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Government Budget and the Economy- Assertion & Reason Type Questions- 2


MCQ Practice Test & Solutions: Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 (15 Questions)

You can prepare effectively for Commerce Online MCQ Tests for Commerce with this dedicated MCQ Practice Test (available with solutions) on the important topic of "Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2". These 15 questions have been designed by the experts with the latest curriculum of Commerce 2026, to help you master the concept.

Test Highlights:

  • - Format: Multiple Choice Questions (MCQ)
  • - Duration: 30 minutes
  • - Number of Questions: 15

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Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 1
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Inward Looking Trade Strategy is called Import Substitution.

Reason: Instead of importing vehicles made in a foreign country, industries would be encouraged to produce them in India itself.

Detailed Solution: Question 1

Inward looking trade strategy : In the first seven plans trade was characterised by what is commonly called 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 : 1. Tariffs and 2. Quotas.

1. Tariffs : Tariffs are a tax on imported goods. They make imported goods costlier and discourage their use.

2. Quotas : They specify the quantity of goods that can be imported.

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

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 2
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): The need to obtain a license to start an industry was misused by big industrial houses.

Reason (R): A big industrialist would get a license not for starting a new firm but to prevent competitors from starting new firms.

Detailed Solution: Question 2

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.

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Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 3
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): It is believed that small-scale industries are more ‘labour intensive’ i.e. they use more labour than the large-scale industries and, therefore, generate more employment.

Reason (R): These small scale industries cannot compete with the big industrial firms.

Detailed Solution: Question 3

Small scale industries refers to those industries which requires less capital, less labour as well as less equipments for production. Nowadays, people get attracted more to large scale industry as they produce in large number, have skilled labour for working. Hence, opportunities are less in small scale industries.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 4
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion ( A): Eliminating subsidies goes against the goal of Equity.

Reason (R): It will increase the disparity between rich and poor farmers.

Detailed Solution: Question 4

Eliminating subsidies can indeed go against the goal of equity because it would likely increase the disparity between rich and poor farmers. Subsidies often help to level the playing field by providing financial support to those who may not have sufficient resources. Removing these subsidies can disproportionately affect poor farmers, widening the economic gap between them and richer farmers.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 5
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Only a handful of states benefited from green revolution in India

Reason (R): Success of green revolution depends on policy implementation by state government

Detailed Solution: Question 5

The green revolution thereby was intended to overcome food shortages in India by increasing the yields of agricultural produce with the help of better irrigation systems, pesticides, fertilizers, agricultural machinery, etc but also principally with the help of crop intensification focused on more resistant high-yielding crop varieties. This was supplemented with socio-economic policies that made credit available to farmers more readily and developmental extension officers were to disseminate knowledge to farmers in employing the new technologies. Among the Indian states that is said to have benefited most from the green revolution in India is the state of Punjab, where food-grains production increased from 5.37 million tonnes in 1965-66 to 32 million tonnes in 1995-96. Food-grains production in Punjab in 1995-96 accounted for 21 per cent of total food-grains produced in India (Singh, 2016). However, although yields have substantially increased in Punjab, this is not the complete story.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 6
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): The small scale industries generate more employment than the large scale industries.

Reason (R): Small scale industries are more 'Capital intensive industries Therefore generate more employment.

Detailed Solution: Question 6

Small scale industries depended upon the business’s capital and labour. This definition is still used to demarcate between small, medium and large-scale industries.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 7
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): GDP indicates the size of an economy.

Reason (R): A higher GDP indicates higher economic activity.

Detailed Solution: Question 7

Gross domestic product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate. GDP can be calculated in three ways, using expenditures, production, or incomes.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 8
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Just a year after independence, efforts towards land reforms were introduced.

Reason (R): Ownership of land would give incentives to the tillers to invest in making improvements.

Detailed Solution: Question 8

The government realized that the agricultural output was not sufficient for the whole country. One way to boost the produce was to make the tillers of the land its owner. And so efforts were made to abolish the intermediaries and this was known as the land reforms.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 9
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Because of India's rapidly growing population the country's traditional agricultural practices yielded insufficient food production.

Reason (R): Agricultural technological advancements offered opportunities to increase productivity.

Detailed Solution: Question 9

In the context of India's rapidly growing population, the country's traditional agricultural practices yielded insufficient food production. By the 1960s, this low productivity led India to experience food grain shortages that were more severe than those of other developing countries. Agricultural technological advancements offered opportunities to increase productivity.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 10
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): The first five year plan gave top priority to industry.

Reason(R): Period of 1951 -1978 gave emphasis to agricultural development, removal of poverty and import substitution.

Detailed Solution: Question 10

The first five-year plan was presented in the parliament by Prime Minister Jawaharlal Nehru in December 1951. This plan promoted the idea of a self-reliant closed economy and was developed by Prof. P. C. Mahalanobis. The plan had heavily borrowed ideas from the USSR's five-year plans developed by Domer. Due to this, the first five-year plan is also called the Domer-Mahalanobis Model. In this plan, highest priority was given to the Agriculture, Irrigation and Power Projects.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 11
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Public sector was given a leading role in industrialization during the period of planning.

Reason (R): Private sector was not have enough capital and also the market was not so big to encourage industrialists to undertake big projects even if they had capital to do so.

Detailed Solution: Question 11

Heavy Capital Requirement There was a need for a large amount of investment in infrastructure and heavy and basic industries for economic development Private sector in India at the eve of independence did not have the capacity to invest such a big amount. Private entrepreneurs were not prepared to bear the risks involved in these projects which had long gestation periods along with high capital investment. Thus, the government played the leading role to provide the basic framework of heavy industries and infrastructure through the public sector to facilitate the private sector.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 12
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Trade policy relates with protection from imports in two forms: tariffs and quotas.

Reason (R): Quotas specify the quality of goods which can be imported.

Detailed Solution: Question 12

Tariffs, import quotas, product standards, and subsidies are some of the primary policy tools a government can use in enacting protectionist policies.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 13
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): The policy of import substitution focuses on saving foreign exchange.

Reason (R): Import substitution policy requires that we domestically produce such goods which we are importing from the rest of the world .

Detailed Solution: Question 13

Import substitution is a strategy under trade policy that abolishes the import of foreign products and encourages production in the domestic market. The purpose of this policy is to change the economic structure of the country by replacing foreign goods with domestic goods.

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 14
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Modernization includes adaptation of Technology and change in Social Outlook

Reason (R): Modernization raises the standard of living of People.

Detailed Solution: Question 14

Modernization, in sociology, the transformation from a traditional, rural, agrarian society to a secular, urban, industrial society.

Modern society is an industrial society. To modernize a society is, first of all, to industrialize it. Historically, the rise of modern society has been inextricably linked with the emergence of industrial society

Test: Government Budget and the Economy- Assertion & Reason Type Questions- 2 - Question 15
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:

Assertion (A): Industry provides employment which is more stable than the employment in agriculture. It promotes modernisation and overall prosperity.

Reason(R): Economists have found that poor nations can progress only if they have a good industrial sector

Detailed Solution: Question 15

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.

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This test contains 15 MCQs on Government Budget and the Economy- Assertion & Reason Type Questions- 2 with detailed solutions for each question. It is part of the Online MCQ Tests for Commerce course on EduRev, designed to align with the current Commerce syllabus. Each solution explains not just the correct answer but also gives you an understanding of the topic — not just to attempt the question but also help you prepare for the exam with practice.

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