Economic Growth and Development Multiple Choice Questions :-
1. An increase in national income because of an increase in prices only is called an
a) Increase in real income
b) Increase in national income at constant prices
c) Increase in nominal national income
d) Increase in national income at base year prices
Answer: c
2. The national income of a country for a given period is equal to the
a) Consumption and investment expenditure incurred by the government
b) Consumption and investment expenditure incurred by Indians abroad
c) Consumption and investment expenditure incurred by private sector
d) Consumption and investment expenditure incurred by all the above
Answer: d
3. In an open economy, the national income (Y) of the economy is (C,I,G,X,M stand for consumption, investment, government expenditure, total exports, and total imports, respectively.)
a) Y = C + I + G + X
b) Y = C + I + G – X + M
c) Y = C + I + G + (X – M)
d) Y = C + I – G + X – M
Answer: c
4. The growth rate in per capita income at current prices is higher than that of per capita income at constant prices, because the former takes into account the rate of
a) Growth of population
b) Increase in price level
c) Growth of money supply
d) Increase in the wage rate
Answer: b
5. The value of all final goods and services produced by the normal residents of a country and their property, whether operating within the domestic territory of the country or outside, in a year is termed
a) Gross national income
b) Net national income
c) Gross domestic product
d) Net domestic product
Answer: a
6. National income in context of India is the collective income of all the Indians. Which of the following is equivalent to national income?
a) Gross domestic product at market price
b) Net domestic product at factor prices
c) Net national product at market prices
d) Net national product at factor cost
Answer: d
7. Gross domestic product is more than the net domestic product. Gross domestic product (GDP) is called “gross” because its computation does not exclude
a) Consumption of capital in production process
b) Subsidies on consumption of goods
c) Earnings of foreign exchange in domestic country
d) Informal economy
Answer: a
8. Which one of the following is responsible for bringing out the report on national and per capital income in India?
a) Ministry of Planning
b) Ministry of Human Resource Development
c) Ministry of Home Affairs
d) Ministry of Statistics and Programme Implementation
Answer: d
9. The main reason for the low growth rate in India in spite of high rates of savings and capital formation is
a) Low rate of investment rate
b) Low level of foreign investment
c) Low capital/output ratio
d) High capital/output ratio
Answer: d
10. In India, National Income Statistics are computed by which of the following ?
a) Planning Commission
b) Ministry of Finance
c) Central Statistical Office
d) RBI
Answer: c
11. Inclusive growth is the agenda of economic development in the future. The strategy of inclusive growth does not focus on
a) Enhancement of education opportunities
b) Reduction of poverty among backward castes
c) Diversifying livelihood for tribal population
d) Promotion of ancillary industry in industrial regions
Answer: d
12. Disguised unemployment typically leads to low level of income levels despite creating perception of high levels of employment. Disguised unemployment generally exists in
a) Manufacturing sector
b) Agriculture
c) Small-scale industries
d) Urban societies
Answer: b
13. When large number of workers lose employment due to automaton of industrial processes, it is called
a) Seasonal unemployment
b) Structural unemployment
c) Disguised unemployment
d) Cyclical unemployment
Answer: b
14. The mechanization and automation of economy is leading to high unemployment rate in the economy. Which one of the following is the unemployment rate?
a) Percentage of unemployment to total population
b) Percentage of employed to total labour force
c) Percentage of unemployed to total work force
d) Percentage of unemployed to total persons not in labour force
Answer: c
15. If the net national product at market price is higher that the net national product at factor cost, then which of the following is the correct description of relationship between indirect taxes and government subsidies:
a) Government subsidies > Indirect taxes
b) Government subsidies < Indirect taxes c) Government subsidies = Indirect taxes d) Government subsidies >= Indirect taxes
Answer: b
16. Disguised unemployment generally means
a) Total productivity of labour is zero
b) Average productivity of labour is zero
c) Marginal productivity of labour is zero
d) None of the above
Answer: c
17. Human Development Index comprises literacy rates, life expectancy at birth, and
a) Gross domestic product per head in US dollar
b) Gross domestic product per head at real purchasing power
c) Gross national product in US dollars
d) National income per head in US dollars
Answer: d
18. Which one of the following is the difference between the value at market prices and value at factor cost for a national income aggregate?
a) Value of consumption of fixed capital
b) Value of indirect taxes net of subsidies
c) Value of net factor income earned abroad
d) Value of subsidies net of indirect taxes
Answer: b
19. Which one of the following is shown by the Phillips curve?
a) Inverse relationship between real and nominal wages
b) Inverse relationship between the rate of inflation and rate of unemployment
c) Positive relationship between nominal wages and rate of employment
d) Positive relationship between rate of inflation and nominal wages
Answer: b
20. The Lorenz curve is used to measure the level of inequality in an economy. It shows the relationship between
a) Asset creation and income generation
b) Population groups and their respective income shares
c) Unemployment and inflation
d) Wage, labour hours, and leisure
Answer: b
Indian Economy – Economic Growth and Development Objective Questions
21. The costs of factors of production, supplied by the entrepreneurs himself, are known as
a) Implicit costs
b) Explicit costs
c) Fixed costs
d) Variable costs
Answer: a
22. The growth process that is sustainable and yields broad-based benefits and ensures equality of opportunity for all is termed
a) Faster growth
b) Inclusive growth
c) Balanced growth
d) Sustained growth
Answer: b
23. In national income accounting, which one of the following is the difference between gross aggregates and net aggregates?
a) The value of net indirect taxes
b) The value of consumption of fixed capital
c) The value of intermediate consumption
d) The value of final consumption
Answer: b
24. The average rate of domestic savings (gross) for the Indian economy is currently estimated to be in the rage of
a) 15 to 20%
b) 20 – 25%
c) 25 – 30%
d) 30 – 35%
Answer: d
25. Which one among the following is the most appropriate definition of a country low on human development?
a) A country with a small agricultural sector, low rate of population growth, and low per capita GNP
b) A country with a high population growth rate, a high per capita GNP growth rate, and an unequal distribution of income
c) A country with inadequate health care, poor educational facilities, and lower per capita GNP
d) A country with low per capita GNP, a large population and a small agriculture sector
Answer: c
26. Consider the following statement
1) The GDP of India (in nominal terms) has crossed $2 trillion.
2) The per capita income (in nominal terms) in India is more than Rs.100,000.
3) India has the third largest GDP in the world in PPP terms.
4) The ICOR in India is lower than that in the United States.
Which of the above statements are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 2, 3 and 4 only
d) 1, 2 , and 3
Answer: d
27. Consider the following statements regarding seasonal unemployment:
1) It results in large-scale migration of agricultural labourers from agriculturally backward regions to that of urban developed regions.
2) Many agricultural workers especially landless labourers and marginal farmers remain unemployed after employment season.
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
Answer: c
28. Consider the following statements about the Multidimensional Poverty Index:
1) It indicates the share of the population that is multidimensionally poor adjusted by the intensity of deprivation in terms of living standards, health, and education
2) In South Asia, only Afghanistan has higher levels of poverty than India.
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
Answer: c
29. Which among the following is added to the gross domestic product to arrive at national income of a nation?
1) Depreciation
2) Subsidies
3) Indirect taxes
4) Net factor income abroad
Select the correct answer using the codes given below:
a) 2 only
b) 1 and 2
c) 1 and 3
d) 3 and 4
Answer: a
30. Consider the following statements:
1) The net domestic product can be greater than the gross domestic product for the same year.
2) The gross national product of an economy is always less than its gross domestic product for the same year.
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
Answer: d
31. Consider the following statements:
1) The income method of GDP calculation considers income received by factors or production only.
2) The GDP calculated through income method is less than the GDP calculated through the expenditure method for the same year.
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
Answer: a
32. With reference to national income accounting, consider the following statements:
1) Gross value added (GVA) at factor cost does not include indirect taxes.
2) GVA at basic prices excludes production taxes and includes production subsidies available on the commodity.
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
Answer: a
33. Consider the following pairs :
Type of unemployment Example
1) Structural unemployment An unemployed worker from cycle industry because people are buying more cars.
2) Cyclical This kind of unemployment occurs when all those who want to work cannot be employed because there is not enough demand in the market for their work.
3) Frictional unemployment A person leaving his/her job to prepare for civil services.
Which of the pairs given above is/are correctly matched?
a) 1 and 2 only
b) 2 and 3 only
c) 3 only
d) 1, 2, and 3
Answer: d
34. Consider the following statements:
1) The nominal gross domestic product (GDP) reflects the changes in both prices and quantities of goods and services produced in an economy.
2) Read GDP reflects only the changes in the quantities of the goods and services produced in an economy.
3) GDP deflator reflects the changes in prices of the goods and services produced in an economy.
Which of the statements given above is/are correct?
a) 1 and 2 only
b) 1 and 3 only
c) 2 and 3 only
d) 1,2, and 3
Answer: d
35. GDP is defined as the output of economic activities carried out within the economic boundaries of a country. Which of the following constitutes the economic territory of a country with respect to GDP calculation?
1) Fishing vessels, oil and natural gas rigs operated by the residents of a country in the international waters.
2) Embassies, consulates, and military establishment of the country located abroad.
3) Ships and aircraft owned by residents of the country operating between two different countries.
4) Industrial establishment owned by residents located abroad.
Select the correct answer using the codes given below:
a) 2 and 3 only
b) 1 and 3 only
c) 1, 2 and 3
d) 1, 2, 3 and 4
Answer: c
36. With reference to assessment of labour market condition, consider the following statements:
1) The labour force participation rate is the ratio of the number of persons in the labour force to the total population.
2) The unemployment rate is the ratio of the number of unemployed persons to the total population.
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
Answer: d
37. Which of the following affect the accuracy of national income estimation in India?
1) Output of non-monetized sector
2) Non-availability of data about income of small producers or household enterprises
3) Unreported legal income
4) Inflation
Select the correct answer using the does given below:
a) 1, 2, 3 and 4
b) 1, 2, and 3 only
c) 2 and 3 only
d) 1 and 4 only
Answer: a
38. Which of the following statements is/are correct?
A rise in per capita income does not automatically imply an increase in economic welfare because
1) Distribution of income is not known
2) Rate of economic growth is not known
3) Per capita income suffers from the limitation of averages
Select the correct answer using the codes given below:
a) 1 only
b) 2 only
c) 1 and 3 only
d) 1, 2, and 3
Answer: c
39. Which of the following explains the term economic growth?
a. Increase in per capita production
b. Increase in per capita real income
c. structural change in the economy
d. all the above are right
Answer: d. all the above are right
40. Economic development is characterized by
a. Structural change in the economy
b. Change in the occupational structure
c. Both a and b
d. None of the above
Answer: c. Both a and b
41. Which of the following explains the term economic development?
a. Improvement in the technology involved
b. Improvement in production
c. Improvement in distribution system
d. All the above
Answer: d. All the above
42. An underdeveloped economy is characterized by
a. High per capita real income
b. Large proportion of labor force in the tertiary sector
c. State of deprivation of large proportion of population
d. All the above
Answer: c. State of deprivation of large proportion of population
43. Scarcity of capital , technological backwardness and unemployment are generally found in
a. Developed countries
b. Underdeveloped countries
c. Both
d. None of the above
Answer: b. Underdeveloped countries
44. Which of the following denotes an underdeveloped economy?
a. High level of inequalities
b. Low level of capital productivity
c. A relatively closed economy
d. All the above
Answer: d. All the above
45. Capital formation in underdeveloped countries is a major bottleneck. The reason can be
a. Small size of market with no incentive for investment
b. Low level of income
c. Demonstration effect
d. All the above
Answer: d. All the above
46. Consider the following statements and identify the right ones.
i. Higher level of capital-output ratio indicates efficient use of capital.
ii. It reflects the productivity of capital in the economy
a. I only
b. ii only
c. both
d. none
Answer: b. ii only
47. Consider the following statements and identify the right ones.
i. COR is relatively low in labour intensive sectors.
ii. COR will be high in capital intensive sectors
iii. Both
iv. None
Answer: iii. Both
48. Which of the following about strategy of balanced growth is right?
a. Simultaneous investment in all sectors
b. All sectors are independent.
c. Both
d. None
Answer: a. Simultaneous investment in all sectors