Exercise : Economy - General Questions
✔ Economy -
General Questions
11.
GDP (Gross Domestic Product) measures the value of:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: GDP is a primary indicator of a country's economic health.
Step 2: It calculates the total market value of all final goods and services produced within a country's geographical borders during a specific time period.
Step 3: It excludes intermediate goods (to avoid double counting) and focuses on where the production happens, regardless of the nationality of the producer.
Step 2: It calculates the total market value of all final goods and services produced within a country's geographical borders during a specific time period.
Step 3: It excludes intermediate goods (to avoid double counting) and focuses on where the production happens, regardless of the nationality of the producer.
12.
The difference between GNP and GDP is:
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: GDP measures production within borders. GNP (Gross National Product) measures production by a country's permanent residents.
Step 2: To move from GDP to GNP, we must add income earned by domestic residents from abroad and subtract income earned by foreign residents within the country.
Step 3: This adjustment factor is known as Net Factor Income from Abroad (NFIA). The formula is \(GNP = GDP + NFIA\).
Step 2: To move from GDP to GNP, we must add income earned by domestic residents from abroad and subtract income earned by foreign residents within the country.
Step 3: This adjustment factor is known as Net Factor Income from Abroad (NFIA). The formula is \(GNP = GDP + NFIA\).
13.
"Real GDP" is adjusted for:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: Nominal GDP measures output using current market prices, which can be inflated by rising prices.
Step 2: Real GDP is calculated using the prices of a constant 'base year'.
Step 3: By using constant prices, Real GDP removes the effects of inflation, providing a more accurate measure of the actual physical volume of production.
Step 2: Real GDP is calculated using the prices of a constant 'base year'.
Step 3: By using constant prices, Real GDP removes the effects of inflation, providing a more accurate measure of the actual physical volume of production.
14.
Stagflation is a situation characterized by:
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: Normally, inflation and unemployment have an inverse relationship (as seen in the Phillips Curve).
Step 2: Stagflation is an abnormal economic condition where 'Stagnation' (low growth and high unemployment) occurs simultaneously with 'Inflation' (rising prices).
Step 3: This is often caused by supply-side shocks, such as a sudden spike in oil prices.
Step 2: Stagflation is an abnormal economic condition where 'Stagnation' (low growth and high unemployment) occurs simultaneously with 'Inflation' (rising prices).
Step 3: This is often caused by supply-side shocks, such as a sudden spike in oil prices.
15.
The "Phillips Curve" describes the relationship between:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: Developed by A.W. Phillips, this curve illustrates a historical inverse relationship in the short run.
Step 2: It suggests that as the unemployment rate decreases, the rate of inflation tends to increase.
Step 3: This implies a trade-off for policymakers between controlling inflation and reducing unemployment.
Step 2: It suggests that as the unemployment rate decreases, the rate of inflation tends to increase.
Step 3: This implies a trade-off for policymakers between controlling inflation and reducing unemployment.
16.
Which of the following is an example of "Transfer Payments"?
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: Transfer payments are government expenditures that do not result in the production of any current goods or services.
Step 2: They are essentially a redistribution of income from the government to individuals.
Step 3: Examples include old-age pensions, unemployment benefits, and scholarships, where the recipient provides nothing in return to the government.
Step 2: They are essentially a redistribution of income from the government to individuals.
Step 3: Examples include old-age pensions, unemployment benefits, and scholarships, where the recipient provides nothing in return to the government.
17.
"Laissez-faire" economics promotes:
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: 'Laissez-faire' is a French term meaning 'let it be' or 'leave it alone'.
Step 2: In economics, it refers to a policy of minimal government interference in the economic affairs of individuals and society.
Step 3: It relies on the 'invisible hand' of the market to allocate resources efficiently through the forces of supply and demand.
Step 2: In economics, it refers to a policy of minimal government interference in the economic affairs of individuals and society.
Step 3: It relies on the 'invisible hand' of the market to allocate resources efficiently through the forces of supply and demand.
18.
The "Multiplier Effect" in Macroeconomics refers to:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: The multiplier effect describes how an initial change in spending (like investment) leads to a larger final change in national income.
Step 2: When the government or a firm invests money, that money becomes income for others, who then spend a portion of it, creating further income.
Step 3: The size of the multiplier depends on the Marginal Propensity to Consume (MPC). The formula is \(k = \frac{1}{1 - MPC}\).
Step 2: When the government or a firm invests money, that money becomes income for others, who then spend a portion of it, creating further income.
Step 3: The size of the multiplier depends on the Marginal Propensity to Consume (MPC). The formula is \(k = \frac{1}{1 - MPC}\).
19.
"Base Year" for the current series of National Income in India is:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: To calculate Real GDP, a reference year (base year) is required to provide constant prices.
Step 2: The Central Statistics Office (CSO) periodically updates this base year to reflect changes in the structure of the economy.
Step 3: In 2015, the base year for India's national accounts was revised from 2004-05 to 2011-12, which remains the current benchmark.
Step 2: The Central Statistics Office (CSO) periodically updates this base year to reflect changes in the structure of the economy.
Step 3: In 2015, the base year for India's national accounts was revised from 2004-05 to 2011-12, which remains the current benchmark.
20.
What is "Hyperinflation"?
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: Inflation is a general increase in prices. Hyperinflation is an extreme and rapid form of inflation.
Step 2: It is usually defined as a monthly inflation rate exceeding 50%.
Step 3: It often occurs during wars or economic mismanagement when a government prints excessive amounts of money, leading to a loss of confidence in the currency.
Step 2: It is usually defined as a monthly inflation rate exceeding 50%.
Step 3: It often occurs during wars or economic mismanagement when a government prints excessive amounts of money, leading to a loss of confidence in the currency.