Daily Static MCQs for UPSC & State PSC Exams - Economy (02 november 2023)

   

Daily Static MCQs Quiz for UPSC, IAS, UPPSC/UPPCS, MPPSC. BPSC, RPSC & All State PSC Exams

Subject : Economy

1. With reference to Union Budget, which of the following is/are covered under Capital receipts?

1. Disinvestment
2. Revenue from Income tax
3. Funds from Public Provident Fund
4. Interest and dividend on government investment

How many of the above options is/are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (B)

Explanation: Government receipts which either (i) create liabilities (e.g. borrowing) or (ii) reduce assets (e.g. disinvestment) are called capital receipts. Thus when govt. raises funds either by incurring a liability or by disposing off its assets, it is called a capital receipt. Two examples of Capital Receipts which create liability are Borrowing and raising of funds from Public Provident Fund and Small savings deposits.
Two examples of Capital Receipts which reduce assets are Disinvestment and Recovery of Loans. Disinvestment by government means selling a part or whole of its shares of public sector undertakings. Funds raised from disinvestment reduce government assets. Hence, option 1 and 3 are correct.

2. Gross Domestic Capital Formation (GDCF), often seen in the Budget and Economic Surveys, essentially refers to:

(a) Money circulation in public hands
(b) Capitalization of the Banking sector
(c) Direct Retail Investment in consumer goods sector
(d) Creation of Infrastructure or durable economic assets

Answer: (D)

Explanation: Capital formation means creation of physical assets and non- physical capital consisting of public health efficiency, visible and no visible capital. Gross domestic capital formation is the addition to the capital stock within the domestic territory of a country during a year. Gross domestic capital formation includes all expenses made by household, business people and Govt, adding new durable goods to the fixed capital stock of a country. These assets are in the form of infrastructure such as buildings, roads canals, bridges, means of transport, machinery and other equipments. Hence, option (d) is correct.

3. Consider the following statements regarding difference between Consumer Price Index (CPI) and GDP deflator:

1. GDP deflator include prices of imported goods but they are not included in CPI.
2. While CPI is released by Central Statistics Office (CSO), the data on GDP deflator is released by Labour Bureau.
3. The weights are constant in CPI, but they differ according to production level of each good in GDP deflator.

How many of the above options is/are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (A)

Explanation: CPI may differ from GDP deflator because:
1. The goods purchased by consumers do not represent all the goods which are produced in a country. GDP deflator takes into account all such goods and services.
2. CPI includes prices of goods consumed by the representative consumer; hence it includes prices of imported goods. GDP deflator does not include prices of imported goods.
3. The weights are constant in CPI – but they differ according to production level of each good in GDP deflator. Ministry of Statistics and Programme Implementation (MOSPI) comes out with GDP deflator in National Accounts Statistics as price indices. Hence, only statement 3 is correct.

4. Consider the following statements:

1. Minimum Support Price (MSP) may be both lower or higher than the prevailing market price of the particular crop.
2. All food grain procurement operations in India are undertaken by the Food Corporation of India (FCI).

Which of the above statements is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (A)

Explanation: MSP can be anything that the government considers that the farmers should fairly get. This is to help them get fair remuneration for their produce and to motivate or demotivate them to produce a particular crop. Hence it can be either lower or higher than the market price. For e.g. if the government wishes to discourage rice farming, it would lower the MSP of rice. The procurement system decentralization was started in 1997 where states play a very important role in the supply chain. Not all procurements are done by FCI. State cooperative agencies and other state-level distribution agencies also play a crucial role. Hence, statement 1 is correct.

5.The Agricultural Market Information System (AMIS) is an inter-agency platform to enhance food market transparency and encourage international policy coordination in times of crisis, was setup by:

(a) World Bank
(b) Organisation for Economic Cooperation and Development (OECD)
(c) G20 members
(d) World Trade Organization (WTO)

Answer: (C)

Explanation: The Agricultural Market Information System (AMIS) is an inter-agency platform to enhance food market transparency and policy response for food security. It was launched in 2011 by the G20 Ministers of Agriculture following the global food price hikes in 2007/08 and 2010. Bringing together the principal trading countries of agricultural commodities, AMIS assesses global food supplies (focusing on wheat, maize, rice and soybeans) and provides a platform to coordinate policy action in times of market uncertainty. Hence, option (c) is correct.