Samacheer Kalvi Class 10 Social Science Solutions Chapter 1 Gross Domestic Product and its Growth

I. Choose the Correct Answer

 

Question 1. GNP equals:
(a) NNP adjusted for inflation
(b) GDP adjusted for inflation
(c) GDP plus net factor income from abroad
(d) NNP plus net property income or abroad
Answer: (c) GDP plus net factor income from abroad
In simple words: GNP is found by adding the net income from foreign countries to the GDP. This accounts for money earned by a country's residents from abroad.

🎯 Exam Tip: Remember the key difference: GDP measures economic activity within a country's borders, while GNP includes income from abroad.

 

Question 2. National Income is a measure of ................
(a) Total value of money
(b) Total value of producer goods
(c) Total value of consumption goods
(d) Total value of goods and services
Answer: (d) Total value of goods and services
In simple words: National Income shows the total value of all goods and services a country makes in a year. It gives an idea of how much a nation produces.

🎯 Exam Tip: The term "National Income" often refers to the market value of all final goods and services produced in an economy over a period.

 

Question 3. Primary sector consist of:
(a) Agriculture
(b) Automobiles
(c) Trade
(d) Banking
Answer: (a) Agriculture
In simple words: The primary sector is where raw materials are gathered, and agriculture is a main part of it. It is the first step in creating goods.

🎯 Exam Tip: Identify primary sector activities as those directly linked to natural resources, like farming, fishing, and mining.

 

Question 4. ................ approach is the value added by each intermediate good is summed to estimate the value of the final good.
(a) Expenditure approach
(b) Value-added approach
(c) income approach
(d) National Income
Answer: (b) Value-added approach
In simple words: This method calculates how much value is added at each step of making a product. It helps avoid counting the same value multiple times.

🎯 Exam Tip: The value-added approach prevents "double counting" by only summing the new value created at each stage of production.

 

Question 5. Which one sector is highest employment in the GDP?
(a) Agricultural sector
(b) Industrial sector
(c) Service sector
(d) None of the options
Answer: (a) Agricultural sector
In simple words: The farming sector usually employs the most people in many developing countries. This is because it needs a lot of manual labor.

🎯 Exam Tip: In developing economies, the agricultural sector often dominates employment, even if its contribution to GDP is lower than other sectors.

 

Question 6. Gross value added at current prices for services sector is estimated at ................ lakh crore in 2018-19.
(a) 91.06
(b) 92.26
(c) 80.07
(d) 98.29
Answer: (b) 92.26
In simple words: In the year 2018-19, the total value added by the services sector, measured at current prices, was around 92.26 lakh crore. This shows the sector's size.

🎯 Exam Tip: For numerical data questions, focus on memorizing the specific figures and the associated time periods (e.g., year) as they are crucial for accuracy.

 

Question 7. India is ................ largest producer in agricultural product.
(a) 1st
(b) 3rd
(c) 4th
(d) 2nd
Answer: (d) 2nd
In simple words: India holds the position of being the second largest producer of agricultural products in the world. This shows its big role in global food supply.

🎯 Exam Tip: Be aware of India's global rankings in key economic indicators, especially in large sectors like agriculture.

 

Question 8. India's life expectancy at birth is ................ years.
(a) 65
(b) 60
(c) 70
(d) 55
Answer: (a) 65
In simple words: On average, a person born in India is expected to live for about 65 years. This number can change over time due to health improvements.

🎯 Exam Tip: Life expectancy is a key indicator of health and development. Knowing the approximate figure for India is useful for general knowledge and exams.

 

Question 9. Which one is a trade policy?
(a) irrigation policy
(b) import and export policy
(c) land-reform policy
(d) wage policy
Answer: (b) import and export policy
In simple words: A trade policy decides how a country trades with others. Rules about importing and exporting goods are a big part of this policy.

🎯 Exam Tip: Trade policies specifically govern the movement of goods and services across national borders, affecting international commerce.

 

Question 10. Indian economy is ................
(a) Developing Economy
(b) Emerging Economy
(c) Dual Economy
(d) All of the options
Answer: (d) All of the options
In simple words: India's economy is seen as developing because it's growing and improving. It's also an emerging economy because it's becoming a bigger player globally, and it has dual characteristics with both traditional and modern sectors.

🎯 Exam Tip: India's economy exhibits characteristics of all these types, reflecting its diverse and transitional nature in the global landscape.

II. Fill in the Blanks

 

Question 1. ................ sector is largest sector in India.
Answer: Service
In simple words: The service sector, which includes jobs like teaching and banking, is the biggest part of India's economy. It creates the most value.

🎯 Exam Tip: Understand the relative contributions of the primary, secondary, and tertiary (service) sectors to India's economy and employment.

 

Question 2. GDP is the indicator of ................ economy.
Answer: economic health
In simple words: GDP shows how well a country's economy is doing. A higher GDP generally means a healthier economy.

🎯 Exam Tip: GDP is a primary measure of a country's economic performance and growth, often used to compare economies globally.

 

Question 3. Secondary sector otherwise called as ................
Answer: Industrial sector
In simple words: The secondary sector is also known as the industrial sector. This is where raw materials are turned into finished products.

🎯 Exam Tip: Connect the secondary sector with manufacturing, construction, and industries that transform raw materials.

 

Question 4. ................ sector is the growth engine of Indian economy.
Answer: Service
In simple words: The service sector helps the Indian economy grow a lot. It includes many jobs and industries that provide services.

🎯 Exam Tip: The service sector's rapid growth in India highlights its role in driving overall economic expansion.

 

Question 5. India is ................ largest economy of the world.
Answer: sixth
In simple words: India's economy is currently ranked as the sixth largest in the world. This position can change as economies grow and shrink.

🎯 Exam Tip: Keep up-to-date with current economic rankings, as these figures can fluctuate year to year.

 

Question 6. India is ................ fastest growing nation of the world.
Answer: fifth
In simple words: India is among the top five fastest-growing economies globally. This means its economy is expanding at a very quick pace.

🎯 Exam Tip: Distinguish between the size of an economy (e.g., largest) and its growth rate (e.g., fastest growing), as they are different measures.

 

Question 7. ................ policy envisages rapid industrialization with modernization for attaining rapid economic growth of GDP.
Answer: Industrial
In simple words: Industrial policy aims to quickly build up industries and use modern technology. This helps the country's economy grow faster.

🎯 Exam Tip: Understand how different economic policies, such as industrial policy, are designed to achieve specific goals like GDP growth.

III. Choose the Correct Statement

 

Question 1. The rate of saving is low in India for the following reason
(i) Low per capita income.
(ii) Poor performance and less contribution of public sector.
(iii) Poor contribution of household sector.
(iv) Savings potential of the rural sector not tapped fully.
(a) (i), (ii), (iv) are correct
(b) (i), (ii) and (iii) are correct
(c) (i), (ii), (iii) and (iv) are correct
(d) (i), (iii) and (iv) are correct
Answer: (c) (i), (ii), (iii) and (iv) are correct
In simple words: All listed reasons contribute to India's low saving rate. Low individual income, public sector issues, household sector problems, and unutilized rural savings all play a role.

🎯 Exam Tip: For "choose the correct statement" questions with multiple factors, carefully evaluate each option to see if it contributes to the given scenario.

IV. Match the Following

 

Question 1. Match the Column I with Column II.

Answer:
A. (iii)
B. (iv)
C. (v)
D. (i)
E. (ii)
In simple words: This match correctly links economic terms with their definitions or related concepts. For example, Per Capita Income is National Income divided by population.

🎯 Exam Tip: When matching, look for direct definitions or primary associations between terms. Formulas are often key indicators.

V. Give Short Answer

 

Question 1. Define National income
Answer: National Income is the total market value of all final goods and services produced by an economy over a period, usually one year. It is also known as Gross National Product (GNP) or National Dividend. It shows the total earnings of a country.
In simple words: National income is the total money value of all goods and services made in a country over a year. It measures how much a nation earns.

🎯 Exam Tip: When defining economic terms, always include the core concept (total value of goods and services), the time period (usually a year), and any alternative names.

 

Question 2. What is meant by Gross Domestic product?
Answer: Gross Domestic Product (GDP) is the total market value of all final goods and services that are produced within a country's borders during a specific period. It is a key measure of a nation's economic output.
In simple words: GDP is the total value of everything a country produces within its own borders in a set time. It's like checking the country's total business activity.

🎯 Exam Tip: Highlight "within the country's borders" for GDP to distinguish it from GNP, which includes income from abroad.

 

Question 3. Write the importance of Gross domestic product.
Answer: GDP is a primary indicator used to measure the economic health of a country. It represents the total monetary value of all goods and services produced over a specific period. This figure helps us understand the size and performance of the economy. A growing GDP often means a healthy economy.
In simple words: GDP is important because it shows how strong a country's economy is. It measures the total value of goods and services made, giving a clear picture of economic performance.

🎯 Exam Tip: Focus on "economic health," "total output," and "size of the economy" as keywords for the importance of GDP.

 

Question 4. What is Per-Capita Income?
Answer: Per-Capita Income is an economic indicator that shows the average living standard of people in a country. It is calculated by dividing the National Income by the total population of that country. It is also known as the output per person in an economy.
In simple words: Per-Capita Income is the average income for each person in a country. You find it by dividing the country's total income by its number of people. It tells you about the living standard.

🎯 Exam Tip: Clearly state the formula (National Income / Population) and its purpose (measuring living standards) when defining Per-Capita Income.

 

Question 5. Define the value added approach with example.
Answer: In the value added approach, the value added by each intermediate good is added up to find the value of the final goods. This method helps avoid counting the same value multiple times. For example, if you make a cup of tea, the tea powder, milk, and sugar are intermediate goods. Each adds value until the final cup of tea is ready, which is the final output.
In simple words: The value-added approach adds up the extra value created at each step of making a product. For example, when making tea, the value added by tea leaves, milk, and sugar are summed up.

🎯 Exam Tip: Use simple, relatable examples like the tea example to illustrate the concept clearly and ensure you mention "intermediate goods" and "final goods."

 

Question 6. Name the sectors contribute to the GDP with examples.
Answer: The three main sectors that contribute to a country's GDP are:
1. **Primary Sector (Agricultural Sector):** This sector involves activities that directly use natural resources. Examples include farming, fishing, mining, and forestry. This is where raw materials are extracted.
2. **Secondary Sector (Industrial Sector):** This sector takes raw materials from the primary sector and processes them into finished goods. Examples include major industries, small-scale industries, and manufacturing (like iron and steel, automobiles).
3. **Tertiary Sector (Service Sector):** This sector provides services rather than producing tangible goods. Examples include transport, communication, banking, education, healthcare, entertainment, and information technology. This sector often facilitates the other two.
In simple words: GDP comes from three main areas: the primary sector (like farming), the secondary sector (like factories making things), and the tertiary sector (like doctors, teachers, and transport).

🎯 Exam Tip: Clearly list the three sectors and provide distinct, simple examples for each to show a full understanding.

 

Question 7. Write the sector wise Indian GDP composition in 2017.
Answer: The composition of India's GDP by sector in 2017-18 was as follows:

The data shows that the service sector was the largest contributor to India's GDP in that period.
In simple words: In 2017-18, the service sector made up the biggest part of India's GDP at 53%. Industry contributed 29%, and agriculture contributed 17%.

🎯 Exam Tip: When presenting data, especially percentages, use a table for clarity and remember to state the year or period the data refers to.

 

Question 8. What are the factors supporting to develop the Indian economy?
Answer: Several factors support the development of the Indian economy:
* **Young Workforce:** India has a large and rapidly growing population of working age, which provides a strong labor force.
* **Legal System and English Speakers:** The country benefits from a strong legal system and a significant number of English-speaking professionals, making it attractive for international business.
* **Low Wage Costs:** Compared to many developed nations, wage costs in India are relatively low, which helps in attracting investments and manufacturing.
* **Advanced Technology Clusters:** India's economy has developed highly advanced and attractive business centers in the technology space, such as IT hubs. These factors help India's economy grow and modernize.
In simple words: India's economy is growing because it has many young people working, a good legal system, many English speakers, low work costs, and growing tech industries.

🎯 Exam Tip: When listing supporting factors, categorize them (e.g., demographics, human capital, cost, technology) for a comprehensive answer.

 

Question 9. Write the name of economic policies in India.
Answer: India has various economic policies that guide its growth and development. These include:
* Agricultural Policy (focuses on farming and food production)
* Industrial Policy (guides manufacturing and industries)
* New Economic Policy (introduced reforms like liberalization)
* Domestic Trade Policy (governs trade within the country)
* International Trade Policy (rules for trade with other countries)
* Employment Policy (aims to create jobs)
* Currency and Banking Policy (manages money and banks)
* Fiscal and Monetary Policy (handles government spending/taxes and money supply)
* Wage Policy (sets rules for salaries)
* Population Policy (addresses population growth and welfare)
In simple words: India uses many economic policies like those for farming, industry, trade, employment, money, and population to manage its economy.

🎯 Exam Tip: List a diverse range of policies, not just the most obvious ones, to show a broad understanding of economic governance.

 

Question 10. Write a short note:
1) Gross National Happiness (GNH)
2) Human Development Index (HDI)
Answer:
1) **Gross National Happiness (GNH):** GNH is a way to measure a country's progress, focusing on a holistic approach rather than just economic growth. It considers both sustainable economic and social developments, while also protecting the environment and culture. It aims for the well-being and happiness of citizens.
2) **Human Development Index (HDI):** The HDI is a single measure that combines different aspects of human development. It looks at life expectancy (how long people live), education levels (how much schooling they get), and per capita income (how much money people earn). Countries are ranked into four levels of human development based on these factors. A higher HDI means a better quality of life.
In simple words: GNH measures a country's success by focusing on happiness, environment, and culture, not just money. HDI measures how well people live by looking at their lifespan, education, and income.

🎯 Exam Tip: For short notes, define each term clearly, mention its purpose, and briefly explain what factors it includes or focuses on.

VI. Write in Detail Answer

 

Question 1. Briefly explain various terms associated with measuring of National Income.
Answer: Measuring National Income involves several key terms, each representing a different aspect of a country's economic activity:
(i) **Gross National Product (GNP):** This is the total value of all goods and services produced by a country's residents, plus the income they receive from investments abroad, over a specific period. It also includes profit earned from capital invested overseas. The formula for GNP is: GNP \( = \) C \( + \) I \( + \) G \( + \) (X \( - \) M) \( + \) NFIA, where C is consumption, I is investment, G is government spending, (X \( - \) M) is net exports, and NFIA is Net Factor Income from Abroad.
(ii) **Gross Domestic Product (GDP):** This measures the total value of goods and services produced by all factors of production located within the geographical borders of a country during a certain time. It focuses on domestic output. The relationship to GNP is: GDP \( = \) GNP \( - \) NFIA.
(iii) **Net National Product (NNP):** This is calculated by subtracting the value of depreciation (wear and tear of capital goods) from the Gross National Product. It gives a truer picture of a nation's net output. So, NNP \( = \) GNP \( - \) Depreciation.
(iv) **Net Domestic Product (NDP):** Similar to NNP, this is derived by deducting the value of depreciation from the Gross Domestic Product. It reflects the net output produced within the country's borders. Thus, NDP \( = \) GDP \( - \) Depreciation.
(v) **Per-Capita Income (PCI):** This indicates the average income per person in a country and is a key measure of the living standard. It is obtained by dividing the National Income (N.I.) by the total population of the country. So, PCI \( = \) N.I. \( / \) population. It helps to compare the economic well-being across different regions or countries.
**In the above context, the terms are explained as:**
* C \( - \) Consumption expenditure (spending by households)
* I \( - \) Investment expenditure (spending by businesses on capital goods)
* G \( - \) Government expenditure (spending by the government)
* NFIA \( - \) Net Factor Income earned from Abroad (income from abroad minus income paid to foreigners)
* Depreciation \( - \) Wear and Tear expenses (reduction in value of assets)
(vi) **Personal Income (PI):** This refers to the total money income received by all individuals in a country from all possible sources before direct taxes are paid. It's the income available to households.
(vii) **Disposable Income (DI):** This is the actual income that individuals and households have left to spend on consumption or save after all direct taxes have been paid. It reflects the purchasing power of the people. Therefore, DI \( = \) PI \( - \) Direct taxes.
In simple words: National income has several parts. GNP is total output including money from abroad. GDP is total output inside the country. NNP and NDP are GNP and GDP minus the value lost by old machines. Per-Capita Income is average income per person. Personal Income is what people earn before tax, and Disposable Income is what they have left to spend after tax.

🎯 Exam Tip: For detailed answers on economic concepts, define each term clearly, provide its formula (if applicable), and briefly explain its significance in measuring national income. Using bullet points helps organize complex information.

 

Question 2. What are the methods of calculating Gross Domestic Product?
Answer: There are three primary methods used for calculating Gross Domestic Product (GDP), which aim to measure the total economic output of a country:
1. **Expenditure Approach:** In this method, GDP is calculated by adding up all the spending on final goods and services produced within the country during a specific period. This includes spending by households (consumption), businesses (investment), government (government spending), and net exports (exports minus imports). It looks at what is bought in the economy.
2. **Income Approach:** This method views GDP from the perspective of earnings. It sums up all forms of income generated by the production of goods and services within the country. This includes wages and salaries paid to employees, profits of companies, rent from property, and interest from capital. It focuses on what is earned in the economy.
3. **Value-Added Approach:** In this approach, GDP is calculated by summing the value added at each stage of production for all goods and services. "Value added" is the difference between the selling price of a product and the cost of the intermediate inputs used to produce it. This method helps prevent double-counting. For example, the value added by a farmer, a miller, and a baker are all counted towards the final value of bread. This method focuses on the worth created at each step.
In simple words: We can calculate GDP in three ways: by adding up all the money people spend (Expenditure Approach), by adding up all the income people earn (Income Approach), or by adding up the value created at each step of making a product (Value-Added Approach).

🎯 Exam Tip: When explaining GDP calculation methods, always name each method, briefly describe how it works, and highlight what it measures (e.g., spending, income, value created).

 

Question 3. Write about the composition of GDP in India.
Answer: The composition of GDP in India includes contributions from three major sectors, reflecting the country's economic structure:
(i) **Agricultural Sector (Primary Sector):** This sector is also known as the primary sector. It encompasses all activities related to natural resources, such as agriculture, allied activities (like dairy and poultry), cattle farming, fishing, mining, and forestry. Historically, this sector was the largest contributor to India's GDP, but its share has decreased over time. It provides raw materials.
(ii) **Industrial Sector (Secondary Sector):** This sector is often called the secondary sector. It focuses on manufacturing and processing raw materials into finished goods. This includes activities by small-scale industries and large-scale industries like iron and steel production, automobile manufacturing, and construction. This sector adds significant value through production processes.
(iii) **Service Sector (Tertiary Sector):** Known as the tertiary sector, this is currently the largest contributor to India's GDP. It includes a wide range of services such as government administration, transport, communications, scientific research, postal and telegraph services, banking, education, entertainment, healthcare, and information technology. This sector has driven much of India's recent economic growth.
**Sector-wise contribution of GDP (2018–19):**
* Agricultural Sector – 14.39%
* Industrial Sector – 31.46%
* Service Sector – 54.15%
In simple words: India's GDP is made up of three main parts: farming (agriculture), factories (industry), and services (like transport, banking, and tech). The service sector now contributes the most to India's GDP.

🎯 Exam Tip: Clearly describe each sector's activities and use updated statistical data (like the 2018-19 figures) to support your explanation of their relative contributions to India's GDP.

 

Question 4. Write the differences between the growth and the development.
Answer: Economic growth and economic development are related but distinct concepts:

In simple words: Economic growth means a country is making more money and goods (it's about quantity). Economic development is a wider idea, meaning people are living better, are healthier, more educated, and wealth is shared more fairly (it's about quality of life). Growth is short-term and just about numbers, while development is long-term and about improving everything for everyone.

🎯 Exam Tip: When comparing concepts, use a table to clearly delineate differences. Focus on "quantitative vs. qualitative," "narrow vs. broad scope," and "short-term vs. long-term" as key differentiating points.

 

Question 5. Explain the Developmental path based on GDP and employment.
Answer: India's developmental path, shaped by its GDP growth and employment strategies, has evolved significantly:
1. **Initial Closed Trade Policy:** India initially followed a policy of closed trade. This meant that interactions and trade with other countries were limited, aiming for self-sufficiency.
2. **Economic Liberalization (1991):** In 1991, India made a significant shift, opening its borders to free trade and liberalizing its economy. This allowed foreign companies to enter, boosting competition and investment.
3. **Emphasis on Employment Generation:** The Five Year Plans always prioritized creating jobs, with a special focus on rural development. This aimed to improve the livelihoods of a large segment of the population.
4. **Role of Public Sector:** The public sector was given immense importance, and private companies were under strict regulations. The government believed it was the protector of the people and focused on social welfare.
5. **Sustained GDP Growth:** India has experienced consistent and rapid GDP growth over the last two decades. This has led to an increase in per capita income and a reduction in poverty. In fact, real capital incomes have doubled in about 12 years, showing significant economic progress. This growth has been a key factor in improving living standards and overall development.
In simple words: India's development started with limited trade, then opened up its economy in 1991. It focused on creating jobs, especially in villages. The government played a big role in social welfare. Over the past twenty years, India has seen fast economic growth, making people richer and reducing poverty.

🎯 Exam Tip: Structure your answer chronologically (e.g., initial policies, reforms, outcomes) and link economic policies directly to their impact on GDP and employment.

 

Question 6. Explain the following policies.
Answer: **Agricultural Policy:** This refers to the set of decisions and actions taken by the government concerning domestic agriculture and the import or export of agricultural products. Its main goal is to ensure food security, support farmers, and promote sustainable practices.
**The policy mainly focus on the following areas:**
(a) Risk Management and Adjustment (helping farmers cope with risks)
(b) Economic Stability (keeping prices stable for farm products)
(c) Natural Resources (managing land and water wisely)
(d) Environmental Sustainability (farming without harming nature)
(e) Research and Development (finding new and better farming methods)
(f) Market for domestic agricultural commodities (making sure farmers can sell their produce easily)
In general, agricultural policy includes Price policy, Land Reform policy, Green Revolution, Irrigation policy, Food policy, Labour policy and Co-operative policy. These help in fair prices, better land use, modern farming, water supply, food availability, worker rights, and group farming.
In simple words: Agricultural policy is how the government manages farming and food trade. It includes many rules about prices, land, water, new methods, and selling farm products to help farmers and ensure food for everyone.

🎯 Exam Tip: When explaining policies, first provide a general definition, then list its key focus areas, and finally, elaborate on specific types or sub-policies within that category.

 

Question 6. Explain the following policies.
Answer:
Agricultural Policy: This policy refers to a set of decisions and actions by the government concerning farming practices, agricultural imports, and related matters within the country. Generally, it includes rules about pricing, land reform, promoting the Green Revolution, managing irrigation, food distribution, labor regulations, and cooperative farming efforts. This policy aims to guide the agricultural sector effectively.
Industrial Policy: This policy involves government decisions related to the industrial sector. It covers domestic production, trade, ensuring the country can produce enough for itself (self-sufficiency), and modernizing industries. The policy mainly focuses on creating jobs, making good use of natural resources, boosting other industries, supporting research and development, updating technology, protecting the environment, facilitating trade, and helping small-scale industries grow. It generally includes specific policies for sectors like textile and sugar industries, along with overall pricing, small business support, and industrial labor laws.
New Economic Policy (NEP): The NEP was introduced in 1991. It included three main components: Liberalisation (making economic rules less strict), Privatisation (transferring government-owned businesses to private hands), and Globalisation (integrating India's economy with the global market). This policy is often called the LPG model. Its main goal was to accelerate India's economic growth, aiming for it to become one of the fastest-growing and largest economies in the world. This model significantly boosted India's economic progress and development.
In simple words: The government makes plans for different parts of the economy. Agricultural policy guides farming, land, and food. Industrial policy guides factories, trade, and jobs. The New Economic Policy (LPG) from 1991 opened up the economy by making rules easier, letting private companies do more, and connecting India with the world. This helped India's economy grow much faster.

🎯 Exam Tip: When asked to explain policies, break down each policy into its definition, key focus areas, and main objectives. Use clear examples where possible to illustrate the points.

 

VII. Activity and Project

 

Question 1. Students are collect the Gross Domestic Product datas of Tamilnadu and compare the other state of Karnataka and Kerala's GDP.
Answer: This activity asks students to collect GDP data for Tamil Nadu, Karnataka, and Kerala to compare their economic performance. This comparison helps in understanding which state has performed better economically. Below are sample tables with data for GDP growth rate and Gross State Domestic Product (GSDP) in crores for recent years, which students can use as a base for their project. They should expand on this data to make a complete analysis. It's important to analyze trends over several years.

In simple words: Students should find information about how much money Tamil Nadu, Karnataka, and Kerala made (GDP). Then, they need to compare these numbers to see which state's economy grew faster and performed better over time.

🎯 Exam Tip: For project-based questions, always clearly state the objective, gather relevant data, present it logically (like in tables), and then provide a concise analysis or comparison to demonstrate understanding.

 

Question 2. Students are collect the details of Employment growth of Tamilnadu.
Answer: The employment growth in Tamil Nadu refers to how quickly the number of working people or available workers in the state has increased. Students can compare this growth using information from the 2001 and 2011 Census reports. Tamil Nadu's total population grew from 62.41 million in 2001 to 72.15 million in 2011. During this period, the total number of workers in the state increased by 1.18%, rising from 27.88 million to 32.88 million. In 2011, Kanyakumari district had the lowest work participation rate at 36.3%, despite having a high literacy level, while Erode district showed a 53.1% work participation rate. Understanding these trends helps assess the state's job market health.
In simple words: Students need to find out how many people got jobs in Tamil Nadu over time. They can look at records from 2001 and 2011. The population and number of workers grew, but some areas had fewer people working even if they were educated.

🎯 Exam Tip: When analyzing employment data, focus on population changes, total workforce numbers, and regional variations. Discuss possible reasons for low work participation rates even in educated areas.

 

I. Choose The Correct Answer

 

Question 1. "Your mother is cooking" - In this statement, cooking is ...................................
(a) Good
(b) Service
(c) Both (a) and (b)
(d) None
Answer: (b) Service
In simple words: When someone cooks for another person, it is a helpful action or a service, not a physical product.

🎯 Exam Tip: Understand the difference between goods (physical items) and services (actions or activities performed for others).

 

Question 2. "Economic growth is one aspect of economic development". Who said it?
(a) Amarthya Sen
(b) Manmohan Singh
(c) Mehabub ul Haq
(d) Ramachandra Guha
Answer: (a) Amarthya Sen
In simple words: The famous economist Amartya Sen explained that economic growth is just one part of the bigger picture of economic development. Development includes many other things like people's well-being.

🎯 Exam Tip: Remember key economists and their contributions, especially when discussing broad concepts like growth versus development.

 

Question 3. Goods and Service has a market ...................................
(a) value
(b) price
(c) Both (a) and (b)
(d) to fix a price
Answer: (c) Both (a) and (b)
In simple words: Both goods and services have a market where they are bought and sold, and because of this, they both have a specific value and a price.

🎯 Exam Tip: Always consider that anything exchanged in a market, whether a physical product or a service, possesses both inherent value and a determined price.

 

Question 4. Which one of the following is not an example of tertiary sector?
(a) Communication
(b) Banking
(c) Transport
(d) Forestry
Answer: (d) Forestry
In simple words: Communication, banking, and transport are all services (tertiary sector). Forestry, which involves gathering natural resources, belongs to the primary sector.

🎯 Exam Tip: Clearly understand the three main sectors of an economy: primary (raw materials), secondary (manufacturing), and tertiary (services).

 

Question 5. The intermediate Goods value are indirectly included in the measurement of ...................................
(a) GDP
(b) GNP
(c) SGDP
(d) NDP
Answer: (a) GDP
In simple words: Intermediate goods are used to make final products. Their value is counted within the final product's price, so they are indirectly part of GDP.

🎯 Exam Tip: To avoid "double counting" in GDP, only the value of final goods and services is directly measured, with intermediate goods' value being captured within them.

 

Question 6. GDP of a country can be calculated by ...................................
(a) 2 Approach
(b) 3 Approach
(c) 4 Approach
Answer: (b) 3 Approach
In simple words: A country's Gross Domestic Product (GDP) can be calculated using three main methods: the expenditure approach, the income approach, and the value-added approach. Each method should give roughly the same result.

🎯 Exam Tip: Be familiar with the three fundamental approaches (expenditure, income, and value-added) used to calculate GDP and understand what each measures.

 

Question 7. The ................................... value is derived from the price at which the Goods and Services are sold in the market.
(a) currency
(b) frequency
(c) Nation's
(d) Trade
Answer: (a) currency
In simple words: The value of goods and services is determined by their price in the market, which is expressed in the country's money or currency.

🎯 Exam Tip: Remember that market prices, expressed in currency, are how we assign value to goods and services in economic calculations.

 

Question 8. National Income is otherwise called as ...................................
(a) Real Income
(b) Money Income
(c) Gross National Product
Answer: (c) Gross National Product
In simple words: National Income is another name for Gross National Product (GNP), which measures the total income earned by a country's residents from producing goods and services.

🎯 Exam Tip: While "National Income" is a broad term, in many contexts, it refers specifically to Gross National Product (GNP), so it is important to know this common equivalence.

 

Question 9. Imagine your father knows book binding technique and after you get new books for this year, he bounded and gave you. Whether binding charges are included on the GDP?
(a) Included
(b) Partially Included
(c) Not included
(d) Both (a) and (b)
Answer: (c) Not included
In simple words: If someone does work for free for their family, like your father binding books for you, it is not part of the economy that is bought and sold. So, it is not counted in GDP.

🎯 Exam Tip: GDP only includes goods and services that are exchanged in a formal market, not unpaid household or volunteer work, to avoid misrepresenting economic activity.

 

Question 10. The method by which we arrive at National Income in India is ...................................
(a) Product method
(b) Expenditure method
(c) Product and Income method
Answer: (c) Product and Income method
In simple words: In India, National Income is mostly calculated by looking at what is produced (product method) and the income earned from it (income method).

🎯 Exam Tip: Understand that countries often use a combination of methods to get the most accurate estimate of their National Income, reflecting both output and earnings.

 

Question 11. If the ................................... goods are included in the GDP, it will result in Double counting.
(a) Final
(b) Intermediate
(c) Import
(d) Export
Answer: (b) Intermediate
In simple words: Intermediate goods are used to make other goods. If you count their value separately in GDP and then again in the final product, you are counting them twice, which is wrong.

🎯 Exam Tip: To avoid double counting, only the value of final goods and services is included in GDP calculations, as the value of intermediate goods is already embedded in them.

 

Question 12. Commonly, National Income is called as ...................................
(a) GNP
(b) GDP
(c) NNP
(d) PCI
Answer: (a) GNP
In simple words: National Income is often referred to as Gross National Product (GNP), which measures the total income received by a country's residents from goods and services.

🎯 Exam Tip: While various measures contribute to national income, GNP is frequently used as a synonym, representing the total value of final goods and services produced by a country's residents.

 

Question 13. ................................... is also called as National Dividend.
(a) GNP
(b) GDP
(c) NNP
(d) NFIA
Answer: (a) GNP
In simple words: The total income of a nation from all its activities, also known as Gross National Product (GNP), is sometimes called the National Dividend.

🎯 Exam Tip: Understanding alternative terms like "National Dividend" for GNP can help broaden your comprehension of national income accounting concepts.

 

Question 14. GNP ................................... net factor from abroad.
(a) Excludes
(b) includes
(c) Sums up
(d) (a) and (c)
Answer: (b) includes
In simple words: Gross National Product (GNP) counts the money earned by a country's citizens and businesses, even if that money comes from outside the country. This means it includes net income from abroad.

🎯 Exam Tip: Remember that GNP differs from GDP because it includes net factor income from abroad, accounting for earnings by residents outside the country and subtracting earnings by non-residents within it.

 

Question 15. GDP ................................... net factor income from abroad.
(a) Excludes
(b) includes
(c) Sums up
(d) (a) and (c)
Answer: (a) Excludes
In simple words: Gross Domestic Product (GDP) only measures the value of goods and services produced within a country's own borders. It does not count income earned from outside the country.

🎯 Exam Tip: A key distinction between GDP and GNP is that GDP strictly measures economic activity geographically within national borders, thus excluding income from abroad.

 

Question 16. GNP minus depreciation gives ...................................
(a) NDP
(b) NNP
(c) GDP
(d) NFIA
Answer: (b) NNP
In simple words: When you take the Gross National Product (GNP) and subtract the value of wear and tear on machines and buildings (depreciation), you get the Net National Product (NNP).

🎯 Exam Tip: Always remember the fundamental relationship: 'Net' measures (like NNP or NDP) are derived by subtracting depreciation from their 'Gross' counterparts (GNP or GDP).

 

Question 17. NDP is the value of depreciation excluded from ...................................
(a) GDP
(b) NNP
(c) NFIA
(d) (X-M)
Answer: (a) GDP
In simple words: Net Domestic Product (NDP) is found by taking the Gross Domestic Product (GDP) and removing the cost of things wearing out (depreciation).

🎯 Exam Tip: Understand that NDP reflects a country's output after accounting for the capital consumed during production, making it a more accurate measure of sustainable output than GDP.

 

Question 18. ................................... denotes the standard of living of the people.
(a) NNP
(b) NDP
(c) PCI
(d) NFIA
Answer: (c) PCI
In simple words: Per Capita Income (PCI) is the average income per person in a country. It is a good way to show how well people generally live.

🎯 Exam Tip: Remember that Per Capita Income (PCI) is often used as a key indicator of the average economic well-being and standard of living for individuals within a country.

 

Question 19. ................................... represents all sources of income excluding direct taxes.
(a) GNP
(b) PCI
(c) PI
(d) DI
Answer: (c) PI
In simple words: Personal Income (PI) is the total money that individuals in a country receive from all sources before they pay their direct taxes.

🎯 Exam Tip: Distinguish between Personal Income (PI), which is pre-tax, and Disposable Income (DI), which is the income left after direct taxes, available for spending and saving.

 

Question 20. Personal income minus direct taxes will give ...................................
(a) DI
(b) DPI
(c) PI
(d) both (a) and (b)
Answer: (d) both (a) and (b)
In simple words: When you subtract direct taxes from your personal income, the amount left is called Disposable Income (DI) or Disposable Personal Income (DPI). This is the money you can actually spend or save.

🎯 Exam Tip: Both Disposable Income (DI) and Disposable Personal Income (DPI) refer to the same concept: personal income remaining after all direct taxes, indicating the actual spending power.

 

Question 21. The quarterly GDP estimates for the ................................... quarter includes months January, February and March.
(a) first
(b) second
(c) third
(d) fourth
Answer: (d) fourth
In simple words: In many economic systems, the period from January to March is considered the fourth quarter when looking at GDP data for a financial year.

🎯 Exam Tip: Be mindful of how financial years are structured and how quarters (Q1, Q2, Q3, Q4) are defined in different contexts, as they don't always align with calendar quarters.

 

Question 22. The quarterly GDP estimates of the month July, August and September includes ................................... quarter.
(a) first
(b) second
(c) third
(d) fourth
Answer: (b) second
In simple words: The months of July, August, and September usually make up the second quarter when countries calculate their GDP, depending on how their financial year starts.

🎯 Exam Tip: Accurately identifying which months fall into which fiscal quarter is crucial for correctly interpreting economic data and trends.

 

Question 23. The first quarter of the GDP estimates includes the months ...................................
(a) Jan, Feb, March
(b) July, Aug, Sep
(c) April, May, June
(d) Oct, Nov, Dec.
Answer: (c) April, May, June
In simple words: The first three months of a financial year, often April, May, and June, are considered the first quarter for calculating GDP in many countries, including India.

🎯 Exam Tip: Knowing the start and end months of each fiscal quarter is essential for understanding seasonal economic reporting and comparisons.

 

Question 24. October, November, December, months are included in ................................... quarter estimates of GDP.
(a) first
(b) second
(c) third
(d) fourth
Answer: (c) third
In simple words: The period of October, November, and December falls into the third quarter for GDP calculations in a financial year that begins in April.

🎯 Exam Tip: Familiarize yourself with the fiscal calendar to correctly identify quarter boundaries, which is fundamental for economic analysis.

 

Question 25. The modern concept of GDP was first developed by Simon Kuznets in the year ...................................
(a) 1930
(b) 1932
(c) 1933
(d) 1934
Answer: (d) 1934
In simple words: Simon Kuznets, a well-known economist, developed the idea of Gross Domestic Product (GDP) in 1934, which is how we still measure a country's economic output today.

🎯 Exam Tip: Attributing key economic concepts to their developers and understanding the historical context helps in appreciating the evolution of economic thought.

 

Question 26. There are ................................... methods to calculate GDP.
(a) 4
(b) 3
(c) 6
(d) 1
Answer: (b) 3
In simple words: There are three main ways to figure out a country's Gross Domestic Product: by adding up all spending, all income, or the value added at each step of production.

🎯 Exam Tip: Remember the three primary methods for calculating GDP: expenditure, income, and value-added. All three should theoretically yield the same result.

 

Question 27. The prices paid to the factors of production are included in the ................................... approach.
(a) Income
(b) Expenditure
(c) Value added
(d) None
Answer: (a) Income
In simple words: When we use the income approach to calculate GDP, we add up all the money paid to people for their work, land, capital, and business skills.

🎯 Exam Tip: The income approach to GDP focuses on the earnings generated by the factors of production (wages, rent, interest, profit) within an economy.

 

Question 28. ................................... helps in the estimation of purchasing power.
(a) GNP
(b) GDP
(c) NDP
(d) NNP
Answer: (b) GDP
In simple words: Gross Domestic Product (GDP) gives a broad idea of how much a country can produce, which then helps estimate how much its people can buy or their overall purchasing power.

🎯 Exam Tip: GDP is a crucial macro-economic indicator that, when considered with other factors, helps in understanding a nation's overall economic strength and its citizens' potential purchasing power.

 

Question 29. Adding up all the expenditures incurred in a country during a specific period of time is called ................................... method.
(a) Income
(b) Expenditure
(c) Value added
(d) None
Answer: (b) Expenditure
In simple words: The method of adding up all the money spent by everyone in a country on goods and services within a certain time is called the expenditure method.

🎯 Exam Tip: The expenditure method for calculating GDP focuses on the total spending by households, businesses, government, and net exports.

 

Question 30. GDP measures only the quantity but not ...................................
(a) quality
(b) price
(c) market value
(d) trade
Answer: (a) quality
In simple words: Gross Domestic Product (GDP) mostly counts how much is produced (quantity) but does not truly measure how good or useful those products and services are (quality).

🎯 Exam Tip: A limitation of GDP is its focus on the volume of economic activity; it doesn't inherently account for the quality of goods and services or the overall well-being they provide.

 

Question 31. There are ................................... sectors in an economy.
(a) one
(b) two
(c) three
(d) four
Answer: (c) three
In simple words: An economy usually has three main parts or sectors: the primary sector (like farming), the secondary sector (like manufacturing), and the tertiary sector (like services).

🎯 Exam Tip: Understand the primary, secondary, and tertiary sectors and the types of economic activities that fall under each category.

 

Question 32. India is the ................................... largest producer of agricultural products.
(a) first
(b) second
(c) third
(d) fourth
Answer: (b) second
In simple words: India holds the position of being the second-largest producer of various farm products in the world. This shows its significant role in global agriculture.

🎯 Exam Tip: Keep track of key economic facts and rankings related to your country, as these are often tested in general knowledge or economics sections.

 

Question 33. Amartya Sen is an ................................... Economist.
(a) American
(b) Australian
(c) Indian
(d) Pakistani
Answer: (c) Indian
In simple words: Amartya Sen is a very famous economist who comes from India. He won a Nobel Prize for his work on welfare economics.

🎯 Exam Tip: Recognizing prominent figures and their nationalities in economics or other fields can be useful for broader general knowledge questions.

 

Question 34. The key parameters of economic growth of an economy are its GDP and ................................... which helps in measuring the actual size of the economy.
(a) GNP
(b) NFIA
(c) Depreciation
(d) PCI
Answer: (a) GNP
In simple words: The main ways to measure how big and how much an economy is growing are through its Gross Domestic Product (GDP) and Gross National Product (GNP).

🎯 Exam Tip: While GDP and GNP are both key measures of economic size, remember their subtle difference: GDP focuses on production within borders, while GNP includes income from abroad.

 

Question 35. The GDP of India is ................................... million United States dollars.
(a) 19.3
(b) 2.8
(c) 3.6
(d) 7.8
Answer: (b) 2.8
In simple words: India's Gross Domestic Product (GDP) is a significant economic figure, valued at approximately 2.8 million million (or 2.8 trillion) United States dollars. This makes India one of the largest economies.

🎯 Exam Tip: Be aware of the general magnitude of a country's GDP to understand its global economic standing. Note that specific figures may change annually.

 

Question 36. The GDP of United States is ................................... million.
(a) 19.3
(b) 2.8
(c) 3.6
(d) 7.9
Answer: (a) 19.3
In simple words: The United States has the world's largest economy, with its Gross Domestic Product (GDP) being around 19.3 million million (or 19.3 trillion) United States dollars. This shows its huge economic power.

🎯 Exam Tip: Knowing the GDP figures of major global economies helps in understanding international economic comparisons and global power dynamics.

 

Question 37. India is ranked ................................... in Globe as regard to GDP.
(a) fourth
(b) fifth
(c) sixth
(d) third
Answer: (c) sixth
In simple words: When comparing the size of economies around the world by GDP, India is currently ranked as the sixth largest. This position highlights its growing economic influence.

🎯 Exam Tip: Stay updated on current economic rankings, as a country's GDP position can shift year to year based on economic growth and global comparisons.

 

Question 38. United States is ranked ................................... in Globe as regard to GDP.
(a) third
(b) fourth
(c) second
(d) first
Answer: (d) first
In simple words: The United States holds the top spot globally when countries are ranked by their Gross Domestic Product (GDP). It has the largest economy in the world.

🎯 Exam Tip: It is fundamental to know the leading global economies by GDP, with the United States consistently holding the number one position due to its vast economic output.

Question 39. Economic Growth is - in nature.
(a) quantitative
(b) qualitative
(c) both (a) and (b)
(d) peculiar
Answer: (a) quantitative
In simple words: Economic growth focuses on how much the economy produces, which can be measured with numbers. It is about how big the economy gets, rather than how good or fair it is.

🎯 Exam Tip: Remember that "quantitative" means something that can be measured or counted, like numbers and amounts.

 

Question 40. Economic - is a broader concept.
(a) Development
(b) Growth
(c) Project
(d) None of the options
Answer: (a) Development
In simple words: Economic development looks at how people's lives get better, not just how much money a country makes. It includes things like health, education, and overall well-being.

🎯 Exam Tip: Distinguish between economic growth (more output) and economic development (better living conditions) for clear understanding.

 

Question 41. - helps to measure the real development of an economy.
(a) GDP
(b) HDI
(c) GNHI
(d) NNP
Answer: (b) HDI
In simple words: The Human Development Index (HDI) is a special number that helps us see how much a country is truly developing. It checks things like how long people live, how much education they get, and their income level.

🎯 Exam Tip: HDI provides a more complete picture of a country's progress beyond just economic output, focusing on human well-being.

 

Question 42. The concept of Economic development is mainly applicable to - economies.
(a) Developed
(b) Developing
(c) Under developed
(d) Less developed
Answer: (b) Developing
In simple words: Economic development is mostly about countries that are still growing and improving their people's lives. These countries are working to get better education, health, and living standards for everyone.

🎯 Exam Tip: Economic development focuses on improving quality of life, which is a primary goal for developing nations.

 

Question 43. The concept of Economic Growth is mainly applicable to - economies.
(a) Developed
(b) Developing
(c) Less developed
(d) Under developed
Answer: (a) Developed
In simple words: Economic growth usually refers to countries that are already rich and advanced. These economies focus on making more goods and services each year.

🎯 Exam Tip: While all economies experience growth, the concept is often highlighted in developed nations where the focus is on expanding existing production.

 

Question 44. The concept of Human Development Index was put forward by -
(a) Amartya Sen
(b) Mahbub-ul-Haq
(c) Wangehuck
(d) Simon Kuznets
Answer: (b) Mahbub-ul-Haq
In simple words: The idea of the Human Development Index (HDI) was first proposed by a clever economist named Mahbub-ul-Haq. He believed we should measure how well people live, not just how rich a country is.

🎯 Exam Tip: Remember the key figures associated with economic theories, as their contributions are important landmarks.

 

Question 45. The concept of HDI was first introduced at the -
(a) United Nations
(b) United Stated
(c) United Kingdom
(d) UAE
Answer: (a) United Nations
In simple words: The Human Development Index (HDI) was first used by the United Nations. They introduced it as a way to compare how well countries are doing for their people, beyond just their money.

🎯 Exam Tip: Note the global organizations involved in creating and using key economic indicators like the HDI.

 

Question 46. The concept of HDI was introduced in the year -
(a) 1960
(b) 1970
(c) 1990
(d) 1980
Answer: (c) 1990
In simple words: The Human Development Index (HDI) first came out in the year 1990. This was a new way to measure a country's progress, focusing on how people live.

🎯 Exam Tip: Knowing the year when important concepts like HDI were introduced can help you understand the timeline of economic thought.

 

Question 47. India lies in - Human Development Index Category.
(a) High
(b) Low
(c) Medium
(d) Very Low
Answer: (c) Medium
In simple words: India falls into the medium category when we look at its Human Development Index (HDI). This means that while there have been improvements, there is still progress to be made in areas like health and education.

🎯 Exam Tip: Be aware of India's current standing in global indices like HDI, as these are frequently updated and reflect national progress.

 

Question 48. India's HDI value for 2017 is -
(a) 0.001
(b) 0.540
(c) 0.640
(d) 0.340
Answer: (c) 0.640
In simple words: In 2017, India's Human Development Index (HDI) score was 0.640. This number shows how well the country was doing at that time in terms of health, education, and living standards for its people.

🎯 Exam Tip: Specific data points like HDI values for a particular year are important facts to remember for objective questions.

 

Question 49. When a country's HDI increases, it removes the country from -
(a) Development
(b) Poverty
(c) Trade disputes
(d) Stagnation
Answer: (b) Poverty
In simple words: When a country's Human Development Index (HDI) goes up, it means people are living better, getting more education, and earning more. This helps to lift the country out of poverty.

🎯 Exam Tip: A rising HDI signifies progress in basic human capabilities, directly impacting poverty reduction.

 

Question 50. GNHI is a philosophy that guides the government of -
(a) America
(b) Nepal
(c) Bhutan
(d) India
Answer: (c) Bhutan
In simple words: Gross National Happiness (GNH) is a special way of thinking that helps the government of Bhutan make decisions. It means they care about the happiness and well-being of their people more than just making money.

🎯 Exam Tip: GNH is a unique concept focusing on holistic well-being, prominently associated with the country of Bhutan.

 

Question 51. Co-operative policy is a part of - policy.
(a) Agriculture
(b) Industry
(c) NEP
(d) Wage
Answer: (a) Agriculture
In simple words: Co-operative policy is a type of plan that helps people work together, especially in farming. It is a part of agricultural policy, which aims to improve farming practices and support farmers.

🎯 Exam Tip: Cooperative societies are often formed in the agricultural sector to help farmers share resources and get better prices for their produce.

 

Question 52. The city - has emerged as a hub for global software business today.
(a) Chennai
(b) Mumbai
(c) Bangalore
(d) Calcutta
Answer: (c) Bangalore
In simple words: Bangalore is known as a very important city for computer software and technology businesses around the world. It has grown into a big center for these kinds of jobs.

🎯 Exam Tip: Recognize major economic hubs and their specialized sectors within India.

 

Question 53. The structural reforms brought in India recently are -
(a) GST
(b) Demonetisation
(c) Both (a) and (b)
(d) None of the options
Answer: (c) Both (a) and (b)
In simple words: Both GST (Goods and Services Tax) and Demonetisation were big changes made in India recently to improve the economy. These were major policy shifts that affected how businesses and money work in the country.

🎯 Exam Tip: Stay updated on recent economic policies and reforms, as they frequently appear in current affairs and exam questions.

 

Question 54. The measure of the value of goods and services produced in an area, industry (or) sector of the economy is called -
(a) GDP
(b) GNP
(c) GVA
(d) NDP
Answer: (c) GVA
In simple words: When we measure the total value of everything made and all services given in a specific part of the economy, it's called Gross Value Added (GVA). This helps us see how much each part of the economy contributes.

🎯 Exam Tip: GVA is a crucial concept for understanding the contribution of different sectors to the overall economy.

 

II. Fill in the blanks

 

Question 55. According to IMF, India is - fastest growing nation of the World.
(a) 3rd
(b) 2nd
(c) 4th
(d) 5th
Answer: (d) 5th
In simple words: The International Monetary Fund (IMF) has stated that India is among the top five fastest-growing economies in the world. This shows how quickly India's economy is expanding.

🎯 Exam Tip: Keep track of reports from international organizations like the IMF regarding global economic rankings, as they are often updated.

 

Question 1. In order to know the performance of India, one should know the - of our country.
Answer: In order to know the performance of India, one should know the GDP of our country. GDP helps to measure the overall economic health and output.
In simple words: To see how India is doing economically, we need to look at its GDP.

🎯 Exam Tip: GDP is the primary indicator for assessing a country's economic performance and size.

 

Question 2. Goods are difference from -
Answer: Goods are difference from Services. Goods are physical items you can touch, while services are actions performed for others.
In simple words: Goods are things you can hold, services are things people do for you.

🎯 Exam Tip: Understand the basic distinction between goods (tangible) and services (intangible) in economics.

 

Question 3. Services are -
Answer: Services are Intangible. This means they cannot be physically touched or held, unlike goods.
In simple words: Services cannot be touched, they are actions or help.

🎯 Exam Tip: Intangibility is a key characteristic that distinguishes services from goods.

 

Question 4. The GDP is the - value of final goods and services produced in the country.
Answer: The GDP is the Market value of final goods and services produced in the country. It reflects the price at which these goods and services are sold.
In simple words: GDP counts the money value of all finished goods and services made in a country.

🎯 Exam Tip: GDP is calculated using market prices, which reflect the monetary value of goods and services.

 

Question 5. The price at which the goods are sold in the market is called -
Answer: The price at which the goods are sold in the market is called Market value. This is the amount consumers pay for a product or service.
In simple words: The selling price of goods in the market is called market value.

🎯 Exam Tip: Market value is critical for economic calculations as it reflects what consumers are willing to pay.

 

Question 6. The GDP is measured in terms of - value of our country.
Answer: The GDP is measured in terms of Rupee value of our country. This indicates that the GDP is expressed in the national currency.
In simple words: India's GDP is measured in Rupees.

🎯 Exam Tip: Always remember that national economic indicators are expressed in the country's local currency unless specified otherwise.

 

Question 7. "The final goods and services will not be a part of other goods and Services", said by -
Answer: "The final goods and services will not be a part of other goods and Services", said by Tyler Cowen and Alex Tabarrok. These economists explain why final goods are counted to avoid double counting.
In simple words: Tyler Cowen and Alex Tabarrok explained that final goods are not used to make other goods.

🎯 Exam Tip: Citing economists for specific statements adds depth to your answers; ensure accuracy of names and their contributions.

 

Question 8. The goods that are used in the production of other goods are called as - goods.
Answer: The goods that are used in the production of other goods are called as Intermediate goods. These goods are not sold to the final consumer.
In simple words: Goods used to make other goods are called intermediate goods.

🎯 Exam Tip: Understanding intermediate goods is key to avoiding double counting in GDP calculations.

 

Question 9. If the intermediate goods are included in the GDP, then it will result in -
Answer: If the intermediate goods are included in the GDP, then it will result in Double counting. This leads to an inaccurate overestimation of economic output.
In simple words: Counting intermediate goods in GDP means counting things twice.

🎯 Exam Tip: Always exclude intermediate goods from GDP calculations to prevent an inflated total.

 

Question 10. Commonly National Income is called as -
Answer: Commonly National Income is called as Gross National Product. This term is often used interchangeably in some contexts.
In simple words: National Income is also commonly known as Gross National Product.

🎯 Exam Tip: Be aware of synonyms and closely related terms in economics, as they are often used in exam questions.

 

Question 11. National Income (or) GNP is also called as -
Answer: National Income (or) GNP is also called as National Dividend. This term refers to the total net income of a country.
In simple words: National Income or GNP can also be called National Dividend.

🎯 Exam Tip: Understand that National Dividend is another way to refer to a country's total income, highlighting its distribution.

 

Question 12. Profits earned from abroad is - with GDP to get GNP.
Answer: Profits earned from abroad is Included with GDP to get GNP. This addition accounts for income generated by a country's residents overseas.
In simple words: Profits from other countries are added to GDP to find GNP.

🎯 Exam Tip: GNP focuses on the income of a nation's residents, regardless of where it's earned, so foreign profits are added.

 

Question 13. If the total value of goods and services are calculated within the geographical boundary of a country it is called -
Answer: If the total value of goods and services are calculated within the geographical boundary of a country it is called GDP. This stands for Gross Domestic Product.
In simple words: All goods and services made inside a country's borders is its GDP.

🎯 Exam Tip: The key difference between GDP and GNP lies in the geographical boundary versus the nationality of producers.

 

Question 14. The process of loosing the value of anything is called as -
Answer: The process of loosing the value of anything is called as Depreciation. This refers to the reduction in value of assets over time due to wear and tear.
In simple words: When things lose value over time, it's called depreciation.

🎯 Exam Tip: Depreciation is an important concept in accounting and economics, reflecting the gradual decline in an asset's worth.

 

Question 15. The Income of individuals from all sources before payment of taxes is called as -
Answer: The Income of individuals from all sources before payment of taxes is called as Personal income. This is the total income received by households and non-corporate businesses.
In simple words: All the money people earn before paying taxes is their personal income.

🎯 Exam Tip: Personal income is a broad measure of income, including wages, salaries, rents, interest, and dividends.

 

Question 16. Personal income minus Direct taxes will give -
Answer: Personal income minus Direct taxes will give Disposable income. This is the amount of money individuals have left to spend or save after taxes.
In simple words: When you take away direct taxes from personal income, you get disposable income.

🎯 Exam Tip: Disposable income is a key determinant of consumer spending and saving behavior.

 

Question 17. - used the term Per Capita Income for the first time in 1867-68.
Answer: Dadabhai Navroji used the term Per Capita Income for the first time in 1867-68. He was a pioneer in estimating India's national income.
In simple words: Dadabhai Navroji was the first to use the term "Per Capita Income" in 1867-68.

🎯 Exam Tip: Recognize historical figures and their significant contributions to economic thought and measurement in India.

 

Question 18. - is the name of the book written by Dadabhai Navroji.
Answer: Poverty and Unemployment is the name of the book written by Dadabhai Navroji. This book highlighted the economic exploitation of India.
In simple words: Dadabhai Navroji wrote a book called "Poverty and Unemployment."

🎯 Exam Tip: Knowing the titles of influential books by important historical figures can be crucial for exams.

 

Question 19. GDP minus depreciation gives -
Answer: GDP minus depreciation gives NDP. This stands for Net Domestic Product.
In simple words: Subtract depreciation from GDP to get NDP.

🎯 Exam Tip: Net Domestic Product (NDP) is an important measure that accounts for the wear and tear of capital goods in production.

 

Question 20. GNP minus depreciation gives -
Answer: GNP minus depreciation gives NNP. This stands for Net National Product.
In simple words: Take away depreciation from GNP to get NNP.

🎯 Exam Tip: NNP is a measure of national income that adjusts for the consumption of fixed capital.

 

Question 21. - is the indicator of standard of living of people in a country.
Answer: Per Capita Income is the indicator of standard of living of people in a country. It measures the average income per person.
In simple words: Per Capita Income shows how well people in a country live.

🎯 Exam Tip: Per Capita Income is often used to compare living standards across different countries.

 

Question 22. The formulae to calculate PCI is -
Answer: The formulae to calculate PCI is N.I. / population. PCI stands for Per Capita Income, and N.I. stands for National Income.
In simple words: To find Per Capita Income, divide a country's total income by its number of people.

🎯 Exam Tip: Understanding the formula for PCI helps in direct calculation questions and conceptual clarity.

 

Question 23. The cost of saree brought by your brother to your mother - from China will be from India's GDP.
Answer: The cost of saree brought by your brother to your mother Excluded from China will be from India's GDP. This is because GDP measures goods produced within a country's borders.
In simple words: A saree bought from China is not part of India's GDP.

🎯 Exam Tip: Remember that imports are excluded from GDP because they are produced outside the domestic economy.

 

Question 24. My uncle sends money to his family in India from Dubai. It is included in India's -
Answer: My uncle sends money to his family in India from Dubai. It is included in India's GNP. This is because GNP considers income earned by residents, even if earned abroad.
In simple words: Money sent from Dubai to India is part of India's GNP.

🎯 Exam Tip: Remittances from abroad are included in GNP, as they represent income to the nation's residents.

 

Question 25. GDP is measured both annually and -
Answer: GDP is measured both annually and Quarterly. Many countries release GDP data every three months.
In simple words: GDP is checked every year and every three months.

🎯 Exam Tip: Quarterly GDP estimates provide more frequent updates on economic performance than annual figures.

 

Question 26. There are - quarters with which GDP is measured.
Answer: There are Four quarters with which GDP is measured. Each quarter typically covers three months.
In simple words: GDP is measured across four periods called quarters.

🎯 Exam Tip: Knowing the number of quarters helps in understanding the periodicity of economic data releases.

 

Question 27. January, February, March refers to the - quarter of the measurement of GDP.
Answer: January, February, March refers to the Fourth quarter of the measurement of GDP. This quarter marks the end of some fiscal years.
In simple words: January, February, and March make up the fourth quarter for GDP tracking.

🎯 Exam Tip: The start and end months of fiscal quarters can vary by country, so it's important to know the specific system being referenced.

 

Question 28. April to June measured as the - quarter in measurement of GDP.
Answer: April to June measured as the First quarter in measurement of GDP. This marks the beginning of the financial year for many economies.
In simple words: April, May, and June are counted as the first quarter for GDP.

🎯 Exam Tip: The first quarter is often watched closely as it sets the tone for the economic year.

 

Question 29. The path of development of India in recent years is moving from agricultural sector to - sector.
Answer: The path of development of India in recent years is moving from agricultural sector to Service sector. This shift indicates a structural transformation in the economy.
In simple words: India is changing from a farming country to one focused on services.

🎯 Exam Tip: Understanding the structural changes in an economy, like the shift from agriculture to services, is vital for analyzing development.

 

Question 30. Wage costs are - in India.
Answer: Wage costs are Low in India. This can attract foreign investment and manufacturing.
In simple words: India has low wage costs.

🎯 Exam Tip: Low wage costs are often a competitive advantage for developing economies in attracting labor-intensive industries.

 

Question 31. GNHf is a philosophy instituted as the goal of government of -
Answer: GNHf is a philosophy instituted as the goal of government of Bhutan. This approach prioritizes citizen well-being over purely economic metrics.
In simple words: Gross National Happiness is the goal for the government of Bhutan.

🎯 Exam Tip: Differentiate between GDP-focused economies and those that embrace broader well-being indicators like GNH.

 

Question 32. India is now experiencing a period of -
Answer: India is now experiencing a period of Demographic transition. This refers to the shift from high birth and death rates to low birth and death rates.
In simple words: India is going through a time of big changes in its population.

🎯 Exam Tip: Demographic transition has significant implications for a country's labor force, dependency ratio, and economic potential.

 

Question 33. As per HDI, India is in the - human development category.
Answer: As per HDI, India is in the Medium human development category. This shows progress but also areas for further improvement.
In simple words: India is in the middle group for human development.

🎯 Exam Tip: Knowing India's HDI ranking (low, medium, high) helps contextualize its development progress.

 

Question 34. In - India, opened up to free trade policy.
Answer: In 1991 India, opened up to free trade policy. This was a landmark year for economic reforms and liberalization.
In simple words: India started its free trade policy in 1991.

🎯 Exam Tip: The year 1991 is crucial in India's economic history, marking significant policy changes towards liberalization and globalization.

 

Question 35. Economic development is a - preocess.
Answer: Economic development is a Continuous process. It involves ongoing improvements in living standards and economic structure.
In simple words: Economic development is a never-ending process.

🎯 Exam Tip: Emphasize that development is an ongoing journey, not a static achievement.

 

Question 36. In India, - city is considered as a hub for global software businesses.
Answer: In India, Bangalore city is considered as a hub for global software businesses. It is often called the "Silicon Valley of India."
In simple words: Bangalore is India's main city for software companies.

🎯 Exam Tip: Identify key cities known for specific industries, such as Bangalore for IT, as they represent economic specialization.

 

Question 37. The new model of economic reforms put forward in 1991 by India is called as - model.
Answer: The new model of economic reforms put forward in 1991 by India is called as LPG model. LPG stands for Liberalization, Privatization, and Globalization.
In simple words: India's 1991 economic reforms are known as the LPG model.

🎯 Exam Tip: The LPG model signifies a major shift in India's economic policy, moving from a closed to a more open economy.

 

Question 38. According to IMF, GDP growth rate of India in 2018 is projected at -
Answer: According to IMF, GDP growth rate of India in 2018 is projected at 7.3%. This figure represents the estimated economic expansion for that year.
In simple words: The IMF thought India's GDP would grow by 7.3% in 2018.

🎯 Exam Tip: Specific economic forecasts from reputable organizations like the IMF are important for current affairs and data-based questions.

 

Question 39. According to World economic outlook, India is - fastest growing nation of the World.
Answer: According to World economic outlook, India is Fifth fastest growing nation of the World. This highlights its significant contribution to global economic growth.
In simple words: The World Economic Outlook says India is the fifth fastest-growing nation.

🎯 Exam Tip: Differentiate between different sources (IMF vs. World Economic Outlook) when quoting rankings, as they might have slight variations.

 

Question 40. According to IMF World Economic Outlook - is in the rank as a fastest growing nation of the world.
Answer: According to IMF World Economic Outlook Bangladesh is in the rank as a fastest growing nation of the world. This indicates strong economic performance by Bangladesh.
In simple words: Bangladesh is one of the fastest-growing nations according to the IMF World Economic Outlook.

🎯 Exam Tip: Be mindful of the specific country being referenced when discussing economic rankings from international reports.

 

III. Choose the correct statement

 

Question 1.
(i) Only the final goods are included in the GDP.
(ii) If the value of the Intermediate goods are included, it will result in double counting,
(iii) The rupee values are desired from the prices at which the goods and services are sold in the market.
(iv) There is no sensible way to add the quantities of goods produced with those of the services produced.
(a) (i), (ii), (iv) are correct
(b) (i), (ii), (iii) are correct
(c) (i), (ii), (iii) and (iv) are correct
(d) (i), (iii) and (iv) are correct
Answer: (c) (i), (ii), (iii) and (iv) are correct
In simple words: All the given statements about GDP are correct. GDP includes only final goods, avoids double counting intermediate goods, uses market prices (like rupee values), and recognizes that goods and services cannot be simply added together by quantity.

🎯 Exam Tip: This question tests a comprehensive understanding of how GDP is calculated and its fundamental principles. Ensure you know why each statement is true.

 

Question 2.
(i) Personal income minus direct taxes gives the disposable income.
(ii) GDP of India includes the market value of all the goods and services produced in the global level.
(iii) Disposable Income minus Transfer payments plus subsidies gives personal income.
(iv) The Quantum of wear and tear expenses are called Depreciation.
(a) (i), (ii), (iv) are correct
(b) (i), (ii), (iii) are correct
(c) (i), (ii), (iii) and (iv) are correct
(d) (i), (iv) are correct
Answer: (d) (i), (iv) are correct
In simple words: Statement (i) is correct because disposable income is what's left after direct taxes. Statement (iv) is correct because depreciation is the cost of wear and tear. Statement (ii) is incorrect as GDP is domestic, not global. Statement (iii) is also incorrect as disposable income is usually derived from personal income after taxes, and the formula given is reversed and complicated.

🎯 Exam Tip: Carefully review the definitions of key economic terms like disposable income, GDP, and depreciation to identify correct and incorrect statements.

 

Question 3.
(i) income methods sums up all forms of income earned by individuals who are involved in the production of goods and services.
(ii) There are several methods to calculate National income or GDP.
(iii) The Modern concept of GDP was first developed by Simon Kuznets in 1934.
(iv) The annual GDP of financial year 2017-18 will include only the goods and services produced during that financial year.
(a) (i), (ii), (iv) are correct
(b) (i), (ii), (iii) are correct
(c) (i), (ii), (iii) and (iv) are correct
(d) (i), (iii), (iv) are correct
Answer: (d) (i), (iii), (iv) are correct
In simple words: Statements (i), (iii), and (iv) are correct. Income methods do sum up individual earnings from production. Simon Kuznets did develop the modern GDP concept in 1934. Annual GDP covers production within that financial year. Statement (ii) is partially true but incomplete; there are three main methods, not just "several."

🎯 Exam Tip: Pay attention to specifics, like the number of methods for calculating GDP or the exact year of a concept's origin, to avoid common errors.

 

Question 4.
(i) GDP measures only quantity but not quality.
(ii) CSO conducts annual survey based on Indexes like Index on Industrial Production (IIP) and Consumer Price Index (CPI).
(iii) High level of Per Capita real GDP will lead to low level of pollution and low suicidal rate.
(iv) India is the largest producer of agricultural products in the world.
(a) (i), (ii), (iv) are correct
(b) (i), (ii), (iii) are correct
(c) (i), (ii) are correct
(d) (i), (iii), (iv) are correct
Answer: (c) (i), (ii) are correct
In simple words: Statements (i) and (ii) are correct. GDP indeed focuses on how much is produced, not how good it is. The CSO (Central Statistical Organisation) does use various indexes to gather economic data. Statement (iii) is wrong; a high GDP can sometimes be linked to more pollution or other social issues. Statement (iv) is also incorrect as India is not the single largest producer of all agricultural products.

🎯 Exam Tip: Be careful with absolute claims (e.g., "largest producer" or "always lead to") in statements, as they are often incorrect in economics.

 

Question 5.
(i) Economic Growth is one aspect of Economic Development-Said by Economist Amartya Sen.
(ii) HDI is apt tool to measure the real development in an economy.
(iii) United States of America ranks top in the globe in terms of its GDP.
(iv) Economic development is quantitative in nature.
(a) (i), (ii), (iv) are correct
(b) (i), (ii), (iii) are correct
(c) (i), (ii), (iii) and (iv) are correct
(d) (i), (iii), (iv) are correct
Answer: (b) (i), (ii), (iii) are correct
In simple words: Statements (i), (ii), and (iii) are correct. Amartya Sen linked economic growth to broader development. HDI is a good measure of real development. The USA is indeed one of the top economies by GDP. Statement (iv) is wrong because economic development is qualitative, focusing on quality of life, not just numbers.

🎯 Exam Tip: Clearly differentiate between quantitative (growth) and qualitative (development) aspects of an economy.

 

Question 6.
(i) Poverty alleviation came as a corollary of rural development.
(ii) In 2011, The UN General Assembly passed Resolution Happiness towards a Holistic approach to development.
(iii) There are nine domains in GNHI
(iv) There are two structural reforms recently brought in India- demonetisation and Goods and Services Tax.
(a) (i), (ii), (iv) are correct
(b) (i), (ii), (iii) are correct
(c) (i), (ii), (iii) and (iv) are correct
(d) (i), (iii), (iv) are correct
Answer: (c) (i), (ii), (iii) and (iv) are correct
In simple words: All four statements are correct. Reducing poverty naturally happens with rural development. The UN did pass a resolution on happiness in 2011. There are indeed nine areas of Gross National Happiness. And India recently had two big economic changes: demonetisation and GST.

🎯 Exam Tip: For true/false statements, ensure you have a firm grasp of recent economic events and international initiatives.

 

IV. Assertion and Reason

 

Question 1. Assertion (A): Economic Development is a broader concept. Reason (R): It is long-term in nature and includes variables like removal of poverty, Rise in life expectancy rate etc.
(a) A is correct and R is the relevant explanation to A.
(b) A is correct and R is not the relevant explanation to A
(c) A is wrong, R is correct.
(d) A is wrong and R is wrong.
Answer: (a) A is correct and R is the relevant explanation to A.
In simple words: The assertion is true: economic development is a wide idea. The reason is also true and explains why it's a broad concept, as it includes many long-term improvements for people like less poverty and longer lifespans.

🎯 Exam Tip: For assertion-reason questions, first check if both statements are individually true, then determine if the reason correctly explains the assertion.

 

Question 2. Assertion (A): There are two major structural reforms brought in India recently. They are demonetization and Goods and Services Tax. Reason (R): India economy is the 5th fastest growing nation of the World.
(a) A is correct, and R is the relevant explanation to A.
(b) A is correct and R is not the relevant explanation to A
(c) A is wrong, R is correct.
(d) A and R is wrong.
Answer: (b) A is correct and R is not the relevant explanation to A.
In simple words: The assertion is true: India did have two big reforms, demonetisation and GST. The reason is also true: India is a fast-growing economy. However, India being a fast-growing economy does not explain why demonetisation and GST were introduced. The reason does not directly connect to or explain the assertion.

🎯 Exam Tip: Even if both assertion and reason are true, they must have a cause-and-effect relationship for the reason to be a "relevant explanation."

 

Question 3. Assertion (A): Intermediate goods are not counted in calculating the GDP. Reason (R): Their value is already included in the final goods.
(a) A is correct and R is the relevant explanation to A.
(b) A is correct and R is not the relevant explanation to A
(c) A is wrong, R is correct
(d) A and R is wrong.
Answer: (a) A is correct and R is the relevant explanation to A.
In simple words: The assertion is true: we don't count intermediate goods in GDP. The reason is also true and explains why: their value is already included in the final product's price, so counting them separately would be double counting.

🎯 Exam Tip: This question tests a core principle of GDP calculation, emphasizing the avoidance of double counting by focusing only on final goods.

 

Question 4. Assertion (A): Economic Growth is a quantitative measure. Reason (R): It considers the increase in the output produced in an economy in a particular period of time.
(a) A is correct and R is the relevant explanation to A.
(b) A is correct and R is not the relevant explanation to A
(c) A is wrong, R is correct
(d) A and R is wrong.
Answer: (a) A is correct and R is the relevant explanation to A.
In simple words: The assertion is true: economic growth is about numbers and measurements. The reason is also true and explains why it's quantitative: it measures how much more a country produces over a certain time.

🎯 Exam Tip: Understand that "quantitative" means measurable by quantity, which directly relates to changes in output as measured by economic growth.

 

V. Match the following

 

Question 1. Match the Column I with Column II.

Answer:
A. (iv) July, August, September - Quarter 2
B. (i) Cement - Intermediate good
C. (v) Government Records - Central Statistical Organisation
D. (ii) Petro-chemical - Secondary sector
E. (iii) Per Capita Income - Dadabai Navroji
In simple words: This match links economic terms and concepts to their correct descriptions or associated elements. For example, July-September forms a specific quarter in economic accounting, cement is an intermediate product, government records are maintained by a statistical body, petro-chemicals belong to the secondary sector, and Dadabhai Navroji is associated with Per Capita Income.

🎯 Exam Tip: For matching questions, systematically go through each item in Column I and find its most accurate match in Column II. Eliminate options as you go.

 

Question 2. Match the Column I with Column II.
Answer: (Answer not provided in source.)
In simple words: This question requires matching two columns, but the details for the columns and the correct pairs are not available.

🎯 Exam Tip: Always double-check if all parts of a question, including tables for matching, are complete. If incomplete, you may need to mention it if context allows.

VI. Give Short Answer

 

Question 1. What is Gross Value Added?
Answer: Gross Value Added (GVA) measures the value of goods and services produced in an area, industry, or sector of an economy. In national accounts, GVA is calculated as the output minus the intermediate consumption. It balances the production account in national statistics. It helps understand the total contribution of a specific sector to the economy.
In simple words: GVA shows how much value a part of the economy adds by making things, after taking away costs of materials used.

🎯 Exam Tip: Remember that GVA focuses on the supply side and is used to measure the contribution of each sector or industry to the overall GDP.

 

Question 2. Distinguish between goods and services.
Answer: Goods are physical items that can be seen and touched, while services are actions or activities performed by others. Here are the key differences:

Goods can be stored and exchanged, while services are used right when they are produced.
In simple words: Goods are things you can hold, like a book. Services are things people do for you, like teaching or cutting hair.

🎯 Exam Tip: When distinguishing between goods and services, focus on tangibility, separability from the producer, and whether they are products or activities.

 

Question 3. In what two ways is the GDP measured in India?
Answer: In India, the Gross Domestic Product (GDP) is measured in two ways: annually and quarterly. The annual GDP covers a full financial year, which runs from April 1st of one year to March 31st of the next. For example, the period 2017-18 refers to April 2017 to March 2018. The quarterly GDP estimates divide the financial year into four parts:
- First quarter (Q1): April, May, and June
- Second Quarter (Q2): July, August, and September
- Third Quarter (Q3): October, November, and December
- Fourth Quarter (Q4): January, February, and March
In simple words: India measures its GDP for the whole year (annual) and also every three months (quarterly), which helps to see how fast the economy is growing more often.

🎯 Exam Tip: Remember the start and end months of India's financial year (April 1st to March 31st) and the months included in each of the four quarters for GDP reporting.

 

Question 4. What is meant by Intermediate good? Give example.
Answer: Intermediate goods are products that are used to make other goods. They are not sold directly to the final user but are processed further into finished products. For example, sugar is an intermediate good when used to bake a cake. The value of intermediate goods is included in the final product's price, to avoid double counting.
Eg: Sugar
In simple words: Intermediate goods are like ingredients, such as sugar, used to make something else, like a cake.

🎯 Exam Tip: The key characteristic of intermediate goods is that they are not sold to the final consumer but are consumed in the production process of another good.

 

Question 5. How do you arrive at NNP?
Answer: To find the Net National Product (NNP), we deduct the value of depreciation from the Gross National Product (GNP). Depreciation is the decrease in value of capital assets (like machinery) over time due to wear and tear.
NNP = GNP - Depreciation
In simple words: NNP is found by taking the total value of all goods and services produced by a country's residents (GNP) and subtracting how much value things like machines lost over time.

🎯 Exam Tip: Always remember that "Net" values in economics generally mean that depreciation has been subtracted from "Gross" values.

 

Question 6. What is meant by GVA?
Answer: Gross Value Added (GVA) is a measure of the value of goods and services produced in a specific area, industry, or sector of an economy. It is calculated by taking the output value and subtracting the cost of intermediate consumption. It also includes the subsidies the government gives and subtracts any taxes.
GVA = GDP + Subsidies - Taxes.
In simple words: GVA shows the total worth of things made by a specific part of the economy, after counting subsidies and taxes.

🎯 Exam Tip: GVA helps in understanding the productivity and economic contribution of different sectors before considering indirect taxes and subsidies at the aggregate level.

 

Question 7. Give examples for tertiary sector.
Answer: The tertiary sector, also known as the service sector, provides services rather than physical goods. This sector is crucial for supporting both the primary (agriculture) and secondary (manufacturing) sectors.
Examples include: Trade, Hotel industry, Transport, Storage, Communication, Finance, Insurance, Real estate, Social services, Postal and Telegraph, Banking, Education, Entertainment, Health care, and Information Technology.
In simple words: The tertiary sector is all about services, like transport, banking, teaching, and healthcare, which help people and businesses.

🎯 Exam Tip: To remember examples for the tertiary sector, think of activities that do not produce physical goods but instead help or provide value to people and businesses.

 

Question 8. What is the financial year of India?
Answer: The financial year in India is the period used for calculating GDP and other economic figures. It starts on April 1st and ends on March 31st of the following calendar year. This twelve-month period is used for budgeting, accounting, and tax purposes.
In simple words: India's financial year is from April 1st to March 31st. This is when the country counts its money and plans its budget.

🎯 Exam Tip: Clearly state the start and end dates of the financial year (April 1st to March 31st) as it is a specific detail for India.

 

Question 9. What is Depreciation?
Answer: Depreciation is the loss in the value of capital assets, like machinery and buildings, due to normal use, wear and tear, or becoming old. This decline in value is measured over time and is an important factor in calculating net economic figures. It is counted as a cost of doing business.
In simple words: Depreciation is how much value things like machines or buildings lose over time because they get old or are used a lot.

🎯 Exam Tip: Define depreciation clearly as the reduction in value of fixed assets over time, usually due to wear and tear or obsolescence.

 

Question 10. Write few parameters to measure economic growth?
Answer: Several factors help measure how much an economy is growing. These include the availability of human resources (people to work), natural resources (like land and minerals), and advancements in technology. Other important parameters are the formation of capital (investments in new businesses and infrastructure), stable political and social economic conditions, and government policies that support growth.
In simple words: Economic growth is measured by things like how many people are working, the amount of natural wealth, new technology, and good government policies.

🎯 Exam Tip: Focus on key factors like resources (human, natural), technology, capital, and the overall political and social environment that drives economic expansion.

 

Question 11. What is Disposable Income (DI)?
Answer: Disposable Income (DI) is the actual amount of money that individuals and families have left to spend or save after paying direct taxes. It represents the income available for consumption and investments. It can be calculated by subtracting direct taxes from personal income.
Thus, it can be expressed as DPI = PI - Direct Taxes.
In simple words: Disposable Income is the money you have left to spend or save after all your taxes have been taken out.

🎯 Exam Tip: Clearly state that Disposable Income is what remains after direct taxes, highlighting its importance for household consumption and saving.

VII. Answer in Detail

 

Question 1. Explain the limitations of GDP.
Answer: Gross Domestic Product (GDP) is a common way to measure an economy, but it has several limitations:
(i) Non-Marketed Items are Not Included: GDP only counts goods and services sold in markets. Things like a parent teaching their child or clean air, which have no market price, are not part of GDP.
(ii) Measures Quantity, Not Quality: GDP focuses on the amount of goods and services produced. It does not always consider their quality. A low-quality product sold in large numbers contributes to GDP, but its true value to people might be less.
(iii) Income Distribution: A country's GDP might grow fast, but this growth does not always mean everyone benefits equally. GDP doesn't show how wealth is spread among people, which can lead to big differences in income and assets.
(iv) Quality of Life: A high Per-Capita real GDP (income per person) does not always mean a good quality of life. It can sometimes be linked to problems like poor health conditions, unfair political systems, high pollution, or even higher rates of sadness. The true well-being of people is not fully captured by GDP alone. A high GDP might hide serious social issues.
In simple words: GDP doesn't count everything, like free help from family or clean air. It looks at how much is made, not how good it is. It also doesn't show if money is shared fairly or if people are truly happy and healthy.

🎯 Exam Tip: When discussing GDP limitations, focus on its inability to capture non-market activities, quality, income inequality, and overall well-being. Provide a brief example for each point.

 

Question 2. How are three sectors of an economy are interdependent?
Answer: The three main sectors of an economy - primary, secondary, and tertiary - are highly interdependent, meaning they rely on each other to function and grow.
The primary sector involves using natural resources directly, like farming, fishing, or mining. It provides raw materials. The secondary sector takes these natural products and changes them into other forms through manufacturing, creating industrial goods. This is the next step after the primary sector.
The third category is the tertiary sector, which provides services. These activities do not produce goods themselves but support the development and operation of the primary and secondary sectors. For example, transport moves raw materials and finished goods, and communication helps businesses coordinate. Banking provides money for investments, and education helps train workers for all sectors. Health care keeps the workforce healthy.
Thus, these three sectors are deeply connected. The primary sector supplies the secondary sector with raw materials. The secondary sector processes these into products, and the tertiary sector provides the necessary services (like transport, finance, and trade) to both the primary and secondary sectors. Without smooth functioning in one sector, the others would face challenges, showing their strong interdependence. This cooperation ensures the overall development of the economy.
In simple words: The three parts of an economy - farming (primary), factories (secondary), and services (tertiary) - all need each other. Farms give materials to factories, and services like transport and banks help both farms and factories work well.

🎯 Exam Tip: Illustrate interdependence with clear examples of how raw materials flow from primary to secondary, and how tertiary services support both, emphasizing the circular nature of economic activity.