Test: Class 11 Economy NCERT Based - 2


30 Questions MCQ Test Indian Economy for UPSC CSE | Test: Class 11 Economy NCERT Based - 2


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QUESTION: 1

Assertion: The policy of ‘land to the tiller’ is based on the idea that the cultivators will take more interest and they will have more incentive resulting in increasing output if they are the owners of the land

Reason: Ownership of land enables the tiller to make profit from the increased output

Select the correct code:

Solution:
  • The policy of ‘land to the tiller’ is based on the idea that the cultivators will take more interest — they will have more incentive — in increasing output if they are the owners of the land.

  • This is because ownership of land enables the tiller to make profit from the increased output. Tenants do not have the incentive to make improvements on land since it is the landowner who would benefit more from higher output.

  • The importance of ownership in providing incentives is well illustrated by the carelessness with which farmers in the former Soviet Union used to pack fruits for sale. It was not uncommon to see farmers packing rotten fruits along with fresh fruits in the same box.

  • Now, every farmer knows that the rotten fruits will spoil the fresh fruits if they are packed together. This will be a loss to the farmer since the fruits cannot be sold.

QUESTION: 2

Consider the following statements regarding the land ceiling. Regarding the land ceiling.

1. This means fixing the minimum size of land which could be owned by an individual

2. The purpose of land ceiling was to reduce the concentration of land ownership in a few hands

3. The ownership conferred on tenants gave them the incentive to increase output and this contributed to growth in agriculture

Which of the statements is/are correct?

Solution:
  • Land ceiling was another policy to promote equity in the agricultural sector.

  • This means fixing the maximum size of land which could be owned by an individual.

  • The purpose of the land ceiling was to reduce the concentration of land ownership in a few hands.

  • The abolition of intermediaries meant that some 200 lakh tenants came into direct contact with the government — they were thus freed from being exploited by the zamindars.

  • The ownership conferred on tenants gave them the incentive to increase output and this contributed to growth in agriculture.

However, the goal of equity was not fully served by abolition of intermediaries.

QUESTION: 3

Why is the goal of equity not fully served by abolition of intermediaries?

1. In some areas the former zamindars continued to own large areas of land by making use of some loopholes in the legislation

2. The poorest of the agricultural labourers did not benefit from land reforms

3. There was not same level of commitment in all the states to abolish intermediaries

Which of the statements is/are correct?

Solution: All statements are correct.

QUESTION: 4

Assertion: The price of food grains declined relative to other items of consumption.

Reason: A good proportion of the rice and wheat produced during the green revolution period was consumed by the farmers themselves

Select the correct code:

Solution:
  • The portion of agricultural produce which is sold in the market by the farmers is called marketed surplus.

  • A good proportion of the rice and wheat produced during the green revolution period (available as marketed surplus) was sold by the farmers in the market. As a result, the price of food grains declined relative to other items of consumption.

  • The low- income groups, who spend a large percentage of their income on food, benefited from this decline in relative prices.

The green revolution enabled the government to procure sufficient amounts of food grains to build a stock which could be used in times of food shortage.

QUESTION: 5

Assertion: The green revolution benefited the small as well as rich farmers

Reason: The risk of the small farmers being ruined attack their crops was considerably reduced

Select the correct code:

Solution:
  • The government provided loans at a low interest rate to small farmers and subsidised fertilisers so that small farmers could also have access to the needed inputs.

  • Since the small farmers could obtain the required inputs, the output on small farms equalled the output on large farms in the course of time.

  • As a result, the green revolution benefited the small as well as rich farmers. The risk of the small farmers being ruined when pests attack their crops was considerably reduced by the services rendered by research institutes established by the government.

QUESTION: 6

What are the reasons to believe that the government should continue with agricultural subsidies?

1. Most farmers are very poor and they will not be able to afford the required inputs without subsidies.

2. Eliminating subsidies will increase the inequality between rich and poor farmers and violate the goal of equity

Choose from the following options.

Solution:
  • It is generally agreed that it was necessary to use subsidies to provide an incentive for adoption of the new HYV technology by farmers in general and small farmers in particular.

  • Any new technology will be looked upon as being risky by farmers. Subsidies were, therefore, needed to encourage farmers to test the new technology. Some economists believe that once the technology is found profitable and is widely adopted, subsidies should be phased out since their purpose has been served.

  • Further, subsidies are meant to benefit the farmers but a substantial amount of fertiliser subsidy also benefits the fertiliser industry; and among farmers, the subsidy largely benefits the farmers in the more prosperous regions.

  • Therefore, it is argued that there is no case for continuing with fertiliser subsidies; it does not benefit the target group and it is a huge burden on the government’s finances.

QUESTION: 7

Assertion: The five year plans place a lot of emphasis on industrial development

Reason: Industry provides employment which is more stable than the employment in agriculture

Select the correct code:

Solution:
  • Economists have found that poor nations can progress only if they have a good industrial sector. Industry provides employment which is more stable than the employment in agriculture; it promotes modernisation and overall prosperity.

  • It is for this reason that the five year plans place a lot of emphasis on industrial development.

QUESTION: 8

Industrial Policy Resolution 1956 (IPR 1956): In accordance with the goal of the state controlling the commanding heights of the economy, the Industrial Policy Resolution of 1956 was adopted. This resolution formed the basis of the Second Five Year Plan, the plan which tried to build the basis for a socialist pattern of society. This resolution classified industries into three categories. Consider the following statement regarding it.

1. The first category comprised industries which would be exclusively owned by the state

2. The second category consisted of industries in which the private sector could supplement the efforts of the state sector, with the state taking the sole responsibility for starting new units

3. The third category consisted of the remaining industries which were to be in the private sector

Which of the statements is/are correct?

Solution:
  • Industrial Policy Resolution 1956 (IPR 1956): In accordance with the goal of the state controlling the commanding heights of the economy, the Industrial Policy Resolution of 1956 was adopted.

  • This resolution formed the basis of the Second Five Year Plan, the plan which tried to build the basis for a socialist pattern of society. This resolution classified industries into three categories.

  • The first category comprised industries which would be exclusively owned by the state; the second category consisted of industries in which the private sector could supplement the efforts of the state sector, with the state taking the sole responsibility for starting new units; the third category consisted of the remaining industries which were to be in the private sector.

  • Although there was a category of industries left to the private sector, the sector was kept under state control through a system of licenses. No new industry was allowed unless a license was obtained from the government.

  • This policy was used for promoting industry in backward regions; it was easier to obtain if the industrial unit was established in an economically backward area. In addition, such units were given certain concessions such as tax benefits and electricity at a lower tariff. The purpose of this policy was to promote regional equality.

QUESTION: 9

Consider the following statements regarding the import substitution policy.

1. This policy aimed at replacing or substituting imports with domestic production.

2. In this policy the government protected the domestic industries from foreign competition

3. Tariffs helped the government specify the quantity of goods which can be imported

Which of the statements is/are correct?

Solution:
  • The industrial policy that we adopted was closely related to the trade policy. In the first seven plans, trade was characterised by what is commonly called an inward looking trade strategy.

  • Technically, this strategy is called import substitution. This policy aimed at replacing or substituting imports with domestic production.

  • For example, instead of importing vehicles made in a foreign country, industries would be encouraged to produce them in India itself. In this policy the government protected the domestic industries from foreign competition. Protection from imports took two forms: tariffs and quotas.

  • Tariffs are a tax on imported goods; they make imported goods more expensive and discourage their use. Quotas specify the quantity of goods which can be imported.

  • The effect of tariffs and quotas is that they restrict imports and, therefore, protect the domestic firms from foreign competition.

QUESTION: 10

Consider the following statements about the licensing Raj system.

1. A big industrialist would get a license not for starting a new firm but to prevent competitors from starting new firms

2. More time was spent by industrialists in trying to obtain a license or lobby with the concerned ministries rather than on thinking about how to improve their products.

Which of the statements is/are not correct?

Solution:
  • The need to obtain a license to start an industry was misused by industrial houses; a big industrialist would get a license not for starting a new firm but to prevent competitors from starting new firms.

  • The excessive regulation of what came to be called the permit license raj prevented certain firms from becoming more efficient. More time was spent by industrialists in trying to obtain a license or lobby with the concerned ministries rather than on thinking about how to improve their products.

  • The protection from foreign competition is also being criticised on the ground that it continued even after it proved to do more harm than good. Due to restrictions on imports, the Indian consumers had to purchase whatever the Indian producers produced.

  • The producers were aware that they had a captive market; so they had no incentive to improve the quality of their goods. Why should they think of improving quality when they could sell low quality items at a high price? Competition from imports forces our producers to be more efficient.

QUESTION: 11

Consider the following statements regarding the concept of 'Jail cost of living'.

1. In pre-independent India, Mahatma Gandhi was the first to discuss the concept of a Poverty Line

2. Gandhi used the menu for a prisoner and used appropriate prevailing prices to arrive at what may be called ‘jail cost of living’

Which of the statements is/are correct?

Solution:
  • In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a Poverty Line. He used the menu for a prisoner and used appropriate prevailing prices to arrive at what may be called ‘jail cost of living’.

  • However, only adults stay in jail whereas, in an actual society, there are children too. He, therefore, appropriately adjusted this cost of living to arrive at the poverty line.

  • For this adjustment, he assumed that one-third of the population consisted of children and half of them very little while the other half half of the adult diet. This is how he arrived at the factor of three-fourths; (1/6)(Nil) + (1/6)(Half) + (2/3)(Full) = (3/4) (Full).

  • The weighted average of consumption of the three segments gives the average poverty line, which comes out to be three-fourth of the adult jail cost of living. In post-independent India, there have been several attempts to work out a mechanism to identify the number of poor in the country.

  • For instance, in 1962, the Planning Commission formed a Study Group. In 1979, another body called the ‘Task Force on Projections of Minimum Needs and Effective Consumption Demand’ was formed. In 1989 and 2005, ‘Expert Groups’ were constituted for the same purpose.

QUESTION: 12

Which of the following are correctly matched?

1. Occasionally poor - who are rich most of the time but may sometimes have a patch of bad luck

2. Churning poor - who regularly move in and out of poverty

3. Chronic poor - Who may sometimes have a little more money

Solution:
  • Categorising Poverty: There are many ways to categorise poverty. In one such way people who are always poor and those who are usually poor but who may sometimes have a little more money (example: casual workers) are grouped together as the chronic poor.

  • Another group are the churning poor who regularly move in and out of poverty (example: small farmers and seasonal workers) and the occasionally poor who are rich most of the time but may sometimes have a patch of bad luck. They are called the transient poor. And then, there are those who are never poor and they are the non-poor.

QUESTION: 13

Consider the following statements about the Monthly Per Capita Expenditure (MPCE).

1. This mechanism is helpful in identifying the poor as a group to be taken care of by the government, but it would be difficult to identify who among the poor need help the most

2. It groups all the poor together and does not differentiate between the very poor and the other poor

Which of the statements is/are correct?

Solution:
  • There are many ways of measuring poverty. One way is to determine it by the monetary value (per capita expenditure) of the minimum calorie intake that was estimated at 2,400 calories for a rural person and 2,100 for a person in the urban area. Based on this, in 2011-12, the poverty line was defined for rural areas as consumption worth Rs 816 per person a month and for urban areas it was Rs 1,000.

  • Though the government uses Monthly Per Capita Expenditure (MPCE) as a proxy for income of households to identify the poor. State that a major problem with this mechanism is that it groups all the poor together and does not differentiate between the very poor and the other poor.

QUESTION: 14

Consider the following statements about the National Social Assistance Programme.

1. Under this programme, elderly people who do not have anyone to take care of them are given pension to sustain themselves

2. Poor women who are destitute and widows are also covered under this scheme

Which of the statements is/are not correct?

Solution:
  • The government has a variety of social security programmes to help a few specific groups. The National Social Assistance Programme is one such programme initiated by the central government. Under this programme, elderly people who do not have anyone to take care of them are given pension to sustain themselves.

  • Poor women who are destitute and widows are also covered under this scheme. The government has also introduced a few schemes to provide health insurance to poor people.

  • From 2014, a scheme called Pradhan Mantri Jan-Dhan Yojana is available in which people in India are encouraged to open bank accounts. Besides promoting savings habits, this scheme intends to transfer all the benefits of government schemes and subsidies to eligible account holders directly.

  • Each bank account holder is also entitled to Rs. 1 lakh accident insurance and Rs. 30,000 life insurance cover.

QUESTION: 15

Consider the following statements.

1. Physical capital is tangible and can be easily sold in the market like any other commodity while Human capital is intangible and Human capital is not sold in the market.

2. Physical capital formation can be built even through imports whereas human capital formation is to be done through conscious policy formulations.

Which of the statements is/are not correct?

Solution:
  • Physical and Human Capital: Both the forms of capital formation are outcomes of conscious investment decisions. Decisions regarding investment in physical capital are taken on the basis of one’s knowledge in this regard.

  • The entrepreneur possesses knowledge to calculate the expected rates of return to a range of investments and then rationally decides which one of the investments should be made. The ownership of physical capital is the outcome of the conscious decision of the owner — the physical capital formation is mainly an economic and technical process.

  • A substantial part of the human capital formation takes place in one’s life when she/he is unable to decide whether it would maximise her/his earnings. Children are given different types of school education and health care facilities by their parents and the society.

QUESTION: 16

Consider the following statements.

1. Human capital treats human beings as a means to an end

2. As per Human Capital Perspective, Any investment in education and health is unproductive if it does not enhance output of goods and services

Which of the statements is/are correct?

Solution:
  • What is the Difference Between the approach of Development of Human Capital and Human Development? Human capital considers education and health as a means to increase labour productivity.

  • Human development is based on the idea that education and health are integral to human well-being because only when people have the ability to read and write and the ability to lead a long and healthy life, they will be able to make other choices which they value.

  • Human capital treats human beings as a means to an end; the end being the increase in productivity. In this view, any investment in education and health is unproductive if it does not enhance output of goods and services.

  • In the human development perspective, human beings are ends in themselves. Human welfare should be increased through investments in education and health even if such investments do not result in higher labour productivity.

  • Therefore, basic education and basic health are important in themselves, irrespective of their contribution to labour productivity.

QUESTION: 17

Education Commission (1964–66) had recommended that at least

Solution:
  • About 50 years ago, the Education Commission (1964–66) had recommended that at least 6 percent of GDP be spent on education so as to make a noticeable rate of growth in educational achievements.

  • The Tapas Majumdar Committee, appointed by the Government of India in 1998, estimated an expenditure of around Rs 1.37 lakh crore over 10 years (1998-99 to 2006-07) to bring all Indian children in the age group of 6-14 years under the purview of school education.

  • Compared to this desired level of education expenditure which is around 6 percent of GDP, the current level of a little over 4 per cent has been quite inadequate. A goal of 6 per cent needs to be reached—this has been accepted as a must for the coming years.

  • In 2009, the Government of India enacted the Right of Education Act to make free education a fundamental right of all children in the age group of 6-14 years.

QUESTION: 18

‘Kudumbashree’ is a women-oriented community-based poverty reduction programme being implemented in:

Solution:
QUESTION: 19

Consider the following statements about Self Help Groups.

1. The SHGs promote thrift in small proportions by a minimum contribution from each member

2. From the pooled money, credit is given to the needy members to be repayable in small instalments at reasonable interest rates

Which of the statements is/are correct?

Solution:
  • The institutional structure of rural banking today consists of a set of multi-agency institutions, namely, commercial banks, regional rural banks (RRBs), cooperatives and land development banks.

  • They are expected to dispense adequate credit at cheaper rates. Recently, Self-Help Groups (henceforth SHGs) have emerged to fill the gap in the formal credit system because the formal credit delivery mechanism has not only proven inadequate but has also not been fully integrated into the overall rural social and community development.

  • Since some kind of collateral is required, a vast proportion of poor rural households were automatically out of the credit network. The SHGs promote thrift in small proportions by a minimum contribution from each member. From the pooled money, credit is given to the needy members to be repayable in small instalments at reasonable interest rates. By March end 2003, more than seven lakh SHGs had reportedly been credit linked.

QUESTION: 20

Consider the following statements.

1. Prior to independence, farmers, while selling their produce to traders, suffered from faulty weighing and manipulation of accounts

2. Farmers who did not have the required information on prices prevailing in markets were often forced to sell at low prices

Which of the statements is/are correct?

Solution:
  • Prior to independence, farmers, while selling their produce to traders, suffered from faulty weighing and manipulation of accounts.

  • Farmers who did not have the required information on prices prevailing in markets were often forced to sell at low prices. They also did not have proper storage facilities to keep back their produce for selling later at a better price.

QUESTION: 21

Consider the following statements.

1. Infrastructure associated with energy, transportation and communication are included in economic infrastructure

2. Infrastructure related to education, health and housing are included in the social infrastructure

Which of the statement/statements is/are correct?

Solution: Some divide infrastructure into two categories — economic and social. Infrastructure associated with energy, transportation and communication are included in the former category whereas those related to education, health and housing are included in the latter.

QUESTION: 22

Assertion: The share of power and telecommunication infrastructure is greater in high-income countries.

Reason: As economies mature and most of their basic consumption demands are met, the share of agriculture in the economy shrinks and more service-related infrastructure is required.

Select the correct code:

Solution:
  • Some economists have projected that India will become the third biggest economy in the world a few decades from now. For that to happen, India will have to boost its infrastructure investment.

  • In any country, as the income rises, the composition of infrastructure requirements changes significantly. For low-income countries, basic infrastructure services, like irrigation, transport and power, are more important.

  • As economies mature and most of their basic consumption demands are met, the share of agriculture in the economy shrinks and more service-related infrastructure is required. This is why the share of power and telecommunication infrastructure is greater in high-income countries.

QUESTION: 23

Consider the following statements.

1. Agriculture depends, to a considerable extent, on the adequate expansion and development of irrigation facilities

2. Industrial progress depends on the development of power and electricity generation, transport and communications

Which of the statement/statements is/are correct?

Solution:
  • For low-income countries, basic infrastructure services, like irrigation, transport and power, are more important.

  • As economies mature and most of their basic consumption demands are met, the share of agriculture in the economy shrinks and more service-related infrastructure is required. This is why the share of power and telecommunication infrastructure is greater in high-income countries.

  • Thus, development of infrastructure and economic development go hand in hand. Agriculture depends, to a considerable extent, on the adequate expansion and development of irrigation facilities. Industrial progress depends on the development of power and electricity generation, transport and communications.

QUESTION: 24

Which of the following are the biotic elements.

1. Birds

2. Animals

3. Air

Which of the statement/statements is/are correct?

Solution:
  • Environment is defined as the total planetary inheritance and the totality of all resources. It includes all the biotic and abiotic factors that influence each other.

  • While all living elements—the birds, animals and plants, forests, fisheries etc.—are biotic elements, abiotic elements include air, water, land etc. Rocks and sunlight are all examples of abiotic elements of the environment.

  • A study of the environment then calls for a study of the inter- relationship between these biotic and abiotic components of the environment.

QUESTION: 25

Consider the following statements regarding the Environment

1. It assimilates waste

2. It sustains life by providing genetic resources and biodiversity

3. It also provides aesthetic services

Which of the statement/statements is/are correct?

Solution:
  • The environment performs four vital functions

(i) it supplies resources: resources here include both renewable and non-renewable resources. Renewable resources are those which can be used without the possibility of the resource becoming depleted or exhausted. That is, a continuous supply of the resource remains available. Examples of renewable resources are the trees in the forests and the fishes in the ocean. Non-renewable resources, on the other hand, are those which get exhausted with extraction and use, for example, fossil fuel

(ii) it assimilates waste

(iii) it sustains life by providing genetic resources and biodiversity and

(iv) it also provides aesthetic services like scenery etc.

QUESTION: 26

Consider the following statements.

1. Absorptive capacity means the ability of the environment to absorb degradation

2. Today many resources have become extinct and the wastes generated are beyond the absorptive capacity of the environment

Which of these statement/statements is/are correct?

Solution:
  • The rising population of the developing countries and the affluent consumption and production standards of the developed world have placed a huge stress on the environment in respect of its functions.

  • Many resources have become extinct and the wastes generated are beyond the absorptive capacity of the environment. Absorptive capacity means the ability of the environment to absorb degradation.

  • The result — we are today at the threshold of environmental crisis. The past development has polluted and dried up rivers and other aquifers making water an economic good.

QUESTION: 27

Consider the following statements about Global Warming.

1. It is caused by man-made increases in carbon dioxide and other greenhouse gases through the burning of fossil fuels and deforestation

2. It is a gradual increase in the average temperature of the earth’s lower atmosphere as a result of the increase in greenhouse gases since the Industrial Revolution

Which of the statement/statements is/are correct?

Solution:
  • Global warming is a gradual increase in the average temperature of the earth’s lower atmosphere as a result of the increase in greenhouse gases since the Industrial Revolution. Much of the recently observed and projected global warming is human-induced.

  • It is caused by man-made increases in carbon dioxide and other greenhouse gases through the burning of fossil fuels and deforestation. Adding carbon dioxide, methane and such other gases (that have the potential to absorb heat) to the atmosphere with no other changes make our planet’s surface warmer.

QUESTION: 28

Consider the following statements.

1. Ozone layer prevents most harmful wavelengths of ultraviolet light from passing through the Earth’s atmosphere

2. Montreal Protocol banned the use of chlorofluorocarbon (CFC) compounds

3. The problem of ozone depletion is caused by high levels of chlorine and bromine compounds in the Troposphere

Which of the statement/statements is/are not correct?

Solution:
  • Ozone depletion refers to the phenomenon of reductions in the amount of ozone in the stratosphere. The problem of ozone depletion is caused by high levels of chlorine and bromine compounds in the stratosphere.

  • The origins of these compounds are chlorofluorocarbons (CFC), used as cooling substances in air conditioners and refrigerators, or as aerosol propellants, and bromofluorocarbons (halons), used in fire extinguishers.

  • As a result of depletion of the ozone layer, more ultraviolet (UV) radiation comes to Earth and causes damage to living organisms. UV radiation seems responsible for skin cancer in humans; it also lowers production of phytoplankton and thus affects other aquatic organisms. It can also influence the growth of terrestrial plants. A reduction of approximately 5 per cent in the ozone layer was detected from 1979 to 1990.

QUESTION: 29

Assertion: There is a concentration of textile industries in Deccan Plateau

Reason: The black soil of the Deccan Plateau is particularly suitable for cultivation of cotton

Select the correct code:

Solution:
  • India has abundant natural resources in terms of rich quality of soil, hundreds of rivers and tributaries, lush green forests, plenty of mineral deposits beneath the land surface, vast stretch of the Indian Ocean, ranges of mountains, etc.

  • The black soil of the Deccan Plateau is particularly suitable for cultivation of cotton, leading to concentration of textile industries in this region. The Indo-Gangetic plains — spread from the Arabian Sea to the Bay of Bengal — are one of the most fertile, intensively cultivated and densely populated regions in the world. India’s forests, though unevenly distributed, provide green cover for a majority of its population and natural cover for its wildlife.

QUESTION: 30

Which of the following are factors responsible for land degradation?

1. Loss of vegetation occurring due to deforestation

2. Unsustainable fuel wood and fodder extraction

3. Shifting cultivation

4. Forest fires and overgrazing

Solution:

Some of the factors responsible for land degradation are:

(i) loss of vegetation occurring due to deforestation

(ii) unsustainable fuel wood and fodder extraction

(iii) shifting cultivation

(iv) encroachment into forest lands

(v) forest fires and overgrazing

(vi) non-adoption of adequate soil conservation measures

(vii) improper crop rotation

(viii) indiscriminate use of agro-chemicals such as fertilisers and pesticides

(ix) improper planning and management of irrigation systems

(x) extraction of groundwater in the competing uses of land for forestry, agriculture, pastures, human settlements and industries exert an enormous pressure on the country’s finite land resources.