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MCQ Questions for Class 12 Economics Unit 1 National Income and Related Aggregates

February 10, 2023February 9, 2023 by Prasanna

National Income and Related Aggregates Class 12 MCQs Questions with Answers

Question 1.

Inventory is a …………….. concept whereas the change in inventory is a concept.

(A) stock, flow
(B) flow, stock
(C) stock, stock
(D) flow, flow
Answer:
(A) stock, flow

Explanation:
Inventory is a stock concept as it can be measured at a point of time and change in inventory is a flow concept because it can be measured over a time period.

Question 2.

Which of the following is not a ‘factor payment?

(A) Free uniform to defence personnel
(B) Salaries to the Members of Parliament
(C) Rent paid to the owner of a building
(D) Scholarship given to the students
Answer:
(D) Scholarship given to the students

Explanation:
Factor Payments are made to the factors of production, thus scholarship is not a factor payment, instead it is a transfer payment.

Question 3.

Goods purchased for the following purpose are final goods:

(A) for the satisfaction of wants
(B) for investment in firm
(C) both (A) and (B)
(D) none of the above
Answer:
(C) both (A) and (B)

Explanation:
Final goods are referred to as those goods that do not require further processing. These goods are produced for the direct consumption either by a consumer for final consumption or by a producer for investment or capital formation.

Question 4.

Which of the following is a stock?

(A) Savings
(B) Production
(C) Consumption of fixed capital
(D) Capital
Answer:
(D) Capital

Explanation:
Capital is measured at a particular point of time.

Question 5.

Which of the following is a flow?

(A) Deposits in a bank
(B) Capital
(C) Depreciation
(D) Wealth
Answer:
(C) Depreciation

Explanation:
Depreciation indicates the changes in the value of an asset over a period $ of time.

Question 6.

Identify the correctly matched pair of the items in Column A to those in Column B:

Column A	Column B
1. Money Flow	(a) Depreciation
2. Real Flow	(b) Factor Services
3. Trade Flow	(c) House Work by Housewife
4. Capital Flow	(d) Inventory

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
Real flow refers to the flow of factor services and goods and services among different sectors of the economy.

Question 7.

Which of the following is a stock?

(A) Wealth
(B) Savings
(C) Exports
(D) Profits
Answer:
(A) Wealth

Explanation:
Wealth is the accumulated value of economic goods or past savings measured at a given point of time.

Question 8.

Identify the correctly matched pair of items in Column A to those in Column B:

Column A	Column B
1. Markets in the Economy	(a) Producers only
2. National Income	(b) Macroeconomics
3. Total Cost	(c) Both Micro and Macroeconomics
4. Net National Product	(d) Microeconomics

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(A) 1-(a)

Explanation:
Money flows refer to the payments for the services.

Question 9.

The study of National Income is related to:

(A) Microeconomics
(B) Macroeconomics
(C) Both Micro and Macroeconomics
(D) None of the above
Answer:
(B) Macroeconomics

Explanation:
Macroeconomics is the study of behaviour of an economy as a whole. National income is the value of total final goods produced by an economy. Thus, the study of National Income is related to macroeconomics.

Question 10.

Unforeseen obsolescence of fixed capital assets during production is:

(A) Consumption of fixed capital
(B) Capital loss
(C) Income loss
(D) None of the above
Answer:
(B) Capital loss

Explanation:
Capital loss is non-recurring in nature. Unforeseen obsolescence of fixed capital. assets during production is a capital loss that may happen due to natural calamities, war, unexpected decrease in demand, etc.

Question 11.

Identify the correctly matched pair of items in Column A to those in Column B:

Column A	Column B
1. Money Flow	(a) Consumption Expenditure
2. Real Flow	(b) Between Households
3. Trade Flow	(c) Only Domestic Economy
4. Capital Flow	(d) Inventory

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
Macroeconomics is the study of behaviour of an economy as a whole. National Income is the value of total final goods produced by an economy. Thus, the study of National Income is related to macroeconomics.

Question 12.

Identify which of the following statements is true:

(A) Durable goods get transformed in the production and consumption process.
(B) More sophisticated and heavy capital goods raise the ability of a labourer to produce goods.
(C) Intermediate goods do not pass through any more stages of production.
(D) Final goods refers to that good which is purchased for the purpose of further production/resale.
Answer:
(B) More sophisticated and heavy capital goods raise the ability of a labourer to produce goods.

Explanation:
More sophisticated and heavy capital goods that raise the ability of a labourer to produce goods includes heavy machineries. These heavy and sophisticated machineries reduce the time taken by labourer.

Question 13.

If in an economy the value of Net Factor Income from Abroad is 200 crores and the value of Factor Income to Abroad is ? 40 crores. Identify the value of Factor Income from Abroad:

(A) 200 crores
(B) 160 crores
(C) 240 crores
(D) 180 crores
Answer:
(C) 240 crores

Explanation:
Net Factor Income from Abroad = Factor Income from Abroad – Factor Income to Abroad ₹ 200 = Factor Income from Abroad – ₹40 Factor Income from Abroad = ₹200 + ₹40 = ₹240 crores

Question 14.

The sum of factor payments is equal to –

(A) Gross Domestic Income
(B) National Income
(C) Per Capital Real Income
(D) Per Capital National Income
Answer:
(B) National Income

Explanation:
The factor payments indicates the value added to the factor/inputs of production, as these are the payments made to factor of production. Thus, the sum of all the factor payments also constitutes National Income.

Question 15.

Which of the following statements is incorrect?

(A) Gross Domestic Product (GDP) at Market Price = GDP at Factor Cost + Net Indirect Taxes
(B) Net National Product (NNP) at Market Price = NNP at Factor Cost.
(C) Gross National Product (GNP) at Market Price = GDP at Market Price + Net Factor Income from Abroad
(D) Net National Product (NNP) at Factor cost = National Income [Delhi Set – II, 2020] ED
Answer:
(B) Net National Product (NNP) at Market Price = NNP at Factor Cost.

Explanation:
Net National Product (NNP) I at Market Price = NNP at Factor Cost + Net Indirect Taxes

Question 16.

Identify the correctly matched pair of items in Column A to those in Column B:

Column A	Column B
1. Total of factor payments	(a) Value Added Method
2. Value Added	(b) Stock Variable
3. Festival gifts	(c) Transfer payments
4. Final expenditure incurred by the government	(d) Consumption expenditure

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(C) 3 – (c)

Explanation:
When there are no goods or services exchanged for the payment of money, it is known as transfer payment

Question 17.

Foreign embassies in India are a part of India’s:

(A) Economic territory
(B) Geographical territory
(C) Both (A) and (B)
(D) None of the above
Answer:
(B) Geographical territory

Explanation:
According to United Nation, “Economic territory is the geographical territory administered by a government within which persons, goods and capital circulate freely.” Since, Foreign Embassies can’t be administered by Indian Government, these are a part of India’s geographical territory.

Question 18.

National Income is the sum of factor incomes accruing to:

(A) Nationals
(B) Economic territory
(C) Residents
(D) Both residents and non-residents
Answer:
(C) Residents

Explanation:
National income is the sum total of factor incomes earned by normal residents of a country in the form of rent, wages, interest and profit in an accounting year.

Question 19.

Identify the correctly matched pair of items in Column A to those in Column B:

Column A	Column B
1. Saks + Intermediate Consumption	(a) Value Added
2. Operating Surplus	(b) interest
3. Cooking Gas (LPG)	(c) Heavily taxed
4. Freemedica1treatmen	(d) Wagesinkind

(A) 1-(a)
(B) 2-(b)
(C) 3-(c)
(D) 4-(d)
Answer:
(D) 4-(d)

Explanation:
Wages and salaries in kind consist of wages/salaries in form of goods and services that are not necessary in the workplace and that can be used by employees on their own time, and on their own initiative, to meet their own needs or those of their family members.

Question 20.

Which of the following affects national income?

(A) Goods and Services Tax
(B) Corporation Tax
(C) Subsidies
(D) None of the above
Answer:
(C) Subsidies

Explanation:
NNPFC= NNFMP – Indirect Taxes + Subsidies

Question 21.

Identify the correctly matched pair of items in Column A to those in Column B:

Column A	Column B
1. Income Tax	(a) ForccdTrans-fer
2. Services of Housewives	(b) Market Activities
3. Retirement Pension	(c)Taxabk? for Firm
4. Annual value of goods and services produced	(d) Income method

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Ans.
(A) 1 – (a)

Explanation:
Income tax is a forced transfer as tax payer cannot avoid it.

Question 22.
With a rise in real national income, welfare of the people:
(A) rises.
(B) faUs.
(C) remains unchanged.
(D) none of the above.
Ans.
(A) rises.

Explanation:
With a rise in real national income, welfare of the people rises as people have more money to spend on the needs and wants

Question 23.
GDP is not an appropriate indicator of welfare because of:
(A) externalities.
(B) composition of GDP and distribution of GDP
(C) non-monetary transactions.
(D) all of the above.
Answer:
(D) all of the above.

Explanation:
There are certain limitations of GDP as an index of welfare:

GDP does not take into account changes in inequalities in the distribution of income.
GDP does not include non-monetary exchanges.
GDP does not consider the changes in the population of a country.
GDP does not account for valuation of externalities.

Question 24.

Pollution created by factories/vehicles is an example of:

(A) positive externalities.
(B) negative externalities.
(C) either (A) or (B).
(D) neither (A) of (B). SB
Answer:
(B) negative externalities.

Explanation:
Cost suffered by unrelated third party due to result of an economic transaction is known as negative externalities. Pollution created by factories/vehicles has negative effect on the society.

Question 25.

Identify, the correctly matched items in Column to that of Column B:?

Column A	Column B
1. Welfare of the people	(a) Social Welfare
2. Total of economic and non-economic welfare	(b) Economic Welfare
3. Benefits or harnis of an activity caused by a firm	(c) Externalities
4. Material well being of the people	(d) Real GDP

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
Non-monetary exchanges refers to goods and services that are produced but not exchanged for cash. The value of these exchanges is often difficult to estimate and therefore excluded from the national income estimates.

Question 26.

Identify the correctly matched items in Column A to that of Column B:

Column A	Column B
1. GDP of a counhy	(a) Absolute measure welfare
2. Underestimation of CDI	(b) Non-monetary exchanges excluded
3. Base year	(c) Year of current market prices
4. Economk Welfare?	(d) Mental satisfaction and peace

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
Non-monetary exchanges refem to goods and services that are produced but not exchanged for cash. The value of these exchanges is often difficult to estimate and therefore excluded from the national income estimates.

Question 27.

Real GDP is considered as an index of:

(A) price level in the economy.
(B) welfare of the people.
(C) profit maximization.
(D) none of the above.
Answer:
(B) welfare of the people.

Question 28.

dentify the correctly matched items in Column A to that of Column B:

Column A	Column B
1. Social Welfare	(a) Total of economic and non-economic welfare
2. Comparison of GDP of different countries	(b) GDPs evaluated at current market prices
3. Economic welfare	(c) Situation of unemployment
4. GDP deflator	(d) Includes prices of imported goods

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(A) 1 – (a)

Explanation:
Social welfare is an aggregate of the utilities or satisfaction of all the individuals in the society.

Question 29.

Smoke emitted by a chemical factory and causing air pollution is an example of:

(A) Positive externalities
(B) Negative externalities
(C) Either (A) or (B)
(D) Neither (A) nor (B)
Answer:
(B) Negative externalities

Explanation:
Negative externalities refer to negative impact of an economic activity on the others without involving any penalty.

Assertion and Reason Based MCQs

Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Question 1.

Assertion (A): The flour purchased by a baker is considered an intermediate good.
Reason (R): The flour is used for the production of bread, cakes and biscuits to be sold to the consumer.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
Goods used in the production of final goods are known as intermediated goods.

Question 2.

Assertion (A): Refrigerator used at home is considered as Capital Good.
Reason (R): Refrigerator is a one-time purchase for the household and will not be purchased for a very long time.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
Capilal goods includes hose fixed or tangible assets that arc purchased by E ‘? producers or businesses to produce goods and services.

Question 3.

Assertion (A): Car purchased by the hotel for the purpose of tourism facilitation is a Capital Good.
Reason (R): The car is purchased by the hotel to provide long term service to the consumers.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
Capital goods includes those fixed or tangible assets that are purchased by ; producers or businesses to produce goods and services.

Question 4.
Assertion (A): Furniture purchased by a household is considered a final good.
Reason (R): Furniture will not be used for further production.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
Final goods are used for direct consumption by consumers or producers.

Question 5.

Assertion (A): The cement purchased by the constructor is considered an intermediate good.
Reason (R): The cement is used for the construction of the building to be sold to the consumer.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
Goods used in the production of I final goods are known as intermediate goods.

Question 6.

Assertion (A): The value of intermediate good should not be included.
Reason (R): This will cause the problem of double counting as the value of intermediate goods is already included in the value of final good.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
The value of intermediate good should not be included as it leads to double counting which will lead to increase in national income. Thus, the norm is to include the value of final goods only.

Question 7.

Assertion (A): Income from illegal activities like smuggling, theft, gambling, etc., should not be included.
Reason (R): Including illegal activities will cause the problem of double counting.

Answer:
(C) Assertion (A) is true, but Reason (R) is false.

Explanation:
Illegal activities like smuggling, theft, gambling, etc., are not considered legal economic activities.

Question 8.

Assertion (A): Brokerage on the sale/purchase of shares and bonds is to be included.
Reason (R): They form the value of final goods and so need to be included with respect to the Value Added Method.

Answer:
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Explanation:
Broker is rendering productive services.

Question 9.

Assertion (A): Leisure is not included in GNP.
Reason (R): It does not involve rendering of any factor service.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Question 10.

Assertion (A): Profits of chemical industries increased 150%; fishermen income reduced by 70% due to untreated chemical pollutants in water bodies. This is a negative externality.
Reason (R): The profits of chemical industries is causing pollution which is harming the water and inturn leading the fishermen to catch less fish as the biodiversity of the water body is disturbed.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Question 11.

Assertion (A): GDP does not exhibit the structure of the product.
Reason (R): If the increase in GDP is mainly due to increased production of war equipment and ammunitions, then such an increase cannot improve welfare in economy.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Question 12.

Assertion (A): GDP is the correct measure of the improvement of welfare of the people.
Reason (R): Many activities in an economy are not evaluated in monetary terms, they are not included in GDP due to non-availability of data.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
There are certain limitations of GDP as an index of welfare:

GDP does not take into account changes in inequalities in the distribution of income.
GDP does not include non-monetary exchanges.
GDP does not consider, the changes in the population of a country.
GDP does not account for valuation of externalities.

Question 13.

Assertion: With every increase in the level of GDP social welfare definitely increases in the economy.
Reason (R): GDP is not a true indicator of welfare of the economy.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
CD? is a flawed measure of human welfare, e.g., if Increase in the level of GDP is associated with higher level of income inequality, social welfare may not increase.

Case-Based MCQs

I. Read the below case and answer the questions that follow:
The Centre on Saturday increased the budgetary allocation for the environment ministry from last fiscal by nearly five percent for 2020-21 with no change in the amount allotted to pollution abatement and climate change action plan. Union Finance Minister, Nirmala Sitharaman, allocated 3,100 crore for the ministry out of which 46O crore were allotted to control pollution, which is the same as the money it received in the last budget.

Control of pollution has been conceptualized to provide financial assistance to Pollution Control Boards/Committees and funding to National Clean Air Programme (NCAP). Similarly, budget for pollution abatement, which was cut by 50 percent last year from 2018-19, remained unchanged at 10 crore.

The minister also announced that states, which are formulating and implementing plans for ensuring cleaner air in cities above one million population should be encouraged. Budget 2020: Allocation for Environment Ministry up 5% to ?3,100 crore – Business Standards, 1st February, 2020

Question 1.

What type of externality will the increase in budget allocation create?

(A) Negative
(B) Positive
(C) Neutral
(D) Can’t be said
Answer:
(B) Positive

Explanation:
Positive externalities refer to positive impact of an economic activity on the others without involving any price.

Question 2.

means material well-being of the ………….. people.

(A) Externality
(B) Welfare
(C) Economy
(D) None of the above
Answer:
(B) Welfare

Explanation:
Welfare means material well-being of the people as it is the state of having enough housing, clothing, food, and possessions, etc. to live comfortably.

Question 3.

Real GDP and Welfare are …………… related with each other.

(A) Directly
(B) Indirectly
(C) Inversely
(D) None of the above
Answer:
(A) Directly

Explanation:
Real GDP and Welfare are related with each other as rise in the real GDP leads to rise in the welfare.

Question 4.

Why is the policy implemented?

(A) To ensure clear air
(B) To ensure clear water
(C) To ensure clean roads
(D) All of the above
Answer:
(A) To ensure clear air

II. Read the below case and answer the questions that follow:
Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction. Labour, Land, Capital & Enterprise
img
The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction. The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households. Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.

Question 1.

Money Flows from ……………. to ………….. as factor payments.

(A) Firms, households
(B) Households, firms
(C) Government, firms
(D) Households, government
Answer:
(A) Firms, households

Question 2.

Circular flow of income refers to the flow of activities of production, income generation and expenditure involving different ……………. of the economy.

(A) Sector
(B) Aspect
(C) Type
(D) None of the above
Answer:
(A) Sector

Explanation:
Two sectors of the economy:
(a) Households
(b) Firms

Question 3.

Which of the following is not the significance of Circular Flow of Income?

(A) It reflects structure of an economy.
(B) It shows interdependence among different sectors.
(C) It shows injections and leakages from flow of money.
(D) It does not help in estimation of national income and related aggregates.
Answer:
(D) It does not help in estimation of national income and related aggregates.

Question 4.

Which of the following is not an assumption of a two sector model of Circular Flow of Income?

(A) Domestic economy comprises only 2 sectors, the producers and the households.
(B) The households spend their entire income, so that there is no saving.
(C) Domestic economy is an open economy (no exports and imports).
(D) There is no government in the economy.
Answer:
(C) Domestic economy is an open economy (no exports and imports).

Explanation:
The two sector economy has the J following assumptions There are only two sectors in the economy household sector and business sector.
(2) No government interventions over the economic activities.
(3) Business sectors do not carry out any import or export activities, creating a closed economy.

III. Read the below case and answer the questions that follow:
The country’s real gross domestic product (GDP) is likely to expand by 11 percent in the next financial year due to a faster economic recovery and on a low base, says a report. The report by domestic rating agency Brickwork Ratings said economic activities are slowly reaching Pre-COVID levels following the relaxation of the lockdown, except in sectors that remain affected by social distancing norms.

“With progress in developing an effective vaccine for COVID-19 and signals of faster-than-expected recovery in the domestic economy, and also supported by a low base, we expect the real GDP to grow at 11 percent in F/Y 22, from the estimated contraction of 7 percent to 7.5 percent in F/Y 21,” the agency said.

According to the first advance estimates of national income released by the National Statistical Office (NSO), the country’s GDP is estimated to contract by a record 7.7 percent during the current financial year. “Real GDP to grow at 11 per cent in F/Y 22: Report” Economic Times, 21st Jan, 2021

Question 1.

Real GDP is when the goods and services are produced by all producing units in the domestic territory of a country during an accounting year and valued at prices or constant price.

(A) base year’s
(B) current year’s
(C) both (A) and (B)
(D) neither (A) nor (B)
Answer:
(A) base year’s

Question 2.

Read the following statement – Assertion (A) and Reason (R).
Choose one of the correct alternatives given below:
Assertion (A): The country’s real gross domestic product is likely to expand.
Reason (R): Some sectors remain affected by social distancing norms.

Alternatives:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Answer:
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Explanation:
The country’s real gross domestic product is likely to expand due to a faster economic recovery following the relaxation of the lockdown.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
Real GDP is nominal GDP I adjusted for inflation and GDP Deflator is the measure of inflation.

Question 3.

What will be the growth rate of GDP according to the NSO?

(A) -7.7%
(B) +7.7%
(C) +11%
(D) -7.5%
Answer:
Option (A) is correct.

Question 4.

Read the following statements – Assertion (A) and Reason (R).
Assertion (A): Real GDP is the true indicator of the growth of the economy.
Reason (R): Real GDP is nominal GDP adjusted for inflation used to measure the actual growth of production.
Select the correct alternative from the following:

(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

MCQ Questions for Class 12 Economics with Answers

MCQ Questions for Class 12 Political Science Unit 8 Globalization

February 10, 2023February 9, 2023 by Prasanna

Security in Contemporary World Class 12 MCQs Questions with Answers

Question 1.

Globalization leads to each culture becoming

(A) more different
(B) more transparent
(C) more distinctive
(D) more different and distinctive
Answer:
(D) more different and distinctive

Explanation:
Globalization of culture contributes to the exchange of cultural values of different countries, the convergence of traditions. For cultural globalization characterized convergence of business and consumer culture between the different countries of the world and the growth of international communication.

Question 2.

The main agenda of the World Social Forum is:

(A) opposition to terrorism
(B) opposition to neo- liberal globalization
(C) opposition to colonialism
(D) opposition to communism.
Answer:
(B) opposition to neo- liberal globalization

Explanation:
Neo-liberalism is a policy that encloses both politics and economics and seeks to transfer the control of economic factors from the public sector to the private sector.

Question 3.

Globalization has …………. dimensions.

(A) political and social
(B) social and economic
(C) political and economic
(D) political, social and economic
Answer:
(D) political, social and economic

Question 4.

Choose the correct option that has significantly contributed to the process of ‘Globalization’.

(A) Fear of war
(B) Security threats
(C) Advancement of technology
(D) Achievements of the United Nations
Answer:
(C) Advancement of technology

Explanation:
Technological advancements reduce costs of transportation and communication across nations and thereby facilitate global sourcing of raw materials and other inputs. Patented technology encourages globalization as the firm owning the patent can exploit foreign markets without much competition.

Question 5.

Which one of the following is a right cause of globalization?

(A) The U.S. people initiated globalization
(B) Technology led to globalization
(C) The Cold War led to globalization
(D) The policy of Non-alignment led to globalization
Answer:
(B) Technology led to globalization

Explanation:
Technology is the vital force in the modem form of business globalization. Technology has helped us in overcoming the major hurdles of globalization and international trade such as trade barrier, lack of common ethical standard, transportation cost and delay in information exchange, thereby changing the market place.

Question 6.

Which of the following statements is true about the causes of Globalisation?

(A) Growth of multinational companies with a global presence in many different economies.
(B) Globalisation is caused by a particular community of people.
(C) Globalisation originated in the US.
(D) Economic interdependence alone causes globalisation.
Answer:
(A) Growth of multinational companies with a global presence in many different economies.

Explanation:
MNC’s play an important role in the globalisation process. They compete with the local producers directly even after being miles apart, thus integrating the markets. Their working leads to exchange of investments and products which leads to interconnection

Question 7.

Globalisation has allowed the of customs, language and products.

(A) restriction
(B) spread
(C) devaluing
(D) escalation
Answer:
(B) spread

Question 8.

India has felt the impact of globalization through increased prosperity, partly triggered by increasing trade volumes, investment, and:

(A) weapons
(B) growth
(C) hatred
(D) terrorism
Answer:
(B) growth

Explanation:
The high growth in GDP is perhaps the most popularly cited benefit of globalization in India. This increase is possible through a favourable balance of trade in contemporary times due to inflows of foreign trade and foreign investment into India.

Question 9.

The wake of globalization was first felt in the 1990s in India when the finance minister, initiated the economic liberalization plan.

(A) Dr. Manmohan Singh
(B) VP Singh
(C) Atal Bihari Vajpayee
(D) Rajiv Gandhi
Answer:
(A) Dr. Manmohan Singh

Explanation:
The Indian economy was liberalised in the year 1991. In India, the concept of economic liberalisation was introduced to attain several objectives – industrialisation, expansion in the role of private and foreign investment, and introducing a free market system.

Question 10.

Which one of the following is the disadvantage of globalization?

(A) It creates global opportunities
(B) It paves the way for global market
(C) It fails to generate sufficient employment
(D) None of the above
Answer:
(C) It fails to generate sufficient employment

Explanation:
Trade liberalization raises the skilled wage rate and the successful probability of matching, which encourages unskilled workers to learn skill but increase the number of the skilled workers after trade liberalization. Therefore, the unemployment rate of skilled workers may increase after globalization.

Question 11.

How India became an exporter of primary goods and raw materials and a consumer of finished goods?

(A) Because of its riches in agriculture
(B) During the Mughal period this exports increased
(C) As a consequence of Britain’s imperial ambitions this exports started
(D) None of the above
Answer:
(C) As a consequence of Britain’s imperial ambitions this exports started

Explanation:
Opium, indigo, sugar, and raw cotton were the major commodities exported by India in 1849. By 1920 exports remained overwhelmingly basic, unfinished commodities: raw cotton, jute manufactures, raw jute, raw skins and hides, and tea.

Question 12.

Why India decided to deregulate various sectors including trade and foreign investment?

(A) Because Indian economy was not in balance
(B) It was a response to a financial crisis and to the desire for higher rates of economic growth
(C) Because government needed money
(D) All of the above (A)
Answer:
(B) It was a response to a financial crisis and to the desire for higher rates of economic growth

Explanation:
India carried out wide-ranging deregulation policies in 1991. Significant sectors of the economy were opened up for private participation through de-licensing and allowing entry to industries previously reserved exclusively for the state-owned sector.

Question13.

What is one of the universal criticism given by the critics to globalization?

(A) The rich get richer and the poor get poorer.
(B) The economic depression would start in 21st century.
(C) It would lead the concentration of the global wealth to one country.
(D) None of the above
Answer:
(A) The rich get richer and the poor get poorer.

Explanation:
According to critics, rich are people who have a high income in society. Globalization leads to an increase in income inequality within the globe. This is because the poor do not ripe the benefits of trade since they have to give up more resources to get less of the rich resources, based on most terms of trade.

Question 14.

What was the protest at World Trade Organization Ministerial Meeting, 19991

(A) The decreasing job opportunities by developed nations
(B) The threat of pandemic
(C) Unfair trade practices by the economically powerful states
(D) Deteriorating cultural practices
Answer:
(C) Unfair trade practices by the economically powerful states

Explanation:
Ministers from developing countries demanded that developed economies such as the US and the stop controversial agricultural subsidies, which hindered globalization. Japan said abusive use of anti-dumping measures should be regarded as a disguised form of protectionism that nullifies tariff reductions overnight.

Assertion and Reason Based MCQs

Directions: In the following questions, a statement of
Assertion (A) is followed by a statement of Reason (R).
Mark the correct choice as:
(A) Both (A) and (R) are true, but (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.

Question 1.

Assertion: Globalization need not always be positive; it can have negative consequences for the people.
Reason: Globalization is a multidimensional concept. It has political, economic and cultural manifestations, and these must be adequately distinguished.

Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Explanation:
Globalization may have some negative consequences too. It may not be able to generate sufficient income for all; illiterate people have less knowledgea bout globalization. Moreover, it is a multidimensional concept and we must be acquainted about each of them and differentiate them accordingly.

Question 2.

Assertion: While globalization is not caused by any single factor, technology remains a critical element.
Reason: The ability of ideas, capital, commodities and people to move more easily from one part of the world to another has been made possible largely by technological advances.

Answer:
(A) Both (A) and (R) are true, but (R) is the correct explanation of (A).

Explanation:
Technological globalization is speeded in large part by technological diffusion, the spread of technology across borders. In addition, technological advances in areas like mobile phones can lead to competition, lowered prices, and concurrent improvements in related areas such as mobile banking and information sharing.

Question 3.

Assertion: Globalization results in an erosion of state capacity, that is, the ability of government to do what they do.
Reason: Globalization also gives freedom to governments to act in an arbitrary manner as far as the global issues are concerned.

Answer:
(C) (A) is true, but (R) is false.

Explanation:
Globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments shift their expenditures in favor of transfers and subsidies and away from capital expenditures. Powerful nations curb the freedom of decision making of the weaker nations by putting indirect pressures, such as, withdrawing economic aid or using veto against them.

Question 4.

Assertion: Economic globalization involves many actors other than the international institutions.
Reason: What is often called economic globalization usually involves greater economic flows among different countries of the world.

Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Explanation:
Economic globalization is the development of trade systems within transnational actors such as corporations or NGOs; Financial globalization: can be linked with the rise of a global financial system with international financial exchanges and monetary exchanges.

Question 5.

Assertion: In 1991, responding to a financial crisis and to the desire for higher rates of economic growth, India embarked on a programme of economic reforms that has sought increasingly to de-regulate various sectors including trade and foreign investment.
Reason: This deregulation opened up the new opportunities of local as well as foreign trade. Hence, the hope of creating new employment opportunities.

Answer:
(A) Both (A) and (R) are true, but (R) is the correct explanation of (A).

Explanation:
The main purpose of liberalization of trade and investment in 1991 was to increase the international competitiveness of industrial production and to motivate foreign investment and technology so as to reduce the burden of debt. Also, they aimed to promote efficiency of local industries.

Question 6.

Assertion: The critics argue that contemporary globalization represents a particular phase of global capitalism that makes the rich richer (and fewer) and the poor poorer.
Reason: Weakening of the state leads to a reduction in the capacity of the state to protect the interest of its poor.

Answer:
(A) Both (A) and (R) are true, but (R) is the correct explanation of (A).

Explanation:
Globalization leads to an increase opportunities of local as well as foreign trade. in income inequality around the globe. This is Hence, the hope of creating new employment because globalization encourages prosperous opportunities. nations to outsource production to locations

Question 7.

Assertion: There have been left wing protests to economic liberalization voiced through political parties as well as through forums like the Indian Social Forum.
Reason: The left wing believed that globalization would corrupt the politics of India.

Answer:
(C) (A) is true, but (R) is false.

Explanation:
The left wing of India criticized globalization mainly on the issue of the entries of multinational companies and foreign investment. According to them, this would affect the trade opportunities of the local industries and products.

Case-Based MCQs

I. Study the cartoon carefully and give the answers to the question that follows:
MCQ Questions for Class 12 Political Science Unit Unit 6 Security in Contemporary World - 1

Question 1.

What is depicted in the picture?

(A) Spread of nuclear weapons
(B) Spread of various diseases
(C) Attacks by using biological weapons
(D) None of the above
Answer:
(B) Spread of various diseases

Explanation:
Globalization, the flow of information, goods, capital, and people across political and geographic boundaries, allows infectious diseases to rapidly spread.

Question 2.

Who identified the four basic aspects of globalization?

(A) IMF
(B) UN
(C) EU
(D) World Bank
Answer:
(A) IMF

Explanation:
In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people, and the I dissemination of knowledge.

Question 3.

How did globalization help in the medical field?

(A) Exports of medicines increased.
(B) Helped in finding effective and speedy cure for the diseases with the collaboration of the medical facilities and knowledge of many countries.
(C) Inviting foreign doctors and creating employment opportunities in the various countries.
(D) All of the above
Answer:
(B) Helped in finding effective and speedy cure for the diseases with the collaboration of the medical facilities and knowledge of many countries.

Explanation:
Although, globalization increases the risk of spreading diseases, it also helps in finding effective and speedy cure for the diseases with the collaboration of the medical facilities and knowledge of many countries. The best example can be the invention of Covid-19 vaccine.

Question 4.

Why is Africa featured in the above picture?

(A) Because it is the centre of globalization.
(B) The diseases mentioned in the picture have their epicentre in Africa.
(C) Because Africa is a poor country.
(D) Because world aims at developing Africa.
Answer:
(B) The diseases mentioned in the picture have their epicentre in Africa.

II. Read the passage given below and answer the questions that follows:
At the most simple level, globalisation results in an erosion of state capacity, that is, the ability of government to do what they do. All over the world, the old ‘welfare state’ is now giving way to a more minimalist state that performs certain core functions such as the maintenance of law and order and the security of its citizens.

However, it withdraws from many of its earlier welfare functions directed at economic and social well-being. In place of the welfare state, it is the market that becomes the prime determinant of economic and social priorities.

The entry and the increased role of multinational companies all over the world leads to a reduction in the capacity of governments to take decisions on their own. What is important is for people in different parts of the world to recognise these interconnections with the rest of the world. Currently, we are aware of the fact that events taking place in one part of the world could have an impact on another part of the world.

The Bird flu or tsunami is not confined to any particular nation. It does not respect national boundaries. Similarly, when major economic events take place, their impact is felt outside their immediate local, national or regional environment at the global level.

Question 1.

At the most simple level, globalisation results in an erosion of …………..

(A) political capacity
(B) state capacity
(C) capital capacity
(D) global capacity
Answer:
(B) state capacity

Explanation:
Globalization has had a dual effect on the sovereignty of the nation-state. Yet, simultaneously, economic integration has limited the range of policy options available to states. This has diminished their capacity to meet these obligations.

Question 2.

What is given way recently by the old “Welfare state”?

(A) More minimalist state
(B) More capitalist state
(C) More socialist state
(D) More democratic state
Answer:
(A) More minimalist state

Explanation:
More minimalist state; A state with the least possible amount of powers. It is a term used in political philosophy where the duties of the state are so minimal that they cannot be reduced much further.

Question 3.

What do the new states withdraw as a result of globalisation?

(A) Many of its ethics for the welfare of human race
(B) The ideal world order
(C) Many of its earlier welfare functions directed at economic and social well-being.
(D) All of the above
Answer:
(B) The ideal world order

Question 4.

The increase in the MNCs all over the world has resulted in ……………

(A) the governments’ inability to cater to their needs.
(B) the capacity of the nations to incorporate these MNCs.
(C) poverty to the population where these companies are set up.
(D) reduction in the capacity of governments to take decisions on their own.
Answer:
(D) reduction in the capacity of governments to take decisions on their own.

III. Read the passage given below and answer the questions that follows:
While everything may not be known about the economic facets of globalisation, this particular dimension shapes a large part of the content and direction of contemporary debates surrounding globalisation. A part of the problem has to do with defining economic globalisation itself. The mention of economic globalisation draws our attention immediately to the role of international institutions like the IMF and the WTO and the role they play in determining economic policies across the world.

Yet, globalisation must not be viewed in such narrow terms. Economic globalisation involves many actors other than these international institutions. A much broader way of understanding of economic globalisation requires us to look at the distribution of economic gains, i.e. who gets the most from globalisation and who gets less, indeed who loses from it. What is often called economic globalisation usually involves greater economic flows among different countries of the world.

Some of this is voluntary and some forced by international institutions and powerful countries. As we saw in the examples at the beginning of this chapter, this flow or exchange can take various forms: commodities, capital, people and ideas. Globalisation has involved greater trade in commodities across the globe; the restrictions imposed by different countries on allowing the imports of other countries have been reduced.

Similarly, the restrictions on movement of capital across countries have also been reduced. In operational terms, it means that investors in the rich countries can invest their money in countries other than their own, including developing countries, where they might get better returns.

Question 1.

Where does economic globalisation draw our attention to?

(A) Declining economy
(B) Poverty in the third world countries
(C) To the role of international institutions like the IMF and the WTO
(D) All of the above
Answer:
(C) To the role of international institutions like the IMF and the WTO

Explanation:
The IMF and the WTO are international organizations with about 150 members in common. While the IMF’s central focus is on the international monetary and financial system, and the WTO’s is on the international trading system, both work together to ensure a sound system for global trade and payments.

Question 2.

How globalisation should not be viewed?

(A) in broader terms
(B) in narrow terms
(C) positively
(D) None of the above
Answer:
(B) in narrow terms

Question 3.

According to broader way of looking at globalisation, what should we focus on?

(A) The distribution of economic gains
(B) Increasing poverty in third world countries
(C) Unemployment in economic sectors
(D) Increasing population of the world
Answer:
(A) The distribution of economic gains

Question 4.

In terms of trade, what is the impact of globalisation?

(A) Countries are divided in groups and trading with their groups only.
(B) Developing countries are not given importance in trade.
(C) Any country can receive the opportunity of trading with the other countries.
(D) None of the above
Answer:
(C) Any country can receive the opportunity of trading with the other countries.

Explanation:
Globalization has increased the production of goods and services. The largest companies are no longer national firms, located in one single country; they are multinational corporations with businesses in 1 many countries.

IV. Read the passage given below and answer the questions that follows:
The most visible impacts of globalization are definitely the ones affecting the economic world. Globalization has led to a sharp increase in trade and economic exchanges, but also to a multiplication of financial exchanges. In the 1970s world economies opened up and the development of free trade policies accelerated the globalization phenomenon. Between 1950 and 2010, world exports increased 33-fold. This significantly contributed to increasing the interactions between different regions of the world.

This acceleration of economic exchanges has led to strong global economic growth. It fostered as well a rapid global industrial development that allowed the rapid development of many of the technologies and commodities we have available nowadays. Knowledge became easily shared and international cooperation among the brightest minds speeded things up. According to some analysts, globalization has also contributed to improving global economic conditions, creating much economic wealth.

At the same time, finance also became globalized. From the 1980s, driven by neo- liberal policies, the world of finance gradually opened. Many states, particularly the US under Ronald Reagan and the UK under Margaret Thatcher introduced the famous “3D Policy”: Disintermediation, Decommissioning, and Deregulation.

Question 1.

We can see “a sharp increase” due to globalisation in ?

(A) employment and capital
(B) trade and economic exchanges
(C) poverty and hunger
(D) All of the above
Answer;
(B) trade and economic exchanges

Explanation:
Globalization has resulted in greater inter connectedness among markets around the world and increased communication and awareness of business opportunities in the far corners of the globe.

Question 2.

In between which years the world’s export has increased 33-fold?

(A) 1970-1980
(B) 1950-1990
(C) 1950-2000
(D) 1950-2010
Answer:
(D) 1950-2010

Question 3.

What is the impact of increase in the economic exchanges between the countries of the world?

(A) Strong global economic growth
(B) Sharp decline in the trade
(C) Decline in the unemployment numbers
(D) Increase in the index of poverty and hunger index
Answer:
(A) Strong global economic growth

Explanation:
Countries that are open to international trade tend to grow faster, innovate, improve productivity and provide higher income and more opportunities to their people.

Question 4.

After the 1980s, which policy was introduced by US and UK?

(A) 4D Policy
(B) 3D Policy
(C) Fair Trade Policy
(D) None of the above
Answer:
(B) 3D Policy

Explanation:
Several states, particular the United states and have adopted the popular “3D Policy”: disintermediation, decommissioning, deregulation. The idea was to simplify the regulation of finance, eliminate the mediators and break down the barriers between the financial centres of the world. And the aim was to make it easier for the financial players of the world to exchange money. This financial globalization has contributed to the rise of a global financial market in which the proliferation of contracts and capital exchanges.

MCQ Questions for Class 12 Political Science with Answers

MCQ Questions for Class 12 Geography Chapter 12 Geographical Perspective on Selected Issues and Problems

February 10, 2023February 9, 2023 by Prasanna

Geographical Perspective on Selected Issues and Problems Class 12 MCQs Questions with Answers

Question 1.

Glasswares, plastic containers, polythene bags, ashes, floppies, CDs, are examples of:

(A) pollutants
(B) solid waste
(C) fertilizers
(D) poison
Answer:
(B) solid waste

Explanation:
Solid waste is the unwanted or useless solid materials generated from human activities in residential, industrial or commercial areas.

Question 2.

Leather, pulp and paper, textiles and chemicals industries are the major :

(A) acid rain producing industries
(B) water polluting industries
(C) pesticides producing industries
(D) Toxin polluting industries
Answer:
(B) water polluting industries

Explanation:
They are industries that discharge more than 1,00,000 litres of wastewater and/or hazardous chemicals into the rivers.

Question 3.

Combustion of fossil fuels, mining and industries are the main sources :

(A) air pollution
(B) noise pollution
(C) smog
(D) diseases
Answer:
(A) air pollution

Explanation:
There are many different types of air pollutants, such as gases, particulates, and biological molecules. Some air pollutants are ? poisonous.

Question 4.

The immediate alterations that the world is witness in climate all across the globe is due to :

(A) global warming
(B) water borne diseases
(C) reservoirs
(D) regular rains
Answer:
(A) global warming

Explanation:
Climate change includes both global warming driven by human-induced emissions of greenhouse gases and the resulting large-scale shifts in weather patterns ?

Question 5.

……………. are residential areas of the least choice, dilapidated houses, poor hygienic conditions, poor ventilation, lack of basic amenities like drinking water, light and toilet facilities, etc.

(A) Slums
(B) Flats
(C) Bunglows
(D) playground
Answer:
(A) Slums

Explanation:
A slum is a highly populated ;; f urban residential area consisting of densely f p packed housing units of weak built quality.

Question 6.

…………… makes people vulnerable to drug abuse, alcoholism, crime, vandalism, escapism, apathy and ultimately social exclusion.

(A) Crime
(B) Poverty
(C) Criticism
(D) adrenal rush
Answer:
(B) Poverty

Explanation:
Poverty is the state of not having enough material possessions or income for a if person’s basic needs.

Question 7.

Temporary or a permanent decline in productive capacity of the land is known as :

(A) land degradation
(B) marshy land
(C) desalination of land
(D) land up gradation
Answer:
(A) land degradation

Explanation:
Land degradation is viewed as any change or disturbance to the land perceived to be deleterious or undesirable.

Question 8.

Which stretch of Yamuna is most polluted?

(A) Delhi to Ghaziabad
(B) Delhi to Agra
(C) Delhi to Noida
(D) Delhi to Etawah
Answer:
(D) Delhi to Etawah

Explanation:
At least 90% of domestic and industrial wastewater in the city flows into the Yamuna.

Question 9.

Mention the sources of water pollution in India.

(A) Toxic effluents from industries
(B) Sewage disposal
(C) Pesticides
(D) All of the Above
Answer:
(D) All of the Above

Explanation:
The largest source of water pollution in India is untreated sewage. Other sources of pollution include agricultural runoff and unregulated small-scale industry. Most rivers, lakes and surface water in India are polluted due to industries, untreated sewage and solid wastes.

Question 10.

‘Urban waste disposal is a serious problem in India.’ Suggest measures that we as citizens can take to solve this problem of urban waste.

(A) Proper waste disposal bins provided by the municipality
(B) Segregate the wet and dry waste
(C) fines can be issued for not disposing waste in the required manner
(D) All of the Above
Answer:
(D) All of the Above

Explanation:
The key to efficient waste management is to ensure proper segregation of waste at source and to ensure that the wastegoes through different streams of recycling and resource recovery. Then reduced final residue is then deposited scientifically in sanitary landfills.

Question 11.

National Mission for Clean Ganga was started in:

(A) 2009
(B) 2011
(C) 2013
(D) 2014
Answer:
(B) 2011

Explanation:
The aim of National Mission for Clean Ganga was to maintain minimum ecological flows in the river Ganga with the aim of ensuring water quality and environmentally

Question 12.

Gullied/ ravenous land, deserted or coastal sands, barren rocky areas, steep sloping land are examples of:

(A) Wasteland
(B) Upland
(C) Refill
(D) None of the Above
Answer:
(A) Wasteland

Explanation:
Wastelands are degraded lands where the soil might have low productive capacity

Question 13.

The Swachh Bharat Mission was launched in:

(A) 2014
(B) 2015
(C) 2016
(D) 2017
Answer:
(A) 2014

Explanation:
Swachh Bharat Mission, Swachh Bharat Abhiyan, or Clean India Mission is a country-wide campaign initiated by the Government of India in 2014 to eliminate open defecation and improve solid waste management sustainable development.

Question 14.

Jhabua district is located in the western most agro- climatic zone in Madhya Pradesh suffers from:

(A) High rains
(B) Resource degradation
(C) High tourist activities
(D) High Government control
Answer:
(B) Resource degradation

Explanation:
Resource degradation is the deterioration of the environment through depletion of resources.

Question 15.

Rajiv Gandhi Mission for Watershed Management was started in:

(A) 1998
(B) 1996
(C) 1994
(D) 1992
Answer:
(C) 1994

Explanation:
The Rajiv Gandhi Mission for Watershed Management is an ambitious Programme of the Government of M.E

Question 16.

Migration of people from developing to developed countries will normally cause an absolute increase in global:

(A) emissions
(B) unrest
(C) harmony
(D) peace
Answer:
(A) emissions

Explanation:
Migration causes land degradation and the degradation of coastal and marine ecosystems due to over use of the resources to cater for the need of the new influx of population.

Assertion and Reason Based MCQs

Directions: In the following questions, A statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both A and R are true and R is the correct explanation of A.
(B) Both A and R are true but R is NOT the correct explanation of A.
(Q A is true but R is false.
(D) A is false and R is true.

Question 1.

Assertion (A): Environmental pollution results from ‘there lease of substances and energy from waste products of human activities.
Reason (R): There are many types of pollution. E Ans. Option (B) is correct.

Explanation:
Since the era of Industrial Revolution, man has continued to introduce hazardous materials into the environment at an alarming rate. Man’s activities through urbanization, industrialization, mining, and exploration are at the forefront of global environmental pollution. Among these activities, industry is the most significant contributor.

Question 2.

Assertion (A): Surface water available from rivers, canals,lakes, etc. is never pure.
Reason (R): It contains small quantities of suspended particles, organic and inorganic substances.

Answer:
(A) Both A and R are true and R is the correct explanation of A.

Explanation:
When concentration of these suspended particles , organic and inorganic substances increases, the water becomes polluted, and hence becomes unfit for use.

Question 3.

Assertion (A): Through watershed management programme the degradation of land in Jhabua district has controlled in a significant manner. Reason (R): About 20% of the total area under Jhabua district has been treated by the watershed programmes.

Answer:
(A) Both A and R are true and R is the correct explanation of A.

Explanation:
This programme has helped to improve soil quality in the district. They planted fodder grass on the pasture land and | adopted social fencing of these lands for at least two years.

Question 4.

Assertion (A): Poisonous elements released from the industries reach the reservoirs, rivers and other water bodies, which destroy the bio-system of these waters.
Reason (R): Most of the industrial wastes are disposed off in running water or lakes.

Answer:
(A) Both A and R are true and R is the correct explanation of A.

Explanation:
Industries produce several undesirable products including industrial wastes, polluted waste water, poisonous gases, chemical residuals, numerous heavy metals, dust, smoke, etc. Most of the industrial wastes are disposed off in running water or lakes.

Question 5.

Assertion (A): Various types of chemicals used in modern agriculture such as inorganic fertilisers, pesticides and herbicides are also pollution generating components.
Reason (R): These chemicals are washed down to rivers, lakes and tanks.

Answer:
(A) Both A and R are true and R is the correct explanation of A.

Explanation:
Water pollution results when contaminants are introduced into the natural environment. Pesticides and fertilizers used in agriculture can contaminate both groundwater and surface water. Fertiliser induces an increase in the nitrate content of surface waters. Farms also discharge large quantities of agro chemicals, organic matter, drug residues, sediments and saline drainage into water bodies.

Question 6.

Assertion (A): Ganga, as a river, has national importance.
Reason (R): The river requires cleaning by effectively controlling the pollution for its water.

Answer:
(B) Both A and R are true but R is NOT the correct explanation of A.

Explanation:
The main causes of water pollution in the Ganga River are the disposal of human sewage and animal waste, increasing population density, and disposal of industrial waste into the river Therefore, the river requires cleaning by effectively controlling the pollution for its
water

Question 7.

Assertion (A): Combustion of fossil fuels, mining and industries are the main sources of air pollution.
Reason (R): These processes release oxides of sulphur and nitrogen,hydrocarbons, carbon dioxide, carbon monoxide, lead and asbestos.

Answer:
(A) Both A and R are true and R is the correct explanation of A.

Explanation:
Fossil fuels as coal and oil for electricity production and road transportation, add huge amount of air pollutants like carbon dioxide, nitrogen and sulfur dioxide. Sulfur I dioxide, oxides of nitrogen and fly ash are 1 produced as main pollutants if coal is used 8 as a fuel. Fossil fuels contain sulphur. On combustion they produce sulphur dioxide and 1 sulphur trioxide. These oxides form sulphuric 1 acid and sulphurous acid in the atmosphere.

Question 8.

Assertion (A): Noise pollution refers to the state of unbearable and uncomfortable to human beings which is caused by noise from different sources.
Reason (R): This matter has become a serious concern only in recent years due to a variety of technological innovations.

Answer:
(B) Both A and R are true but R is NOT the correct explanation of A.

Explanation:
Noise pollution impacts millions of people on a daily basis. The most common health problem it causes is Noise Induced Hearing Loss (NIHL). Exposure to loud noise can also cause high blood pressure, heart disease, sleep disturbances, and stress.

Case-Based MCQs

I. Read the case study given below and answer the questions that follow:
Buses merely skirt the periphery. Auto rickshaws cannot go there, Dharavi is part of central Mumbai where three wheelers are banned. Only one main road traverses the slum, the miscalled ‘ninety-foot road’, which has been reduced to less than half of that for most of its length. Some of the side alleys and lanes are so narrow that not even a bicycle can pass.

The whole neighbourhood consists of temporary buildings, two or three storeyed high with rusty iron stairways to the upper part, where a single room is rented by a whole family, sometimes accommodating twelve or more people; it is a kind of tropical version of the industrial dwelling of Victorian London’s East End.

But Dharavi is a keeper of more sombre secrets than the revulsion it inspires in the rich; a revulsion, moreover, that is, in direct proportion to the role it serves in the creation of the wealth of Bombay. In this place of shadow less, treeless sunlight, uncollected garbage, stagnant pools of foul water, where the only non- human creatures are the shining black crows and long grey rats, some of the most beautiful, valuable and useful articles in India are made. From Dharavi come delicate ceramics and pottery, exquisite embroidery and zari work, sophisticated leather goods, high-fashion garments, finely-wrought metalwork, delicate jewellery

settings, wood carvings and furniture that would find its way into the richest houses, both in India and abroad.
Dharavi was an arm of the sea, that was filled by waste, largely produced by the people who have come to live there: Scheduled Castes and poor Muslims. It comprises rambling buildings of corrugated metal, 20 metres high in places, used for the treatment of hides and tanning. There are pleasant parts, but rotting garbage is everywhere…”

Question 1.

In which state is Dharavi located?

(A) Andhra Pradesh
(B) Maharashtra
(C) Tamil Nadu
(D) Assam
Answer:
(B) Maharashtra

Explanation:
Dharavi is a locality in Mumbai, Maharashtra, India, considered to be one of § Asia’s largest slums.

Question 2.

To which place has Dharavi been compared to?

(A) Victorian London’s East End
(B) Victorian London’s West End
(C) Victorian London’s North End
(D) Victorian London’s South End
Answer:
(A) Victorian London’s East End

Explanation:
Dharavi has been compared to Victorian London’s East End as the area to contain some of the worst poverty in Britain.

Question 3.

Which of these are not made in Dharavi?

(A) Jewellery
(B) Pottery
(C) Garments
(D) Stationery
Answer:
(D) Stationery

Explanation:
Dharavi has an active informal economy in which numerous household enterprises employ many of the slum residents leather, textiles and pottery products are among the goods made inside Dharavi.

Question 4.

According to the passage, earlier Dharavi was a/an of the sea?

(A) Face
(B) Leg
(C) Arm
(D) Body
Answer:
(C) Arm

Explanation:
Dharavi was an arm of the sea,that was filled by waste, largely produced by the people who have come to live there.

Question 1.

How many roads traverse the main slum?

(A) One
(B) Two
(C) Five
(D) Ten
Answer:
(A) One

Question 2.

To whom does Dharavi inspire revulsion into?

(A) Poor
(B) Rich
(C) Middle income
(D) All of these
Answer:
(B) Rich

Question 3.

Which of these is not a characteristic of Dharavi?

(A) Uncollected garbage
(B) Treeless sunlight
(C) Pools of foul water
(D) Closeness to river
Answer:
(D) Closeness to river

Explanation:
Dharavi lies between two railway lines on low-lying land, previously used as a rubbish tip, and is one of the biggest squatter settlements in the world. The Dharavi slums face a lot of problems like noise, water and air 1 | pollution, it also has no sewage or drainage systems.

Question 4.

Where are the goods made in Dharavi sold to?

(A) India
(B) Overseas
(C) Both (A) and (B)
(D) None of these
Answer:
(C) Both (A) and (B)

Explanation:
The processed hides are sold to the national and the international markets.

II. Read the case study given below and answer the questions that follow:
Based on the universal law “Polluter pays”, a silent but strong effort to restore the ecology and safeguard the human health with people’s participation has taken place in Daurala near Meerut. These efforts are now bearing fruits after a span of three years when Meerut based NGO had developed a model for ecological restoration.

The recent meeting of the Daurala Industries officials, NGOs, Government officials and other stakeholders at Meerut has brought out results which usually come out mainly through the Court’s decisions The powerful logics, authentic studies and the pressure of the NGO has in a way brought a new lease of life to the twelve thousand residents of this village.

It was in the year 2003 that the pitiable condition of Dauralaites drew the attention of the civil society. The groundwater of this village with a population of 12,000 persons was contaminated with heavy metals. The reason r was that the untreated wastewater of Daurala industries was leaching to the groundwater table and was also being used for irrigation.

The activists of the NGO conducted a door-to-door survey of the health status of the residents and came out with a report. The group reported that 192 deaths in the past five years have been recorded in the village due to consumption of contaminated water.

The industry came under pressure due to activism. The organisation, the village community and people’s representatives sat together to find out sustainable solutions to this problem. The industrialists showed a keen interest towards checking the deteriorating ecology. The overhead water tank’s capacity in the village was enhanced and a 900 m extra pipeline was laid to serve potable water to the community.

The silted pond of the village has been cleaned and recharged by desilting it. Large quantity of silt was removed paving way to pure water so that it percolated deep down the aquifers. Rainwater harvesting structures have been constructed at different places which has helped in diluting the contaminants of the groundwater after the monsoons. About 1000 trees have also been planted which have improved the environment.

Question 1.

How long has it taken to show results of the efforts taken by the NGO?

(A) One year
(B) Two years
(C) Three years
(D) Five years
Answer:
(C) Three years

Question 2.

What was the groundwater being used for?

(A) Drinking
(B) Irrigation
(C) Cooking food
(D) Preparing juices
Answer:
(B) Irrigation

Explanation:
Groundwater use in irrigation is increasing both in absolute terms and in percentage of total irrigation. |

Question 3.

What is potable water?

(A) Water fit for drinking
(B) Water fit for bathing
(C) Water fit for watering plants
(D) Water fit for all purposes
Answer:
(A) Water fit for drinking

Explanation:
Potable water, also known as 8 drinking water, comes from surface and ground 8 sources and is treated to levels that that meet 1 state and federal standards for consumption.

Question 4.

How has the groundwater been recharged?

(A) By filtering
(B) By distilling
(C) Bydesilting
(D) By evaporating
Answer:
(C) Bydesilting

Explanation:
Desilting is the removal of silt from a body of water.

III. Read the case study given below and answer the questions that follow:
Environmental pollution by solid wastes has now got significance because of enormous growth in the quantity of wastes generated from various sources. Solid waste refers to a variety of old and used articles, for example-stained small pieces of metals, broken glassware, plastic containers, polythene bags, ash, floppies, CDs, etc., dumped at different places. These discarded materials are also termed as refuse, garbage and rubbish, etc. and are disposed of from two sources :

(i) household or domestic establishments, and (ii) industrial or commercial establishments.
The household wastes are disposed off either on public lands or on private contractors’ sites, whereas the solid wastes of industrial units are collected and disposed off through public(municipal) facilities at low lying public grounds (landfill areas). The huge turnout of ashes and debris from industries, thermal power houses and building constructions or demolitions have posed problems of serious consequences.

Solid wastes cause health hazard through creation of obnoxious smell, and harbouring of flies and rodents, which act as carriers of diseases like typhoid, diphtheria, diarrhoea, malaria and cholera, etc. These wastes cause frequent nuisance as and when these are carelessly handled, spread by wind and spluttered through rain water.

Question 1.

……………… is the unwanted or useless solid materials generated from human activities in residential, industrial or commercial areas.

(A) Industrial waste
(B) Solid waste
(C) Commercial waste
(D) Animal waste
Answer:
(B) Solid waste

Explanation:
Solid waste commonly known as trash is a waste type consisting of everyday items that are discarded by the public.

Question 2.

How can we control the solid waste pollution?

(A) By composting
(B) By recycling
(C) By making landfills
(D) All of the Above
Answer:
(D) All of the Above

Explanation:
Various methods are practiced to control solid waste pollution as composting, recycling, incineration, pyrolysis, disposal, landfills etc.

Question 3.

What are the examples of solid waste?

(A) Commercial refuse
(B) Sludge from water supply
(C) Construction debris
(D) All of the Above
Answer:
(D) All of the Above

Question 4.

What has caused the increase in solid waste?

(A) Increased trade
(B) Increased urbanization
(C) Increased government policies
(D) None of the Above
Answer:
(B) Increased urbanization

Explanation:
Overpopulation, urbanization and the growing technology are among the few reasons for solid waste pollution. The rising population have lead to the production of more waste, with every passing year people have several kinds of stuff to use and discard

MCQ Questions for Class 12 Geography with Answers

MCQ Questions for Class 12 Economics Unit 5 Balance of Payments

February 10, 2023February 9, 2023 by Prasanna

Balance of Payments Class 12 MCQs Questions with Answers

Question 1.

An Indian real estate company receives rent from Google in New York. This transaction would be recorded on side of account.

(A) credit, current
(B) debit, capital
(C) credit, capital
(D) debit, current
Answer:
(A) credit, current

Explanation:
It is an inflow of money and it is recurring in nature.

Question 2.

A company located in India receives a loan from a company located abroad. How is this transaction recorded in India’s Balance of Payments Account?

(A) Credit side of current account
(B) Debit side of current account
(C) Credit side of capital account
(D) Debit side of capital account
Answer:
(C) Credit side of capital account

Explanation:
It is an inflow of money in Indian economy.

Question 3.

An Indian company located in India invests in a company located abroad. This transaction is entered in India’s Balance of Payments Account on:

(A) Credit side of current account.
(B) Debit side of current account.
(C) Credit side of capital account.
(D) Debit side of capital account.
Answer:
(D) Debit side of capital account.

Explanation:
It is an outflow of money from Indian economy.

Question 4.

Foreign Exchange Transactions which are independent of other transactions in the Balance of Payments Account are called:

(A) Current transactions.
(B) Capital transactions.
(C) Autonomous transactions.
(D) Accommodating transactions.
Answer:
(C) Autonomous transactions.

Explanation:
Autonomous transactions are independent of the state of BOP Account. For example, if a foreign company is making investments in India with the aim of earning profit, then such a transaction is independent of the country’s BOP situation.

Question 5.

Foreign Exchange Transactions dependent on other Foreign Exchange Transactions are called:

(A) Current account transactions.
(B) Capital account transactions.
(Q Autonomous transactions.
(D) Accommodating transactions.
Answer:
(D) Accommodating transactions.

Explanation:
Accommodating transactions are those that are undertaken as a consequence of the autonomous transactions.

Question 6.

Which of the following statements is not true?

(A) Borrowings from the Asian Development Bank by the government is an accommodating transaction.
(B) Loans given to Sri Lanka by the government is an accommodating transaction.
(C) Buying of machinery from Japan is an accommodating transaction.
(D) Borrowing from public is an accommodating transaction.
Answer:
(C) Buying of machinery from Japan is an accommodating transaction.

Explanation:
Buying of machinery from Japan is an autonomous transaction. Autonomous items refers to those Balance of Payment (BOP) transactions which are undertaken for profit.

Question 7.

Identify the correct sequence of alternatives given in Column B by matching them with respective Column A:

Column A	Column B
(1) Borrowings from IMF	(a) Current Account
(2) Import of shipping services	(b) Invisible items
(3) Export of machinery	(c) Accommodating items
(4) Foreign aid	(d) Visible items

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
Invisible items refer to those items which cannot be seen, felt, touched or measured. For example, services of shipping, banking, insurance, etc.

Question 8.

Identify the correct matched pair from Column A to Column B:

Column A	Column B
(1) Import of Petroleum from Iran	(a) Debit side of Current Account
(2) BPO services provided by India to USA	(b) Credit Side of Capital Account
(3) Investment by Saudi Aramco in RIL	(c) Debit Side of Capital Account
(4) Export of Spices to Greece	(d) Debit Side of Current Account

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(A) 1 – (a)

Explanation:
Import of goods and services are recorded in current account. Import is recorded on the debit side as it leads to an outflow of foreign exchange in the country.

Question 9.

Identify the correctly matched pair from Column A to Column B:

Column A	Column B
(1) Increase of Foreign Reserve from $400 to $450 millions	(a) Credit side of Capital Account
(2) Dasault Ltd. invested in Reliance Defence	(b) Debit Side of Capital Account
(3) India gave line of credit to Botswana	(c) Credit Side of the Capital Account
(4) India borrowed $ 350 million from the world bank	(d) Debit Side of the Capital Account

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Assertion and Reason Based MCQs

Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Question 1.

Assertion (A): Import of machinery is reflected in the current account of balance of payments.
Reason (R): Export and import of goods and invisibles are recorded in current account of balance of payments.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Question 2.

Assertion (A): The level of aggregate demand tends to rise.
Reason (R): Exports are more than imports.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Explanation:
Aggregate demand is based on four components. These are: consumption, investment, government spending and net exports. Exports leads to a rise in AD.

Question 3.

Assertion (A): Autonomous items cause movements of goods and services across the borders.
Reason (R): Accommodating items cause to clear the deficit or surplus in the Balance of Payment.

Answer:
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).

Explanation:
Autonomous items refers to those Balance of Payment (BOP) transactions which are undertaken for profit.

Question 4.

Assertion (A): Current account is a part of Balance of Trade.
Reason (R): Current account records exports and imports of goods and services and transfer payments.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
Balance of Trade is a part of current account.
Balance on Current Account =Trade balance + Invisibles balance

Case-Based MCQs

see opportunities of growth,” he said at a FICCI webinar. India’s exports fell for the fourth straight month in June as shipments of key segments like petroleum and textiles declined but the country’s trade turned surplus for the first time in 18 years as imports dropped by a steeper 47.59 per cent. The country posted a trade surplus of USD 0.79 billion in June. “Balance of payments to be ‘very, very strong’ this year, green shoots visible in economy: Piyush Goyal” – The Economic Times-August 10th, 2020

Question 1.

Why is India having a very strong Balance of Payment?

(A) Increase in Exports
(B) Decrease in Imports
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Answer:
(C) Both (A) and (B)

Explanation:
A Balance of Payments surplus means the country exports more than it imports.

Question 2.

Read the following statements – Assertion (A) and Reason (R).
Assertion (A): The country’s trade turned surplus for the first time.
Reason (R): India’s exports fell for the fourth straight month in June.
Select the correct alternative from the following:

(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Answer:
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).

Explanation:
Imports dropped by a steeper 47.59 percent.

Question 3.

Consider the following statements:

(i) It will get a lot of investments.
(ii) The government can achieve its development goals.
(iii) Increase the GDP of the economy.
(iv) It is more profitable for the domestic manufacturers.
Which of the following is the true benefit of having a strong Balance of Payment:
(A) i and iii only
(B) iii and iv only
(C) i, iii and iv only
(D) i, ii, iii and iv
Answer:
(B) iii and iv only

Question 4.

……………… is the situation when the imports of goods are more than the export of goods.

(A) Trade Surplus
(B) Trade Deficit
(C) Either (A) or (B)
(D) Neither (A) nor (B)
Answer:
(B) Trade Deficit

I. Read the news report given below and answer the questions that follow on the basis of the same:
A lower trade deficit along with strong FDI and portfolio flows in F/Y 19 January-March quarter may help the external sector balance sheet and prop up both current account as well as the overall balance of payments numbers. This could reflect in a lower current account deficit in the balance of payments for the quarter ended March.

Trade balance, an important component of the current account, is estimated at a deficit of $35.6 billion for Q4 compared to $40.6 billion in the same period a year ago, thanks to lower crude prices and slowdown in gold and other imports. Other factors influencing the current account are software services income and remittances by overseas IndiAnswer: Market estimates for F/Y 19 March quarter current account deficit is at $8.1 billion versus $13.2 billion for March’18 quarter.

In the capital account, thanks to some bidding for defaulting companies by Arcelor Mittal which are expected to have bought in some funds, FDI inflows in March is projected to be almost double the amount in the previous comparable period of March’18. Also, external commercial borrowing flows in the latest quarter are almost double the amount of previous comparable quarter ending March’18.

In addition, forex resources raised through the swap agreements with the commercial banks are expected to add another $5 billion through the foreign investment route. The overall balance of payments surplus is estimated higher at $17 billion for the latest March quarter compared to $13 billion surplus in the March’18 quarter.
– “Fall in trade deficit, strong flows boost balance of payments no’s in Q4″~ The Economic Times – May 15th, 2019.

Question 1.

Which of the following is not the benefit of a lower trade deficit?

(A) Help the external sector balance sheet.
(B) Prop-up the Current Account.
(C) Increase the Balance of Payment numbers.
(D) Increase the Capital Account deficit.
Answer:
(D) Increase the Capital Account deficit.

Question 2.

FDI inflows in March is a type of ……………

(A) Accommodating transactions
(B) Accumulating transactions
(C) Autonomous transactions
(D) None of the above
Answer:
(C) Autonomous transactions

Explanation:
Foreign direct investments are autonomous transactions of long-term capital movements, motivated by economic interests, with the profit at the first place.

Question 3.

The Forex resources has surged in India. What effect does it have on the country?

(A) Balance of Payment surplus
(B) Balance of Trade surplus
(C) Balance of Payment deficit
(D) Balance of Trade deficit
Answer:
(A) Balance of Payment surplus

Explanation:
The Balance of Payments of a country is the difference between all money flowing into the country in a particular period of time and the outflow of money to the rest of the world.

Question 4.

FDI inflows is recorded in which of the following accounts of Balance of Payment;

(A) Current Account
(B) Capital Account
(C) Foreign Reserve Account
(D) Depends on the type of FDI
Answer:
(B) Capital Account

Explanation:
Foreign Investment cause an inflow of foreign exchange into the country. Thus, it is recorded as positive items in the Capital Account of BOR

II. Read the news report given below and answer the questions that follow on the basis of the same:
The trade deficit between India and China in April-June this fiscal year fell to USD 5.48 billion as compared to USD 13.1 billion in the same period last year, Parliament was informed on Wednesday.

In a written reply, Commerce and Industry Minister Piyush Goyal said the bilateral trade between the countries too dipped to USD 16.55 billion during the first three months of 2020-21 as against USD 21.42 billion in the same period last year. “Government has consistently taken steps to balance our trade with China by increasing our exports to China and reducing our dependence on imports from China,” he said.

In a separate reply, the minister said at present, about 550 tariff lines (or products) are under the restricted/prohibited category for imports under the Foreign Trade Policy. Imports of these products are restricted from all countries, including China. Replying to a separate question, he said merchandise exports from special economic zones (SEZs) dipped to ₹81,481 crore during April- August, 2020 as against ₹1,30,129 crore in the same period of 2019-20. “However, services exports have shown a growth of 9 per cent during April to August 2020 in comparison to corresponding period of previous year,” he added.
– “Indo-China trade deficit dips to $5.48 billion in April-June” – The Economic Times – September 16, 2020

Question 1.

Considering the steps taken by the government to reduce the Trade deficit with China, choose the correct alternative:

(i) To reduce the dependence on imports from China.
(ii) To increase our exports to China
(iii) To make Rupees stronger than Yuan
(iv) To prohibit the use of the Chinese good.

(A) (i) and (ii)
(B) (ii) and (iii)
(C) (i), (ii) and (iii)
(D) (iii) and (iv)
Answer:
(A) (i) and (ii)

Explanation:
Minister Piyush Goyal said, “Government has consistently taken steps to i balance our trade with China by increasing our exports to China and reducing our dependence on imports from China.”

Question 2.

Which of the following has seen a growth?

(A) Trade deficit with China
(B) Imports of merchandise
(C) Export of merchandise
(D) Export of service
Answer:
(D) Export of service

Explanation:
Services exports have shown a growth of 9 per cent during April to August 2020.

Question 3.

The bilateral trade between India and China dipped to …………..

(A) 5.48 Billion USD
(B) 13.1 Billion USD
(C) 16.55 Billion USD
(D) 21.42 Billion USD
Answer:
(C) 16.55 Billion USD

Question 4.

550 tariff lines (or products) are under the restricted/prohibited category for ………….. under the Foreign Trade Policy.

(A) imports
(B) exports
(C) either (A) or (B)
(D) neither (A) nor (B)
Answer:
(A) imports

Foreign Exchange Rate Class 12 MCQs Questions with Answers

Question 1.

Identify which of the following statement is true?

(A) The flexible exchange rate system gives the government more flexibility to maintain large stocks of foreign exchange reserves.
(B) In the managed floating exchange rate system, the government intervenes to buy and sell foreign currencies.
(C) In the managed floating exchange rate system, the central bank intervenes to moderate exchange rate fluctuations.
(D) In the fixed exchange rate system, market forces fix the exchange rate.

Answer:
(C) In the managed floating exchange rate system, the central bank intervenes to moderate exchange rate fluctuations.

Explanation:
Managed floating exchange rate system is the amalgamation of the flexible exchange rate system and the fixed exchange rate system. Under this system, central banks intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements.

Question 2.

Foreign exchange refers to:

(A) the price of one currency in terms of gold in the domestic market.
(B) the price of one currency determined by government of other country.
(C) the price of one currency in relation to other currencies in the international money market.
(D) none of the above.
Answer:
(C) the price of one currency in relation to other currencies in the international money market.

Question 3.

Identify the correctly matched pair from Column Ato that of Column B:

Column A	Column B
(1) Flexible Ex-change Rate	(a) Foreign Exchange Rate is determined by the Central Bank.
(2) Fixed Exchange Rate	(b) The foreign ex¬change rate is determined by the demand and supply.
(3) Managed Flexible Rate	(c) The Central Bank interferes with the market demand and supply of foreign currency.
(4) Managed Fixed Rate	(d) The Central Bank controls the foreign rate regime.

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D)4 – (d)
Answer:
(C) 3 – (c)

Explanation:
Managed floating exchange rate system is the amalgamation of the flexible exchange rate system and the fixed exchange rate system. Under this system, central bank intervenes to buy and sell foreign currencies in an attempt to moderate exchange rate movements.

Question 4.

Which of the following statements is not true?

(A) Depreciation of the foreign currency leads to the fall in exports.
(B) Devaluation of the domestic currency leads to a rise in imports.
(C) Appreciation of domestic currency leads to rise in exports.
(D) Appreciation of foreign currency leads to fall in imports.
Answer:
(A) Depreciation of the foreign currency leads to the fall in exports.

Explanation:
Depreciation of home currency implies fall in the price of domestic goods for the foreign buyers.

Question 5.

When domestic currency loses its value in relation to a foreign currency in the international money market, it is a situation of:

(A) Currency appreciation
(B) Currency depreciation
(C) Currency devaluation
(D) None of the above
Answer:
(B) Currency depreciation

Explanation:
Depreciation of domestic
currency refers to fall in the value of domestic currency in terms of foreign currency caused by rise in foreign exchange rate in the foreign exchange market.

Question 6.

Exchange rate is the price of a currency expressed in terms of:

(A) gold.
(B) metal.
(C) another currency.
(D) none of the above.
Answer:
(C) another currency.

Explanation:
It is the rate at which one currency can be converted into another currency.

Question 7.

Identify the correct pair as given in Column B by matching them with respective concepts …………… in Column A:

Column A	Column B
(1) Reduction in the value of domestic currency by the government	(a) Devaluation
(2) Reduction in the value of domestic currency through market forces	(b) Appreciation
(3) Increase in the value of domestic currency by the government	(c) Depreciation
(4) Increase in the value of domestic currency through market forces	(d) Revaluation

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(A) 1 – (a)

Explanation:
Devaluation refers to fall in the value of a domestic currency due to a deliberate increase in foreign exchange rate by the government which follows a fixed exchange rate system.

Assertion and Reason Based MCQs

Directions:
In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as.
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Question 1.

Assertion (A): When in order to buy US dollar ₹ 80 are needed instead of ₹ 75, domestic currency shows depreciation.
Reason (R) : Depreciation of domestic currency refers to fall in the value of domestic currency in terms of foreign currency caused by rise in foreign exchange rate in the foreign exchange market.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Explanation:
Here, domestic currency shows depreciation because more rupees are to be paid to buy one US dollar.

Question 2.

Assertion (A): Export of goods and services from India to US would mean outflow of foreign exchange from India.
Reason (R): Foreign exchange in terms of receipts for exports flows from US to India.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
Export of goods and services I from India to US would mean inflow of I foreign exchange to India.

Question 3.

Assertion (A): In case of currency appreciation, less rupees are to be paid to buy one US dollar.
Reason (R): Currency appreciation leads to increase in value of domestic currency in reference to foreign currency. So, less in needed to pay for same amount.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Explanation:
Export of goods and services I from India to US would mean inflow of I foreign exchange to India.

Question 4.

Assertion (A): In order to restore the value of depreciating domestic currency, Central Bank sells the US dollars in the international money market.
Reason (R): By selling US dollars, supply of dollars will increase which will reduce the price of dollar.

Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Case-Based MCQs

I. Read the news report given below and answer the questions that follow with respect to the same:
The rupee depreciated by 6 paise to close at 73.02 (provisional) against the US dollar on Monday, tracking a rebound in the American currency overseas.

At the interbank Forex market, the domestic unit opened at ₹ 72.89 against the US dollar and witnessed an intra-day high of ₹ 72.84 and a low of ₹ 73.15. The local unit finally settled at ₹ 73.02, registering a fall of 6 paise over its previous close, even as the domestic equity market settled with significant gains on Budget day.

On Friday, the rupee had closed at ₹ 72.96 against the American currency. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.21 per cent to ₹ 90.78. On the domestic equity market front, the BSE Sensex ended 2,314.84 points or 5 per cent higher at 48,600.61, while the broader NSE Nifty advanced 646.60 points or 4.74 per cent to 14,281.20.

Foreign institutional investors were net sellers in the capital market as they offloaded shares worth ₹ 5,930.66 crore on Friday, according to exchange data. Brent Crude Futures, the global oil benchmark, advanced 0.84 per cent to USD 55.50 per barrel.
– “Rupee tumbles 6 paise to close at ₹ 73.02 against US dollar” – The Economic Times – February 01, 2021

Question 1.

How will the devaluation of Indian Rupee affect the imports?

(A) Imports will fall.
(B) Imports will rise.
(C) Imports will have no effect.
(D) None of the above
Answer:
(A) Imports will fall.

Explanation:
Imports become more expensive.

Question 2.

How will the devaluation of Indian Rupee affect the exports?

(A) Exports will fall.
(B) Exports will rise.
(C) Exports will remain same.
(D) Exports will fall first and then rise.
Answer:
(B) Exports will rise.

Explanation:
Exports become cheaper.

Question 3.

Read the following statements – Assertion (A) and Reason (R).

Assertion (A): Forex reserve of the country will fall.
Reason (R): Due to devaluation of domestic currency.
Select the correct alternative from the following:

(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Explanation:
Imports becomes more expensive, i.e., the domestic buyers will now have to pay more for imports.

Question 4.

How is the exchange rate determined in India?

(A) By the government.
(B) By the demand and supply of Foreign Currency
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Answer:
(C) Both (A) and (B)

Explanation:
India practices managed floating I exchange rate system in which the Central Bank has a major role to play.

II. Read the news report given below and answer the questions that follow with respect to the same:
The rupee rose by 3 paise to settle at ₹ 72.94 (provisional) against the US dollar on Monday, extending its gains for the fifth straight session despite heavy selling in the domestic equity market. At the interbank Forex market, the rupee opened at ₹ 72.95 against the American currency, and hit an intra-day high of ₹ 72.89 and a low of ₹ 72.96 in day trade.

It finally finished at ₹ 72.94, higher by 3 paise over its last close. On Friday, the rupee had settled at ₹ 72.97 against the American currency. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.10 per cent to ₹ 90.32.

“The rupee has managed to hold its fort around the ₹ 72.90 to 73 levels, but given the sell-off in equities and the likelihood of a rebound in the dollar index, we see the trend tilting slightly towards depreciation going forward,” said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare NSE 0.52 % Broking. – “Rupee rises for 5th straight session, settles 3 paise higher at ₹ 72.94” – The Economic Times – January 25, 2021

Question 1.

What is the benefit for the appreciation of the Indian Rupees?

(A) The Forex Reserve of the country will increase.
(B) The imports of the country will decline.
(C) There will be an increase in the Foreign Direct Investment.
(D) None of the above.
Answer:
(C) There will be an increase in the Foreign Direct Investment.

Question 2.

Which of the following is not the reason for increase in the price of rupees in the Forex Market?

(A) Increase in investment through FDI and FPI.
(B) Increase in the share and security market.
(C) Better government policies.
(D) Heavy selling in the domestic equity market.
Answer:
(D) Heavy selling in the domestic equity market.

Question 3.

India follows system of ………….. Foreign Exchange, as per the given report.

(A) Fixed Exchange Rate
(B) Flexible Exchange Rate
(C) Managed Floating Exchange Rate
(D) None of the above
Answer:
(C) Managed Floating Exchange Rate

Explanation:
India practices managed floating exchange rate system in which the Central Bank has a major role to play.

Question 4.

Rupee rose by …………… paise against USD.

(A) 2
(B) 3
(C) 4
(D) 5
Answer:
(B) 3

Explanation:
The rupee rose by 3 paise to settle at 72.94 (provisional) against the US dollar on Monday.

III. Read the news report given below and answer the questions that follow with respect to the same: NEW DELHI: India’s Foreign Direct Investment (FDI) saw a significant jump in November 2020. FDI data released by the Commerce Ministry shows that total FDI in the month of November 2020 grew by a whopping 81 % to $ 10.15 billion against $ 5.6 billion in November 2019. FDI equity has also jumped to $ 8.5 billion as against $ 2.8 billion in November 2019, registering a growth of 70 %.

India has attracted total FDI inflow of $ 58.37 billion during April to November 2020. It is the highest ever for the first eight months of a financial year (F.Y.) and 22 % higher as compared to the first eight months of 2019-20 ($ 47.67 billion). FDI equity inflow received during F.Y. 2020-21 (April to November 2020) is $ 43.85 billion. It is also the highest ever for the first eight months of a financial year and 37% more compared to the first eight months of 2019-20 ($ 32.11 billion), the data revealed.

FDI is a major driver of economic growth and an important source of non-debt finance for the economic development of India. It has been the endeavour of the government to put in place an enabling and investor-friendly FDI policy, the Commerce Ministry said. The intent all this while has been to make the FDI policy more investor-friendly and remove the policy bottlenecks that have been hindering the investment inflows into the country.

The steps taken in this direction have borne fruit, as is evident from the ever-increasing volumes of FDI inflows being received into the country, it said. Measures taken by the Government on the FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country. The following trends in India’s Foreign Direct Investment are an endorsement of its status as a preferred investment destination amongst global investors.

– “India’s foreign direct investment inflows grew by 81 percent in November 2020 to $10 billion” – The Economic Times – January 28, 2021

Question 1.

What effect will the increase in foreign direct investment will have on the economy?

(A) Increase in the Forex Reserve
(B) Increase in the supply of Foreign Currency
(C) Decrease in the Exchange Rate
(D) All of the above
Answer:
(D) All of the above

Question 2.

Why does the country foster for a higher Foreign Direct investment?

(A) FDI is a major driver of the Economic Growth.
(B) FDI helps in getting better foreign exchange returns.
(C) FDI helps the government to control foreign exchange rate.
(D) All of the above.
Answer:
(A) FDI is a major driver of the Economic Growth.

Question 3.

There has been an increase in the FDI. How has the government helped it?

(A) FDI policy reforms
(B) Ease of doing business
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Answer:
(C) Both (A) and (B)

Explanation:
Measures taken by the Government on the FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.

Question 4.

When the FDI increases, the of foreign currency increases.

(A) Demand
(B) Supply
(C) Either (A) or (B)
(D) Neither (A) nor (B)
Answer:
(B) Supplys

Explanation:
It leads to inflow of foreign currency.

MCQ Questions for Class 12 Economics with Answers

MCQ Questions for Class 12 Economics Unit 4 Government Budget and the Economy

February 10, 2023February 9, 2023 by Prasanna

Government Budget and the Economy Class 12 MCQs Questions with Answers

Question 1.

Primary deficit in a government budget will be zero, when …………….

(A) Revenue deficit is zero
(B) Net interest payments are zero
(C) Fiscal deficit is zero
(D) Fiscal deficit is equal to interest payment
Answer:
(D) Fiscal deficit is equal to interest payment

Explanation:
Primary deficit indicates borrowing requirements of the govt, to meet fiscal deficit net of interest payments.

Question 2.

Which one of the following is not a capital expenditure?

(A) Loans advanced by World Bank
(B) Construction of school buildings
(C) Repayment of loans
(D) Purchase of Metro Coaches from Japan
Answer:
(A) Loans advanced by World Bank

Explanation:
Loan advanced by World Bank is a capital receipt as it raises liability or reduces assets.

Question 3.

Primary deficit is borrowing requirements of government for making:

(A) Interest payments.
(B) Other than interest payments.
(C) All types of payments.
(D) Some specific payments.
Answer:
(B) Other than interest payments.

Explanation:
Primary deficit indicates borrowing requirements of the govt, to meet fiscal deficit net of interest payments.

Question 4.

Fiscal deficit equals:

(A) Primary deficit minus interest payments.
(B) Primary deficit plus interest payments.
(C) Total budget expenditure minus total budget receipts.
(D) None of the above.
Answer:
(B) Primary deficit plus interest payments.

Explanation:
Fiscal Defici t refers to the excess of total expenditure over total receipts excluding borrowings.

Question 5.

Identify the correctly matched pair of the items in

Column A to those in Column B:

Column A	Column B
1. Fiscal Deficit	(a) Other than interest payments
2. Primary Deficit	(b) Borrowings less interest payments
3. Revenue Deficit	(c) Borrowings
4. Tax Deficit	(d) Borrowings in government budget

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
Primary deficit indicates borrowing requirements of the govt, to meet fiscal deficit net of interest payments.

Question 6.

Which of the following sources of receipts in the government budget increases its liabilities?

(A) Direct taxes
(B) Recovery of loans
(C) Borrowings
(D) Dividend from public sector undertakings
Answer:
(C) Borrowings

Explanation:
Borrowings is a capital receipt as it creates a liability.

Question 7.

Identify the correctly matched pair in Column A to that of Column B:

Column A	Column B
1. Excise Duty	(a) Capital Receipts
2. Income Tax	(b) Direct Tax
3. Earning from PSU	(c) Indirect Tax
4. Old Age Pensions	(d) Non-Tax Revenue Receipts

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(B) 2 – (b)

Explanation:
A direct tax is a tax, the burden of which is on that very person who is liable to pay it to the government.

Question 8.

Fiscal Deficit equals:

(A) Interest payments
(B) Borrowings
(C) Interest payments less borrowing
(D) Borrowings less interest payments
Answer:
(B) Borrowings

Explanation:
Primary deficit indicates borrowing requirements of the govt, to meet fiscal deficit net of interest payments

Question 9.

Primary deficit in a government budget is:

(A) Revenue expenditure – Revenue receipts
(B) Total expenditure – Total receipts
(C) Revenue deficit – Interest payments
(D) Fiscal deficit – Interest payments.
Answer:
(D) Fiscal deficit – Interest payments.

Question 10.

Identify the correctly matched pair of the items in Column A to those in Column B:

Column A	Column B
1. Revenue Expenditure	(a) Does not cause any reduction in government liability
2. Capital Expenditure	(b) Which creates corresponding liability for the government
3. Revenue Receipts	(c) Which causes reduction in assets of the government
4. Capital Receipts	(d) Causes reduction in government liability

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(A) 1 – (a)

Explanation:
Revenue receipts do not create any liability for the government. For example, taxes received by the government, unlike borrowings, do not create any liabilities for it.

Question 11.

Which one of the following is a combination of direct taxes?

(A) Excise duty and Wealth tax
(B) Service tax and Income tax
(C) Excise duty and Service tax
(D) Wealth tax and Income tax
Answer:
(D) Wealth tax and Income tax

Explanation:
In case of direct tax, the burden of tax and the liability to pay it falls on the same person.

Question 12.

Match the items in Column A to those in Column B and choose the correct option:

Column A	Column B
1. GST	(a) Indirect Tax
2. Income Tax	(b) Burden can be shifted
3. Fine	(c) Direct Tax
4. Tax Receipts	(d) Capital Receipt

(A) 1 – (a)
(B) 2 – (b)
(C) 3 – (c)
(D) 4 – (d)
Answer:
(A) 1 – (a)

Explanation:
Indirect tax is a tax on gods and services.

Question 13.

The Non-tax revenue in the following is:

(A) Export duty.
(B) Import duty.
(C) Dividends.
(D) Excise.
Answer:
(C) Dividends.

Explanation:
Non-Tax Revenue is the recurring f income earned by the government from sources other than taxes.

Question 14.

Match the items in column A to those in column B and choose the correct option:

Column A	Column B
1. Balanced Budget	(a) Total Anticipated Expenditure < Total Anticipated Revenue.
2. Surplus Budget	(b) Total Expenditure > Total Revenue
3. Capital Budget	(c) Capital receipts + Capital expenditure
4. Deficit Budget	(d) Total Expenditure = Total Revenue

Answer:
Option (C) is correct.

Explanation:
Capital Budget is the statement of estimated capital receipts and estimated capital expenditure during a fiscal year.

Question 15.

Which of the following statements is true’

(A) Expenditure on Ujjwala Yojana launched by the Government is an example of capital expenditure.
(B) Expenditure on Ujjwala Yojana launched by the Government is an example ,of Revenue Expenditure.
(C) Expenditure on Ujjwala Yojan. launched by the Government is an example of Deferred Revenue Expenditure.
(D) None of the statements are cc act.
Answer:
(A) Expenditure on Ujjwala Yojana launched by the Government is an example of capital expenditure.

Question 16.

Borrowing in government bu get is:

(A) Revenue deficit.
(B) Fiscal deficit
(C) Primary deficit
(D) Deficit in taxes.
Answer:
(B) Fiscal deficit

Explanation:
Fiscal deficit is defined as excess of total budget expenditure over total budget receipts excluding borrowings during a fiscal year

Question 17.

Identify which of the following statements is true.

(A) The difference between planned revenue expenditure and planned revenue receipts is called Fiscal deficit.
(B) The difference between total planned expenditure and total planned receipts is called fiscal deficit.
(C) The difference between total planned receipts and interest payment is called primary deficit.
(D) The sum of primary deficit and interest payment is called fiscal deficit.
Answer:
(D) The sum of primary deficit and interest payment is called fiscal deficit.

Question 18.

Which of the following statements is true?

(A) Government Borrowings from the World Bank is a Revenue Receipt.
(B) Higher fiscal deficit is the result of higher revenue deficit.
(C) The loans taken by government represents a situation of fiscal deficit.
(D) The excess of capital receipts over the revenue receipts is called Revenue deficit.
Answer:
(C) The loans taken by government represents a situation of fiscal deficit.

Explanation:
Fiscal deficit is defined as the amount of borrowing the government has to J resort to meet its expenses.

Question 19.

Which of following is a direct tax?

(A) Corporation tax
(B) Entertainment tax
(C) Excise duty
(D) Service tax
Answer:
(C) Excise duty

Explanation:
In case of direct tax, the burden of tax and the liability to pay it falls on the same person.

Question 20.

Which of the following is a source of capital receipt?

(A) Foreign donations
(B) Dividends
(C) Dis-investment
(D) Indirect taxes
Answer:
(C) Dis-investment

Explanation:
Disinvestment is a capital receipt as it reduces assets.

Question 21.

Direct tax is called direct because it is collected directly from:

(A) The producers on goods produced.
(B) The sellers on goods sold.
(C) The buyers of goods.
(D) The income earners.
Answer:
(D) The income earners.

Explanation:
In case of direct tax, the burden of tax and the liability to pay it falls on the same person. The liability to pay the tax cannot be shift on other person.

Question 22.

Which of the following is not a revenue receipt?

(A) Recovery of Loans
(B) Foreign Grants
(C) Profits of Public Enterprises
(D) Wealth Tax
Answer:
(A) Recovery of Loans

Question 23.

Purchase of shares is related to:

(A) revenue receipt
(B) revenue expenditure
(C) capital receipt
(D) capital expenditure
Answer:
(D) capital expenditure

Explanation:
The purchase of shares is an investment for the government and increases assets.

Question 24.

Revenue budget includes:

(A) revenue receipts of the government
(B) revenue expenditure of the government
(C) capital receipts of the government
(D) both (A) and (B)
Answer:
(D) both (A) and (B)

Explanation:
Revenue budget is the statement of estimated revenue receipts and estimated revenue expenditure during a fiscal year.

Question 25.

The focus of the government budget is to:

(A) maximize fiscal deficit
(B) maximize fiscal deficit
(C) maximize expenditure
(D) maximize revenue
Answer:
(B) minimise fiscal deficit

Assertion and Reason Based MCQs

Directions :
In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Question 1.

Assertion (A): Revenue deficit includes capital receipts and capital expenditure.
Reason (R): Revenue deficit is related to revenue expenditure and revenue receipts of the government.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
Revenue Deficit refers to the excess of total revenue expenditure over total revenue receipts. It means that govt, will not be able to meet its revenue expenditure from its revenue receipts.

Question 2.

Assertion (A): Fiscal deficit is the difference between primary deficit and interest payment.
Reason (R): Fiscal deficit is the sum total of primary deficit and interest payment.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Explanation:
Fiscal Deficit refers to the excess of total expenditure over total receipts ‘ excluding borrowings. It indicates borrowing requirements of the government.

Question 3.

Assertion (A): Fiscal deficit is measured in terms of borrowings.
Reason (R): External borrowings increases the Frist deficit.

Answer:
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).

Explanation:
Fiscal Deficit refers to the exi s of total expenditure over total receipts exc ding borrowings. It indicates borrowing rcq rements of the government.

Question 4.

Assertion (A): Budget shows monetary policy of the goverment
Reason (R): Policy adopted by the Central Bank of an economy in the direction of credit control or money supply is known as Monetary PoLky.

Answer:
(D) Assertion (A) is false, but Reason (R) is true.

Case-Based MCQs

I. Read the following news report and answer the questions that follow:

MUMBAI:
Investors were relieved as the finance minister Nirmala Sitharaman avoided an increase in the long-term capital gains tax on equity investments and securities transaction tax in the Union Budget for 2021-22 announced today. Heading into the Budget, most investors were concerned that the government may look at increasing the long-term capital gains tax or the securities transaction tax in order to boost its revenues, especially as the stock market has witnessed a breakneck rally since the beginning of April.

In her Budget speech in July 2019, the finance minister had reintroduced the long-term capital gains tax after 15 years. Currently, individuals who make capital gains of more than 1 lakh on their equity investment after a holding period of more than one year have to pay a tax of 10 per cent on the capital gains.

However, the capital gains tax for individuals in the highest bracket of earnings comes around 15 per cent inclusive of a cess. Money managers had said that the government needed to bring out an equity friendly budget, implying no changes in taxations related to the stock market, in order to ensure that its divestment plans went smoothly in the next fiscal year.

– “Budget 2021: Investors breathe a sigh of relief as FM skips LTCG, STT hike”- The Economic Times – February 1st, 2021

Question 1.

What type of tax is the Capital Gains Tax?

(A) Direct Tax
(B) Indirect Tax
(C) It is a cess
(D) It is a fine
Answer:
(A) Direct Tax

Explanation:
A capital gains tax is a type of tax applied to the profits earned on the sale of an asset.

Question 2.

What is the reason for the government to increase taxes?

(A) To extract money from the people
(B) To use the money for themselves
(C) To achieve the objective of equality in income distribution
(D) To get their salary.
Answer:
(C) To achieve the objective of equality in income distribution

Explanation:
Government can collect tax from the rich and exempt the poor from income tax. Money so collected can be spent on providing free services to the poor. It will reduce disposable income of the rich and increase that of the poor.

Question 3.

Why didn’t the government say anything about the capitals gain tax?

(A) To stabilize the economic growth
(B) To help the economy for economic growth
(C) To rectify the losses that happened due to Covid-19
(D) All of the above
Answer:
(B) To help the economy for economic growth

Question 4.

The capital gains come in the highest bracket of earning comes around .

(A) 10%
(B) 15%
(C) 20%
(D) None of the above
Answer:
(B) 15%

II. Read the news report given below and answer the questions that follow:
The Finance Minister Nirmala Sitharaman has proposed a sharp 34.5 per cent hike in capital expenditure to ^5.54 lakh crore in financial year 2022 in order to push growth. The massive increase comes at a time when the country is looking to recover from the Covid pandemic, as rising government spending is key to bringing the economy back on track.

The government will also provide an additional ?2 lakh crore to states for capital expenditure over and above its own commitment. “We will also work out specific mechanism to nudge states to spend more of their Budget on creation of infrastructure/’ Ms. Sitharaman said.

The finance minister said that the government will launch a national asset monetisation pipeline which includes the sale of oil and gas pipelines, power transmission lines and operation of toll roads under the National Highway Authority of India. This year’s budget, according to the government, rests on six pillars: health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and research and development, and “minimum government, maximum governance,” the finance minister had asserted. And capital expenditure is an important component that drives the growth.

-“Budget 2021: Finance Minister Proposes Sharp 34.5% Hike in Capital Expenditure.”- NDTV Budget 2021 – February 01,2021

Question 1.

Why has the Finance ministry hiked the Capital Expenditure?

(A) To recover from the Covid-19 pandemic
(B) To bring the economy back on track
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Answer:
(C) Both (A) and (B)

Question 2.

…………… is an important component that drives the growth.

(A) Capital Expenditure
(B) Revenue Expenditure
(C) Capital Receipts
(D) Revenue Receipts
Answer:
(A) Capital Expenditure

Explanation:
Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc.

Question 3.

Which objective of the Government Budget does the increase in capital expenditure serve?

(A) Encouragement of economic growth
(B) Stability in the economy
(C) Generation of employment
(D) All of the above
Answer:
(D) All of the above

Question 4.

What problem can the increase in this Capital Expenditure create?

(A) Fiscal Deficit
(B) Revenue Deficit
(C) Primary Deficit
(D) Budgetary Deficit
Answer:
(A) Fiscal Deficit

Explanation:
Fiscal deficit takes place either due to revenue deficit or a major hike in capital expenditure.

III. Read the report given below and answer the questions that follow:

New Delhi:
Finance Minister Nirmala Sitharaman on Monday announced plans to sell stake in LIC as part of her disinvestment plans for F/Y 22. In her Budget speech, the FM said her government will complete divestment of BPCL, CONCOR and SCI in F/Y 22. She said that her government will privatise two public sector banks (PSBs) and one general insurance company as well. “LIC IPO may see light of day soon,” said Jiger Saiya, Partner and Leader – Tax & Regulatory Services at BDO India.

Earlier, in an interview with ET, LIC Chairman M R Kumar had said the IPO is very much likely. “The point is that it is going to be big and we want to get the valuations right,” he had said adding that the listing of an insurance company requires determining the embedded value of the business. LIC has started the process and would soon announce the software, which will assist it determine the right valuation.

“We have floated an RFP for the actuarial firm that will undertake the exercise. This calculation will take some time. Once this process is done, we will be ready,” Kumar said on January 11. Last week, a Reuters report quoting sources suggested that the government was looking to sell 10-15 per cent in the country’s biggest insurer to improve public finances. To facilitate the sale of the LIC stake, the government will need Parliament approval to amend the LIC Act.

As part of its divestment drive, four CPSEs – HAL, SAIL, Bharat Dynamics and IRCTC -have come out with offers for sale (OFSs) this financial year. They garnered ₹ 12,907 crore to the exchequer. In addition, IPOs of IRFC and Mazagon Dock Shipbuilders together fetched ₹ 1,984 crore.
Also, this year, the government sold shares worth about ₹ 1,837 crore in private companies, in which it holds stakes through SUUTI.

Four state-owned companies, NTPC, RITES, NMDC and KIOCL, completed share buybacks, adding ₹ 2,769 crore to the exchequer.
The government is also looking to sell its entire ₹ 26.12 per cent stake in Tata Communications (TCL), erstwhile VSNL, through an OFS and strategic sale this financial year. The process of privatisation of Air India, BPCL, Pawan Hans, BEML, Shipping Corp, Neelachal Ispat Nigam Limited and Ferro Scrap Nigam Limited (FSNL) is currently under way.

-“Budget: LIC IPO coming; 2 PSU banks, 1 insurer to be sold” – The Economic Times – February 02, 2021.

Question 1.

The government will privatise …………. Public Sector Banks.

(A) One
(B) Two
(C) Three
(D) None of the above
Answer:
(B) Two

Explanation:
Finance Minister Nirmala Sitharaman on Monday announced that her government will privatise two public sector banks (PSBs) and one general insurance company as well.

Question 2.

What is the main reason for’this disinvestment?

(A) To reduce the fiscal deficit
(B) To revive the economy
(C) To create monopoly of industrialists
(D) To earn revenue
Answer:
(A) To reduce the fiscal deficit

Explanation:
Dis-investment reduces financial burden of the government.

Question 3.

According to Reuters, why is the government looking to sell country’s insurer?

(A) To reduce revenue deficit
(B) To reduce fiscal deficit
(C) To improve public finances
(D) To get money from other than taxes.
Answer:
(C) To improve public finances

Question 4.

What other thing can the government do to improve the deficit with respect to the current Covid situation?

(A) Borrowing from public
(B) Lowering government expenditure
(C) Raising government revenue
(D) None of the above
Answer:
(D) None of the above

National Income and Related Aggregates Class 12 MCQs Questions with Answers

Inventory is a …………….. concept whereas the change in inventory is a concept.

Which of the following is not a ‘factor payment?

Goods purchased for the following purpose are final goods:

Which of the following is a stock?

Which of the following is a flow?

Identify the correctly matched pair of the items in Column A to those in Column B:

Which of the following is a stock?

Identify the correctly matched pair of items in Column A to those in Column B:

The study of National Income is related to:

Unforeseen obsolescence of fixed capital assets during production is:

Identify the correctly matched pair of items in Column A to those in Column B:

Identify which of the following statements is true:

If in an economy the value of Net Factor Income from Abroad is 200 crores and the value of Factor Income to Abroad is ? 40 crores. Identify the value of Factor Income from Abroad:

The sum of factor payments is equal to –

Which of the following statements is incorrect?

Identify the correctly matched pair of items in Column A to those in Column B:

Foreign embassies in India are a part of India’s:

National Income is the sum of factor incomes accruing to:

Identify the correctly matched pair of items in Column A to those in Column B:

Which of the following affects national income?

Identify the correctly matched pair of items in Column A to those in Column B:

Pollution created by factories/vehicles is an example of:

Identify, the correctly matched items in Column to that of Column B:?

Identify the correctly matched items in Column A to that of Column B:

Real GDP is considered as an index of:

dentify the correctly matched items in Column A to that of Column B:

Smoke emitted by a chemical factory and causing air pollution is an example of:

Assertion (A): The flour purchased by a baker is considered an intermediate good. Reason (R): The flour is used for the production of bread, cakes and biscuits to be sold to the consumer.

Assertion (A): Refrigerator used at home is considered as Capital Good. Reason (R): Refrigerator is a one-time purchase for the household and will not be purchased for a very long time.

Assertion (A): Car purchased by the hotel for the purpose of tourism facilitation is a Capital Good. Reason (R): The car is purchased by the hotel to provide long term service to the consumers.

Question 4. Assertion (A): Furniture purchased by a household is considered a final good. Reason (R): Furniture will not be used for further production.

Assertion (A): The cement purchased by the constructor is considered an intermediate good. Reason (R): The cement is used for the construction of the building to be sold to the consumer.

Assertion (A): The value of intermediate good should not be included. Reason (R): This will cause the problem of double counting as the value of intermediate goods is already included in the value of final good.

Assertion (A): Income from illegal activities like smuggling, theft, gambling, etc., should not be included. Reason (R): Including illegal activities will cause the problem of double counting.

Assertion (A): Brokerage on the sale/purchase of shares and bonds is to be included. Reason (R): They form the value of final goods and so need to be included with respect to the Value Added Method.

Assertion (A): Leisure is not included in GNP. Reason (R): It does not involve rendering of any factor service.

Assertion (A): GDP does not exhibit the structure of the product. Reason (R): If the increase in GDP is mainly due to increased production of war equipment and ammunitions, then such an increase cannot improve welfare in economy.

Assertion (A): GDP is the correct measure of the improvement of welfare of the people. Reason (R): Many activities in an economy are not evaluated in monetary terms, they are not included in GDP due to non-availability of data.

Assertion: With every increase in the level of GDP social welfare definitely increases in the economy. Reason (R): GDP is not a true indicator of welfare of the economy.

What type of externality will the increase in budget allocation create?

means material well-being of the ………….. people.

Real GDP and Welfare are …………… related with each other.

Why is the policy implemented?

Money Flows from ……………. to ………….. as factor payments.

Circular flow of income refers to the flow of activities of production, income generation and expenditure involving different ……………. of the economy.

Which of the following is not the significance of Circular Flow of Income?

Which of the following is not an assumption of a two sector model of Circular Flow of Income?

Real GDP is when the goods and services are produced by all producing units in the domestic territory of a country during an accounting year and valued at prices or constant price.

Read the following statement – Assertion (A) and Reason (R). Choose one of the correct alternatives given below: Assertion (A): The country’s real gross domestic product is likely to expand. Reason (R): Some sectors remain affected by social distancing norms.

What will be the growth rate of GDP according to the NSO?

Read the following statements – Assertion (A) and Reason (R). Assertion (A): Real GDP is the true indicator of the growth of the economy. Reason (R): Real GDP is nominal GDP adjusted for inflation used to measure the actual growth of production. Select the correct alternative from the following:

MCQ Questions for Class 12 Economics with Answers

Security in Contemporary World Class 12 MCQs Questions with Answers

Globalization leads to each culture becoming

The main agenda of the World Social Forum is:

Globalization has …………. dimensions.

Choose the correct option that has significantly contributed to the process of ‘Globalization’.

Which one of the following is a right cause of globalization?

Which of the following statements is true about the causes of Globalisation?

Globalisation has allowed the of customs, language and products.

India has felt the impact of globalization through increased prosperity, partly triggered by increasing trade volumes, investment, and:

The wake of globalization was first felt in the 1990s in India when the finance minister, initiated the economic liberalization plan.

Which one of the following is the disadvantage of globalization?

How India became an exporter of primary goods and raw materials and a consumer of finished goods?

Why India decided to deregulate various sectors including trade and foreign investment?

What is one of the universal criticism given by the critics to globalization?

What was the protest at World Trade Organization Ministerial Meeting, 19991

Assertion: Globalization need not always be positive; it can have negative consequences for the people. Reason: Globalization is a multidimensional concept. It has political, economic and cultural manifestations, and these must be adequately distinguished.

Assertion: While globalization is not caused by any single factor, technology remains a critical element. Reason: The ability of ideas, capital, commodities and people to move more easily from one part of the world to another has been made possible largely by technological advances.

Assertion: Globalization results in an erosion of state capacity, that is, the ability of government to do what they do. Reason: Globalization also gives freedom to governments to act in an arbitrary manner as far as the global issues are concerned.

Assertion: Economic globalization involves many actors other than the international institutions. Reason: What is often called economic globalization usually involves greater economic flows among different countries of the world.

Assertion: The critics argue that contemporary globalization represents a particular phase of global capitalism that makes the rich richer (and fewer) and the poor poorer. Reason: Weakening of the state leads to a reduction in the capacity of the state to protect the interest of its poor.

Assertion: There have been left wing protests to economic liberalization voiced through political parties as well as through forums like the Indian Social Forum. Reason: The left wing believed that globalization would corrupt the politics of India.

What is depicted in the picture?

Who identified the four basic aspects of globalization?

How did globalization help in the medical field?

Why is Africa featured in the above picture?

At the most simple level, globalisation results in an erosion of …………..

What is given way recently by the old “Welfare state”?

Assertion (A): The flour purchased by a baker is considered an intermediate good.
Reason (R): The flour is used for the production of bread, cakes and biscuits to be sold to the consumer.

Assertion (A): Refrigerator used at home is considered as Capital Good.
Reason (R): Refrigerator is a one-time purchase for the household and will not be purchased for a very long time.

Assertion (A): Car purchased by the hotel for the purpose of tourism facilitation is a Capital Good.
Reason (R): The car is purchased by the hotel to provide long term service to the consumers.

Question 4.
Assertion (A): Furniture purchased by a household is considered a final good.
Reason (R): Furniture will not be used for further production.

Assertion (A): The cement purchased by the constructor is considered an intermediate good.
Reason (R): The cement is used for the construction of the building to be sold to the consumer.

Assertion (A): The value of intermediate good should not be included.
Reason (R): This will cause the problem of double counting as the value of intermediate goods is already included in the value of final good.

Assertion (A): Income from illegal activities like smuggling, theft, gambling, etc., should not be included.
Reason (R): Including illegal activities will cause the problem of double counting.

Assertion (A): Brokerage on the sale/purchase of shares and bonds is to be included.
Reason (R): They form the value of final goods and so need to be included with respect to the Value Added Method.

Assertion (A): Leisure is not included in GNP.
Reason (R): It does not involve rendering of any factor service.

Assertion (A): GDP does not exhibit the structure of the product.
Reason (R): If the increase in GDP is mainly due to increased production of war equipment and ammunitions, then such an increase cannot improve welfare in economy.

Assertion (A): GDP is the correct measure of the improvement of welfare of the people.
Reason (R): Many activities in an economy are not evaluated in monetary terms, they are not included in GDP due to non-availability of data.

Assertion: With every increase in the level of GDP social welfare definitely increases in the economy.
Reason (R): GDP is not a true indicator of welfare of the economy.

Read the following statement – Assertion (A) and Reason (R).
Choose one of the correct alternatives given below:
Assertion (A): The country’s real gross domestic product is likely to expand.
Reason (R): Some sectors remain affected by social distancing norms.

Read the following statements – Assertion (A) and Reason (R).
Assertion (A): Real GDP is the true indicator of the growth of the economy.
Reason (R): Real GDP is nominal GDP adjusted for inflation used to measure the actual growth of production.
Select the correct alternative from the following:

Assertion: Globalization need not always be positive; it can have negative consequences for the people.
Reason: Globalization is a multidimensional concept. It has political, economic and cultural manifestations, and these must be adequately distinguished.

Assertion: While globalization is not caused by any single factor, technology remains a critical element.
Reason: The ability of ideas, capital, commodities and people to move more easily from one part of the world to another has been made possible largely by technological advances.

Assertion: Globalization results in an erosion of state capacity, that is, the ability of government to do what they do.
Reason: Globalization also gives freedom to governments to act in an arbitrary manner as far as the global issues are concerned.

Assertion: Economic globalization involves many actors other than the international institutions.
Reason: What is often called economic globalization usually involves greater economic flows among different countries of the world.

Assertion: The critics argue that contemporary globalization represents a particular phase of global capitalism that makes the rich richer (and fewer) and the poor poorer.
Reason: Weakening of the state leads to a reduction in the capacity of the state to protect the interest of its poor.

Assertion: There have been left wing protests to economic liberalization voiced through political parties as well as through forums like the Indian Social Forum.
Reason: The left wing believed that globalization would corrupt the politics of India.

Assertion (A): Environmental pollution results from ‘there lease of substances and energy from waste products of human activities.
Reason (R): There are many types of pollution. E Ans. Option (B) is correct.

Assertion (A): Surface water available from rivers, canals,lakes, etc. is never pure.
Reason (R): It contains small quantities of suspended particles, organic and inorganic substances.

Assertion (A): Poisonous elements released from the industries reach the reservoirs, rivers and other water bodies, which destroy the bio-system of these waters.
Reason (R): Most of the industrial wastes are disposed off in running water or lakes.

Assertion (A): Various types of chemicals used in modern agriculture such as inorganic fertilisers, pesticides and herbicides are also pollution generating components.
Reason (R): These chemicals are washed down to rivers, lakes and tanks.

Assertion (A): Ganga, as a river, has national importance.
Reason (R): The river requires cleaning by effectively controlling the pollution for its water.

Assertion (A): Combustion of fossil fuels, mining and industries are the main sources of air pollution.
Reason (R): These processes release oxides of sulphur and nitrogen,hydrocarbons, carbon dioxide, carbon monoxide, lead and asbestos.

Assertion (A): Noise pollution refers to the state of unbearable and uncomfortable to human beings which is caused by noise from different sources.
Reason (R): This matter has become a serious concern only in recent years due to a variety of technological innovations.

Assertion (A): Import of machinery is reflected in the current account of balance of payments.
Reason (R): Export and import of goods and invisibles are recorded in current account of balance of payments.