macro fundamentals, GDP, investment & growth section 1 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Answer: (d)

An economy produces two types of final goods i.e. consumption and capital goods. Consumption goods get consumed and capital goods are used for further production processes (capital goods are also called investment).

The value of these two goods produced in the economy in a year is called GDP. These two types of goods i.e. GDP is purchased by the four sectors of the economy

1. Household sector (consumption goods)
2. Private sector (capital goods)
3. Government sector (consumption and capital both)
4. External sector (consumption and capital booth)

Answer: (d)

Informal economic activity constitutes around 30% of the GDP. We may not be able to measure it accurately but while calculating the GDP figures informal activity is extrapolated based on formal activities and are included in GDP.

Re-exports means, something imported and then processed and then again exported. So, whatever goes in processing will be part of our GDP.

For example, India imported crude oil worth Rs 50 and then refined/processed it and then exported it in Rs. 80, then Rs. 80 – Rs. 50 = Rs. 30 will be included in India’s GDP

Answer: (d)

Answer: (d)

Answer: (d)

Wholesale Price Index (WPI) is released by the Office of Economic Advisor, Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry. The Base year has been revised to 2011-12 and includes 697 items.

WPI inflation measures the average change in prices of commodities for bulk sale at the level of the early stage of transactions pertaining to four sectors namely agriculture, mining, manufacturing and electricity. WPI does not cover services. WPI covers commodities falling under three Major Groups namely:

"Primary Articles" (weight 22.62%) like agricultural commodities and minerals

"Fuel and Power" (weight 13.15%) like coal and electricity and

"Manufactured Products" (weight 64.23%) like textiles, leather, machine tools

The prices tracked are agri-market (mandi) prices for agricultural commodities, ex-factory prices for manufactured products and ex-mines prices for minerals. The prices used for compilation do not include indirect taxes in order to remove the impact of fiscal policy. This is in consonance with best international practices and makes the new WPI conceptually closer to the "Produce Price Index" used internationally.

The weight given to each commodity covered in the WPI basked is based on the net traded value of the item in the year 2011-12. The net traded value is the value of output in the year 2011-12 adjusted for net imports. Thus, the net traded value represents the total transactions of each product in the economy during the base year.