National Income & Gross Domestic Product

Total Questions: 55

21. The proportion of labour in GNP (Gross National Product ) becomes low due to the following reason : [U.P.P.C.S. (Mains) 2008]

(a) Profit lags behind wages
(b) Profit lags behind prices
(c) Prices lag behind Profit
(d) Wages lag behind prices

Correct Answer: (d) Wages lag behind prices

Solution:Low share of labour in Gross National Product is due to low wages as compared to Prices. Price rise is an important characteristics of Indian economy due to which if there is an increase in wages then also the resulting profit will be low. Lower wages mean that workers earn less, leading to a smaller share of the total income generated within the country. With lower incomes, workers may have reduced purchasing power, potentially leading to lower consumer spending and a smaller demand for goods and services.

22. Match List I with List II and select the correct answer using the codes given below the lists. [U.P.U.D.A./L.D.A. (Spl.) (Mains) 2010]

List - I	List - II
A. Economic Development	1. Gross Domestic Product
B. Economic growth	2. Gross Domestic Product
C. Sustainable Development	3. Health
D. Quality of life	4. Constructive change

Code :

	A	B	C	D
(a)	1	2	3	4
(b)	4	2	3	1
(c)	3	4	1	2
(d)	4	1	2	3

Correct Answer: (d)

Solution:The correct match of the list I and list II is as follows :

List- I	List - II
Economic Development	Constructive change
Economic growth	Gross Domestic Product
Sustainable Development	Environment
Quality of life	Health

23. With reference to Indian economy, consider the following statements : [U.P.S.C (Pre) 2010]

1. The Gross Domestic Product (GDP) has increased by four times in the last 10 years.

2. The percentage share of public Sector in GDP has declined in the last 10 years.

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

Correct Answer: (b) 2 only

Solution:Statement (1) is incorrect because in the last decade the GDP of India has not increased four times. On the other side statement (2) is correct because in the last decade the share of public sector in GDP has decreased whereas that of private sector has increased. Thus, the correct answer is option (b). Gross Domestic Product (GDP) represents the final value of goods and services produced within a country's borders in a specific period, typically a year. The GDP growth rate is a crucial indicator of economic performance, reflecting health, growth, and development.
Gross Domestic Product (GDP) is calculated using three primary methods:
the Production Method, Expenditure Method, and Income Method. Each approach offers unique insights into a nation's economic activities. The methods of estimation of GDP are as follows:
Income Method: It measures the total income earned by the factors of production, that is, labour and capital,
within a country's domestic boundaries
GDP (as per income method) = GDP at factor cost + Taxes - Subsidies.
Expenditure Method: It calculates the total amount of money spent on products and services within a
nation's borders by all entities.
GDP (as per expenditure method) = C + I + G + (X-IM)
C: Consumption expenditure,
1: Investment expenditure,
G: Government spending
(X-IM): Exports minus imports, that is, net exports.
Production (Output) Method: All commodities and services produced inside the borders of the country are valued in terms of money or market value. Real GDP, or GDP at constant prices, is calculated to prevent a skewed assessment of GDP brought on by changes in price levels.
GDP (as per output method) = Real GDP (GDP at constant prices) - Taxes + Subsidies.

24. Match List I with List II and select the correct answer using the codes given below the lists: [U.P.S.C (Pre) 2000]

List - I	List - II
A. Boom	1. Business activity at high level with increasing income, output and employment at macro level
B. Recession	2. Gradual fall of income, output and employment with business activity in a low gear
C. Depression	3. Unprecedented level of under employment and unemployment, drastic fall in income, output and employment.
D. Recovery	4. Steady rise in the general level of prices, income, output and employment.

Codes :

	A	B	C	D
(a)	1	2	3	4
(b)	1	2	4	3
(c)	2	1	4	3
(d)	2	1	3	4

Correct Answer: (a)

Solution:Business activity at high level with increasing income, output and employment at macro level, shows that the economy is in boom period. While during recession, gradual fall of income, output and employment with business activity in a low gear is noticed. Unprecedented level of under-employment and unemployment, drastic fall in income, output and employment shows that economy is in depression. When economy recovers, then there is steady rise in the general level of prices, income, output and employment. shows that economy is in depression. When economy recovers, then there is steady rise in the general level or prices, income, output and employment.

25. In the context of Indian economy, consider the following pairs : [U.P.S.C (Pre) 2010]

(Term)	(Most appropriate description)
1. Melt down	Fall in stock prices
2. Recession	Fall in growth rate
3. Slow down	Fall in GDP

Which of the pairs given above is/are correctly matched ?

(a) 1 only
(b) 2 and 3
(c) 1 and 3
(d) 1, 2 and 3

Correct Answer: (a) 1 only

Solution:An economic meltdown is an extraordinary event that is not necessarily a part of the standard economic cycle. It is a breakdown of a national, regional, or territorial economy that typically follows a time of crisis. It can occur due to financial deregulation, like the 2008 great recession, or an unexpected crisis, like the Covid-19 pandemic.
Recession refers to two-quarters of the continued negative growth rate of GDP which leads to a slide in the GDP. This was witnessed in the fallout of the Covid economic crisis where India marked a technical Recession. It refers to a significant decline in general economic activity in a designated region.
A slowdown is a situation in which GDP growth slows but does not decline. A cyclical slowdown is a period of weak economic growth that occurs at regular intervals. A structural slowdown is a more deep-rooted phenomenon signifying weak economic growth for a long time. It occurs due to a shift driven by disruptive technologies, changing demographics, and/or changes in consumer behaviour.

26. Given below are two statements : [Uttarakhand P.C.S. (Pre) 2002]

Assertion (A): The Indian economic policy is increasingly being criticized by insiders as well as outsiders.

Reason (R): The criticism is largely based on ideological differences.

Select the correct answer from the codes given below:

(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true, but R is NOT the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

Correct Answer: (a) Both A and R are true and R is the correct explanation of A.

Solution:The criticism of New Economic Policy adopted by India in the year 1991, which is based on liberalization, privatization and globalization, is continued till now. The developed economies of the world are criticising on the ground that the new economic policy was not adopted at right time whereas within the country it is criticised on the ground that it is adopting capitalism and deviating from the path of socialism mentioned in the Constitution. These criticisms are largely based on ideological differences. Hence, both A and R are true and R is the correct explanation of A.

27. What was the main strategy of new economic policy adopted in 1991 ? [U.P.P.C.S. (Mains) 2015]

(a) Liberalisation
(b) Privatization
(c) Globalization
(d) All of the above

Correct Answer: (d) All of the above

28. Economic liberalization in India started with : [U.P.S.C (Pre) 2000]

(a) substantial changes in industrial licensing policy
(b) the convertibility of Indian rupee
(c) doing away with procedural formalities for foreign direct investment
(d) significant reduction in tax rates

Correct Answer: (a) substantial changes in industrial licensing policy

Solution:Economic liberalization in India started with substantial 31. On changes in industrial licensing policy. Economic liberalization was introduced in India on 24 July, 1991 by the Narsimha Rao government after its formation in June, 1991. New Industrial policy was declared on 24 July, 1991. In this policy all the industries except 18 prominent industries were made free from license.

29. Which one of the following is correct regarding stabilization and structural adjustment as two components of the new economic policy adopted in India ? [U.P.S.C (Pre) 1996]

(a) Stabilization is a gradual, multi-step process, while structural adjustment is a quick adaptation process.
(b) Structural adjustment is a gradual multi-step process, while stabilization is a quick adaptation process.
(c) Stabilization and structural adjustment are very similar and complimentary policies. It is difficult to separate one from the other.
(d) Stabilization mainly deals with a set of policies which are to be implemented by Central Government while structural adjustment is to be set in motion by the State Governments.

Correct Answer: (b) Structural adjustment is a gradual multi-step process, while stabilization is a quick adaptation process.

Solution:New Economic Policy adopted by India has two executive sides stabilization and structural adjustment. Stabilization is related to the management of demand side of the economy which includes inflation control, fiscal management and balance of payment. Structural adjustment is related to the management of supply side of the economy which includes reforms in trade and capital flow, industrial control, investment and finance reforms etc. Although stabilization and structural adjustment are complimentary but structural adjustment is related to supply side and takes more time as compared to stabilization. Stabilization component of any economy is essentially a short-term programme while the structural adjustment component is a long-term process.

30. Who is called the pioneer of liberalization of Indian Economy ? [M.P.P.C.S. (Pre) 2008]

(a) Dr. Manmohan Singh
(b) P.V. Narsimha Rao
(c) Dr. Bimal Jalan
(d) P. Chidambaram

Correct Answer: (a) Dr. Manmohan Singh

Solution:Liberalization of Indian Economy started in the year 1991. At that time Dr. Manmohan Singh was the Finance Minister of India. So he is called as the 'Pioneer of liberalization of Indian Economy'. Liberalisation is the removal of restrictions from the private sector activities typically pertaining to the economic system. Liberalization includes the removal of controls and regulations from a country's economy to ensure that businesses and corporations can maximize their contribution to economic development. In India, it began with the introduction of a new economic policy to tide over conditions of the balance of payment crisis. Liberalization was undertaken to attain objectives like industrialization, expansion in the role of private and foreign investment, and the introduction of a free market system.

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