Indian Economy- Part 6

Indian Economy

1. Which economic theory suggests that individuals base their consumption decisions on their current income rather than their lifetime income?

a) Permanent Income Hypothesis b) Life Cycle Hypothesis c) Relative Income Hypothesis d) Keynesian Consumption Function

d) The Keynesian Consumption Function suggests that current consumption is primarily driven by current disposable income, implying that people spend a fixed proportion of their income regardless of future expectations.

2. In which year was the Goods and Services Tax (GST) introduced in India?

a) 2014 b) 2015 c) 2016 d) 2017

d) The Goods and Services Tax (GST) was introduced in India on July 1, 2017, as a unified indirect tax to replace multiple taxes levied by the central and state governments.

3. Which of the following is a characteristic feature of 'Perfect Competition'?

a) A single firm controls the market b) Firms have significant control over pricing c) Free entry and exit of firms in the market d) Differentiated products

c) In a perfectly competitive market, there are many firms, none of which has significant market power, products are homogeneous, and there is free entry and exit of firms, which keeps prices stable and close to the cost of production.

4. In the context of international trade, what does the 'Heckscher-Ohlin Theorem' state?

a) Countries export goods that require resources in which they are relatively well endowed b) All countries benefit equally from trade regardless of their resources c) Trade policies should aim to maximize government revenue d) Protectionism is essential for developing economies to grow

a) The Heckscher-Ohlin Theorem states that a country will export goods that utilize its abundant resources more intensively and import goods that utilize its scarce resources.

5. What does the term 'Capital Account Convertibility' refer to?

a) The ability of a country to borrow and lend freely in international markets b) The ease with which a country's currency can be converted into foreign exchange for trade c) The freedom to conduct financial transactions involving cross-border movement of capital d) The ability to control inflation through currency exchange rates

c) Capital Account Convertibility refers to the freedom to convert local financial assets into foreign financial assets and vice versa at market-determined exchange rates, allowing for free movement of capital across borders.

6.What is the significance of the 'Lorenz Curve' in economics?

a) It shows the trade-offs between inflation and unemployment b) It represents the distribution of income or wealth within an economy c) It illustrates the relationship between savings and investment d) It indicates the level of government intervention in an economy

b) The Lorenz Curve is a graphical representation of income or wealth distribution in a society. It shows the proportion of total income earned by cumulative percentages of the population, with a perfectly equal distribution represented by a 45-degree line.

7. Which of the following measures is primarily used to assess a country’s standard of living and overall economic health?

a) Consumer Price Index (CPI) b) Gross Domestic Product (GDP) per capita c) Balance of Payments (BOP) d) Human Development Index (HDI)

b) GDP per capita measures the average economic output per person, which is often used to assess a country's standard of living. It provides a more accurate representation of the economic well-being of a country’s residents than GDP alone.

8. What is the primary objective of the Reserve Bank of India’s ‘Operation Twist’?

a) To control inflation through direct market interventions b) To simultaneously buy long-term government bonds and sell short-term bonds to flatten the yield curve c) To strengthen the rupee against the dollar d) To provide liquidity to the banking sector through targeted lending

b) ‘Operation Twist’ is a monetary policy strategy used by central banks, including the RBI, to buy long-term government securities and sell short-term ones. This aims to reduce long-term interest rates, flatten the yield curve, and stimulate economic growth without changing short-term interest rates.

9. What does the term 'Revealed Preference Theory' suggest in consumer behavior?

a) Consumers prefer to buy goods that maximize utility regardless of price b) Consumers' preferences can be understood by observing their purchasing decisions under varying budget constraints c) Consumers will always buy the cheapest available option d) Consumers make decisions based purely on future expectations

b) Revealed Preference Theory, developed by economist Paul Samuelson, suggests that the best way to understand consumer preferences is by observing their choices and spending habits under different budget constraints. This approach assumes that the choices made reflect the true preferences of consumers.

10. What was the primary goal of the 'Green Revolution' in India?

a) To increase the production of cash crops like cotton and sugarcane b) To boost agricultural productivity through the use of high-yielding variety seeds and modern farming techniques c) To promote sustainable farming practices and organic agriculture d) To reduce the agricultural sector's dependence on monsoon rains

b) The Green Revolution in India aimed to increase agricultural productivity, particularly of staple crops like wheat and rice, through the introduction of high-yielding variety (HYV) seeds, chemical fertilizers, pesticides, and improved irrigation methods. This movement significantly increased food grain production in the country.

If any answer found wrong, Please comment.

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