UGC NET Paper 2 Economics Mock Test - 9 - UGC NET MCQ

CONCEPT:

At the corner point of the feasible reason, we have to check the value of the objective function to get the maximum value.

CALCULATION:

Given:

The feasible region as shown in the figure has the objective function F = 3x - 4y.

Hence, the maximum value of F is 12.

So, the correct answer will be option 3.

The correct answer is 2 percent of GDP.

Key Points

•  FRBM Act:
  • The full form of FRBM Act is fiscal responsibility and budget management act.
  • This FRBM bill was first introduced in Parliament of India in year 2000 by Atal Bihar Vajpayee Government.
  • This bill was introduced for providing legal backing to the fiscal discipline to be institutionalized in country.
  • The FRBM Act was passed in year 2003.
  • This Act sets targets to establish financial discipline, improve the management of public funds ,strengthen fiscal prudence and reduce fiscal deficits.
  • As per the latest targets of FRBM Act,
  1. Government is required to limit the fiscal deficit to 3% of GDP by March,31,2021.
  2. Government is required to limit debt of the central Government to 40% of GDP by year 2024-25.

 Additional Information

• The major objectives of this Act are:
  • Introduction of transparent system of fiscal management within the country.
  • Ensuring equitable distribution of debt over the years.
  • Ensuring fiscal stability in long run.
• Hence, it can be concluded that according to FRBM Act, India's fiscal deficit should not exceed 3% of GDP.

All the non-banking financial institutions in India come under the category of Organised sector and Unorganised sector.

• As of January 31, 2021, there were 9,507 non-banking financial companies (NBFCs) registered with the Reserve Bank of India. The vast majority of over nine thousand NBFCs belonged to the non-deposit-taking category.
• Nonbank banks are financial institutions that are not considered full-scale banks because they do not offer both lending and depositing services.
• Nonbank banks can engage in credit card operations or other lending services, provided they do not also accept deposits.

Additional Information

• Non- Banking Assets, therefore, are those Financial Assets acquired by the banks to settle their debts. When a borrower is unable to repay the amount of the loan in cash and in a place of that offers an asset to the bank. This is known as a non-banking asset.
• A non-banking financial institution (NBFI) or non-bank financial company (NBFC) does not have a full banking license but facilitates bank-related financial services like investment, contractual savings, and market brokering and risk pooling.
• The role of NBFIs is generally to allocate surplus resources to individuals and companies with financial deficits, allowing them to supplement banks. By unbundling financial services, targeting them and specializing in the needs of the individual, NBFIs work to enhance competition in the financial sector.

The correct answer is The stage of high investment.

• Rostow's model of  "Stages of Economic Growth":
• ​ Rostow penned his classic "Stages of Economic Growth" in 1960, which presented five steps through which all countries must pass to become developed.
• The model asserted that all countries exist somewhere on this linear spectrum, and climb upward through each stage in the development process:

Important Points 

• These five steps are:
  1. Traditional Society: This stage is characterized by a subsistent, agricultural-based economy with intensive labour, low levels of trading, and a population that does not have a scientific perspective on the world and technology.
  2. Preconditions to Take-off: Here, a society begins to develop manufacturing and a more national/international outlook instead of regional.
  3. Take-off: Rostow describes this stage as a short period of intensive growth, in which industrialization begins to occur, and workers and institutions become concentrated around a new industry.
  4. Drive to Maturity: This stage takes place over a long period, as standards of living rise, the use of technology increases, and the national economy grow and diversifies.
  5. Age of High Mass Consumption: At the time of writing, Rostow believed that Western countries, most notably the United States, occupied this last "developed" stage. Here, a country's economy flourishes in a capitalist system, characterized by mass production and consumerism.

Hence, The stage of high Investment is not the stage of growth of Economic growth in Rostow.

The correct answer is 7.6%.

Key Points

• Morgan Stanley has trimmed India's gross domestic product (GDP) growth forecasts to 7.6% for F2023 and to 6.7% for F2024.
• Further, a slowdown in global growth, higher commodity prices, and potential risk aversion in global capital markets expose India to downside risks. 
• It also expects global growth to average 2.9% YoY in 2022 slowing from 6.2% growth in CY21. 

Important Points

•  The government's policy reforms, plus expansion of public infrastructure spending alongside an increase in capacity utilization levels, should help private CAPEX to recover in 6-9 months. ​
• Morgan Stanley expects front-loaded rate hikes and pencil in hikes of 50bp each in the June and August meetings, to be followed by back-to-back rate hikes to take the policy rate to 6 percent by December 2022.

Using characteristic equation | A - λI| = 0, we get

(1-λ) (λ²-2) + (2-λ) – λ = -λ³ + λ² = 0

Hence, λ = 0, λ = 1

The largest eigen value is 1, so we calculate the eigen vector corresponding to eigen value 1.

The specific factor in the industry producing the good experiences an increase in its reward.

Key Points

• The Specific Factors Model (also known as the Ricardo-Viner model) is a model in international economics that suggests that at least one factor of production is specific to its use in a particular industry, while at least one factor is mobile and can be used in all industries.
• The implications following an increase in the price of a product are dictated by the nature of this model. When the price of a product rises, it creates an incentive to produce more of that product. The industry involved responds by utilizing more of their specific factor to increase production.
• Due to the increased demand for the factor specific to that industry, the return on that factor (wage rate if labor, rental rate if capital) also increases.
• The other factors -- the ones that are not specific, i.e., are mobile and can be used in all industries -- do not experience the same increase since they are not specific to the industry affected by the price increase, and hence their returns remain unchanged. This shows that income distribution within the economy is impacted depending on the factor's specific or mobile nature.
• This means Option B is more representative of the outcomes predicted by the Specific Factors Model, contrasted with Options A, C, and D which do not correctly represent these dynamics.

The correct answer is 1, 2, and 3.

Key Points

• Balance Of Payments (BoP):
  • The Balance Of Payments (BoP) records the transactions in goods, services, and assets between residents of a country with the rest of the world for a specified time period typically a year.
  • The Balance of Payments deficit can be reduced by:
    • The sale of sovereign bonds in international markets will lead to an increase in Capital account balance and thus reduce the BoP deficit. Hence, Statement 1 is correct. 
    • Demand slowdown can reduce the demand for imports and can thus reduce the BoP deficit. Hence, Statement 2 is correct. 
    • Restricting non-essential imports will lead to a reduction in imports and thus reduce the BoP deficit. Hence, Statement 3 is correct. 
• There are two main accounts in the BoP:
  • The current account-
    • It records exports and imports in goods and services and transfer payments.
  • The capital account-
    • It records all international purchases and sales of assets such as money, stocks, bonds, etc.

• Hot Money is the Capital which is frequently transferred between financial institutions in an attempt to maximize interest or capital gain.

Thus, A is the correct answer.

Answer (b) Tendulkar Committee

• The Tendulkar Committee for the first time recommended use of implicit prices derived from quantity and value data collected in household consumer expenditure surveys for computing and updating the poverty lines.
• Tendulkar Committee developed a methodology using implicit prices for estimating state wise poverty lines for the year 2004-05. Using these poverty lines and distribution of monthly per capita consumption expenditure based on mixed reference period (MRP), the Tendulkar Committee estimated poverty ratios for the year 2004-05.In its Report, Tendulkar Committee recommended a methodology for updating 2004-05 poverty lines derived by it.

Capital to Risk Weighted Assets Ratio (CRAR) has decreased from March 2022 to September 2022.

Non-probability Sampling is a method often known as non-random sampling. In this method, the probability of any unit of the population being chosen is not known.  The method of selection relies mostly on personal judgment and does not produce samples that represent the whole population. Here, the greatest error occurs as the researchers try to generalize their results on the basis of non-probability samples to the entire population.

Types of Non-Probability sampling are:

1. Quota Sampling

2.Snowball Sampling

3. Judgemental Sampling

4. Dimensional Sampling

5. Convenience Sampling

a. Quota Sampling: This Sampling method ensures that certain characteristics of the population are represented by the samples chosen. The sample may be selected on the basis of age,  geographical region, gender, or occupation. In this sampling method, the sample confirms the characteristics of the population that a researcher desires. This sampling method reduces time and costs in collecting the data.

b. Snowball Sampling: This Sampling method is also called chain sampling or network sampling. In this method, the samples are selected who have traits that are found rarely. In this technique, the existing samples provide referrals of other samples for a research study. 

c. Dimensional Sampling:  This method is an extension of the quota sampling method. The researcher considers various characteristics of the sample such as education qualification, income, gender, and residence. The researcher ensures that the sample chosen represents the characteristic of the population.

The probability Sampling method is also known as the random sampling method. In this method total population has an equal opportunity of being included in the sample. The random sampling method is used in a homogeneous population where the population possesses the same attributes that a researcher is interested in.

The correct answer is Option 4.

Key Points

• The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade between nations. It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948.The WTO is the world's largest international economic organization, with 164 member states representing over 98% of global trade and global GDP. 
• Reserve Bank of India is the Central Bank of our country. It was established on 1st April 1935 under the RBI Act of 1934. It holds the apex position in the banking structure. RBI performs various developmental and promotional functions.
• International Monetary Fund (IMF) is a United Nations (UN) specialized agency, founded at the Bretton Woods Conference in 1944 to secure international monetary cooperation, to stabilize currency exchange rates, and to expand international liquidity (access to hard currencies).
• International Bank for Reconstruction and Development (IBRD), Main component organization of the World Bank. The IBRD lends money to middle-income and creditworthy poorer countries. Most of its funds come from sales of bonds in international capital markets. 

The correct answer is 1 and 2 only.

Key Points

• The economies across the world have undertaken massive use of fiscal policy measures with an objective to protect the lives and livelihoods against the health and economic effect of the COVID-19 pandemic, to boost the demand and foster the reopening of the economies after the lockdown phase.
• The fiscal measures adopted have been diverse, comprising of above-the-line measures, below-the-line measures, and contingent liabilities (guarantees, quasi-fiscal operations).
• “Above-the-line” measures include those for which full cost is reflected in the fiscal deficit, government debt, and increased borrowing needs in the short term. These measures include additional spending (for example, health services and unemployment benefits); capital grants and targeted transfers (for example, wage subsidies or direct transfers); or tax measures (for example, tax cuts or other relief) provided through standard budget channels. Hence, statements 1 and 2 are correct.
• “Below-the-line” measures are defined as generally involve the creation of assets, like equity injections, loans, asset purchase, etc., which may have little or no upfront impact on the fiscal deficit all although they can later increase debt or reduce liquidity. Hence, statement 3 is not correct.
• Estimates by IMF show that the Government of India announced above-the-line measures equivalent to 2.2 percent of GDP and other liquidity support measures of around 5.3 percent of GDP up to September 2020. Although India’s measures were smaller than those of other developed countries, they were successful in facilitating recovery in the economy.

Important Points 

• Fiscal Deficit:
  • The government describes fiscal deficit of India as “the excess of total disbursements from the Consolidated Fund of India, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts) during a financial year”.
  • In simple words, it is a shortfall in a government's income compared with its spending.
  • The government that has a fiscal deficit is spending beyond its means.
  • It is calculated as a percentage of Gross Domestic Product (GDP), or simply as total money spent in excess of income.
  • In either case, the income figure includes only taxes and other revenues and excludes money borrowed to make up the shortfall.
  • Formula:
    • Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts).

Additional Information

• Controller General of Accounts:
  • It comes under the Department of Expenditure, Ministry of Finance.
  • It is the Principal Accounting Adviser to the Government of India and is responsible for establishing and maintaining a technically sound Management Accounting System.
  • The Office of CGA prepares monthly and annual analysis of expenditure, revenues, borrowings and various fiscal indicators for the Union Government. 

The growth forecast is for fiscal year 2015-16 as disclosed in the Survey was 8.1 to 8.5%.

Since, A^-1 exists pre-multiplying by A^-1

We get

A^-1 (A³ – 3A² + 4A – 6I) = 0

A² – 3A + 4 – 6A^-1 = 0

A⁻¹ = 1/6(A²−3A+4I)

The incorrect statement is Following an expansionary monetary policy.

• Curbing imports of non-essential goods and promoting exports would help control imports and thus the depreciation of the rupee by increasing the growth with promoting exports. Hence statement 1 is correct.
• Encouraging Indian borrowers to issue rupee-denominated Masala Bonds is a measure of the RBI/government to stop the slide of Indian rupee as it does not put pressure on our currency through borrowing dollars as the bond issue would be rupee denominated. Hence statement 2 is correct.
• Easing conditions relating to external commercial borrowing will lead to higher borrowing abroad and would temporarily reduce the deficit of forex in India preventing the slide of rupee. Hence statement 3 is correct.
• Following an expansionary monetary policy may lead to lower interest rates thereby increasing the inflation with higher imports through higher spending of the government and therefore the slide of rupee takes place. Hence Option 4 is not a measure taken by the government/RBI to stop the slide of Indian Rupee. Hence statement 4 is not correct.

The correct answer is Providing affordable and quality education to the citizens for free.

Important Points

• SWAYAM is a Hindi acronym that stands for "Study Webs of Active-Learning for Young Aspiring Minds".
• SWAYAM is an online platform of the Ministry of HRD through which online programmes/courses are offered to students in India.
• It was launched on 9th July 2017.
• It has Massive Open Online Courses (MOOCs) and provide high quality education on various subjects which includes classes from 9 to 12^th and also Under Graduate and Post Graduate courses.
• The scheme aims to provide free high quality e-content to all colleges and universities free of cost.
• Learners wishing a SWAYAM certificate have to register for the final proctored exams that come at a fee and attend in-person at designated centres on specified dates.

The Correct Answer is 3 only

Key Points

• “The bare necessities” is the availability of such as housing, water, sanitation, electricity, and clean cooking fuel are a sine qua non to live a decent life. Hence, statement 1 is incorrect.
•  Access to bare necessities is the highest in the States such as Kerala, Punjab, Haryana, and Gujarat while it is the lowest in Odisha, Jharkhand, West Bengal, and Tripura. Hence statement 2 is incorrect.
• Compared to 2012, access to “the bare necessities” has improved across all States in the country in 2018. Hence, statement 3 is correct.
• -necessities for a healthy life can not be one (think logically)

Important Points

• About Bare Necessities Index:
  • The BNI talks about 26 indicators over five dimensions namely water, sanitation, housing, micro-environment, along with various other facilities. 
  • It has been created for all states in 2012 and 2018 using the data by NSO. 
  • The specifications about the index are that it classifies areas on three levels of access which is high, medium and low to all bare necessities.
  • In this survey, it has been underlined that the Government needs to focus on reducing variations in the access to bare necessities in rural and urban areas, and also between various income groups.
• Key Takeaways:
  • ​In India, access to the Bare Necessities for all income groups in 2018 is significantly better compared to 2012.
  • India has seen an improvement in access to drinking water to households in 2018 compared to 2012. It is visible both in rural as well as urban areas.
  • States having low access to sanitation in 2012 have gained more. The regional disparity in access to sanitation has declined after this.
  • As per the survey, there is an improvement in Housing Index and reduction in inter-States disparities for the lowest income group in 2018 compared to 2012.
  • The economic survey saw an improvement in the microenvironment for all States in 2018. Only some like Assam in rural and Odisha and Assam in urban areas didn’t see an improvement compared to 2012.
  • Survey points towards a positive correlation between access to bare necessities and better health and education outcomes. 
  • In 2018, access to bare necessities was the highest in states such as Kerala, Punjab, Haryana, and Gujarat, and lowest in Odisha, Jharkhand, West Bengal, and Tripura.
  • The survey also notes an improvement in child survival, decline in stillbirths, malnutrition, and infant mortality with improved access to sanitation and clean drinking water.
  • J&K, Punjab, Rajasthan, Gujarat, Maharashtra, Karnataka, Chhattisgarh, Tamil Nadu, Andhra Pradesh, Kerala, Goa, Meghalaya, and Arunachal Pradesh showed improvement in access to bare necessities in rural areas between 2012 and 2018.
  • In 2012, urban areas of only Bihar and Manipur fell in the lowest BNI category.
  • In 2018, the lowest access in rural India was seen in Uttar Pradesh, Madhya Pradesh, Bihar, Jharkhand, West Bengal, Odisha, Assam, Manipur, and Tripura.
  • As per the Survey, “the improvement inequity is particularly noteworthy because while the rich can seek private alternatives, lobby for better services, or if need be, move to areas where public goods are better provided for, the poor rarely have such choices.”

•  I.M.F.'s primary role is to stabilize currency exchange rates and address balance of payments issues, whereas I.B.R.D. lends loans for development programmes in member nations, primarily to build out infrastructure.
• The 190 nations that make up the International Monetary Fund (IMF) strive for sustainable growth and prosperity. In order to boost productivity, job creation, and economic well-being, it accomplishes this by supporting economic policies that encourage monetary cooperation and financial stability.
• One advantage of a well-developed IBRD is that it can: reduces the risk of project failure owing to incorrectly interpreted or aligned requirements. connects to bigger company objectives and aids in project health monitoring. encourages cooperation and consensus-building among team members and stakeholders.

Hence, Both (IBRD was created to provide long-term finance) and (IMF was created to solve short-term balance of payment problem of the member countries.) are true and (R) is the correct explanation of (A).

The correct answer is Capital Market

Key Points

• A capital market is a place where buyers and sellers indulge in trade (buying/selling) of financial securities like bonds, stocks, etc.
• The trading is undertaken by participants such as individuals and institutions.
• The capital market trades mostly in long-term securities.
• The magnitude of a nation’s capital markets is directly interconnected to the size of its economy which means that ripples in one corner can cause major waves somewhere else.

Types of Capital Market

• The capital market consists of two types i.e. Primary and Secondary.
• Primary Market: Primary market is the market for new shares or securities. A primary market is one in which a company issues new securities in exchange for cash from an investor (buyer). It deals with trade of new issues of stocks and other securities sold to the investors.
• Secondary Market: Secondary market deals with the exchange of prevailing or previously-issued securities among investors. Once new securities have been sold in the primary market, an efficient manner must exist for their resale. Secondary markets give investors the means to resell/ trade existing securities. Another important division in the capital market is made on the basis of the nature of security sold or bought, i.e. stock market and bond market.

The demand for money refers to how much assets individuals wish to hold in the form of money (as opposed to illiquid physical assets.) It is sometimes referred to as liquidity preference. The demand for money is related to income, interest rates and whether people prefer to hold cash(money) or illiquid assets like money.

Feudalism is a system of land ownership and duties. It was used in the Middle Ages. With feudalism, all the land in a kingdom was the king's. However, the king would give some of the land to the lords or nobles who fought for him, called vassals. These gifts of land were called fiefs.

Mercantilism, also called "commercialism,” is a system in which a country attempts to amass wealth through trade with other countries, exporting more than it imports and increasing stores of gold and precious metals.

Imperialism is a policy of extending a country's power and influence through colonization, use of military force, or other means.

Capitalism is an economic system. In it the government plays a secondary role. People and companies make most of the decisions, and own most of the property. ... The means of production are largely or entirely privately owned (by individuals or companies) and operated for profit.

An elasticity of zero indicates that quantity supplied does not respond to a price change: the good is "fixed" in supply. Such goods often have no labor component or are not produced, limiting the short run prospects of expansion. If the elasticity is exactly one, the good is said to be unit-elastic.

Bharat Nirman is a business plan for rural infrastructure which was implemented by the Government of India in order to provide some basic amenities to the rural India. Bharat Nirman is an Indian business plan for creating basic rural infrastructure. It comprises projects on irrigation, roads (Pradhan Mantri Gram Sadak Yojana), housing (Pradhan Mantri Awaas Yojana), water supply (National Rural Drinking Water Programme), electrification (Rajiv Gandhi Grameen Vidyutikaran Yojana) and telecommunication connectivity.

The National Food for Work Programme(NFWP), 2004 was launched by minister of rural development, central government on 14 November 2004 in 150 of the most backward districts of India with the objective of generating supplementary wage employment.

Pradhan Mantri Gramin Awaas Yojana, previously Indira Awaas Yojana, is a social welfare flagship programme, created by the Indian Government, to provide housing for the rural poor in India. A similar scheme for urban poor was launched in 2015 as Housing for All by 2022.

SITRA was launched in July 1992, as a sub-scheme of IRDP in selected districts; this scheme has since been extended to all the districts of the country. Under the scheme, a variety of crafts persons, except weavers, tailors, needle workers and beedi workers, are supplied with a kit of improved hand tools within a financial ceiling of Rs.2000, of which the artisans have to pay 10 per cent and the remaining 90 per cent is a subsidy from the Government of India. The supply of power driven tools, subject to a ceiling of Rs.4500, is also permitted under this scheme.

1. Unit Root Test-Stationarity
2. Contingency Table- χ2-test
3. Regression Coefficient- Student&aposs t-test
4. Autocorrelation- Durbin- Watson Test

Since there is monopoly or imperfect competition in product market, the marginal revenue (MR) is less than the price (AR) of the product. MR < Price (under monopoly both AR (P) and MR slope downward). This is monopolistic exploitation of labour by the firm.