CUET PG Economics Mock Test - 4 - CUET PG MCQ

The correct answer is Mumbai.

• Full form: National Bank for Agriculture and Rural Development
• Founding date: 12th July 1982
• Headquarters: Mumbai
• The first chairman of NABARD: M. Ram Krisannaya
• The present chairman of NABARD: Shri Shaji K V​​

Other Related Points

• It is the Supreme body that ensures the responsibility of policy formation and planning for agriculture and other economic activities of rural India.
• It provides credit facilities, direct finance, and short & long-term refinance for various projects under Agriculture and Rural Development.
• It also manages Funds such as Rural Infrastructural Development Fund and Micro Irrigation Fund.

The correct answer is Paul A. Samuelson.

1. The growth-oriented definition of economics was given by Prof. Samuelson.
2. He stated, “Economics is a study of how people and society choose, with or without the use of money to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in the future among various persons and groups of society.”
3. He focused on the growth of the nation through efficiency in the satisfaction of wants through the use of scarce resources.

Hence, The correct answer is Paul A. Samuelson.

• If the demand elasticity of two markets is different, discriminating monopoly may be conceivable.
• Only when customers from various sub-markets are prepared to pay different prices for the same commodity is price discrimination possible.
• The impact of a price change on the customer will also be the same if the elasticity of demand is the same.

Hence, Discriminating monopoly is possible, if two markets have different elasticities of demand.

The correct answer is - NABARD

• NABARD
  • NABARD stands for National Bank for Agriculture and Rural Development.
  • The E-Shakti project is an initiative by NABARD aimed at digitizing Self-Help Groups (SHGs) to improve their access to formal financial services.
  • The project focuses on creating a digital platform to capture SHG-related information, which helps in better monitoring and financial inclusion of rural women.
  • It aims to ensure transparency, better credit linkage, and real-time monitoring of SHGs' activities and financial transactions.

Other Related Points

• RRB
  • RRB stands for Regional Rural Banks.
  • They were established to provide credit and other financial services to rural areas, especially to small and marginal farmers, agricultural laborers, and small entrepreneurs.
• SIDBI
  • SIDBI stands for Small Industries Development Bank of India.
  • SIDBI focuses on the promotion, financing, and development of Micro, Small, and Medium Enterprises (MSMEs) in India.
• SBI
  • SBI stands for State Bank of India.
  • SBI is the largest public sector bank in India, providing a wide range of banking and financial services to individuals, businesses, and government entities.

The correct answer is Quantitative classification. When data is classified based on numerical values, it is called quantitative classification.

• Based on numerical values: Quantitative classification involves classifying data based on numerical values or measurements.
  • The numerical values may be discrete or continuous. Examples of quantitative data include age, height, weight, income, and temperature.
• Provides quantitative information: Quantitative classification provides information in the form of numerical values or measurements, which can be analyzed and compared using mathematical and statistical methods.
  • The data can be summarized using measures of central tendency (such as mean, median, and mode) and measures of variability (such as range, standard deviation, and variance).
• Commonly used in scientific research: Quantitative classification is commonly used in scientific research and statistical analysis, as it provides a more objective and precise way of classifying and analyzing data.
  • Quantitative data can be analyzed using various statistical tests, such as t-tests, ANOVA, regression analysis, and correlation analysis.

Other Related Points

• Examples of quantitative data include numerical measurements such as length, weight, time, and temperature, as well as numerical ratings and scores.
  • Quantitative classification can be used to analyze relationships between variables, such as the correlation between age and income, or the effect of a certain variable on an outcome of interest.
  • Quantitative data can be collected through various methods such as surveys, experiments, and observational studies.

Quantitative classification is the term used when data is categorized based on numerical values or measurements, making option 1) the correct answer.

The correct answer is - Central Statistical Organization

• Central Statistical Organization (CSO)
  • It is responsible for the coordination of statistical activities in India and for evolving and maintaining statistical standards.
  • The CSO compiles and releases the estimates of national income, state domestic product, and other related aggregates.
  • It operates under the Ministry of Statistics and Programme Implementation (MOSPI).

Other Related Points

• Planning Commission
  • The Planning Commission was an institution in the Government of India, which formulated India's Five-Year Plans, among other functions.
  • It was replaced by the NITI Aayog in 2015.
• Finance Commission
  • The Finance Commission is constituted by the President of India to define the financial relations between the central government and the individual state governments.
  • It determines the distribution of net proceeds of taxes between the Centre and the States.
• Indian Statistical Institute (ISI)
  • The ISI is an academic institute of national importance which is focused on research, teaching, and application of statistics, natural sciences, and social sciences.
  • It is not directly involved in estimating national income.

The correct answer is More than access to credit poor need subsidies.

• Microfinance services cater to unemployed or low-income individuals who often lack access to traditional financial institutions due to poverty or limited financial resources, enabling them to secure small business loans safely and ethically.
• While microfinance initiatives are global, the majority are concentrated in developing nations like Bangladesh, Cambodia, India, Afghanistan, Democratic Republic of Congo, Indonesia, and Ecuador, where they play a crucial role in fostering economic empowerment and poverty alleviation.
• The advantages of microfinance extend beyond merely providing capital to individuals; entrepreneurs who establish successful businesses through microfinance can further contribute to their communities by generating employment opportunities and facilitating trade, thereby fostering overall socio-economic development.

Important Points

• While certain microfinance interest rates may be lower compared to traditional banks, critics argue that some operations are profiting from the impoverished population.
• Moreover, the involvement of major financial institutions and large corporations in launching for-profit microfinance departments has raised concerns that higher interest rates imposed by these entities could potentially lead to a debt trap for low-income borrowers, overshadowing the intended benefits.
• Nevertheless, microfinance serves as a crucial form of banking service for low-income individuals or groups who lack access to conventional financial services.

The correct answer is Private good.

• A good that is consumed by a single person or household is known as Private good.
• Private goods refer to groups or individuals whose ownership is limited to buying goods for their own consumption.
• Private items are not shared with anyone else but can be sold along with the right to use or consume.
• Private goods are different from public goods, which everyone can use regardless of their income level.

Other Related Points

• Merits Goods:
  • ​Merit goods are those goods and services that the government believes that people will not consume enough. They should be subsidized or provided free of charge when used so that consumption does not depend primarily on the ability to pay for goods or services.
• ​Demerit Goods:
  • Demerit goods ​is a product that may have a negative impact on consumers, but these harmful effects may be unknown or ignored by consumers.
  • Demerit goods usually also have negative externalities, in which consumption has an adverse effect on third parties.
• Public Goods:
  • Public goods are goods or services that benefit all members of society and are generally provided free of charge through public taxes.
  • Public goods are the opposite of private goods, private goods are rare by nature and are paid for only by individuals.
  • Society will have different opinions about what goods should be considered as public goods.

The correct answer is Changes in total income.

• The accelerator principle states that investment spending is positively related to changes in total income or aggregate demand.
• When the economy experiences a rise in income or an increase in aggregate demand, it creates a favourable environment for businesses to expand their production capacities.
• This prompts them to invest in new capital goods and equipment to meet the growing demand.

Hence changes in total income as the primary influence on investment spending according to the accelerator principle.

The correct answer is Mean - Median.

• Mean - Median:
  • This is an absolute measure of skewness. It directly measures the difference between the mean and median of a data set.
  • In a financial enterprise, understanding skewness is essential for risk management and investment decisions. For instance, a positive skewness might indicate potential for higher returns, but also higher risk.
  • The absolute measure helps in identifying whether the data is skewed to the left or right without considering the size of the data set.

Other Related Points

• (Mean - Median) / standard deviation:
  • This is a relative measure of skewness , not an absolute measure. Dividing by the standard deviation normalizes the skewness value, making it unitless and comparable across datasets.
  • This is not an absolute measure.
• (Q₃ + Q₁ - 2Q₂) / standard deviation:
  • This formula involves dividing by the standard deviation, which makes it a relative measure of skewness . Like Option A, this is normalized and not an absolute measure.
  • This is not an absolute measure.
• (Mean - Mode) / standard deviation:
  • This is another relative measure of skewness . Dividing by the standard deviation normalizes the skewness value, so it is not absolute.
  • This is not an absolute measure.

Key Concept: Goods and Services Tax (GST)

• GST is an indirect tax introduced in India on July 1, 2017, to replace multiple indirect taxes levied by the central and state governments. It aims to create a unified, simplified, and transparent taxation system.
• GST is applicable at every stage of the supply chain and is ultimately borne by the end consumer , making it an indirect tax .

Analysis of Each Statement:
A: It is a direct tax.

• This statement is incorrect.
• GST is an indirect tax , not a direct tax. Direct taxes (e.g., income tax, corporate tax) are paid directly by individuals or entities to the government, while indirect taxes (e.g., GST, sales tax) are collected by intermediaries (like businesses) and passed on to the government.

B: It will replace all indirect taxes with a single tax.

• This statement is correct.
• GST was designed to subsume most indirect taxes, such as excise duty, service tax, VAT, and others, into a single tax framework. However, certain taxes like customs duty and stamp duty remain outside the GST regime.

C: It aims to simplify the existing system of taxation in India.

• This statement is correct.
• One of the primary objectives of GST is to simplify the complex and fragmented system of indirect taxation in India by creating a unified tax structure.

D: The GST system is expected to make goods cheaper for the end consumer.

• This statement is correct.
• By eliminating the cascading effect of taxes (tax on tax) and streamlining the tax structure, GST reduces the overall tax burden on goods and services, potentially making them cheaper for the end consumer.

The statement that is NOT correct is: A: It is a direct tax.

The correct answer is product method.

• Product Method:
  • Product or value added method is a way of computing the national income of a country.
  • This system is also known as output or inventory method. This method calculates national income by adding value to a product at every stage of its production.
• expenditure method
  • The expenditure method is a system for calculating gross domestic product (GDP) that combines consumption, investment, government spending, and net exports.
  • It is the most common way to estimate GDP. It says everything that the private sector, including consumers and private firms, and government spend within the borders of a particular country, must add up to the total value of all finished goods and services produced over a certain period of time.
• consumption method
  • These consumption inventory methods offer a radically different method of accounting for a community's contribution to greenhouse gas emissions.
  • Traditional inventories evaluate the emissions associated with a diverse set of activities within a geographic area.​
• Income Method:
  • In the income method, the national income is measured by adding up the pretax income generated by the individuals and companies in the economy.
  • It consists of income from wages, rent of buildings and land, interest on capital, profits, etc.

The correct answer is 'Option 4'

• A market failure occurs when there is an inefficient allocation of resources.
• It happens when the true cost of a good is not reflected in the price.
• This might be because a third party benefits but does not pay for that benefit.
• Or, it could arise due to a cost that is imposed on a third party without their consent and compensation.

Let's discuss the factors in question one at a time in light of the definition provided above:

1. A: Asymmetric Information: Is a factor of market failure. It falls in one of the categories. Asymmetric information leads to the selling of a product at a value which it does not hold. Hence, this does cause an imbalance and inefficient allocation of resources and thus market failure.
2. B: Public Goods: The quality of public goods includes both non-rival and non-excludable and thus there is a free-rider problem and the consumer benefits but does not pay the price. Hence, they do cause market failure.
3. C: Externality: Externalities are market imperfections where the market offers no price for service or disservice. The presence of externalities in consumption and production also leads to market failure.
4. D: Lack of demand: when there is simply a lack of demand there is no inefficiency in the allocation of resources. Neither is any other element of market failure fulfilled when there is simply a lack of demand in the market. Therefore, this is the only reason out of the given which does not cause market failure.

Therefore 'Lack of Demand' is the correct option. Few causes and examples of externalities include:​

• Negative Externalities- such as pollution and alcohol;
• Positive Externalities- such as education and health;
• Imperfect Information- for example, a second-hand car is sold as new;
• Monopolies- such as Government Monopolies sometimes;
• Merit goods- such as education and libraries;
• De-merit goods- such as smoking, etc; and
• Public goods-such as law, defense, etc.

The correct answer is - Commercial Banks

• Commercial Banks
  • Commercial banks have the largest share in credit disbursal to agriculture and allied activities in India.
  • They provide a significant portion of agricultural loans through various schemes and programs initiated by the government.
  • These banks include both public sector banks and private sector banks.
  • Commercial banks have extensive networks and resources, enabling them to reach a larger number of farmers across the country.
• Microfinance Institutions
  • Microfinance institutions provide financial services to the unbanked and underbanked segments of the population, including small farmers and entrepreneurs.
  • However, their overall share in credit disbursal to agriculture and allied activities is much smaller compared to commercial banks.
• Regional Rural Banks
  • Regional Rural Banks (RRBs) were established to provide credit and other facilities to small farmers, agricultural laborers, and artisans in rural areas.
  • While RRBs play a crucial role in rural credit, their share is still less than that of commercial banks.
• Co-operative Banks
  • Co-operative banks operate at the state and district levels, providing credit to the agricultural sector.
  • These banks are important for rural credit but do not have the same extensive reach and resources as commercial banks.

The correct answer is - Regulating foreign trade

• Monetary Policy in India
  • The primary objectives of the monetary policy in India are set by the Reserve Bank of India (RBI).
  • These objectives include managing inflation, ensuring economic growth, and maintaining financial stability.
• Objective not included: Regulating foreign trade
  • Regulating foreign trade is typically the responsibility of the Ministry of Commerce and Industry.
  • While monetary policy can influence trade indirectly through exchange rates, it is not a direct objective.

Other Related Points

• Enhancing economic growth
  • The monetary policy aims to promote economic growth by managing interest rates and ensuring adequate liquidity in the economy.
  • Lower interest rates can stimulate investment and consumption, leading to economic growth.
• Achieving price stability
  • Price stability, or controlling inflation, is a key objective of monetary policy.
  • High inflation can erode purchasing power, while deflation can lead to reduced consumer spending.
  • The RBI uses tools like repo rates and open market operations to control inflation.
• Stabilizing the exchange rate
  • The exchange rate stability is crucial for maintaining investor confidence and avoiding excessive volatility in the foreign exchange market.
  • The RBI intervenes in the forex market to smooth out excessive fluctuations in the value of the Indian Rupee.

Key Concept: Regressive Tax
A regressive tax is a tax system in which the tax rate decreases as the taxable income increases . In other words:

• Lower-income individuals pay a higher percentage of their income in taxes compared to higher-income individuals.
• This type of tax disproportionately affects those with lower incomes because the tax burden (as a proportion of income) is heavier for them.

Analysis of Each Option:

A: As income increases, the tax rate decreases

• This is the defining characteristic of a regressive tax . As income rises, the tax rate falls, meaning higher-income individuals pay a smaller percentage of their income in taxes compared to lower-income individuals.
• This is correct.

B: As income decreases, the tax rate decreases

• This implies that lower-income individuals pay a lower tax rate, which is the opposite of what happens in a regressive tax system.
• In a regressive tax system, lower-income individuals pay a higher tax rate relative to their income.
• This is incorrect.

C: As income increases, the tax rate goes up

• This describes a progressive tax , where the tax rate increases with income. For example, higher-income individuals pay a higher percentage of their income in taxes.
• A regressive tax has the opposite effect: the tax rate decreases as income increases.
• This is incorrect.

D: As income increases, tax rate remains the same

• This describes a proportional tax (or flat tax), where the tax rate remains constant regardless of income.
• A regressive tax does not have a constant tax rate; instead, the tax rate decreases with higher income.
• This is incorrect.

The correct option is D: As income increases, the tax rate decreases.

The correct answer is - 3,1,4,2

Explanation

• Current Account
  • This is the first section of the balance of payments accounts.
  • It records the trade balance, net income from abroad, and net current transfers.
  • The trade balance includes exports and imports of goods and services.
  • Net income from abroad includes earnings on investments and wages.
  • Net current transfers include remittances and foreign aid.
• Capital Account
  • This is the second section of the balance of payments accounts.
  • It records all transactions related to the acquisition or disposal of non-financial, non-produced assets.
  • It includes transfers of ownership of fixed assets and capital transfers received or paid.
• Official Settlement Account (or Financial Account)
  • This is the third section of the balance of payments accounts.
  • It records transactions involving foreign exchange reserves held by the central bank.
  • It includes the purchase or sale of foreign currencies and other financial assets to balance international payments.
• Errors and Omissions
  • This is the last section of the balance of payments accounts.
  • It is used to adjust for any discrepancies that arise from the other sections.
  • It ensures that the balance of payments accounts balance out to zero.

Other Related Points

• Balance of Payments (BoP)
  • The Balance of Payments is a comprehensive record of all economic transactions between residents of a country and the rest of the world during a specific period.
  • It consists of the Current Account, the Capital Account, and the Financial Account.
  • The BoP must balance, meaning that the sum of the current account, capital account, and financial account must be zero when errors and omissions are taken into account.
• Understanding the Structure of BoP
  • The Current Account reflects the net trade in goods and services, income, and current transfers.
  • The Capital Account shows capital transfers and the acquisition/disposal of non-produced, non-financial assets.
  • The Official Settlement Account includes transactions that involve the central bank's reserves to balance international payments.
  • Errors and Omissions account for any statistical discrepancies to ensure the BoP balances.

The correct answer is - By progressive taxation

Explanation

• Progressive Taxation
  • Progressive taxation is a tax system where the tax rate increases as the taxable amount increases.
  • This means that those who earn higher incomes pay a higher percentage of their income in taxes compared to those with lower incomes.
  • The principle behind progressive taxation is to reduce income inequality by ensuring that those who can afford to pay more contribute a larger share.
  • It aims to achieve equity in taxation, ensuring that the tax burden is distributed fairly according to the taxpayer's ability to pay.

Other Related Points

• Proportional Taxation
  • Proportional taxation, also known as a flat tax, applies the same tax rate to everyone, regardless of income level.
  • While it is simpler, it does not necessarily address income inequality effectively, as everyone pays the same percentage of their income.
• Regressive Taxation
  • Regressive taxation imposes a higher tax rate on lower-income earners compared to higher-income earners.
  • This system can exacerbate income inequality, as it places a heavier burden on those with less ability to pay.
• One-time Tax
  • A one-time tax is a unique or non-recurring tax levied on individuals or businesses.
  • It is not designed to address ongoing issues of equity in the taxation system.

The correct answer is - IMF: Balance of payments problems

• IMF: Balance of payments problems
  • The International Monetary Fund (IMF) was established in 1944 during the Bretton Woods Conference to ensure the stability of the international monetary system.
  • The IMF provides financial assistance and support to member countries facing balance of payments problems, enabling them to stabilize their economies.
  • Balance of payments problems occur when a country is unable to pay for essential imports or service its debt repayments, leading to a crisis.
  • IMF assistance typically comes with conditions aimed at correcting the underlying economic problems causing the imbalance.

Other Related Points

• MFA: Agricultural free trade
  • The Multi-Fibre Arrangement (MFA) was an international trade agreement on textiles and clothing that was active from 1974 to 2004, not specifically related to agricultural free trade.
  • The MFA aimed to regulate the volume of textile and clothing exports from developing countries to developed countries.
• UNCTAD: Free trade zone
  • The United Nations Conference on Trade and Development (UNCTAD) is a permanent intergovernmental body established in 1964 to promote the development-friendly integration of developing countries into the world economy.
  • UNCTAD deals with a range of issues related to trade, investment, and development, but it is not specifically designated as a free trade zone.
• MFN: Foreign direct investment
  • Most Favoured Nation (MFN) is a principle in international trade that means a country must extend the same favorable terms of trade to all its trading partners.
  • It is not specifically related to foreign direct investment (FDI); rather, MFN status ensures non-discriminatory trade practices among countries.

The correct answer is - Ranking

• Ranking
  • Ranking is a method of arranging or ordering items based on their relative positions. It does not provide a central value around which other values cluster.
  • It is often used in contexts where the relative position is more important than the actual values.
  • For example, ranking students in a class based on their exam scores or ranking countries based on their GDP.
• Mode
  • The mode is the value that appears most frequently in a data set.It is a measure of central tendency because it identifies the most common value in a set of data.
  • For example, in the data set {1, 2, 2, 3, 4}, the mode is 2.
• Mean
  • The mean, or average, is calculated by adding all the values in a data set and dividing by the number of values.
  • It represents the central value of a data set and is widely used in statistical analysis.
  • For example, the mean of {2, 3, 4, 5, 6} is (2+3+4+5+6)/5 = 4.
• Median
  • The median is the middle value in a data set when the values are arranged in ascending or descending order.
  • If the number of observations is odd, the median is the middle number. If even, it is the average of the two middle numbers.
  • For example, in the data set {1, 3, 3, 6, 7, 8, 9}, the median is 6.

The correct answer is - Free trade area - Customs union - Common market - Economic union

• Free Trade Area
  • In a Free Trade Area, member countries agree to remove tariffs and other trade barriers among themselves.
  • Each country maintains its own trade policies towards non-member countries.
  • Examples include NAFTA (North American Free Trade Agreement).
• Customs Union
  • A Customs Union extends a Free Trade Area by adopting a common external tariff towards non-members.
  • This means that member countries agree on the same import tariffs and trade policies for non-member countries.
  • The Southern African Customs Union (SACU) is an example.
• Common Market
  • A Common Market builds on a Customs Union by allowing free movement of goods, services, capital, and labor among member countries.
  • This integration level promotes a higher level of economic cooperation and policy harmonization.
  • The European Economic Area (EEA) is an example.
• Economic Union
  • An Economic Union represents the most advanced form of economic integration, incorporating all elements of a Common Market.
  • Member countries coordinate their economic policies, including fiscal and monetary policies, to function as a single economic unit.
  • The European Union (EU) is a prime example, with a single currency (the Euro) for many of its members.

Other Related Points

• Economic Integration
  • Economic integration is the process by which different countries agree to remove trade barriers between them to boost economic cooperation and mutual benefits.
  • It includes various stages, from Free Trade Areas to Economic Unions, each with increasing levels of integration and economic policy coordination.
• Examples of Economic Integration
  • NAFTA: An example of a Free Trade Area comprising the United States, Canada, and Mexico.
  • SACU: An example of a Customs Union in Southern Africa.
  • EEA: An example of a Common Market that includes EU countries plus Iceland, Liechtenstein, and Norway.
  • EU: The European Union is an Economic Union with several member countries sharing a single currency and coordinated economic policies.

The correct answer is - Government's borrowings from the public

• Government's borrowings from the public
  • Capital receipts in the government budget include funds that the government receives through loans or borrowings.
  • These borrowings can be from internal sources (such as the public through the issuance of government bonds) or external sources (such as foreign governments or international organizations).
  • Borrowings are considered capital receipts because they create a liability for the government to repay the borrowed amount in the future.

Other Related Points

• Interest receipts on loans given by the Government to other parties
  • These are considered revenue receipts because they represent earnings from the government's investments and are not repayable.
• Dividends and profits of public enterprises
  • These are also considered revenue receipts as they are earnings from the government's shareholding in public sector enterprises.
• property tax receipts
  • These are property tax receipts and are classified as revenue receipts as they represent the government's earnings from taxes.

The correct answer is - J.M. Keynes

Explanation

• J.M. Keynes
  • John Maynard Keynes was a British economist whose ideas fundamentally changed the theory and practice of macroeconomics.
  • He introduced the concept of the "inflationary gap" in his work "The General Theory of Employment, Interest and Money" (1936).
  • The inflationary gap refers to the excess of total spending (aggregate demand) over the value of total output (aggregate supply) at full employment.
  • According to Keynes, this gap can lead to demand-pull inflation, where prices increase because demand outstrips supply.

Other Related Points

• A.C. Pigou
  • Arthur Cecil Pigou was an English economist known for his work in welfare economics.
  • He is best known for the "Pigovian Tax," a tax imposed on activities that generate negative externalities.
• A. Marshall
  • Alfred Marshall was a British economist who played a key role in the development of microeconomics.
  • His book "Principles of Economics" was the dominant economic textbook in England for many years.
• J.R. Hicks
  • John Richard Hicks was a British economist who made significant contributions to the theory of consumer demand and welfare economics.
  • He is also known for his work on general equilibrium theory and the IS-LM model, which explains the interaction between the goods market and the money market.

The correct answer is - cannot be left

Explanation

• Fixed cost of the firm in the short run cannot be left
  • Fixed costs refer to business expenses that are not dependent on the level of goods or services produced by the business. They remain constant irrespective of the production output.
  • Examples of fixed costs include rent, salaries of permanent staff, and insurance premiums.
  • In the short run, these costs must be paid even if the production is zero because they are obligatory and contractual.
  • These costs are unavoidable and must be covered by the firm regardless of its operational status in the short run.

Other Related Points

• Fixed Costs Overview
  • Fixed costs are contrasted with variable costs, which vary with the level of production.
  • Understanding the nature of fixed costs is crucial for businesses to manage their budgets and forecast their financial needs.
  • In the long run, all costs can become variable as contracts expire and businesses can adjust all their inputs.
• Explanation of Other Options
  • Zero: Fixed costs are never zero in the short run as they are ongoing expenses that must be paid.
  • Can only be avoided by reducing production to zero: This is incorrect because fixed costs must be paid even if production is reduced to zero.
  • Directly variable with production: Fixed costs do not vary with production levels; they remain constant regardless of the output.

The correct answer is - J. M. Keynes

Explanation

• J. M. Keynes
  • John Maynard Keynes was a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.
  • He is best known for his advocacy of government intervention to mitigate the adverse effects of economic recessions, depressions, and booms.
  • The statement "Interest is the reward for departing from liquidity" highlights Keynes' belief that interest is a compensation for parting with liquidity.
  • This forms a part of Keynes' broader theory on liquidity preference, which is a central component of his work in "The General Theory of Employment, Interest, and Money".

Other Related Points

• Ohlin
  • Bertil Ohlin was a Swedish economist known for his work on international trade and the Heckscher-Ohlin model.
  • His work was primarily focused on the effects of international trade on factor prices and income distribution.
• H. Knight
  • Frank H. Knight was an American economist who is best known for his work on risk and uncertainty.
  • His book "Risk, Uncertainty, and Profit" makes a distinction between measurable risk and unmeasurable uncertainty.
• A. Marshall
  • Alfred Marshall was a British economist whose work laid the foundation for the neoclassical school of economics.
  • He is famous for his book "Principles of Economics" and his contributions to microeconomics, including the concepts of supply and demand, marginal utility, and cost of production.

The correct answer is - 4

• If M.P.C. is 0.75 then the value of the multiplier will be 4
  • The multiplier (k) is determined using the formula: k = 1 / (1 - MPC), where MPC stands for Marginal Propensity to Consume.
  • Given MPC = 0.75, the calculation would be: k = 1 / (1 - 0.75) = 1 / 0.25 = 4.
  • This indicates that an initial change in spending will create a total impact on the economy that is four times the original amount spent.
  • This concept is crucial in understanding how economies can amplify initial spending, leading to greater overall economic activity.

Other Related Points

• Marginal Propensity to Consume (MPC)
  • MPC is the fraction of additional income that a household consumes rather than saves.
  • If MPC is 0.75, it means that out of every extra dollar earned, 75 cents are spent on consumption.
  • MPC is a key component in Keynesian economic theory, which emphasizes the role of consumer spending in driving economic activity.
• Multiplier Effect
  • The multiplier effect refers to the proportional amount of increase in final income that results from an injection of spending.
  • It explains how an initial increase in spending leads to further spending and results in an overall increase in economic output.
  • The formula k = 1 / (1 - MPC) helps in quantifying this effect.

The correct answer is - Uruguay Session

Explanation

• Uruguay Session
  • The Uruguay Round was the last and most comprehensive of the General Agreement on Tariffs and Trade (GATT) negotiation rounds.
  • It commenced in September 1986 in Punta del Este, Uruguay, and concluded in April 1994 with the signing of the Marrakesh Agreement.
  • This round led to the establishment of the World Trade Organization (WTO) on January 1, 1995, which replaced GATT as the framework for international trade.
  • The Uruguay Round addressed a wide range of issues, including tariff reductions, agricultural subsidies, intellectual property rights, and trade in services.

Other Related Points

• Singapore Session
  • There was no GATT session specifically named the Singapore Session.
  • Singapore is known for the first WTO Ministerial Conference held in 1996, after the establishment of the WTO.
• Geneva Session
  • Geneva hosted multiple rounds of GATT negotiations, including the initial meeting in 1947.
  • However, it was not the last session; the Uruguay Round was the final and most significant session.
• Washington Session
  • There was no specific GATT session named the Washington Session.
  • Washington, D.C. has been a venue for various international trade negotiations, but not the concluding GATT session.

The correct answer is - Narasimhan Committee

Key Concept: Revival and Restructuring of Weak Public Sector Banks

• In the 1990s, India's banking sector faced challenges due to inefficiencies, high non-performing assets (NPAs), and weak financial health of many public sector banks.
• To address these issues, several committees were formed, but the most notable one for revival and restructuring of weak public sector banks was the Narasimhan Committee .

Analysis of Each Option:
A: Varma Committee

• The Varma Committee (1984) was established to review the functioning of rural banks and suggest measures to improve their performance. It focused on regional rural banks (RRBs) rather than public sector banks.
• This is not the correct committee.

B: Narasimhan Committee

• The Narasimhan Committee , headed by former RBI Governor M. Narasimhan, was set up in 1991 and submitted its report in 1998 . It specifically addressed the issue of revival and restructuring of weak public sector banks .
• Key recommendations included:
  • Strengthening the regulatory framework for banks.
  • Introducing prudential norms for income recognition, asset classification, and provisioning.
  • Encouraging mergers and consolidation of weak banks to improve efficiency.
• This is the correct committee.

C: Rekhi Committee

• The Rekhi Committee (1985) was formed to examine taxation reforms in India. It had no specific role in the revival or restructuring of public sector banks.
• This is not the correct committee.

D: Goiporia Committee

• The Goiporia Committee (1991) focused on improving customer service in banks. It aimed to enhance the quality of services provided by banks to customers but did not deal with the revival or restructuring of weak banks.
• This is not the correct committee.

The correct option is B: Narasimhan Committee

The correct answer is - Bretton Woods

Explanation

• Bretton Woods Conference
  • The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was held in July 1944.
  • The conference was attended by delegates from 44 Allied nations to regulate the international monetary and financial order after World War II.
  • It led to the establishment of the International Monetary Fund (IMF) and the World Bank.
  • One of the significant outcomes was the creation of a system of fixed exchange rates, with currencies pegged to the US dollar, which was convertible to gold.
  • This framework is the origin of the modern idea of currency convertibility.

Other Related Points

• Marshall Plan
  • The Marshall Plan was an American initiative passed in 1948 for foreign aid to Western Europe.
  • The US gave over $12 billion (nearly $130 billion in current dollar value) in economic assistance to help rebuild Western European economies after the end of World War II.
• Washington Consensus
  • The Washington Consensus refers to a set of 10 economic policy prescriptions considered to constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.–based institutions such as the IMF, World Bank, and the US Treasury Department.
  • The Washington Consensus was formulated in 1989 and is associated with the neoliberal economic policies of the late 20th century.
• IMF Plan
  • The IMF Plan typically refers to the policies and programs that the International Monetary Fund implements to stabilize economies and promote growth, particularly in developing countries.
  • The IMF provides financial aid and policy advice to countries facing economic difficulties.

The correct answer is - 0

• Skewness (β1)
  • Skewness, is a measure of the asymmetry in the distribution of data.
  • For a symmetric distribution, the skewness (β1) is 0.
  • Skewness indicates the direction and degree of skew:
    • A positive skew indicates a distribution with a longer right tail.
    • A negative skew indicates a distribution with a longer left tail.
  • Skewness is an important statistical measure to understand the shape of the data distribution.

Other Related Points

• Option 1: 3
  • A skewness value of 3 indicates a highly positively skewed distribution.
• Option 3: 1
  • A skewness value of 1 indicates a moderately positively skewed distribution.
• Option 4: 2
  • A skewness value of 2 indicates a significantly positively skewed distribution.