Explanation: Comparative advantage – It refers to a country’s ability to produce goods and services at a lower opportunity cost than its trading partners. Trade liberalization – The removal or reduction of barriers, such as tariffs and quotas, to encourage free and open exchange of goods and services between nations for economic growth.

Explanation: Input cost: The actual cost incurred on goods and services produced by industries and firms. Factor costs include all the costs of the factors of production to produce a given product in an economy. It includes the costs of land, labour, capital and raw material, transportation etc. Ex-factory cost – The selling cost of the products less any price accompanies the delivery of the products to the customer. The market price – The current price at which a goods or service can be purchased or sold.

Explanation: Inward Looking Trade Strategy – Trade and Economic policy that advocates replacing foreign imports with domestic production. Example – Instead of importing vehicles made in a foreign country, industries would be encouraged to produce them in India itself. It protects imports in two ways – Tariffs and Quotas. Outward-looking trade strategy : Direct transition from a simple, open trade policy to vigorous promotion of manufactured exports by all internationally tolerated means, without going through an in-between phase of high protection.

Explanation: depreciation – means loss of fixed assets overtime due to wear and tear. The most common types of depreciation methods include straight-line, double declining balance, units of production, and sum of years digits. Fixed capital consists of assets that are not consumed or destroyed in the production of a good or service and can be used multiple times.

Explanation: Marketable surplus – Difference between the total output produced by a farmer and his self consumption from that output. Consumer surplus – Difference between willingness to pay for a good and the price that consumer actually pays for it. Producer surplus – Total amount that a producer benefits from producing and selling a quantity of a good at the market price.

Explanation: 49.09 . 1979 Planning Commission task force on poverty estimation suggested a minimum calorie consumption of 2400 calories for rural areas (with a consumption expenditure of 49.1 Rs per capita per month) and 2100 calories for urban areas (with a consumption expenditure of Rs 56.64 per capita per month). Some committees for poverty line – Lakdawala Committee (submitted report in 1993), Tendulkar Committee (2009), Rangarajan Committee (2014).

Explanation: Q = f(L,C). Production function refers to the functional relationship between the quantity of a good produced (output) and factors of production (inputs). Mathematically, such a basic relationship between inputs and outputs may be expressed as: Q = f( L, C, N ). Where Q = Quantity of output, L = Labour, C = Capital, N = Land.

Explanation: Both I and II. Other features of a perfectly competitive market: 1. Each firm produces and sells a homogenous product. i.e the product of one firm cannot be differentiated from the product of any other firm. 2. Entry into the market as well as exit from the market are free for firms. Total revenue (TR) of the firm = price of the good (p) × firm’s output (q).

Explanation: Both I and II. Marginal utility: It is a measure that defines the additional satisfaction a customer receives from one more unit of a product or service. Ordinal utility: It explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference.

Explanation: A = 100, MPC = 0.8. The correct limit of marginal propensity to consume is 0 < MPC < 1. Marginal propensity to consume (MPC) refers to the proportion of extra income that a person spends instead of saving. The average propensity to consume is the percentage of income spent. Marginal propensity to save (MPS): An economic measure of how savings change, given a change in income.

Explanation: Both I and II. The production possibility frontier (PPF) is a curve on a graph that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.

Explanation: The Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry has notified the National Manufacturing Policy (NMP) on November 4, 2011. Other Objectives: Increase manufacturing sector growth to 12-14% over the medium term, Enhance global competitiveness of Indian manufacturing, Increase domestic value addition and technological ‘depth’ in manufacturing. National Investment & Manufacturing Zones (NIMZs) : An important instrumentality of the manufacturing policy; have been conceived as large integrated industrial townships.

Explanation: Department of Agriculture and Cooperation. The Minimum Support Price is recommended by the Commission for Agricultural Costs & Prices (CACP).

Explanation: Wholesale Price Index (WPI) is an inflation indicator that measures change in the overall price level of goods before they are sold at retail. WPI = (Current Price / Base Period Price) × 100

Explanation: Production possibility curve. The Production Possibilities Curve (PPC) is a model used to show the trade offs associated with allocating resources between the production of two goods. Transformation curve is defined as the maximum amount of commodity X obtainable for any given amount of commodity Y, and vice versa.

Explanation: Sunk cost is the cost which is not altered by a change in current business activity. Replacement cost is the cost of replacing an asset, plant, machinery, equipment etc. Opportunity cost refers to the cost of the next best alternative foregone in order to pursue the chosen action. Imputed cost are hypothetical costs which are considered just for the purpose of decision making and do not involve any actual cash outflow.

Explanation: Gini coefficient measures inequality in income distribution (0- perfect equality; 100- perfect inequality).

Explanation: 1 and 3 only. Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. Example – Unemployment Allowance, Social Security Payments, Old age Pension, scholarship etc.

Explanation: Only 1 and 2. GDP or Gross Domestic Product is the total value of all the final goods and services produced within the domestic boundaries of a country during a year. GDP is also used as a measure of welfare of people. The Welfare of people depends upon the per head availability of goods and services.

Explanation: Personal income. National income – the total value of all the final services and goods produced in an economy during a specific period of time. Gross income – Total income earned by an individual on a paycheck before taxes and other deductions. Disposable income – (Personal income – Taxes).

Explanation: Indirect Taxes – Subsidies. Net Indirect Taxes : Taxes that are levied on services and products and are collected by the seller. Examples – Sales tax, Value-added tax (VAT), Excise tax, Customs duty, Service tax. Indirect taxes are transferable taxes where the liability to pay can be shifted to others like Value Added Tax.

Explanation: Examples of Capital Receipts – loans raised by the government from the public (market borrowings), borrowing by the government from the RBI, commercial banks and other financial institutions, loans received from foreign governments and international organisations, and recovery of loans previously granted by the central government, small savings schemes (Post office savings accounts), Provident Funds and net receipts obtained from the sale of shares in PSUs (disinvestment).

Explanation: Steady increase in the GDP. Economic growth means the increase in real national income of a country. Indicators of Economic Growth: Industrial Production, Real Gross Domestic Product, Per-Capita Income, Health, Education etc. GDP calculated at some constant set of prices is called Real GDP. GDP that takes into account the costs in terms of environmental pollution and exploitation of natural resources is called Green GDP. GDP deflator = (Nominal GDP / Real GDP) × 100.

Explanation: ₹7,300 crore. Fiscal Deficit = Primary Deficit + Interest Payment = Rs. 6,900 crore + Rs. 400 crore = Rs. 7,300 crore. Fiscal deficit – It is the expenditure of a government that is more than the revenue generated by the government in a given fiscal year. Interest payment – It is the cost of borrowing money. The borrower makes these payments in addition to paying back the principal on a loan.

Explanation: Progressive tax: The tax liability increases with individual or entity income. Under this system, lowest income people are generally exempted while highest income people pay highest taxes. Proportional Tax – A flat tax is levied regardless of income of wealth. Example : Corporation tax. Regressive Tax – The tax rate diminishes as the taxable amount increases. Digressive tax – A mixture of proportional and progressive tax systems.

Explanation: capital receipts: Those receipts which either create liabilities or reduce the asset value of the government. Revenue receipts: Receipts that neither reduce the assets of the organisation nor create any liability on the government. They are termed as non-redeemable. Non-tax receipts: The recurring income earned by the government from sources other than taxes. Tax receipts: The total receipts from taxes or other government duties.

Explanation: Capital expenditure: It involves the spending of government funds on the acquisition of assets that have long-term value and contribute to the overall development of the country. Example – Construction of school and Buildings. Revenue expenditure: It refers to the government’s spending on day-to-day operational costs and current expenses such as salaries, wages, interest payments, and subsidies.

Explanation: Change in sales during the year. The stock of unsold finished goods, or semi-finished goods,or raw materials which a firm carries from one year to the next is called inventory. Inventories are treated as capital. Its Addition to the stock of capital of a firm is known as investment.

Explanation: Customs. Tax revenue: Funds collected from taxes on income and profits. Non tax revenue : Recurring income earned by the government other than taxes (interest receipts, profits and dividends).

Explanation: 450 crores. Given, GDP at market price = 600 crores Consumption of fixed capital = 100 crores Indirect taxes = 200 crores Subsidies = 50 crores GDP at factor cost = GDP at market price + Subsidies – Indirect Tax. GDP at factor cost = 600 + 50 – 200 GDP at factor cost = 450

Explanation: The Macro-Economic Framework Statement, was presented to Parliament as per the Fiscal Responsibility and Budget Management Act, 2003. The FRBM instructs the government to make an assessment of the growth prospects of the economy with specific underlying assumptions.

Explanation: Gross Domestic Product (GDP). Net Domestic Product (NDP) – Measures the total value of all goods and services produced in a country, adjusted for the depreciation of physical capital. Formula : NDP = GDP – Depreciation. Gross national product (GNP) – Gross national product (GNP) refers to the total value of all the goods and services produced by the residents and businesses of a country, irrespective of the location of production. Formula : GNP = GDP + NR (Net income inflow from assets abroad or Net Income Receipts) – NP (Net payment outflow to foreign assets). Net national product (NNP) – Net national product refers to gross national product minus depreciation. Formula : NNP = GNP – Depreciation.

Explanation: Sale of government bonds. Capital Receipts are loans raised from the public (market loans), borrowings from the Reserve Bank and other parties through the sale of Treasury bills, loans received from foreign bodies and governments, and recoveries of loans granted by the Central government. Capital Receipts are long term receipts.

Explanation: Budget Deficit – When a government spends more than it collects by way of revenue, it incurs a budget deficit. Types of Deficits : Revenue Deficit = Revenue expenditure – Revenue receipts. Fiscal deficit = Total expenditures – Total receipts excluding borrowings. Primary Deficit = fiscal deficit – interest payments on previous borrowings.

Explanation: Sale of government-owned land. Non-debt capital receipts: Those money receipts which are received by the government from the sale of old assets. It refers to the incoming cash flows and not treated as liabilities of the government. Example: Recovery of loans and advances, disinvestment, and issue of bonus shares.

Explanation: Personal Income (PI) ≡ National Income – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms. Private income is income obtained by private individuals from any source, productive or otherwise, and the retained income of corporations.

Explanation: Expenditure method. Output method – Measures the monetary or market value of all the goods and services produced within the borders of the country. GDP (as per output method) = Real GDP (GDP at constant prices) – Taxes + Subsidies. Income Method – It measures the total income earned by the factors of production, that is, labour and capital within the domestic boundaries of a country. GDP (as per income method) = GDP at factor cost + Taxes – Subsidies.

Explanation: National Disposable Income = Net National Product at market prices + other current transfers from the rest of the world. Private Income = National Income (or NNP at Factor Cost) + Transfer Payments + Interest on Public Debt — Social Security — Profits and Surpluses of Public Undertakings. Personal Income = Private Income – Undistributed Corporate Profits – Profit Taxes.

Explanation: Expenditure equal to revenue. Balanced Budget is an ideal approach to achieve a balanced economy and maintain fiscal Discipline. Surplus Budget – when income or revenue exceeds expenditures. Deficit Budget – when government expenses exceed revenue.

Explanation: National income – Refers to the total income earned by residents (Including individuals and businesses) of a country irrespective of the location, within or outside the country’s borders over a specific period.

Explanation: Personal income includes payments to individuals (income from wages and salaries, and other income), plus transfer payments from the government, less employee social insurance contributions. Disposable personal income measures the after-tax income of persons and nonprofit corporations.

Explanation: Only A. Real GDP : An inflation -adjusted measure that reflects the value of all goods and services produced by an economy in a given year. Real GDP is expressed in base-year prices. Nominal GDP is the GDP given in current prices, without adjustment for inflation. Real GDP = (Nominal GDP / Price Index) x 100. The real GDP will always be less than the nominal GDP value (in case of positive inflation).

Explanation: Smaller. Aggregate demand is a term used in macroeconomics to describe the total demand for goods produced domestically, including consumer goods, services, and capital goods. Formula :- AD = C + I + G + (X – M), AD = aggregate demand, C = consumption, I = investment, G = government spending, X = total exports, M = total imports.

Explanation: 1,42,789. NNP (Net National Product) at market price = NDP (Net Domestic Product) at factor cost – Net Income (from abroad) + Net Indirect taxes = 1,25250 – 581 + 18,120 = 1,42,789. Net National Product – The total value of finished goods and services produced by a country’s citizens overseas and domestically, minus depreciation. Factor cost – The total cost of all the factors of production in manufacturing a good.

Explanation: Net Investment = Gross Investment – Depreciation. Gross investment – The total expenditure or investment that is made by a company to acquire capital goods. Net Investment – The total amount of money that a company spends on capital assets, minus the cost of the depreciation of those assets.

Explanation: NNP at FC. Net Domestic Product (NDP) at factor cost (FC) is the income earned by the factors in the form of wages, profits, rent, interest, etc., within the domestic territory of a country. NDP at FC = NDP at Market Price – Indirect Cases + Subsidies. Net National Product (NNP) at market price − Net factor income from overseas = Net domestic product at market price. Gross National Product (GNP) at market price is the market value of all final goods and services produced in a country’s domestic territory by ordinary citizens during an accounting year, including net factor income from abroad.

Explanation: Equivalent. Ricardian equivalence is an economic theory that says that financing government spending out of current taxes or future taxes (and current deficits) will have equivalent effects on the overall economy. He developed the comparative advantage theory, Labor theory of value and theory of rents.

Explanation: All – A, B and C. Government budget: Country’s document or yearly financial statement that shows estimated revenue and expenditure of every item during the course of that year. It is mentioned in Article 112 of the Indian Constitution. Types of Budget: Balanced Budget (Revenue = Expenditure), Surplus Budget (Revenue > Expenditure) and Deficit Budget (Revenue < Expenditure).

Explanation: Real GDP (Gross Domestic Product) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year. Nominal GDP – It is given in current prices, without adjustment for inflation. Nominal GDP = Real GDP × 𝑃𝑟𝑖𝑐𝑒 𝐼𝑛𝑑𝑒𝑥 100 = 240 × 120_100 = 288.

Explanation: Gross domestic product (GDP) – The market value of all the final goods and services produced in a specific time period within the geographical boundaries of a nation. GDP = consumption + investment + (government spending) + (exports – imports), or, GDP = C + I + G + (X – M).