Economics: CUET Mock Test - 8 - CUET MCQ

Ford Motors entered the Indian machine business with Mahindra and Mahindra, an Indian manufacturer.
Ford Motor is a multinational corporation (MNC). Ford Motors, an American company, is one of the world's largest machine manufacturers, with products spread over 26 countries. In 1995, Ford Motors came to India for the collaboration. Globalisation is the process of commerce and integration among people, companies, and governments worldwide. Globalisation has eased since the 18th century because of transportation and communication technology advances. India introduced globalisation under the New Economic Reforms in 1991.

The correct answer is Defence.

Key Points

• Among the options, defence expenditure is not included in the developmental expenditure.
• The money spent by the government on developmental and welfare programmes is known as development expenditure.
• Developmental expenditures include expenditures on economic services, social and communist services, and grants to states.
• It helps in economic development by increasing the production and real income of the country.
• Developmental expenditure on revenue can be divided into two, developmental expenditure on revenue account and developmental expenditure on capital account.
• Social and community services, economic services and developmental assistance to states are included in it.
• Developmental expenditure has a definite objective to achieve during the plan period.
• The share of developmental expenditure is gradually decreasing.
• Expenditure on Railways, power, health, education, and Science and Technology are examples of Development expenditure.
• Non-Developmental Expenditure refers to expenditure of the government which does not directly help in the economic development of the country.

The correct option is (A) - (I), (B) - (IV), (C) - (II), (D) - (III)

Key Points

• Flexible Exchange Rate:

  • Definition: An exchange rate that is determined by the free market through supply and demand for the currency.
  • Key feature: It fluctuates based on market conditions.
  • Match: Market forces.

• Devaluation:

  • Definition: A deliberate downward adjustment to the value of a country's currency relative to another currency, group of currencies, or standard.
  • Key feature: Typically done by the government or monetary authority.
  • Match: Government.

• Fixed Exchange Rate:

  • Definition: An exchange rate that is pegged or fixed by the government or central bank at a certain level.
  • Key feature: It does not fluctuate with market conditions; instead, it remains fixed.
  • Match: Pegged exchange rate.

• Depreciation:

  • Definition: A decrease in the value of a currency in the context of a floating exchange rate system.
  • Key feature: It occurs due to market forces and reflects changes in supply and demand.
  • Match: Floating exchange rate.

(D), (C), (A), (B)

Key Points The correct sequence of events relating to identifying the number of poor in India, as indicated by Option 3, reflects a chronological and methodological development in the approach towards understanding and measuring poverty in India. Here is the explanation for each step in the correct sequence:

• (D) Dadabhai Naoroji formulated the 'Jail cost of living': Dadabhai Naoroji, a prominent figure in the Indian independence movement and a pioneer in economics, developed the 'Jail cost of living' index in the late 19th century. This was one of the earliest attempts to quantify the minimum living standard necessary to sustain life, based on the basic expenses of prisoners, which he used as a benchmark for the poorest in society. This concept was pivotal as it laid the foundational idea of setting a poverty threshold.
• (C) Planning Commission formed a study group: As India gained independence and embarked on planned development, the Planning Commission was established in 1950. To address various economic issues, including poverty, the Commission formed several study groups over the decades. These groups were tasked with refining the approach to measuring poverty, among other economic indicators, to tailor economic policies more effectively.
• (A) Task force on projection of minimum needs and effective demand formed: Recognizing the need to accurately define and project the requirements of the poor, the Planning Commission set up a task force specifically focused on establishing a methodology for assessing minimum needs and effective demand. This task force aimed to update and expand upon the initial poverty benchmarks, considering changes in economic conditions and living standards.
• (B) Expert groups formed: Following the initial assessments and continued efforts to refine poverty measurement, expert groups such as the Lakdawala Committee and later the Tendulkar Committee were formed. These groups provided revisions and updates to poverty estimation methodologies, incorporating new data and improved statistical techniques to ensure that poverty estimates reflected actual conditions and helped in the formulation of targeted welfare programs.

The correct option is ' 1921'.

Key Points

• The year 1921 is referred to as the "Year of the Great Divide" in the history of Indian demography.
• This term signifies a notable shift in the population growth pattern of India.
• Before 1921, India witnessed a fluctuating but generally increasing population growth rate.
• In the census of 1921, for the first time in recorded history, there was a decline in the population of India compared to the previous census.
• The decline was attributed to a combination of factors, including the aftermath of World War I, the influenza pandemic of 1918-19, and famines, which led to a high mortality rate.
• Since 1921, every subsequent census has shown a steady increase in the population, marking it as the demographic divide between the era of fluctuating growth and the era of continuous population increase.

Additional Information

• The demographic trends observed since the "Year of the Great Divide" have been instrumental in shaping India's population policies and socio-economic planning.
• The 1921 census serves as a pivotal point in demographic studies, highlighting the impact of socio-political and environmental factors on population dynamics.

The price system in a market economy helps allocate resources by indicating where they are most needed based on demand and supply changes.

As demand rises, the price increases, which motivates producers to supply more of the good to meet the demand.

Price fluctuations are influenced by demand, supply, and external factors like government policies, international trade, and technological advancements.

When prices fall, producing the good becomes less profitable, leading producers to reduce the supply.

External factors like government regulations, international trade, and technological changes can impact the pricing and supply-demand balance.

While money functions as a medium of exchange, unit of account, and store of value, it does not inherently redistribute wealth equally.

Money simplifies trade by serving as a universally accepted medium of exchange, which eliminates the inefficiencies of bartering.

As a unit of account, money provides a standard measure for valuing and comparing goods and services.

Money as a store of value ensures that wealth can be saved and utilized in the future, as long as inflation does not erode its value.

Stability in money's value ensures that individuals and businesses can make informed decisions about savings and investments without fear of drastic changes in value.

Following are some factors which affect the price of a commodity in different countries.
One of the major factors that affects the prices of goods is the difference in taxes and import duties across countries. When dealing in commodities, or any physical good, the cost to transport them must be included, resulting in different prices when commodities from two different locations are examined. Because transaction costs exist and can vary across different markets and geographic regions, prices for the same good can also vary between markets. Legal barriers such as capital controls, or in the case of wages, immigration restrictions, can lead to persistent price differentials rather than one price. 

Rapid improvement in technology is definitely helped in stimulating the process of the globalization. Globalization is the process of interaction and integration among people, companies, and governments worldwide.
With the help of technology, it is so much faster to communicate across the world which has helped the businesses and companies to grow faster across the world.

Tax on imports is an example of a trade barrier. Trade barriers are the boundaries set by countries while trading with other countries. With globalisation, most countries had to open their markets, and it was challenging to put physical barriers on imports. But to keep the imports low, many governments imposed taxes on them. This was done to protect the domestic industry from low-cost foreign goods and decrease the flow of foreign exchange due to imports. Thus, taxes on imports created a barrier to the import of goods and services.

World Trade Organisation (WTO) is one such organisation whose aim is to liberalise international trade. Started at the initiative of the developed countries, WTO establishes rules regarding international trade, and sees that these rules are obeyed.

Globalisation has created new opportunities of employment, emerging multinationals and providing service.
There are several advantages of globalisation. Several new opportunities are available now. As new MNCs set up offices in a country, employment is generated. New opportunities are also generated for the service sector, particularly the IT field. Moreover, several services are done at a low rate in India and exported to different countries. Emerging multinationals have also gained quite a lot from the opportunities created by globalisation. They have invested in new technology and also raised their production standards. Some companies have gained from collaborations with the MNCs, while some have emerged as multinationals themselves. Thus, all the options given in the question are correct.

The American MNC, Cargill Foods, has bought Parakh Foods.
MNCs have colossal wealth, and so the most common route for MNCs to expand their manufacturing is to buy up local companies to enhance production. Cargill Foods is a vast American MNC that has bought over a smaller Indian company, Parakh Foods.
Parakh Foods had already established an extensive marketing network across various parts of India, where it had garnered a strong reputation. Parakh Foods also had four oil refineries. All of these assets have now shifted into the control of Cargill Foods. With this acquisition, Cargill Foods is currently the largest producer of edible oil in India, with a capacity to produce 5 million pouches daily.

The import of Chinese toys into India typically results in a greater variety of toys being available in the Indian market at relatively lower prices compared to domestically manufactured toys. This broadens the choices available to Indian consumers, often at more competitive rates. The availability of inexpensive imports from China can influence consumer behavior by providing more options across different price points, which can appeal to a wider demographic. This situation highlights the impact of global trade dynamics on local markets, where imports can either complement or compete with domestic products.

• Sustainable development is the idea that human beings should sustain themselves by meeting their basic needs and ensuring that future generations can meet their basic needs.
• Sustainable development is essential because it balances countries' economic growth and humanity.
• Today is fear of overuse or complete exhaustion of these limited natural resources. 
• In an economic growth, the damage is being caused to the environment and ecology, which ultimately will create insecurity for human beings.
• Careful use of resources needed by the present generation and a reserve for future generations.
• Humans are overusing renewable resources like groundwater.
• The problem of soil degradation is because of overusing chemical fertilizers.
• Coal, petrol, and natural gas are non-renewable resources limited in stock.
• It can take thousands of years to be replenished.

Final Answer:

• Sustainable development is essential because stocks of natural resources are limited.
• Natural resources are exhausted by humans for economic development.
• In an economic growth, the damage is being caused to the environment and ecology, which ultimately will create insecurity for human beings.
• Careful use of resources needed by the present generation and a reserve for future generations.

Imposing a tax on Chinese toys can make them more expensive for Indian consumers, thereby reducing their competitive pricing edge. This potentially leads to a decrease in demand for Chinese toys as they become less affordable compared to their previous market position. Consequently, Indian toy-makers may benefit from this shift, as consumers could turn to locally made toys, which might remain more affordable in comparison. This situation can foster growth and prosperity for the Indian toy industry by leveling the playing field against cheaper imported goods.

Removing barriers or restrictions set by the government is called liberalisation. Liberalisation is the act of eliminating restrictions or barriers put in place by the government. Liberalisation occurs when something previously forbidden is made legal or when governmental restrictions are loosened. For example, most restrictions on certain personal activities are removed. Simply put, liberalisation is loosening governmental restrictions on social, political, and fiscal policy. The term "liberalisation" refers to easing governmental restrictions and regulations to allow for greater participation by private businesses in economic policy. It is a technique for lowering control systems to encourage economic growth. To increase the role of private and foreign investment and market orientation in the economy, economic liberalisation was started in India in 1991.

The automobile industry is characterized by a large number of well-off buyers, particularly in urban areas. Cars and other vehicles often represent significant investments and are associated with higher levels of disposable income. Urban environments offer the infrastructure and lifestyle that accommodate and even necessitate private vehicle ownership, making automobiles a common choice among affluent buyers. In contrast, while industries like footwear, jewelry, and clothing and accessories also cater to well-off consumers, the level of financial commitment and the demographic breadth interested in automobiles typically surpasses that of the other listed options.

Special Economic Zones (SEZs) are a significant government initiative designed to attract foreign investment into India. These zones provide a conducive business environment with favorable tax regimes, simpler compliance regulations, and infrastructure tailored to the needs of business operations. By establishing SEZs, the government aims to enhance foreign investment by creating regions that are economically and legally advantageous for foreign companies looking to establish operations in India. This focus on improving the business environment directly targets foreign investors and is distinctly different from educational improvements or employment policies in the public sector.

In today's competitive job market, employers often prefer to employ workers flexibly. This flexibility can manifest in various forms, such as offering part-time positions, temporary contracts, remote working options, or flexible working hours. Such arrangements allow businesses to adapt more efficiently to market conditions, manage costs effectively, and respond to fluctuations in demand. Employing workers flexibly also enables companies to tap into a wider talent pool, including those who may not be able to commit to traditional full-time roles but can contribute significantly in more flexible setups.

The EXIM policy is often called the Foreign Trade Policy (FTP). It was introduced in 1992 and regulated by the Foreign Trade Development and Regulation Act. It comprises the guidelines relevant to the import and export of products and services in and out of the country.

• Disinvestment is the process in which a certain percentage of shares of public sector units are disinvested to the private sector. It is also known as privatization.
• The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs.
• The government sells up to 50% or such a higher percentage of its ownership rights to private companies.
• Disinvestment policy began with the introduction of economic reforms in 1991.
• National Investment Fund was created in 2005 into which the proceeds from disinvestment of Central Public Sector Enterprises were collected.
• The main reasons for disinvestment in India are:
  • To meet the budgetary needs.
  • To reduce the fiscal deficit.
  • To improve public finance and overall economic efficiency.
  • To diversify the ownership of PSUs for enhancing efficiency.
  • To introduce competition in the market.