Structure of the Indian Economy & Demographics (Part-I)

Total Questions: 50

21. A consumer is said to be in equilibrium, if [1998]

Correct Answer: (a) he is able to fulfil his need with a given level of income
Solution:A consumer is said to be in equilibrium when he feels that he "cannot change his condition either by earning more or by spending more or by changing the quantities of thing he buys". A rational consumer will purchase a commodity up to the point where the price of the commodity is equal to the marginal utility obtained from the thing.

22. The supply-side economics lays greater emphasis on the point of view of: [1998]

Correct Answer: (a) producer
Solution:Supply-side economics is a school of macroeconomics that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services as well as invest in capital. The investment and expansion of businesses will increase the demand for employees. Typical policy recommendations of supply side economists are lower marginal tax rates and less regulation.

23. Human Poverty Index was introduced in the Human Development Report of the year: [1998]

Correct Answer: (d) 1997
Solution:
  • The Human Poverty Index (HPI) was an indication of the Standard of living in a country, developed by the United Nations (UN) to complement the Human Development Index (HDI) and was first reported as a part of the Human Development Report :
  • 1997. In 2010, it was supplanted by the UN's Multidimensional Poverty Index.

24. The current Price Index (base 1960) is nearly 330. This means that the price of: [1998]

Correct Answer: (c) weighted mean of price of certain items has increased 3.3 times
Solution:A price index is a normalized average (typically a weighted average) of price relatives for a given class of goods or services in a given region, during a given interval of time. The current Price Index (base 1960) is nearly 330. This means that the price of the weighted mean of price of certain items has increased 3.3 times.
Consumer Price Index (CPI)?

The consumer price index (CPI) is a metric that reflects the change in the price level of items purchased by retail customers, who are on the demand side of the economy.

  • CPI can be construed to gauge the purchasing power of an economy's currency for the same reason.
  • CPI is calculated for a fixed basket of goods and services that the government may or may not change from time to time.
  • It is a macroeconomic indicator used to track inflation.
  • The consumer price index (CPI) is a metric that reflects the change in the price level of items purchased by retail customers, who are on the demand side of the economy.
  • CPI can be construed to gauge the purchasing power of an economy's currency for the same reason.
  • CPI is calculated for a fixed basket of goods and services that the government may or may not change from time to time.
  • It is a macroeconomic indicator used to track inflation.

25. Assertion (A): Devaluation of a currency may promote export. [1999]

Reason (R): Price of the country's products in the international market may fall due to devaluation

Correct Answer: (a) Both A & R are true & R is the correct explanation of A
Solution:Devaluation is a deliberate downward adjustment to the value of a country's currency relative to another currency, group of currencies or standard. It is a monetary policy tool used by countries that have a fixed exchange rate or semi-fixed exchange rate.

After devaluation of the currency, country's goods become cheaper for foreigners and become more competitive in a global market. This leads to increase in exports.

The rupee was devalued first in 1966 by 57% from Rs. 4.76 to 7.50 against US dollar. In the year 1991, the rupee was again devalued by 19.5% from Rs. 20.5 to Rs. 24.5 against the US dollar.

In this paper, an attempt is made to review the probable reasons for the devaluation of the rupee and analyses the impact of currency devaluation on the various sector of the country.

26. Assertion (A): Fiscal deficit is greater than budgetary deficit. [1999]

Reason (R): Fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.

Correct Answer: (a) Both A & R are true & R is the correct explanation of A
Solution:Budget deficit Total Receipts - Total Expenditure Fiscal deficit is the sum of Budget deficit plus Borrowings and other liabilities Hence, fiscal deficit is greater than budgetary deficit.
  1. Budget Deficit: the government spends more money than it collects in taxes and revenue.
  2. Revenue Deficit: the government spends more money on its revenue-generating activities, such as tax collection, than it collects in revenue from those activities.
  3. Fiscal Deficit: the government spends more money on all of its activities, including both revenue-generating and non-revenue-generating activities, than it collects in revenue from all sources.
  4. Primary Deficit: the government spends more money on all of its activities, excluding interest payments, than it collects in revenue from all sources.
  5. Effective Revenue Deficit: the govt spends more money on its revenue-generating activities, excluding grants for the creation of capital assets, than it collects in revenue from those activities.

27. Persons below the poverty line in India are classified as such based whether: [1999]

Correct Answer: (a) they are entitled to a minimum prescribed food basket
Solution:Till 2011, India used to define the poverty line based on a method defined by a task fore in 1979. It was based on expenditure for buying food worth 2,400 calories in rural areas, and 2,100 calories in Urban areas.
In 2011, the Suresh Tendulkar Committee defined the poverty line on the basis of monthly spending on food, education, health, electricity and transport. However, this has also faced criticism. The NDA government has now constituted a 14-member task force under NITI Aayog's vice-chairman Arvnd Panagariya to come out with recommendations for a realistic poverty line.

28. Which one of the following statements regarding the levying. collecting and distribution of Income Tax is correct? [1999]

Correct Answer: (a) The Union levies, collects and distributes the proceeds of income tax between itself and the states
Solution:Income tax is levied and collected by Union government or the central government and distributed between itself and states.

New Income Tax Bill 2025

  • The New Income Tax Bill 2025 has been designed to make tax compliance simpler and more user-friendly. Here's how:
  • Simpler Legal Language: The bill replaces complex jargon with clear, straightforward language, making it easier for taxpayers to understand and comply without needing legal expertise.
  • Shorter, More Efficient Laws: The new legislation will be about half the length of the current tax laws, removing redundant sections and reducing legal disputes. This will streamline processing for both taxpayers and officials.
  • No New Taxes: This reform isn't about adding more taxes—it's about simplifying existing laws. By cutting down on complexity, taxpayers can navigate the system with ease and minimal bureaucratic hurdles.
  • Budget Announcements Included: Key tax updates from the national budget, like income tax rate changes and TDS revisions, will be seamlessly integrated, ensuring clarity and smoother implementation.
  • This reform is all about making taxation simpler, more transparent, and easier to follow for everyone.

29. Among which one of the following sets of social/religious groups is the extent of poverty the highest, as per Government statistics for the nineties? [1999]

Correct Answer: (b) Tribals in Bihar, Orissa, M.P. and Maharashtra
Solution:According to the recent data made available by Central Statistical Organisation, the incidence of poverty is highest in tribes of Bihar, Orissa and Madhya Pradesh.
  • Poverty meaning, It is a multidimensional phenomenon that reflects the inability of individuals to access essential resources for a basic standard of living.
  • It encompasses lack of income, education, healthcare, and opportunities for economic and social mobility.
  • Despite significant efforts at global, national, and regional levels, poverty remains a pressing issue, affecting billions worldwide.

Classification of Poverty

  • Poverty can be broadly classified into two categories:
  • Absolute Poverty: It is defined as a condition where individuals cannot meet the minimum requirements for basic necessities such as food, shelter, and clothing.
  • Relative Poverty: It reflects economic inequality, where individuals are poor in comparison to others in their society.

30. The first Indian State to have its Human Development Report prepared and released by Amartya Kumar Sen in Delhi is: [1999]

Correct Answer: (c) Madhya Pradesh
Solution:Madhya Pradesh was the first state to have calculated Human Development Report in 1995, under the guidance of Prof. Amartya Sen.

The United Nations has outlined certain features which pertain to Megacities-

  • Megacities prioritize economic competitiveness and employment.
  • The environment matters, but may be sacrificed for growth.
  • Transport overtakes all other infrastructure concerns.
  • Better governance is a vital step towards better cities.
  • Holistic solutions are desired but difficult to achieve.
  • Cities will seek to improve services, but could do more to manage demand. Technology will help deliver transparency and efficiency.
  • The private sector has a role to play in increasing efficiency.