[Mission 2022] QUIZ – 2022: INSIGHTS STATIC QUIZ, 19 March 2022 – Economy

Solution: a)

Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of production, instead of market prices.

Factor cost refers to the actual cost of the various factors of production includes government grants and subsidies but it excludes indirect taxes.

Since, GST is an indirect tax, it is not included in Factor cost.

Solution: b)

Fiscal Deficit is the difference between the Revenue Receipts plus Non-debt Capital Receipts (NDCR) and the total expenditure. FD is reflective of the total borrowing requirements of Government.

Revenue Deficit refers to the excess of revenue expenditure over revenue receipts.

Effective Revenue Deficit is the difference between Revenue Deficit and Grants for Creation of Capital Assets.

Primary Deficit is measured as Fiscal Deficit less interest payments.

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.

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.

Tax concessions to MSMEs help in reducing the prices of goods and services. Thus, increase the demand in the economy.

Increasing the government grants increases the spending capacity.

Solution: b)

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. 

GVA at basic prices will include production taxes and exclude production subsidies available on the commodity.

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

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

Solution: a)

The First Five-year Plan was launched in 1951 which mainly focused in development of the primary sector.  

It was based on the Harrod-Domar model with a few modifications.