Fundamental of economic development - class-XII

Economic activities are related to manufacturing, distribution, exchange and consumption of goods and services. The most important aim of economic activity is the production of goods and services with a view to make them available to the consumer. 

Non-economic activity is an action perform willingly, with the aim of providing services to others lacking any regard as to monetary gain. Individuals human activities which are assumed for individual satisfaction or to satisfy human sentiment are non-economic activities.

The correct option is A.

Intergenerational equity is a concept that says that humans 'hold the natural and cultural environment of the Earth in common both with other members of the present generation and with other generations, past, and future'.

There are five interrelated elements of inclusive growth. They are mentioned as below:

1. Poverty Reduction and increase in quantity and quality of employment
2. Agricultural Development
3. Social Sector Development
4. Reduction in regional disparities
5. Protecting the environment

An underdeveloped economy is characterised by state of deprivation of large proportion of population. Apart from that, other characteristics of an underdeveloped economy are low per capita income, a higher proportion of labour force involved in primary sector activities.

D. All of the above

a. High inequality of income and wealth is another common feature of underdeveloped countries. In these countries, large percentage of national income is shared by a small segment of the society while a large segment of the society gets barely enough to survive. Economic inequality exists even in developed countries but it is not as much as found in underdeveloped countries.

b. Rate of capital formation is very low in underdeveloped economies due to low income levels and high incidence of poverty.

c. The state in underdeveloped economy fails to provide acceptable levels of living to a large fraction of its population, thus resulting into misery and material deprivations. We need to note here that underdevelopment is a relative concept but it sustains absolute poverty. 

Population Growth: Population growth is one of the central problems of economic development. Some developing countries have population growth rates in excess of their GDP growth rates and therefore have negative growth rates of per capita GDP. Many developing countries have rates of population growth that are nearly as large as their rates of GDP growth. As a result, their standards of living are barely higher than they were 100 years ago

Cultural Barriers: Traditions and habitual ways of doing business vary among societies, and not all are equally conducive to economic growth. In developing countries, cultural forces are often a source of inefficiency. Sometimes personal considerations of family, past favors, or traditional friendship or enmity are more important than market incentives in motivating behavior.

Foreign Dept: Sharp increases in real interest led to increased debt-service payments and as a result, many countries could not make their payments. The lending banks had little choice but to reschedule the debt essentially lending the developing nations the money to make interest payments while adding to the principal of the existing loans. 

In economics, underdevelopment is when resources are not used to their full socio-economic potential. As a result  local or regional development is slower in most cases than it should be, especially compared with the investment and innovation in countries that surround it. The scarcity of capital, technological backwardness, and unemployment are generally found in underdeveloped countries.

Forecasting refers to predicting the imputed values of various economic variables like demand, supply etc. to develop premises for the economic plans for smooth conduct of production in the economy according to the plans that aims at achieving growth and development of the economy.  

The money spent on food is not a part of the opportunity cost of going on holiday.Opportunity cost of production of a commodity refers to the cost which has to be sacrificed in terms of the next best alternative which could be produced out of that cost. Therefore, food is part of our everyday expense which will not be considered as the sacrifice of any other commodity. 

Normative Statement refers to "What ought to be" or it makes an
assessment of an activity and offers advice. Hence the statement made by
Madhur is a normative statement.

Custom Duties are levied on exports and imports. Custom duty can also be defined as a type of tax which should be paid by people for exporting to foreign countries and importing goods from foreign countries.

Convertibility of rupees refers to the ability of rupees to be converted into any foreign currency backing with the exchange rate that prevails at the time of conversion. 

Jacob Viner defined Economics as  'Economics in what Economists do'.

"Oikonomia" is a Latin word which means household as it is related to the financial management of  household activities through which the concept of economics was derived. 

The term 'Economics' owes its origin to the Greek work 'Oiknonomiia' means 'household'.

India had  adopted socialist form of economy before 1991 which involved a lot of government intervention into International trade where import was banned on most of the goods through quota and licenses so that the foreign goods does not dominate domestic market. 

In the pre-reforms period (i.e. before 1991), Import of food grains was permitted in order to meet domestic demand in case  of shortage of foodgrains. Demand for food grains by the nation used to fall short in the pre-reform period, hence to  cope up with the shortage of food grains, import was done from the foreign countries.

India adopted the socialist form of economy prior to 1991 which involved a lot of government intervention in all the sectors including banking sector which made Indian economy a little conservative compared to other economic structures prevalent then. But after 1991, the government disinvested all its share from most of the sectors including banking sector which brought privatization in banking sector where public sector used to dominate prior to 1991.

Agricultural tax belong exclusively to the State Governments. This means that tax from agricultural sector or primary sector of the economy is collected only by the state government. Central government has no authority of collecting agricultural tax.

In pre-reform period, that is, before the year of 1991, Surplus Budget in each financial year. Surplus Budget in each financial year introduced after the year of 1991. Budget can be defined as a statement of receipts and expenditure of an economy.

Prior to 1991, credit purchases was not allowed in the consumer market but after the coming of new economic policies credit purchase on consumer durables were allowed as there was high competition in the market after the coming of foreign merchandise.  

Financial sector reforms relates to reforms in all such sectors where finance was a major and prominent factor which included all the three sector i.e. banking, capital market, and insurance. 

All  the following developments ( such as National Debt was nearly 60% of the GNP of India, Inflation crossed double digits) were noticed during 1991, when economic reforms were enforced, except  "Foreign Reserves were maintained at a very high level. During 1991, Indian Government adopted New Economic Policy which emphasized liberalization, privatization and globalization.

During 1991, some new economic reforms where introduced in India which were also known as LPG ( Liberalization, Privatization, and Globalization). These reforms where taken to make the economy stable and take it out from the national crisis which it was facing. 

New industrial policy include the policy of liberalization where it was specified that it is compulsory only for few major named industries to have compulsory licence under the rules and regulations of the government where as other industries were free to establish as well as expand their company without any government intervention. 

 India adopted socialist form of economy which involved a lot of government intervention into international trade where government used to offer export subsidies backed with transaction costs, delays and corruption so that only a few government selected companies could complete in the international market. 

'Served from India' was a concept which was started in 2015 as a export promotion techniques for the services that were exported to various countries. 

Increasing of import/ export duty rates does not relate to the External Sector Reforms in 1991. As per New economic policy which was adopted in 1991, the import rates and export duty rates were to be decreased so that there would be fair flow of goods between the domestic country and other countries as a result of which there will be rationalization in the tariff structure,

Restrictions on Foreign Direct Investment does not relate to the External Sector Reforms in 1991. After 1991, foreign direct investment was proposed so that India could avail high investments from outside and grow.  New economic reforms was enacted in 1991 which liberalized the FDI.

Cash compensatory scheme was a scheme where foreign cash was allowed to be compensated on various means in the domestic territory and EXIM scrip scheme was the export and import assistance bank set up in India in 1981. These both schemes were abolished as a part of new economic reform globalisation and its fair conduct.

As a part of globalization, the import rates and export duty rates were to be decreased so that there would be fair flow of goods between the domestic country and other countries as a result of which there will be rationalization of tariff structure. 

In India, the exporters get a lot of benefit as they complete in the international market with the foreign goods. There is tax concessions on many exported items, exported items get a separate marketing assistance at national level and there is export financial inclusion for many exporting firms who needs them.   

Advertising Economies is an important ingredient of Selling Economies. Advertising helps to increase the sale of a product by encouraging buyers to buy more products or avail more services. 

As
a result of Economic Reforms, Re-structuring, Mergers &
Acquisitions of Companies, Business Process Re-engineering, processes
have been simplified.

                                    <div class="option-text o2_text block">b) Increase in quality and cost consciousness</div><div class="option-text o2_text block">c)Increase in Value-Added Exports.</div></div></div>

The consumer is in equilibrium at a point where the budget line is
tangent to an indifference curve, because it can not intersect the IC
either from above or below.

In economic terms, constant returns to scale is when a firm changes its inputs with the results being exactly the same change in outputs (production). In other words, if a firm increases its inputs they will see a proportional increase in production (or outputs). 

The similar can be true if a firm decreases its inputs and that results in a proportional decrease in outputs. Constant returns to scale take place when increasing the number of inputs leads to an equivalent increase in the output.

 Thus, the correct option is B.

Since govt.  also earn income it can also effect savings.

Accounting profit is the monetary costs a firm pays out and the income a firm receive. It is the accounting profit, and it is higher than economic profit. 

Accounting profit = total monetary revenue- total costs. 

Economic profit is the monetary costs and opportunity costs a firm pays and the revenue a firm receives.The level of profit that occurs when total revenue is equal to total cost. This stage indicates that a firm is doing just as well as it would have if it had selected to use its income to produce a different product or struggle in a different industry.

Common profit is also known as zero monetary profit.

Thus, the correct option is B.

An indifference curve slopes down towards right since more of one
commodity and less of another result same satisfaction to the consumer.

Decrease in demand will decrease the price and quantity both.

Cross holding method of Disinvestment refers to Government selling part of its Shares in one PSU to other PSUs.The term disinvestment is more popularly used where central/ state government sells its holdings of public sector companies.Disinvestment means selling of Public investment to a Private entrepreneur.Disinvestment of the public sector can be defined as a process of
transferring the ownership of any enterprise from public to private
sector.

An entrepreneur has to initiate a business enterprise, bear the risk and innovate new products.

The term disinvestment is more popularly used where central/ state government sells its holdings of public sector companies.Disinvestment means selling of Public investment to a Private entrepreneur.Disinvestment of the public sector can be defined as a process of
transferring the ownership of any enterprise from public to private
sector.

Comforts lies between necessaries and luxuries because comforts refer to those goods which are not required for a happy living.

'Salt' have perfectly inelastic demand.

In very short period (market period) supply cannot be changed.

Privatization refers to -a) The transfer of assets or service functions from the public to private ownership or control

Differential pricing refers to different prices functional in the market based on various factors such as geography, external environment or various reasons. This implies that there is one product in the market, but, different people need to pay different prices for it. 

Cross holding method of Disinvestment refers to Government selling part of its Shares in one PSU to other PSUs. The term disinvestment is more popularly used where central/ state government sells its holdings of public sector companies. Disinvestment means selling of Public investment to a Private entrepreneur.

The correct option is B.

When the government decides to transfer the ownership and control of a public sector entity to some other entity, either private or public, the process is called strategic disinvestment. 

The Department of Investment and Public Asset Management  which comes under the Finance Ministry defines Strategic disinvestment as follows: “Strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of central public sector enterprises of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.”

The correct option is A.

Qualitative measures to control credit are also called selective methods.Qualitative methods of credit control
affects specific sectors of the economy. Qualitative instruments of
credit control are those instruments which focus on select sectors of
the economy. This policy of credit control is also known as policy of
selective control.

Land does not yield (product) anything, unless human efforts are employed is correct statement.

Quantitative or the traditional method of credit control comprises of bank rate policy, open market operations and variable reserve ratio. Qualitative or selective methods of credit control include directive of margin requirement, credit rationing, regulation of consumer credit and direct action.

The correct option is A.

In
India, the three major objectives of economic policy are growth, social
justice and price stability. Social Justice can be
pursued most effectively by the monetary authorities of the country. Social justice can be defined which is an ideal situation where everone gets equal treatment; any sort of dicimination is not applicable.

Oligopolistic industries have a few dominant firms and substantial
barriers to entry; because there is may be some entry barriers.

Quantitative or traditional methods of credit control consist of banks rate policy, open market operations and variable reserve ratio. Qualitative or selective methods of credit control consist of the guideline of margin requirement, credit rationing, regulation of customer credit and direct action. 

Quantitative controls are planned to control the volume of credit created by the banking system qualitative measures or selective methods are intended to regulate the flow of credit in specific uses.

The correct option is D.

Quantitative Methods aim at influencing the total volume of credit in the banking system.Quantitative measures to control credit
are also known as general measures. Quantitative instruments of control
credit are those instruments which focus on overall supply of money in
the economy. These measures are used in a manner such that overall
supply of money in the economy is reduced during inflation and increased
during deflation.

Kandla, also known as the Kandla Port Trust or Deendayal Port is a seaport in Kutch District of Gujarat state in western India, near the city of Gandhidham. Located on the Gulf of Kutch, it is one of major ports on west coast as it is one of the top traffic handler off all the merchandise that is imported and exported to the west countries. 

Thomas Robert Malthus was an English cleric and scholar, influential in the fields of political economy and demography who for the first time proposed the condition of food shortage on the grounds of scarce resources and unlimited wants after studying the world demographics. 

Kandla, also known as the Kandla Port Trust or Deendayal Port is a seaport in the Kutch district of Gujarat state in western India, near the city of Gandhidham. Located on the Gulf of Kutch, it is one of the major ports on the west coast as it is one of the top traffic handlers of all the merchandise that is imported and exported to the western countries.

The economic reforms have failed to keep fiscal deficits to the targeted
levels, fully implement industrial deregulation and fully open the
economy to trade.

The capital formations really signify a very significant part of economic development. This earnings manufacture and growth of more capital goods, such as machines, tools, factories, buildings, raw materials, fuels, etc., which are to be additionally used in producing more goods. 

Resources creation does not mean enlarge in money capital, but it actually refers to increase in physical capital, i.e., machinery, factories, transport equipment, bridges, power projects, dams, irrigation systems, etc. 

To sum up, capital formation implies the making of real assets. Low per capita real profits is one of the most defining qualities of developing economies. 

The correct answer is C.

The government controls economic activities under centrally planned economies A centrally planned economy, also known as a command economy, is an economic system in which a central authority, such as a government, makes economic decisions regarding the manufacturing and the distribution of products. Centrally planned economies are different from market economies in which such decisions are traditionally made by businesses and consumers.

In economic terms, constant returns to scale is when a firm changes its inputs with the results being exactly the same change in outputs (production). In other words, if a firm increases its inputs they will see a proportional increase in production (or outputs). 

The similar can be true if a firm decreases its inputs and that results in a proportional decrease in outputs. Constant returns to scale take place when increasing the number of inputs leads to an equivalent increase in the output.

Thus, the correct option is A.

If
one unit of labour and one unit of capital give 200 units of output,
two units of labour and two units of capital give 400 units of output
and 5 units of labour and five units of capital give 1000 units of
output then this is a case of Constant Returns to Scale.Constant Returns to Scale can be defined as a situation when an increase in inputs cause proportional increase in output.

Monopolies and Restrictive Trade Practices act, 1969 was enacted to prevent the concentration of economic power to common detriment, control of monopolies, and prohibition of monopolistic and restrictive trade practices and matters connected therewith. But after the New economic reforms, liberalization, privatization, and globalization it was necessary that there must be competition in the market for the survival of the fittest. Therefore, the MRTP Act 1969 was replaced by Competition Act in year 2002. 

In the data, as the factor increases by 1, the output increases by 15 consistently. This constant ratio of output to factor (15/1 = 30/2 = 45/3 = 60/4 = 75/5 = 15) indicates constant returns to scale.

Quantitative methods of credit control affects indiscriminately all sectors of the economy.Quantitative measures to control credit
are also known as general measures. Quantitative instruments of control
credit are those instruments which focus on overall supply of money in
the economy. These measures are used in a manner such that overall
supply of money in the economy is reduced during inflation and increased
during deflation.

After a certain period of time, the demand of the people for agricultural output falls and for industrial output rises. Since the coming of industrialization, the demand for industrial products are risings which is a result of modern standard of living from the traditional one so people prefer industrial product over agricultural product.