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Prelims-IAS –ECONOMICS MCQ Ans-02

1..Consider the following regarding HDI:

  1. It was first developed by Mahbub Ul Haq in an attempt to define and measure the levels of development.
  2. It is released by the United Nations Development Programme (UNDP) in the Human Development Report (HDR).
  3. It is measured on a scale of 0 to 1.
  4. It categorises the countries of the world in three categories based on their HDI score.

Select the correct answer from the codes given below:
(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 3 and 4 only
(d) All of the above

  • ANS-B
  • Countries fall into four broad human development categories Very High Human Development, High Human Development, Medium Human Development and Low Human Development.
  • Prior to 2010 there were only three categories.

2..Which of the following are calculated in the Education Index of HDI?

  1. Mean years of schooling
  2. Expected years of schooling
  3. Gross Enrollment ratio

Select the correct answer using code given below.
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

  • ANS-A
  • New Method of calculating Education Index (2010 onwards)
  • Education index : calculated on the basis of Mean Years of Schooling and Expected Years of Schooling. Old method of calculating Education Index

Education index: Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary Gross Enrolment Ratio (with one-third weighting).


3..Which of the following statements refers to Green GDP?

  1. Conventional GDP figures adjusted for the environmental costs of economic activities.
  2. Growth of Green Investments in economy.
  3. Monetary value of the resources like forests, land and all the economic services provided by them.
  4. Accounts showing the monetized loss of biodiversity, costs caused by climate change.

Select the correct answer using the code given below.
(a) 1 only
(b) 1 and 3 only

(c) 1 and 4 only

(d) 1, 3 and 4 only

  • ANS-C
  • The green gross domestic product (green GDP) is an index of economic growth with the environmental consequences of that growth factored into a country’s conventional GDP.
    Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change.

4..With reference to the recent base year revision released in January 2015, which of the following statements is/are the correct changes?

  1. Headline growth rate will now be measured by GDP at constant market prices instead of GDP at factor cost.
  2. Sector-wise estimates of gross value added (GVA) in manufacturing will now be given at basic prices instead of factor cost.

Select correct answer using codes given below.
(a) 1 only
(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

  • ANS-C
  • The current base year revision follows the revision undertaken in January 2010. The following are the major changes incorporated in the just-concluded base-year revision:

    • Headline growth rate will now be measured by GDP at constant market prices, which will henceforth be referred to as ‘GDP’, as is the practice internationally. Earlier, growth was measured in terms of growth rate in GDP at factor cost at constant prices.
    • Sector-wise estimates of gross value added (GVA) will now be given at basic prices instead of factorcost.

5..Nominal GDP differs from Real GDP because:

(a)  Nominal GDP is measured using a market basket of all goods and services, while real GDP uses a market basket of consumer goods and services.
(b)  Nominal GDP is measured on the basis of current year prices, while the Real GDP is measured on the basis of constant-base year prices.
(c)  Nominal GDP includes the output of both goods and services, while real GDP includes only the output of tangible goods.

(d)  Nominal GDP includes only goods and services with market prices, while real GDP includes estimates of the value of all goods and services.

  • ANS-B
  • The main difference between nominal and real values is that real values are adjusted for inflation, while nominal values are not.
  • As a result, nominal GDP will often appear higher than real GDP.

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