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Balance of Payments Formula and Components mcq for Students
In India, which communities are at the greatest risk of poverty?
a) Households belonging to Scheduled Castes
b) Households belonging to Scheduled Tribes
c) Both a and b
d) Neither a nor b
Option c – Both a and b
Small farmers and seasonal labourers who repeatedly rise above and fall below the poverty line are known as
a) Occasionally poor
b) Churning poor
c) Usually poor
d) Always poor
Option b – Churning poor
What was the per-person monthly consumption threshold fixed for the rural poverty line in 1979?
a) ₹43.5
b) ₹49.09
c) ₹56.7
d) ₹62.1
Option b – ₹49.09
As per the 2011–12 Planning Commission data, which group of states recorded the highest share of people living below the poverty line?
a) Gujarat and Haryana
b) Kerala and Punjab
c) Chhattisgarh and Jharkhand
d) Bihar and Odisha
Option c – Chhattisgarh and Jharkhand
According to the Planning Commission (2011–12), what percentage of Chandigarh’s Population lived below the poverty line?
a) 2.77%
b) 9.86%
c) 21.81%
d) 9.91%
Option c – 21.81%
Why do proportional taxes lower the autonomous expenditure multiplier?
a) Taxes increase the marginal propensity to consume (MPC)
b) MPC plays no role in the process
c) Taxes and MPC become equal
d) Taxes reduce the MPC
Option d – Taxes reduce the MPC
Jan Breman described the transformation in the relationship between dominant landlords and low-caste farm workers as a shift from
a) Tenant to tiller
b) Patronage to exploitation
c) Exploitation to patronage
d) Bonded labour to free labour
Option b – Patronage to exploitation
Around 2011–12, the poverty rate in Bihar was roughly
a) 33.7%
b) 43.7%
c) 53.7%
d) 63.7%
Option a – 33.7%
Which of these is not considered a driver of poverty?
a) Low productivity levels
b) Slow Population growth
c) Government policies
d) An underdeveloped Economy
Option b – Slow Population growth
Between 2011 and 2019, by how much did India’s extreme poverty fall according to the World Bank?
a) 12.3%
b) 13.3%
c) 14.3%
d) 15.3%
Option a – 12.3%
The condition in which individuals or communities lack the financial means and necessities for a basic standard of living is called
a) Unemployment
b) Illiteracy
c) Unethical conduct
d) Poverty
Option d – Poverty
The share of people living below the poverty line is known as the poverty ratio or
a) Headcount Ratio
b) Income Disparity Index
c) Gini Coefficient
d) Socioeconomic Quotient
Option a – Headcount Ratio
Which data source was used to prepare the national Multidimensional Poverty Index (MPI) Baseline Report?
a) Annual Employment–Unemployment Survey
b) National Census
c) Economic Survey
d) National Family Health Survey (NFHS-4)
Option d – National Family Health Survey (NFHS-4)
If the marginal propensity to consume (MPC) is 0.6, what is the marginal propensity to save (MPS)?
a) 0.16
b) 0.36
c) 0.4
d) –0.6
Option c – 0.4
An unanticipated surge in product sales results in
a) Planned accumulation of inventory
b) Planned decumulation of inventory
c) Unplanned decumulation of inventory
d) Unplanned accumulation of inventory
Option c – Unplanned decumulation of inventory
Trade liberalisation has strengthened India’s medium- to high-Technology industries primarily by
a) Enhancing comparative advantage
b) Increasing imports
c) Improving fuel efficiency
d) Boosting labour intensity
Option a – Enhancing comparative advantage
The import-substitution policy is often referred to as
a) Make in India campaign
b) Outward-looking trade strategy
c) Balanced trade strategy
d) Inward-looking trade strategy
Option d – Inward-looking trade strategy
The use of fixed capital over time is termed
a) Depreciation
b) NET investment
c) Gross investment
d) Appreciation
Option a – Depreciation
Which economic perspective stresses methodological individualism, analysing purposeful human actions?
a) Keynesian Economics
b) Washington Consensus
c) Austrian School of Economics
d) Monetarist theory
Which of these does not directly influence India’s current account balance?
b) Foreign aid
c) Revenue Income
d) Trade gap
Option c – Revenue Income
Transfer payments are recorded in which type of economic account?
a) Government account
b) Household account
c) Production account
d) Appropriation account
Option a – Government account
Which of the following counts as a transfer payment?
a) Unemployment benefits
b) Scholarships
c) Retirement pensions
d) All of the above
Option d – All of the above
An account that an Indian Bank maintains in a foreign country, typically in that nation’s currency for transactions, is called a
a) Nostro account
b) Vostro account
c) MIBOR account
d) LIBOR account
Option a – Nostro account
The Environmental Kuznets Curve illustrates the relationship between
a) Environmental degradation and tax revenue
b) Environmental degradation and per-capita Income
c) Income inequality and tax revenue
d) Income inequality and per-capita Income
Option b – Environmental degradation and per-capita Income
What is the primary goal of the “Doughnut Model” of development?
a) Complete rejection of Technology
b) Living in harmony with nature
c) Rapid growth followed by later environmental repair
d) Ensuring both humanity and the planet thrive together
Option d – Ensuring both humanity and the planet thrive together
An Indian investor buying shares in a British automobile company will be recorded under:
a) Balance of Trade only
b) Balance of Payments only
c) Both Balance of Payments and Balance of Trade
d) Neither Balance of Payments nor Balance of Trade
Option b – Balance of Payments only
Regarding India’s Economy, consider the following statements: 1. An increase in the Nominal Effective Exchange Rate (NEER) shows appreciation of the rupee. 2. An increase in the Real Effective Exchange Rate (REER) indicates improved trade competitiveness. 3. Higher domestic inflation compared to other countries widens the gap between NEER and REER. Which of these statements are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Option c – 1 and 3 only
Which of the following is not an objective of NITI Aayog?
a) Offering strategic guidance for development
b) Acting as a policy think tank
c) Monitoring and evaluating programme implementation
d) Serving as the “provider of first and last resort” for Inter-state disputes
Option d – Serving as the “provider of first and last resort” for Inter-state disputes
Which statement about currency exchange rates is accurate?
a) Floating exchange rates involve government intervention through buying or selling currency
b) Fixed exchange rates are determined and maintained by government action
c) Under the Bretton Woods system, exchange rates moved with changes in gold prices
d) Under the classical gold standard, exchange rates were tied to the dollar’s price
Option b – Fixed exchange rates are determined and maintained by government action
Which of the following counts as Foreign Direct Investment (FDI)?
a) A foreign company purchasing shares on Indian stock exchanges
b) A foreign pension fund investing in Indian stock markets
c) A foreign merchant banker buying shares from Indian markets
d) A foreign entity establishing an educational institution in India
Option d – A foreign entity establishing an educational institution in India
Which organisation provides support through the “Extended Fund Facility”?
a) International Fund for Agricultural Development
b) International Monetary Fund
c) International Bank for Reconstruction and Development
d) United Nations Development Programme
Option b – International Monetary Fund
Which of the following are aims of NITI Aayog? 1. Imposing policies on States and Union Territories 2. Allocating funds at national and state levels 3. Designing long-term strategies and policy frameworks. Select the correct answer:
a) 1 and 2 only
b) 2 and 3 only
c) 1, 2 and 3
d) 3 only
Option d – 3 only
Which indicator is part of India’s National Multidimensional Poverty Index (MPI)?
a) Years of schooling
b) Literacy rate
c) Life expectancy
d) Per capita Income
Option a – Years of schooling
The estimation of poverty using Monthly Per Capita Consumption Expenditure (MPCE) on a Mixed Reference Period was recommended by:
a) Lakdawala Committee
b) Tendulkar Committee
c) Dandekar Committee
d) Alagh Committee
Option b – Tendulkar Committee
What are the effects of devaluation or depreciation of a currency? 1. Higher imports and lower exports 2. Higher exports and lower imports 3. Increase in domestic inflation 4. Decrease in domestic inflation. Select the correct option:
a) 1 and 3 only
b) 1 and 4 only
c) 3 only
d) 2 and 3 only
Option d – 2 and 3 only
The SDG India Index, created by NITI Aayog, tracks 17 Sustainable Development Goals for each state. Which of the following is not included?
a) Zero hunger
b) Reduced unemployment
c) Life below water
d) Responsible consumption and production
Option b – Reduced unemployment
Consider these statements about poverty measurement in India: 1. The poverty line is based on minimum needs for Food, clothing, fuel, Light, education, and healthcare. 2. The daily calorie requirement is 2400 calories in rural areas and 2100 calories in urban areas. Which statements are correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Option c – Both 1 and 2
Which of the following statements about India’s foreign exchange reserves is correct?
a) Most reserves are held as foreign currency
b) Holding foreign currency reserves has no cost to the nation
c) Both 1 and 2
d) Neither 1 nor 2
Option a – Most reserves are held as foreign currency
Identify the option that is not a poverty-reduction initiative in India
a) Prime Minister Rozgar Yojana
b) Rashtriya Ucchatar Shiksha Abhiyan
c) Swarna Jayanti Shahari Rozgar Yojana
d) Integrated Rural Development Programme
Option b – Rashtriya Ucchatar Shiksha Abhiyan
Poverty evaluated using income and expenditure criteria is termed as
a) Poverty limit
b) Poverty bar
c) Poverty band
d) Poverty line
Option d – Poverty line
Choose the scheme that is not aimed at poverty eradication in India
a) Sampoorna Grameen Rozgar Yojana (SGRY)
b) Rural Housing – Indira Awaas Yojana (IAY)
c) Rural Employment Generation Programme (REGP)
d) Namami Gange
Option d – Namami Gange
In children facing severe poverty, stunted growth mainly reflects
a) Sleep deprivation
b) Lack of clothing
c) Undernutrition
d) Lack of housing
Option c – Undernutrition
According to the Economic Survey 2013–14, the Indian state with the lowest poverty rate in 2011–12 was
a) Haryana
b) Kerala
c) Gujarat
d) Karnataka
Option b – Kerala
As per the Planning Commission’s Lakdawala estimates, the share of India’s Population below the poverty line in 2004–05 was about
a) 38.86%
b) 44.48%
c) 27.5%
d) 35.97%
Option c – 27.5%
Who remarked, “What I object to is the craze for machinery. Men keep saving labour until thousands are left jobless and die of starvation”?
a) Lal Bahadur Shastri
b) Swami Vivekananda
c) Mahatma Gandhi
d) Jawaharlal Nehru
Option c – Mahatma Gandhi
The Multidimensional Poverty Index was introduced in India in
a) 2020
b) 2021
c) 2022
d) 2023
Option b – 2021
Dadabhai Naoroji estimated the poverty line using which method?
a) Industrial output
b) Agricultural productivity
c) Export–import data
d) Prison diet
Option d – Prison diet
Rashtriya Swasthya Bima Yojana, providing Health Insurance to below-poverty-line households, began in
a) 2017
b) 2009
c) 2014
d) 2008
Option d – 2008
Poverty line assessments in India rely on surveys conducted by the
a) Ministry of finance
b) Reserve Bank of India
c) Ministry of Rural Development
d) National Statistical Office
Option d – National Statistical Office
For 2011–12, the national urban poverty line was roughly what monthly per-capita amount?
a) ₹3,000
b) ₹1,000
c) ₹2,000
d) ₹1,500
Option b – ₹1,000
Which metric is commonly used to gauge poverty levels?
a) Average Marginal Utility
b) Maximum Support Value
c) Minimum Support Price
d) Monthly Per Capita Expenditure
Option d – Monthly Per Capita Expenditure
In pre-independence India, the idea of a poverty line was first proposed by
a) M.K. Gandhi
b) Mahadev Govind Ranade
c) Dadabhai Naoroji
d) B.R. Ambedkar
Option c – Dadabhai Naoroji
Identify the incorrect statement about India’s poverty line I. It is generally estimated once every ten years. II. The percentage of people below the poverty line is uniform across all Social and economic groups.
a) Only I
b) Only II
c) Both I and II
d) Neither I nor II
Option a – Only I
Which factor is not a cause of rural poverty in India?
a) Migration from rural areas
b) Limited employment opportunities outside Agriculture
c) Illiteracy
d) Lack of capital
Option a – Migration from rural areas
In India, poverty line calculations are typically based on sample surveys conducted every
a) Five years
b) Ten years
c) Six years
d) Twice a year
Option a – Five years
The committee constituted to measure poverty in India was the
a) P.K. Mohanty Committee
b) Y.V. Reddy Committee
c) Tendulkar Committee
d) Abid Hussain Committee
Option c – Tendulkar Committee
Which initiative conducts a thorough review of a country’s financial system, jointly undertaken by the World Bank and IMF in developing and emerging nations?
a) Evaluation and Monitoring of the Financial Sector
b) Developing Economies Financial Audit Scheme
c) Financial Sector Assessment Program
d) finance and Socio-Economic Audit Scheme
Option c – Financial Sector Assessment Program
According to Malthus’ theory, which factor increases in a geometric progression?
a) Employment
b) Poverty
c) Population
d) Food supply
Option c – Population
Which policy action reflects a move toward economic liberalisation?
a) Raising import tariffs
b) Removing most import licensing requirements
c) Tightening Bank reserve rules and capping interest rates
d) Imposing limits on capital formation
Option b – Removing most import licensing requirements
Which was a key consequence of India’s industrial licensing policy?
a) Large industrial groups obtained licenses to reduce competition
b) Licenses were mainly granted to backward states
c) Most licenses targeted the import of goods
d) Many small private companies secured licenses
Option a – Large industrial groups obtained licenses to reduce competition
In the context of India’s trade History, which year is known as the “year of division”?
a) 2010
b) 1991
c) 1981
d) 1996
Option b – 1991
What is a primary benefit of foreign competition?
a) Eliminates the need for product development
b) Encourages efficient production
c) Expands access to overseas markets
d) Conserves foreign exchange reserves
Option b – Encourages efficient production
Which of the following is not considered an investment?
a) Building new residential properties
b) Purchasing shares of a company
c) Buying machinery and equipment for production
d) Maintaining inventories of raw materials
Option b – Purchasing shares of a company
A nation can enhance its balance of payments by currency devaluation if the combined elasticity of demand for imports and exports is
a) Less than one
b) Equal to one
c) Greater than one
d) Zero
Option c – Greater than one
The Foreign Exchange Management Act (FEMA) was enacted to replace FERA in which year? ( Balance of Payments Formula and Components mcq )
a) 1999
b) 1988
c) 2014
d) 1992
Option a – 1999
Which law was passed in 1973 to control foreign exchange in India? ( Balance of Payments Formula and Components mcq )
a) FERA
b) FEMA
c) FRBM
d) SARFAESI
Option a – FERA
Under the Liberalised Exchange Rate Management System (LERMS), what share of foreign exchange earnings had to be converted at the RBI’s official rate? ( Balance of Payments Formula and Components mcq )
a) 20%
b) 60%
c) 30%
d) 40%
Option d – 40%
IBM and Coca-Cola exited India in which year for failing to meet the Foreign Exchange Regulation Act’s 40% foreign ownership limit? ( Balance of Payments Formula and Components mcq )
a) 1964
b) 1981
c) 1956
d) 1977
Option d – 1977
Which policy encouraged domestic vehicle manufacturing instead of imports? ( Balance of Payments Formula and Components mcq )
a) Export substitution
b) Indian substitution
c) Import substitution
d) Ruralisation
Option c – Import substitution
Which two methods are commonly used in an inward-focused trade strategy to protect local industries from external competition? ( Balance of Payments Formula and Components mcq )
a) Quotas and Subsidies
b) Tariffs and Subsidies
c) Tariffs and Quotas
d) Tariffs and Price Controls
Option c – Tariffs and Quotas
What is the term for the approach that replaces imports with locally produced goods? ( Balance of Payments Formula and Components mcq )
a) Import Liberalisation
b) International Trade
c) Export-led Growth
d) Import Substitution
Option d – Import Substitution
What does a country’s balance of trade represent? ( Balance of Payments Formula and Components MCQ )
a) Total value of imports
b) Total value of exports
c) Ratio of global trade
d) Difference between export and import values
Option d – Difference between export and import values
Which is the oldest and most common way to enter a foreign market? ( Balance of Payments Formula and Components MCQ )
a) Establishing wholly owned production facilities
b) Making portfolio investments
c) Exporting
d) Engaging in mergers and acquisitions
Option c – Exporting
In 2015, India allowed up to 49% Foreign Direct Investment (FDI) in which sector? ( Balance of Payments Formula and Components MCQ )
a) Defence
b) Manufacturing of medical services
c) Education
d) Food products
Option a – Defence
The “transformation curve” is also called the ( Balance of Payments Formula and Components MCQ )
a) Production possibility curve
b) Indifference curve
c) Supply curve
d) Demand curve
Option a – Production possibility curve
A higher reading of which index signals more unequal income distribution? ( Balance of Payments Formula and Components MCQ )
a) Gini coefficient
b) Consumer Price Index (CPI)
c) NET Domestic Product (NDP)
d) Gross Domestic Product (GDP)
Option a – Gini coefficient
Ronald Reagan’s major 1981 tax cut was based on which economic concept? ( Balance of Payments Formula and Components MCQ )
a) Laffer Curve
b) Lorenz Curve
c) Kuznets Curve
d) Sweezy’s Kinked Demand Curve
Option a – Laffer Curve
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