes - Production subsidies) 
Examples of production taxes are land revenues, stamps and registration fees and tax on profession. Examples of production subsidies include, input subsidies to farmers, subsidies to village and small industries, administrative subsidies to corporations or cooperatives, etc Some examples of product taxes are excise tax, sales tax, service tax and import and export duties. Product subsidies include food, petroleum and fertilizer subsidies, interest subsidies given to farmers, households, etc.

Which of the following comes under Macroeconomics?
1. Gross Domestic product
2. National income
3. Inflation
4. Profits of a firm
5. Demand and supply
Select the correct answer from the options given below: 
  • a)
    1 and 3
  • b)
    1, 2 and 5
  • c)
    1, 2 and 3
  • d)
    All of the above
Correct answer is option 'C'. Can you explain this answer?

Macroeconomics studies larger phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment etc.
Microeconomics: Microeconomics is a branch of economics that studies the behavior of individual units in making decisions regarding the allocation of scarce resources and the interactions among these individual units. 

The concept of ‘invisible hand’ propagated by Adam Smith means
  • a)
    Every person, by looking out for themselves, inadvertently helps to create the best outcome for all.
  • b)
    A wealthy nation is one that is populated with citizens working productively.
  • c)
    An institutional framework is necessary to steer humans toward productive pursuits that are beneficial to society.
  • d)
    None of the above.
Correct answer is option 'A'. Can you explain this answer?

The phrase invisible hand was introduced by Adam Smith in his book 'The Wealth of Nations'. He assumed that an economy can work well in a free market scenario where everyone will work for his/her own interest.
He explained that an economy will comparatively work and function well if the government will leave people alone to buy and sell freely among themselves. He suggested that if people were allowed to trade freely, self-interested traders present in the market would compete with each other, leading markets towards the positive output with the help of an invisible hand.
The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand.

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