macro fundamentals, GDP, investment & growth section 3 MCQ Questions & Answers Detailed Explanation

Answer: (b)

The value of capital goods produced is defined as investment.

Hence, the production of consumption goods and services are not investment. Buying and selling shares from one person to another person is also not an investment for the economy as only the ownership changes and nothing happens on the ground.

So, only (ii) statement is true.

Answer: (c)

Answer: (d)

Exports means produced within the country and sold to foreigners (or non-residents). If a foreigner is coming to India and then purchasing goods and services, then it is a case of exports.

In the same way, if a foreigner is coming to India for medical treatment or tourism then the foreigner is basically purchasing medical and tourism services produced in our country.

So, the best possible answer is exports.

Answer: (a)

Answer: (a)

Consider an example: If a country is exporting only apples and importing only oranges, then the terms of trade (TOT) are simply the ratio of the price of apples to the price of oranges. Suppose the price of an apple is Rs. 120/kg and Oranges is Rs. 40/kg

So, TOT = $\text"Export Price"/\text"Import Price" = 120/40$ = 3

This means if India is exporting apples and importing oranges then for one kg of apples exported, we can import 3kg of oranges. In other words, how many oranges can we import for a unit of export of apples?

So, TOT is a measure of how much imports an economy can get for a unit of exported goods. Since economies typically export and import many goods, measuring the TOT requires defining price indices for exported and imported goods and comparing the two.

A rise in the prices of exported goods in international markets would increase the TOT, while a rise in the prices of imported goods would decrease it. So, statements (i), (iii) & (iv) are true.

Answer: (c)

CPI includes indirect taxes. So, when government increases the GST rate, it is captured in the CPI data.

But in the new series of WPI (2011-12), the government has excluded indirect taxes while measuring WPI. This is in consonance with international practices and will make the new WPI conceptually closer to the Producer Price Index (PPI).