Indian Economy MCQs Set 2

Indian Economy MCQs Set 2

1.    The term mixed economy denoted existence of both

(a)    rural and urban sector

(b)    private and public sector

(c)    heavy and small industry

(d)    developed and under developed sector

1. (b) The concept of mixed economy evolved from the ideas of Keynes. The concept of mixed economy means that both private enterprises and public enterprises coexist. However, the condition attached is that the private enterprises must work for serving the society rather than having only self interest. Further the private enterprises may not be allowed in every sector of the economy like area of national importance.

There are 3 types of economics system:-

a.    Capitalism – the private ownership of the means of production (capital) and a market economy for co-ordination. As-corporate capitalism

b.    Mixed Economy Example – American school, Japanese system, Nordi model,

Social corporatism etc

c.    Socialism – In this economic system, two coordinating mechanism (planning and market) subdended into planned socialist and market socialist system.

2.    It will be true to classify India as

(a)    a food-deficit economy

(b)    a labour-surplus economy

(c)    a trade-surplus economy

(d)    a capital-surplus economy

2.    (b) India is a labour-surplus economy because in India there is disguised unemployment along with under-employment which means that qualified, skilled workforce willing to work is available but there are not enough employment opportunities.

Trade Surplus Economy – Economic measure of positive Balance of trade where a country’s export exceed its imports.

Surplus Labour is concept used by Karl Marx in his critique of political economy.

Capital Surplus – It is equity which cannot otherwise be classified as capital stock or retained earnings.

3.    The Indian economy is characterised by

(a)    pre-dominance of agriculture

(b)    low per capita income

(c)    massive unemployment

(d)    all of the above

3.    (d) The Indian Economy is characterised by pre-dominance of agriculture, low per capita income and massive unemployment. In India contribution of agriculture to GDP is around 17.9%.

4.    Which is not included in the private income arising in a country?

(a)    Factor income from net domestic product

(b)    Net factor income from abroad

(c)    Current transfers from government

(d)    Current payments on foreign loans

4.    (d) Private income arising in a country does not include current payments on foreign loans. Private income includes any type of income received by a private individual or household, often derived from occupational activities, or income of an individual that is not in the form of a salary (e.g. income from investments). Thus private income includes factor income from net domestic product, net factor income from abroad & current transfers from government.

[Private income = Domestic product accruing to the private sector + Net factor income from abroad + Net other transfer income.]

5.    Who coined the term ‘Hindu rate of growth’ for Indian economy?

(a)    A.K. Sen

(b)    Kirit S. Parikh

(c)    Raj Krishna

(d)    Montek Singh Ahluwalia

5.    (c)    The term was coined by Indian economist Raj Krishna. The Hindu rate of growth is a derogatory term referring to the low annual growth rate of the

socialist economy of India before 1991, which stagnated around 3.5% from 1950s to 1980s.

6.    GDP at factor cost is

(a)    GDP minus indirect taxes plus subsidies

(b)    GNP minus depreciation allowances

(c)    NNP plus depreciation allowances

(d)    GDP minus subsidies plus indirect taxes

6.    (a) GDP at factor cost is GDP at market price minus indirect taxes plus subsidies. GDP at factor cost measure the value of output in terms of what it really cost to produce.

Gross value of output = Value total Sales Goods & Services + Value of changes in the inventories.

The Sum of net value added in various economic activities is known as GDP at factor cost.

7.    Per capita income is obtained by dividing national income by

(a)    total population of the country

(b)    total working population

(c)    area of the country

(d)    volume of the capital used

7.    (a) Per capita income is obtained by dividing national income by total population of the country per capita income, also known as income per person, is the mean income of the people in a country. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross national income) and dividing it by the total population.

8.    GDP is defined as the value of all

(a)    goods produced in an economy in a year

(b)    goods and services in an economy in a year

(c)    final goods produced in an economy in a year

(d)    final goods and services produced in an economy in a year.

8.    (d) GDP is defined as the value of all final goods and services produced in an economy in a year. The total quantity of goods produced in an economy during year are multiplied by their current prices to get the GDP. Gross Domestic Product can be calculated using formulas.

GDP = C + G + I + NX

C – Private consumption or consumer spending in nation economy.

G – Sum of Govt. spending.

I – Sum of all the country’s investment including business Capital expenditure. NX – Nation’s total next exports

NX = Export – Import

9.    Depreciation is equal to

(a)    GNP – NNP

(b)    NNP – GNP

(c)    GNP – Personal Income

(d)    Personal Income – Personal Taxes

9.    (a)    Depreciation is equal to GNP–NNP (Gross national products–Net national products)

In economic, Depreciation is the gradual decrease in the economic value of the capital stock of a form nation or other entity.

10.    Which one of the following is not a method of measurement of National income?

(a)    Value Added Method

(b)    Income Method

(c)    Expenditure Method

(d)    Investment Method

10.    (d)    Investment method is not a method of measurement of National income. There are three methods of measurement: income method, product or value added method and the expenditure method.

Investment method in only appropriate if the property is let or operated under as management structure by a third party.

Income method – Under this method National income is measured as a flow of factor income.

11.    Net National Product (NNP) of a country is

(a)    GDP minus depreciation allowances

(b)    GDP plus net income from abroad

(c)    GNP minus net income from abroad

(d)    GNP minus depreciation allowances

11.    (d)    Net National Product (NNP) of a country is GNP minus depreciation allowances. NNP is the actual addition to year’s wealth. While calculating GNP, we ignore depreciation of assets but in reality the process of

        production uses up the fixed assets or there is some wear and tear or fixed assets by process of depreciation. In order to arrive at NNP we deduct depreciation from GNP.

12.    National income is based on the

(a)    total revenue of the state

(b)    production of goods and services

(c)    net profit earned and expenditure made by the state.

(d)    the sum of all factors of income

12.    (b)    National Income is based on the production of goods and services. A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income (NNI* adjusted for natural resource depletion).

13. Which of the following is definitely a major indication of the state of the economy of a country?

(a)    Rate of GDP growth

(b)    Rate of inflation

(c)    Number of banks in a country

(d)    None of these

13.    (a)    Rate of GDP growth is a major indication of the state of the economy of a country. Economic growth is the increase in the market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in gross domestic product.

14. In terms of economics, the total value of the output (goods and services) produced and income received in a year by a domestic resident of a country put together is called

(a)    Net National Product

(b)    Gross National Product

(c)    Gross National Income

(d)    National income

14.    (b)    GNP is the total value of all final goods and services produced within a country in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. GNP measures the value of goods and services that the country’s citizens produced regardless of their location.

Gross National Income – It is total domestic and foreign output claimed by residents of country consisting of GDP plus factor income earned by foreign resident minus income earned in the domestic income by nonresident.

15.    Which of the following is equivalent to National income?

(a)    GDP at market price (b) NDP at factor cost

(c)    NNP at market price

(d)    NNP at factor cost

15.    (d)    NNP at factor cost is equivalent to national income. Net National Product at factor cost is the aggregate payments made to the factors of production. NNP at FC is the total incomes earned by all the factors of production in the form of wages, profits, rent, interest etc. plus net factor income from abroad.

16.    Which sector of the Indian economy contributes largest to the GDP?

(a)    Primary sector

(b)    Secondary sector

(c)    Tertiary sector

(d)    Public sector

16.    (c)    Tertiary sector of the Indian economy contributes largest to the GDP. During last decade tertiary sector has shown remarkable expansion. The economy is divided into three sectors on the basis of activities-primary, secondary and tertiary. Primary sector is involved into agriculture, secondary sector is involved into manufacturing, mining, construction while tertiary sector is involved into trade, transport, communication, banking & other services. In the last decade, India has expanded maximum in providing services like IT, telecommunication, healthcare, tourism which is contributing around 60% to GDP.

17.    National Income estimates in India are prepared by

(a)    Planning Commission

(b)    Reserve Bank of India

(c)    Central Statistical Organisation

(d)    Indian Statistical Institute

17.    (c)    Central Statistical Organisation (CSO), prepares the estimates of national income in India. The first official estimates of the national income, prepared by the CSO at constant prices with base year 1948-49, as well as at current prices, were brought out in 1956.

Planning Commission – It was an institution of Govt. of India which formulated India’s Five year plans. Headquarters – New Delhi

        Reserve Bank of India – India’s central Banking institution, which control the monetary policy of Indian Rupee.

Indian Statistical Institute – Institution devoted to research, teaching and application of statistics, natural science & social science.

18.    The main source of National income in India is

(a)    service sector

(b)    agriculture

(c)    industrial sector

(d)    trade sector

18.    (a)    Service sector is one of the three economic sectors. it includes: telecommunication, hospitality industry/tourism, mass media, healthcare/hospitals, information technology, banking, insurance, investment management, accountancy, legal services, consulting, retail sales, real estate, education. Maximum contribution to national income comes from service sector which contributes more than 50%.

19.    Who estimated national income in India first?

(a)    Dadabhai Naoroji

(b)    R.C. Dutt

(c)    V.K. R.V. Rao

(d)    D.R. Gadgil

19.    (a)    Dadabhai Naoroji had estimated national income in India first. National income estimate before independence was prepared by Dadabhai Naoroji in 1876. He estimated national income by estimating the value of agricultural production and then adding some percentage of non– agricultural production. This method was non–scientific.

VKRV Rao – The first person to adopt a scientific procedure postmating the national income was Dr. VKRV Rao in 1931.

R.C. Dutt – He was an Indian civil servant, economics, historian, writer and translator of Ramayan & Mahabharat.

D.R. Gadgil – A social scientist and the first critic of Indian planning.

20.    The National Income of a country is

(a)    the annual revenue of the government

(b)    sum total of factor incomes

(c)    surplus of PSU’S

(d)    export minus import

20.    (b)    National income is the sum total of wages, rent, interest, and profit earned by the factors of production of a country in a year. Thus it is the aggregate values of goods and services rendered during a given period counted without duplication.

21.    The most appropriate measure of a country’s economic growth is its

(a)    Gross Domestic Product

(b)    Net Domestic Product 

(c)    Net National Product

(d)        Per capita real income

21.    (d)    The most appropriate measure of a country’s economic growth is its percapita real income. Per capita income is average income, a measure of the wealth of the population of a nation. It is used to measure a country’s standard of living thus a better indicator of economic growth.

Economic growth is the increase in the inflation-adjusted market value of the Goods and services produced by an economy overtime.

22.    The existence of a parallel economy or black money

(a)    makes the economy more competitive

(b)    makes the monetary policies less effective

(c)    ensure a better distribution of income and wealth

(d)    ensure increasing productive investment

22. (b) The existence of a parallel economy or black money makes the monetary policies less effective. Parallel economy, based on the black money or unaccounted money, causes high circulation of money in the market and thus causes inflation etc.

Black Money – Black Money is the proceeds of an illegal transaction on which income and other taxes have not been paid and which can only be legitimised by same form of money Laundering.

23.    The philosophy of ‘Laissez-Faire’ is associated with

(a)    Gandhian state

(b)    Industrial state

(c)    Socialist state

(d)    Welfare state

23.    (b)    The philosophy of ‘Laissez-Faire’ is associated with industrial state. Laissez Faire – Abstention by Govt. from interfering in the working of free market.

24.    In free economy, inequalities in income is due to

(a)    free competition

(b)    private property and inheritance

(c)    differences in the marginal productivity of labour

(d)    private property only

24.    (b)    In free economy, inequalities in income is due to private property and inheritance.

Economic Inequality is the difference found in various measure of economic well being among individual in a group, or among countries.

25.    Personal disposable income means?

(a)    Personal income- direct taxes

(b)    Personal income- indirect taxes + fees+ fines

(c)    Personal income- indirect taxes + fees+ fines+ social security contribution by employers

(d)    None of these

25.    (a)    Personal income- direct taxes + fees+ fines+ social security contribution by employers. The amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.Disposable income is total personal income minus personal current taxes.

Disposable Personal Income is the amount of money that households have avail a see for spending & saving after income taxes have been counted for.

P.I = Direct taxes + fees + fines + social society contribution by employees

26.    Among Indian economists, who had done pioneering work on National Income?

(a)    P. N Dhar

(b)    Prof. Shenoi

(c)    V. K. R. V Rao

(d)    Jagdish Bhagwati

26.    (c)    The first person to adopt a scientific procedure in estimating the national income was Dr. VKRV Rao in 1931.

PN Dhar – He was an economist & head of Indira Gandhi’s Secretariat Jagdish Bhagwati – An Indian Economist. He is University professor of economics and Law at Columbia University.

27.    One of the problems in calculating the national income in India currently is

(a)    under-employment

(b)    inflation

(c)    non-monetised consumption

(d)    low savings

27.    (c)    

28.    Why is demographic dividend likely to be manifested in India in future?

(a)    Population in the age group between 8-15 years is likely to increase.

(b)    Population of children below 7 years is likely to increase

(c)    Population in the age group of 15-64 years is likely to increase

(d)    opulation in the age group above 65 years is likely to increase

28.    (c)    

29.    Which one of the following is not a feature of India’s economic planning?

(a)    imperative planning

(b)    limited centralisation 

(c) democratic socialism

(d) indicative planning

29.    (a)    Imperative planning is not a feature of economic planning of India. In case of imperative planning economic activities belong to public sector. In this type of planning economic decisions are made through a central planning authority instead of a market system. There is absence of institutions of private property, competition and profit motive of industrialists.

30.    What does the term ‘Green shoots’ represent in an Economy?

(a)    signs of growth of agriculture sector in a growing economy

(b)    signs of economic recovery during an economy downturn 

(c)    signs of growth of agriculture sector in a declining economy 

(d) signs of economic decline in a developed economy.

30.    (b)    Green shoots is the first signs of an improvement in an economy that is performing badly. It was first used in this sense by Norman Lamont, the then Chancellor of the Exchequer of the United Kingdom, during the 1991 recession.

31.    Consider the following statements in regard to inclusive development:

(1)    Inclusive developments refer to the social inclusion of the socially excluded sections of the society.

(2)    Creating productive and gainful employment opportunities.

Which of the statements given above is/are correct?

(a) 1 only 

(b) 2 only

(c)    Both 1 and 2

(d)    Neither 1 nor 2

31.    (c)    Inclusive growth is a concept which includes equitable allocation to every section of society. It creates an environment of equality in opportunity in all dimensions such as employment creation, market, consumption, and production and has created a platform for people who are poor to access a good standard of living.

32.    Consider the following statements in regard to the GDP of a country :

(1)    Real GDP is calculated by keeping inflation into consideration.

(2)    Nominal GDP is calculated on the basis of the prices of goods and services produced in the current year.

Which of the statements given above is/are correct?

(a) 1 only 

(b) 2 only

(c)    Both 1 and 2

(d)    Neither 1 nor 2

32.    (c)    Real Gross Domestic Product (real GDP) is a macroeconomic measure of the value of economic output adjusted for price changes (i.e., inflation or deflation). Nominal gross domestic product is defined as the market value of all final goods produced in a geographical region.

33.    Consider the following statements :

(1)    Higher growth in GDP and population can occur together.

(2)    Per capita income always decreases with high population growth.

Which of the statements given above is/are correct?

(a) 1 only 

(b) 2 only

(c)    Both 1 and 2

(d)    Neither 1 nor 2

33.    (c)    Higher growth in GDP and population can occur together. Per capita income always decreases with high population growth as income per person decreases with rise in population.

34.    GDP deflator is used to :

(a)    measure the relative reduction in GDP growth rate of a country.

(b)    measure the inflation in a country.

(c)    compare the GDP of a country vis a vis other countries of the world.

(d)    estimate the purchasing power of the citizen of a country.

34.    (b)    GDP deflator is an economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. The GDP deflator shows how much a change in the base year’s GDP relies upon changes in the price level.

35. In India, rural incomes are generally lower than the urban incomes. Which of the following reasons account for this?

(1)    A large number of farmers are illiterate and know little about scientificagriculture.

(2)    Prices of primary products are lower than those of manufactured products.

(3)    Investment in agriculture has been lower when compared to investment in industry :

(a)    1, 2 and 3

(b)    1 and 2 

(c)    1 and 3 

(d) 2 and 3

35.    (a)    In India a large number of farmers are illiterate and know little about scientific-agriculture methods. Prices of primary products are lower than those of manufactured products and investment in agriculture has been lower when compared to investment in industry. All these reasons are responsible for lower rural income.

36.    Human Development Index comprises literacy rates, life expectancy at birth and

(a)    GDP per head in the US dollars.

(b)    GDP per head at real purchasing power.

(c)    GNP in US dollars

(d)    National Income per head in US dollars.

36.    (b)    HDI combines three dimensions: A long and healthy life: Life expectancy at birth, Education index: Mean years of schooling and Expected years of schooling and a decent Standard of living.

37.    National Income is the

(a)    NNP at market price

(b)    NNP at factor cost

(c)    Net Domestic product at market price (d) Net domestic product at factor cost.

37.    (b)    National Income is the Net National product at the factor cost.

38.    The ‘activity rate’ of an economy depends upon so many factors, such as :

1.    School leaving age

2.    Popularity of higher education

3.    Social customs

 4.    Retirement age Code :

(a)    1 and 2

(b)    2 and 3

(c)    2, 3 and 4

(d)    1, 2, 3 and 4

38.    (d)    The labour force of an economy is known as the activity rate (also called participation rate). It is shown in per cent and always as a proportion of an economy. The concept of the ‘demographic dividend’ is related to this rate.

39.    The “Dual Economy” is a mixture of ?

(a)    traditional agriculture sector and modern industrial sector

(b)    industrial sector and manufacturing sectors

(c)    state ownership of the means of production

(d)    industrial sector and trading of goods obtained through imports

(e)    None of these

39.    (a)    A dual economy is the existence of two separate economic sectors within one country, divided by different levels of development, technology, and different patterns of demand. The concept was originally created by Julius Herman Boeke to describe the coexistence of modern and traditional economic sectors in a colonial economy.

40.    Market Based economic climate means:

(a)    All financial determinations are taken based mostly on the demand and provide forces

(b)    Some financial choice are taken by authorities and different are left to market forces

(c)    Government has full handle over the exclusive sector

(d)    Economic judgements are taken after maintaining in view the social welfare

40.    (a)    Market based economic climate refers back to the financial system the place all financial judgements are taken based mostly on the demand and provide circumstances prevailing out there. Government has minimal interference in financial actions. Private gamers are free to supply the items and expertise based mostly on the demand and provides alerts out.

41.    In India, planned economy is based on?

(a)    Gandhian system

(b)    Socialist system

(c)    Capitalist system

(d)    Mixed economy system

41.    (d)    The planned economy is based on mixed economy system. The concept of mixed economy evolved from the ideas of Keynes. The concept of Mixed Economy means that both private enterprises and public enterprises coexist. However the condition attached is that the private enterprises must work for serving the society rather than having only self interest. Further the private enterprises may not be allowed in every sector of the economy like area of national importance.

Gandhian Economic order is based on co-operation equality, human values self sufficient village, nationalisation of basic industries & theory of trusteeship.

•    A socialistic economic system is characterised by social ownership and democratic control of means of production.

•    Capitalist system : It is the system where means of production are owned by private individuals profit is main motive & there is no interference by the Govt in the economic activity.

42. Which one of the following states was having the highest Human Development Index in the year 2012?

(a)    Assam

(b)    Kerala

(c)    Uttar Pradesh

(d)    Madhya Pradesh

42.    (b) The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income used to rank states. Among the given states Kerala was having the highest Human Development Index around 0.92 in the year 2012 for achieving highest literacy rate, quality health services and consumption expenditure of people.

Latest HDI of Indian state – Kerala – Highest (0.797)

– Chhattishgarh lowest (NA)

42.    (b) The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income used to rank states. Among the given states Kerala was having the highest Human Development Index around 0.92 in the year 2012 for achieving highest literacy rate, quality health services and consumption expenditure of people.

Latest HDI of Indian state – Kerala – Highest (0.797)

– Chhattishgarh lowest (NA)

43.    Indian economy has witnessed highest growth rate in GDP in the year

(a)    2003 – 04 (b) 2004 – 05 (c)    2005 – 06 (d) 2006 – 07

43.    (d) In the year 2006 – 07, the Indian economy has witnessed highest growth rate in GDP. The economy grew by 7.7 %.

Highest growth rate GDP – in 2010 (10.26%)

44. Which one of the following economists proposed the LPG model of economic development in India?

(a)    Y.B. Reddy

(b)    K.V. Kamath

(c)    Manmohan Singh

(d)    None of these

44.    (c)    The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalization, Privatization and Globalization model. LPG model of economic development in India was proposed by Dr.

Manmohan Singh, economist and finance minister at that time.

45.    Economic planning is in

(a)    Union list

(b)    State list

(c)    Concurrent list

(d)    Not any specified list

45.    (c)    The Concurrent List or List-III is a list of 52 items given in Part XI of the Constitution of India, concerned with relations between the Union and States. Economic planning is specified in Concurrent list.

46.    The concept of Economic Planning in India is derived from which country?

(a)    USA

(b)    UK

(c)    Russia

(d)    France

46.    (c)    The concept of Economic planning in India is derived from Russia.

47. In which year was the 20 point economic programme was announced for the very first time?

(a) 1975 (b) 2006 (c) 1986

(d) 1982

47.    (a)    The Twenty Point Programme was initially launched by Prime Minister Indira Gandhi in 1975 and was subsequently restructured in 1982 and again on 1986. With the introduction of new policies and programmes it has been finally restructured in 2006 and it has been in operation at present. The basic objective of the 20-Point Programme is to eradicate poverty and to improve the quality of life of the poor and the under privileged population of the country.

48.    Planning was considered a prerequisite :

(1)    For balanced socio-economic development

(2)    For extending the benefits of development in an even manner.

(3)    For focussing on removal of regional disparities (4) For maximizing the utilization of available resources Select the correct answer using the codes given below :

Codes :

(a)    1 and 2

(b) 1, 2 and 3

(c)    2, 3 and 4

(d)    All the above

48.    (d)    Planning was considered for balanced socio-economic development to focus on removal of regional disparities and maximizing the utilization of available resources.

49.    Consider the following statements regarding Indian planning.

(1)    The second five year plan emphasized on the establishment of heavy industries.

(2)    The third five year plan aimed to achieve self-sufficiency in foodgrains and increase agricultural production to meet the requirements of industry and exports.

Which of the statements given above is/are correct?

(a) 1 only (b) 2 only

(c)    Both 1 and 2

(d)    Neither 1 nor 2

49.    (c)    The Second Five Year Plan heralded in a true sense the Socialist Project of the then Prime Minister, Jawaharlal Nehru. The economic policies of Nehru were heavily influenced by the erstwhile Union of Soviet Socialist

        Republics (USSR) which had followed the path of speedy industrialisation to expand the manufacturing base of its economy. The Second Five year Plan focused mainly on heavy industry as against the First Plan which was essentially an agricultural plan. This was done to boost domestic production and manufacturing of goods. Third plan aimed to achieve selfsufficiency in foodgrains and to increase agricultural production to meet the requirements of industry and exports.

50. Which of the following can aid in furthering the Government’s objective of inclusive growth?

(1)    promoting self help group

(2)    promoting micro, small and medium Enterprises

(3)    Implementing the Right to Education Act

Select the correct answer using the codes given below :

(a)    1 only

(b)    1 and 2 only (c)    2 and 3 only

(d) 1, 2 and 3

50.    (d)    The Governments objective of inclusive growth can be furthered by promoting self help groups, promoting micro, small and medium enterprises and implementing the right to education. This will improve employement opportunities, increase GDP etc.

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