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UPSC IAS Prelims 2021: Important Questions on Economics - Topic 2 (Economic Growth & National Income)

Sakshi Saroha

National Income is the total amount of goods and services produced within the nation during the given period. It is one of the most important topics of Economics and UPSC aspirants must prepare it well. Every year many questions from different topics of the economy are asked in the Prelims exam. Hence, a clear understanding of each topic is required to solve such questions. To help the aspirants in their preparation, we have provided the 10 most important questions from the Composition Structure of Indian Economy topic of Economics for UPSC Prelims 2021.

Also Check: Important Topics to study from Economics Syllabus

Ques 1: Which of the following measures will spur economic growth?

  1. Transparent and hassle-free land acquiring.
  2. Availability of Skilled labour.
  3. The decrease in effective demand.

Select the correct answer using the code given below:

(a) 1 and 2 only 

(b) 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Ans: a

Explanation: 

 If end users are seeing lesser money in hand than earlier, demand will certainly be impacted.

Therefore, in an environment where the other factors of production are not favorable for an investor, low-interest rates by themselves may not prove attractive enough.

Ques 2: Choose the false statement among the following statements:

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(a)   Consumer Price Index (CPI) is the index of prices of a given basket of commodities which are bought by the representative consumer.

(b)   The weights of representative goods are constant in GDP Deflator– but they differ according to the production level of each good in CPI.

 (c)The index for wholesale prices is called the Wholesale Price Index (WPI), in the USA it is referred to as Producer Price Index (PPI).

(d) 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.

Ans: b

Explanation: 

In GDP deflator, the ‘basket’ in each year is the set of all goods that were produced domestically, weighted by the market value of the total consumption of each good.

Ques 3: Consider the following statements regarding India’s GDP data:

  1. The National Statistical Office (NSO) is mandated to prepare national accounts as well as publish biannual estimates of the national product.
  2. India’s economy for the first time in the last decade saw a negative quarterly growth rate in (April-June) Q1 of 2020-21.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ans: b

Explanation: 

NSO, among other its functions, prepares national accounts as well as publishes annual estimates of national product, government and private consumption expenditure, capital formation, savings, estimates of capital stock and consumption of fixed capital, as also the state level gross capital formation of supra-regional sectors and prepares comparable estimates of State Domestic Product (SDP) at current prices.

India’s economy contracted by a historic 23.9% in the June quarter, marking the sharpest drop in the country’s growth numbers in more than 40 years. Data released by the National Statistical Office recently shows that manufacturing, construction and trade sectors experienced massive contraction at 39.3%, 50.3%, 47%, respectively.

Ques 4: Consider the following statements:

  1. The Gross Value Added (GVA) of fisheries sector forms more than one-third share of Agricultural GVA.
  2. The Pradhan Mantri Matsya Sampada Yojana is a completely Central Sector Scheme.

Which of the statements given above is/are correct?

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ans: d

Explanation: 

The Gross Value Added (GVA) of fisheries sector in the national economy during 2018-19 stood at Rs 2,12,915 crores (current basic prices) which constituted 1.24% of the total National GVA and 7.28% share of Agricultural GVA.

The PMMSY is an umbrella scheme with two separate Components namely (a) Central Sector Scheme (CS) and (b) Centrally Sponsored Scheme (CSS). 

Ques 5: Consider the following statements:

  1. GNP = GDP + Net factor income from abroad
  2. Net National Product at factor cost is “National Income”
  3. National Disposable Income=Net National product at market prices + other current transfers from the rest of the world.

Which of the statements given above is/are correct?

  (a) 1 and 2 only

  (b) 2 and 3only

  (c) 1, 2 and 3

 (d) 1 and 3 only

Ans: c

Explanation: 

Gross national product (GNP) is an estimate of total value of all the final products and services turned out in a given period by the means of production owned by a country's residents. 

Net National Product at factor cost is also called as national income. Net National Product at factor cost is equal to sum total of value added at factor cost or net domestic product at factor cost and net factor income from abroad.

Ques 6: Consider the following statements:

  1. Real GDP measures an economy’s total goods and services in a given year, taking into account changes in price levels.
  2. Real GDP can never be more than the nominal GDP.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ans: a

Explanation: 

 Nominal GDP can be less than real GDP if prices in the current year are less than the prices in the base year.

Ques 7: The net value of GDP after deducting depreciation from GDP is

(a). Net national product

(b). Net domestic product

(c). Gross national product

(d). Disposable income

Ans: b

Explanation: 

After deducting the depreciation charges of plant and machinery from GDP, we get net value of GDP which is called NDP.

Ques 8: The value of NNP at the production point is called

(a) NNP at factor cost

(b). NNP at market price

(c). GNP at market price

(d). GNP at factor cost

Ans: b

Explanation: 

NNP at factor cost is the value of the NNP when the value of goods and services are taken at the production point.

Ques 9: Consider the following statements and identify the right ones.

  1.  While calculating GNP, income generated by foreigners in a country is taken into consideration
  2. While calculating GNP, income generated by nationals of a country outside the country is taken into account

Which of the following statements is/are not correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ans: a

Explanation: 

While calculating GNP, income generated by foreigners in a country is not taken into consideration.

Ques 10: When depreciation is deducted from GNP, the net value is

(a). Net national product

(b). Net domestic product

(c). Gross national product

(d). Disposable income

Ans: a

Explanation: 

NNP is the net value of GNP after the depreciation of plant and machinery is deducted. NNP at market price is calculated by deducting indirect taxes and subsidies from NNP at factor cost. NNP at factor cost is the value of the NNP when the value of goods and services are taken at the production point.

We sincerely hope that the given questions would have helped you in your Prelims preparation. You can also check the below link to keep yourself updated on the latest GK quiz and events. 

GK Quiz on Daily Static and Current Events

 
 

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