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Question 1 of 5
1. Question
2 points
The National Income of a country (India) is equal to which of the following:
Correct
Sol: (B) Net National Product at Market Prices
Exp: National Income (NI) and Net National Income (NNI) are same terms and used interchangeably.
National Income = Net National Income (NNI) = Net National Product (NNP)
NNP = GNP – Depreciation
Earlier NSO was using factor cost to calculate NNP but now it uses Market Prices to calculate NNP.
Incorrect
Sol: (B) Net National Product at Market Prices
Exp: National Income (NI) and Net National Income (NNI) are same terms and used interchangeably.
National Income = Net National Income (NNI) = Net National Product (NNP)
NNP = GNP – Depreciation
Earlier NSO was using factor cost to calculate NNP but now it uses Market Prices to calculate NNP.
Question 2 of 5
2. Question
2 points
Consider the following statements
(i) Capital goods are final goods and are not used as an input
(ii) Intermediate goods are capital goods
Select the correct answer using the code given below:
Correct
Sol: (D) Neither (i) nor (ii)
Exp: Goods are of two types: Intermediate and Final. And final goods are of two types: Consumption and Capital. So, capital goods are final goods and are used as input in the production process and they remain as it is and don’t get transformed. Intermediate goods are also used as an input but they get transformed or lost in the production process. Intermediate goods are semi-finished goods which have been produced by a man made process but cannot be used as it is and need to go through further production/transformation process to be converted into a final good. For example, steel sheets. The steel sheets cannot be used as it is and needs to be transformed into final products like automobiles, appliances etc.
Incorrect
Sol: (D) Neither (i) nor (ii)
Exp: Goods are of two types: Intermediate and Final. And final goods are of two types: Consumption and Capital. So, capital goods are final goods and are used as input in the production process and they remain as it is and don’t get transformed. Intermediate goods are also used as an input but they get transformed or lost in the production process. Intermediate goods are semi-finished goods which have been produced by a man made process but cannot be used as it is and need to go through further production/transformation process to be converted into a final good. For example, steel sheets. The steel sheets cannot be used as it is and needs to be transformed into final products like automobiles, appliances etc.
Question 3 of 5
3. Question
2 points
Consider the following measures.
(1) Increasing Cash Reserve Ratio (CRR)
(2) Decreasing Statutory Liquidity Ratio (SLR)
(3) Permitting Central/State agencies to import duty free pulses and sugar.
How many of the above steps will result in containing inflation?
Correct
Sol: (B) 1 and 3 only
Exp: In order to curb inflation if CRR is increased, then it may take liquidity from markets as banks will have to deposit more money with RBI. Moreover inflation may also be curbed by Permitting Central/State agencies to import duty free pulses and sugar. However, Decreasing SLR will leave more money with banks to give loans, which in turn will lead to inflation.
Incorrect
Sol: (B) 1 and 3 only
Exp: In order to curb inflation if CRR is increased, then it may take liquidity from markets as banks will have to deposit more money with RBI. Moreover inflation may also be curbed by Permitting Central/State agencies to import duty free pulses and sugar. However, Decreasing SLR will leave more money with banks to give loans, which in turn will lead to inflation.
Question 4 of 5
4. Question
2 points
Which of the following constitutes investment in the economy?
(i) Production of consumption goods
(ii) Production of capital goods
(iii) Production of services
(iv) Buying and selling of shares
Select the correct answer using the code given below:
Correct
Sol: (B) (ii) only
Exp: The value of capital goods produced is defined as investment and the production of consumption goods and services are not investment.
Buying and selling of shares from one person to another person is also not investment for the economy as only the ownership changes and nothing happens on ground. So, only (ii) statement is true.
Incorrect
Sol: (B) (ii) only
Exp: The value of capital goods produced is defined as investment and the production of consumption goods and services are not investment.
Buying and selling of shares from one person to another person is also not investment for the economy as only the ownership changes and nothing happens on ground. So, only (ii) statement is true.
Question 5 of 5
5. Question
2 points
Welfare of the people of a country is best represented by which of the following parameter:
Correct
Sol : (A) Per capita net national income at constant prices
Exp: The question talks about “people of a country” which is basically residents of the country and the income coming to residents is represented by National Income rather than GDP.
As the question talks about welfare, so it should be better calculated as ‘per capita’ National Income rather than just National Income. Because if GNP/GDP increased but population increased more than GNP/GDP, then peoples’ standard of living (welfare) will not improve.
Since increase in price can increase the National Income at market price without increasing the welfare of the people. So, welfare can best be represented by per capita National Income at constant market prices rather than current market prices.
Incorrect
Sol : (A) Per capita net national income at constant prices
Exp: The question talks about “people of a country” which is basically residents of the country and the income coming to residents is represented by National Income rather than GDP.
As the question talks about welfare, so it should be better calculated as ‘per capita’ National Income rather than just National Income. Because if GNP/GDP increased but population increased more than GNP/GDP, then peoples’ standard of living (welfare) will not improve.
Since increase in price can increase the National Income at market price without increasing the welfare of the people. So, welfare can best be represented by per capita National Income at constant market prices rather than current market prices.
