# Static Quiz, March 17

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``` 17 March 2022 Time limit: 0 Quiz-summary 0 of 10 questions completed Questions: 1 2 3 4 5 6 7 8 9 10 Information 17 March 2022 Static Quiz for UPSC Prelims You have already completed the quiz before. Hence you can not start it again. Quiz is loading... You must sign in or sign up to start the quiz. You have to finish following quiz, to start this quiz: Results 0 of 10 questions answered correctly Your time: Time has elapsed You have reached 0 of 0 points, (0) Average score     Your score     Your result has been entered into leaderboard Loading Name: E-Mail: Captcha: 1 2 3 4 5 6 7 8 9 10 Answered Review Question 1 of 10 1. Question 2 points Which among the following accounts/account for the lowest share in? India’s Gross Domestic Product (GDP)? Private Final Consumption Expenditure (PFCE) Government Final Consumption Expenditure (GFCE) Investment Net exports Correct Answer: (d) Explanation: According to the   xpenditure Method ‘, GDP (Gross Domestic Product) is calculated   as C+G+I+ (X-M), where C denotes ̳Private Final Consumption Expenditure (PFCE); G denotes Government Final Consumption Expenditure (GFCE); I denote investment; X denotes exports; and M denotes imports. The PFCE, accounting for around 60% of India’s GDP, is the major driver. The net exports (exports- imports), accounting for around -3% of India’s GDP, has the lowest share. Incorrect Answer: (d) Explanation: According to the   xpenditure Method ‘, GDP (Gross Domestic Product) is calculated   as C+G+I+ (X-M), where C denotes ̳Private Final Consumption Expenditure (PFCE); G denotes Government Final Consumption Expenditure (GFCE); I denote investment; X denotes exports; and M denotes imports. The PFCE, accounting for around 60% of India’s GDP, is the major driver. The net exports (exports- imports), accounting for around -3% of India’s GDP, has the lowest share. Question 2 of 10 2. Question 2 points With reference to the GDP estimation in India, consider the following statements: The GDP is estimated at the Market Prices, instead of the Factor The base year for the calculation of the GDP is 2011-12. The GDP is estimated by the National Statistical Office (NSO). Which of the statements given above are correct? 1 and 2 only 1 and 3 only 2 and 3 only 1, 2 and 3 Correct Answer: (d) Explanation: The Gross Domestic Product (GDP) refers to the market value of all final goods and services produced within an economy. Recent changes in the GDP estimation (2015): Change in the base year from 2004-05 to 2011-12. Usually, the base years are revised at a frequency of 7-10 years by taking into account the changing economic landscape of the country. Change in the GDP estimation from the GDP at the Factor Cost to GDP at the Market Prices. Change in the database for capturing economic activity from RBI’s database to the MCA-21 database of the Ministry of Corporate Affairs. This database is basically used for two purposes: Estimate the production of goods and services in the organized sector, based upon the tax Extrapolate the production of goods and services in the unorganized sector, based upon the organized sector activity. The GDP is estimated by the National Statistical Office (NSO). Incorrect Answer: (d) Explanation: The Gross Domestic Product (GDP) refers to the market value of all final goods and services produced within an economy. Recent changes in the GDP estimation (2015): Change in the base year from 2004-05 to 2011-12. Usually, the base years are revised at a frequency of 7-10 years by taking into account the changing economic landscape of the country. Change in the GDP estimation from the GDP at the Factor Cost to GDP at the Market Prices. Change in the database for capturing economic activity from RBI’s database to the MCA-21 database of the Ministry of Corporate Affairs. This database is basically used for two purposes: Estimate the production of goods and services in the organized sector, based upon the tax Extrapolate the production of goods and services in the unorganized sector, based upon the organized sector activity. The GDP is estimated by the National Statistical Office (NSO). Question 3 of 10 3. Question 2 points Which among the following countries has introduced the concept of Gross National Happiness (GNH) to measure its socioeconomic progress? (Nepal Bhutan Sri Lanka Norway Correct Answer: (b) Explanation: The phrase G   ross National Happiness‘ (GNH) was first coined by the 4th king of   Bhutan, King Jigme Singye Wangchuck, in 1972, when he declared, ―Gross National Happiness is more important than Gross Domestic Product.‖ The concept implies that sustainable development should take a holistic approach towards the notions of progress and give equal importance to non- economic aspects of well- being. The GNH Index includes both traditional areas of socio-economic concern, such as living standards, health and education, and less traditional aspects of culture and psychological well-being. Incorrect Answer: (b) Explanation: The phrase G   ross National Happiness‘ (GNH) was first coined by the 4th king of   Bhutan, King Jigme Singye Wangchuck, in 1972, when he declared, ―Gross National Happiness is more important than Gross Domestic Product.‖ The concept implies that sustainable development should take a holistic approach towards the notions of progress and give equal importance to non- economic aspects of well- being. The GNH Index includes both traditional areas of socio-economic concern, such as living standards, health and education, and less traditional aspects of culture and psychological well-being. Question 4 of 10 4. Question 2 points Goods ‘X’ and ‘Y’ are considered to be ‘Complementary Goods’. If the price of goods ‘X’ increases, then what would happen to the demand for goods ‘Y’? Increase in demand Decrease in demand Demand for goods 'Y' would remain unaffected None of the above. Correct   Answer: (b) Explanation: Complementary goods are those goods which are used together in satisfying a particular want. Examples of complementary goods are car and petrol, ball pen and refill, etc. If the price of one of them increases, the demand for the other goods will decrease and if the price of one of them falls, the demand for the other will increase. Incorrect   Answer: (b) Explanation: Complementary goods are those goods which are used together in satisfying a particular want. Examples of complementary goods are car and petrol, ball pen and refill, etc. If the price of one of them increases, the demand for the other goods will decrease and if the price of one of them falls, the demand for the other will increase. Question 5 of 10 5. Question 2 points The Lorenz Curve shows the relationship between Inflation and Unemployment Tax rate and Tax collection Percentage of total income earned by cumulative percentage of the population Tax rate and GDP growth Correct Answer: (c) Explanation: The Lorenz Curve shows the percentage of total income earned by cumulative percentage of the population. In a perfectly equal society, 10% of the population would earn 10% of the cumulative income. Similarly, 25% of the population would earn 25% of the cumulative income. Hence, as shown in the figure, in a perfectly equal society, the line inclined at 45° is called the “Line of Perfect Equality”. As inequality increases, the Lorenz Curve deviates from the Line of Equality and shows that the income gets concentrated in a few sections of the society. Incorrect Answer: (c) Explanation: The Lorenz Curve shows the percentage of total income earned by cumulative percentage of the population. In a perfectly equal society, 10% of the population would earn 10% of the cumulative income. Similarly, 25% of the population would earn 25% of the cumulative income. Hence, as shown in the figure, in a perfectly equal society, the line inclined at 45° is called the “Line of Perfect Equality”. As inequality increases, the Lorenz Curve deviates from the Line of Equality and shows that the income gets concentrated in a few sections of the society. Question 6 of 10 6. Question 2 points 6) Which among the following factors is/are likely to affect the demand for the goods in an economy? 1. Prices of the goods 2. Prices of the related goods 3. Income level of the buyer Select the correct answer using the code given below: 1 only 1 and 2 only 1 and 3 only 1, 2 and 3 Correct Answer: (d) Explanation: The demand for goods is defined as the quantity of the good purchased at a given price at a given time. Individual demand refers to the quantity of a commodity that an individual buyer is willing to buy at a given price per unit of time. Hence, the demand is dependent on a number of factors, such as: (i) Price of the commodity; (ii) Price of the related goods; (iii) Income of the buyer; and (iv) Tastes and preferences of the buyer. Incorrect Answer: (d) Explanation: The demand for goods is defined as the quantity of the good purchased at a given price at a given time. Individual demand refers to the quantity of a commodity that an individual buyer is willing to buy at a given price per unit of time. Hence, the demand is dependent on a number of factors, such as: (i) Price of the commodity; (ii) Price of the related goods; (iii) Income of the buyer; and (iv) Tastes and preferences of the buyer. Question 7 of 10 7. Question 2 points Which one of the following is the correct definition of “unemployment rate” in an economy? Number of people who are not working divided by the population Number of people who are not working divided by the total number of people who are working or looking for jobs Number of people who are not working and are looking for jobs divided by the population Number of people who are not working and are looking for jobs divided by the total number of people who are working or looking for jobs Correct Answer: D Explanation: The unemployment rate is defined as the number of unemployed people as percent of the labor force. The labor force includes the people who are either employed or unemployed, i.e. who don’t have a job but are actively looking for one. So, option (d) is correct Incorrect Answer: D Explanation: The unemployment rate is defined as the number of unemployed people as percent of the labor force. The labor force includes the people who are either employed or unemployed, i.e. who don’t have a job but are actively looking for one. So, option (d) is correct Question 8 of 10 8. Question 2 points The term “Helicopter money” sometimes seen in the news recently, it means The amount of money invested aggressively to make use of derivatives and leverage to generate higher returns The large sums of money printed and distributed to the public by the central bank The capital that investors regularly move between economies and financial markets to profit from the highest short-term interest rates The amount of money absorbed by the central bank by issuing government securities Correct Answer: B Explanation: Helicopter money is the term used for a large sum of new money that is printed and distributed among the public by the central bank to stimulate the economy during a recession or when interest rates fall to zero. It is also referred to as a helicopter drop, in reference to a helicopter scattering supplies from the sky. So, option (b) is correct Incorrect Answer: B Explanation: Helicopter money is the term used for a large sum of new money that is printed and distributed among the public by the central bank to stimulate the economy during a recession or when interest rates fall to zero. It is also referred to as a helicopter drop, in reference to a helicopter scattering supplies from the sky. So, option (b) is correct Question 9 of 10 9. Question 2 points 9) Which of the following are included as “capital expenditure”? 1. Loans raised by the union government from the public. 2. Investment by the union government in shares. 3. Loans and advances by the union government to state governments. Select the correct answer using the code given below. 1 and 2 only 2 and 3 only 1 and 3 only 1, 2 and 3 Correct Answer: B Explanation: The capital expenditures are expenditures of the government which result in creation of physical or financial assets or reduction in financial liabilities. This includes expenditure on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to state and union territory governments, PSUs and other parties. So, statement 2 and 3 are correct. The capital receipts are loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies, and recoveries of loans from State and Union Territory Governments and other parties. So, statement 1 is not correct. Incorrect Answer: B Explanation: The capital expenditures are expenditures of the government which result in creation of physical or financial assets or reduction in financial liabilities. This includes expenditure on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to state and union territory governments, PSUs and other parties. So, statement 2 and 3 are correct. The capital receipts are loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies, and recoveries of loans from State and Union Territory Governments and other parties. So, statement 1 is not correct. Question 10 of 10 10. Question 2 points Consider the following statements about the “Open Market Operations”: 1. It is an instrument of monetary policy under which only purchase of government Treasury Bills and bonds takes place. 2. It is used as a means of controlling the money supply. Which of the statements given above is/are correct? 1 only 2 only Both 1 and 2 Neither 1 nor 2 Correct Answer: B Explanation: Open Market Operations are market operations conducted by central banks by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. The government securities in India include Treasury Bills (T-bills), Cash Management Bills (CMBs), dated G-Secs, and State Development Loans (SDLs). So, statement 1 is not correct. The objective of Open Market Operations is to regulate the money supply in the economy. When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system. So, statement 2 is correct. Incorrect Answer: B Explanation: Open Market Operations are market operations conducted by central banks by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. The government securities in India include Treasury Bills (T-bills), Cash Management Bills (CMBs), dated G-Secs, and State Development Loans (SDLs). So, statement 1 is not correct. The objective of Open Market Operations is to regulate the money supply in the economy. When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system. So, statement 2 is correct. ```
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