public finance fiscal & monetary policy section 6 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Capital formation refers to capital accumulation, referring to the total “stock of capital” that has been formed, or to the growth of this total capital stock.

It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period.

Total capital formation” in national accounting equals net fixed capital investment, plus the increase in the value of inventories held, plus (net) lending to foreign countries, during an accounting period (a year or a quarter).

Capital is said to be “formed” when savings are utilized for investment purposes, often investment in production.

Answer: (c)

The Differential Rate of Interest Scheme, formulated in March 1972, offers financial assistance at concessional rate of interest @ 4% to those who intend taking up any productive activity and has been tailored for persons whose income is very low. This scheme is meant for:

• Persons belonging to SC/STs, Adivasis engaged in agricultural operations and/ or allied activities;

• Persons engaged in collection of forest products, fodder and selling these in markets;

• Persons engaged in Village and Cottage Industries on a very small scale; etc.

Answer: (b)

Joseph E. Stiglitz, a Nobel laureate in economics, has pointed how lack of opportunity leads to widening of inequality. It leads to concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.

Answer: (d)

The primary market is that part of the capital markets that deals with the issuance of new securities.

Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is the market for new long term equity capital.

The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).

Answer: (b)