SSC CHSL Topic Wise Study Material – General Awareness – Indian Economy

SSC CHSL Topic Wise Study Material – General Awareness – Indian Economy

SSC CHSL Study MaterialSSC CHSL Previous PapersSSC CHSL Practice Workbook

However, Indian Economy is an essential component of the question paper of General Awareness, but its importance gets enhanced manifold in context of the examination conducted by SSC to recruit the Data Entry Operators at 10+2 level. The number of questions from this subject has been increased from the last 2 to 3 years of examination. From this subject the questions asked in the examination are related to the following topics: National Income of India, Planning in India, New Economic Policy, Poverty; Unemployment, Flagship Programmes of Government of India, Agriculture Industry, Money and Banking, Insurance, Indian Fiscal System, Union Budget, Tax Structure, International Economic Organisations, etc.

Reference Corner

1. Find arc elasticity of demand, if quantity demanded falls from 1050 to 950 when price of the item is increased from Rs 250 to Rs 290? SSC (10+2) 2017
(a) -0.68
(b) -0.6
(c) 0.68
(d) 0.6

2. Suppose the equilibrium price for sugar is Rs 50 per kg. If the government sets a price floor of Rs 70 per kg, then SSC (10+2) 2017
(a) quantity of sugar demanded will be greater than the quantity demanded at equilibrium price
(b) there will be a shortage of sugar in the market
(c) there will be a surplus of sugar in the market
(d) quantity of sugar supplied will be less than what was supplied at the equilibrium price

3. The Industrial Development Bank of India was set up in SSC (10+2) 2015
(a) July, 1968
(b) July, 1966
(c) July, 1962
(d) July, 1964

4. Barter transactions means SSC (10+2) 2015
(a) money acts as a medium
(b) coins are exchanged for goods
(c) goods are exchanged with gold
(d) goods are exchanged with goods

5. What is meant by ‘Capital Gain? SSC (10 + 2) 2014
(a) Appreciation in the money value of assets
(b) Additions to the capital invested in a business
(c) Part of profits added to the capital
(d) None of the above

6. Which of the following listed is not a feature of organic farming? SSC (10 + 2) 2014
(a) Use of synthetic fertilizers
(b) Very less energy consumption
(c) The non-use of chemical fertilizers and pesticides
(d) Soil is nurtured for future use by maintaining micro-organisms

7. Which of the schemes of the Government of India makes Indian cities free from slums? SSC (10+2) 2014
(a) Rajiv Awas Yojana
(b) Antyodaya
(c) Indira Awas Yojana
(d) Central Rural Sanitation Programme

8. Indian economy is a SSC (10 + 2) 2014
(a) capitalistic economy
(b) centralized economy
(c) mixed economy
(d) communistic economy

9. Who is called the Father of Economics? SSC (10+ 2) 2014
(a) Adam Smith
(b) Alfred Marshall
(c) Max Muller
(d) Karl Marx

10. Which of the following occurs when labour productivity rises? SSC (10 + 2) 2014
(a) The equilibrium nominal wage falls
(b) The equilibrium quantity of labour falls
(c) Competitive firms will be induced to use more capital
(d) The labour demand curve shifts to the right

11. Which of the following are consumer semi-durable goods? SSC (10+2) 2014
(a) Cars and television sets
(b) Milk and milk products
(c) Food grains and other food products
(d) Electrical appliance like fans and electric irons

Answers

1. (a)
2. (a)
3. (d)
4. (d)
5. (a)
6. (a)
7. (a)
8. (c)
9. (a)
10. (c)
11. (c)

Features of Indian Economy
» Indian economy is world’s 9th largest economy on exchange rate basis and 4th largest economy on PPP (Purchasing Power Parity) basis in 2010 (World Bank).
» With an acceleration in its growth rate of GDP (Gross Domestic Product) to an average of 8% during 2000 and 2009,’ India is supposed to enter the group of upper middle income countries, very soon.
» India has a share of 17.4% in world population, but accounts for only 2.3% of world’s GNI (Gross National Income) on exchange rate basis.
» The base of Indian economy is agriculture because agriculture dominance prevails in both the GNP and employment.
» The nature of Indian economy is a mixed economy due to public and private sectors co-exist.

National Income of India
According to National Income Committee (1949), “A national income estimate measures the volume of commodities and service turned out during a given period counted without duplication”.

National Income Aggregates
1. Gross Domestic Product (GDP)
It is the total money value of all final goods and services produced within the geographical boundaries of the country during a given period of time.
GDP=C+ G+ I
Where, C = Consumption expenditure
G = Government expenditure
I = Investment expenditure
But in closed economy, (R-P), then GDP = GNP where, (R – P) = Net factor income from abroad.
Where,
C = Consumption expenditure
G = Government expenditure
I = Investment expenditure

2. Gross National Product (GNP)
GNP refers to the Money value of total output of production of final goods and services produced by the nationals of a country during a given period of time, generally a year. Symbolically,
GNP = GDP + (X – M) + (R – P)
GNP= C + G+ I+ (X – M) +( R-P)
X = Income earned and received by Indians working abroad
M = Income earned and received by non-Indians in India. (R-P) ≈ Net factor income from abroad.

3. National Income (NI)
When NNP is calculated at factor cost (FC) it is called National Income, This measure is calculated by deducting indirect taxes and adding subsidies in NNP at Market Price (MP)
NNP(FC) = NNP(MP) – Indirect Taxes+ Subsidies + Government Surplus = National Income
NI = NNP – Subsidies – Indirect taxes or, GNP – Depreciation – Indirect taxes + Subsidies.

Estimates of National Income in India
» In 1868, the first attempt was made by Dadabhai Naoroji in his book ‘Poverty and Un-British Rule in India’. He estimated the per capita annual income to be Rs 20.
» The first scientific attempt to measure national income in India was made by Professor VKRV Rao in 1931-32. He divided the Indian economy into 13 sectors.
» In 1949, National Income Committee under the Chairmanship of Professor PC Mahalanobis was constituted.
» National Statistical Commission (NSO) was set up on 1st June. 2005, for promoting statistical network in the country. It was then headed by Professor SD Tendulkar.

CSO and NSSO
* In 1949, Central Statistical Organisation (CSO) was constituted to publish national income data.
* NSSO (National Sample Survey Organisation) was set up in 1950 for conducting large scale sample survey to meet the data needs of the country for the estimation of national income and other aggregates.

Economic Planning In India
» First attempt was made was by Sir M Visvesvarayya through his book ‘Planned Economy for India’ in 1934.
» National Planning Committee was set-up under the Chairmanship of Jawaharla Nehru in 1938.

History of Planning
1944 Bombay Plan (A Plan of Economic Development) by eight industrialists
1944 Gandhian Plan by SN Agarwal
1945 People’s Plan by MN Roy
1950 Sarvodaya Plan byJai Prakash Narayan
The Government of India set up the Planniog Commission on 15th March, 1950 to assess the country’s needs of material capital and human resources and to formulate economic plans for this more balanced and effective utilization.
NITI AYOG National Institution for transforming India. Ayog was established on 1 January, 2015. It has replaced the Yojana Ayog.

Poverty
» Poverty line is defined on the basis of nutritional standards. The least calorie intake is fixed at 2400 cal/person/day for rural area and 2100 cal/ person/day for urban area. The least per capita per month in rural area is fixed at Rs 816 and for urban area is Rs 1000. The people below these nutritional and income standards are considered to be below the poverty line (BPL).
» According to Tendulkar Commettee in 2004-05 37.2% population in India is below Poverty Line. It is 41.8% in rural India and 25.7% in urban areas. National Sample Survey Organisation (NSSO) conducts this survey.

Human Development
» The Human Development Report (HDR) was published by the UNDP since 1990 captures the essence of human development.
» The HDR was started by Pakistani economist Mahbub-ul-Haq and Amartya Sen.
» HDI (Human Development Index) ranks countries on scale of 0 to 1.

Variable
» Life expectancy at birth index.
» Education index comprises mean year of schooling and expected year of schooling.
» GNI Per Capita (PPPUS $) Index for decent standard of living.

Unemployment
» An economic condition marked by the fact that individual actively seeking jobs remain unemployed.
Unemployment is expressed as a percentage qf the total available workforce. The level of unemployment varies with economic conditions and other circumstances.
» In India, a person working 8 hours a day for 273 days of the year is regarded as employed on a standard person year basis.
» On unemployment estimates Planning Commission set up B. Bhagwati Committee in 1973

Agriculture
» Agriculture is the mainstay of the Indian economy despite concerted in industrialization in the last six decades,
» At 2011-12 prices its share in national income is declining but still it contributed 13.9% to the total GDP in 2014-15.
» Agriculture provides livelihood to more than half of the population. In 2011, it contributed 58% to the total employment in the country.
» Although, the share of agricultural products in total trade of India is declining due to export diversification. Yet in 2009-10, it contributed 11% to the total exports and 13% to the total imports of the country.

Green Revolution
* Indian Green Revolution is associated with the use of HYVS (High Yielding Variety Seeds), chemical fertilizers increasing irrigation,pesticides and new technology which led to a sharp rise in agricultural production during the middle of 1960.
* The credit of this goes not only to Nobel Laureate Dr Norman Borlaug,But also to Dr MS Swaminathan.

Industry
» Industry sector comprises of mining, manufacturing, electricity and gas and construction.
» Industry has a share of 28% in the overall GDP and its share in total employment increased from 16.2% in 1999-2000 to 21.9% in 2009-10 to 26% in 2012-13.

Maharatna
» In 2009, the government established the Maharatna status, which raised the PSEs investment ceiling from Rs 1000 crore to Rs 5000 crore.
» The Maharatnas firm can now decide on investments of upto 15% of their net worth.

List of Maharatna
There are Seven Maharatnas in India
• Oil and Natural Gas Corporation (ONGC)
• Bharat Heavy Electrical Limited (BHEL)
• Gas Authority of India Limited (GAIL)
• Steel Authority India Limited (SAIL)
• Indian Oil Corporation (IOC)
• National Thermal Power Corporation (NTPC)
• Coal India Limited (CIL)

Navratna
» The Navratna status empowers a company to invest utpo Rs 1000 crore on 15% of their net worth overseas without government approval.
» At present, there are 17 Navratnas.

List of Navratna
• Bharat Electronics Limited
• Bharat Petroleum Corp Ltd.
• Hindustan Aeronautics Limited
• Hindustan Petroleum Corporation Limited
• Mahanagar Telephone Nigam Limited
• National Aluminium Company Limited
• National Mineral Development Corporation
• Nevyeli Lignite Corporation Limited
• Oil India Limited
• Power Finance Corporation Limited
• Power Grid Corporation of India Limited
• Rashtriya Ispat Nigam Limited
• Rural Electrification Corporation Limited
• Shipping Corporation of India Limited
• Engineers India Limited.
• National Building (construction Corporation Limited.
• Container Corporation of India Limited

Miniratna
Category Miniratna I
» Public Sector Enterprises (PSEs) that have made profit continusouly for the last three years or earned a net profit of Rs 30 crores or more in one of three years.
» At present, there are 51 Miniratna-I.
Category Miniratna II
» PSEs that have made profit for the 1st three years and should have a positive net worth.
» At present, there are 14 Miniratna-II.

Important Industries of India
Industrial sector comprises of mining, manufacturing, electricity, gas and construction. Industry has a share of 28% . Here we discuss the some important industries in India.
1. Iron and steel Industry
» 1st Steel industry was established at Kulti, near Jharia, West Bengal as ‘Bengal Iron Work’ Company’ in 1870. 1st large scale steel plant TISCO at Jamshedpur in 1907 followed by IISCO at Burnpur in 1919. Both belonged to private sector
» The first public sector unit was ‘Vishveshvarayya Iron and Steel Works’ at Bhadrawati.

2. Jute Industry
» Its first modernized industrial unit was established at Reshra in West Bengal in 1855.
» The jute industry in the country is traditionally export oriented. India ranks number one in raw jute and jute goods production and number two in export of jute goods in the world.
3. Cotton and Textile Industry
» Oldest industry of India, and employs largest number of workers.
» The first Indian modernized cotton cloth mill was established in 1818 at Fort Gloaster near Kolkata but this mill was not successful. The second mill named ‘Bombay Spinning and Weaving Co.’ was established in 1854 at Bombay by KGN Daber.
4. Sugar Industry
» Sugar industry is the second largest industry after cotton textile industry among agriculture based industries in the country.
» India is now the largest producer and consumer of sugar in the world. Maharashtra contributes over one-third of the total sugar output, followed closely by UP.
5. Silk Industry
» India is the second largest (first being China) country in the world in producing natural silk. At present, India produces about 16% silk of the world.
6. Petroleum and Natural Gas
» First successful oil well was dug in India in 1889 at Digboi, Asom.
» For exploration purpose, Oil and Natural Gas Commission (ONGC) was established in 1956 at Dehradun, Uttarakhand.

Foreign Direct Investment
» FDI is a type of investment that involves the injection of Foreign funds into an enterprises that operate in different country of origin from the investor. FDI play an extraordinary and growing role in global business. FDI occurs when a company invests in a business that is located in another country and it is investing not less than 10% of shares belonging to the foreign company. It is a non-debt capital flow.

Special Economic Zone (SEZ)
» A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market oriented than a country’s typical national laws.
» Asia’s first Export Processing Zone (EPZ) was set up in Kandla, India in 1965.
» The First SEZ policy was announced in April, 2002 to make SEZ an engine of growth supported by quality infrastructure backed by attractive fiscal package.

SEZ Act 2005
* Duty free import/domestic procurement of goods for development operation and maintenance of SEZ unit
* 100% income Tax exemption an export income of SEZ unit \exemption from Central Sales Tax and Service Tax. Single window clearance mechanism of establishment of units

The Indian Currency System
» The present monetary system of India is based on in-convertible paper currency and is managed by the RBI.
» The present currency system is based on minimum reserve system of note issue. It was adopted in 1957, under the minimum reserve system, minimum of gold and foreign securities to the extent of Rs 200 crore (of which gold should be of value Rs 115 crore) and the balance in rupee securities is maintained.
» The symbol of Indian rupee came into vague on 15 th July, 2010.
» The new symbol is an amalga- mation of Devanagri ‘Ra’ and the symbol Roman ‘R’ without the stem.

Demonetization
Currency demonetization is a radical financial step in which a particular currency’s status as a legal tender is declared invalid. On 9th November, 2016 Reserve bank of India withdrew the old Rs 500 and Rs 1000 notes as official mode of payment. The reason for this move given was that it will help to tackle black money, help to eliminate fake currency and to lower cash circulation in the country.

Devaluation of Currency
» Devaluation of currency means reducing the value of a currency by the fiscal authorities, so as to make exports cheaper and imports costlier and overcome balance of payments deficit.
» In India, devaluation has been resorted to four times.
(a) First Devaluation In June, 1949 (by 30.5%) (Finance Minister Dr. John Mathai).
(b) Second Devaluation In June, 1966 (by 57%) (Finance Minister Sachindra Chaudhry).
(c) Third Devaluation On 1 July, 1991 (by 9%) (Finance Minister Dr. Manmohan Singh).
(d) Fourth Devaluation On 3 July, 1991 (by 11%) (Finance Minister Dr Manmohan Singh).

Banking System in India
» The first bank of Limited liability managed by an Indian was Oudh Commercial Bank in 1881.
» The first purely Indian bank was the Punjab National Bank (1894).

Reserve Bank of India
» It is the Central Bank of the country.
» It was established on 1 April, 1935 with a capital of Rs 5 crore.
» The new symbol designed by D Udaya Kumar, a post-graduate of IIT Bombay was finally selected by the Union Cabinet on 15th July, 2010.
» It was nationalized on 1 January, 1949 as govt, acquired the private share holdings.

Functions
* Issuing of Notes
* Banker to the Government
* Banker’s Bank
* Controller of Credit
* Custodian of Foreign Reserves
* It formulates and administers the monetary policy.
* Acts as the agent of the Government of India in respect to India’s membership of the IMF and the World Bank..

State Bank of India (SBI)
» It was created in January, 1921 by amalgamation of 3 presidency banks.
» After nationalization in 1955, its name was changed to State Bank of India.
» It is the biggest commercial bank in the public sector of India.
» It has the largest number of branches (more than 13000) in the world.
» In 2016, the government approved the merger of five associate banks of SBI as well as Bhartiya Mahila Bank into SBI.

Nationalization of Banks
» In order to have more control over the banks, 14 large commercial banks whose reserves were more than Rs 50 crore each, were nationalized on 19 July, 1969. These banks were
1. The Central Bank of India
2. Bank of India
3. Punjab National Bank
4. Canara Bank
5. United Commercial Bank
6. Syndicate Bank
7. Bank of Baroda
8. United Bank of India
9. Union Bank of India
10. Dena Bank
11. Allahabad Bank
12. Indian Bank
13. Indian Overseas Bank
14. Bank of Maharashtra
» On April 15, 1980, those 6 private sector banks whose reserves were more than Rs 200 crore each were nationalized. These banks were
1. Andhra Bank
2. Punjab and Sindh Bank
3. New Bank of India
4. Vijaya Bank
5. Corporation Bank
6. Oriental Bank of Commerce
» In September 1993, the New Bank of India was merged with the Punjab National Bank.
» These nationalized banks, together with Regional Rural Banks (RRBs), come under the category of Public Sector Commercial Banks. The other kind of commercial banks are Private Sector Commercial Banks.
» At present there are 20 nationalized banks besides the RBI.

NABARD

* National Bank for Agriculture and Rural Development(NABARD)was set up in July, 1982 as the Apex Bank with a paid-up capital of Rs 100 crore contributed equally by RBI and Government of India its headquarter is at Mumbai.
* The role of NABARD was to act as a refinance institution for all kind of production and investment credit to agriculture and village sector
* The paid-up capital of NABARD was raised to Rs 5000 crore on 23rd October 2011 by the government.
* The RBI divested all of its stake from the NABARD to the government in October 2010. Now, 99% shares of NABARD is with the government.
* Rural Infrastructure Development Fund (RIDF) was set up in 1995-96, under NABARD for holistic rural development.

Insurance
Life insurance in India was introduced by Britishers. A British firm in 1818 established the Oriental Life Insurance Company at Calcutta now Kolkata.

Life Insurance Corporation of India (LIC)
» LIC was established on 1st September, 1956, which set the pace for nationalization of life insurance under the Stewardship of CD Deshmukh. It has head office at Mumbai and eight zonal offices the most recent being at Patna.
» LIC is also operating inter nationally in Fiii, Mauritives, UK, Singapore, Nepal, Sri Lanka etc.

General Insurance Corporation (GIC)
» GIC was established on 1st January, 1973, with its four subsidiaries, viz
1. National Insurance Company Limited, Kolkata
2. The New India Assurance Company Limited, Mumbai
3. The Oriental Fire and General Insurance Company Limited New Delhi; and
4. United India General Insurance Company Limited, Chennai.
On 3rd November, 2000, GIC was renamed as GIC Re and approved’ as Indian Reinsurer and the four subsidiaries of GIC were separated from GIC and are functioning independently under Public Sector General Insurance Companies (GIPSA).

Insurance Regulatory and Development Authority (IRDA)
» IRDA was set up on 19th April, 2000, under IRDA Act, 1999, to protect the interest of holders of insurance policies and to regulate, promote and to insure orderly growth of the insurance industry.
» IRDA comprises of a Chairman, three whole-time members and four part-time members.

Indian Money Market
Money market is a market for ‘near money’ or it is the market for borrowing and lending of short-term funds.

Instruments of Money Market
» Treasury Bills (14, 91, 182 and 364 days)
» Dated Government securities
» Certificate to Deposits
» Commercial Papers

Stock Exchange in India
» Stock exchange or share market deals in shares, debentures and financial securities.
» Bombay Stock Exchange (BSE) is the oldest stock exchange in Asia was established in 1875. It is synonymous with Dalai Street BSE was corporatised and renamed BSE Limited in 2005.
» In 1894, the Ahmadabad Stock Exchange was started to facilitate dealing in the shares of textile mills.
» In 1908, Calcutta Stock Exchange was started to facilitate market shares of plantations and jute mills.
» There are 23 stock exchanges in India. Among them two are national level stock exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The rest 21 are Regional Stock Exchanges (RSE).

Securities and Exchange Board of India(SEBI)
» It was established in April, 1988, and awarded statutory status by an Act of Parliament in 1992
» It is the regulatory authority of stock exchanges and protects investors from fraudulent dealings.

Tax Structure
Tax is a compulsory payment by the citizens to the government to meet the public expenditure. It is legally imposed by the government on the taxpayer and in no case taxpayer can deny to pay taxes to the government.

International Economic Organisations
An international Economic Organisations has been defined as a forum of cooperation of sovereign. States based on multilateral international agreement and comprising of a relatively stable range of participants. The fundamental feature of which is the existence of permanent organs with definite competences and powers acting for the carrying out of common aims. Here we discuss some big Economic Organisations.

International Monetary Fund (IMF]
» Established on 27 December, 1945 in Washington DC on the recommendations of Bretton Woods Conference. But it started its operations on March, 1947.
» Its objective is to Promote international Monetary co-operation.

International Bank for Re-Construction and Development (IBRD)
» IBRD was established in December 1945 with the IMP on the basis of the recommendations of the Bretton Woods Conference. That is why IMF and IBRD are called ‘Bretton Woods Twins’. Its Headquarter is at Washington DC. .
» Objective of assisting the member nations in the economic reconstruction and development of the their territories.

World Trade Organisation (WTO)
» It was constituted on January 1, 1995 and took the place of Gatt (General Agreement on Tariffs and Trade) as an effective formal organization. GATT was an informal organization which regulated world trade since 1948.
» Its headquarter is at Geneva.
» Function To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.

Asian Development Bank (ADB)
It was established in December, 1966, with the aim to accelerated economic and social development in Asia and Pacific region. It is headquartered at Manila, Phillipines.

Glossary

» Absolute Advantage The ability to produce more units of a good or service than some other producer, using the same quantity of resources.
» Aggregate Demand (AD) A schedule (or graph) that shows the value of output (real GDP) that would be demanded at different price levels.
» Aggregate Supply (AS) A schedule (or graph) that shows the value of output (real GDP) that would be produced at different price levels. In the long run, the schedule shows a constant level of real GDP at all price levels, determined by the economy’s, productive capacity at full employment.. In the short run, the aggregate supply schedule may show different levels of real GDP as the price level changes.,
» Automated Teller Machine (ATM) A machine that provides cash and performs banking services (for deposits and transfers of funds between accounts,) automatically, when accessed, by customers using plastic cards coded with Personal Identification Numbers (PINs).
» Balance of Payments Deficit An imbalance in a nation’s balance of payments, where more currency is flowing out of the country than is flowing in. This unequal flow of currency is considered unfavorable and can lead to a loss of foreign currency reserves.
» Balance of Payments Surplus An imbalance in a nation’s balance of payments, in which more , currency is flowing into the country than is flowing
Out. This unequal flow of currency is considered favorable and can lead to an increase in foreign currency reserves.
» Balance of Trade The part of a nation’s balance of payments accounts that deals only with its imports and exports of goods and services. The balance of trade is divided into the balance on goods (merchandise) and the balance on services. If the value of a country’s exports of goods and services is greater than its imports, it has a balance of trade surplus. If the value of a country’s imports of goods and services is greater than its exports, it has a balance of trade deficit
» Balanced Budget A financial plan, in which income is equal to expenses.
» Blue Chip Stocks Stocks in large, nationally known companies that have been profitable for a long time and are well-known and trusted.
» Command Economy An economy, in which most economic issues of production and distribution are resolved through central planning and controlling.
» Consumer Price Index (CPI) A price index that measures the cost of a fixed basket of consumer goods and services and compares the cost of this basket in one time period with its cost in some base period. Changes in the CPI are used to measure inflation.
» Cost-Push Inflation Inflation caused by rising costs of production.
» Crowding-Out Increased interest rates and decreased private investment caused by government borrowing.
» Currency Devaluation A government adjusts the value of the nation’s currency so that it buys less of foreign currencies than before.
» Current Account Part of a nation’s balance of payments accounts; records exports and imports of goods and services, net investment income and transfer payments with other countries.
» Current Account Balance The inflow of the goods, services, investment income and transfer accounts into the United States from foreign countries netted against the outflow of goods, services, investment income and transfer accounts from the United States to foreign countries.
» Demand-Pull Inflation Inflation caused by increasing demand for output Or too much money chasing too few goods.
» Depreciation A reduction in the value of capital goods over time due to their use in production.
» Depreciation of Currency A decline in the price of one currency relative to another.
» Depression A Severe,prolonged economic contraction.
» Fixed Exchange Rate An exchange rate that is set and therefore prevented from rising or falling with changes in supply and demand for a nation’s currency.
» Flexible Exchange Rate An exchange rate that is determined by the international demand for and supply of a nation’s money; a rate free to rise or fall (to float).
» Hyperinflation A very rapid rise in the overall price level.
» Imperfect Competition Any market structure, in which firms are not price takers, but instead must seek the price and output levels that maximize their profits.
» Initial Public Offering (IPO) A company’s first sale of stock to the public. When a company ‘goes public’, it sells blocks of stock shares to an investment firm that specializes in initial offerings of stock and resells them to the public.
» Market Failures The systematic overproduction or underproduction of some goods and services that occurs, when producers or consumers do not have to bear the full costs of transactions they undertake. Usually related to externalities or the need for public goods.
» Monopolistic Competition A market structure, in which slightly differentiated products are sold by a large- number of relatively small producers, and in which the barriers to new firms entering the market are low.
» Monopoly A market structure in which there is a single supplier of a good or service. Also, a firm that is the single supplier of a good or service, for which there are no close substitutes; also known as a monopolist.
» Monopsony A market situation, in which there is only one buyer of a resource. Also, a firm that is the only buyer of a resource; also known as a monopsonist.
» Natural Monopoly An industry, in which the advantages of large-scale production make it possible for a single firm to produce the entire output of the market at a lower average cost than a number of firms each producing a smaller quantity.
» Non-Price Competition Competition by firms trying to attract customers by methods other than reducing prices; examples include advertising and promotional gifts.
» Oligopoly A market structure, in which a few, relatively large firms account for all or most of the production or sales of a good or service in a particular market, and where barriers to new firms entering the market are very high. Some oligopolies produce homogeneous products; .others produce heterogeneous products.
» Open Market Operations The. buying and selling of government bonds by the Federal Reserves to control bank reserve and the money supply.
» Pegged Exchange Rate An exchange rate that is fixed within a certain range or against a major currency or basket of currencies.
» Perfect Competition A market structure, in which a large number of relatively small firms produce and sell identical products and, in which there are no significant barriers’, to entry into or exit from the industry.
» Progressive Tax A tax that take a larger percentage of income from people in higher-income groups than from people in lower-income ones; the US federal income tax is an example.
» Recession A decline in the rate of national economic activity, usually measured by a decline in real GDP for atleast two consecutive quarters (Le., six months).
» Regressive Tax A tax that takes a larger percentage of income from people in lower-income groups than from higher-income ones. Sales taxes and excise taxes are examples.
» Velocity of Money Member The average number of times each dollar is spent on final goods and services in a year.

Practice Exercise

1.In which of the following types of economy are the factors of production owned individually?
(a) Capitalist
(b) Socialist
(c) Mixed
(d) (a) and (b)

2.The concept of Five Year Plans in India was introduced by
(a) Lord Mountbatten
(b) Jawaharlal Nehru
(c) Indira Gandhi
(d) Lai Bahadur Shastri

3.India has
(a) Socialistic economy
(b) Gandhian economy
(c) Mixed economy
(d) Free economy

4.‘Mixed Economy’ means
(a) co-existence of small scale and large scale industries
(b) co-existence of the rich and the poor
(c) co-existence of private and public sector
(d) assigning equal importance to both agriculture and heavy industries

5.India’s economic planning cannot be said to be
(a) indicative
(b) imperative
(c) limited
(d) democratic

6.National Development Council was set up in
(a) 1948
(b) 1950
(c) 1951
(d) 1952

7.Poverty in less developed countries is largely due to
(a) voluntary idleness
(b) income inequality
(c) lack of cultural activities
(d) lack of intelligence of the people

8.The most appropriate measure of a country’s economic growth is its
(a) Gross Domestic Product
(b) Net Domestic Product
(c) Net National Product
(d) Per Capita Real Income

9.Which committee was set up to review the concept of the poverty line?
(a) S Tendulkar Committee
(b) Lakdawala Committee
(c) Wanchoo Committee
(d) Dutt Committee

10.The deputy chairman of the Planning Commission
(a) is the Prime Minister
(b) is the Planning Minister
(c) holds the rank of a cabinet minister
(d) is an economist of repute

11.Economic liberalisation in India started with
(a) substantial changes in industrial licensing policy
(b) the convertibility of Indian rupee
(c) doing away with procedural formalitites for foreign direct investment
(d) significant reduction in tax rates

12. Self-reliance in the economic context implies that a country
1. meets its demands for all goods and services from its domestic production
2. exports some of its goods but does not need to import anything
3. has sufficient foreign exchange reserves to buy all its needs
4. meets its demand for certain vital goods and services from its domestic production
(a) 1 and 3
(b) 2 and 4
(c) 1, 2 and 3
(d) 3 and 1

13. Which of the following is the most appropriate because of export surplus?
(a) Country’s export promotion value
(b) Developments in national and international market
(c) Country’s stringent import policy
(d) None of the above

20. Which one of the following is a revamp of the Integrated Rural Development Programme?
(a) Jawahar Gram Samridhi Yojana
(b) Community-based Pro-poor Initiative
(c) Swam Jayanti Gram Swarozgar Yojana
(d) National Social Assistance Programme

21. What is main objective of Antyodaya programme?
(a) Uplift tire poor
(b) Uplift the urban poor
(c) Uplift the fanner
(d) Uplift the landless labour

22. Swarn Jayanti Gram Swarozgar Yojana came into being in
(a) April, 1995
(b) April, 1997
(c) April, 1999
(d) July, 2001

23. Operation Blackboard aims at
(a) promoting adult literacy
(b) providing education to urban slum dwellers
(c) opening of new schools specially for female children
(d) providing primary education in an educationally backward area

24. Consider the following statements
1. Indira Awaas Yojana seeks to provide shelter to rural households living below the poverty line
2. Allotment of house under Indira Awaas Yojana is made in the name of female member of the household
Which of the statements given above is/are correct?
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2

25. The cause of inflation is
(a) increase in money supply
(b) fall in production
(c) increase in money supply and fall in production
(d) decrease in money supply and fall in production

26. Inflation implies
(a) rise in budget deficit
(b) rise in money supply
(c) rise in general price index
(d) rise in prices of consumer goods

27. Which one of the following is not a feature of limited liability partnership firm?
(a) Partners should be less than 20
(b) Partners and management need not to be separate
(c) Internal governance may be decided by mutual agreement among partners
(d) It is a corporate body with perpetual .succession

28. Stagflation implies a case of
(a) galloping inflation
(b) recession plus inflation
(c) adverse balance of trade
(d) rising wages and employment

29.In order to minimize the financial burden of the PSE, the government has started Voluntary Retirement Scheme (VRS) for the employees.
What is the name of this scheme?
(a) Navnirman
(b) Navikaran
(c) Punjikaran
(d) Golden Handshake

30.Hard Currency is defined as currency
(a) which can hardly be used for international transactions
(b) which is used in times of war
(c) which loses its value very fast
(d) traded in foreign exchange market for which demand is persistently relative to the supply

31.When was decimal coinage introduced in India ?
(a) 1947
(b) 1950
(c) 1957
(d) 1960

32.The first Bank established in India was
(a) Punjab National Bank
(b) Traders Bank
(c) State Bank of India
(d) Bank of Hindustan

33.In India, the first bank of limited liability managed by Indians and founded in 1881 was
(a) Hindustan Commercial Bank
(b) Oudh Commercial Bank
(c) Punjab National Bank
(d) Punjab and Sindh Bank

34.Word Bull and Big are associated with which branch of commercial activity ?
(a) Foreign Trade
(b) Banking
(c) Share Market
(d) Manufacturing

35.The central banking performed by the functions in India are
(a) Central Bank
(b) State Bank of India
(c) Reserve Bank of India
(d) Both (b) and (c)

36.The National Stock Exchange functions from
(a) New Delhi
(b) Mumbai
(c) Nagpur
(d) Kolkata

37.Which of the following constitute short-term sources of finance for small scale industries ?
1. Private money lenders
2. Loans by commercial banks
3. Credit Guarantee schemes
4. National Small Industries Corporation
(a) 1,2 and 3
(b) 1 only
(c) 1,2 and 4
(d) 1,2,3 and 4

38.Which bank gives long term loan to farmers?
(a) NABARD
(b) Land Development Bank
(c) SBI
(d) Rural Banks

39.In 1921, the Presidency Banks of Bengal, Madras and Bombay were nationalized to give birth to
(a) Punjab National Bank
(b) Syndicate Bank
(c) State Bank of India
(d) Punjab and Sindh Bank

40. The oldest stock exchange of India is
(a) Bombay Stock Exchange
(b) Ahmedabad Stock Exchange
(c) Bangalore Stock Exchange
(d) Hyderabad Stock Exchange

41. Which among the following formulates fiscal policy?
(a) RBI
(b) Finance Ministry
(c) SEBI
(d) Planning Commission

42. The Five Year Plans of India intend to develop the country industrially through
(a) the public sector
(b) the private sector
(c) the public, private, joint and Cooperative sectors
(d) increasing collaboration with non-resident Indians

43. Consider the following factors regarding an industry
1. Capital investment
2. Business turnover
3. Labour force
4. Power consumption

44.Which of these determine the nature and size of the industry?
(a) 1,3 and 4
(b) 1,2 and 4
(c) 2, 3 and 4
(d) 2 and 3

44. Which of the following is not a part of machinery that settles industrial disputes?
(a) Concialiation Officers
(b) Board of Concialiation
(c) Wege Courts
(d) Works Committee

45. Planning in India derives its objectives from
(a) Fundamental Rights
(b) Directive Principles of State policy
(c) Fundamental Duties
(d) Preamble

46. Most important source of capital formation in India has been
(a) household savings
(b) public sector savings
(c) government revenue surpluses
(d) corporate savings

47. Monetary policy is regulated by
(a) money lenders
(b) Central Bank
(c) private entrepreneurs
(d) Government policy

48. Which one of the following forms the largest share of deficit of government of India Budget?
(a) Primary deficit
(b) Budgetary deficit
(c) Fiscal deficit
(d) Revenue deficit

49. A Scheduled Bank is one which is included in the
(a) II Schedule of Banking Regulation Act
(b) II Schedule of Constitution
(c) II Schedule of Reserve Bank of India Act
(d) None of the above

50. For regulation of the Insurance Trade in the country the Government has formed
(a) SEBI
(b) Reserve Bank of India
(c) Insurance Regulatory and Development Authority
(d) General Insurance Corporation

Answers