Poverty, Planning, Finance and Economic/Social Development (Part-II)

Total Questions: 50

21. Supply of money remaining the same when there is an increase in demand for money, there will be : [2013-1]

Correct Answer: (b) an increase in the rate of interest
Solution:Supply of money remaining the same when there is an increase in demand for money, there will be an increase in the rate of interest and vice-versa.

22. Economic growth in country X will necessarily have to occur if : [2013-1]

Correct Answer: (c) there is capital formation of X
Solution:A country's economic growth is reflected through capital formation, which in turn encourages private enterprises in enhancing the growth of a country's economy.

Capital Formation as Economic Factor in Economic Growth
• Capital formation is the process by which a community’s savings are channeled into investments in capital goods such as plant, equipment, and machinery.
• Capital Formation increases a country’s productive capacity and worker efficiency by ensuring a greater flow of goods and services in a country.
• The process of capital formation implies that a community does not spend its entire income on goods for current consumption, but rather saves a portion of it and uses it to produce or acquire capital goods that significantly increase the nation’s productive capacity.
• More goods and services produced can lead to an increase in national income levels.
• A country must generate savings and investments from household savings or from government policy in order to accumulate additional capital.
• Countries with high household savings rates can accumulate funds to produce capital goods more quickly, and a government that runs a surplus can invest the surplus.
• Capital formation refers not only to the creation of physical goods but also to the creation of human capital such as education, health, skill development, etc.

23. If the interest rate is decreased in an economy, it will : [2014-1]

Correct Answer: (c) increase the investment expenditure in the economy
Solution:When interest rates decreases then investment expenditure by businesses on capital goods like factories and equipment will increase in an economy.

What Exactly Is a Rate of Interest
The cost of taking out a loan or the return you get for keeping your money in the bank is both represented by an interest rate. It is determined as a proportion of the total amount of money that was either borrowed or saved.

  1. When you take out a mortgage on a home, you are borrowing money from the bank. Other loans can be utilised for the purchase of a vehicle, an appliance, or for the payment of educational expenses.
    When you make a deposit at a bank, the bank is effectively borrowing money from you; in exchange for the usage of the money you placed, the bank will give you interest on the money.

  1. The money that is deposited is used to fund the loans that are given out.
    The interest rate that banks charge borrowers is marginally greater than the rate that they pay out to depositors. The difference is how much profit they make. Interest rates are kept within a relatively small range of one another because banks compete with one another for customers who deposit money and customers who take out loans.

24. With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? [ [2014-1]

1. Defence expenditure

2. Interest payments

3. Salaries and pensions

4. Subsidies

Select the correct answer using the code given below.

Correct Answer: (c) 1, 2, 3 & 4
Solution:Non-plan expenditure covers interest payments, subsidies (mainly on food and fertilisers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, defence, loans to public enterprises, loans to States, Union Territories and foreign governments.

25. The sales tax you pay while purchasing a toothpaste is a: [2014-1]

Correct Answer: (d) tax imposed and collected by the State Government
Solution:Taxes on tooth paste come under GST which is administered by State government.Sales tax is paid to sales tax authority in the state from where the goods are moved.

The Goods and Services Tax (GST) is an indirect tax-taxation is levied on the supply of goods and services and is ultimately paid by the consumer.

26. What does venture capital mean? [2014-1]

Correct Answer: (b) A long-term start-up capital provided to new entrepreneurs
Solution:Venture capital (VC) is a long term financial capital provided to early-stage, high-potential, growth startup companies or new companies.

How Venture Capital Works?
• Fundraising: Venture capital funds raise money from various investors to create a pool of funds.
• Investment: They then identify and invest in startups and early-stage companies with high growth potential. The investment is not just monetary; venture capitalists also provide mentorship, strategic advice, and networking opportunities.
• Growth Stage: With the infusion of capital, these companies ideally grow and expand. During this phase, venture capitalists may provide additional rounds of funding.
• Exit: The ultimate goal of a venture capital investment is to exit the investment at a significantly higher valuation than the entry point. Exits are typically achieved through an initial public offering (IPO) or by selling the company to a larger one (acquisition).

27. Which of the following are associated with 'Planning' in India? [2014-1]

  1. The Finance Commission
  2. The National Development Council
  3. The Union Ministry of Rural Development
  4. The Union Ministry of Urban Development
  5. The Parliament

Select the correct answer using the code given below.

Correct Answer: (c) 2 & 5 only
Solution:Finance commission is involved in distribution of taxes and grants. It is not involved in planning. So by just eliminating all options involving statement 1, we get answer (c) correct.
NITI Aayog or the National Institution for Transforming India, established on January 1, 2015, is the policy think tank of the Indian government, replacing the Planning Commission. It focuses on inclusive development, cooperative federalism, and sustainable growth. The organization is led by the Prime Minister and members include state representatives and experts.
NITI Aayog works on key initiatives like the Atal Innovation Mission and the Aspirational District Programme, promoting innovation and addressing socio-economic disparities. Despite its advisory role and limitations in resource allocation, it plays a pivotal role in shaping India’s policies and governance.

28. A decrease in tax to GDP ratio of a country indicates which of the following? [2015-1]

1. Slowing economic growth rate

2. Less equitable distribution of national income

Select the correct answer using the code given below.

Correct Answer: (a) I only
Solution:A tax-to-GDP ratio is a gauge of a nation's tax revenue relative to the size of its economy as measured by gross domestic product (GDP).

The tax-to-GDP ratio is a measure of a nation's tax revenue relation to the size of its economy.

It determines how well a nation's governemnt use its economic resources via taxation.

Developed nations typically have higher tax-to-GDP ratios than developing nations.

If the tax to GDP ratio is low it shows a slow economic growth rate.

The ratio represents that the governement can finance its expenditure.

A higher tax to GDP ratio means that an economy's tax buoyancy is strong.

A lower tax-to-GDP ratio puts pressure on the governemnt to meet its fiscal deficit targets.

29. With reference to 'Indian Ocean Rim Association for Regional Cooperation (IOR-ARC)', consider the following statements: [2015-1]

1. It was established very recently in response to incidents of piracy and accidents of oil spills.

2. It is an alliance meant for maritime security only.

Which of the statements given above is / are correct?

Correct Answer: (d) Neither 1 nor 2
Solution:IOR-ARC is a regional cooperation initiative of the Indian Ocean Rim countries which was established in Mauritius in March 1997 with the aim of promoting economic and technical cooperation. IOR-ARC is the only pan-Indian ocean grouping. It brings together countries from three continents having different sizes, economic strengths, and a wide diversity of languages, cultures. It aims to create a platform for trade, socio-economic and cultural cooperation in the Indian Ocean rim area, which constitutes a population of about two billion people. Presently it has 19 members- Australia, Bangladesh, India, Indonesia, Iran, Kenya, Malaysia, Madagascar.

Mauritius, Mozambique, Oman, Seychelles, Singapore, South Africa, Sri Lanka, Tanzania, Thailand, UAE and Yemen.

30. Consider the following statements: [2015-1]

1. The Accelerated Irrigation Benefits Programme was launched during 1996-97 to provide loan assistance to poor fanners.

2. The Command Area Development Programme was launched in 1974-75 for the development of water-use efficiency.

Which of the statements given above is/are correct?

Correct Answer: (b) 2 only
Solution:The Command Area development programme was launched in 1974-75 as a centrally sponsored scheme and its main objective was to improve the utilization of the created irrigation potential and optimizing the agricultural production and productivity from the irrigated lands.

The Accelerated Irrigation Benefit Programme (AIBP) was launched during 1996-1997 to give loan assistance to the States to help them complete some of the incomplete major/medium irrigation projects which were at an advanced stage of completion and to create additional irrigation potential in the country.