# Economic Growth and Development Questions and Answers

## Multiple Choice Questions and Answers (MCQ) on Economic Growth and Development

Question 1 : An increase in national income because of an increase in prices only is called an

a) Increase in real income

b) Increase in national income at constant prices

c) Increase in nominal national income

d) Increase in national income at base year prices

Answer : c

Question 2 : The national income of a country for a given period is equal to the

a) Consumption and investment expenditure incurred by the government

b) Consumption and investment expenditure incurred by Indians abroad

c) Consumption and investment expenditure incurred by private sector

d) Consumption and investment expenditure incurred by all the above

Answer : d

Question 3 : In an open economy, the national income (Y) of the economy is (C,I,G,X,M stand for consumption, investment, government expenditure, total exports, and total imports, respectively.)

a) Y = C + I + G + X

b) Y = C + I + G – X + M

c) Y = C + I + G + (X – M)

d) Y = C + I – G + X – M

Answer : c

Question 4 : The growth rate in per capita income at current prices is higher than that of per capita income at constant prices, because the former takes into account the rate of

a) Growth of population

b) Increase in price level

c) Growth of money supply

d) Increase in the wage rate

Answer : b

Question 5 : The value of all final goods and services produced by the normal residents of a country and their property, whether operating within the domestic territory of the country or outside, in a year is termed

a) Gross national income

b) Net national income

c) Gross domestic product

d) Net domestic product

Answer : a

Question 6 : National income in context of India is the collective income of all the Indians. Which of the following is equivalent to national income?

a) Gross domestic product at market price

b) Net domestic product at factor prices

c) Net national product at market prices

d) Net national product at factor cost

Answer : d

Question 7 : Gross domestic product is more than the net domestic product. Gross domestic product (GDP) is called “gross” because its computation does not exclude

a) Consumption of capital in production process

b) Subsidies on consumption of goods

c) Earnings of foreign exchange in domestic country

d) Informal economy

Answer : a

Question 8 : Which one of the following is responsible for bringing out the report on national and per capital income in India?

a) Ministry of Planning

b) Ministry of Human Resource Development

c) Ministry of Home Affairs

d) Ministry of Statistics and Programme Implementation

Answer : d

Question 9 : The main reason for the low growth rate in India in spite of high rates of savings and capital formation is

a) Low rate of investment rate

b) Low level of foreign investment

c) Low capital/output ratio

d) High capital/output ratio

Answer : d

Question 10 : In India, National Income Statistics are computed by which of the following ?

a) Planning Commission

b) Ministry of Finance

c) Central Statistical Office

d) RBI

Answer : c

Question 11 : Inclusive growth is the agenda of economic development in the future. The strategy of inclusive growth does not focus on

a) Enhancement of education opportunities

b) Reduction of poverty among backward castes

c) Diversifying livelihood for tribal population

d) Promotion of ancillary industry in industrial regions

Answer : d

Question 12 : Disguised unemployment typically leads to low level of income levels despite creating perception of high levels of employment. Disguised unemployment generally exists in

a) Manufacturing sector

b) Agriculture

c) Small-scale industries

d) Urban societies

Answer : b

Question 13 : When large number of workers lose employment due to automaton of industrial processes, it is called

a) Seasonal unemployment

b) Structural unemployment

c) Disguised unemployment

d) Cyclical unemployment

Answer : b

Question 14 : The mechanization and automation of economy is leading to high unemployment rate in the economy. Which one of the following is the unemployment rate?

a) Percentage of unemployment to total population

b) Percentage of employed to total labour force

c) Percentage of unemployed to total work force

d) Percentage of unemployed to total persons not in labour force

Answer : c

Question 15 : If the net national product at market price is higher that the net national product at factor cost, then which of the following is the correct description of relationship between indirect taxes and government subsidies:

a) Government subsidies > Indirect taxes

b) Government subsidies < Indirect taxes

c) Government subsidies = Indirect taxes

d) Government subsidies >= Indirect taxes

Answer : b

Question 16 : Disguised unemployment generally means

a) Total productivity of labour is zero

b) Average productivity of labour is zero

c) Marginal productivity of labour is zero

d) None of the above

Answer : c

Question 17 : Human Development Index comprises literacy rates, life expectancy at birth, and

a) Gross domestic product per head in US dollar

b) Gross domestic product per head at real purchasing power

c) Gross national product in US dollars

d) National income per head in US dollars

Answer : d

Question 18 : Which one of the following is the difference between the value at market prices and value at factor cost for a national income aggregate?

a) Value of consumption of fixed capital

b) Value of indirect taxes net of subsidies

c) Value of net factor income earned abroad

d) Value of subsidies net of indirect taxes

Answer : b

Question 19 : Which one of the following is shown by the Phillips curve?

a) Inverse relationship between real and nominal wages

b) Inverse relationship between the rate of inflation and rate of unemployment

c) Positive relationship between nominal wages and rate of employment

d) Positive relationship between rate of inflation and nominal wages

Answer : b

Question 20 : The Lorenz curve is used to measure the level of inequality in an economy. It shows the relationship between

a) Asset creation and income generation

b) Population groups and their respective income shares

c) Unemployment and inflation

d) Wage, labour hours, and leisure

Answer : b

Question 21 : The costs of factors of production, supplied by the entrepreneurs himself, are known as

a) Implicit costs

b) Explicit costs

c) Fixed costs

d) Variable costs

Answer : a

Question 22 : The growth process that is sustainable and yields broad-based benefits and ensures equality of opportunity for all is termed

a) Faster growth

b) Inclusive growth

c) Balanced growth

d) Sustained growth

Answer : b

Question 23 : In national income accounting, which one of the following is the difference between gross aggregates and net aggregates?

a) The value of net indirect taxes

b) The value of consumption of fixed capital

c) The value of intermediate consumption

d) The value of final consumption

Answer : b

Question 24 : The average rate of domestic savings (gross) for the Indian economy is currently estimated to be in the rage of

a) 15 to 20%

b) 20 – 25%

c) 25 – 30%

d) 30 – 35%

Answer : d

Question 25 : Which one among the following is the most appropriate definition of a country low on human development?

a) A country with a small agricultural sector, low rate of population growth, and low per capita GNP

b) A country with a high population growth rate, a high per capita GNP growth rate, and an unequal distribution of income

c) A country with inadequate health care, poor educational facilities, and lower per capita GNP

d) A country with low per capita GNP, a large population and a small agriculture sector

Answer : c

Question 26 : Consider the following statement

1) The GDP of India (in nominal terms) has crossed \$2 trillion.

2) The per capita income (in nominal terms) in India is more than Rs.100,000.

3) India has the third largest GDP in the world in PPP terms.

4) The ICOR in India is lower than that in the United States.

Which of the above statements are correct?

a) 1 and 2 only

b) 2 and 3 only

c) 2, 3 and 4 only

d) 1, 2 , and 3

Answer : d

Question 27 : Consider the following statements regarding seasonal unemployment:

1) It results in large-scale migration of agricultural labourers from agriculturally backward regions to that of urban developed regions.

2) Many agricultural workers especially landless labourers and marginal farmers remain unemployed after employment season.

Which of the statements given above is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : c

Question 28 : Consider the following statements about the Multidimensional Poverty Index:

1) It indicates the share of the population that is multidimensionally poor adjusted by the intensity of deprivation in terms of living standards, health, and education

2) In South Asia, only Afghanistan has higher levels of poverty than India.

Which of the statements given above is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : c

Question 29 : Which among the following is added to the gross domestic product to arrive at national income of a nation?

1) Depreciation

2) Subsidies

3) Indirect taxes

4) Net factor income abroad

Select the correct answer using the codes given below:

a) 2 only

b) 1 and 2

c) 1 and 3

d) 3 and 4

Answer : a

Question 30 : Consider the following statements:

1) The net domestic product can be greater than the gross domestic product for the same year.

2) The gross national product of an economy is always less than its gross domestic product for the same year.

Which of the statements given above is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : d

Question 31 : Consider the following statements:

1) The income method of GDP calculation considers income received by factors or production only.

2) The GDP calculated through income method is less than the GDP calculated through the expenditure method for the same year.

Which of the statements given above is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : a

Question 32 : With reference to national income accounting, consider the following statements:

1) Gross value added (GVA) at factor cost does not include indirect taxes.

2) GVA at basic prices excludes production taxes and includes production subsidies available on the commodity.

Which of the statements given above is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : a

Question 33 : Consider the following pairs :

 Type of unemployment Example 1) Structural unemployment An unemployed worker from cycle industry because people are buying more cars. 2) Cyclical This kind of unemployment occurs when all those who want to work cannot be employed because there is not enough demand in the market for their work. 3) Frictional unemployment A person leaving his/her job to prepare for civil services.

Which of the pairs given above is/are correctly matched?

a) 1 and 2 only

b) 2 and 3 only

c) 3 only

d) 1, 2, and 3

Answer : d

Question 34 : Consider the following statements:

1) The nominal gross domestic product (GDP) reflects the changes in both prices and quantities of goods and services produced in an economy.

2) Read GDP reflects only the changes in the quantities of the goods and services produced in an economy.

3) GDP deflator reflects the changes in prices of the goods and services produced in an economy.

Which of the statements given above is/are correct?

a) 1 and 2 only

b) 1 and 3 only

c) 2 and 3 only

d) 1,2, and 3

Answer : d

Question 35 : GDP is defined as the output of economic activities carried out within the economic boundaries of a country. Which of the following constitutes the economic territory of a country with respect to GDP calculation?

1) Fishing vessels, oil and natural gas rigs operated by the residents of a country in the international waters.

2) Embassies, consulates, and military establishment of the country located abroad.

3) Ships and aircraft owned by residents of the country operating between two different countries.

4) Industrial establishment owned by residents located abroad.

Select the correct answer using the codes given below:

a) 2 and 3 only

b) 1 and 3 only

c) 1, 2 and 3

d) 1, 2, 3 and 4

Answer : c

Question 36 : With reference to assessment of labour market condition, consider the following statements:

1) The labour force participation rate is the ratio of the number of persons in the labour force to the total population.

2) The unemployment rate is the ratio of the number of unemployed persons to the total population.

Which of the statements given above is/are correct ?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : d

Question 37 : Which of the following affect the accuracy of national income estimation in India?

1) Output of non-monetized sector

2) Non-availability of data about income of small producers or household enterprises

3) Unreported legal income

4) Inflation

Select the correct answer using the does given below:

a) 1, 2, 3 and 4

b) 1, 2, and 3 only

c) 2 and 3 only

d) 1 and 4 only

Answer : a

Question 38 : Which of the following statements is/are correct?

A rise in per capita income does not automatically imply an increase in economic welfare because

1) Distribution of income is not known

2) Rate of economic growth is not known

3) Per capita income suffers from the limitation of averages

Select the correct answer using the codes given below:

a) 1 only

b) 2 only

c) 1 and 3  only

d) 1, 2, and 3

Answer : c