Previous Year Questions: Economics- 3 - BPSC (Bihar) MCQ

The correct option is C.
Per capita income is a measure of the amount of money earned per person in a nation or geographic region. Per capita income can be used to determine the average per-person income for an area and to evaluate the standard of living and quality of life of the population.

National income is thee total value a country’s final output of new goods and services produced in one year. Transfer payments are not a part of tge national income so they are cut from national income to get n.n.p in order to arrive national income such payments are bad debts incurred by banks, payments of pensions, charity, Scholarships etc. Private sector transfers include charitable donation and prizes to lottery winners.

National Income refers to the money value of all the goods and services produced in a country during a financial year. In other words, the final outcome of all the economic activities of the nation during a period of one year, valued in terms of money is called as a National income

B is the correct option.This is called national income of the country. National income of a country can be defined as the total market value of all final goods and services produced in the economy in a year. HENCE, the national income of a country is total productive income.

Product method is also known as output method or value added method. In this method, we calculate the national income in terms of final goods and services produced in an economy during a particular period of time.

Rate of Interest Determination

- Liquidity Preference Theory: According to this theory, the rate of interest is determined by the demand for and supply of money in the economy. When people prefer to hold cash rather than invest it, the rate of interest tends to be higher. On the other hand, when people are willing to invest their money, the rate of interest tends to be lower.

- Central Bank Policies: The central bank plays a crucial role in influencing interest rates through its monetary policy. By adjusting the supply of money in the economy, the central bank can indirectly affect the rate of interest. For example, by lowering interest rates, the central bank can encourage borrowing and spending, leading to lower interest rates.

- Market Forces: The rate of interest is also influenced by market forces such as inflation, economic growth, and investment opportunities. When inflation is high, lenders demand higher interest rates to compensate for the loss of purchasing power. Similarly, in times of economic growth, interest rates tend to be higher as demand for credit increases.

- Risk and Return: The rate of interest is also influenced by the risk associated with the investment. Lenders demand a higher interest rate for riskier investments to compensate for the higher probability of default. Conversely, safer investments tend to have lower interest rates.

- Global Factors: Interest rates are also influenced by global factors such as exchange rates, foreign investment, and international trade. Changes in global economic conditions can impact interest rates in a particular country.

Overall, the rate of interest is determined by a combination of factors such as liquidity preference, central bank policies, market forces, risk, and return, and global factors. It is essential for policymakers and investors to consider these factors when making decisions related to interest rates.

It was introduced in Budget 2005-06. The government felt many companies were disguising perquisites such as club facilities as ordinary business expenses, which escaped taxation altogether. Employers have to now pay FBT on a percentage of the expense incurred on such perquisites.

C is the correct option.The national debt is simply the net accumulation of the federal government's annual budget deficits. Premium collected in the form of different life insurance policies does not contribute to any kind of debt.

Explanation:

Current Account in India's Balance of Payments:

- The current account of India's Balance of Payments includes various components such as trade in goods, trade in services, investment income, and transfer payments.
- These components help in measuring the flow of goods, services, income, and transfers between India and the rest of the world.

Components included in the Current Account:

1. Short-term commercial borrowings: These are a part of the financial account and represent the borrowing and lending activities between India and other countries. These borrowings are included in the current account as they involve the flow of funds.

2. Investment income: This component includes income earned from investments made by residents of India in foreign countries and vice versa. It includes interest, dividends, and profits earned on these investments.

3. Transfer payments: Transfer payments are unilateral transfers of money or goods between countries without any corresponding exchange of goods or services. Examples include remittances, foreign aid, and grants.

Component not included in the Current Account:

- Non-monetary gold movements are not included in the current account of India's Balance of Payments. Gold movements are considered as a part of the capital account, which involves changes in ownership of financial and non-financial assets between residents and non-residents.

Therefore, option B, non-monetary gold movements, is not included in the current account of India's Balance of Payments.

A is the correct option.Fiscal deficit refers to the excess of total expenditure over total receipts (excluding borrowings) during the given fiscal year. ... The extent of fiscal deficit is an indication of how far the government is spending beyond its means.