Indian Economy Quiz (Set - 2)

Indian Economy Quiz (Set - 2)

1. Which of the following is definitely a major indication of the state of the economy of a country?

(a) Rate of GDP growth

(b) Rate of inflation

(c) Number of banks in a country

(d) None of these

2. Which of the following can be called as a part of the service sector?

(a) Textile mills

(b) Banking

(c) Coal mines

(d) Agricultural

3. In terms of economics, the total value of the output (goods and services) produced and income received in a year by a domestic resident of a country put together is called 

(a) Net National Product

(b) Gross National Product

(c) Gross National Income

(d) National income

4. Which of the following is equivalent to National income?

(a) GDP at market price

(b) NDP at factor cost

(c) NNP at market price

(d) NNP at factor cost

5. Which sector of the Indian economy contributes largest to the GNP?

(a) Primary sector

(b) Secondary sector

(c) Tertiary sector

(d) Public sector

6. National Income estimates in India are prepared by

(a) Planning Commission

(b) Reserve Bank of India

(c) Central Statistical Organisation

(d) Indian Statistical Institute

7. Per capita Income of a country is derived from

(a) National Income

(b) Population

(c) National Income and population both

(d) None of these

8. The main source of National income in India is

(a) service sector

(b) agriculture

(c) industrial sector

(d) trade sector

9. Which of the following is not an example of economic overheads?

(a) Schools

(b) Sanitary facilities

(c) Roads and Railways

(d) Coal mines

10. Who estimated national income in India first?

(a) Dadabhai Naoroji

(b) R.C. Dutt

(c) V.K. R.V. Rao

(d) D.R. Gadgil

11. Who wrote a book describing the theory of economic drain of India during British rule?

(a) Lala Lajpat Rai

(b) Mahatma Gandhi

(c) J.L. Nehru

(d) Dadabhai Naoroji

12. As the economy develops, the share of the tertiary sector in the GDP:

(a) Decreases

(b) Decreases then increases

(c) Increases

(d) Remains constant

13. The National Income of a country is

(a) the annual revenue of the government

(b) sum total of factor incomes

(c) surplus of PSU’S

(d) export minus import

14. The most appropriate measure of a country’s economic growth is its

(a) Gross Domestic Product

(b) Net Domestic Product

(c) Net National Product

(d) Per capita real income

15. Which one among the following countries has the lowest GDP per capita?

(a) China

(b) India

(c) Indonesia

(d) Sri Lanka

16. The major aim of devaluation is to

(a) Encourage exports

(b) Encourage imports

(c) Encourage both exports and imports

(d) Discourage both exports and imports

17. Inflation is caused by

(a) Increase in supply of goods

(b) Increase in cash with the government

(c) Decrease in money supply

(d) Increase in money supply

18. Devaluation usually causes the internal price to

(a) Fall

(b) Rise

(c) Remain unchanged

(d) None of these

19. In India, one-rupee coins and notes and subsidiary coins are issued by

(a) The Reserve Bank of India

(b) The Central Government

(c) The State Bank of India

(d) The Unit Trust of India

20. The process of curing inflation by reducing money supply is called

(a) Cost-push inflation

(b) Down–pull inflation

(c) Disinflation

(d) Reflation

Answers with Explanations:

1. (a) Rate of GDP growth is a major indication of the state of the economy of a country. Economic growth is the increase in the market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in gross domestic product. Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a year, or other given period of time.

2. (b) The tertiary sector of the economy (also known as the service sector) is one of the three economic sectors. The service sector consists of activities where people offer their knowledge and time to improve productivity. Examples of tertiary industries may include the following: telecommunication, hospitality industry/tourism, mass media, healthcare/hospitals, information technology, banking, insurance, investment management, accountancy, legal services, consulting, retail sales, real estate, education.

3. (b) GNP is the total value of all final goods and services produced within a country in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. GNP measures the value of goods and services that the country’s citizens produced regardless of their location.

4. (d) NNP at factor cost is equivalent to national income. Net National Product at factor cost is the aggregate payments made to the factors of production. NNP at FC is the total incomes earned by all the factors of production in the form of wages, profits, rent, interest etc. plus net factor income from abroad. Similarly National income is the sum total of wages, rent, interest, and profit earned by the factors of production of a country in a year. Thus it is the aggregate values of goods and services rendered during a given period counted without duplication.

5. (c) Tertiary sector of the Indian economy contributes largest to the GNP. During last decade tertiary sector has shown remarkable expansion. The economy is divided into three sectors 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.

6. (c) Central Statistical Organisation (CSO), prepares the estimates of national income in India. The first official estimates of the national income, prepared by the CSO at constant prices with base year 1948- 49, as well as at current prices, were brought out in 1956.

7. (c) Per capita income of a country is derived from National income and population both. 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.

8. (a) Service sector is one of the three economic sectors. it includes : telecommunication, hospitality industry/tourism, mass media, healthcare/ hospitals, information technology, banking, insurance, investment management, accountancy, legal services, consulting, retail sales, real estate, education. Maximum contribution to national income comes from service sector which contributes around 60% .

9. (d) Coal mines is not an example of economic overheads. Economic overhead is capital investment into the infrastructure which should encourage new industrial growth and social well being. The other three School, sanitary facilities and roads and railways are economic overheads.

10. (a) Dadabhai Naoroji had estimated national income in India first. National income estimate before independence was prepared by Dada Bhai Naoroji in 1876. He estimated national income by estimating the value of agricultural production and then adding some percentage of non–agricultural production. This method was non–scientific.

11. (d) Dadabhai, known as the Grand old man, wrote the book ‘Poverty and Un-British Rule in India’ describing the theory of economic drain of India during British rule.

12. (c) As the economy develops, the share of the tertiary sector in the GDP increases. The tertiary sector of the economy consists of activities where people offer their knowledge and time to improve productivity like telecommunication, hospitality industry/tourism, mass media, healthcare/ hospitals, information technology, banking, insurance, investment management, accountancy, legal services, consulting, retail sales, real estate, education. As economy develops people develop more skills and knowledge which they offer as services.

13. (b) National income is the sum total of wages, rent, interest, and profit earned by the factors of production of a country in a year. Thus it is the aggregate values of goods and services rendered during a given period counted without duplication.

14. (d) The most appropriate measure of a country’s economic growth is its per capita real income. Per capita income is average income, a measure of the wealth of the population of a nation. It is used to measure a country’s standard of living thus a better indicator of economic growth.

15. (b) India, among the countries has the lowest GDP per capita. GDP per capita is as follows-India 1509 USD, China 6959 USD, Sri Lanka 3204 USD, Indonesia 3510 USD.

16. (a) The major aim of devaluation is to encourage exports. Devaluation is a deliberate downward adjustment to the value of a country’s currency, relative to another currency, group of currencies. One reason a country may devaluate its currency is to combat trade imbalances. Devaluation causes a country’s exports to become less expensive, making them more competitive on the global market. This in turn means that imports are more expensive, making domestic consumers less likely to purchase them.

17. (d) Inflation is increase in the prices of commodities. It is caused due to decrease in supply and increase in demand of commodities. So when money supply in the economy increases it means people have more purchasing capacity and thus demand increases which results in inflation .

18. (c) Devaluation is a deliberate downward adjustment to the value of a country’s currency, relative to another currency, group of currencies. Since it is relative to other currency so internal price remains unchanged. It causes a country’s exports to become less expensive and imports more expensive.

19. (b) The responsibility for coinage lies with central government on the basis of the Coinage Act, 1906. The designing and minting of coins in various denominations is decided by Central government.

20. (c) The process of curing inflation by reducing money supply is called disinflation. Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the price level of goods and services in GDP. Disinflation occurs when the increase in the “consumer price level” slows down from the previous period when the prices were rising.