Which one of the following items is not included in the current account of India’s Balance of Payments?
(a) Short-term commercial borrowings
(b) Non-monetary gold movements
(c) Investment income
(d) Transfer payments
Solution: (b)
Balance of payments (BoP) accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country’s exports and imports of goods, services, financial capital, and financial transfers. The two principal parts of the BOP accounts are the current account and the capital account. The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers. Some of the components of the current account of BOP include investment income; borrowing entities in respect of their external commercial borrowing; secondary income account (transfer payments); primary income account (factor income such as from loans and investments), etc.
A new capital issue is placed in
(a) Secondary market
(b) Grey market
(c) Primary market
(d) Black market
Solution: (c)
The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).
Capital formation in an economy depends on
(a) Total Income
(b) Total demand
(c) Total savings
(d) Total production
Solution: (c)
Capital formation refers to capital accumulation, referring to the total “stock of capital” that has been formed, or to the growth of this total capital stock. It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period. Total capital formation” in national accounting equals net fixed capital investment, plus the increase in the value of inventories held, plus (net) lending to foreign countries, during an accounting period (a year or a quarter). Capital is said to be “formed” when savings are utilized for investment purposes, often investment in production.
‘Golden Handshake Scheme’ is associated with
(a) inviting foreign companies
(b) private investment in public enterprises
(c) establishing joint enterprises
(d) voluntary retirement
Solution: (d)
The voluntary retirement scheme (VRS) is the most humane technique to provide overall reduction in the existing strength of the employees. It is a technique used by companies for trimming the workforce employed in the industrial unit. It is also known as ‘Golden Handshake’ as it is the golden route to retrenchment.
A mixed economy works primarily through the
(a) market mechanism
(b) central allocative machinery
(c) market mechanism regulated by Government policy
(d) market mechanism guided by Government participation and planning
Solution: (d)
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. The basic idea of the mixed economy is that the means of production are mainly under private ownership; that markets remain the dominant form of economic coordination; and that profit-seeking enterprises and the accumulation of capital remain the fundamental driving force behind economic activity. However, unlike a free-market economy, the government would wield considerable indirect influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism’s tendency toward financial crises and unemployment, along with playing a role in interventions that promote social welfare.
What is referred to as ‘Depository Services’?
(a) A new scheme of fixed deposits
(b) A method for regulating stock exchanges
(c) An agency for the safe-keeping of securities
(d) An advisory service to investors
Solution: (c)
It is a service offered by a securities depository under which the depository maintains book accounts recording the ownership of securities held on behalf of the depository’s participants, for eligible securities.
Which of the following is not viewed as national debt?
(a) Life Insurance Policies
(b) Long-term Government Bonds
(c) National Savings Certificates
(d) Provident Fund
Solution: (a)
Government debt (also known as public debt, national debt) is the debt owed by a central government. Government debt is one method of financing government operations, but it is not the only method. Governments can also create money to monetize their debts, thereby removing the need to pay interest. But this practice simply reduces government interest costs rather than truly canceling government debt. Governments usually borrow by issuing securities, government bonds and bills. Less creditworthy countries sometimes borrow directly from a supranational organization (e.g. the World Bank) or international financial institutions. Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against.
Who among the following has suggested tax on expenditure?
(a) Dalton
(b) Kaldor
(c) Musgrave
(d) Gautam Mathur
Solution: (b)
Nicholas Kaldor’s seminal work, titled ‘An Expenditure Tax,’ was brought out in 1955. Kaldor asked to levy a tax on a person’s expenditure (consumption), instead of on his income. When expenditure is made the basis of taxation, the problems created by the non-comparability of various types of accruals of wealth resolve themselves. This was his major argument in favour of an expenditure tax.
Interest on public debt is part of
(a) Transfer payments by the enterprises
(b) Transfer payments by the government
(c) National income
(d) Interest payments by households
Solution: (b)
In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output. Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses (firms). Government debt is the debt owed by a central government. In the budget, it is listed among the transfer payments by the government.
Evaluating all the options to find out most suitable solution to business problems is inter-displinary activities. It is called
(a) Professional research
(b) Management research
(c) Operational research
(d) Commercial research
Solution: (c)
Operational research is a discipline that deals with the application of advanced analytical methods to help make better decisions. Employing techniques from other mathematical sciences, such as mathematical modeling, statistical analysis, and mathematical optimization, operations research arrives at optimal or near-optimal solutions to complex decision-making problems. In a nutshell, operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions.
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