Solution: (b)
Consumption and income are directly or positively related. An increase in income is associated with an increase in income; a decrease in consumption accompanies a decrease in income.
The price mechanism is a feature of
(a) Capitalist economy
(b) Barter economy
(c) Mixed economy
(d) Socialist economy
Solution: (a)
Price mechanism is an economic term that refers to the manner in which the prices of commodities affect the demand and supply of goods and services. It is essentially a feature of market-driven or capitalist economic systems. It is based on the principle that only by allowing prices to move freely will the supply of any given commodity match demand.
A ‘Transfer Income’ is an
(a) Income that is not produced by any production process
(b) Income taken away from one person and given over to another
(c) Unearned income
(d) Earned income
Solution: (a)
Income which is not produced by any production process is called Transfer Income.
It is received as a transfer from government or other organizations, such as social security, unemployment benefits, and welfare payments.
Reflects the redistribution of wealth or resources within society, aimed at helping those who are in need or facing difficulties. It is typically not taxed, as it is considered as a form of social support or assistance. Typically used for immediate consumption or to cover basic needs or expenses.
Can be used to cover basic needs such as food, housing, and healthcare, or to pay off debts and other expenses.
Which one of the following is not a dimension of the human development index?
(a) Life expectancy
(b) Knowledge
(c) Social status
(d) Standard of living
Solution: (c)
Social Status is not a dimension of Human Development Index (HDI). The HDI is a statistical tool that measures a country’s development in three dimensions: life expectancy, education, and standard of living. The HDI was created to emphasize the importance of people and their capabilities over economic growth alone. It does not consider other important aspects of development, such as political rights, environmental sustainability, or cultural diversity. It also doesn’t account for non-income measures of well-being, like happiness.
The United Nations Development Programme (UNDP) created the HDI in 1990 and releases the Human Development Report (HDR) annually.
The economic progress of a country is determined by
(a) Increase in per capita income of people of the country
(b) Increase in the price of produced capital goods during the year
(c) Increased numbers of Trade Unions
(d) Fall in the general price level of a country
Solution: (a)
Economic progress of a country is determined by increase in per capita income of people of that country.
A camera in the hands of a professional photographer is a _______ good.
(a) Free
(b) Intermediary
(c) Consumer
(d) Capital
Solution: (b)
Good is any tangible item, whether produced or found naturally and which is available for exchange. Free good is a good that is so abundant is supply that it has no opportunity cost, for example, air. Intermediary good is a firm’s product that is used as an input into the production process of either the same firm or another.
The difference between GNP and NNP equals
(a) corporate profits
(b) personal taxes
(c) transfer payments
(d) depreciation
Solution: (d)
Gross National Product [GNP] is the gross value of all the final products without deducting the depreciation of fixed capital. Net National Product [NNP] is the value of net output in an economy during a period of one year. The difference between the GNP and NNP is equal to Capital depreciation.
Which of the following is not an investment expenditure in goods and services?
(a) Expansion of the main plant of a company
(b) Purchase of a house
(c) Purchase of machinery
(d) An increase in business inventories
Solution: (b)
Investment expenditure refers to the expenditure incurred either by an individual or a firm or the government for the creation of new capital assets like machinery, building etc. Business inventories are goods that firms produce in one time period with the intent to sell later and they are counted as part of business investment. The purchase of house cannot be considered as investment expenditure as it may be for personal use.
The incomes of Indians working abroad are 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 non-residents in that country.
