Question 1

In national income accounting, the term national income generally refers to which of the following?

Accepted Answer

Introduction / Context: National income is a core concept in macroeconomics and is frequently used to measure the economic performance of a country. A clear understanding of what exactly is included in national income is essential for interpreting figures like gross domestic product and net national product. This question asks which description matches the general idea of national income in exam level discussions. Given Data / Assumptions: The question is about the meaning of national income. Options mention goods, services, stocks and shares, capital goods, and consumer goods. We assume a one year period for measurement. Concept / Approach: In simple terms, national income can be described as the total money value of final goods and services produced within a country in a given year, after avoiding double counting. More technically, it may involve concepts like net national product at factor cost, but for general knowledge questions the focus is on production of final goods and services over time. It does not include simple transfers of existing financial assets like shares, nor is it restricted only to consumer or capital goods alone. Step-by-Step Solution: Step 1: Identify that national income relates to production over a period, not to simple financial asset transfers.Step 2: Recognise that both goods and services contribute to the value of output.Step 3: Understand that both consumer goods and capital goods are part of total production.Step 4: Match this understanding with the option stating money value of all final goods and services produced in a country during one year.Step 5: Conclude that this broad definition best captures national income in general terms. Verification / Alternative Check: Introductory macroeconomics texts often define national income as the sum of all factor incomes earned in the production of final goods and services in a year, or as the sum of final expenditure on goods and services. Both views point to the value of final output, not to intermediate transactions or purely financial trades. Therefore, the simple description referring to final goods and services produced in a year is fully consistent with the accepted concept. Why Other Options Are Wrong: Option B focuses on stocks and shares, which are financial assets that can be bought and sold many times without changing the real production in the economy, so they are not counted directly in national income. Option C restricts attention only to capital goods, ignoring consumer goods and services. Option D restricts the definition to consumer goods and services, leaving out capital goods and some other final services. Hence, none of these partial descriptions is as accurate as the one including all final goods and services. Common Pitfalls: Some examinees confuse wealth and income and may think national income refers to the value of all financial assets held in a country. Others are uncertain about whether services are included. To avoid such confusion, remember that national income focuses on flow of production and incomes over time, not on the stock of assets at a point in time, and includes both goods and services as long as they are final outputs. Final Answer: National income generally refers to the money value of all final goods and services produced in a country during one year.

Question 2

On 24 October 2017, the Government of India announced a massive package of what approximate size in lakh crore rupees to boost the economy through bank recapitalisation and infrastructure spending?

Accepted Answer

Introduction / Context: This question is drawn from contemporary economic policy in India. In October 2017, the Government of India announced a large package combining bank recapitalisation and infrastructure spending to stimulate growth, address stressed assets, and improve roads and connectivity. The question asks you to recall the approximate total size of this package measured in lakh crore rupees. Given Data / Assumptions: The date is 24 October 2017. The package aimed to boost the economy. It included major components like bank recapitalisation and road building. Options present four approximate values in lakh crore rupees. Concept / Approach: On that date, the government announced a recapitalisation plan for public sector banks along with a large road building programme. The recapitalisation plan was around a little more than two lakh crore and the road programme was around seven lakh crore, together being spoken of as a package of roughly nine lakh crore rupees. Many current affairs sources summarised the combined announcement as a nine lakh crore boost to the economy. Step-by-Step Solution: Step 1: Recall that the bank recapitalisation component was a little above two lakh crore.Step 2: Recall that the road and infrastructure component was around seven lakh crore.Step 3: Add the approximate figures, giving a total near nine lakh crore.Step 4: Compare this with the answer choices: seven, nine, fifteen and five lakh crore.Step 5: Select nine lakh crore as the rough combined package size highlighted in the announcement. Verification / Alternative Check: Newspaper reports and exam oriented notes from late 2017 frequently describe the government decision as a nine lakh crore package where bank recapitalisation and road connectivity plans were together projected as a major stimulus to economic growth and employment. This figure was widely quoted in editorials and economic reviews, confirming that nine lakh crore is the value expected in competitive exam answers. Why Other Options Are Wrong: Seven lakh crore roughly matches only the road programme and does not include the recapitalisation component, so it understates the size of the combined package. Fifteen lakh crore exceeds the reported figure by a wide margin and was not the value publicised at the time. Five lakh crore is also far below the total and does not reflect the scale of the policy move. Hence, only nine lakh crore correctly represents the approximate combined value presented to the public. Common Pitfalls: Candidates may remember only one component, such as the large road programme or the bank recapitalisation plan, and mistakenly choose the figure associated with that single part. Others may confuse this package with other later schemes that involve different amounts. To answer reliably, it helps to associate the year 2017 with the specific nine lakh crore combination of banking support and infrastructure expansion. Final Answer: On 24 October 2017, the Government of India announced a combined economic package of about Rs 9 lakh crore.

Question 3

In the history of economic thought, who is generally credited with introducing and using the term macro economics to distinguish it from micro economics?

Accepted Answer

Introduction / Context: Modern economics is divided into two broad branches: micro economics, which studies individual units such as households and firms, and macro economics, which studies the economy as a whole. The terminology itself has a history. This question asks about the economist who first introduced and used the words micro economics and macro economics in a systematic way in economic analysis. Given Data / Assumptions: We are asked about the origin of the term macro economics. The options list well known economists such as Keynes, Ragnar Frisch, Ragnar Nurkse and Knight. We assume a standard history of economic thought. Concept / Approach: While John Maynard Keynes played a huge role in developing macroeconomic theory through his work on employment, interest and money, he did not invent the label macro economics. The term is generally credited to the Norwegian economist Ragnar Frisch, who introduced the distinction between micro and macro in the early twentieth century. Frisch later shared the first Nobel Prize in economics for his work on econometrics. Step-by-Step Solution: Step 1: Recall that Keynes is associated with the birth of modern macroeconomic theory but not necessarily with coining the term.Step 2: Remember that Ragnar Frisch worked on econometrics and classification of economic analysis.Step 3: Historical notes indicate that Frisch introduced the terms micro economics and macro economics to describe different levels of analysis.Step 4: Ragnar Nurkse and Prof Knight made important contributions but are not linked directly to this terminology.Step 5: Conclude that Ragnar Frisch is the correct answer. Verification / Alternative Check: Standard histories of economic thought and introductions to macro economics mention that the credits for coining the terms micro economics and macro economics go to Ragnar Frisch. Keynes work, although foundational, is usually described as macroeconomic analysis but the word itself is attributed to Frisch. This consistent attribution across textbooks confirms that Ragnar Frisch is the accepted answer for exam purposes. Why Other Options Are Wrong: J. M. Keynes is wrong in this context because he developed many macroeconomic ideas but did not originate the terminology. Ragnar Nurkse is known mainly for his work on development economics and the theory of balanced growth. Prof Knight contributed to the theory of risk and uncertainty. None of these economists are cited in textbooks as the ones who coined the words micro economics and macro economics, so they do not fit the specific question. Common Pitfalls: Many students automatically choose Keynes because they strongly associate him with macro economics. This is understandable but historically inaccurate in terms of terminology. To avoid this error, remember that the person who names a concept is not always the one who makes it famous. Keeping a small separate memory note that Ragnar Frisch coined these terms while Keynes built the core macro theory helps answer such questions correctly. Final Answer: The term macro economics is generally credited to Ragnar Frisch, who introduced the label to distinguish it from micro economics.

Question 4

In public finance and taxation, what is the standard name for a tax levied on inherited property that passes from one generation to another after death?

Accepted Answer

Introduction / Context: Governments can tax wealth and property in different ways, including taxes on income, consumption, gifts and inheritance. The question focuses on the specific tax that is imposed when property is transferred after the death of the owner. Knowing the standard term for this type of tax is important for understanding discussions on wealth distribution and inheritance laws. Given Data / Assumptions: The tax is levied on inherited property. The transfer occurs after the death of the original owner. Options include excise duty, estate duty, gift tax, and sales tax. We assume conventional legal and public finance terminology. Concept / Approach: A tax on inherited estates is usually called estate duty or inheritance tax, depending on the jurisdiction. The key feature is that the tax is triggered by the death of the owner and the transfer of the property to heirs. Excise duty is imposed on production of goods, gift tax on voluntary transfers made during a person lifetime, and sales tax on the sale of goods in commerce. Thus, only estate duty matches an inheritance situation. Step-by-Step Solution: Step 1: Identify that the tax is associated with inheritance on death, not with normal commercial sales.Step 2: Recall that estate duty is the well known term for a tax on the value of an estate passing to heirs.Step 3: Recognise that excise duty relates to manufacturing or production of goods like alcohol or petroleum.Step 4: Note that gift tax applies to transfers between living persons, not transfers caused by death.Step 5: Conclude that estate duty is the correct term for a tax on inheritance. Verification / Alternative Check: Textbooks of public finance list estate duty and gift tax together as two different types of wealth transfer taxes. Estate duty arises at death and is calculated on the estate value, while gift tax is charged on voluntary transfers during life beyond certain thresholds. Excise duty and sales tax are presented as taxes on production and consumption, not on inheritance. This classification confirms that estate duty is the correct answer here. Why Other Options Are Wrong: Excise duty is wrong because it is charged on manufactured goods, often collected at the factory gate, and has no link to inheritance. Gift tax is also incorrect in this context because it applies to living transfers, not to transfers triggered by death. Sales tax is levied on the sale of goods to consumers at the point of transaction, again unrelated to inheritance. Hence, none of these terms captures the estate transfer nature of the tax described. Common Pitfalls: Students sometimes confuse gift tax and estate duty, especially because both relate to property transfers. To keep them separate, remember that gift tax is about voluntary gifts while the donor is alive, whereas estate duty concerns what happens to property after death. Another pitfall is to pick sales tax out of habit, but it always refers to ordinary buying and selling, not to inheritance matters. Final Answer: The tax levied on inherited property after the owner death is commonly known as estate duty.

Question 5

Which economic curve depicts an inverse relationship between the rate of unemployment and the rate of inflation in an economy over the short run?

Accepted Answer

Introduction / Context: In macroeconomics, various curves represent relationships between key variables like output, inflation, interest rates and unemployment. The curve that shows a short run trade off between unemployment and inflation is especially important in discussions of stabilisation policy. This question asks you to identify that curve from among several standard diagrams. Given Data / Assumptions: We are looking for a curve that shows an inverse relationship. The variables are unemployment and inflation. Options include supply curve, indifference curve, IS curve and Phillips curve. The context is short run macroeconomic analysis. Concept / Approach: The Phillips curve, originally based on empirical work by A. W. Phillips, suggested that when unemployment is low, inflation tends to be high and vice versa, creating a downward sloping relationship in the unemployment inflation space. Although later theory refined this relationship, the basic idea that the Phillips curve shows such a trade off in the short run remains a standard textbook result and often appears in exam questions. Step-by-Step Solution: Step 1: Recall that a supply curve usually relates price and quantity of a single good.Step 2: Remember that an indifference curve relates combinations of two goods that give equal satisfaction to a consumer.Step 3: Note that the IS curve relates interest rates and output where the goods market is in equilibrium.Step 4: Identify the Phillips curve as relating inflation to unemployment, typically with a negative slope in the short run.Step 5: Conclude that the curve asked for is the Phillips curve. Verification / Alternative Check: Any standard macroeconomics text introduces the Phillips curve with a diagram in which the horizontal axis shows unemployment and the vertical axis shows inflation. The curve slopes downwards from left to right, showing that lower unemployment is associated with higher inflation. The figure is labelled Phillips curve and discussed as a short run policy trade off. This direct association verifies that option D is correct. Why Other Options Are Wrong: The supply curve deals with the relationship between price and quantity supplied of a specific good and is not used to relate unemployment and inflation. Indifference curves belong to microeconomics and consumer theory rather than macro level unemployment and inflation questions. The IS curve arises in the IS LM model and shows combinations of interest rates and income where the goods market is balanced. None of these alternatives deals directly with unemployment and inflation together, so they do not answer the question. Common Pitfalls: Sometimes students confuse the IS curve with the Phillips curve because both appear in macro models. Another common confusion is to think that any downward sloping curve in macroeconomics could be the Phillips curve. To avoid this, always pay attention to the variables on the axes: unemployment and inflation belong to the Phillips curve, while interest rate and output belong to the IS curve, and price and quantity relate to supply and demand curves. Final Answer: The curve that shows an inverse relationship between unemployment and inflation in the short run is the Phillips curve.

Question 6

In macroeconomic terminology, short term contractions and expansions in overall economic activity that repeat over time are collectively known by which name?

Accepted Answer

Introduction / Context: Economies rarely grow in a perfectly straight line. Instead, they go through phases of expansion, peak, slowdown, recession, and recovery. These ups and downs in aggregate economic activity over time are an important subject of macroeconomic study. The question asks for the standard term used to describe this recurring pattern of short term contractions and expansions. Given Data / Assumptions: We are dealing with overall economic activity, not a single sector. The pattern involves both contractions and expansions. These movements are short term and repeat over time. Options include expansions, recession, deficits, and business cycle. Concept / Approach: The correct term that summarises the repeating sequence of upswings and downswings in the economy is business cycle. A business cycle includes four main phases: expansion, peak, contraction (or recession) and trough. It is broader than just a single recession or a single expansion. It focuses on fluctuations in real output, employment, income and other macro variables over time. Step-by-Step Solution: Step 1: Note that the question mentions both contractions and expansions, not just one phase.Step 2: Recall that business cycle is the standard term for the recurring ups and downs in economic activity.Step 3: Recognise that expansion is only one upward phase in this cycle.Step 4: Recession is a downward phase, not the entire sequence.Step 5: Deficits refer to gaps in budgets or trade, not to overall output fluctuations, so they do not fit. Verification / Alternative Check: Macroeconomics textbooks define business cycle as the pattern of periodic but irregular fluctuations in economic activity, measured by changes in real gross domestic product and other indicators. They emphasise that the cycle includes different phases rather than just one condition. None of the other terms in the options is used in such a broad sense to describe the full set of movements, which confirms that business cycle is the term being tested. Why Other Options Are Wrong: Expansions refer only to the rising segments of economic activity and therefore ignore the contraction periods that the question clearly mentions. Recession is only one phase of the business cycle where output and employment decline; it does not include the upward swing. Deficits are related to public finances or external accounts and do not describe alternating contractions and expansions in the whole economy. Thus, only business cycle matches the description given. Common Pitfalls: Some candidates choose recession because they associate it strongly with economic downturns, forgetting that the question explicitly includes expansions. Others may think expansion alone represents cycles because it feels like the normal desired state. To answer accurately, always ask whether the term covers both directions of change and whether it is used in macroeconomics for repeated patterns rather than for a single episode. Final Answer: The recurring pattern of short term contractions and expansions in economic activity is called the business cycle.

Question 7

In the context of Indian economic policy, the concept of a joint sector specifically refers to cooperation between which types of enterprises?

Accepted Answer

Introduction / Context: The idea of a joint sector has been discussed in Indian planning and industrial policy since the middle of the twentieth century. It represents a particular organisational form where both government owned and privately owned enterprises participate together in ownership and management. This question checks whether you know which parties are involved in such a joint sector arrangement. Given Data / Assumptions: The term used is joint sector. Options describe different types of cooperation: public private, inter governmental, and domestic foreign. The context is clearly Indian economic planning. Concept / Approach: Joint sector in Indian policy literature refers to enterprises where the government, typically through public sector units or financial institutions, holds a significant part of the equity and participates in management, while private investors hold the remaining part and also participate in running the enterprise. It was seen as a middle path between full state ownership and purely private ownership, combining benefits of both sectors. Step-by-Step Solution: Step 1: Recognise that joint sector is a term used in discussions of mixed economy and public private partnership.Step 2: Recall that in such enterprises both public and private shareholders are present.Step 3: State and central government cooperation describes inter governmental relations, not joint sector in the sense of industrial ownership.Step 4: Domestic and foreign company collaboration is usually described as joint ventures or foreign direct investment rather than joint sector.Step 5: Therefore, joint sector means cooperation between public sector and private sector industries. Verification / Alternative Check: Indian planning commission documents and textbooks on Indian economy describe joint sector units as enterprises where government and private interests jointly own and operate the company. Examples include some heavy engineering and infrastructure projects where the state wanted control but also wanted private capital and expertise. The definition consistently focuses on public private participation rather than any other pairing. Why Other Options Are Wrong: Cooperation between state and central governments is important but falls under federal relations, not joint sector industrial organisation. Links between domestic and foreign companies are typically labelled joint ventures, strategic alliances or foreign collaborations, and are not the intended meaning of joint sector in this question. Option D and option E are too broad and do not match the specific policy usage of the term. Common Pitfalls: Some candidates may confuse joint sector with any joint venture, including foreign partners, because of the word joint. Others may think of coordination between levels of government. To avoid confusion, always remember that in the Indian mixed economy context, joint sector has a specific meaning: enterprises jointly owned and managed by the public sector and private sector. Final Answer: The concept of joint sector in Indian planning refers to cooperation between public sector and private sector industries.

Question 8

Under the Constitution of India, economic planning for the country is included in which of the following lists of legislative subjects?

Accepted Answer

Introduction / Context: The Constitution of India divides legislative powers between the Union and the states through three lists: the Union List, the State List and the Concurrent List. Economic and social planning is an important subject for both levels of government. This question asks you to recall in which list economic planning has been placed. Given Data / Assumptions: The subject is economic planning. We need to identify the correct constitutional list. The options contain the Union List, State List, Concurrent List and broad alternatives. We assume the standard reading of the Seventh Schedule of the Constitution. Concept / Approach: Entry 20 of the Concurrent List covers economic and social planning. Being in the Concurrent List means that both Parliament and state legislatures can make laws on the subject, although Union law prevails in case of conflict. The idea is that planning requires coordination between central and state governments, so neither level has exclusive control. Step-by-Step Solution: Step 1: Recall the three lists: Union List, State List and Concurrent List.Step 2: Identify that economic and social planning is specifically mentioned in the Concurrent List.Step 3: Understand that if it were in the Union List, only Parliament could legislate on it.Step 4: If it were in the State List, only state legislatures would have power, which is not the case for planning.Step 5: Therefore, conclude that economic planning lies in the Concurrent List. Verification / Alternative Check: Constitutional law textbooks and summaries of the Seventh Schedule mention that entry 20 in the Concurrent List is economic and social planning. This is often cited in exam preparation material explaining why planning commissions or related bodies require cooperation between both levels of government. This clear statement confirms that the correct answer is the Concurrent List. Why Other Options Are Wrong: If economic planning were in the Union List, state governments would have no independent legislative role in this vital area, which is contrary to the actual constitutional design. The State List is reserved for matters where states should have primary control, such as police and public health, not for national economic planning as a whole. Options D and E are not precise and do not reflect the constitutional text, so they must be rejected. Common Pitfalls: Students sometimes guess Union List because national plans and central institutions are very visible. Others guess State List due to the important role of states in implementing schemes. The safest way is to remember the exact entry number in the Concurrent List and the idea that planning is a shared responsibility, which is why it is placed there rather than exclusively with one level of government. Final Answer: Economic planning is included in the Concurrent List of the Constitution of India.

Question 9

For each perfectly competitive firm operating in the long run, which equality correctly holds between price and cost measures?

Accepted Answer

Introduction / Context: This question examines your understanding of the long run equilibrium of a perfectly competitive firm in microeconomics. Perfect competition is a benchmark market structure where many small firms sell identical products and no single firm can influence the price. In the long run, firms adjust their output and scale so that economic profits are driven to zero and a specific cost condition holds at the chosen output level. Given Data / Assumptions: The market structure is perfect competition. The time horizon is the long run, when firms can adjust all inputs. We must compare price with marginal and average costs. Standard textbook assumptions about cost curves and free entry are implied. Concept / Approach: In a perfectly competitive market, each firm is a price taker, so price equals marginal revenue. Profit maximisation requires producing where marginal cost equals marginal revenue, so in equilibrium price equals marginal cost. In the long run, free entry and exit ensure that firms earn only normal profit, which happens when price equals minimum average total cost. Therefore, in long run equilibrium we have price equals marginal cost equals minimum average total cost. Step-by-Step Solution: Step 1: Recall that in perfect competition marginal revenue equals price at all output levels.Step 2: For profit maximisation, the firm sets output where marginal cost equals marginal revenue.Step 3: Combine these facts to get price equals marginal cost at the chosen output.Step 4: In the long run, entry and exit drive economic profit to zero, which occurs when price equals average total cost.Step 5: At the efficient scale in this market, the firm produces where average total cost is at its minimum, so price equals marginal cost equals minimum average total cost. Verification / Alternative Check: Standard microeconomics diagrams of long run equilibrium for a perfectly competitive firm show the horizontal demand curve at the point where it is tangent to the firm average total cost curve at its minimum point and also intersects the marginal cost curve. The tangency and intersection points confirm that price equals marginal cost and equals minimum average total cost simultaneously. This visual confirmation matches the statement in option C. Why Other Options Are Wrong: Option A equates price, marginal cost and average variable cost, but in long run equilibrium it is the average total cost, not only the variable part, that equals price. Option B is incorrect because price is not equal to average profit; average profit is zero in long run competitive equilibrium, while price is positive. Option D is incomplete, as minimum average variable cost does not capture fixed costs and does not represent the true long run equilibrium condition. Thus, only option C correctly states the equality that holds. Common Pitfalls: Candidates sometimes confuse average variable cost with average total cost, especially when thinking about shutdown decisions. They may also forget that in the long run all costs are variable, which shifts focus to total cost measures. Another mistake is to think that any point where marginal cost equals average cost is automatically efficient; in fact, it must be at the minimum of the average total cost curve. Keeping these distinctions clear will help in solving similar questions. Final Answer: For a perfectly competitive firm in the long run, price equals marginal cost and also equals minimum average total cost.

Question 10

According to the Commerce Ministry report Logistics Ease Across Different States (LEADS), which Indian state topped the logistics index chart in terms of logistics performance?

Accepted Answer

Introduction / Context: The Logistics Ease Across Different States (LEADS) index is an initiative of the Commerce Ministry to rank Indian states on their logistics environment, performance and regulatory climate. It provides a comparative picture of how efficiently goods can move through different regions. This question asks which state topped the logistics index chart in that report. Given Data / Assumptions: The ranking is based on the LEADS report of the Commerce Ministry. We are asked about the state that came first on the logistics index chart. Options include Maharashtra, Andhra Pradesh, Gujarat and Karnataka. We assume the initial widely cited edition of the index where the top state gained attention in current affairs. Concept / Approach: The LEADS index evaluates states on infrastructure, services, safety, regulatory processes and other logistics related factors. In the first widely publicised report and in several subsequent years, Gujarat emerged at the top due to its strong port infrastructure, industrial corridors and logistics friendly policies. Competitive exam notes often highlight Gujarat as the leading state in logistics performance in this index. Step-by-Step Solution: Step 1: Recall what the LEADS index measures and which states are industrial leaders in logistics.Step 2: Identify Gujarat as a state with major ports, good road connectivity and robust industrial zones.Step 3: Remember that news headlines emphasised Gujarat topping the first LEADS index prepared by the Commerce Ministry.Step 4: Compare this with Maharashtra, Andhra Pradesh and Karnataka, which performed well but were not consistently ranked number one in those early reports.Step 5: Conclude that Gujarat is the state referred to in the question. Verification / Alternative Check: Press information releases and economic survey style summaries highlight that Gujarat led the rankings in the LEADS index when it was introduced, followed by a few other states. Exam oriented compilations of that year also list Gujarat at the top under questions about logistics performance. Since the question asks which state topped the chart, Gujarat is the answer that matches both official releases and preparation material. Why Other Options Are Wrong: Maharashtra is an important industrial state with major ports and large cargo movement, but it did not occupy the top spot in the particular LEADS ranking being referenced. Andhra Pradesh and Karnataka also have strong infrastructure but were placed lower than Gujarat in the same report. Hence, while all these states are significant players in logistics, the question is specifically about the state that ranked first, which is Gujarat. Common Pitfalls: Candidates sometimes guess Maharashtra because of Mumbai port and the state large economy, or Karnataka due to its technology driven growth. Others may confuse different rankings such as ease of doing business with logistics performance. To avoid such mistakes, associate Gujarat specifically with logistics leadership in the LEADS index, while other states may lead in different indices. Final Answer: According to the LEADS logistics index, Gujarat topped the logistics performance chart among Indian states.

Question 11

In Indian Parliamentary procedure, a cut motion that proposes to reduce a particular demand for grant by exactly Rs 100 is known as which specific type of cut motion?

Accepted Answer

Introduction / Context: In the Indian Parliamentary system, members of Parliament have several tools to scrutinise and influence government expenditure. One such tool is the system of cut motions that can be moved on the demands for grants presented in the budget. Each type of cut motion has a specific purpose and a characteristic way in which the amount of demand is reduced. This question focuses on identifying the name of the cut motion in which the proposed reduction in a demand for grant is a small, symbolic amount of exactly Rs 100. Given Data / Assumptions: We are dealing with cut motions related to demands for grants in the Lok Sabha. The motion in question proposes to reduce the amount of a demand for grant by Rs 100. Common types of cut motions include policy cut, economy cut, and token cut. The options also mention other budgetary concepts like vote on account and guillotine, which are related but distinct procedures. Concept / Approach: There are three classic types of cut motions in Indian Parliamentary practice. A disapproval of policy cut (policy cut) seeks to reduce the demand for a grant to Re 1, indicating that the member disapproves of the policy underlying that demand. An economy cut seeks to reduce the demand by a specified amount, usually to suggest that the expenditure can be reduced without harming the service. A token cut is used to ventilate a specific grievance within the sphere of government responsibility and always proposes a reduction of exactly Rs 100. The symbolic nature of the Rs 100 reduction is what distinguishes a token cut motion from the other types. Step-by-Step Solution: Step 1: Recall that in a policy cut motion, the amount of the demand is reduced to Re 1 to express total disapproval of the policy.Step 2: Remember that an economy cut motion proposes a reduction of a substantial amount, which can vary depending on what the member considers to be the possible saving.Step 3: In contrast, a token cut motion proposes a reduction of exactly Rs 100 in the demand for a grant to highlight a specific grievance.Step 4: The question clearly states that the demand is reduced by Rs 100, which matches the definition of a token cut motion.Step 5: Therefore, among the given options, the correct answer is token cut motion. Verification / Alternative check: Standard Indian polity handbooks and parliamentary procedure guides list the three cut motions and specify the amount involved in each. Policy cut involves reduction to Re 1, economy cut involves reduction by a specified large amount, and token cut involves a fixed reduction of Rs 100. The purpose of the token cut is not to drastically reduce expenditure but to symbolically raise an issue. Since the amount in the question is exactly Rs 100, this matches the token cut description perfectly, which confirms the choice. Why Other Options Are Wrong: Economy cut motion: This involves a reduction by a specified amount that is usually more than a token sum and is aimed at securing economy in expenditure, not a fixed Rs 100. Disapproval of policy cut motion: This reduces the demand to Re 1, expressing total disagreement with the policy, and does not mention the specific figure of Rs 100. Vote on account: This is a provision for a temporary grant to meet essential expenditure until the full budget is passed, not a type of cut motion. Guillotine on demands for grants: Guillotine refers to the process of putting all outstanding demands to vote without discussion on a fixed day, not a motion to reduce a demand by Rs 100. Common Pitfalls: Students often confuse economy cut with token cut because both involve reducing the demand amount. A simple way to avoid this confusion is to remember the exact figures: policy cut reduces to Re 1, token cut reduces by Rs 100, and economy cut reduces by any other specified amount that reflects a proposed saving. Keeping these figures and purposes clear helps in correctly identifying the type of cut motion in examination questions. Final Answer: A cut motion that reduces a demand for grant by exactly Rs 100 is called a token cut motion.

Question 12

If the Reserve Bank of India (RBI) reduces the cash reserve ratio (CRR) that commercial banks must maintain, what will be the most likely impact on the overall process of credit creation in the banking system?

Accepted Answer

Introduction / Context: This question deals with an important tool of monetary policy used by the Reserve Bank of India (RBI): the cash reserve ratio (CRR). The CRR specifies the percentage of their deposits that commercial banks must keep as cash reserves with the RBI. Understanding how changes in CRR affect banks ability to create credit is fundamental for topics related to money supply, monetary policy, and banking operations in the Indian economy. Given Data / Assumptions: CRR is the fraction of deposits that banks must maintain as cash reserves with the RBI. The RBI is assumed to reduce the CRR. Commercial banks continue to follow the fractional reserve system. We assume that banks are willing and able to lend additional funds when they have excess reserves. Other policy tools and economic conditions are considered unchanged for the purpose of this question. Concept / Approach: Under the fractional reserve banking system, commercial banks keep only a fraction of deposits as reserves and lend out the rest, which leads to multiple expansion of deposits and credit. The cash reserve ratio determines the minimum portion that must be held as reserves with the RBI. When the RBI reduces the CRR, banks are required to keep a smaller fraction of their deposits as reserves. This frees up more funds that can be used for lending and investment, thereby increasing the capacity of the banking system to create credit. Conversely, an increase in CRR would absorb liquidity and reduce credit creation. Step-by-Step Solution: Step 1: Recognise that CRR is a mandatory reserve requirement. A lower CRR means banks can hold fewer funds idle with the RBI.Step 2: When CRR is reduced, a portion of the funds that were previously locked as reserves is released back to the banks as excess reserves.Step 3: Banks can use these excess reserves to extend new loans or purchase securities, which increases their interest earning assets.Step 4: Through the credit multiplier process, each new loan leads to multiple rounds of deposits and further lending, expanding overall credit in the economy.Step 5: Therefore, a reduction in CRR increases the credit creation capacity of the banking system.Step 6: The correct description of this effect is that credit creation will increase. Verification / Alternative check: We can verify the effect using the simple money multiplier formula in a fractional reserve system. If the required reserve ratio (rr) falls, the theoretical money multiplier, which is 1 / rr, becomes larger. For example, if CRR falls from 4 per cent to 3 per cent, the multiplier increases from 25 to about 33.33. This means that the same initial injection of reserves now supports a larger expansion of deposits and credit. This numerical reasoning confirms that lower CRR is expansionary for credit and money supply. Why Other Options Are Wrong: It will decrease credit creation: This would be true if the RBI increased the CRR, not when it reduces the ratio. It will have no impact on credit creation: Changes in CRR are specifically used as a tool to influence liquidity and credit, so there is definitely an impact. The impact on credit creation will be uncertain and indefinite: While actual lending depends on many factors, the basic direction of the effect of a CRR cut is clear and expansionary. It will completely stop credit creation by banks: This is the opposite of what happens; credit creation becomes easier, not impossible. Common Pitfalls: Students sometimes confuse CRR with other measures like statutory liquidity ratio (SLR) or open market operations and may incorrectly assume that any policy change tightens credit. A simple way to remember the effect is that a lower required reserve ratio frees more money for lending and therefore increases the scope for credit creation, while a higher ratio locks up more funds with the central bank and restricts lending. Final Answer: If the RBI reduces the cash reserve ratio, the credit creation capacity of banks will increase.

Question 13

In macroeconomics, what is the slowdown in the rate of increase of the general price level of goods and services in a country's GDP over time (that is, inflation is still positive but rising more slowly) called?

Accepted Answer

Introduction / Context: In macroeconomics, it is important to distinguish between different price level phenomena such as inflation, deflation, disinflation, reflation, and stagflation. Although these terms sound similar, they refer to different situations in an economy. This question asks specifically about a situation where prices are still rising, but the pace at which they rise has slowed down compared to earlier periods. Understanding the correct term for this situation helps in interpreting economic reports and central bank statements. Given Data / Assumptions: The focus is on the rate of increase of the general price level, not just the price level itself. Prices are still going up; inflation is positive. The rate at which prices are increasing has slowed down over time. We are not dealing with an absolute fall in prices or a situation of zero inflation. The options offer definitions of deflation, disinflation, inflation, reflation, and stagflation. Concept / Approach: Inflation is the sustained increase in the general price level of goods and services over time. Disinflation is a reduction in the rate of inflation, meaning that inflation is still present but at a slower pace than before. Deflation refers to a sustained fall in the overall price level, where inflation becomes negative. Reflation is an attempt through policy to raise the general price level from a period of deflation or very low inflation. Stagflation combines stagnant or falling output with high inflation. Because the question clearly describes a slowdown in the rate of increase of prices without indicating that prices are actually falling, the correct term is disinflation. Step-by-Step Solution: Step 1: Identify the key condition in the question: the rate of increase of prices is slowing down, but prices are still increasing.Step 2: Recognise that if prices were falling, we would be dealing with deflation, but the question does not mention any fall.Step 3: Recall the definition of disinflation: a reduction in the rate of inflation, where inflation remains positive but gradually declines.Step 4: Understand that plain inflation refers to the presence of rising prices, not to the change in the inflation rate itself.Step 5: Reflation refers to policy interventions to raise prices back to a desired level and is not simply a slowdown in inflation.Step 6: Stagflation includes both high inflation and stagnant output, which is not described in the question.Step 7: Therefore, the situation described matches disinflation. Verification / Alternative check: To verify, imagine annual inflation rates changing from 8 per cent to 6 per cent to 4 per cent over three years. Prices are still increasing each year, but the inflation rate is declining. Economists call this pattern disinflation, not deflation, because the price level continues to rise. In deflation, the inflation rate would turn negative, such as -2 per cent, meaning the price level actually falls. This simple numerical illustration confirms that the slowdown in the rate of increase in prices is best described as disinflation. Why Other Options Are Wrong: Deflation (a sustained fall in the general price level): This requires the price level to decline, which is not stated in the question. Inflation (a continuous rise in the general price level): This describes rising prices but says nothing about the change in the rate of inflation. Reflation (a deliberate policy to raise prices from a low level): This is a policy action, not a description of a slowing inflation rate. Stagflation (high inflation with stagnation of output): This combines inflation with poor growth, which goes beyond the question focus on price behaviour alone. Common Pitfalls: Many learners mistakenly use deflation and disinflation interchangeably, but they are different. Deflation implies falling prices and can be harmful because it may discourage spending and investment. Disinflation, on the other hand, often reflects a successful monetary policy that is gradually bringing high inflation down to a more comfortable level. Remembering that disinflation refers to a slowdown in inflation, while deflation refers to actual price declines, helps avoid confusion in exam questions and economic discussions. Final Answer: The slowdown in the rate of increase of prices over time is called disinflation.

Question 14

Consider the following statements about Bitcoin and similar 'cryptocurrencies': I. Bitcoin is a decentralised electronic payment system. II. Only a finite number of bitcoins can ever be created by miners. III. Bitcoins are indivisible units of curre…

Accepted Answer

Introduction / Context: Bitcoin is the first and most well known cryptocurrency and is frequently mentioned in questions on Indian economy and general awareness. To answer such questions accurately, it is important to understand the basic design features of Bitcoin, including decentralisation, supply limits, divisibility, and the concept of blockchain. This question presents four statements about Bitcoin and asks you to identify which of them are correct, testing both conceptual clarity and attention to detail. Given Data / Assumptions: Statement I: Bitcoin is a decentralised electronic payment system. Statement II: Only a finite number of bitcoins can ever be created by miners. Statement III: Bitcoins are indivisible units of currency. Statement IV: Every bitcoin transaction is recorded in a ledger called the blockchain. We assume standard technical descriptions of Bitcoin as implemented in practice. Concept / Approach: Bitcoin was designed as a decentralised digital currency that does not depend on a central authority such as a government or central bank. Transactions are verified by a network of nodes and recorded in a distributed ledger known as the blockchain. The Bitcoin protocol has a built in limit on the total number of bitcoins that can ever be mined, often cited as 21 million. However, bitcoins are highly divisible; each bitcoin can be divided into many smaller units (the smallest commonly referred to as a satoshi), so the claim that bitcoins are indivisible is incorrect. The correct approach is to evaluate each statement in light of these basic facts. Step-by-Step Solution: Step 1: Evaluate Statement I. Bitcoin does not rely on a central issuing authority; it operates on a peer to peer network, so it is correctly described as a decentralised electronic payment system.Step 2: Evaluate Statement II. The Bitcoin protocol sets a maximum supply cap, meaning that only a finite number of bitcoins can ever be created by mining. This statement is correct.Step 3: Evaluate Statement III. Bitcoins are not indivisible; one bitcoin can be split into many smaller units, allowing very small value transactions. Therefore, this statement is incorrect.Step 4: Evaluate Statement IV. Bitcoin uses a distributed ledger technology known as the blockchain, where every confirmed transaction is recorded in blocks that are cryptographically linked. This description is correct.Step 5: Combine the correct statements. Statements I, II and IV are correct, while III is incorrect.Step 6: Among the given options, the combination (i), (ii) and (iv) corresponds to this set of correct statements. Verification / Alternative check: To verify, consider how Bitcoin functions in practice. Users send and receive bitcoins through digital wallets without a central clearing house, which illustrates decentralisation. Mining rewards and the halving schedule are defined in the protocol in such a way that total supply approaches a fixed upper limit, confirming statement II. Wallet applications routinely allow users to specify amounts far smaller than one bitcoin, for example 0.001 or 0.00000001 bitcoin, showing that bitcoins are divisible and invalidating statement III. Finally, blockchain explorers allow anyone to view the history of transactions recorded in the ledger, which supports statement IV. This cross check confirms that only I, II and IV are correct. Why Other Options Are Wrong: (i), (ii) and (iii): This option wrongly includes statement III, which claims that bitcoins are indivisible units, contradicting their actual divisibility. (i), (iii) and (iv): This combination again includes the incorrect statement about indivisibility and omits the correct statement II about finite supply. (i), (ii), (iii) and (iv): This suggests all statements are correct, but statement III is clearly false. (ii), (iii) and (iv): This option excludes the correct statement I on decentralisation and includes the incorrect statement III. Common Pitfalls: Many learners confuse the idea of a finite total supply with indivisibility and assume that if the number of bitcoins is capped, each unit must be indivisible. In reality, cryptocurrencies can have both a fixed maximum number of units and high divisibility at the same time. It is also easy to overlook the decentralised nature of Bitcoin and think of it as being controlled by some central company or authority. Keeping the core features distinct decentralisation, fixed supply cap, divisibility, and blockchain recording helps in accurately evaluating statements in exam questions. Final Answer: The correct statements are I, II and IV, so the right option is (i), (ii) and (iv).

Question 15

In macroeconomics, inflation is commonly described as a situation that can be summarised by which of the following phrases about money and goods in an economy?

Accepted Answer

Introduction / Context: Inflation is one of the most important concepts in macroeconomics and everyday economic discussion. It refers to a sustained rise in the general price level of goods and services over time. A popular way to describe the essence of inflation is through a simple phrase that compares the amount of money in the economy to the amount of goods available. This question asks you to identify that widely used phrase, which captures the demand side view of inflation in intuitive terms. Given Data / Assumptions: We are talking about inflation, that is, a general and sustained increase in prices. The options provide several phrases that relate money, goods, and people. We assume a basic understanding of supply and demand in determining prices. The famous phrase associated with inflation is used in many textbooks and speeches by economists. Concept / Approach: From a demand side perspective, inflation can be seen as a situation where aggregate demand in the economy outstrips aggregate supply at the existing price level. When there is too much purchasing power or money in the hands of consumers and investors relative to the available supply of goods and services, they bid up prices, leading to inflation. This idea is popularly summarised as too much money chasing too few goods. It does not mean that the number of people alone causes inflation, but rather the excess of monetary demand over real output. Step-by-Step Solution: Step 1: Focus on the fact that inflation involves rising prices due to demand being high relative to supply.Step 2: Identify the phrase that emphasises an excess of money (purchasing power) relative to goods (output).Step 3: The option that states too much money chasing too few goods captures this relationship directly.Step 4: Too little money chasing too many goods suggests weak demand and falling prices, which would be associated with deflation or disinflation, not inflation.Step 5: Options referring to too many people focus on population rather than the monetary side and do not directly express the inflation mechanism.Step 6: Therefore, the correct phrase for inflation is too much money chasing too few goods. Verification / Alternative check: In basic macroeconomic models, when the money supply grows faster than the real output of the economy, and if the velocity of money is reasonably stable, the result is upward pressure on the price level. Real life episodes of high inflation often coincide with rapid growth in money and credit relative to production. This supports the intuition behind the phrase too much money chasing too few goods. While there are also cost push and structural explanations of inflation, the demand pull view is accurately encapsulated in this widely quoted expression. Why Other Options Are Wrong: Too little money chasing too many goods: This describes a situation of abundant supply and weak demand, which would tend to lower prices rather than raise them. Too many people chasing too few goods: Population pressure alone does not automatically cause inflation; what matters more is effective monetary demand. Too many people chasing too little money: This refers to poverty or lack of purchasing power, and would not normally lead to rising prices across the board. Too much credit and zero supply of goods: Zero supply is an extreme and unrealistic situation; even if supply is constrained, inflation is better understood as an imbalance between demand and available output, not literally zero goods. Common Pitfalls: Students sometimes confuse the number of people with the amount of money, assuming that more people automatically means more inflation. However, inflation is about purchasing power relative to output, not simply population size. Another mistake is to forget that the famous phrase refers to both money and goods; remembering both elements makes it easier to recall the correct option in exams. Final Answer: Inflation is often described as a situation of too much money chasing too few goods.

Question 16

In economics, which one of the following activities would be classified as 'labour' as a factor of production, because it involves human effort used for economic purposes rather than purely for personal pleasure?

Accepted Answer

Introduction / Context: In economics, labour is defined as any physical or mental effort undertaken by human beings for the purpose of earning income or creating economic value. Not every kind of effort or activity qualifies as labour in this technical sense. Activities done purely for personal satisfaction or love, with no intention of earning or contributing to the market, are not treated as labour in factor of production terminology. This question asks you to distinguish between economic and non economic activities using this definition. Given Data / Assumptions: Option (a) describes a musician performing at a ticketed benefit concert to raise funds. Option (b) describes a painter who paints only for his own personal pleasure. Option (c) describes reading a book purely as a hobby. Option (d) describes a mother teaching her own son at home without any payment. Option (e) describes a person playing music alone in a park just for enjoyment. We assume labour in economics means effort used in some form of organised or market oriented production or service, whether or not the individual personally keeps the earnings. Concept / Approach: Labour, as a factor of production, refers to all human efforts used in the production of goods and services that have economic value. The key elements are that the effort is not purely for self satisfaction and that it contributes to some form of output demanded in the economy. It may be paid or unpaid for the individual worker, but it should be part of an organised activity that generates or supports income. Personal hobbies, self education, and unpaid family care done solely for love or enjoyment are not counted as labour in this narrow economic sense. A musical performance at a ticketed benefit concert aims to generate funds and is part of an organised service, so it qualifies as labour. Step-by-Step Solution: Step 1: Consider option (a). A musician performing at a benefit concert is using skill and effort to provide entertainment for an audience that pays for tickets. Even if the funds raised go to charity, the activity is economically productive and typically organised.Step 2: Consider option (b). A painter working only for his own pleasure is engaged in a personal hobby. There is no market output or payment, so this is not labour in the economic sense.Step 3: Consider option (c). Reading a book purely as a hobby is self directed leisure activity, not an input into production.Step 4: Consider option (d). A mother teaching her own son without pay is an example of domestic or household work motivated by love and responsibility, not organised market oriented labour.Step 5: Consider option (e). A person playing music alone in a park for personal enjoyment is also a leisure activity and does not create economic value for others.Step 6: Therefore, only the musician providing a performance at a ticketed benefit concert is clearly supplying labour as a factor of production. Verification / Alternative check: Economics textbooks often classify work into economic and non economic activities. Economic activities include those that are done with the objective of earning income or producing goods and services that are traded or valued in the market. Non economic activities include hobbies, family care, and charitable acts performed from love or moral duty, without an economic motive. A concert performance, even if for charity, involves a service for which people are willing to pay and which could be valued in money terms. On the other hand, painting for self amusement or reading as a hobby are examples of non economic activities. This classification verifies that option (a) represents labour. Why Other Options Are Wrong: A painter working only for his own personal pleasure: This is a hobby unless he sells his paintings; as described, it is not an economic activity. Reading a book purely as a hobby in free time: This is leisure and self improvement, not labour in the production sense. A mother teaching her own son at home without pay: Although very valuable socially, it is not counted as labour as a factor of production because it is not part of market oriented production. A person playing music alone in a park just for enjoyment: This is again a personal leisure activity with no direct economic output to others. Common Pitfalls: Students sometimes confuse moral or social value with economic value and may think that unpaid family work should always count as labour. In economic theory, however, the classification is based on whether the activity contributes to market production or is undertaken with an economic motive. Remembering this distinction between economic and non economic activities helps in correctly identifying examples of labour in exam questions. Final Answer: The activity that counts as labour in economics is a musician performing at a ticketed benefit concert to raise funds.

Question 17

In the context of Indian monetary policy, the term 'Open Market Operations' (OMOs) specifically refers to which of the following activities carried out by the Reserve Bank of India (RBI)?

Accepted Answer

Introduction / Context: Open Market Operations (OMOs) are one of the most important tools of monetary policy used by the Reserve Bank of India (RBI) to control liquidity and influence interest rates in the economy. Many competitive examinations test whether candidates can correctly identify what OMOs actually involve, as opposed to other common banking activities. This question focuses on the precise meaning of the term in the Indian monetary system. Given Data / Assumptions: The context is Indian monetary policy and the role of the RBI. We are asked to define what 'Open Market Operations' refer to. The options mention borrowing by banks, lending by banks, purchase and sale of government securities, deposit mobilisation, and currency issuance. We assume the standard textbook definition of OMOs as used by central banks worldwide. Concept / Approach: Open Market Operations are the buying and selling of government securities in the open market by a central bank, such as the RBI. When the RBI buys government securities, it injects liquidity into the banking system; when it sells government securities, it absorbs liquidity. This tool helps the RBI manage short term interest rates, control money supply, and stabilise financial markets. Other activities like borrowing by banks from the RBI, deposit mobilisation, and commercial lending are important but are not technically called OMOs. Step-by-Step Solution: Step 1: Recall that the key idea behind OMOs is the central bank using government securities as an instrument to add or drain liquidity.Step 2: When the RBI purchases government securities from banks or the public, it credits their accounts, increasing the reserves and liquidity in the banking system.Step 3: When the RBI sells government securities, buyers pay for them, which reduces their bank balances and thereby reduces liquidity.Step 4: This process of buying and selling government securities in the open market is precisely what is meant by Open Market Operations.Step 5: Borrowings by scheduled banks from the RBI are part of the lender-of-last-resort and refinance facilities, not OMOs.Step 6: Deposit mobilisation, commercial lending, and issuance of new currency notes are other banking functions and do not define OMOs.Step 7: Therefore, the correct option is the purchase and sale of government securities by the RBI in the open market. Verification / Alternative check: Standard macroeconomics texts and RBI publications describe OMOs as a key monetary policy tool. They explain that OMOs help maintain desired liquidity conditions and transmit policy rate changes to the broader financial system. For example, during periods of excess liquidity, the RBI may sell government securities under OMOs to absorb surplus funds. Conversely, in times of tight liquidity, it may buy securities to inject funds. None of these descriptions refer to deposit mobilisation or direct commercial lending, which confirms the correct definition. Why Other Options Are Wrong: Borrowings by scheduled banks from the RBI: These are part of refinance facilities and the liquidity adjustment facility but are not called OMOs. Lending by commercial banks directly to industry: This is normal credit creation by banks and is unrelated to the RBI open market dealings. Deposit mobilisation by commercial banks from the public: This is a liability raising activity of banks, not a central bank operation in the securities market. Issue of new currency notes by the RBI: Although the RBI issues currency, this is separate from OMOs, which relate specifically to government securities transactions. Common Pitfalls: Candidates sometimes confuse any open market activity of banks with Open Market Operations. The key is to remember that OMOs are central bank operations involving government securities, not everyday banking actions like accepting deposits or giving loans. Focusing on the phrase purchase and sale of government securities by the RBI helps you recall the correct definition quickly in exam situations. Final Answer: Open Market Operations refer to the purchase and sale of government securities by the RBI in the open market.

Question 18

Which Article of the Constitution of India explicitly guarantees the Right to Equality before the Law and equal protection of the laws within the territory of India?

Accepted Answer

Introduction / Context: The Constitution of India contains a set of fundamental rights designed to protect individual freedoms and ensure equality. Among these, the Right to Equality occupies a central position. It includes different specific guarantees distributed over several Articles, but one Article in particular uses the exact phrase equality before the law and equal protection of the laws. This question tests your ability to recall the correct Article number associated with this foundational guarantee. Given Data / Assumptions: We are dealing with the Right to Equality in the Indian Constitution. The key phrases are equality before the law and equal protection of the laws. The options list Articles 13, 14, 15, 17, and 19. We assume familiarity with the basic structure of Part III (Fundamental Rights). Concept / Approach: The Right to Equality is primarily covered under Articles 14 to 18 of the Constitution. Article 14 is the starting point and provides that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. This Article extends to all persons, not only citizens. Article 15 prohibits discrimination on specified grounds, Article 16 deals with equality of opportunity in public employment, Article 17 abolishes untouchability, and Article 18 abolishes titles. Article 13, on the other hand, deals with the effect of fundamental rights on existing and future laws, and Article 19 covers certain freedoms, not equality before the law. Step-by-Step Solution: Step 1: Recall that the Right to Equality begins with Article 14 and runs through Article 18.Step 2: Identify the Article that contains the exact wording about equality before the law and equal protection of the laws.Step 3: Article 14 clearly states that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.Step 4: Article 15 focuses on non discrimination on grounds of religion, race, caste, sex or place of birth, but does not itself carry the equality before the law phrase.Step 5: Article 17 abolishes untouchability, an important equality measure, but again is not the Article that states equality before the law.Step 6: Article 13 and Article 19 belong to different parts of the scheme and are not the direct equality before law provision.Step 7: Therefore, the correct answer is Article 14. Verification / Alternative check: Checking any standard text of the Constitution or a reliable guide to fundamental rights shows that Article 14 is the first right listed under the Right to Equality and explicitly uses the phrase equality before the law and equal protection of the laws. Commentaries further explain that Article 14 embodies both the British concept of formal equality before the law and the American concept of equal protection, blended into a single provision. No other Article in the options carries this exact combination of phrases, confirming that Article 14 is correct. Why Other Options Are Wrong: Article 13: This deals with laws inconsistent with fundamental rights and the concept of judicial review, not the direct guarantee of equality before the law. Article 15: It prohibits discrimination on certain grounds but assumes and builds upon the general equality principle laid down in Article 14. Article 17: It abolishes untouchability and forbids its practice in any form; while related to equality, it is not the general equality before law provision. Article 19: This Article guarantees six fundamental freedoms, such as freedom of speech and expression, and is part of the Right to Freedom, not the Right to Equality. Common Pitfalls: Students often remember the range 14 to 18 for the Right to Equality but may mix up the specific content of each Article. A helpful mnemonic is to recall Article 14 as the broad equality clause, Article 15 as non discrimination, Article 16 as equality of opportunity, Article 17 as abolition of untouchability, and Article 18 as abolition of titles. This structure helps in accurately answering questions that ask for the exact Article number for particular guarantees. Final Answer: The Right to Equality before the law and equal protection of the laws is guaranteed under Article 14 of the Constitution of India.

Question 19

In population economics, a sudden and sharp decrease in the birth rate of a country is most likely, other things remaining the same, to have which impact on the economy over time?

Accepted Answer

Introduction / Context: Demographic changes, such as changes in the birth rate, can have important effects on economic variables like per capita income, savings, and investment. A sudden drop in birth rates reduces the growth of population and alters the age structure over time. This question asks you to identify the most likely impact, in general economic theory, of a sharp decrease in birth rate on a country economy, assuming other factors remain broadly unchanged. Given Data / Assumptions: There is a sudden and significant decrease in the birth rate. Other major economic factors such as total output and technology are assumed to stay the same in the short run. We consider long run trends rather than immediate, short term shocks. The options include changes in per capita income, investment, savings, loan requests, and labour productivity. Concept / Approach: Per capita income is defined as national income divided by the population. If the total output or income of the country grows at a given rate, but population growth slows down due to a reduced birth rate, then income per person is likely to increase faster than before. This is sometimes referred to as a demographic dividend, where a lower dependency ratio and a higher share of working age population can raise per capita income and living standards. Direct, immediate jumps in investment or savings are less certain and depend on many other variables, so they are not the most straightforward expected effect. Step-by-Step Solution: Step 1: Recognise that a lower birth rate means slower population growth in future years.Step 2: If total national income grows at a moderate or constant rate, but population grows more slowly, the ratio of income to population (per capita income) tends to rise.Step 3: This effect arises because the same or slightly higher output is shared among fewer additional people, leading to higher average income per person.Step 4: Over time, a lower birth rate also reduces the proportion of dependants (children) in the population, which can allow more resources to be invested in health, education, and capital formation, further supporting higher per capita income.Step 5: While investment and savings may adjust in response to demographic trends, the direction and magnitude of these changes are less direct and depend on policy, behaviour, and expectations.Step 6: There is no clear reason to expect a sudden surge in loan requests due solely to a fall in birth rate.Step 7: Therefore, the most logical and widely accepted outcome is an increase in per capita income over time. Verification / Alternative check: Empirical evidence from countries that have experienced fertility declines shows that, when combined with appropriate policies, lower birth rates can contribute to higher per capita income. Many East Asian economies benefited from a demographic dividend when falling birth rates reduced the dependency ratio and a larger share of the population entered the workforce. While such outcomes are not automatic and require supportive economic conditions, the basic arithmetic of per capita income still holds: slower population growth, with steady or rising output, allows average income per person to rise. Why Other Options Are Wrong: An immediate increase in investment expenditure: Investment decisions depend on expected demand, interest rates, and policy; there is no guarantee of an immediate rise solely due to lower birth rates. A permanent increase in household savings rate: Savings behaviour is influenced by income, preferences, social security systems, and culture; a change in birth rate alone does not guarantee a permanent rise in savings. A surge in loan requests from households: There is no direct theoretical link between a sudden fall in birth rate and an increase in household borrowing. A fall in labour productivity in the long run: Lower birth rates do not automatically reduce productivity; in fact, with fewer dependants, more resources can be invested per worker, potentially increasing productivity. Common Pitfalls: Some learners may think that fewer births always mean fewer workers and therefore lower output, ignoring the role of per capita measures. Others may focus on savings or investment without considering that these are influenced by many factors beyond demography. The key is to distinguish between total output and output per person. When answering exam questions, remember that per capita income is sensitive to population growth, and lower population growth generally supports higher per capita income, all else being equal. Final Answer: A sudden decrease in birth rate is most likely to lead, over time, to an increase in per capita income.

Question 20

In the last decade or so, among the sectors listed below, which has attracted the highest foreign direct investment (FDI) inflows into India?

Accepted Answer

Introduction / Context: Foreign Direct Investment (FDI) plays a major role in India growth story, particularly in sectors that require large capital expenditure and advanced technology. Over the last decade, policy liberalisation and rapid expansion in certain industries have attracted substantial FDI inflows. This question asks you to identify, from among the listed sectors, which one has attracted the highest FDI inflows into India in recent years, as highlighted in many exam oriented summaries and reports. Given Data / Assumptions: The sectors mentioned are food processing, petro chemical, chemicals other than fertilisers, and telecommunications, with an additional option in handloom and textiles. We focus on relative FDI attractiveness among these listed sectors, not necessarily across all sectors of the economy. Recent policy measures have allowed higher FDI limits in certain infrastructure and service sectors. The telecommunications sector in India has undergone rapid expansion, requiring significant capital and technology. Concept / Approach: FDI tends to flow to sectors that offer high growth potential, large markets, and supportive regulatory environments. Telecommunications in India has seen massive growth in subscriber base, data usage, and network expansion during the last decade. The government has progressively liberalised FDI limits in telecom, making it an attractive destination for global telecom companies and investors. While food processing and chemical industries do receive FDI, the scale and visibility of telecom investments have been particularly notable when compared with the other options given. Step-by-Step Solution: Step 1: Consider the telecommunications sector. It has high capital requirements for spectrum auctions, infrastructure rollout, and technology upgrades, making it a natural magnet for foreign investment.Step 2: Review the food processing sector. Although important for value addition in agriculture, FDI inflows into food processing have generally been smaller relative to telecom.Step 3: Assess the petro chemical and other chemical sectors. They do receive foreign investment, but the regulatory and market dynamics have not generated FDI volumes as large as those in telecom in many recent years.Step 4: Handloom and textiles, while significant for employment, have historically been less dominant in FDI rankings compared with capital intensive, technology driven sectors.Step 5: Based on typical FDI statistics and exam summaries, telecommunications is repeatedly highlighted as one of the top FDI attracting sectors among such lists.Step 6: Therefore, among the options provided, the telecommunications sector is the correct choice. Verification / Alternative check: FDI data published over the years show that services and telecom are often among the leading sectors attracting foreign investment. The liberalisation of FDI caps in telecom, entry of multinational telecom operators, and large mergers and acquisitions have all contributed to high inflows. In contrast, while food processing and chemicals are important, they usually appear lower down in FDI ranking tables for given years. When exam preparation books discuss major FDI destinations by sector, telecom is consistently mentioned as a major recipient, confirming this choice for questions framed with these specific options. Why Other Options Are Wrong: Food processing sector: Although it has growth potential and receives FDI, its inflows have typically been lower compared to the telecom sector. Petro chemical industry: This sector does attract investment but has not been consistently highlighted as the highest FDI recipient among such lists in the last decade. Chemicals other than fertilisers: This is an important industrial category but not usually at the top of FDI inflow rankings when compared with telecom. Handloom and textiles sector: This sector is labour intensive and significant for exports, but it has not been a leading sector in terms of FDI inflows. Common Pitfalls: Candidates sometimes assume that sectors linked to agriculture or traditional industries like textiles receive the most FDI due to their social importance. However, FDI decisions are driven more by profitability, market size, and capital requirements. Remember that, among the options given, telecom stands out because it combines large markets, high capital intensity, and liberal FDI rules. Keeping this perspective helps in tackling similar FDI related questions in exams. Final Answer: Among the listed sectors, the telecommunications sector has attracted the highest FDI inflows into India in the last decade or so.

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