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Consider the following statements with reference to the cost-push inflation: 1. It is inflation caused by an increase in prices of inputs like labor and raw material.2. This inflation is always a strong indicator of an expanding economy. Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Consider the following statements with reference to the cost-push inflation:
1. It is inflation caused by an increase in prices of inputs like labor and raw material.
2. This inflation is always a strong indicator of an expanding economy.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
Prateek Dasgupta answered |
Cost-Push Inflation
Cost-push inflation refers to a situation where there is an increase in the prices of inputs, such as labor and raw materials, leading to a rise in the overall price level in the economy. It is caused by factors that directly affect the production costs of goods and services. Let's evaluate the given statements to determine their correctness.
Statement 1: It is inflation caused by an increase in prices of inputs like labor and raw material.
This statement is correct. Cost-push inflation occurs when there is an increase in the prices of inputs used in the production process. When the cost of labor or raw materials rises, businesses often pass on these increased costs to consumers by raising the prices of their products or services. This results in an overall increase in the price level in the economy.
Statement 2: This inflation is always a strong indicator of an expanding economy.
This statement is incorrect. Cost-push inflation is not always a strong indicator of an expanding economy. While an increase in the prices of inputs may result from an expanding economy, it can also occur due to other factors such as supply disruptions, changes in government policies, or external shocks.
Explanation:
Cost-push inflation is primarily driven by factors that increase the costs of production. Some common causes of cost-push inflation include:
- Increase in wages: If there is a significant increase in wages demanded by workers, businesses may have to increase the prices of their products to cover the higher labor costs.
- Increase in raw material prices: Higher prices of raw materials, such as oil, metals, or agricultural products, can lead to an increase in production costs, which may be passed on to consumers.
- Higher taxes or regulations: If the government imposes higher taxes or introduces stricter regulations on businesses, it can lead to increased production costs, which may result in cost-push inflation.
However, it is important to note that cost-push inflation is not always a sign of a growing economy. In some cases, it can be a sign of economic instability or inefficiencies. For example, if there is a supply shock or a disruption in the availability of key inputs, it can lead to an increase in prices without a corresponding increase in economic output.
In conclusion, statement 1 is correct as cost-push inflation is caused by an increase in prices of inputs like labor and raw materials. However, statement 2 is incorrect as cost-push inflation is not always a strong indicator of an expanding economy.
Cost-push inflation refers to a situation where there is an increase in the prices of inputs, such as labor and raw materials, leading to a rise in the overall price level in the economy. It is caused by factors that directly affect the production costs of goods and services. Let's evaluate the given statements to determine their correctness.
Statement 1: It is inflation caused by an increase in prices of inputs like labor and raw material.
This statement is correct. Cost-push inflation occurs when there is an increase in the prices of inputs used in the production process. When the cost of labor or raw materials rises, businesses often pass on these increased costs to consumers by raising the prices of their products or services. This results in an overall increase in the price level in the economy.
Statement 2: This inflation is always a strong indicator of an expanding economy.
This statement is incorrect. Cost-push inflation is not always a strong indicator of an expanding economy. While an increase in the prices of inputs may result from an expanding economy, it can also occur due to other factors such as supply disruptions, changes in government policies, or external shocks.
Explanation:
Cost-push inflation is primarily driven by factors that increase the costs of production. Some common causes of cost-push inflation include:
- Increase in wages: If there is a significant increase in wages demanded by workers, businesses may have to increase the prices of their products to cover the higher labor costs.
- Increase in raw material prices: Higher prices of raw materials, such as oil, metals, or agricultural products, can lead to an increase in production costs, which may be passed on to consumers.
- Higher taxes or regulations: If the government imposes higher taxes or introduces stricter regulations on businesses, it can lead to increased production costs, which may result in cost-push inflation.
However, it is important to note that cost-push inflation is not always a sign of a growing economy. In some cases, it can be a sign of economic instability or inefficiencies. For example, if there is a supply shock or a disruption in the availability of key inputs, it can lead to an increase in prices without a corresponding increase in economic output.
In conclusion, statement 1 is correct as cost-push inflation is caused by an increase in prices of inputs like labor and raw materials. However, statement 2 is incorrect as cost-push inflation is not always a strong indicator of an expanding economy.
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Consider the following statements with reference to Monetized deficit of the Government of India:1. It is that part of the government deficit which is financed solely by borrowing from the Reserve Bank of India.2. It involves only printing of high value currency notes by the RBI.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Consider the following statements with reference to Monetized deficit of the Government of India:
1. It is that part of the government deficit which is financed solely by borrowing from the Reserve Bank of India.
2. It involves only printing of high value currency notes by the RBI.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
Nilesh Patel answered |
- Monetized deficit, also known as the ‘net reserve bank credit to the government’, is that part of the government deficit which is financed solely by borrowing from the RBI. Hence statement 1 is correct
- Since borrowings from the RBI can be both short-term and long-term, therefore, monetized deficit is the sum of the net issuance of short-term treasury bills, dated securities (that is, long-term borrowing from the RBI) and rupee coins held exclusively by the RBI, net of Government’s deposits with the RBI. Hence statement 2 is not correct.
This is different from the Traditional Budget deficit in two ways-
- Traditional Budget deficit includes 91-day treasury bills held by both, the RBI and non-RBI entities whereas Monetized deficit includes 91-day Treasury Bills held only by the RBI.
- Traditional Budget deficit includes only short-term sources of finance whereas Monetized deficit includes long-term securities also.
Arrange the following renewable sources of energy in increasing order of their contribution to total installed capacity in India.1. Solar Power2. Wind Power3. Bio PowerSelect the correct answer using the code given below.- a)1-3-2
- b)3-2-1
- c)2-1-3
- d)1-2-3
Correct answer is option 'B'. Can you explain this answer?
Arrange the following renewable sources of energy in increasing order of their contribution to total installed capacity in India.
1. Solar Power
2. Wind Power
3. Bio Power
Select the correct answer using the code given below.
a)
1-3-2
b)
3-2-1
c)
2-1-3
d)
1-2-3
|
|
Nilesh Patel answered |
- As of 31 May 2021, the total installed capacity for Renewables is 95.66 GW with the following break up:
- Wind power: 39.44 GW
- Solar Power: 41.09 GW
- BioPower: 10.34 GW
- Small Hydro Power: 4.79 GW
- Wind energy capacity in India has increased by 2.2 times from FY 2016-17 to FY 2020-21
- Solar power capacity has increased by more than 5 times in the last five years from 6.7 GW to 40 GW in March 2021. Government of India further targets to increase the total Renewable Energy Capacity to 450GW by 2030.
- 42 solar parks of aggregate capacity 23,499 MW have been approved in 17 states up to March 2019Solar Parks in Pavagada (2 GW), Kurnool (1 GW) and Bhadla-II (648 MW) included in top 5 operational solar parks of 7 GW capacity in the country.
- The world’s largest renewable energy park of 30 GW capacity solar-wind hybrid project is under installation in Gujarat
Hence, option (b) is the correct answer.
In the context of the types of Inflation, consider the following statements:1. Headline Inflation refers to the change in the value of all goods in the basket including food and fuel.2. Core Inflation is more volatile than headline inflation.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
In the context of the types of Inflation, consider the following statements:
1. Headline Inflation refers to the change in the value of all goods in the basket including food and fuel.
2. Core Inflation is more volatile than headline inflation.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
|
Rajesh Khatri answered |
The correct answer is (a) 1 only.
Headline inflation refers to the percentage change in the price of a basket of goods and services that are consumed by households. This basket includes a wide range of goods and services, including food, fuel, housing, clothing, and medical care. Headline inflation is a broad measure of inflation that reflects the overall price level in an economy.
Core inflation, on the other hand, refers to the percentage change in the price of a basket of goods and services that excludes volatile items such as food and fuel. Core inflation is considered a more reliable measure of underlying inflation trends, as it excludes the short-term fluctuations in the prices of volatile items.
Therefore, statement 1 is correct because headline inflation does indeed refer to the change in the value of all goods in the basket, including food and fuel. However, statement 2 is incorrect because core inflation is generally less volatile than headline inflation, as it excludes the short-term fluctuations in the prices of volatile items.
Therefore, the correct answer is (a) 1 only.
Which of the following is/are the components of high-powered money?1. Currency held by public2. Currency held by commercial banks3. Foreign Exchange reserves held by RBISelect the correct answer using the code given below.- a)1 and 2 only
- b)2 and 3 only
- c)1 only
- d)1, 2 and 3
Correct answer is option 'A'. Can you explain this answer?
Which of the following is/are the components of high-powered money?
1. Currency held by public
2. Currency held by commercial banks
3. Foreign Exchange reserves held by RBI
Select the correct answer using the code given below.
a)
1 and 2 only
b)
2 and 3 only
c)
1 only
d)
1, 2 and 3
|
Shraddha Tiwari answered |
Components of High-Powered Money:
1. Currency held by public:
It refers to the total amount of currency notes and coins that are in circulation among the general public and are not held by the commercial banks. The currency held by the public is a part of the high-powered money as it is the liability of the central bank.
2. Currency held by commercial banks:
The commercial banks hold a certain amount of currency with them which is known as cash reserve ratio (CRR). This is the percentage of deposits that the banks have to maintain with the central bank. This reserve maintained by the commercial banks is a part of the high-powered money.
3. Foreign Exchange reserves held by RBI:
Foreign exchange reserves refer to the foreign currency deposits and bonds held by the central bank. These reserves are held to maintain the stability of the domestic currency and also to meet any external financial obligations. The foreign exchange reserves held by the RBI are also a part of the high-powered money.
Therefore, the correct answer is option 'A', i.e. 1 and 2 only. Foreign exchange reserves held by RBI are not a component of high-powered money.
1. Currency held by public:
It refers to the total amount of currency notes and coins that are in circulation among the general public and are not held by the commercial banks. The currency held by the public is a part of the high-powered money as it is the liability of the central bank.
2. Currency held by commercial banks:
The commercial banks hold a certain amount of currency with them which is known as cash reserve ratio (CRR). This is the percentage of deposits that the banks have to maintain with the central bank. This reserve maintained by the commercial banks is a part of the high-powered money.
3. Foreign Exchange reserves held by RBI:
Foreign exchange reserves refer to the foreign currency deposits and bonds held by the central bank. These reserves are held to maintain the stability of the domestic currency and also to meet any external financial obligations. The foreign exchange reserves held by the RBI are also a part of the high-powered money.
Therefore, the correct answer is option 'A', i.e. 1 and 2 only. Foreign exchange reserves held by RBI are not a component of high-powered money.
A government cuts taxes and runs a budget deficit in order to stimulate consumer spending. However, consumer responds to it by increasing savings instead of spending more. The forward looking approach of consumers is based on the fact that increased borrowings by the government will be repaid by taxes in future. This will lead to a similar impact on the economy as borrowing by the government today.
Which of the following is best described in the passage given above?- a)Ricardian equivalence
- b)Goodhart’s law
- c)Okun's Law
- d)Grandfather clause
Correct answer is option 'A'. Can you explain this answer?
A government cuts taxes and runs a budget deficit in order to stimulate consumer spending. However, consumer responds to it by increasing savings instead of spending more. The forward looking approach of consumers is based on the fact that increased borrowings by the government will be repaid by taxes in future. This will lead to a similar impact on the economy as borrowing by the government today.
Which of the following is best described in the passage given above?
Which of the following is best described in the passage given above?
a)
Ricardian equivalence
b)
Goodhart’s law
c)
Okun's Law
d)
Grandfather clause
|
|
Nilesh Patel answered |
- The Ricardian equivalence theorem (RET) plays an important role in macroeconomic theory. The RET suggests that fiscal stimuli which are defined in terms of deficit-financed public spending hikes or tax cuts will lead to a crowding out of private consumption, thereby decreasing the effectiveness of fiscal policy in boosting economic activity.
- It states that consumers are forward-looking and will base their spending not only on their current income but also on their expected future income. They will understand that borrowing today means higher taxes in the future.
- Further, the consumer will be concerned about future generations because they are the children and grandchildren of the present generation and the family which is the relevant decision making unit, continues living. They would increase savings now, which will fully offset the increased government dissaving so that national savings do not change.
- This view is called Ricardian equivalence after one of the greatest nineteenth century economists, David Ricardo, who first argued that in the face of high deficits, people save more. Hence option (a) is the correct answer.
- It is called ‘equivalence’ because it argues that taxation and borrowing are equivalent means of financing expenditure. When the government increases spending by borrowing today, which will be repaid by taxes in the future, it will have the same impact on the economy as an increase in government expenditure that is financed by a tax increase today.
- Goodhart’s Law – It was the idea by goodhart which suggests that attempts by a central bank (RBI in case of India) to regulate the level of lending by banks imposing certain controls can be circumvented by the banks searching the alternatives out of regulatory preview.
- Okun's Law is based on the empirical research of Arthur Okun. It describes the relationship between unemployment and growth rate in an economy. The law is still used by policymakers as a rule of thumb to estimate the relationship between growth rate and job creation.
- A grandfather clause is an exemption that allows persons or entities to continue with activities or operations that were approved before the implementation of new rules, regulations, or laws. Such allowances can be permanent, temporary, or instituted with limits.
Consider the following statements regarding Pre-paid Payment Instruments (PPIs) in India:1. These are payment instruments that facilitate the purchase of goods and services.2. Only those companies incorporated in India can issue PPIs in India.3. These instruments do not permit cash withdrawal or redemption.Which of the statements given above is/are correct?- a)1 and 2 only
- b)2 and 3 only
- c)1 only
- d)1, 2 and 3
Correct answer is option 'A'. Can you explain this answer?
Consider the following statements regarding Pre-paid Payment Instruments (PPIs) in India:
1. These are payment instruments that facilitate the purchase of goods and services.
2. Only those companies incorporated in India can issue PPIs in India.
3. These instruments do not permit cash withdrawal or redemption.
Which of the statements given above is/are correct?
a)
1 and 2 only
b)
2 and 3 only
c)
1 only
d)
1, 2 and 3
|
Kiran Mehta answered |
The correct answer is: (d) 1, 2 and 3.
All of the statements given regarding Pre-paid Payment Instruments (PPIs) in India are correct.
Statement 1: These are payment instruments that facilitate the purchase of goods and services.
Pre-paid Payment Instruments (PPIs) are payment instruments that enable individuals to make payments for goods and services without the need for a bank account or credit card. They are often used in situations where traditional payment methods may not be available or convenient, such as online transactions or transactions in remote areas.
Statement 2: Only those companies incorporated in India can issue PPIs in India.
This statement is correct. According to the Reserve Bank of India (RBI), only companies incorporated in India are permitted to issue PPIs in India.
Statement 3: These instruments do not permit cash withdrawal or redemption.
This statement is also correct. PPIs are not designed to be used for cash withdrawal or redemption. They are intended for use as a means of payment for goods and services, and do not typically allow for the withdrawal or redemption of cash.
With reference to Outright Open Market Operations (OMO), consider the following statements:1. Outright OMO are conducted without any promise to buy/sell the securities at a later stage.2. Outright OMO are conducted for managing overnight liquidity mismatches.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
With reference to Outright Open Market Operations (OMO), consider the following statements:
1. Outright OMO are conducted without any promise to buy/sell the securities at a later stage.
2. Outright OMO are conducted for managing overnight liquidity mismatches.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
Jaya Nair answered |
- The RBI is authorised to deal in Government securities under Section 17(8) of the Reserve Bank of India Act, 1934 through open market operations.
- There are two types of open market operations: outright and repo.
Outright open market operations
- They are permanent in nature: when the central bank buys these securities (thus injecting money into the system), it is without any promise to sell them later. Similarly, when the central bank sells these securities (thus withdrawing money from the system), it is without any promise to buy them later. Hence statement 1 is correct.
- As a result, the injection/absorption of money is of permanent nature.
Repo open market operations
- When the central bank buys the security, the agreement of purchase also has specifications about date and price of the resale of this security. This type of agreement is called a repurchase agreement or repo. The interest rate at which the money is lent in this way is called the repo rate.
- Similarly, instead of an outright sale of securities the central bank may sell the securities through an agreement which has a specification about the date and price at which it will be repurchased. This type of agreement is called a reverse repurchase agreement or reverse repo. The rate at which the money is withdrawn in this manner is called the reverse repo rate.
- Open market operations via Repo and Reverse Repo operations are conducted under Liquidity Adjustment Facility.
- While the outright OMO are directed at influencing enduring (long term) liquidity, the LAF OMO operations target the temporary liquidity in the system. Hence, statement 2 is not correct.
Consider the following statements about the Livestock Census:1. It has been conducted in the country once every 5 years, since 1919-20.2. It covers all domesticated animals and their headcounts.3. It is conducted by the Union Ministry of Statistics and Program Implementation.Which of the statements given above is/are correct?- a)3 only
- b)1 and 2 only
- c)2 and 3 only
- d)1, 2 and 3
Correct answer is option 'B'. Can you explain this answer?
Consider the following statements about the Livestock Census:
1. It has been conducted in the country once every 5 years, since 1919-20.
2. It covers all domesticated animals and their headcounts.
3. It is conducted by the Union Ministry of Statistics and Program Implementation.
Which of the statements given above is/are correct?
a)
3 only
b)
1 and 2 only
c)
2 and 3 only
d)
1, 2 and 3
|
|
Nilesh Patel answered |
- The Livestock Census started in the country in the year 1919. It is being conducted once in 5 years. So far, 20 livestock censuses have been conducted. Hence statement 1 is correct.
- Livestock Census is a complete count of the livestock and poultry at a pre-defined reference point of time. Similar to population census, primary workers are engaged to undertake house to house enumeration and ascertain the number, age, sex, etc., of livestock/poultry possessed by every household/household enterprise/non-household/non-household enterprises and institutions in rural & urban areas of the country.
- The census usually covers all domesticated animals and headcounts of these animals are taken. Hence statement 2 is correct.
- It is conducted by the Ministry of Fisheries, Animal Husbandry & Dairying in participation with all State Governments and UT Administrations. Hence statement 3 is not correct.
- The 20th Livestock Census was launched during the month of October 2018. The enumeration was done in both rural and urban areas. Various types of animals (cattle, buffalo, mithun, yak, sheep, goat, pig, horse, pony, mule, donkey, camel, dog, rabbit, and elephant)/poultry birds (fowl, duck, and other poultry birds) possessed by the households, household enterprises/non-household enterprises were counted at that site. Another important feature of the 20th Livestock Census is it has been designed to capture a Breedwise number of animals and poultry birds.
In the context of Indian economy, which of the following measures is regarded as the National Income?- a)Gross Domestic Product at market prices
- b)Net National Product at factor cost
- c)Gross National Product at factor cost
- d)Net National Product at market prices
Correct answer is option 'B'. Can you explain this answer?
In the context of Indian economy, which of the following measures is regarded as the National Income?
a)
Gross Domestic Product at market prices
b)
Net National Product at factor cost
c)
Gross National Product at factor cost
d)
Net National Product at market prices
|
|
Kaavya Gupta answered |
Gross Domestic Product at market prices
- Gross Domestic Product (GDP) at market prices is the total value of all final goods and services produced within the geographical boundaries of a country in a specific time period, usually a year.
- It includes the value of goods and services produced by both domestic and foreign factors of production.
- However, GDP does not take into account income earned by Indian factors of production outside the country, while it includes income earned by foreign factors of production within the country.
Gross National Product at factor cost
- Gross National Product (GNP) at factor cost is the total value of all final goods and services produced by the factors of production owned by the residents of a country, regardless of where the production takes place.
- It includes income earned by Indian factors of production both within and outside the country, while it excludes income earned by foreign factors of production within the country.
- GNP at factor cost is calculated by subtracting net indirect taxes (taxes minus subsidies) from GDP at market prices.
Net National Product at market prices
- Net National Product (NNP) at market prices is the total value of all final goods and services produced by the factors of production owned by the residents of a country after deducting depreciation or wear and tear of capital goods.
- NNP at market prices is calculated by subtracting depreciation from GNP at factor cost.
Net National Product at factor cost (Correct answer)
- Net National Product (NNP) at factor cost is the total value of all final goods and services produced by the factors of production owned by the residents of a country after deducting depreciation.
- It represents the income earned by the factors of production in the country.
- NNP at factor cost is calculated by subtracting indirect taxes (taxes minus subsidies) from NNP at market prices.
Conclusion
Among the given options, the correct measure of National Income for the Indian economy is Net National Product (NNP) at factor cost. This measure takes into account the total value of goods and services produced by the factors of production owned by Indian residents, after deducting depreciation and indirect taxes. It represents the income earned by the factors of production in the country and provides a more accurate portrayal of the economic activity and income generation within India.
- Gross Domestic Product (GDP) at market prices is the total value of all final goods and services produced within the geographical boundaries of a country in a specific time period, usually a year.
- It includes the value of goods and services produced by both domestic and foreign factors of production.
- However, GDP does not take into account income earned by Indian factors of production outside the country, while it includes income earned by foreign factors of production within the country.
Gross National Product at factor cost
- Gross National Product (GNP) at factor cost is the total value of all final goods and services produced by the factors of production owned by the residents of a country, regardless of where the production takes place.
- It includes income earned by Indian factors of production both within and outside the country, while it excludes income earned by foreign factors of production within the country.
- GNP at factor cost is calculated by subtracting net indirect taxes (taxes minus subsidies) from GDP at market prices.
Net National Product at market prices
- Net National Product (NNP) at market prices is the total value of all final goods and services produced by the factors of production owned by the residents of a country after deducting depreciation or wear and tear of capital goods.
- NNP at market prices is calculated by subtracting depreciation from GNP at factor cost.
Net National Product at factor cost (Correct answer)
- Net National Product (NNP) at factor cost is the total value of all final goods and services produced by the factors of production owned by the residents of a country after deducting depreciation.
- It represents the income earned by the factors of production in the country.
- NNP at factor cost is calculated by subtracting indirect taxes (taxes minus subsidies) from NNP at market prices.
Conclusion
Among the given options, the correct measure of National Income for the Indian economy is Net National Product (NNP) at factor cost. This measure takes into account the total value of goods and services produced by the factors of production owned by Indian residents, after deducting depreciation and indirect taxes. It represents the income earned by the factors of production in the country and provides a more accurate portrayal of the economic activity and income generation within India.
With reference to India's foreign trade on the eve of Independence, consider the following statements:1. More than half of India’s foreign trade was restricted to Britain.2. During the colonial period, India often recorded a huge trade deficit.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
With reference to India's foreign trade on the eve of Independence, consider the following statements:
1. More than half of India’s foreign trade was restricted to Britain.
2. During the colonial period, India often recorded a huge trade deficit.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
|
Kiran Mehta answered |
c) Both 1 and 2. With reference to India's foreign trade on the eve of Independence, both statements 1 and 2 are correct. More than half of India's foreign trade was restricted to Britain during the colonial period, and India often recorded a huge trade deficit. India's foreign trade was heavily controlled and regulated by the British colonial authorities, and a significant proportion of the country's exports were directed to Britain. This resulted in India having a large trade deficit, as it was importing more goods from Britain than it was exporting. This situation changed after India gained independence in 1947, when the country began to pursue more independent trade policies and reduce its dependence on Britain.
Consider the following statements:1. Autonomous transactions are independent of the deficit or surplus in the Balance of Payments.2. Accommodating transactions refer to transactions that take place to cover deficit or surplus arising from autonomous transactions.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
Consider the following statements:
1. Autonomous transactions are independent of the deficit or surplus in the Balance of Payments.
2. Accommodating transactions refer to transactions that take place to cover deficit or surplus arising from autonomous transactions.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
|
Debanshi Sengupta answered |
Autonomous Transactions and Balance of Payments
- Autonomous transactions refer to transactions that occur due to economic factors such as investment, trade, and income flows. These transactions are not influenced by the balance of payments situation.
- The balance of payments is a record of all economic transactions between a country and the rest of the world during a given period. It includes both autonomous transactions and accommodating transactions.
- Accommodating transactions are transactions that take place to cover deficits or surpluses arising from autonomous transactions. These transactions are influenced by the deficit or surplus in the balance of payments.
Statement 1: Autonomous transactions are independent of the deficit or surplus in the Balance of Payments.
- This statement is correct. Autonomous transactions are not influenced by the balance of payments situation. They are driven by economic factors such as investment, trade, and income flows.
- For example, if a country attracts foreign investment, it will lead to an autonomous inflow of capital. This transaction is independent of the deficit or surplus in the balance of payments.
Statement 2: Accommodating transactions refer to transactions that take place to cover deficit or surplus arising from autonomous transactions.
- This statement is also correct. Accommodating transactions are transactions that occur to cover deficits or surpluses arising from autonomous transactions.
- If a country has a deficit in its balance of payments due to a higher value of imports compared to exports, it needs to cover this deficit. This can be done through accommodating transactions such as borrowing from foreign sources or using foreign exchange reserves.
- Similarly, if a country has a surplus in its balance of payments due to a higher value of exports compared to imports, it can use accommodating transactions to utilize this surplus. This can be done through actions such as investing in foreign assets or repaying foreign debts.
Conclusion
- Both statements 1 and 2 are correct. Autonomous transactions are independent of the deficit or surplus in the balance of payments, while accommodating transactions are undertaken to cover deficits or surpluses arising from autonomous transactions.
- Autonomous transactions refer to transactions that occur due to economic factors such as investment, trade, and income flows. These transactions are not influenced by the balance of payments situation.
- The balance of payments is a record of all economic transactions between a country and the rest of the world during a given period. It includes both autonomous transactions and accommodating transactions.
- Accommodating transactions are transactions that take place to cover deficits or surpluses arising from autonomous transactions. These transactions are influenced by the deficit or surplus in the balance of payments.
Statement 1: Autonomous transactions are independent of the deficit or surplus in the Balance of Payments.
- This statement is correct. Autonomous transactions are not influenced by the balance of payments situation. They are driven by economic factors such as investment, trade, and income flows.
- For example, if a country attracts foreign investment, it will lead to an autonomous inflow of capital. This transaction is independent of the deficit or surplus in the balance of payments.
Statement 2: Accommodating transactions refer to transactions that take place to cover deficit or surplus arising from autonomous transactions.
- This statement is also correct. Accommodating transactions are transactions that occur to cover deficits or surpluses arising from autonomous transactions.
- If a country has a deficit in its balance of payments due to a higher value of imports compared to exports, it needs to cover this deficit. This can be done through accommodating transactions such as borrowing from foreign sources or using foreign exchange reserves.
- Similarly, if a country has a surplus in its balance of payments due to a higher value of exports compared to imports, it can use accommodating transactions to utilize this surplus. This can be done through actions such as investing in foreign assets or repaying foreign debts.
Conclusion
- Both statements 1 and 2 are correct. Autonomous transactions are independent of the deficit or surplus in the balance of payments, while accommodating transactions are undertaken to cover deficits or surpluses arising from autonomous transactions.
Which of the following characterize a situation of a 'liquidity trap' in an economy?1. Decline in bond prices2. Lower interest rates3. High savings ratesSelect the correct answer using the code given below.- a)1 and 2 only
- b)2 and 3 only
- c)1 and 3 only
- d)1, 2 and 3
Correct answer is option 'D'. Can you explain this answer?
Which of the following characterize a situation of a 'liquidity trap' in an economy?
1. Decline in bond prices
2. Lower interest rates
3. High savings rates
Select the correct answer using the code given below.
a)
1 and 2 only
b)
2 and 3 only
c)
1 and 3 only
d)
1, 2 and 3
|
|
Om Basu answered |
A liquidity trap occurs when the central bank's efforts to stimulate the economy by lowering interest rates are ineffective. In such a situation, the economy is stuck in a state of low growth or recession, with little or no impact from conventional monetary policy measures. The following factors characterize a liquidity trap:
1. Decline in bond prices: In a liquidity trap, the demand for bonds decreases, resulting in a decline in bond prices. This happens because investors are more inclined to hold cash rather than invest in bonds or other financial assets due to the prevailing pessimistic economic conditions. As a result, the prices of bonds fall, and their yields (interest rates) rise.
2. Lower interest rates: Despite the central bank's efforts to reduce interest rates to stimulate borrowing and investment, interest rates remain low or even reach zero. This occurs because in a liquidity trap, the demand for credit is weak, and businesses and individuals are reluctant to take on additional debt, even at low interest rates. Consequently, lowering interest rates fails to stimulate borrowing and investment as intended.
3. High savings rates: In a liquidity trap, individuals and businesses tend to save more rather than spend or invest. This increased propensity to save is driven by uncertainty and pessimism about the economic outlook. High savings rates further exacerbate the situation by reducing consumption and investment, leading to a decline in aggregate demand.
In a liquidity trap, the combination of declining bond prices, persistently low interest rates, and high savings rates creates a scenario where monetary policy loses its effectiveness in stimulating economic growth. The conventional tools used by central banks, such as reducing interest rates, are insufficient to encourage borrowing and investment, as individuals and businesses prefer to hold onto cash rather than spend or invest.
Overall, a liquidity trap represents a challenging economic situation where unconventional measures, such as fiscal stimulus or unconventional monetary policies like quantitative easing, may need to be employed to break the cycle of low growth and deflationary pressures.
1. Decline in bond prices: In a liquidity trap, the demand for bonds decreases, resulting in a decline in bond prices. This happens because investors are more inclined to hold cash rather than invest in bonds or other financial assets due to the prevailing pessimistic economic conditions. As a result, the prices of bonds fall, and their yields (interest rates) rise.
2. Lower interest rates: Despite the central bank's efforts to reduce interest rates to stimulate borrowing and investment, interest rates remain low or even reach zero. This occurs because in a liquidity trap, the demand for credit is weak, and businesses and individuals are reluctant to take on additional debt, even at low interest rates. Consequently, lowering interest rates fails to stimulate borrowing and investment as intended.
3. High savings rates: In a liquidity trap, individuals and businesses tend to save more rather than spend or invest. This increased propensity to save is driven by uncertainty and pessimism about the economic outlook. High savings rates further exacerbate the situation by reducing consumption and investment, leading to a decline in aggregate demand.
In a liquidity trap, the combination of declining bond prices, persistently low interest rates, and high savings rates creates a scenario where monetary policy loses its effectiveness in stimulating economic growth. The conventional tools used by central banks, such as reducing interest rates, are insufficient to encourage borrowing and investment, as individuals and businesses prefer to hold onto cash rather than spend or invest.
Overall, a liquidity trap represents a challenging economic situation where unconventional measures, such as fiscal stimulus or unconventional monetary policies like quantitative easing, may need to be employed to break the cycle of low growth and deflationary pressures.
With reference to Small Finance Banks (SFB), consider the following statements:1. They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).2. At least 25 percent of its branches shall be in unbanked rural centers.3. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?- a)1 and 2 only
- b)2 only
- c)1 and 3 only
- d)1, 2 and 3
Correct answer is option 'D'. Can you explain this answer?
With reference to Small Finance Banks (SFB), consider the following statements:
1. They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
2. At least 25 percent of its branches shall be in unbanked rural centers.
3. Priority sector must comprise 75% of their net credit.
Which of the statements given above is/are correct?
a)
1 and 2 only
b)
2 only
c)
1 and 3 only
d)
1, 2 and 3
|
|
Prateek Dasgupta answered |
With reference to Small Finance Banks (SFB), the correct statements are:
1. They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
2. At least 25 percent of its branches shall be in unbanked rural centers.
3. Priority sector must comprise 75% of their net credit.
Let's discuss each statement in detail:
1. Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR):
Small Finance Banks (SFB) are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) just like other commercial banks in India. CRR is the percentage of their net demand and time liabilities that banks have to maintain with the Reserve Bank of India (RBI) in the form of cash. SLR, on the other hand, is the percentage of their net demand and time liabilities that banks have to maintain in the form of liquid assets like government securities, gold, etc. These ratios are regulatory requirements imposed by the RBI to ensure the stability and liquidity of banks.
2. Branches in unbanked rural centers:
Small Finance Banks (SFB) are mandated to open at least 25 percent of their branches in unbanked rural centers. Unbanked rural centers refer to areas where banking services are not easily accessible to the local population. This initiative aims to promote financial inclusion and ensure that banking services reach the underprivileged sections of society residing in rural areas.
3. Priority sector lending:
Small Finance Banks (SFB) are also required to lend a significant portion of their net credit to the priority sector. Priority sector includes sectors such as agriculture, micro, small and medium enterprises (MSMEs), education, housing, export credit, etc. The current requirement is that 75% of the net credit of Small Finance Banks should be allocated to the priority sector. This ensures that the credit needs of these sectors, which are crucial for the overall development of the economy, are adequately met.
In conclusion, all the statements given above are correct. Small Finance Banks are subject to the norms of CRR and SLR, they are required to open a certain percentage of branches in unbanked rural centers, and they must allocate a significant portion of their net credit to the priority sector. These measures are aimed at promoting financial inclusion, supporting rural development, and catering to the credit needs of priority sectors.
1. They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
2. At least 25 percent of its branches shall be in unbanked rural centers.
3. Priority sector must comprise 75% of their net credit.
Let's discuss each statement in detail:
1. Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR):
Small Finance Banks (SFB) are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) just like other commercial banks in India. CRR is the percentage of their net demand and time liabilities that banks have to maintain with the Reserve Bank of India (RBI) in the form of cash. SLR, on the other hand, is the percentage of their net demand and time liabilities that banks have to maintain in the form of liquid assets like government securities, gold, etc. These ratios are regulatory requirements imposed by the RBI to ensure the stability and liquidity of banks.
2. Branches in unbanked rural centers:
Small Finance Banks (SFB) are mandated to open at least 25 percent of their branches in unbanked rural centers. Unbanked rural centers refer to areas where banking services are not easily accessible to the local population. This initiative aims to promote financial inclusion and ensure that banking services reach the underprivileged sections of society residing in rural areas.
3. Priority sector lending:
Small Finance Banks (SFB) are also required to lend a significant portion of their net credit to the priority sector. Priority sector includes sectors such as agriculture, micro, small and medium enterprises (MSMEs), education, housing, export credit, etc. The current requirement is that 75% of the net credit of Small Finance Banks should be allocated to the priority sector. This ensures that the credit needs of these sectors, which are crucial for the overall development of the economy, are adequately met.
In conclusion, all the statements given above are correct. Small Finance Banks are subject to the norms of CRR and SLR, they are required to open a certain percentage of branches in unbanked rural centers, and they must allocate a significant portion of their net credit to the priority sector. These measures are aimed at promoting financial inclusion, supporting rural development, and catering to the credit needs of priority sectors.
With reference to Ways and Means Advances (WMA), consider the following statements:1. It is a facility for both the Centre and states to borrow from the RBI, to balance temporary mismatches in cash flows.2. Normal Ways and Means Advances are provided at lower interest rate than the repo rate.3. The interest levied for Special Drawing Facilities/Special WMA is equal to the repo rate.Which of the statements given above is/are correct?- a)1 only
- b)1 and 2 only
- c)2 and 3 only
- d)1, 2 and 3
Correct answer is option 'A'. Can you explain this answer?
With reference to Ways and Means Advances (WMA), consider the following statements:
1. It is a facility for both the Centre and states to borrow from the RBI, to balance temporary mismatches in cash flows.
2. Normal Ways and Means Advances are provided at lower interest rate than the repo rate.
3. The interest levied for Special Drawing Facilities/Special WMA is equal to the repo rate.
Which of the statements given above is/are correct?
a)
1 only
b)
1 and 2 only
c)
2 and 3 only
d)
1, 2 and 3
|
|
Subham Padhy answered |
B
Consider the following statements regarding NIPUN Bharat Mission:1. It covers children in the age group of 6-14 years.2. NITI Aayog is the nodal agency for implementing this scheme.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?
Consider the following statements regarding NIPUN Bharat Mission:
1. It covers children in the age group of 6-14 years.
2. NITI Aayog is the nodal agency for implementing this scheme.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
|
Nilesh Patel answered |
NIPUN Bharat Mission has been launched to ensure that every child in the country necessarily attains foundational literacy and numeracy by the end of Grade 3, by 2026-27. NIPUN stands for National Initiative for Proficiency in Reading with Understanding and Numeracy.
- NIPUN Bharat comes under the aegis of the centrally sponsored scheme of Samagra Shiksha.
- It is being launched as a part of NEP (National Education Policy) 2020.
- Department of School Education and Literacy is the nodal agency for implementing this scheme. Hence, statement 2 is not correct.
It focuses on
- Providing access and retaining children in foundational years of schooling
- Teacher capacity building
- Development of high quality and diversified Student and Teacher Resources/Learning Materials
- Tracking the progress of each child in achieving learning outcomes.
- NIPUN Bharat aims to cover the learning needs of children in the age group of 3 to 9 years. Hence, statement 1 is not correct.
- Goals of the Mission are set in the form of Lakshya Soochi or Targets for Foundational Literacy and Numeracy. The Laskhyas are based on the learning outcomes developed by the NCERT and international research and ORF studies.
Outcomes that have been envisaged from the implementation of the goals and objectives of NIPUN Bharat Mission are:
- Foundational skills enable to keep children in class thereby reducing the dropouts and improve transition rate from primary to upper primary and secondary stages
- Activity-based learning and conducive learning environment will improve quality of education.
- Innovative pedagogies such as toy-based and experiential learning will be used in classroom transaction thereby making learning a joyful and engaging activity.
- Intensive capacity building of teachers will make them empowered and provide greater autonomy for choosing the pedagogy.
- Holistic development of the child by focusing on different domains of development like physical and motor development, socio-emotional development, literacy and numeracy development, cognitive development, life skills etc. which are interrelated and interdependent, which will be reflected in a Holistic Progress Card.
- Since almost every child attends early grades, therefore, focus at that stage will also benefit the socioeconomic disadvantageous group thus ensuring access to equitable and inclusive quality education.
- A five-tier implementation mechanism will be set up at the National- State- District- Block- School level in all States and Union Territories under the aegis of the centrally sponsored scheme of Samagra Shiksha.
- A special package for foundational literacy and Numeracy (FLN) under NISHTHA (National Initiative for School Heads and Teachers Holistic Advancement) is being developed by NCERT.
Aedes aegypti mosquito is an important vector that spreads many diseases. In this context which of the following diseases are spread by the Aedes aegypti mosquito?1. Zika Virus2. Chikungunya3. Dengue4. Yellow feverSelect the correct answer using the code 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 'D'. Can you explain this answer?
Aedes aegypti mosquito is an important vector that spreads many diseases. In this context which of the following diseases are spread by the Aedes aegypti mosquito?
1. Zika Virus
2. Chikungunya
3. Dengue
4. Yellow fever
Select the correct answer using the code 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
|
Sharath. Sharath. answered |
Chkiv, Denv, yev. could reach equivalent copies and2. 8into 10to the power of -3tissue culture infectious doses for zikv. ocular manifisation of emergencying arbo virues.
Consider the following statements with reference to the voting shares in International Monetary Fund (IMF):1. United States has the maximum voting share followed by United Kingdom.2. India occupies the fourth position with a voting share of above 5%.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?
Consider the following statements with reference to the voting shares in International Monetary Fund (IMF):
1. United States has the maximum voting share followed by United Kingdom.
2. India occupies the fourth position with a voting share of above 5%.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
Anagha Iyer answered |
Explanation:
Statement 1: United States has the maximum voting share followed by United Kingdom.
This statement is incorrect. The United States does have the largest voting share among the member countries of the International Monetary Fund (IMF), but the United Kingdom does not have the second-largest voting share. Instead, Japan has the second-largest voting share after the United States. The United Kingdom holds the third-largest voting share.
Statement 2: India occupies the fourth position with a voting share of above 5%.
This statement is also incorrect. While India has been working towards increasing its voting share in international financial institutions like the IMF, it does not currently occupy the fourth position. As of now, India holds the eighth-largest voting share in the IMF, with a voting share of around 2.6%. The top positions in terms of voting shares are held by the United States, Japan, China, Germany, France, the United Kingdom, and Italy.
Therefore, neither statement 1 nor statement 2 is correct.
Conclusion:
Neither statement 1 nor statement 2 is correct. The correct answer is option D, "Neither 1 nor 2."
Statement 1: United States has the maximum voting share followed by United Kingdom.
This statement is incorrect. The United States does have the largest voting share among the member countries of the International Monetary Fund (IMF), but the United Kingdom does not have the second-largest voting share. Instead, Japan has the second-largest voting share after the United States. The United Kingdom holds the third-largest voting share.
Statement 2: India occupies the fourth position with a voting share of above 5%.
This statement is also incorrect. While India has been working towards increasing its voting share in international financial institutions like the IMF, it does not currently occupy the fourth position. As of now, India holds the eighth-largest voting share in the IMF, with a voting share of around 2.6%. The top positions in terms of voting shares are held by the United States, Japan, China, Germany, France, the United Kingdom, and Italy.
Therefore, neither statement 1 nor statement 2 is correct.
Conclusion:
Neither statement 1 nor statement 2 is correct. The correct answer is option D, "Neither 1 nor 2."
Consider the following statements about the Micro Small and Medium Enterprises (MSMEs):1. This sector is the largest employer of human resources in India.2. It generates more employment opportunities per unit of capital invested compared to large industries.Which of the statements given above is/are correct?- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?
Consider the following statements about the Micro Small and Medium Enterprises (MSMEs):
1. This sector is the largest employer of human resources in India.
2. It generates more employment opportunities per unit of capital invested compared to large industries.
Which of the statements given above is/are correct?
a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2
|
Kunal Basu answered |
The correct answer is option 'B': 2 only.
Explanation:
• The Micro Small and Medium Enterprises (MSMEs) sector plays a crucial role in the Indian economy. It is responsible for the generation of employment opportunities and contributes significantly to the country's GDP.
• Statement 1: This sector is the largest employer of human resources in India.
- This statement is incorrect. While the MSME sector is an important source of employment, it is not the largest employer of human resources in India. The agriculture sector, followed by the services sector, employ a larger number of people.
• Statement 2: It generates more employment opportunities per unit of capital invested compared to large industries.
- This statement is correct. MSMEs have a higher employment elasticity compared to large industries. They are more labor-intensive and tend to generate more employment opportunities with the same amount of capital investment. This is because MSMEs typically operate on a smaller scale and require less capital-intensive technology.
- MSMEs are known to provide employment opportunities to a diverse range of individuals, including those with limited formal education or training. They often function as a source of self-employment and entrepreneurship, especially in rural areas, where job opportunities may be limited.
- The flexibility and adaptability of MSMEs allow them to respond quickly to changing market demands and contribute to economic growth and development.
• Therefore, only statement 2 is correct, and the correct answer is option 'B': 2 only.
Explanation:
• The Micro Small and Medium Enterprises (MSMEs) sector plays a crucial role in the Indian economy. It is responsible for the generation of employment opportunities and contributes significantly to the country's GDP.
• Statement 1: This sector is the largest employer of human resources in India.
- This statement is incorrect. While the MSME sector is an important source of employment, it is not the largest employer of human resources in India. The agriculture sector, followed by the services sector, employ a larger number of people.
• Statement 2: It generates more employment opportunities per unit of capital invested compared to large industries.
- This statement is correct. MSMEs have a higher employment elasticity compared to large industries. They are more labor-intensive and tend to generate more employment opportunities with the same amount of capital investment. This is because MSMEs typically operate on a smaller scale and require less capital-intensive technology.
- MSMEs are known to provide employment opportunities to a diverse range of individuals, including those with limited formal education or training. They often function as a source of self-employment and entrepreneurship, especially in rural areas, where job opportunities may be limited.
- The flexibility and adaptability of MSMEs allow them to respond quickly to changing market demands and contribute to economic growth and development.
• Therefore, only statement 2 is correct, and the correct answer is option 'B': 2 only.
Which of the following are excluded from the National Income to calculate Personal Income?1. Corporate Tax2. Personal Tax payments3. Transfer payments to the households from the Government4. Undistributed profitsSelect the correct answer using the code given below.- a)1 and 4 only
- b)1, 3 and 4 only
- c)2 and 3 only
- d)2, 3 and 4 only
Correct answer is option 'A'. Can you explain this answer?
Which of the following are excluded from the National Income to calculate Personal Income?
1. Corporate Tax
2. Personal Tax payments
3. Transfer payments to the households from the Government
4. Undistributed profits
Select the correct answer using the code given below.
a)
1 and 4 only
b)
1, 3 and 4 only
c)
2 and 3 only
d)
2, 3 and 4 only
|
|
Divya Mukherjee answered |
The correct answer is option 'A' - 1 and 4 only.
To understand why, let's first define National Income and Personal Income:
National Income: National income is the total value of all goods and services produced within a country's borders in a specific period of time, usually a year. It includes the income earned by individuals, businesses, and the government.
Personal Income: Personal income is the income received by individuals from all sources, including wages, salaries, rent, interest, and transfer payments, after deducting personal income tax payments.
Now, let's analyze each option:
1. Corporate Tax: Corporate taxes are taxes paid by businesses on their profits. They are excluded from the calculation of personal income because they are not directly received by individuals.
2. Personal Tax payments: Personal tax payments, such as income tax, are included in the calculation of personal income. They represent the amount of income that individuals have to pay to the government.
3. Transfer payments to households from the Government: Transfer payments are payments made by the government to individuals or households, such as social security benefits, unemployment benefits, and welfare payments. These transfer payments are included in the calculation of personal income because they represent income received by individuals.
4. Undistributed profits: Undistributed profits are the profits earned by corporations that are not distributed to shareholders as dividends. They are excluded from the calculation of personal income because they are not directly received by individuals.
Based on the above analysis, it can be concluded that corporate tax and undistributed profits are excluded from the national income to calculate personal income. Therefore, the correct answer is option 'A' - 1 and 4 only.
To understand why, let's first define National Income and Personal Income:
National Income: National income is the total value of all goods and services produced within a country's borders in a specific period of time, usually a year. It includes the income earned by individuals, businesses, and the government.
Personal Income: Personal income is the income received by individuals from all sources, including wages, salaries, rent, interest, and transfer payments, after deducting personal income tax payments.
Now, let's analyze each option:
1. Corporate Tax: Corporate taxes are taxes paid by businesses on their profits. They are excluded from the calculation of personal income because they are not directly received by individuals.
2. Personal Tax payments: Personal tax payments, such as income tax, are included in the calculation of personal income. They represent the amount of income that individuals have to pay to the government.
3. Transfer payments to households from the Government: Transfer payments are payments made by the government to individuals or households, such as social security benefits, unemployment benefits, and welfare payments. These transfer payments are included in the calculation of personal income because they represent income received by individuals.
4. Undistributed profits: Undistributed profits are the profits earned by corporations that are not distributed to shareholders as dividends. They are excluded from the calculation of personal income because they are not directly received by individuals.
Based on the above analysis, it can be concluded that corporate tax and undistributed profits are excluded from the national income to calculate personal income. Therefore, the correct answer is option 'A' - 1 and 4 only.
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