Which of the following would not constitute an economic activity in Economics ?
(a) A teacher teaching students in his college
(b) A teacher teaching students in a coaching institute
(c) A teacher teaching his own daughter at home
(d) A teacher teaching students under Sarva Shiksha Abbiyan Scheme
Solution: (c)
Economic activity, is quite simply, the activity of the economy. It includes the growth and shrinkage of the economy and all factors that affect this (for example Aggregate Expenditure). It is commonly measured by the GDP (Gross Domestic Product) which is probably one of the most reliable economic indicators. A teacher teaching his daughter at home is the example of a non-economic activity.
Which one of the following is not included while estimating national income through income method?
(a) Rent
(b) Pension
(c) Mixed incomes
(d) Undistributed profits
Solution: (b)
The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation. Transfer incomes are excluded from national income. Therefore, wages of labourers will be included, pensions of retired workers will be excluded from national income. Labour income includes, compensations in kind. Non-labour income includes dividends, un distributed profits of corporations before taxes, interest, rent, royalties, profits of non-incorporated enterprises and of government enterprises.
The incomes of Indians working abroad are a part of
(a) domestic income of India
(b) income earned from Abroad
(c) net domestic product of India
(d) gross domestic product of India
Solution: (c)
Domestic Product is the ross money value of all final goods and services produced in the domestic territory of a country during a year. National Product is the gross money value of all final goods and services produced by the normal residents of a country during a year. It includes net factor income from abroad.
Which one of the following is not a method for computing GNP ?
(a) Income Approach
(b) Expenditure Approach
(c) Savings Approach
(d) Value Added Approach
Solution: (a)
Gross National Product (GNP) can be defined as an economic statistic which includes Gross Domestic Product, plus any income earned by the residents from investments made overseas. Net factor income from abroad = income earned in foreign countries by the residents of a country – income earned by nonresidents in that country.
Preparation of butter, ghee by a household for their own use is a part of :
(a) own-account production
(b) household capital formation
(c) industrial production
(d) consumption
Solution: (d)
The processing of agricultural products; the production of grain by threshing; the production of flour by milling; the curing of skins and the production of leather; the production and preservation of meat and fish products; the preservation of fruit by drying, bottling, etc.; the production of dairy products such as butter or cheese; the production of beer, wine or spirits; the production of baskets and mats; etc, come under processing of primary commodities for own consumption.
According to Keynes, business cycles are due to variation in the rate of investment caused by fluctuations, in the
(a) Marginal efficiency of capital
(b) Marginal propensity to save
(c) Marginal propensity to consumption
(d) Marginal efficiency to investment
Solution: (a)
According to Keynes’ ‘General Theory of Employment, Interest and Money,’ business cycles are caused by variations in the rate of investment which are caused by fluctuations in the marginal efficiency of capital. Marginal efficiency of capital means the expected profits from new investments.
Regarding money supply situation in India it can be said that the :
(a) Currency with the public is inconvertible only.
(b) Currency with the public is less than the deposits with the banks.
(c) Currency with the public is more than the deposits with the banks.
(d) Currency with the public is almost equal to the deposits with banks.
Solution: (b)
Money supply in India includes the following: (i) Currency with the public; (ii) Demand deposits and time deposits with banks; (iii) Deposits with reserve Bank of India; and (iv) Deposits in Post Office. The currency with public is less than the total currency issued by RBI. This is because of cash reserves with banks, i.e., a part of currency issued remains with banks. As far as deposits are concerned, during the last four decades, the proportion of demand deposits, time deposits and other with banks in relation to total supply of money has been increasing with reciprocal diminution in currency held by the public. This is mainly due to the expansion of banking facilities in the country. Almost all the money in the economy exists as bank deposits – and banks create these deposits simply by making loans.
Internal economies
(a) arise when there is expansion in an industry.
(b) arise in an economy as it makes progress.
(c) accrue to a firm when it expands its output.
(d) arise when there is expansion in internal trade.
Solution: (a)
Internal economies are those economies in production—those reductions in production costs—which accrue to the firm itself when it expands its output or enlarges its scale of production. The internal economies arise within a firm as a result of its own expansion independent of the size and expansion of the industry as a whole.
In which of the following market forms, a firm does not exercise control over price?
(a) Monopoly
(b) Perfect competition
(c) Oligopoly
(d) Monopolistic competition
Solution: (b)
In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product. The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry. As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.
Malthusian theory is associated with which of the following ?
(a) Poverty
(b) Employment
(c) Diseases
(d) Population
Solution: (d)
The most well-known theory of population is the Malthusian theory. It explains the relationship between the growth in food supply and in population. It states that population increases faster than food supply and if unchecked leads to vice or misery. Thomas Robert Malthus enunciated his views about population in his famous book, Essay on the Principle of Population as it affects the Future Improvement of Society, published in 1798.
