Chapter Wise Economy MCQ’s With Explanation

Today’s Topic: National Income

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Today’s Topic: National Income


Q1. In Context of the financing pattern of the ADB. Think about following statement:

1. It was established in 1966
2. It provides both soft loans and hard loans.
3. It finances both public sector and private sector projects.
4. It finances projects only in Asia and Pacific region.
Which of the above statements is/are correct?
a) 1 and 2 only b) 3 and 4 c) Only 4 d) All of the above.
Ans: D
Explanation: The ADB is a regional development bank established on August 22, 1996 to facilitate economic development of countries in Asia. The bank admits the members of the United Nations Economic and social commission for Asia and Pacific. It finances both public sector and private sector projects.

Q2. Consider the following statements:

1. MNREGA will increase the structural employment
2. MNREGA will increase disguised unemployment
Choose correct option
a) 1 and 2 b) Only 1 c) Only 2 d) None of the above
Ans: A
Explanation: MNREGA will increase the structural employment because its creation of infrastructure facilities is also a part of the employment programme, so it will decrease the structural unemployment. But in MNREGA the efficiency is very poor. There is over population for doing a particular job. Even if the manpower is reduced from the present one still it is possible to achieve the target.

Q3. Consider the following statements regarding Reserve Bank of India.

1. It is banker to the central government
2. It acts as an agent of government in respect of India.
3. It formulates and administers monetary policy.
4. It handles the borrowing programme of government of India.
Ans: A
Explanation: The function of central banks are:
1. Banks of issue 2. Banker, agent and financial advisor to the state
3. Bankers to the bank 4. Custodian of foreign exchange
5. Controller of credit etc

Q4. Which one of the following is the objective of National Renewal Fund?

a) To safeguard the interests of workers who may be affected by technological up gradation of industry of sick units.
b) To develop the core sector of the economy
c) For the development of infrastructure such as energy, transport communication and irrigation.
d) For human resource development such as full literacy, employment population control, housing and drinking water.
Ans: A
Explanation: To safeguard the interests of workers who may be affected by the technological upgradation of industry by closure of sick units is the basic objective to establish National Renewal Fund. It has to provide assistance to cover the cost of retaining and redevelopment of employers arising as a result of modernization of technology.

Q5. Consider the following statements:

The price of any currency in international markets is decided by
1. World Bank
2. Demand for good\services provided by the country concerned.
3. Stability of the government of the concerned country
4. Economic potential of the country
Choose Correct answers.
a) 1, 2, 3 and 4 b) 2 and 3 c) 3 and 4 d) 1 and 4
Ans: B
Explanation: The price of any currency in international market is decided by the demand for good/services of a country and stability of the government of concerned country.

Q6. Tourism industry in India is quite small compared in terms of India potential size. Which one of following statements is correct in the regard?

a) Distances in India are too far apart and Luxury hotel are too expensive for western tourists.
b) For most of months India is too hot for western tourists to feel comfortable.
c) Most of the picturesque resorts in India such as in the North east and Kashmir are, for all practical purpose, out of bounds.
d) In India the infrastructure required for attracting tourists in inadequate.
Ans: D
Explanation: Govt. of India is not providing great emphasis on development of infrastructure, which is a dominant factor for attracting tourists even though every state in India is having some attractive place for tourists.

Q7. Match List-1 with List-II and select the correct answer using below.

List I (Term)                List II (Explanation)
A. Fiscal deficit             1. Excess of total expenditures over total receipts.
B. Budget deficit           2. Excess of Revenue expenditures.
C. Revenue deficit        3. Excess of total expenditure over total receipts less borrowings.
D. Primary deficit          4. Excess of total expenditures over total receipts less borrowings and interest                                                         payments.
Codes: A    B     C     D
a) 3    1      2      4
b) 4    3      2      1
c) 1    3      2      4
d) 3    1      4      2
Ans: A

1. Fiscal Deficit = Budgetary deficient + Public borrowing and other liabilities
2. Budget Deficit = Total receipts – Total expenditure
3. Reserve deficit = Total revenue receipts – Total revenue expenditure
4. Primary Deficit = Excess of total expenditure over total receipts less borrowings and interest payment.

Q8. Match List-I with List-II and select the correct answer

List I                                                              List II
A. Disinvestment of share in public sector       1. Rajah Chelliah
B. Industrial sickness                                        2. Onkar Goswami
C. Tax Reforms                                                 3. R N Malhotra
D. Reforms in insurance sector                         4. C Rangrajan
Codes: A    B    C    D
a) 1    4     2     3
b) 4    2     1     3
c) 4    1     2     3
d) 1    3     4     2
Ans: B

Disinvestment of share – C. Rangrajan
Industrial Sickness – Onkar Goswami
Tax Reforms – Rajah Chelliah
Reforms in insurance sector – R N Malhotra

Q9. Which of the following constitute the World bank?

1. International Bank for reconstruction and development
2. International Monetary Fund
3. International Finance Corporation
4. International Development association
a) 1, 2, 3 b) 1 and 2 c) 1, 3 and 4 d) only 2
Ans: C
Explanation: The World Bank was established in 1945. It included the institution was established in 1945. It included the institution in international finance corporation (1956). International development Associate (1960), MIGA (1988) and ICSID (1966). It provides long term loan to the countries which have membership.

Q10. In the context of governance, consider the following:

1. Privatization of higher educational institutions       2. Encouraging FDI inflows
3. Down- sizing of Bureaucracy                                 4. Selling/off loading the shares of public sector
Which of the above can be used as measures to control the fiscal deficit in India?
a) 2, 3, 4            b) 3 and 4            c) 1, 2 and 3            d) All of these
Ans: B
Explanation: Downsizing of bureaucracy and selling the shares of public sector will reduce the fiscal deficit. Privatization of higher education institution can ameliorate the situation; however its effect will be negligible. Without knowing the destination of FDI inflows. We cannot determine the actual effect of its on fiscal deficit.


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