Indian Economy MCQs

Notes:
Complementary goods, defined by their negative cross elasticity of demand, are products whose demand is influenced by one another. When the price of a good declines, the demand for its complementary good rises. Printers need ink cartridges, tea is often consumed with sugar, and mobile phones require SIM cards for operation. However, tea and coffee are substitutes, not complements, as they are consumed separately and often in place of one another, hence they are not complementary goods.

Notes:
Trombay, Nangal and Sindri are known for fertilizer plants. Sindri was among the earliest major fertilizer manufacturing centers in India, and the other two locations are also associated with fertilizer production. Fertilizers are used to supply essential nutrients to crops and improve agricultural productivity.

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Emissions trading (aka. cap and trade) refers to the market-based approach to control pollution by providing economic incentives for reducing the emissions of pollutants.

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Economic growth results in higher disposable income available with the consumers which increases the overall demand along with the supply available for the consumers. This increase in demand spurs inflation, which eventually becomes a necessary evil for a growing economy.

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In case of High-income elasticity of demand, an increase in income is accompanied by a relatively larger increase in quantity demanded for normal goods. Thus, among the given options Car has highest income elasticity of demand.

• Car: A luxury good with high income elasticity; demand rises sharply with an increase in income.
• Milk: A necessity good with low to moderate income elasticity.
• Paddy: A basic necessity and staple food, with very low income elasticity.
• Tobacco: Considered an addictive good with low or even negative income elasticity in some cases, as demand is less income-sensitive.

Notes:
Outsourcing goods and services to foreign countries (statements 1 and 2) increases payments made abroad, thereby worsening the current account deficit. Domestic tourism spending (3) does not affect the current account, as funds remain within the economy. Increase in foreign tourist arrivals (4) actually improves the current account by bringing foreign currency into the country.

Notes:
An inflationary gap exists when actual GDP exceeds potential GDP. This describes an economic condition where production surpasses the sustainable full employment level, creating excess demand over supply. The concept was introduced by John Maynard Keynes. The inflationary gap is calculated as Actual GDP minus Potential GDP. This situation generally leads to increased prices and inflationary pressures in the economy.

Notes:
Fiscal deficit is calculated as total expenditure minus the sum of revenue receipts and non-debt capital receipts. Fiscal deficit data is published annually in the Union Budget. It shows the full amount the government must borrow in a financial year. The government’s fiscal deficit for 2023-24 was targeted at 5.9% of GDP.

Notes:
PRASHAD stands for Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive. It is a Central Sector scheme of the Ministry of Tourism that supports the development of pilgrimage and heritage destinations through financial assistance to States and Union Territories. The Ministry’s latest reported figures show 54 sanctioned projects across 28 States/UTs. Hence, all three statements are correct.

Notes:
In the Avadi session of Indian National Congress in 1955 the Congress stated that object of the planning has to be “Socialist Pattern” and not absolute “Socialism”. The Socialist pattern meant that India has to be a mixed economy where private & public sector would coexist. In the same year, Imperial Bank of India, which came into being in 1921, came under the public sector and became “State Bank of India” in 1955.