DAY – 1(InstaTest-1): Insta 70 Days Revision Plan-2021: Topic – ECONOMY, Subject-wise Test 12, Textbook-wise Test 1 and June 2020 CA

Solution: D

Both the statements are correct.

The incremental capital output ratio (ICOR) explains the relationship between the level of investment made in the economy and the consequent increase in GDP. ICOR is a metric that assesses the marginal amount of investment capital necessary for a country or other entity to generate the next unit of production.

The incremental capital output ratio (ICOR) is a frequently used tool that explains the relationship between the level of investment made in the economy and the consequent increase in GDP. ICOR indicates the additional unit of capital or investment needed to produce an additional unit of output.

A lower capital output ratio shows that only low level of investment is needed to produce a given growth rate in the economy. This is considered as a desirable situation. Lower capital output ratio shows that capital is very productive or efficient. Hence, lower capital output ratio shows productivity of capital and technological progress.

https://www.investopedia.com/terms/i/icor.asp

Solution: D

A Lorenz curve is a graphical representation of income inequality or wealth inequality developed by American economist Max Lorenz in 1905. The graph plots percentiles of the population on the horizontal axis according to income or wealth. It plots cumulative income or wealth on the vertical axis, so that an x-value of 45 and a y-value of 14.2 would mean that the bottom 45% of the population controls 14.2% of the total income or wealth. In practice, a Lorenz curve is usually a mathematical function estimated from an incomplete set of observations of income or wealth.

KEY TAKEAWAYS

• A Lorenz curve is a graphical representation of the distribution of income or wealth within a population.
• Lorenz curves graph percentiles of the population against cumulative income or wealth of people at or below that percentile.
• Lorenz curves, along with their derivative statistics, are widely used to measure inequality across a population.
• Because Lorenz curves are mathematical estimates based on fitting a continuous curve to incomplete and discontinuous data, they may be imperfect measures of true inequality.

Solution: D

Factors of production is an economic term that describes the inputs used in the production of goods or services in order to make an economic profit. These include any resource needed for the creation of a good or service. The factors of production include land, labor, capital, and entrepreneurship.

Solution: A

Gross value added (GVA) is defined as the value of output less the value of intermediate consumption. Value added represents the contribution of labour and capital to the production process. When the value of taxes on products (less subsidies on products) is added, the sum of value added for all resident units gives the value of gross domestic product (GDP).

GVA at basic prices will include production taxes and exclude production subsidies available on the commodity. Hence, statement 2 is incorrect.

On the other hand, GVA at factor cost includes no taxes and excludes no subsidies and GDP at market prices include both production and product taxes and excludes both production and product subsidies. Hence, statement 1 is correct.

By formula: GVA at factor cost + (Production taxes less Production subsidies) = GVA at basic prices.

GDP at market prices = GVA at basic prices + Product taxes- Product subsidies

In the revision of National Accounts statistics done by Central Statistical Organization (CSO) in January 2015, it was decided that sector-wise wise estimates of Gross Value Added (GVA) will now be given at basic prices instead of factor cost.

http://www.arthapedia.in/index.php%3Ftitle%3DGross_Value_Added_(GVA)_at_basic_prices_and_GVA_at_Factor_Costs

Solution: C

Both the statements are correct.

Ideally with increase in GDP, the tax collection should also increase. If the economy is growing and business is doing well, naturally, profits will be better and therefore taxes should also be higher.

Efficient tax administration helps in higher tax collection and reduces the tax evasion.

Solution: A

India is likely to emerge as the world’s third largest economy in 2031 (fiscal 2031-32), suggests a recent report by BofA Securities, and should touch Japan’s nominal GDP (in USD) that year.

The projections have assumed 6 per cent real growth rate, 5 per cent inflation and 2 per cent depreciation. Currently, India is the world’s sixth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP).

Solution: C

Expansionary fiscal policy is a form of fiscal policy that involves decreasing taxes, increasing government expenditures or both, in order to fight recessionary pressures.

Increasing the subsidies decreases the out of pocket expenditure. Thus, increases the spending capacity. Hence, statement 1 is incorrect.

Tax rebate to companies increase the profit to companies. This further helps in reducing the prices of goods and services. Thus, increase the demand in the economy. Hence, statement 2 is correct.

Providing loans at higher interest rate decreases the demand for the loans. Thus, it decreases the liquidity in the market and leads to decreases the spending capacity. Hence, statement 3 is incorrect.

Solution: B

Fiscal consolidation is defined as concrete policies aimed at reducing government deficits and debt accumulation. These consolidation plans and detailed measures are given as a per cent of nominal GDP. All measures are quantified to the extent possible. Most of the measures announced in this publication appear to be structural and could improve the underlying primary balance, but some important exceptions exist for pension accounting changes, one-off or temporary measures and rolling back stimulus measures.

Fiscal Consolidation refers to the policies undertaken by Governments (national and sub-national levels) to reduce their deficits and accumulation of debt stock.

Farm loan waiver increases the expenditure of government. Thus, it will go against the principle of fiscal consolidation. Hence Statement 2 is incorrect.

Rationalization of tax base. Thus, it increases the revenue for the government and promotes the fiscal consolidation. Decreasing the subsidies improves fiscal consolidation.

https://www.oecd.org/gov/budgeting/Fiscal%20Consolidation%20Targets,%20Plans%20and%20Measures.pdf

Solution: D

Five-Year Plans (FYPs) are centralized and integrated national economic programs. Joseph Stalin implemented the first Five-Year Plan in the Soviet Union in 1928. Most communist states and several capitalist countries subsequently have adopted them.

China continues to use FYPs, although China renamed its Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to signify the central government’s more hands-off approach to development. India launched its First FYP in 1951, immediately after independence, under the socialist influence of India’s first prime minister, Jawaharlal Nehru.

The First Five-year Plan was launched in 1951 which mainly focused in development of the primary sector.  The total planned budget of Rs.2069 crore (2378 crore later) was allocated to seven broad areas: irrigation and energy (27.2%), agriculture and community development (17.4%), transport and communications (24%), industry (8.4%), social services (16.6%), rehabilitation of landless farmers (4.1%), and for other sectors and services (2.5%).

The period of the three consecutive Annual Plans was 1966–69. It was the period between the third and fourth five year plans. Hence, statement 1 is incorrect.

In indicative Planning, the planning authority sets the broad goals for the economy. The implementation of the plan requires the co-ordination of the various units in the economy. This type of planning in India since the 8th Five-Year Plan. Hence, statement 2 is incorrect.

https://en.wikipedia.org/wiki/Five-Year_Plans_of_India

Solution: A

With increasing fiscal challenges in the aftermath of the global financial crisis, multilateral surveillance of fiscal developments, a key part of the IMF’s surveillance responsibilities, has gained further importance.

In response, the Fiscal Monitor was launched in 2009 to survey and analyze the latest public finance developments, update fiscal implications of the crisis and medium-term fiscal projections, and assess policies to put public finances on a sustainable footing.

The Fiscal Monitor is prepared twice a year by the IMF’s Fiscal Affairs Department. Its projections are based on the same database used for the World Economic Outlook (WEO) and the Global Financial Stability Report (GFSR).

The fiscal projections for individual countries have been prepared by IMF desk economists, and, in line with the WEO guidelines, assume that announced policies will be implemented.

Key Publications of IMF

Other Key Publications

1. World economic outlook
2. Global financial stability report
3. Regional economic prospects
4. Finance and Development

Solution: A

The Coalition for Disaster Resilient Infrastructure (CDRI) is a partnership of national governments, UN agencies and programmes, multilateral development banks and financing mechanisms, the private sector, and knowledge institutions that aims to promote the resilience of new and existing infrastructure systems to climate and disaster risks in support of sustainable development. Hence, statement 1 is correct.

CDRI promotes rapid development of resilient infrastructure to respond to the Sustainable Development Goals’ imperatives of expanding universal access to basic services, enabling prosperity and decent work.

Member Countries:

China is not a member of this coalition. Hence, statement 2 is incorrect.

 Member Organizations:

https://cdri.world/cdri-overview

Source: Yojana 2020

Solution: C

The UN Convention to Combat Desertification (UNCCD) and the Government of the Republic of Korea Forest Service (KFS) have signed a Memorandum of Understanding (MoU) to establish the Peace Forest Initiative (PFI). The Initiative will support land and forest rehabilitation in post conflict areas to reduce peace and security challenges stemming from natural resource degradation. Hence, option (c) is correct.

The PFI was initially launched on 10 September 2019 during the 14th Conference of the Parties to the UNCCD in New Delhi, India.

In supporting needs assessments, the Initiative will engender collaboration, provide guidance, support transparency and support local parties to conflict to resolve their disputes and grievances. The PFI also aims to contribute to land degradation neutrality (LDN) implementation through partnerships that build peace and security.

https://sdg.iisd.org/news/unccd-kfs-sign-mou-establishing-peace-forest-initiative/

Source: Yojana – January 2020

Solution: C

Almost 70% of Maharashtra state’s geographical area lies in the semi-arid region, rendering it vulnerable to water scarcity. 

Women were disproportionately affected by scarcity. This increased their burden in terms of household tasks as they need to travel further in order to search for water, fuel and fodder. This has a direct impact on their sanitation, hygiene and nutritional outcomes, which also affect their next generations.

In order to address the problem, UNICEF along with the government of Maharashtra implemented ‘Women-led Water, Sanitation, Hygiene and Resilient Practices Project’ or W-SHARP in 2018 in the region. The Project sought to enhance water, livelihood and food security across 100 villages which include 10,000 families in two drought-affected areas of the state.

Hence, option (c) is correct.

Source: Yojana – January 2020.

Solution: C

Both the statements given above are correct.

Jal Jeevan Mission, is envisioned to provide safe and adequate drinking water through individual household tap connections by 2024 to all households in rural India.

The programme will also implement source sustainability measures as mandatory elements, such as recharge and reuse through grey water management, water conservation, rain water harvesting.

The Jal Jeevan Mission will be based on a community approach to water and will include extensive Information, Education and communication as a key component of the mission.

The Mission was launched on August 15, 2019.

https://vikaspedia.in/health/sanitation-and-hygiene/jal-jeevan-mission

Solution: D

The Western Ghats aka Sahyadri is a mountain range that covers an area of 160,000 km² in a stretch of 1,600 km parallel to the western coast of the Indian peninsula, traversing the states of Tamil Nadu, Kerala, Karnataka, Goa, Maharashtra and Gujarat and Union territory of Dadra & Nagar Haveli.

Hence, option (d) is correct.

Solution: A

GNI calculates the total income earned by a nation’s people and businesses, including investment income, regardless of where it was earned. It also covers money received from abroad such as foreign investment and economic development aid.

• GDP is the total market value of all finished goods and services produced within a country in a set time period.
• GNI is the total income received by the country from its residents and businesses regardless of whether they are located in the country or abroad. Hence, option (a) is correct.
• GNP includes the income of all of a country’s residents and businesses whether it flows back to the country or is spent abroad. It also adds subsidies and taxes from foreign sources.

Solution: D

E-waste broadly covers waste from all electronic and electrical appliances and comprises of items such as computers, mobile phones, digital music recorders/players, refrigerators, washing machines, televisions (TVs) and many other household consumer items.

A computer contains highly toxic chemicals like lead, cadmium, mercury, beryllium, BFR, polyvinyl chloride and phosphor compounds.

https://vikaspedia.in/energy/environment/waste-management/e-waste-management/e-waste-hazard

Solution: B

Both are related to the categorisation of the Western Ghats as Ecologically Sensitive Areas (ESA).

What did the Gadgil Committee say?

It defined the boundaries of the Western Ghats for the purposes of ecological management. It proposed that this entire area be designated as ecologically sensitive area (ESA).

Within this area, smaller regions were to be identified as ecologically sensitive zones (ESZ) I, II or III based on their existing condition and nature of threat.

None of the six concerned states agreed with the recommendations of the Gadgil Committee, which submitted its report in August 2011.

In August 2012, then Environment Minister constituted a High-Level Working Group on Western Ghats under Kasturirangan to “examine” the Gadgil Committee report in a “holistic and multidisciplinary fashion in the light of responses received” from states, central ministries and others.

Solution: C

About Indian Gaur:

• The gaur, Bos gaurus, also called the Indian bison, is one of the largest extant bovines.
  • It is the tallest species of wild cattle found in India and largest extant bovine.
• It is native to South and Southeast Asia and has been listed as Vulnerable on the IUCN Red List since 1986.
• Distribution: In India, the population was estimated to be 12,000–22,000 in the mid-1990s. The Western Ghats and their outflanking hills in southern India constitute one of the most extensive extant strongholds of gaur, in particular they are found in Nagarhole, Bandipur, Masinagudi National Parks and BR Hills.

Threats

• Diseases, particularly rinderpest and foot-and-mouth disease, transmitted by domestic cattle are a potentially serious threat.
• Hunting for food, medicinal products and handicrafts products.
• Loss of suitable habitat

Solution: D

Sukhna lake:

The man-made Sukhna Lake was built in 1958 by Le Corbusier, the architect of Chandigarh. Located in the foothills of the Shivalik Hills, it was designed to collect runoff water from the Hills. The Lake, which is in the process of being officially notified as a wetland, also has a nearby wildlife sanctuary that is home to sambar, pangolin, wild boars, red jungle fowl, cobras and other species.

The Punjab and Haryana high court has declared Sukhna Lake a “living entity” or “legal person” with rights, duties and liabilities of a living person.

It is declared as a wetland under Wetland (Conservation and Management) Rule 2017 (Wetland Rules)

Solution: C

Remdesivir:

Remdesivir, sold under the brand name Veklury, is a broad-spectrum antiviral medication developed by the biopharmaceutical company Gilead Sciences. It is a drug with antiviral properties that was manufactured by US-based biotechnology company in 2014, to treat Ebola cases. It was also tried in patients of MERS and SARS, both caused by members of the coronavirus family, but experts said it did now show promising results back then. It is now being studied as a COVID-19 treatment.

Solution: B

Pneumonia:

• The World Health Organisation (WHO) identifies pneumonia is the single largest cause of death in children worldwide.
• Every year, it kills an estimated 1.4 million children under the age of five years, accounting for 18% of all deaths of children under five years old worldwide, according to the WHO. This, despite pneumonia being preventable and treatable.

How is it spread?

• Infectious agents may include bacteria, viruses and fungi.
• Streptococcus pneumoniae is the most common cause of bacterial pneumonia in children, and Haemophilus influenzae type b (Hib) is the second most common cause of bacterial pneumonia. Respiratory syncytial virus is the most common viral cause of pneumonia.
• Air sacs in an infected individual’s lungs (alveoli) become inflamed due to deposits of fluid and pus, making it painful and difficult for them to breathe.
• Children and the elderly above the age of 65 years are especially vulnerable.

What are the symptoms of infection?

• Symptoms include high fever and chills, cough with phlegm, physical weakness and a feeling of being unwell, shortness of breath and rapid breathing, and a racing pulse.

How can it be prevented and treated?

• Preventive measures include maintaining hygiene and getting vaccinations against certain pneumonia causing bacteria.
• Saving a child from pneumonia requires urgent treatment, that usually involves the administration of antibiotics, which typically do not cost much. On average, treatment lasts for about five to seven days.

Solution: C

LiDAR- Light Detection and Ranging:

• It is a remote sensing method that uses light in the form of a pulsed laser to measure ranges (variable distances) to the Earth.
• These light pulses—combined with other data recorded by the airborne system— generate precise, three-dimensional information about the shape of the Earth and its surface characteristics.

How it works?

• A lidar instrument principally consists of a laser, a scanner, and a specialized GPS receiver.
• Airplanes and helicopters are the most commonly used platforms for acquiring lidar data over broad areas.
• LiDAR follows a simple principle — throw laser light at an object on the earth surface and calculate the time it takes to return to the LiDAR source. Given the speed at which the light travels (approximately 186,000 miles per second), the process of measuring the exact distance through LiDAR appears to be incredibly fast.

Applications LiDAR used for:

• Agriculture
• The technology is also used in control and navigation for some autonomous cars.
• Object detection for transportation systems
• Hydrology and water management systems
• Geology-related applications
• Archaeology

Solution: A

Arms Trade Treaty (ATT):

• It is an international treaty that regulates the international trade in conventional arms.
• It seeks to prevent and eradicate illicit trade and diversion of conventional arms by establishing international standards governing arms transfers.
• The ATT contributes to international and regional peace, security and stability, reducing human suffering, and promoting cooperation, transparency and responsible action among the international community.
• The Treaty came into force on 24 December 2014.
• At this stage the Treaty has a total of 106 States Parties and 130 Signatory States.
• The ATT Secretariat is headquartered in Geneva, Switzerland.
• India have not yet joined the treaty.

What types of conventional weapons deals does the Arms Trade Treaty seek to regulate?

• Conventional weapons covered by the UN Arms Trade Treaty include tanks and other armored combat vehicles, artillery, attack helicopters, naval warships, missiles and missile launchers, and small arms.
• It also establishes common international standards for the regulation of the international trade in ammunition, weapons parts, and arms components.
• The treaty does not regulate the domestic sale or use of weapons in any country. It also recognizes the legitimacy of the arms trade to enable states to provide for their own security.

Solution: C

Talamaddale:

• It is an ancient form of performance dialogue or debate performance in Southern India in the Karavali and Malnad regions of Karnataka and Kerala.
• The plot and content of the conversation is drawn from popular mythology but the performance mainly consists of an impromptu debate between characters involving sarcasm, puns, philosophy positions and humour.

 How is it different from Yakshagana?

• Unlike the Yakshagana performance, in the conventional ‘talamaddale,’ the artists sit across in a place without any costumes and engage in testing their oratory skills based on the episode chosen.
• If music is common for both Yakshagana performance and ‘talamaddale’, the latter has only spoken word without any dance or costumes.
• Hence it is an art form minus dance, costumes and stage conventions.

Solution: C

Total number days Ramesh alone takes to finish the work = 15days

Thus, work done by Ramesh in one day = 1/15

The total number days worked by Ramesh = 3 days + 3 days = 6 days

Total work done by Ramesh = 6/15 = 2/5.

Therefore, Remaining work done by Suresh = 1- 2/5 = 3/5

If Suresh can finish 3/5 th work in 3 days, then work done by him in one day = 1/5.

Thus, total time required by Suresh alone to complete the wok = 5 days.

Hence, option (c) is correct.

Rani and Vani can together finish a work in 30 days. They worked together for 20 days and then Vani left. After another 20 days, Rani finished the remaining work. In how many days, Rani alone can finish the work?

Solution: A

Suppose pipe A alone takes x hours to fill the tank.
Then pipes B and C will take x/3 and x/6 hours respectively to fill the tank.
Therefore,

1/x + 3/x + 6/x= 1/20 (As it takes 20 hours by three pipes A, B and C to fill the tank)

Thus,  10/x = 1/20

Or x = 200hrs

Hence, option (a) is correct.

Solution: B

A can fill the cistern in 36 minutes, so in 1 min, the cistern filled by A = 1/36
Thus, in 24 min, A can fill the cistern = 24/36 = 2/3.

Remaining part = 1- 2/3 = 1/3

As B can fill full cistern in 48 minutes, so it will fill 1/3rd part in 16 minutes.

Hence, option (b) is correct.

Ans. B.

Statement A is wrong as then the rule of trade would break down. Statement C is wrong as the passage states that India gives subsidies which are far lower than those given by the developed countries. Statement D is wrong as the passage does not talk about the services sector. Hence B is the most accurate answer.