introduction to indian economy section 11 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 1

When the prices of commodities, goods and services start declining consistently, the phenomenon is known as

a) Deflation

b) Market capitalism

c) Negative growth

d) Discount field

Answer: (a)

When the prices of commodities, goods and services start declining consistently, the phenomenon is known as deflation. Deflation is because of a fall in the aggregate level of demand.

That is, there is a fall in how much the whole economy is willing to buy and the price for goods. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity.

Since this idles the productive capacity, investment also falls, leading to further reductions in aggregate demand.

Question : 2 [SSC Constable 2012]

The most accessible mediumin India is

a) Newspapers

b) Radio

c) Cinema

d) Television

Answer: (a)

The newspaper’s importance in India may be due to the fact that it is relatively free from the competition despite the rise of the Internet. Though there are a large number of households that own television sets, there are still many more without.

Newspapers are highly affordable and are the more accessible alternative, even for rural areas.

Moreover, it is not dependent on other factors such as infrastructure or availability of electricity, which are both areas that are lacking in India.

Question : 3

Which is the correct definition of National Income ?

  1. National Income means the total amount of money Govt. earns through direct tax collection.
  2. It is the total value of stocks held by a country at a particular point of time.
  3. This is the measure of goods and services produced during an accounting year without double counting.

    a) 2 only

b) 3 only

c) 1 only

d) All 1, 2 and 3

Answer: (b)

Question : 4

Which of the following is associated with fiscal policy?

a) Taxation

b) Consumption

c) Inflation

d) Money supply

Answer: (b)

Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.

The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors.

Question : 5

The main source of National income in India is

a) agriculture

b) trade sector

c) industrial sector

d) service sector

Answer: (d)

The service sector is one of the three economic sectors. it includes:

  1. telecommunication,
  2. hospitality industry/tourism,
  3. mass media,
  4. healthcare/ hospitals,
  5. information technology,
  6. banking,
  7. insurance,
  8. investment management,
  9. accountancy,
  10. legal services,
  11. consulting,
  12. retail sales,
  13. real estate,
  14. education.

The maximum contribution to national income comes from the service sector which contributes around 60%.

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