Test: Economics - Economics And Social Development - 1 - UPSC MCQ

Generally all economic activities divided into eight different industrial divisions.They are (i) Agriculture (ii) Mining and Quarrying (iii) Manufacturing (iv) Electricity, Gas andWater Supply (v) Construction (vi) Trade (vii) Transport and Storage and (viii) Services.

For simplicity, these divisions can be clubbed into three major sectors viz., (a) primary sectorwhich includes (i) and (ii) , (b) secondary sector which includes (iii), (iv) and (v) and (c) servicesector which includes divisions (vi), (vii) and (viii).

Basically, ‘factor cost’ is the ‘input cost’ the producer has to incur in the process of producingsomething (such as cost of capital i.e. interest on loans, raw materials, labour, rent, power,etc.). This is also termed as ‘factory price’ or ‘production cost/price’. This is nothing but ‘price’of the commodity from the producer’s side. While the ‘market prices’ is derived after addingthe indirect taxes to the factor cost of the product, it means the cost at which the goods reachthe market i.e. showrooms (these are the Cenvat/central excise and the CST which are paid bythe producers to the Central government in India).

Earlier, in India, income is calculated at factor cost, and so is the case with most of the developing countries. The reasons are – lack of uniformity in taxes, goods are not printed with their prices, etc.

Gross National Product (GNP) is the GDP of a country added with its ‘income from abroad’. Theitems which are counted in the segment ‘Income from Abroad’ are:

1. Trade Balance: the net outcome at the year end of the total exports and imports of acountry may be positive or negative accordingly added with the GDP.

2. Interest of External Loans: the net outcome on the front of the interest payments i.e.balance of the inflow (on the money lend out by the economy) and the outflow (on themoney borrowed by the economy) of the external interests.

3. Private Remittances: the net outcome of the money which inflows and outflows onaccount of the ‘private transfers’.

The balance of all the three components of the ‘Income from Abroad’ segment may turn out tobe positive or negative. Thus relationship between GDP and GNP depends on the net value ofincome from abroad. When the income from abroad is zero GDP is equal to GNP.

Unlike other price indexes, the GDP deflator is not based on a fixed basket of goods andservices. It covers the whole economy

Explanation: A capitalist economy can be defined as an economy in which most of theeconomic activities have the following characteristics (a) there is private ownership of means ofproduction (b) production takes place for selling the output in the market (c) there is sale andpurchase of labour services at a price which is called the wage rate (the labour which is soldand purchased against wages is referred to as wage labour).

The correct option is D.
Disinvestment of a percentage of shares owned by the Government in public undertakings emerged as a policy option in the wake of economic liberalisation and structural reforms launched in 1991.
 

Headquartered in Beijing, the Asian Infrastructure Investment Bank (AIIB) is a development bank established to boost lending for projects in sectors like energy, transportation, urban construction, logistics, education and healthcare. AIIB presently has 97 approved members worldwide. The Bank has invested in 13 member regions; it has members from outside Asia in Egypt (Middle East), Azerbaijan (Asia and Europe) and others. The three largest shareholders of the bank are China, India and Russia.

India presently follows mixed economy.

Company ‘X’ is headquartered at Delhi, India and it has a production facility at Beijing,China. The output of the production facility is part of China’s GDP. The profits of the company which are repatriated to India are part of India’s GNP. 

1.  According to the Atomic Minerals Directorate for Exploration and Research (AMD), a constituent Unit of the Department of Atomic Energy (DAE), India has 10.70 million tonnes of Monazite which contains 9,63,000 tonnes of Thorium Oxide (ThO2).

India's thorium deposits, estimated at 360,000 tonnes, far outweigh its natural uranium deposits at 70,000 tonnes. The country's thorium reserves make up 25 per cent of the global reserves. It can easily be used as a fuel to cut down on the import of Uranium from different countries.

2. The largest source of uranium comprise the monazite sands. Monazite sands occur on east and west coasts and in some places in Bihar. But the largest concentration of monazite sand is on the Kerala coast. Over 15,200 tonnes of uranium is estimated to be contained in monazite

The correct answer is D asForeign exchange rate means the rate at which the currency of one country can be traded for The currency of any other country in the foreign exchange market.

 Mines and Minerals (Development and Regulation) Bill adds a new FourthSchedule to the Act. It includes bauxite, iron ore, limestone and manganese ore and aredefined as notified minerals. The central government may, by notification, amend thisSchedule.

ED is in news for quite a long time. Prepare about it. It is part of Department ofRevenue not Expenditure.

The Strategic Arms Reduction Treaty (START) was signed between the US and Soviet Union inJuly 1991. In summary, START I limited the number of heavy bombers (the large aircraft able tocarry heavier bombs including nuclear ones), intercontinental ballistic missiles (ICBMs), andsubmarine launched ballistic missiles (SLBMs), to 1,600 in total. These delivery systems werethen limited to deploying no more than 6,000 nuclear warheads in all.

The Strategic Offensive Reductions Treaty (SORT) or Moscow Treaty entered into force in June2003 to limit the numbers of operationally deployed nuclear warheads by the US and Russia to1,700-2,200 apiece.

Antarctica TreatyIn June 1961 the Antarctica Treaty established the use of this continent as only for peacefulpurposes and it must be free from nuclear weapons deployment and testing.

Seabed Treaty The Seabed Treaty entered into force in May 1972 with the purpose of forbidding the sitting ofnuclear weapons and other weapons of mass destruction on the seabed or ocean floor over 12miles away from any coastal zone.

The Tendulkar committee, appointed before the Rangarajan committee, had included the estimatesof health and education in its estimation of poverty. But the Rangarajan committee also includednutrition (fat etc.) and a richer basket of commodities for the poor’s consumption.

Depreciation is nothing but a continous reduction in the value of something over time. Continuoususe of machine leads to depreciation and change of technology makes a machine obsolete. That isan example of depreciation of physical capital. In the case of human capital, depreciation takes placewith ageing but can be reduced, to a large extent, through continuous investment in education,health, etc. This investment also facilitates the human capital to cope with change in technologywhich is not the case with physical capital.

In a knowledge economy, a significant part of a company's value may consist of intangible assets,such as the value of its workers' knowledge (intellectual capital).Lesser-developed countries tend to have agriculture or agriculture and manufacturing-basedeconomies, while developing countries tend to have manufacturing or manufacturing and servicebasedeconomies, and developed countries tend to have service-based economies, which revolvemostly around intellectual capital. IT, research, consultancy etc. are major examples of a knowledgebased economy.

To determine the correct answer, let's analyze each statement regarding public expenditure on education in India:

1. Elementary education takes a major share of total education expenditure.

   • Historically, elementary education has received a significant portion of the total education budget in India because it is fundamental to building the foundation of education for the majority of the population. This statement is generally true.

2. Expenditure per student in tertiary education is higher than that of elementary.

   • Tertiary education, which includes colleges and universities, typically involves higher costs per student due to factors like advanced facilities, specialized equipment, and higher faculty salaries. This statement is generally true.

3. Public expenditure on education per year is greater than that in the Defence sector.

   • This statement requires specific and up-to-date data. Historically, India's defence budget has been substantial and often exceeds the education budget. As of the most recent data, the defence budget tends to be higher than the education budget. This statement is generally false.

Given these analyses, the correct answer is:

4. 1 and 2 only

The capital that is consumed by an economy or a firm in the production process is known as Depreciation. In economics, depreciation is the gradual decrease in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question.

The correct answer is B: 2 only.
Explanation:
1. The growth rate of GDP has steadily increased in the last five years: This statement is incorrect. The growth rate of GDP in the Indian economy has not been consistently increasing in the last five years. There have been fluctuations in the GDP growth rate during this period. For example, in 2016-17, the GDP growth rate was 8.2%, which declined to 4% in 2019-20. Therefore, statement 1 is incorrect.
2. The growth rate in per capita income has steadily increased in the last five years: This statement is correct. The per capita income is calculated by dividing the total income of a country by its population. In the last five years, the per capita income in India has shown a steady increase. According to the Economic Survey 2020-21, the per capita income in India increased from Rs. 94,130 in 2015-16 to Rs. 1,34,186 in 2019-20. Therefore, statement 2 is correct.
In conclusion, only statement 2 is correct. The growth rate of GDP has not been consistently increasing in the last five years.

In the last four decades (1972-2010), people have moved from self-employment and regular salariedemployment to casual wage work. Yet self-employment continues to be the major employmentprovider. Scholars call this process of moving from self-employment and regular salariedemployment to casual wage work as casualization of workforce. This makes the workers highlyvulnerable due to lack of proper legal protection, tough work conditions and social security schemes.

The correct answer is D: All of the above.
The United Nations Development Program (UNDP) publishes several human development indicators that provide insights into various aspects of human development. These indicators include:
1. Multi-dimensional Poverty Index (MPI): The MPI measures poverty based on a range of indicators, such as health, education, and living standards, to provide a comprehensive view of poverty beyond income alone.
2. Inequality-adjusted HDI: The Inequality-adjusted Human Development Index takes into account the disparities in income, education, and life expectancy within a country, providing a more nuanced measure of human development that considers inequality.
3. Gender Development Index (GDI): The GDI measures gender disparities in human development outcomes, including factors such as education, income, and life expectancy. It provides insights into the differences between males and females in terms of development opportunities and outcomes.
4. Gender Inequality Index (GII): The GII measures gender inequality in reproductive health, empowerment, and labor market participation. It highlights the disparities between males and females in various dimensions of empowerment and well-being.
These indicators are important tools for assessing and monitoring human development around the world, and the UNDP plays a crucial role in collecting and disseminating this data.

Explanation:
Statement 1: India has the lowest income inequality among all emerging economies.
- This statement is true.
- India does have relatively low income inequality compared to other emerging economies.
- However, it is important to note that income inequality in India is still relatively high compared to developed countries.
Statement 2: Its income inequality is lower than that in all the western developed countries.
- This statement is false.
- Income inequality in India is actually higher than that in many western developed countries.
- Countries like Sweden, Denmark, and Norway have lower income inequality compared to India.
Statement 3: Income inequality in India has increased in the last decade.
- This statement is true.
- Income inequality in India has indeed increased in the last decade.
- According to various studies and reports, the gap between the rich and the poor in India has widened in recent years.
Therefore, the correct answer is option C: 1 and 3 only.

To address the longevity risks among the workers in unorganized sector and to encourage theworkers in unorganized sector to voluntarily save for their retirement

 The APY is focussed on all citizens in the unorganized sector. All bank account holders mayjoin APY. APY is applicable to all citizen of India aged between 18-40 years.

 The scheme is administered by the Pension Fund Regulatory and Development Authority(PFRDA) through NPS architecture.

 Under the APY, there is guaranteed minimum monthly pension for the subscribers rangingbetween Rs. 1000 and Rs. 5000 per month. GoI will also co-contribute 50% of thesubscriber’s contribution or Rs. 1000 per annum, whichever is lower. Government cocontributionis available for those who are not covered by any Statutory Social SecuritySchemes and is not income tax payer. The pension is guaranteed by GoI.

Underdeveloped countries face the problem of deprivation of large section of the population, low per capita real income etc.

What may a government do to rescue the economy from the phase of recession? The usualremedies are given below:

(i) Direct and indirect taxes should be cut down, so that the consumers have higher disposableincomes (income after paying direct tax i.e. income tax) on the one hand and the goods shouldbecome cheaper on the other hand thus there is hope that the demand might pick up.

(ii) The burden of direct tax, specially the income tax, divdend tax, interest tax are slashed toenhance the disposable income (i.e income after direct tax payment)—

(iii) Salaries and wages should be revised by the government to encourage general spendingby the consumers (as the Government of India implemented the recommendations of the fifthpay commission without much deliberation in 1996–97).

(iv) Indirect taxes such as custom duty, excise duty (cenvat), sales tax, etc. should be cut downso that produced goods reach the market at cheaper prices.

(v) The government usually goes on to follow a cheap money supply policy by slashing down theinterest rates across the board and the lending procedure is also liberalised.

(vi) Tax breaks are announced for new investments in the productive areas. etc.

Inflation Indexed Bonds (IIBs) were issued in the name of Capital Indexed Bonds (CIBs) during1997. The CIBs issued in 1997 provided inflation protection only to principal and not to interestpayment. IIBs will provide inflation protection to both principal and interest payments.

Tax provisions will be applicable on interest payment and capital gains on IIBs. There will be nospecial tax treatment for these bonds.

IIBs would be Government securities (G-Sec) and the different classes of investors eligible toinvest in G-Secs would also be eligible to invest in IIBs. FIIs would be eligible to invest in the IIBsbut subject to the overall cap for their investment in G-Secs (currently USD 25 billion).

Inflation is a sustained rise in overall price levels.Repo rate is the rate at which the RBI lends money to commercial banks. In the event ofinflation, central banks increase repo rate as this acts as a disincentive for banks to borrow fromthe central bank. This ultimately reduces the money supply in the economy and thus helps inarresting inflation.

Introduction of increased taxes is one of the fiscal policies to control inflation. But sometimesthis may result in cost-push inflation, as increased indirect tax rate increases cost ofproduction.

Maintenance of buffer stock of major agricultural products could be used in supplymanagement which maintains price stability.Decrease in crude oil production increases crude oil price, which in turn increases cost ofproduction.

The PPI measures price changes from the perspective of the producer while the cosumer priceindex (CPI) measures it from the consumers’ perspective. As the producers sell at higher pricesto their wholesellers, so retailers and the price increase is translated into the higher consumerprices—thus the PPI is useful in having an idea of the consumer prices in the future.In PPI, only basic prices are used while taxes, trade margins and transport costs are excluded.This index is considered a better measure of inflation as price changes at primary andintermediate stages can be tracked before it gets built into the finished goods stage.The proposal of switching over to the PPI (from the WPI) came up from the Government bymid-2003. A working Group was set up in mid-2003–04 under the chairmanship of Prof. AbhijitSen, Member, Planning Commission to fulfill the twin tasks of:I. Revising the current series of the WPI (i.e. base 1993–94) andII. Recommending a producer price index (PPI) for India which could replace the WPI.