Economy (Part-3) (CDS-Solved Paper)

Total Questions: 50

41. Which of the following statements is/are true? [Evening Shift-2014 (II)]

1. If increase in demand and supply are of equal magnitude, the price will remain unchanged, but the equilibrium quantity will increase.
2. If increase in demand is of greater magnitude than increase in supply, both equilibrium price and equilibrium quantity will increase.
3. If increase in supply is of greater magnitude than increase in demand, equilibrium price will fall but equilibrium quantity will increase.
Select the correct answer using the codes given below

Correct Answer: (d) 1, 2 and 3
Solution:

If demand and supply both increases then the equilibrium price will remain unchanged and equilibrium quantity will be increased. If increase in demand is greater than, increase in supply then the price will increase and the equilibrium quantity is also increased due to increase in supply.

If increase in supply is greater than, increase in demand then the price will fall but the equilibrium quantity will be increased due to increase in supply. Hence all the statements are correct.

42. A market in which there are large numbers of sellers of a particular product, but each seller sells somewhat differentiated but close products is termed as [Evening Shift-2014 (II)]

Correct Answer: (c) monopolistic competition
Solution:

The model of monopolistic competition describes a common structure in which firms have many competitors, but each one sells a slightly different product.

Perfect competition is the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers.

Monopoly is a market structure characterised by a single seller, selling a unique product in the market.

An oligopoly is a market form wherein a market or industry is dominated by a small number of large sellers.

43. 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 [Evening Shift-2014 (II)]

Correct Answer: (a) Gross National Income
Solution:

Gross National Income (GNI) is defined as the sum of value added by all producers, who are residents in a nation, plus any product taxes (minus subsidies) not included in output, plus income received from abroad such as employee compensation and property income.

Net National Income (NNI) is net national product minus indirect taxes. Net national income encompasses the income of households, businesses, and the government.

Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a a specific period.

The Net Domestic Product (NDP) equals the Gross Domestic Product (GDP) minus depreciation on a country’s capital goods. Net domestic product accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration.

44. National product at factor cost is equal to [Evening Shift-2014 (II)]

Correct Answer: (b) National product at market prices − Indirect taxes + Subsidies
Solution:

National income at factor cost is a measure of the sum of all factor incomes earned by the residents of a country both from within the country as well as abroad. It is infact an alternative name for net National product at factor cost.
National income at factor cost or Net National product at factor cost is the total income earned by a nation’s residents in the production of goods and services.
It is inclusive of net factor income earned from abroad. The main components of national income at factor costs.
National income at factor cost = National income at market price − Indirect taxes + Subsidies.
Hence, option (b) is correct.

45. Which of the following theories form the basis of international trade? [Evening Shift-2014 (II)]

1. Absolute cost difference
2. Comparative cost difference
3. Opportunity cost
Select the correct answer using the codes given below

Correct Answer: (d) 1, 2 and 3
Solution:

International trade is the system by which countries exchange goods and services. International trade takes place because of the variations in productive factors in different countries.

The variations of productive factors cause differences in price in different countries and the price differences are the main cause of international trade. Hence, all the theories are correct.

46. Which one among the following is not a source of tax revenue for the Central Government in India? [Evening Shift-2014 (II)]

Correct Answer: (d) Motor vehicle tax
Solution:

Motor Vehicle tax in India was imposed by state government prior to GST regime. Goods and Services Tax (GST) is an indirect tax used in India on the supply of goods and services.

It is a comprehensive, multistage, destination based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.

Income tax and custom duties are source of revenue for Central government. Service Tax has also been subsumed into GST.

47. Which of the following does not form part of current account of Balance of Payments? [Evening Shift-2014 (II)]

Correct Answer: (d) Capital receipts and payments
Solution:

The Balance of Payments (BoP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in particular period (over a quarter of an year or more commonly over an year). These transactions are made by individuals, firms and government bodies.
Capital receipls and payments are not the part of Balance of Payments.
Current account might include :
(i) Trade (Buying and selling of goods and services)
(ii) Exports (A credit entry)
(iii) Imports (A debit entry)
(iv) Trade balance (The sum of exports and imports)
(v) Factor income (Repayments and dividends from loans and investments)
(vi) Factor earnings (A credit entry)
(vii) Factor payments (A debit entry)
(viii) Factor income balance (The sum of earnings and payments)
Hence option (d) is incorrect.

48. Consider the following statements: [Evening Shift-2014 (II)]

1. Government of India has upgraded the National Industrial Classification from NIC-1987 to NIC-2008.
2. NIC is an essential statistical standard for developing and maintaining comparable database according to economic activities.
Which of the statement(s) given above is/are correct?

Correct Answer: (c) Both 1 and 2
Solution:

Union Ministry of Commerce and Industry on 27th June, 2014 upgraded the NIC-1987 to NIC-2008. The National Industrial Classification (NIC) is an essential statistical standard for developing and maintaining comparable database according to economic activities. Hence, option (c) is correct.

49. Under the forceful thrust of British rule, a rapid transformation of the Indian economy took place. In this context, which of the following statements is/are correct? [Evening Shift-2014 (II)]

1. Indian economy was transformed into a colonial economy in the 19th century whose structure was determined by Britain’s fast developing industrial economy.
2. The influx of cheap Indian products into England gave a great blow to English textile industries.
3. The 19th century saw the collapse of the traditional Indian village economy and fresh economic alignment along commercial lines.
Select the correct answer using the codes given below

Correct Answer: (a) 1 and 3
Solution:

The economic policies followed by the British led to the rapid transformation of India’s economy into a colonial economy in 19th century. Whose nature and structure were determined by the needs of the British economy.

The ruler prior to British made no basic changes in the country's economic structure. The peasant, the artisan and the trader had continued to lead the same type of existence as before.

The basic economic pattern was that of the self-sufficient rural economy. However, the British conquerors totally disrupted the traditional structure of the Indian economy. Hence, statements 1 and 3 are correct.

Britain began to export machine-made yarn and cloth to India in the 1780s. Encouraging exports of low-cost fabric and imposing tariffs on imports of Indian cloth enabled Britain’s textile industry to grow rapidly, but severely hampered the development of India’s own industry. Hence, statement 2 is not correct.

50. In May, 2014, an agreement for credit of $ 24 million (equivalent) from World Bank for additional financing for Uttarakhand Rural Water Supply and Sanitation Project was signed. The objective/objectives of the agreement was/were [Evening Shift-2014 (II)]

1. to improve the effectiveness of Rural Water Supply and Sanitation (RWSS) services through decentralisation.
2. to restore services of damaged schemes in the disaster affected areas in the State of Uttarakhand.
Select the correct answer using the codes given below

Correct Answer: (c) Both 1 and 2
Solution:

The objective of the Uttarakhand Rural Water Supply and Sanitation Project is to improve the effectiveness of Rural Water Supply and Sanitation (RWSS) services through decentralisation and increased role of Panchayati Raj institutions and local communities in Uttarakhand.

World Bank has given a $ 24 million additional credit to restore the services of damaged schemes in the disaster affected areas of Uttarakhand. Hence, both the statements are correct.