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Daily-static-mcqs 22 Aug 2024

Daily Static MCQs for UPSC & State PSC Exams - Economics 22 Aug 2024

Daily Static MCQs for UPSC & State PSC Exams - Economics

Q1:

Which of the following may lead to increase in personal income in an economy?

1. Increase in national income

2. Increase in undistributed profits.

3. Increase in corporate tax.

Select the correct answer using the code given below.

A: Only one

B: Only Two

C: All three

D: None

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Answer: A

Explanation:

Personal Income is the part of National Income which is received by households. To calculate personal income we have to consider the following factors:

Undistributed Profits: It is a part of the profit which is earned by the firms and government enterprises and is not distributed among the factors of production. We have to deduct undistributed profit (UP) from National Income (NI) to arrive at Personal Income (PI), since UP does not accrue to the households. Increasing it will reduce personal income. Hence, option 2 is incorrect.

Corporate Tax: Similarly, Corporate Tax, which is imposed on the earnings made by the firms, will also have to be deducted from the NI, since it does not accrue to the households. Increasing it will reduce the personal income. Hence, option 3 is incorrect.

Thus, personal Income (PI) = National Income Undistributed profits-Net interest payments made by households-corporate tax+transfer payments to the households from the government and firms.

Q2:

Which of the following is correct about transfer payment?

A: Payment given to the importers by a domestic firm for the goods supplied.

B: It is a part of profit which is not distributed among the factors of production.

C: It is a one-way payment to a person who has given or exchanged no money, goods or service for it.

D: Payment made by the parent company to subsidiary companies for use of goods or services.

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Answer: C

Explanation:

A transfer payment is a one-way payment to a person who has given or exchanged no money, goods or service for it. It is a process used by governments as a way to redistribute money through programs such as old age or disability pensions, student grants, scholarships, prizes, unemployment compensation etc. Hence, option (c) is correct.

Q3:

Which of the following curve shows that inflation and unemployment have a stable and inverse relationship?

A: Phillips Curve

B: Kuznets Curve

C: Laffer Curve

D: Lorenz Curve

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Answer: A

Explanation:

The Phillips Curve shows that inflation and unemployment have a stable and inverse relationship. The theory states that inflation comes with economic growth, which in turn should lead to more jobs and less unemployment. Hence, option (a) is correct.

Q4:

With reference to Indian economy, consider the following statements:

1. It is 5th largest service exporter in the world.

2. India was the highest recipient of remittances in the world in 2022.

Which of the statements given above is/are incorrect?

A: 1 only

B: 2 only

C: Both 1 and 2

D: Neither 1 nor 2

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Answer: A

Explanation:

India is the 7th largest service exporter in the world. Hence, statement 1 is incorrect.

According to World Bank, India was the highest recipient of remittances in the world in 2022. Hence, statement 2 is correct.

Q5:

With reference to the types of poverty, consider the following statements:

(1) Absolute poverty is defined from the social perspective.

(2) Relative poverty is a condition where household income is below a necessary level.

Which of the statements given above is/are correct?

A: 1 only

B: 2 only

C: Both 1 and 2

D: Neither 1 nor 2

Show

Answer: D

Explanation:

Absolute poverty is when a household's income falls below the level required for basic living necessities like food and shelter. It allows for cross-country and temporal comparisons. Introduced in 1990 as the "dollar a day" line, the World Bank updated it to $1.90 a day in 2015.

Relative poverty is determined by comparing one's living standard to the economic norms of their community. It's often measured as the percentage of people with income lower than a set fraction of the median income.