introduction to indian economy section 2 MCQ Questions & Answers Detailed Explanation

Answer: (a)

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a year.

GDP can be determined in three ways: the production (or output) approach, the income approach, or the expenditure approach.

Answer: (c)

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time.

The United Nations Conference on the Law of the Sea has defined sovereign rights over international waters by defining such concepts as Internal Waters, exclusive economic zones (EEZs), continental shelf jurisdiction, etc. According to this law, the income generated by Indian fishermen would be accounted for in the GDP of India.

Answer: (d)

Dadabhai Naoroji had estimated national income in India first. National income estimate before independence was prepared by Dada Bhai Naoroji in 1876.

He estimated national income by estimating the value of agricultural production and then adding some percentage of non–agricultural production. This method was non–scientific.

Answer: (d)

The medium and long term loans are disbursed to the farmers through Primary Land Development Banks who draw their finances from Central Land Development Banks who in turn draw their finances from NABARD.

As for the short term credit, this is disbursed to the farmers through Primary Agricultural Credit Societies who draw their finances from Central Cooperative Banks who in turn draw their finances from the State Cooperative Banks.

Answer: (c)

The reserve requirement (or cash reserve ratio) is a central bank regulation that sets the minimum reserves each commercial bank must hold (rather than lend out) of customer deposits and notes. These required reserves are normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank.

The required reserve ratio is sometimes used as a tool in monetary policy, influencing the country’s borrowing and interest rates by changing the number of funds available for banks to make loans with.

The main objective of minimum reserves is the stabilisation of money market rates. Minimum reserves allow credit institutions to smooth out fluctuations in liquidity such as those caused by the demand for banknotes.

Answer: (a)

All developing countries like India are mixed economies. A mixed economy is neither pure capitalism nor pure socialism but a mixture of the two systems.

The features of a mixed economy which exist in India are:

1. Private ownership of means of production;
2. The important role of market mechanism;
3. Presence of a large public sector along with free enterprise;
4. Economic planning