-by Pre Empower Oct 18 : Daily Quiz for Civil Services Prelims Examination
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Welcome to Pre Empower, your daily destination for mastering multiple-choice questions (MCQs) framed for Civil Services Examinations. Each day, we present a diverse set of carefully crafted MCQs to enhance your knowledge, boost your confidence, and prepare you for success in your civil services examinations of UPSC CSE and other State PCS like APSC, BPSC, UPPCS and others.
Questions have been designed as per the demands of examination that cover a wide range of topics, including General Studies, Current Affairs, and Aptitude for CSAT. With Pre Empower, you’ll not only test your understanding but also develop critical thinking skills essential for tackling the challenges of the Preliminary exam in the best possible manner.
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Question 1 of 5
1. Question
Which of the following statements is correct regarding the Gross Domestic Product (GDP) calculation in India?
(i) GDP at market prices includes both direct and indirect taxes but excludes subsidies.
(ii) GDP at factor cost excludes indirect taxes but includes subsidies.
(iii) GDP at constant prices adjusts for inflation while GDP at current prices does not.
(iv) GDP deflator is calculated by dividing GDP at current prices by GDP at constant prices and multiplying by 100.
Select the correct answer using the codes given below:Correct
Answer: Option (B) (ii), (iii), and (iv) only
Explanation:
GDP at market prices reflects the value of all final goods and services produced within a country at prevailing market prices. It includes indirect taxes (like GST) and subtracts subsidies provided by the government. So, statement (i) is incorrect because it claims that GDP at market prices excludes subsidies when it should be subtracting them.
GDP at factor cost, in contrast, reflects the cost of factors of production like labor and capital. It excludes indirect taxes (since they are not part of factor payments) and includes subsidies, as subsidies reduce the cost of production. Hence, statement (ii) is correct.
GDP at constant prices accounts for inflation by using prices from a base year, allowing us to measure real growth, whereas GDP at current prices uses prevailing prices, which include inflation effects. Therefore, statement (iii) is correct.
The GDP deflator is an index that measures the level of price inflation or deflation within an economy. It is calculated as:This makes statement (iv) correct.
Incorrect
Answer: Option (B) (ii), (iii), and (iv) only
Explanation:
GDP at market prices reflects the value of all final goods and services produced within a country at prevailing market prices. It includes indirect taxes (like GST) and subtracts subsidies provided by the government. So, statement (i) is incorrect because it claims that GDP at market prices excludes subsidies when it should be subtracting them.
GDP at factor cost, in contrast, reflects the cost of factors of production like labor and capital. It excludes indirect taxes (since they are not part of factor payments) and includes subsidies, as subsidies reduce the cost of production. Hence, statement (ii) is correct.
GDP at constant prices accounts for inflation by using prices from a base year, allowing us to measure real growth, whereas GDP at current prices uses prevailing prices, which include inflation effects. Therefore, statement (iii) is correct.
The GDP deflator is an index that measures the level of price inflation or deflation within an economy. It is calculated as:This makes statement (iv) correct.
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Question 2 of 5
2. Question
Consider the following statements regarding India’s economic planning:
(i) The Planning Commission was established in 1950 to promote a rapid rise in the standard of living through planned economic development.
(ii) The NITI Aayog replaced the Planning Commission in 2015, shifting from a top-down approach to a bottom-up approach.
(iii) The 12th Five-Year Plan (2012-17) aimed for a growth rate of 9%, but the actual achievement was much higher due to favorable global conditions.
(iv) The shift from the Planning Commission to NITI Aayog marked a move towards cooperative federalism.
Which of the statements given above is/are correct?Correct
Answer: Option (B) (i), (ii), and (iv) only
Explanation:
Statement (i) is correct. The Planning Commission, established in 1950, was responsible for formulating India’s Five-Year Plans. Its objective was to promote rapid and balanced economic development, and it played a significant role in India’s socialist-oriented economic policies until 2014.
Statement (ii) is also correct. The NITI Aayog (National Institution for Transforming India) was established in 2015, replacing the Planning Commission. NITI Aayog represents a shift from centralized planning (top-down) to a more participatory, decentralized approach (bottom-up), emphasizing cooperation with states for strategic policy formulation.
Statement (iii) is incorrect. The 12th Five-Year Plan (2012-17) targeted a growth rate of 8%, not 9%. However, India’s economy struggled to meet this goal due to several domestic challenges and global economic headwinds, resulting in an actual growth rate lower than the target.
Statement (iv) is correct. The NITI Aayog’s structure and functioning emphasize cooperative federalism, where both the central and state governments work together in policy formulation, unlike the Planning Commission’s more centralized approach.Incorrect
Answer: Option (B) (i), (ii), and (iv) only
Explanation:
Statement (i) is correct. The Planning Commission, established in 1950, was responsible for formulating India’s Five-Year Plans. Its objective was to promote rapid and balanced economic development, and it played a significant role in India’s socialist-oriented economic policies until 2014.
Statement (ii) is also correct. The NITI Aayog (National Institution for Transforming India) was established in 2015, replacing the Planning Commission. NITI Aayog represents a shift from centralized planning (top-down) to a more participatory, decentralized approach (bottom-up), emphasizing cooperation with states for strategic policy formulation.
Statement (iii) is incorrect. The 12th Five-Year Plan (2012-17) targeted a growth rate of 8%, not 9%. However, India’s economy struggled to meet this goal due to several domestic challenges and global economic headwinds, resulting in an actual growth rate lower than the target.
Statement (iv) is correct. The NITI Aayog’s structure and functioning emphasize cooperative federalism, where both the central and state governments work together in policy formulation, unlike the Planning Commission’s more centralized approach. -
Question 3 of 5
3. Question
Which of the following best describes ‘crowding out effect’ in the context of government expenditure?
(i) It refers to a situation where increased government borrowing reduces the funds available for private sector investment.
(ii) It indicates a scenario where government spending stimulates private sector investment and economic growth.
(iii) It occurs when the government’s high fiscal deficit leads to inflation, eroding the purchasing power of households.
(iv) It describes a condition where the private sector withdraws from investments due to excessive taxation and regulation.
Select the correct answer using the codes given below:Correct
Answer: Option (A) (i) only
Explanation:
Statement (i) is correct. The crowding out effect occurs when the government increases its borrowing to finance its deficit, leading to higher demand for funds in the financial market. This can push up interest rates, making borrowing more expensive for the private sector, thus reducing private investments. This typically happens when the government borrows extensively from the domestic market, leaving fewer resources for private players.
Statement (ii) describes the opposite phenomenon, often referred to as the crowding in effect, where government spending in areas like infrastructure or public goods leads to an increase in private investment. This is not the crowding out effect.
Statement (iii) relates to inflation, which is more of a consequence of high fiscal deficits, but it is not directly linked to the crowding out effect. The crowding out effect is about capital availability, not inflation.
Statement (iv) confuses the effect with government regulation. Excessive taxation and regulation can lead to reduced private sector investment, but this is not the crowding out effect.Incorrect
Answer: Option (A) (i) only
Explanation:
Statement (i) is correct. The crowding out effect occurs when the government increases its borrowing to finance its deficit, leading to higher demand for funds in the financial market. This can push up interest rates, making borrowing more expensive for the private sector, thus reducing private investments. This typically happens when the government borrows extensively from the domestic market, leaving fewer resources for private players.
Statement (ii) describes the opposite phenomenon, often referred to as the crowding in effect, where government spending in areas like infrastructure or public goods leads to an increase in private investment. This is not the crowding out effect.
Statement (iii) relates to inflation, which is more of a consequence of high fiscal deficits, but it is not directly linked to the crowding out effect. The crowding out effect is about capital availability, not inflation.
Statement (iv) confuses the effect with government regulation. Excessive taxation and regulation can lead to reduced private sector investment, but this is not the crowding out effect. -
Question 4 of 5
4. Question
Which of the following sectors is included in the calculation of India’s Gross Value Added (GVA) at basic prices?
(i) Agriculture, Forestry, and Fishing
(ii) Mining and Quarrying
(iii) Public Administration and Defense
(iv) Retail Trade and Manufacturing
Select the correct answer using the codes given below:Correct
Answer: Option (C) (i), (ii), (iii), and (iv)
Explanation:
Gross Value Added (GVA) is the measure of the value of goods and services produced in an economy. It is calculated by subtracting the cost of intermediate goods from the total output. GVA at basic prices accounts for the value added by each sector of the economy before taxes and subsidies are added.
The sectors listed in the question—Agriculture, Forestry, and Fishing (i), Mining and Quarrying (ii), Public Administration and Defense (iii), and Retail Trade and Manufacturing (iv)—are all part of the GVA calculation. GVA is used to measure the contribution of each sector to the economy.Incorrect
Answer: Option (C) (i), (ii), (iii), and (iv)
Explanation:
Gross Value Added (GVA) is the measure of the value of goods and services produced in an economy. It is calculated by subtracting the cost of intermediate goods from the total output. GVA at basic prices accounts for the value added by each sector of the economy before taxes and subsidies are added.
The sectors listed in the question—Agriculture, Forestry, and Fishing (i), Mining and Quarrying (ii), Public Administration and Defense (iii), and Retail Trade and Manufacturing (iv)—are all part of the GVA calculation. GVA is used to measure the contribution of each sector to the economy. -
Question 5 of 5
5. Question
Consider the following types of unemployment:
(i) Frictional Unemployment
(ii) Cyclical Unemployment
(iii) Structural Unemployment
(iv) Disguised Unemployment
Which of the above is/are most prevalent in the Indian agricultural sector?Correct
Answer: Option (A) (iii) and (iv) only
Explanation:
Structural Unemployment occurs when there is a mismatch between the skills of the workforce and the jobs available. In India, especially in the agricultural sector, structural unemployment is evident because of outdated farming methods and the inability of laborers to transition to other industries that require more specialized skills.
Disguised Unemployment is a common feature of the Indian agricultural sector, where more people are engaged in agricultural activities than are actually needed to produce the same level of output. In this scenario, even if some workers were removed, there would be no impact on productivity. This is prevalent in rural India due to the lack of alternative employment opportunities.
Cyclical Unemployment, caused by economic downturns, and Frictional Unemployment, which occurs due to the time lag between jobs, are less significant in the Indian agricultural context.Incorrect
Answer: Option (A) (iii) and (iv) only
Explanation:
Structural Unemployment occurs when there is a mismatch between the skills of the workforce and the jobs available. In India, especially in the agricultural sector, structural unemployment is evident because of outdated farming methods and the inability of laborers to transition to other industries that require more specialized skills.
Disguised Unemployment is a common feature of the Indian agricultural sector, where more people are engaged in agricultural activities than are actually needed to produce the same level of output. In this scenario, even if some workers were removed, there would be no impact on productivity. This is prevalent in rural India due to the lack of alternative employment opportunities.
Cyclical Unemployment, caused by economic downturns, and Frictional Unemployment, which occurs due to the time lag between jobs, are less significant in the Indian agricultural context.
