Economics: CUET Mock Test - 5 - CUET MCQ

Foreign travellers defined the finest quality of muslin as Malmal Shahi or Malmal Khas implying that it was worn by, or fit for, the royalty

The correct answer is a, c, d and b.

Key Points

• The correct order in the manufacture of cloth in the market economy is:
  • Ginning mill cleans the cotton and makes it into balls
  • The spinning mill buys the cotton and sells yarn to the yarn traders
  • Yarn dealers give the yarn to the weavers.
  • Weavers return with the cloth.
• Ginning is the process in which all the cotton fibres are separated from the seeds.
• Transforming fibre into yarn is called spinning.
• The yarn is then converted to cloth by the process of weaving.

Thus, we can conclude the correct sequence is

• Ginning mill cleans the cotton and makes it into balls
• Spinning mill buys the cotton and sells yarn to the yarn traders
• Yarn dealers give the yarn to the weavers.
• Weavers return with cloth

Concept:

• The Population Census is the overall process of collecting, compiling, analyzing, or otherwise disseminating demographic, economic, and social data concerning all persons in a country or in a well-defined part of a country at a specific time.
• As such, the census offers a snapshot of the population and housing of the country at a given point in time.

Explanation:

• The year 1921 is considered to be the defining year.
• As population growth was scarce before that time, it is also known as the year of the Great Divide. The population growth of India after 1921 was steady.
• It is known as the demographic divide since the population was not constant until this year, often increasing and at other times decreasing.
• The population growth scale was generally low prior to 1921. But after this year the population grew dramatically and slowly.
• The net population growth between 1901 and 1911 was 5.9 percent and a decline of 0.39 percent between 1911 and 1921.
• The rise was 11.1 percent during the 1921-1931 decade, 14.00 percent from 1931 to 1941, and 13.5 percent from 1941-1951.
• After that, it shows an increasing trend.
• The year 1921 is thus rightly referred to as the demographic divide or the year of the great divide.

Additional Information

• National Population Policy, 2000:
• The National Population Policy (NPP), 2000 is the central government’s second population policy.
• The NPP states its immediate objective as addressing the unmet needs for contraception, healthcare infrastructure, and health personnel, and providing integrated service delivery for primary reproductive and child healthcare.
• The medium-term objective of the NPP 2000 was to reduce the Total Fertility Rate (TFR) to replacement levels by 2010.
• The long-term objective is to achieve a stable population by 2045, at a level consistent with sustainable economic growth, social development, and environmental protection requirements.

The correct answer is Option 3.

Key Points

• Poverty is defined as a social phenomenon in which a section of society is unable to fulfill even its basic necessities of life.
• There are many ways to categorize 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 (for 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).
  • 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.
• 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 which was estimated at 2,400 calories for a rural person and 2,100 calories for a person in an 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.
• In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a Poverty Line.
  • 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 now called as NITI Aayog 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. Besides the Planning Commission, many individual economists have also attempted to develop such a mechanism.
• The official data on poverty is now made available to the public by the NITI Aayog.
  • It is estimated on the basis of consumption expenditure data collected by the National Sample Survey Organisation (NSSO) now called as National Statistical Office. Hence, Option 3 is the correct answer.

• The Tata Iron and Steel company (TISCO) was established by Dorabji Tata in 1907.
• He was committed to fulfill the the dream of his father, Jamsetji Nusserwanji Tata, an Indian Pioneer industrialist who founded the Tata Group.
• Dorabji Tata was knighted by Edward VII, becoming Sir Dorabji Tata in January 1910.

The correct option is 'Net National Product at Factor Cost'.

Key Points

• Net National Product at Market Price
  • This statement refers to the net value of all goods and services produced within a country at market prices, after adjusting for depreciation. While it is a measure of national income, it does not accurately reflect the income at factor cost.
• Gross National Product at Factor Cost
  • This is the total value of goods and services produced by the residents of a country, plus any product taxes (less subsidies) not included in the valuation of output, at factor cost. However, it does not adjust for the depreciation of assets like the Net National Product does.
• Net National Product at Factor Cost
  • This is the correct definition of National Income. It represents the net value of all goods and services produced within a country (after adjusting for depreciation), measured at factor cost, which means it reflects the incomes earned by factors of production like labor and capital.
  • Since it adjusts for depreciation (netting out the loss in value of assets over time) and measures income at factor cost (the cost of inputs used in production), it provides a clear picture of the country's economic performance and the income generated from its production activities.
• Gross National Product at Market Price
  • This measure accounts for the total value of all goods and services produced within a country at market prices, including net income from abroad. However, it does not subtract the depreciation of assets, making it a gross measure rather than a net measure.

Therefore, the statement that Net National Product at Factor Cost can also be called National Income is correct. Hence, Option 3 is the correct answer.

The correct option is 'A - IV, B - I, C - II, D - III'.

Key Points

• Trade includes export and import of goods is related to the Current Account.
  • The current account of a country's balance of payments includes the trade of goods and services, wherein export and import of goods are a primary component.
  • This account reflects the net amount of a country's income if it is in surplus, or spending if it is in deficit, on international trade.
• Foreign Direct Investment falls under the Capital Account.
  • Foreign Direct Investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country.
  • FDI is a part of the capital account, which records the net change in ownership of national assets.
• Net sale of service products like banking and tourism is categorized as Invisible Trade.
  • Invisible trade refers to the trade of services, as opposed to the trade of tangible goods. This includes services such as banking, insurance, and tourism.
  • It is a part of the current account, contributing to the balance of payments in ways other than the physical transfer of goods.
• The Receipts of payment without providing goods and services are known as Transfer Payment.
  • Transfer payments refer to payments made in which no goods or services are being paid for, such as welfare, financial aid, and grants.
  • These are unilateral payments made without a direct return in goods or services, but they affect the balance of payments.

Therefore the correct pairing is:
A - IV: Trade includes export and import of goods - Current Account
B - I: Foreign Direct Investment - Capital Account
C - II: Net sale of service products like banking and tourism - Invisible Trade
D - III: The Receipts of payment without providing goods and services - Transfer Payment

Tax Revenue & Tax Receipts

Key Points

• Tax Revenue: This is the income earned by the government through the imposition of taxes such as income tax, corporate tax, goods and services tax (GST), excise duties, etc. Tax revenues are a major part of government revenue and are used to finance public services and goods. These are indeed non-redeemable, as once paid, taxes cannot be claimed back by the taxpayer under normal circumstances.
• Revenue Receipts: This broader category includes not just tax revenues but also other sources of government income that do not involve the creation of liability or diminution of an asset. Besides taxes, this includes non-tax revenues like fees, fines, proceeds from public services, and grants-in-aid. Like tax revenues, these receipts are used for the government's day-to-day functioning and are non-redeemable.
• So, the correct answer is both tax revenue (2) and revenue receipts (3), it elucidates that all forms of income that the government receives without an obligation to return them—whether through taxes or other non-tax avenues—are classified together for this context. Thus, saying both tax revenues and revenue receipts are non-redeemable is a way of illustrating that all money coming into the government through these channels is not expected to be paid back to the contributors, encompassing both the specific income from taxes and the broader category of all routine, non-repayable incomes.

The correct option is '3) 5'.

Key Points

• The concept of Money Multiplier reflects the maximum extent to which the money supply can increase based on an initial deposit in the banking system.
• The Cash Reserve Ratio (CRR) is the percentage of deposits that banks are required to keep with the central bank. A CRR of 20% means that for every 100 units of currency deposited, banks must keep 20 units with the central bank and can lend out the remaining 80 units.
• Money creation or the money multiplier effect occurs when banks lend out their excess reserves. The initial deposit leads to a series of loans and deposits, creating more money in the economy than was initially deposited.
• The formula for calculating the money multiplier is 1/CRR. Therefore, with a CRR of 20% (or 0.20), the money multiplier is calculated as 1/0.20 = 5.
• This means that for every unit of currency deposited, the banking system can increase the money supply by up to 5 units through the process of lending and depositing, assuming there are no other leakages in the system.
• In the context of this question, with an initial deposit of Rs. 1000 and a money multiplier of 5, the total money creation in the economy could be up to Rs. 5000, illustrating the significant impact of the banking system on the money supply.

Additional Information

• The money multiplier is a crucial concept in monetary economics, illustrating the role of banks in the money creation process and how central banks can influence the money supply through regulatory tools like the Cash Reserve Ratio.
• Understanding the money multiplier helps in analyzing the potential impacts of monetary policy decisions on the economy, including inflation and interest rates.

Investment in education turns human resources into 'Human Capital'

Key Points

• Human Capital:
  • Investment in education enhances the skills, knowledge, and competencies of people, making them more productive and valuable to the workforce, which is referred to as human capital.
  • Human capital is crucial for economic development, innovation, and the overall competitiveness of a nation or organization.
  • This concept emphasizes the role of individual development through education and training as an investment, similar to investing in physical assets.

Additional Information

• Human Development:
  • While closely related, human development is a broader concept that encompasses improvements in health, education, and living standards, alongside human capital.
  • It is more about increasing people's choices and enhancing capabilities, not just focusing on the economic value of their skills.
• Human Capital Formation:
  • Human capital formation is the process of increasing the number of individuals who have the skills, education, and experience that are critical for the economic and political development of a country.
  • It's essentially the process that leads to the creation of human capital.
• Physical Capital:
  • Physical capital refers to tangible assets such as machinery, buildings, and infrastructure that contribute to the production process.
  • Unlike human capital, it does not include the skillset or knowledge of the workforce.

Life expectan cy during the British rule was as low as 44 years with the present of 69.42 years.(source: World Bank)

British enabled India to be an exporter of primary products and an importer of finished goods.

ttempts were made by all of the above personalities, however Rao’s estimates were considered as most significant.

Zamindars did nothing to improve the condition of agriculture and focused on the collection of rent which caused immense misery and social tension for the cultivators.

India was characterised as a stagnant economy due to its low growth rate of GDP and GDP per capita; a backward economy as evident through its poor performance of demographic indicators and a colonial economy as British exerted their political and economic will over India.

Indian farmers were forced to shift to commercial crops (Indigo, in particular) from the traditional food crops (like wheat and rice).

Under land settlement system, zamindars and colonial government did nothing to improve the productivity of land and were focused towards collection of land revenues.

Heavy export duties were imposed on the handicraft products with a meagre duty on British manufactured goods resulted in low demand for Indian handicrafts.

The decline in the handicraft industries resulted in unemployment on a large scale wherein the consumer demand in the domestic market was met by the foreign produced goods.

British followed discriminatory tariff policy wherein import of British goods were made tariff free and heavy export duties were imposed on Indian handicrafts.

The de-industrialisation policy followed during colonial period has two major objectives: first to reduce the status of India as an exporter of primary products and second is to turn India into the sprawling market for the finished products produced in Britain.

The role of the public sector was confined to railways, power generation, communications, ports and some other departmental undertakings.

India maintained a huge export surplus but it did not resulted in inflow of gold or silver into India because the country had to make large foreign payments to England on account of administrative and war expenses.

British restricted the direction and flow of India’s trade wherein more than half of India’s foreign trade was restricted to Britain while the rest was allowed with other countries like China, Ceylon (Sri Lanka) and Persia (Iran).

Mortality rate was as high as 218 per thousand and often results due to lack of food availability and affordability, poor sanitation and public health facilities.

Provincial and district barriers (cordons), speculation and hoarding were the main factors responsible for the spectacular rise in prices and resulting in shortages.

British monopolised the foreign trade to shift the direction of trade policy in their favour by encouraging tariff free imports and imposing heavy duties on exports.

Agriculture accounted for nearly 70-75% of the workforce, whereas the share of manufacturing and service sector was 10% and 20-25% respectively.

The industrial sector was in dismal state with hardly any capital goods industry and lack of support from the government.