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Economics Test – 02

 

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#1 Which of the following organization is responsible for the preparation of economic survey in India??Solution (b)

  • The Department of Economic Affairs , Finance Ministry of India presents the Economic Survey in the parliament every year, just before the Union Budget .
  • It is prepared under the guidance of the Chief Economic Adviser , Finance Ministry.
  • It is the ministry’s view on the annual economic development of the country.
  • A flagship annual document of the Ministry of Finance, Government of India, Economic Survey reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.
  • This document is presented to both houses of Parliament during the Budget Session.
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#2 Given below are statements regarding current account of balance of payments. 1. A country’s net current account balance is always zero. 2. A positive current account balance indicates that the nation is a net borrower from the rest of the world. 3. A negative current account balance indicates that it is a net lender to the rest of the world. Which of the above are correct??Solution (d)

  • The current account records a nation’s transactions with the rest of the world – specifically its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments – over a defined period of time, such as a year or a quarter.
  • The current account is one half of the balance of payments, the other half being the capital or financial account.
  • While the capital account measures cross-border investments in financial instruments and changes in central bank reserves, the current account measures imports and exports of goods and services; payments to foreign holders of a country’s investments and payments received from investments abroad; and transfers such as foreign aid and remittances.
  • A country’s current account balance may be positive (a surplus) or negative (a deficit); in either case the capital account balance will register an equal and opposite amount.
  • Exports are recorded as credits in the balance of payments, while imports are recorded as debits.
  • Each credit in the current account (such as an export) will be recorded as a corresponding debit in the capital account: the country “imports” the money that a foreign buyer pays for the export.
  • A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower.
  • A current account surplus increases a nation’s net foreign assets by the amount of the surplus, while a current account deficit decreases it by the amount of the deficit.
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#3 White goods, in the context of GST, referred to:?Solution (b)

Statement (b) is correct definition of White Goods.

Statement (a) is definition of Grey goods;

Statement (d) is definition of Demerit goods whereas

Statement (c) is definition of Public goods.

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#4 Which of the following fall under the capital receipts component of government of India? 1. Recovery of loans and advances made by union government to PSUs. 2. Disinvestment proceeds. 3. Dividends from PSUs. Choose the appropriate code?Solution (d)

Government receipts are divided into two groups—Revenue Receipts and Capital Receipts.

All Government receipts which either create liability or reduce assets are treated as capital receipts whereas receipts which neither create liability nor reduce assets of Government are called revenue receipts.

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· Revenue Receipts: Government receipts which neither (i) create liabilities nor (ii) reduce assets are called revenue receipts. These are proceeds of taxes, interest and dividend on government investment, cess and other receipts for services rendered by the government. These are current income receipts of the government from all sources. Government revenue is the means for government expenditure. In the same way as production is means for consumption. Revenue receipts are further classified Into Tax Revenue and Nontax Revenue.

· Capital Receipts: Government receipts which either (i) create liabilities (e.g. borrowing) or (ii) reduce assets (e.g. disinvestment) are called capital receipts. Thus when govt. raises funds either by incurring a liability or by disposing off its assets, it is called a capital receipt.

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#5 Which of the following statement related to Effective Revenue Deficit is correct??Solution (c)

  • Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets.
  • Effective Revenue Deficit signifies that amount of capital receipts that are being used for actual consumption expenditure of the Government.
  • Effective Revenue Deficit was introduced in the Budget of 2011-12 for the first time.
  • In 2012-13, Effective Revenue Deficit was introduced as a fiscal parameter.
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2 thoughts on “Economics Test – 02

  • February 23, 2019 at 6:11 am
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    Well questions, but please give description of each answer and mention options which are correct

    Reply
    • February 23, 2019 at 7:45 am
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      Its a technical thing. we will try to resolve as early. Till then stay connected.

      Reply

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