Indian Economy Quiz (Set - 1)
1. The term mixed economy denoted existence of
both
(a) rural and urban sector
(b) private and public sector
(c) heavy and small industry
(d) developed and under developed
sector
2. In an economy, the sectors are classified into
public and private on the basis of
(a) employment condition
(b) nature of economic activities
(c) ownership of enterprises
(d) use of raw materials
3. Which sector of Indian economy has shown
remarkable expansion during the last decade?
(a) Primary sector
(b) Secondary sector
(c) Tertiary sector
(d) Mining sector
4. When development in economy takes place, the
share of tertiary sector in national income
(a) first falls and then rises
(b) first rises and then falls
(c) keeps on increasing
(d) remains constant
5. It will be true to classify India as
(a) a food-deficit economy
(b) a labour-surplus economy
(c) a trade-surplus economy
(d) a capital-surplus economy
6. The Indian economy is characterised by
(a) pre-dominance of agriculture
(b) low per capita income
(c) massive unemployment
(d) all of the above
7. In India, planned economy is based on
(a) Gandhian system
(b) Socialist system
(c) Capitalist system
(d) Mixed economy system
8. Economic liberalisation in India started with
(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
9. A firm sells shares worth Rs.1000 direct to
individuals. This transaction will cause
(a) GNP to rise by Rs.1000
(b) GDP to rise by Rs.1000
(c) National income to rise by Rs.1000
(d) No impact on Gross National
Product
10. Which is not included in the private income
arising in a country?
(a) Factor income from net domestic
product
(b) Net factor income from abroad
(c) Current transfers from government
(d) Current payments on foreign loans
11. In India, agriculture income is calculated by
(a) output method
(b) input method
(c) expenditure method
(d) commodity flow method
12. Who coined the term ‘Hindu rate of growth’ for
Indian economy?
(a) A.K. Sen
(b) Kirit S. Parich
(c) Raj Krishna
(d) Montek Singh Ahluwalia
13. GDP at factor cost is
(a) GDP minus indirect taxes plus
subsidies
(b) GNP minus depreciation allowances
(c) NNP plus depreciation allowances
(d) GDP minus subsidies plus indirect
taxes
14. Per capita income is obtained by dividing
national income by
(a) total population of the country
(b) total working population
(c) area of the country
(d) volume of the capital used
15. Which one of the following is a development
expenditure?
(a) Irrigation expenditure
(b) Administration
(c) Debt services
(d) Grant-in-aid
16. GDP is defined as the value of all
(a) goods produced in an economy in a
year
(b) goods and services in an economy
in a year
(c) final goods produced in an
economy in a year
(d) final goods and services produced
in an economy in a year.
17. Depreciation is equal to
(a) GNP – NNP
(b) NNP – GNP
(c) GNP – Personal Income
(d) Personal Income – Personal Taxes
18. Which one of the following is not a method of
measurement of National income?
(a) Value Added Method
(b) Income Method
(c) Expenditure Method
(d) Investment Method
19. Net National Product (NNP) of a country is
(a) GDP minus depreciation allowances
(b) GDP plus net income from abroad
(c) GNP minus net income from abroad
(d) GNP minus depreciation allowances
20. National income is based on the
(a) total revenue of the state
(b) production of goods and services
(c) net profit earned and expenditure
made by the state.
(d) the sum of all factors of income
Answers with Explanations:
1. (b) The concept of mixed economy evolved
from the ideas of Keynes. The concept of mixed economy means that both private
enterprises and public enterprises coexist. However, the condition attached is
that the private enterprises must work for serving the society rather than
having only self interest. Further the private enterprises may not be allowed
in every sector of the economy like area of national importance.
2. (c) In
an economy, the sectors are classified into private and public on the basis of
ownership. Private sector is owned and managed by proprietors and partnerships
while the public sector is wholly owned and managed by government.
3. (c)
During last decade, tertiary sector has shown remarkable expansion. The economy
is divided into three sector on the basis of activities–primary, secondary and
tertiary. Primary sector is involved into agriculture, secondary sector is
involved into manufacturing, mining, construction while tertiary sector is
involved into trade, transport, communication, banking & other services. In
the last decade India has expanded maximum in providing services like IT,
Telecommunication, Healthcare, Tourism which is contributing around 60% to GDP.
4. (c)
When development in economy takes place, the share of tertiary sector in
national income keeps on increasing because tertiary sector is involved into
services within and outside the country. With development the disposable income
of individuals income results in growth of banking, trading, communication
etc., both domestically and internationally.
5. (b)
India is a labour-surplus economy because in India there is disguised
unemployment along with under-employment which means that qualified, skilled
workforce willing to work is available but there are not enough employment
opportunities.
6. (d)
The Indian Economy is characterised by pre-dominance of agriculture, low per
capita income and massive unemployment. In India contribution of agriculture to
GDP is around 13.7%. Per capita income, a gauge for measuring living standard,
is estimated at ` 5,729 per month in 2012–13 which is low as compared to other
developing nations like China having per capita income to be $6091. In India
the rate of unemployment is around 9.9 % which is higher than other developing
nations like China which has unemployment rate of 4.1.
7. (b)
In India, planned economy is based on socialist system in which all have equal
opportunities to education, healthcare, non exploitation, equality of wealth
etc. The concept was borrowed from Russia and is based on achieving directive
principles mentioned in our constitution.
8. (a)
Economic liberalisation in India started with substantial changes in industrial
licensing policy. The LPG Model (Liberalisation, Privatisation &
Globalisation) was introduced by Dr Manmohan Singh in 1991 as India was facing
problems of depleting reserves. Under liberalization the industrial licensing
policy was changed and under the new licensing policy the private players can
set up their industrial units without obtaining license from government and
thus private investment in India increased drastically.
9. (d) A
firm sells shares worth ` 1000 direct to individuals. This transaction will
cause no impact on Gross National Product as GNP measures the output generated
by a country’s enterprises (whether physically located domestically or abroad)
but here no output is generated.
10. (d)
Private income arising in a country does not include current payments on
foreign loans. Private income includes any type of income received by a private
individual or household, often derived from occupational activities, or income
of an individual that is not in the form of a salary (e.g. income from
investments). Thus private income includes factor income from net domestic
product, net factor income from abroad & current transfers from government.
11. (a)
For calculating national income, the Indian economy is divided into 14 broad
sectors, which are then grouped into three main categories A, B and C. In
India, agriculture, forestry and logging, fishing, mining and quarrying,
registered manufacturing and construction units are included in category A. The
output method is applied to category A. The value added by this category is
found by subtracting the value of raw materials and other inputs from the
aggregate of commodity-wise output.
12. (c)
The term was coined by Indian economist Raj Krishna. The Hindu rate of growth
is a derogatory term referring to the low annual growth rate of the socialist
economy of India before 1991, which stagnated around 3.5% from 1950s to 1980s.
The word “Hindu” implies that the Hindu outlook of fatalism and contentedness
was responsible for the slow growth.
13. (a)
GDP at factor cost is GDP at market price minus indirect taxes plus subsidies.
GDP at factor cost measure the value of output in terms of what it really cost
to produce. However, adjustments have to be made for government subsidies to
firms that make up market prices purchasers pay so price plus subsidy represent
the true income to factor of production. We can, therefore, value domestic
output at prices received by producers after indirect taxes and subsidies have
been taken into account.
14. (a)
Per capita income is obtained by dividing national income by total population
of the country per capita income, also known as income per person, is the mean
income of the people in a country. It is calculated by taking a measure of all
sources of income in the aggregate (such as GDP or Gross national income) and
dividing it by the total population.
15. (a)
The important heads of developmental expenditure within the revenue account are
(i) social and community services, (ii) economic services and (iii) grants-
in-aid to states and union territories. The largest component in this group is
economic services. Economic services include general economic services,
agriculture and allied services, industry; and minerals, water and power and
power development, transport and communication, railways, post and telegraphs
etc.
16. (d)
GDP is defined as the value of all final goods and services produced in an
economy in a year. The total quantity of goods produced in an economy during
year are multiplied by their current prices to get the GDP.
17. (a)
Depreciation is equal to GNP–NNP (Gross national products–Net national
products) Depreciation is also known as consumption of fixed capital. It is the
wear and tear to the physical assets. It measures the amount of GNP that must
be spent on new capital goods to maintain the existing physical capital stock.
18. (d)
Investment method is not a method of measurement of National income. There are
three methods of measurement: income method, product or value added method and
the expenditure method. In the initial phase, production of goods and services
takes place. During the course of production payment is made to all factors of
production like wages to labour etc. Once the production completes the output
is distributed for different uses like consumption etc.
19. (d)
Net National Product (NNP) of a country is GNP minus depreciation allowances.
NNP is the actual addition to year’s wealth. While calculating GNP, we ignore
depreciation of assets but in reality the process of production uses up the
fixed assets or there is some wear and tear or fixed assets by process of
depreciation. In order to arrive at NNP we deduct depreciation from GNP.
20. (b)
National Income is based on the production of goods and services. A variety of
measures of national income and output are used in economics to estimate total
economic activity in a country or region, including gross domestic product
(GDP), gross national product (GNP), net national income (NNI), and adjusted
national income (NNI* adjusted for natural resource depletion). All are
specially concerned with counting the total amount of goods and services
produced within some “boundary”.
