INSIGHTS STATIC QUIZ 2020 - 21
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Question 1 of 5
1. Question
Consider the following statements regarding Index of Eight Core Industries (ICI).
- The Eight Core Industries comprise more than 40 percent of the weight of items included in the Index of Industrial Production (IIP).
- Index of Eight Core Industries is released by Office of Economic Adviser, Department for Promotion of Industry and Internal Trade.
- Electricity constitutes the highest weightage in the Index of Eight Core Industries.
Which of the above statements is/are correct?
Correct
Solution: a)
The Office of Economic Adviser, Department for Promotion of Industry and Internal Trade releases Index of Eight Core Industries (ICI). ICI measures combined and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).
Refinery Products constitutes the highest weightage followed by Electricity.
Incorrect
Solution: a)
The Office of Economic Adviser, Department for Promotion of Industry and Internal Trade releases Index of Eight Core Industries (ICI). ICI measures combined and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).
Refinery Products constitutes the highest weightage followed by Electricity.
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Question 2 of 5
2. Question
Consider the following statements regarding Overheating of an economy.
- Overheating of an economy occurs when its productive capacity is fully able to keep pace with growing aggregate demand.
- It is generally characterised by above-average rate of economic growth.
Which of the above statements is/are correct?
Correct
Solution: d)
Overheating of an economy occurs when its productive capacity is unable to keep pace with growing aggregate demand.
It is generally characterised by a below-average rate of economic growth, where growth is occurring at an unsustainable rate.
Incorrect
Solution: d)
Overheating of an economy occurs when its productive capacity is unable to keep pace with growing aggregate demand.
It is generally characterised by a below-average rate of economic growth, where growth is occurring at an unsustainable rate.
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Question 3 of 5
3. Question
Which of the following are not considered as tax revenue for the Union Government?
- Excise Duty
- Personal income tax
- Income through Spectrum Auctions
- Dividends on investments
Select the correct answer code:
Correct
Solution: c)
Tax revenues consist of the proceeds of taxes and other duties levied by the central government.
Tax revenues comprise of direct taxes – which fall directly on individuals (personal income tax) and firms (corporation tax), and indirect taxes like excise taxes (duties levied on goods produced within the country), customs duties (taxes imposed on goods imported into and exported out of India) and service tax.
Non-tax revenue of the central government mainly consists of interest receipts (on account of loans by the central government which constitutes the single largest item of non-tax revenue), dividends and profits on investments made by the government, fees and other receipts for services rendered by the government. Cash grants-in-aid from foreign countries and international organisations are also included.
Income generated by the Central Government through the spectrum auctions is part of non-tax revenue.
Incorrect
Solution: c)
Tax revenues consist of the proceeds of taxes and other duties levied by the central government.
Tax revenues comprise of direct taxes – which fall directly on individuals (personal income tax) and firms (corporation tax), and indirect taxes like excise taxes (duties levied on goods produced within the country), customs duties (taxes imposed on goods imported into and exported out of India) and service tax.
Non-tax revenue of the central government mainly consists of interest receipts (on account of loans by the central government which constitutes the single largest item of non-tax revenue), dividends and profits on investments made by the government, fees and other receipts for services rendered by the government. Cash grants-in-aid from foreign countries and international organisations are also included.
Income generated by the Central Government through the spectrum auctions is part of non-tax revenue.
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Question 4 of 5
4. Question
Consider the following statements regarding Transfer payments.
- Transfer Payments are payments which are made without any counterpart of services received by the payer.
- These payments are considered to be non-exhaustive.
- The examples for Transfer Payments are financial aid, social security, and government subsidies for certain businesses.
Which of the above statements is/are correct?
Correct
Solution: d)
Transfer payment is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government subsidies for certain businesses.
For the purpose of calculating gross domestic product (GDP), government spending does not include transfer payments, which are the reallocation of money from one party to another.
Incorrect
Solution: d)
Transfer payment is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government subsidies for certain businesses.
For the purpose of calculating gross domestic product (GDP), government spending does not include transfer payments, which are the reallocation of money from one party to another.
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Question 5 of 5
5. Question
Consider the following statements regarding the difference between CPI and GDP deflator.
- CPI does not include prices of imported goods, while they are included in GDP deflator.
- GDP deflator takes into account all goods and services produced in a country, while CPI takes into account a basket of goods.
- The weights are constant in GDP deflator, but they differ according to production level of each good in CPI.
Which of the above statements is/are incorrect?
Correct
Solution: a)
The first difference is that the GDP deflator measures the prices of all goods and services produced, whereas the CPI measures the prices of only the goods and services bought by consumers. Thus, an increase in the price of goods bought by firms or the government will show up in the GDP deflator but not in the CPI.
The second difference is that the GDP deflator includes only those goods produced domestically. Imported goods are not part of GDP and do not show up in the GDP deflator. CPI includes prices of goods consumed by the representative consumer; hence it includes prices of imported goods.
The third difference is that CPI assigns fixed weights to the prices of different goods, whereas the GDP deflator assigns changing weights. The CPI is computed using a fixed basket of goods, whereas the GDP deflator allows the basket of goods to change over time as the composition of GDP changes.
Incorrect
Solution: a)
The first difference is that the GDP deflator measures the prices of all goods and services produced, whereas the CPI measures the prices of only the goods and services bought by consumers. Thus, an increase in the price of goods bought by firms or the government will show up in the GDP deflator but not in the CPI.
The second difference is that the GDP deflator includes only those goods produced domestically. Imported goods are not part of GDP and do not show up in the GDP deflator. CPI includes prices of goods consumed by the representative consumer; hence it includes prices of imported goods.
The third difference is that CPI assigns fixed weights to the prices of different goods, whereas the GDP deflator assigns changing weights. The CPI is computed using a fixed basket of goods, whereas the GDP deflator allows the basket of goods to change over time as the composition of GDP changes.
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