macro fundamentals, GDP, investment & growth section 3 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 4 EXERCISES
The following question based on Macro fundamentals, GDP, Investment, Growth topic of indian economy mcq
(a) Verghese Kurien
(b) P.J. Kurien
(c) M.S. Raghanathan
(d) M.S. Swaminathan
The correct answers to the above question in:
Answer: (a)
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Question : 1
The Concept of ‘Navratna’ is associated with
a) selected export - oriented units
b) selected categories of technical manpower
c) selected Public Sector Enterprises
d) selected food - processing industries
Answer »Answer: (c)
Question : 2
In the last one decade, which one among the following sectors has attracted the highest foreign direct investment inflows into India?
a) Services Sector
b) Chemicals other than fertilizers
c) Telecommunication
d) Food processing
Answer »Answer: (a)
Question : 3
For a sustained high growth, which of the following statements will be true:
a) Increasing capital output ratio and keeping investment at a constant rate
b) Raising the investment and incremental capital output ratio both
c) Raising the investment by keeping the incremental capital output ratio minimum
d) All of the above
Answer »Answer: (c)
% change in GDP = $\text"Investment %"/\text" Incremental Capital Output Ratio (ICOR)"$
So, for higher growth rate, we require more investment and less ICOR
Question : 4
The importance of agriculture in Indian economy is indicated by its contribution to which of the following?
a) Industrial development and international trade
b) National income and employment
c) All of the above
d) Supply of food grains
Answer »Answer: (c)
Question : 5
Despite being a high saving economy, capital formation may not result in significant increase in output due to:
a) high population density
b) illiteracy
c) weak administrative machinery
d) high capital-output ratio
Answer »Answer: (d)
First, let us develop the general concept of (average) productivity and marginal productivity.
- 1 Acre Land
- 5 Labourers
- 2 Tonne production
If one acre of land produces 2 Tonnes of food grains, then; Productivity of Land = $\text"Output"/\text"Input(land)"$ ${2\text"Tonne"}/{1 \text"acre"}$ = 2 Tonne/acre
Productivity of Labour =$\text"Output"/\text"Input(labour)" = {2\text"Tonne"}/{5\text"labourer"}$ = 0.4 Tonne/labour
The above two are basically average productivity.
If by adding one extra labour, production increases by 0.2 tonne, then
Marginal productivity of labour = $\text"change in output"/\text"Change in labour" = {0.2\text"tonne"}/{1 \text"labour"}$ = 0.2 tonne/labour
In the same way, productivity of capital = $\text"Output"/\text" Capital"$ Higher is the productivity of capital, it is good for the economy. The inverse of “productivity of capital” is Capital/Output ratio.
A higher capital/output ratio is bad for the economy. If the Capital/Output ratio is 3/1, that means Rs. 1 unit of output is produced from Rs. 3 units of capital. And if the Capital/Output ratio is 4/1, that means to produce Rs. 1 unit of output, Rs. 4 units of capital is required. So, 3/1 is better than 4/1 for the economy.
Generally, if an economy has higher savings, higher capital formation happens. But if the Capital/Output ratio in the economy is high, then that means the productivity of the capital is low, so output production may not increase much even if capital formation is high.
So, the answer is (d)
Question : 6
Green Revolution made the country self-sufficient in food production but had some fallouts. Consider the following statements.
- It is successful in the case of wheat, but not in the case of pulses.
- Brought inter-state disparities.
- Help in restoring soil fertility.
- The reduced water table in some states.
a) Only 2 and 4
b) 1, 2 and 4
c) All are correct
d) 1, 3 and 4
Answer »Answer: (b)
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