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Basic Concepts & National Income — UPSC Prelims Economy previous year questions

55 solved previous year questions on Basic Concepts & National Income, papers from 1996 to 2023, drawn from UPSC CSE Prelims, UPPCS, UPSC CDS. Each carries the printed answer key and the explanation from the source compilation.

1. #1UPSC CSE Prelims 2019
   With reference to India's Five Plans, which of the following is/are correct? 1. From the Second Five -Year Plan, there was a determined thrust towards substitution of basic and capital good industries. 2. The Fourth Five -Year Plan adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power. 3" In the Fifth Pive Plan, for the first time, the finandal sector was included as an part of the Plan.Select the correct using the code given below, holdings and not individual holdings. providing agricultural land to all the landless. predominant form of cultivation. to the ceiling limits. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if agricultural output. industrial output. ( poverty and unemployment increase
   • A1 and 2 on ly
   • B2 only
   • C3 only
   • D1, 2 and 3 With to 1 and reforms in independent Indfa-1
   Answer: (A) 1 and 2 on ly
   Explanation

   Option a is the correct 1 is correct F om the Second Five -Year was.a determinea thrust towards substitution of ood 2 is correct. The Fourth Five -Year Plan objective of correcting the earlier trend of of wealth and economic 3 is incorrect. For the first time in Financial sector became an integral part of in the Ninth Five - Year Plan

2. #2UPSC CSE Prelims 2013
   The national income of a country for a given period is equal to the
   • Atotal value of goods and services produced by the nationals
   • Bsum of total consumption and investment expenditure
   • Csum of personal income of all individuals
   • Dmoney value of final goods and services produced
   Answer: (D) money value of final goods and services produced
   Explanation

   Option d is the correct income means the value of goods and by a country during a financial year. Thus, it is result of all economic activities of any country during of one year and is valued in terms of money

3. #3UPSC CSE Prelims 2010
   In the context of Indian economy, consider the following pairs: 1. Melt down Fall in stock prices 2. Recession Fall in growth rate 3. Slow down Fall in GDPWhich of the pairs given above is/are correctly matched?
   • A1 only
   • B2 and 3
   • C1 and 3
   • D1, 2 and 3
   Answer: (A) 1 only
   Explanation

   Option a is the Pair 1 is corre.c The of economic meltdown is u an economic collapse which may be due to bad financial V r osid'itions, like recession, bankruptcy, and high economy is in trouble for a significant amount of As a result, there is fall in stock prices during this time due to the loss of confidence of investors in market. Pair. 2 is incorrect: Recession refers to two quarters of continued negative growth rate of GDP which leads to slide in the GDP. So, just fall in growth rate does not lead to recession For example, if GDP growth rate falls from I to from FY 2022 to 2023. It is not the condition of recession. But if growth rate changed to for two quarters, then it would be called recession Pair 3 is incorrect: An economic slowdown is a period of slower economic growth, typically characterised by a decrease in the rate of growth of real gross domestic product (GDP) But it doe

4. #4UPSC CSE Prelims 2001
   The term National Income represents
   • AGross National Product at market prices minus depreciation
   • BGross National Product at market prices minus depreciation plus net factor income from abroad
   • CGross National Product at market prices minus depreciation and indirect taxes plus subsidies
   • DGross National Product at market prices minus net factor income from abroad
   Answer: (C) Gross National Product at market prices minus depreciation and indirect taxes plus subsidies
   Explanation

   Option c is the correct National Product (NNP) at Factor Prices i s also National lncome or just National Income. at Factor Cost (FC) represents Gross at market prices minus depreciation and plus subsidies. But this was the situation till January 2015 9, we calculate various Market Prices her than at Factor Cost (FC). a IJ Important Tips -. Factor Cost (FC) Market Price (MP) - Indirect Subsidies National Income (MP) Gross national product (MP) - deprecation ( 2 ) National Income (FC) Gross national product - deprecation - indirect ta subsidies Using (1) _ d J

5. #5UPPCS 2017
   An underdeveloped economy is generally characterized by: 1. Low per capita income 2. Low rate of capital formation 3. Low dependency ratio 4. Work force largely in the tertiary sectorSelect the correct answer from the codes given below: Codes
   • A1 and 2
   • B2 and 3
   • C3 and 4
   • D1 and 4
   Answer: (A) 1 and 2
   Explanation

   Option a is the correct underdeveloped economy is characterized by low income, low rate of capital formation, and ratio. The workforce in an is largely concentrated in the primary is the agricultural sector. The tertiary sector, the service sector, is not as developed in Important Tips Low per capita in come: T he per capita income in an underdeveloped economy is low. Per capita income (PCI) or total income per capita is a metric used to d etermine the average income earned by each individual. T hi s calcu lation involves dividing the total income of the area by its total population lo arrive at I he per capita income figure. Low rate of capital formation: The rate of capital fo rmatio n in an underdeveloped economy is low, which means that the country is not investing enough in its f-i.rture. Capital formation refers to the net increase in a country's stock of capihll goods, which inclu

6. #6UPPCS 2015
   Who was the chairman of National Income Committee appointed by the Government of India in 1949?
   • AC.R. Rao
   • BP.C. Mahalanobis
   • CV. K. R.V. Rao
   • DK. N. Raj
   Answer: (B) P.C. Mahalanobis
   Explanation

   Option b is the correct Government of India appo inted the National after independence in August 1949 with Mahalanobis as its Chairman. Prof D.R. Gadgil and -- Dr.. Rao were its two members. The committee up to compile national income. The first report of mmittee was prepared in 1951

7. #7UPPCS 2013
   The most appropriate measure of a country's economic growth is its
   • AGross Domestic Product (GDP)
   • BNet Domestic Product (NDP)
   • CNet National Product (NNP)
   • DPer Capita Product (PCP)
   Answer: (D) Per Capita Product (PCP)
   Explanation

   Option dis the coned most appropriate measure of a country's is its Per Capita Product It is the product per capita, or GDP per capita. the country's gross domestic product by its It reflects the actual condition of the people country. Like we are 5th largest GDP in the world, are not even in the top 100 in GDP per capita NNP and NDP do not reflect the true condition of of that particular country. Even countries developing or least developed countries based per capita. It makes it the most appropriate a country's economic growth

8. #8State PCS 1996
   The Hin.du rate of growth refers to the growth rate of
   • APer Capita Income
   • BNational Income s s
   • CPopulation
   • DLiteracy
   Answer: (B) National Income s s
   Explanation

   Option bis the correct rate of growth is a term describing low Indian rates from the to the which It takes into account the National Income of It was coined by Professor Rajkrishna, an in 1978

9. #9State PCS 2013
   Which one of the following is a sign of economic growth?
   • AAn increase in National Income v,at constant prices during a year.,i O
   • BA sustained increase in real Per Capita Income
   • CAn increase in National Income at current prices over time
   • DAn increase in National Income along v,ith an increase in population
   Answer: (B) A sustained increase in real Per Capita Income
   Explanation

   Option b is the correct per capita income is a measure of a country's that takes into account the purchasing its citizens. It is calculated by dividing the domestic product (GDP) by its population, and for inflation. It is considered the best sign growth in a real sense. For instance, India is 5th largest economy but on a per capita income ranked 141st by GDP (nominal). Hence, increase NNP, NDP over time do not reflect the real picture growth Even nations are divided into or poor based on per capita income. increase in real per capita income is the best sign growth. Important Tips For Example: To arrive at the change in real income of farmers, we need to adjust the current income of the farmers with an appropriate inflation index. If the inflation in the economy is higher than the farm produce prices then actually it reduces the real income of farmers. And when prices received by farmers

10. #10State PCS 2013
    Theoretically, if economic growth is conceptualized, which one of the following is not usually taken into consideration?
    • AGrowth in Gross Domestic Product (GDP)
    • BGrowth in financial aid from World Bank
    • CGrowth in Gross National Product (GNP)
    • DGrowth in Per Capita Gross National Product
    Answer: (B) Growth in financial aid from World Bank
    Explanation

    Option b is the correct economic growth is conceptualized, a growth aid from the World Bank is not usually consideration. Economic growth refers to an aggregate production in an economy. economic growth is measured in terms of Product (GNP), Gross Domestic Product (GDP), National Product (NNP)

11. #11UPSC CDS 2022
    Which one of the following central features is not associated with Capitalist Economy? of different years at common prices. prices, without adjustment for inflation GDP d_ivided by population
    • AThere is generalized commodity production it has market value (6) Productive wealth is held predominantly in private hands
    • BPotential GDP is the real GDP that the economy would produce if its resources were fully employed
    • CEconomic life is organized according to market principles
    • DEconomic organisation is based on planning, a supposedly rational process of resource allocation. 109
    Answer: (D) Economic organisation is based on planning, a supposedly rational process of resource allocation. 109
    Explanation

    Option d is the correct organization based on planning is not a capitalist economy. Instead, it is with a planned or command economy, government or a central authority exercises control allocation and economic a is correct: In a capitalist system, goods and produced as commodities for exchange in the value of these commodities is determinerl by such as supply and demand Option b is correct: In a capitalist system, the means including factories, machinery, and assets, are owned and controlled by. or entities in their hand then only they will spend on buying goods and services If the consumer will buy the goods and consumption in the economy will increase and vice ye,rsa When the aggregate consumption is potted against a straight line. showing direct relation between the national income and consumption will be obtained. The slope of the line showing a direct relation always positive. The s

12. #12UPSC CDS 2014
    The value of all final goods and services produced by the normal residents of a country and their property, whether operating within the domestic territory of the country or outside in an year is termed as
    • AGross National Income
    • BNet National Income
    • CGross Domestic Product
    • DNet Domestic Product
    Answer: (A) Gross National Income
    Explanation

    Option a is the correct National Income (GNI) represents the total all final goods and services produced by the of a country, including their property, the domestic territory of the country and a specific period, typically a year. Important Tips Facts related to GNI The term "normal residents" in the definition of GNI refers to individuals and businesses that have a significant economic connection to the country, such as citizens, corporations, and, foreign nationals residing in the country for an extended period GNI takes into account not only the economic activity occurring within a country's borders (which is measured by Gross Domestic Product - GDP) but also the economic activity generated by its residents abroad and the income earned from their property and investments outside the country. GNI includes factors such as wages, profits, rents, and net income from foreign assets. It pro

13. #13UPSC CSE Prelims 2012
    Under which of the following circumstances may 'capital gains 'arise? 1. when there is an increase in the sales of a product. 2. when there is a natural increase in the value of the property owned. 3. when you purchase a painting and there is a growth in its value due to increase in its popularity. Select the correct answer using the codes given below
    • A1 only
    • B2 and 3 only
    • C2 only
    • D1, 2 and 3
    Answer: (B) 2 and 3 only
    Explanation

    Option bis the correct 2 and 3 are correct. Capital gain is an increase capital asset's value and is considered to be realized asset is sold. Realized capital gains and losses occur asset is sold, which triggers a taxable event. and lo sses, sometimes referred to as paper gains reflect an increase or decrease in an but are not considered a capital gain that should as a taxable l is incorre ct. Increase sale of a product the increase of value of that product. So, no

14. #14UPSC CDS 2021
    The percentage by which the money the borrower pays back exceeds the money that was borrowed is called as
    • ABank rate
    • BNominal interest rate
    • CReal interest rate
    • DTerms of credit
    Answer: (B) Nominal interest rate
    Explanation

    Option b is the correct nominal interest rate refers to the percentage by money the borrower pays back exceeds the money borrowed. It represents the explicit cost of the return on lending. When someone borrows agree to pay back the original amount borrowed plus an additional amount known as nominal interest rate is the rate at which this calculated and expressed as a percentage of the principal. Important Tips: Bank rate, also known as the discount rate or base rate, is the rate at which central banks lend money to commercial banks. It is used as a tool by central banks to control money supply and influence interest rates in the economy. Real interest rate refers to the nominal interest rate adjusted for inflation. It represents the actual purchasing power or real return of an investment or loan after accounting for inflation. Terms of credit generally refer to the conditions and terms u

15. #15UPSC CAPF 2021
    The amoun.t by which the equilibrium level GDP exceeds the full employment level of GDP fa called?
    • Arecessionary gap
    • Binflationary gap
    • Cincome multiplier
    • Dautomatic stabiliser
    Answer: (B) inflationary gap
    Explanation

    Option bis the correct amount by which the equilibrium level of real the full employment level of GDP is called gap. An inflationary gap exists when for goods and services exceeds production due such as higher levels of overall employment, activities, or elevated government expenditure. backdrop, the real GDP can exceed the potential in an inflationary gap. Important Tips Recessionary Gap can be defined as the difference between the real GDP and potential GDP at the full employment level. This is also known as the contractionary gap. The income multiplier shows the change the gross domestic product (GDP) of a country due to the injection or investment in the economy. Automatic stabilizers are mechanisms built into government budgets, any from legislators, that increase spending or taxes when the economy slows

16. #16UPSC CDS 2023
    The computation of poverty in terms of Monthly Per Capita Consumption Expenditure (MPCE) based on the Mixed Reference Period was recommended by the
    • ALakdawala Committee
    • BTendulkar Committee
    • CDandekar Committee
    • DAlagh Committee
    Answer: (C) Dandekar Committee
    Explanation

    Option c is the correct Achieve and Trade (PAT) is a regulatory reduce Specific Energy Consumption in energy with an associated market based mechanism the cost effectiveness through certification of saving which can be traded. Important Tips National Mission for Enhanced Energy Efficiency (NMEEE) is one of th e eight missions under the National Action Plan on Climate Change {NAPCC). Perform, Achieve and Trade (PAT) is the flagship programme und er the mission implemented by Bureau of Energy Efficiency (BEE) under the aegis of Ministry of Power. 'i SECTOR AND unit consists of from External Sector Consider the following statements: Statement-I: Switzerland is one of the leading exporters of gold in terms of value. Statement-II: Switzerland has the second largest gold reserves in the world. Which one of the following is correct in respect of the above statements? [UPSC CSE Pre 2023] (a) Bot

17. #17UPPCS 2007
    Which of the following crops are grown mostly under subsistence farming?
    • ACoarse Cereals and Rice
    • BCotton and Tobacco
    • CTea and Coffee
    • DVegetables and Fruits
    Answer: (A) Coarse Cereals and Rice
    Explanation

    Option a is the correct farming is a type of agriculture in grow crops primarily for their own than for sale. Coarse cereals and rice are that are grown in many parts of the world farming They are relatively easy to grow few inputs, making them a good choice for are limited in resources. Coarse cereals include as millet, sorghum, and maize. Rice is a cereal grain grown in flooded fields. Both coarse cereals and rice sources of calories and nutrients for people in subsistence farming areas

18. #18CGPSC 2017
    Which of the following plants is not helpful in nitrogen fixation?
    • AGram
    • BPea
    • CBean
    • DPaddy (e) None of the above
    Answer: (D) Paddy (e) None of the above
    Explanation

    Option d is the correct have a symbiotic relationship with bacteria These bacteria live in nodules on the roots and fix nitrogen from the atmosphere This then available to the legume plant, which can use it Paddy is a cereal crop that does not fix nitrogen. options, gram, pea, and bean are all legumes that m. Fo

19. #19Practice set
    Consider the following statements with reference to Economic Growth and Economic Development:l. Unlike Economic Growth, Economic Development does not require changes in income, savings and investments in an economy, - 2. Increase in government spending can foster Economic Growth while reduction in income inequality may indicate Economic Development. 3. Unlike Economic Growth, Economic Development is measured by quantitative factors such as an increase in real GDP.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct l is incorrect: Economic growth refers to in the real output of goods and services in Economic development implies changes in and investment along with progressive socioeconomic structure of country (institutional 2 is correct: Economic Growth relates to increase in one of the components of Gross consumption, government spending, exports. Economic Development relates to growth capital, decrease in inequality figures, and that improve the quality of life of the 3 is incorrect: Economic Growth is measured factors such as increase in real GDP or qualitative measures such as HDI (Human gender related index, Human poverty index mortality, literacy rate etc. are used to development

20. #20Practice set
    In the context of microeconomics, Rahn curve establishes relationship between which of the followings?
    • AEconomic growth and government's spending as a per cent of GDP
    • BEnvironmental degradation and stage of economic development
    • CCumulative portion of income to cumulative per cent of population
    • DRelationship between income inequality and per capita income
    Answer: (A) Economic growth and government's spending as a per cent of GDP
    Explanation

    Option a is the correct curve establishes the relationship between and government's spending as a per cent of suggests that there is an optimal level of which maximises the rate of economic growth. Economic Rahn Curve Performan e Government of GOP Important Tips Environmental Kuznets Curve establishes the relationship between environmental degradation and stage of economic development. It suggests that economic development initially leads to a deterioration in the environment, but after a certain level of economic growth, a society begins to improve its relationship with the environment and levels of environmental degradation reduces. Lorenz curve establishes the relationship between Cumulative share/portion of income to the section or per cent of population. It is a graphical representation of the distribution of income or wealth within a population. Kuznets curve is used to demonstrate

21. #21Practice set
    It is a concept of microeconomics in which no individual or group can be made better off without making someone else worse off. Which of the following options best describes the above mkroeconomk concept?
    • APareto Optimality
    • BConcept of Diminishing Marginal Utility
    • CTayl or Rule
    • DParadox of Thrift
    Answer: (A) Pareto Optimality
    Explanation

    Option a is the correct optimality or Pareto efficiency is an where resources cannot be reallocated to individual better off without making at least worse off. Hypothetically, if there were and resources were used to maximum then everyone would be at their highest standard or at Pareto efficiency. Important Tips The law of diminishing marginal utility states that all else equal, as consumption increases, the marginal utility derived from each additional unit declines. The Taylor Rule is an equation linking the United States of America's Federal Reserve Bank's benchmark interest rate to levels of inflation and economic growth. The paradox of thrift is a microeconomic theory that argues that personal savings can be detrimental to overall economic growth. It is based on a circular flow of the economy in which current spending drives future spending. It calls for a lowering of interest rates

22. #22Practice set
    The term "Wealth effect" represents an economic theory in which
    • AOverall demand rises due to an increase in GDP
    • BAn individual spends more due to perception of increased disposable income
    • CPer capita income increases due to the increase in the price of assets
    • DValue of stocks decline in bear market. 26
    Answer: (B) An individual spends more due to perception of increased disposable income
    Explanation

    Option b is the correct b is correct: Wealth Effect-It is a theory in which people spend more as they financially secure and confident about their their homes or investment portfolios increase They are made to feel richer, even if their income costs are the same as before. So due to perception disposable income, individuals or households increase in wealth and spend more

23. #23Practice set
    Consider the following types of recession and their definition. Recession:Definition l. Double dip recession that fall quickly recession and fail to recover. 2. Growth economy is growing at recession such a slow pace that more jobs are lost than created. 3. Technical economy goes into anthor recession recession shortly after recovering from first recession.How many pairs given above are correctly matched?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct l is incorrectly matched. Double dip recession is followed by a short lived recovery followed 2 is correctly matched. An economy that is such a slow pace that more jobs are being lost than The lack of job creation make it feels as if is in a recession, even though the economy is 3 is incorrectly matched. A technical recession is country faces a back-to-back decline (for two in the GDP

24. #24Practice set
    "The aggregate savings rate of an economy growing at per annum is Assuming that the people in this economy use half their savings for investment, what is the Incremental Capital Output Ratio (ICOR) of this economy?"
    • A7.00
    • B1.75
    • C0.57
    • D3.5
    Answer: (B) 1.75
    Explanation

    Option b is the correct Investment rate / GDP Growth Investment (savings rate) X 1/2 Growth rate 12.5 ICOR 21.875/12.5 measures the additional unit of output created by increase in investment capital

25. #25Practice set
    With reference to Incremental capital output ratio ( consider the following 1. ICOR represents relation between investment and GDP growth rate. 2. Lower ICOR value reflects lower efficiency of the capital.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (A) 1 only
    Explanation

    Option a is the correct l is correct: The ICOR is the ratio of rate to the real GDP growth rate. It reflects of the 2 is incorrect: ICOR measures the incremental capital that goes to generate one unit output. By definition, the lower the ICOR, the efficiency and vice versa

26. #26Practice set
    With reference to Indian economy, consider Lhe following statements: 1. An increase in economic variables over a period of time is called economic growth 2. Economic development implies an upward movement of the quality of life in the economy. 3. Economic growth generally brings quantitative changes in the economy. 4. Economic development brings qualitative changes in the economy.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (D) All four
    Explanation

    Option d is the correct development is defined as a sustained material well being of 1 is correct. An increase in economic a period of time is economic growth. The term can in an individual case or in the case of an economy or whole world. Economic growth refers to an increase in a country's real output of goods and services real output per capita income. It relates to a in one of the components of Gross consumption, government spending, 2 is correct. Economic development implies movement of the quality of life in 3 is correct. Economic growth is considered as concept. Increases in real GDP. It only changes in the 4 is correct. Economic development is concept. It includes HDI gender related index (GDI), Human poverty infant mortality, literacy rate etc. It brings in the economy

27. #27Practice set
    With reference to 'GDP Deflator', consider the following statements: 1. It is a more comprehensive measure of inflation as against wholesale price indices. 2. Unlike Consumer Price Index, GDP deflator accounts for all goods and services, whether produced domestically or outside. 3. In India, GDP deflator data is only available on a quarterly basis along with GDP estimates.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct l is correct: Since the deflator covers the of goods and services produced in the economy - the limited commodity baskets for the wholesale price indices - it is seen as a more of 2 is incorrect: GDP deflator reflects the all goods and services produced domestically in whereas the CPI reflects the prices of goods bought by domestic Consumer (whether they in India or not is 3 is correct: GDP deflator is available only on basis along with GDP estimates, whereas CPI data are released every month. Important Tips The GDP deflator, also called implicit price deflator, is a measure of inflation. GDP price deflator measures the difference between real GDP and nominal GDP

28. #28Practice set
    Which of the following statements is correct regarding the term Green GDP?
    • AIt is the amount of investment made in sustainable activities in an economy
    • BIt is the value of goods and services only created by climate friendly activities
    • CIt is the value of goods and services calculated after accounting for monetary loss due to environmental damage
    • DIt is the GDP value created by the forest resources of a nation
    Answer: (C) It is the value of goods and services calculated after accounting for monetary loss due to environmental damage
    Explanation

    Option c is the correct standard GDP is a statistic that calculates the goods and services produced in a nation's economy particular year. It is generally a measure of in a country. It assumes that the natural materials such as timber, water, coal, petroleum, minerals, etc) that are required as inputs for are constant and need no accounting m However recently a new concept called "Green GDP" to the fore. It believes in accounting for the raw materials provided by nature freely as well as in monetary terms due to continuous resources - either due to u damage and pollution which renders or hampers in their regeneration

29. #29Practice set
    Which of the following Items are not included in the calculation of GDP? 1. Milk used for producing sweets 2. Purchase of license of a computer software. 3. Sell of country-gun to mafia on darknet 4. Purchase of second-hand vehicle 5. Purchase of a new houseSelect the correct option form the codes given below: from various factors of production in abroad subtracted by the net taxes paid on the earned income in abroad. from various factors of production in abroad in addition to the net retained earnings from abroad. from various factors of production in abroad in addition to the transfer payments, gifts and donations from abroad. from various factors of production in abroad and deducting the net factor income earned by the foreigners in India. Consider the following statements about the Income method of National Income Accounting
    • A1, 2 and 3 only
    • B1, 3 and 4 only
    • C2, 3 and 5 only
    • D1, 4 and 5 only
    Answer: (B) 1, 3 and 4 only
    Explanation

    Option bis the correct Domestic Product (GDP) is the market value of final goods and services produced within the of a country during a specified 1 is correct: An intermediate good is a to produce a final good or finished product. It is while calculating GDP to prevent the same good twice. Hence, milk used for producing an intermediate good and cannot be 2 is incorrect: Purchase of license of a is considered as an investment hence is national income accounting by expenditure 3 is correct: Sell of illegal goods or sells black market like darknet are often left out from of GDP. These items are not included in of GDP because they involve issues related and quantification 4 is correct: Sell/ purchase of is also not included, because income done for the new products and services of the 5 is incorrect: Purchase of a new house is as an investment under expenditure method calculation of national

30. #30Practice set
    With reference to Genuine Progress Indicator (GPI), which of the following statements is/are incorrect? 1. It takes into account the negative impacts of the economic activities on environment and society. 2. GPI per capita is always less than GDP per capita.Select the correct answer using the code given below
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2 86
    Answer: (B) 2 only
    Explanation

    Option b is the correct Genuine Progress Indicator (GPI) is a metric that suggested to replace, or supplement, gross as a measure of economic l is correct: A Genuine Progress is a metric used to measure the economic growth country. The GP! indicator takes everything the GDP account but adds other figures that represent the the negative effects related to economic activity, the cost of crime, cost of ozone depletion, and cost depletion, among 2 is incorrect: The GPI per capita can be the GDP per capita. The GPI measures environmental sustainability, and social equity, GDP only measures the economic output of a the GPI could be greater than the GDP if is making progress in areas such as and social equity while its economic output necessarily increasing. However, usually (not is lesser than GDP due to negative externalities

31. #31Practice set
    Who is responsible for calculating GDP in India?
    • AReserve Bank of India
    • BDepartment of Economic Affairs
    • CNational Statistical Office
    • DChief Economic Advisor
    Answer: (C) National Statistical Office
    Explanation

    Option c is the correct National Statistical Office under the Ministry and Program Implementation is macroeconomic data gathering and statistical It releases India's GDP data. Important Tips The Chief Economic Adviser to the Government of India (CEA) advises the eovernment on economic matters and is responsible for the preparation of the Economic survey of India tabled in Parliament before the Union budget of India is presented

32. #32Practice set
    With reference to Net National Product (NNP) consider the following statements: 1. It takes into account the depreciation of capital goods. 2. It includes income earned by citizens from abroad. 3. It considers income generated in the informal sector of the economy.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct 1 is correct: Net national product (NNP) total value of finished goods and services a country's citizens overseas and domestically, the depreciation of capital 2 is correct: NNP includes income earned abroad and excludes income earned l,y Gross Domestic Product (GDP) NFIA Gross (GNP) National Product Net National Product 3 is incorrect: As such no special mechanism for considering the income generated from sector in case of NNP. NNP basically relies on data. GDP ignores the value of informal or activity. It relies on recorded transactions data, so it does not take into account the extent economic activity

33. #33Practice set
    Consider the following pairs with reference to components of expenditure method of national income calculation: 1. Consumption Purchasing new car by an Indian resident llllt Practicebo 2. Investment Purchase of land for business 3. Government Money spent on Spending primary education by Government of IndiaHow many of the above given pairs are correctly matched?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (C) All three
    Explanation

    Option c is the correct l is correct: Purchasing new car, mobiles, both India made (Imported) foreign made in expenditure method calculation of We can ignore the purchase of second-hand we are only measuring 'new' things "Made in present 2 is correct: Purchase of tangible capital assets House, Land, Building, Factory, Truck, purchase of intangible capital assets like IPR / Software etc. are part of investment under on business capital 3 is correct: The government spending national income calculation represents expenditures local and central government authorities on nondefense goods and services, such as weaponry, and education. Important Tips The expenditure method is a system for calculating gross domestic product (GDP) that combines consumption, investment, government spending, and net exports. It says everything that the private sector, including consumers and private firms, and gove

34. #34Practice set
    Which among the following statements is/are correct regarding the Gross Value Added in the Economy? 1. It is a measure of the contribution to GDP made by an individual producer, industry or sector. 2. It gives the picture of the state of the economy from the consumers' side.Select the correct answer using the code given below
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (A) 1 only
    Explanation

    Option a is the correct l is correct. Gross value added (GVA), is the value of output minus the value of and is a measure of the contribution to by an individual producer, industry or sector. data is crucial to understand how the various the real economy are 2 is incorrect. GVA gives a picture of the state activity from the producers' side or supply the GDP gives the picture from the consumers' demand perspective Practicebo

35. #35Practice set
    Which of the following is incorrect with reference to the term "Potential GDP"?
    • AIt is the level of output which any economy can produce at a constant inflation rate
    • BPotential GDP helps in the calculation of the GDP gap
    • CInflation and recession are the only determinants of potential GDP
    • DHigher level of capital formation can lead to increase in potential GDP
    Answer: (C) Inflation and recession are the only determinants of potential GDP
    Explanation

    Option c is the correct a is correct. Potential gross domestic is the level of output which any economy can a constant inflation b is correct. The GDP gap is defined as between potential GDP and real c is incorrect. Apart from inflation and stock, the potential labour force depending and participation rates, the non accelerating inflation rate of unemployment, and the level efficiency also help determine this potential d is correct. Higher level of capital lead to increase in potential GDP

36. #36Practice set
    Consider the following statements: 1. Nominal GDP is calculated such that the goods and services are evaluated at some constant prices. 2. Real GDP is the value of GDP at the current prevailing prices. 3. GDP Deflator gives an idea about the movement of prices from the base year.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone ok
    Answer: (A) Only one
    Explanation

    Option a is the correct l is incorrect. Real GDP is calculated in a that the goods and services are evaluated at set of prices (or constant 2 is incorrect. Nominal GDP is the value of the current prevailing 3 is correct. The ratio of nominal to real GDP GDP Deflator. The ratio of nominal GDP to real an idea of how the prices have moved from the

37. #37Practice set
    Consider the following statements: 1. Kuznets hypothesis suggests that economic growth initially leads to greater equality, followed by inequality. 2. India's per capita gross domestic product had increased nearly five times in the past two decades. 3. If every resident in India has the same income, the Gini coefficient will be zero.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct I is incorrect. Kuznets' inverted- U curve income inequality tends to increase at an initial development and then decrease as the economy whtn income has ktpt rising and reached a income inequality increases 2 is correct. India's per capita gross (GDP) increased five times between 2000 to in 2019 from in 3 is correct. A country in which every the same income would have an income Gini

38. #38Practice set
    Consider the following statements: 1. Gross value added (GVA) is a measure of the contribution to GDP made by an individual producer, industry or sector. 2. In India, Gross domestic product (GDP) at factor cost is used to measure economic growth. 3. Gross Domestic Product (GDP) of any nation represents the sum of gross value added (GVA) in all the sectors of that economy during the said year after adjusting for taxes and subsidies.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct l is correct: Gross value added (GVA) as the value of output less the value of It is used to measure the output or a particular 2 is incorrect: Economic growth was measured percent rate of increase in GDP at Factor cost at till January 2015 in India. The Central Statistics measuring the country's economic growth by (GVA) at basic 3 is correct: GDP at Market Prices I GVA prices product taxes - product

39. #39Practice set
    Which of the following components is/are included in the GDP calculation of India? 1. Salaries to Indian residents working in Russian Embassy in India. 2. Profits earned by a company in India, which is owned by non-residents. 3. Profits earned by a branch of IDBI bank in Germany.Select the correct answer using the code given below
    • A1 and 2 only
    • B2 only
    • C2 and 3 only
    • D3 only
    Answer: (B) 2 only
    Explanation

    Option b is the correct l is incorrect. Salaries to Indian in Russian Embassy in India is not included calculation as Russian embassy in India is not a part territory of 2 is correct. Profits earned by a company which is owned by non-residents is included in of India because the income is created within (domestiterritory of 3 is incorrect. Profits earned by a branch of in Germany is not included in GDP calculation as situated outside the domestic territory of India

40. #40Practice set
    Take a hypothetical situation: "India's GDP is projected to grow at 10.4 per cent in FY23 after a 7.8 per cent contraction in the FY22". The distortion in growth rate that results from abnormally high or low levels of growth rate in the previous period is known as
    • AEdge effect
    • BBase effect
    • CDomino effect
    • DFisher Effect
    Answer: (B) Base effect
    Explanation

    Option b is the correct base effect is the distortion in a growth rate figure from abnormally high or low levels of the same the year-ago

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