Ramesh Singh Test: Introduction To Economics - 2


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QUESTION: 1

National Income at Factor Cost is equal to: 

Solution:
  • Putting indirect taxes' and 'subsidies' together, India's National Income will thus be derived with the following formula (as India does it at factor cost): National Income at Factor Cost = NNP at Market Cost – Indirect Taxes + Subsidies

QUESTION: 2

In India, which Ministry/Institution announce the rates by which assets depreciate: 

Solution:  

The governments of the economies decide and announce the rates by which assets depreciate (done in India by the Ministry of Commerce and Industry) and a list is published, which is used by different sections of the economy to determine the real levels of depreciation in different assets.

QUESTION: 3

“Quantitative, as well as the qualitative aspects of the economy, i.e., the 'internal' as well as the 'external' strength of the economy, are indicated by :

Solution: It is the more exhaustive concept of national income than the GDP as it indicates towards the “quantitative as well as the qualitative aspects of the economy, i.e., the 'internal as well as the 'external strength of the economy.

QUESTION: 4

Which of the following can be used to calculate 'National Income' of an economy?

Solution:  
  • Closely related to the concept of GNP is another concept called NNP of a country. 

  • NNP is a more accurate measure of the total value of goods and services by a country.

QUESTION: 5

In India, which of the following is negative:

1. Private remittances 

2. Interest on external loans 

3. External Grants 

Choose from the following options.

Solution:

Interest on External Loans: the net outcome on the front of the interest payments, i.e., the balance of inflow (on the money lent out by the economy) and outflow (on the money borrowed by the economy) of external interests. In India's case, it has always been negative as the economy has been a 'net borrower' from the world economies. 

External Grants: the net outcome of the external grants i.e., the balance of such grants which flow to and from India. 

Today, India offers more such grants than it receives. India receives grants (grants or loan-grant mix) from few countries as well as UN bodies (like the UNDP) and offers several developmental and humanitarian grants to foreign nations. 

QUESTION: 6

Consider the following statements: 

1. When we divide Net Domestic Product by the total population of a nation we get the per capita income of that nation.

2. Higher the rates of depreciation lower the per capita income of the nation.

Which of these statements is/are correct?

Solution:  
  • When we divide NNP (Net National Product) by the total population of a nation we get the 'per capita income' (PCI) of that nation, i.e., ‘income per head per year'. 

  • A very basic point should be noted here that this is the point where the rates of depreciation followed by different nations make a difference.

  • Higher the rates of depreciation lower the PCI of the nation (whatever be the reason for it logical or artificial as in the case of depreciation being used as a tool of policy making). 

QUESTION: 7

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?

Solution:  
  • If the national income is being derived at ‘market cost, the indirect taxes do not need to be deducted from it. 

  • In this case, the government does not have to add their income accruing from indirect taxes to the national income. It means that the confusion in the case of national income accounting at factor cost is only related to indirect taxes.

QUESTION: 8

Which of the following are correctly matched? 

1. Nominal income - the wage someone gets in hand per day or per month 

2. Real income - nominal income minus the present-day rate of inflation 

3. Disposable income - the net part of wage one is free to use which is derived after deducting the Direct Access from the real/nominal income

Choose from the following options.

Solution:  
  • The income of a person has three forms—the first form is nominal income (the wage someone gets in hand per day or per month).

  • The second form is real income (this is nominal income minus the present-day rate of inflation-adjusted in percentage form), and 

  • The last one is the disposable income (the net part of wage one is free to use which is derived after deducting the direct taxes from the real/nominal income, depending upon the need of data). 

QUESTION: 9

MCA21 is a initiative of Ministry of 

Solution:  
  • MCA21 is an e-Governance initiative of the Ministry of Corporate Affairs (MCA), Government of India that enables an easy and secure access of the MCA services to the corporate entities, professionals and citizens of India.

  • Use of the MCA21 database for manufacturing companies has helped in accounting for activities other than manufacturing undertaken by these companies.

QUESTION: 10

GDP (at market prices) is equal to :

Solution:  
  • GVA (Gross Value Added) at basic prices = CE + OS/MI + CFC + production taxes less production subsidies. 

  • GVA at factor cost = GVA at basic prices -production taxes fewer production subsidies. 

  • GDP = GVA at basic prices + product taxes - product subsidies.

  •  Production taxes or production subsidies are paid or received with relation to production and are independent of the volume of actual production. 

  • Some examples of production taxes are land revenues, stamps and registration fees and profession tax.