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

Total Questions: 50

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

(a) he is able to fulfil his need with a given level of income
(b) he is able to live in full comforts with a given level of income
(c) he can fulfil his needs without consumption of certain items
(d) he is able to locate new sources of income

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]

(a) producer
(b) global economy
(c) consumer
(d) middle-man

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]

(a) 1994
(b) 1995
(c) 1996
(d) 1997

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]

(a) all items cost 3.3 times more than what they did in 1960
(b) the price of certain selected items have gone upto 3.3 times
(c) weighted mean of price of certain items has increased 3.3 times
(d) gold price has gone up 3.3 times

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.

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

(a) Both A & R are true & R is the correct explanation of A
(b) Both A & R are true but R is not a 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 & 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.

(a) Both A & R are true & R is the correct explanation of A
(b) Both A & R are true but R is not a 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 & 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.

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

(a) they are entitled to a minimum prescribed food basket
(b) they get work for a prescribed minimum number of days in a year
(c) they belong to agricultural labourer household and the scheduled caste/tribe social group
(d) their daily wages fall below the prescribed minimum wages

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]

(a) The Union levies, collects and distributes the proceeds of income tax between itself and the states
(b) The Union levies, collects and keeps all the proceeds of income tax to itself
(c) The Union levies and collects the tax but all the proceeds are distributed among the states
(d) Only the surcharge levied on income tax is shared between the Union and the states

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.

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]

(a) Muslims in Kerala, Gujarat and A.P.
(b) Tribals in Bihar, Orissa, M.P. and Maharashtra
(c) Scheduled Caste in Punjab, Western UP, Northern Rajasthan and Tamil Nadu
(d) Christians in Gujarat, Maharashtra and Assam

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.

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

(a) West Bengal
(b) Kerala
(c) Madhya Pradesh
(d) Andhra Pradesh

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.

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