Tag: economics of planning

Questions Related to economics of planning

The most serious economic problem in India is ___________.

economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. unemployment

  2. rising population

  3. poverty

  4. all of the above

Show answer
Correct Option: D
Explanation:

The most serious economic problems in India are:

1)Unemployment- High unemployment indicates the economy is operating below full capacity and is inefficient; this will lead to lower output and incomes. The unemployed are also unable to purchase as many goods, so will contribute to lower spending and lower output. A rise in unemployment can cause a negative multiplier effect.

2) This economic problem of rising population leads to poverty, lack of free medical assistance, lack of social security and bad living conditions. Excessive population leads to working institutions dysfunctionality and makes all plans to improve a country’s infrastructure, medical assistance facilities and social welfare initiatives ineffective. This includes the Indian Government which has struggled to enact reforms over the past 69 years since independence. 

3) The direct effects of poverty are hunger, malnutrition and susceptibility to diseases. These have been identified as huge problems across the world. ... The growth of population in India is way beyond the growth in economy and the gross result is such that the poverty figures have remained more or less constant.

Multiple Choice Question:

The opportunity cost of $100kg$ of rice produced on a land which can also produce $80$ tonnes of wheat is _____________.

economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. $100kg$ of wheat

  2. $80$ tonnes of wheat

  3. $8,000$ tonnes of wheat

  4. none of these

Show answer
Correct Option: B
Explanation:

Opportunity cost of production of a commodity refers to the resources which have to be sacrifice in terms of the next best alternative which could have been produced using the same resources.
Therefore, the next best alternative which could be produced on the piece of land mentioned here is 80 tonnes of wheat, which is sacrificed for the production of 100 kg of rice.

The problem of 'what to produce' relates to ______________.
economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. the choice of technique

  2. distribution of income

  3. market value of the goods and services

  4. the choice of goods and services

Show answer
Correct Option: D
Explanation:
The central problem of "what to produce?" which is faced by the economy where the economy decides the goods that need to be produced in the economy whether consumer or capital goods to satisfy human wants to keep in mind the available resources and state of technology in the economy.
Hence, D is the correct option.

Which of the following is related to the problem 'how to produce'?
economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. Factorial distribution of income.

  2. The choice of technique.

  3. The choice of product.

  4. None of the above.

Show answer
Correct Option: B
Explanation:

The question for "How to produce?" is faced by the economy they should consider both labour intensive techniques as well as capital intensive techniques depending upon the availability of resources in the economy.

Multiple choice question:

In which of the following situations, does scarcity arise?

economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. Supply of resources $>$ Demand for resources

  2. Supply of resources $<$ Demand for resources

  3. Supply of resources $=$ Demand for resources

  4. None of these

Show answer
Correct Option: B
Explanation:

Scarcity of resources refers to the situation where resources are limited in quantity and have alternative uses in production of various commodities. So the problem of these scarce resources is reflected in the aggregate supply of the economy which is also limited owing to limited source of inputs and unlimited demands as human wants are unlimited. 

Multiple Choice Question:

Output of Good-X decreases by $500$ units and output of Good - Y increases by $500$ units, when some resources are shifted from the production of X to the production of Y. The marginal opportunity cost is __________.

economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. $0.2$

  2. $0.75$

  3. $0.8$

  4. $1.0$

Show answer
Correct Option: D
Explanation:

Output of Good-X decreases by 500 units and output of Good-Y increases by 500 units, when some resources are shifted from the production of X to the production of Y. The marginal opportunity cost is 1.0. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. The formula to calculate marginal opportunity cost is sacrifice/gains. Therefore, the marginal opportunity cost is 500/500= 1.

In a free market economy, decision relating to 'for whom to produce' enhances the gap between the rich and the poor.
economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

In a free economy, the producers will produce goods for those who can afford to pay high price. Poorer sections of the society are often, thus, ignored. As a result, the gap between the rich and the poor enhances.

Marginal opportunity cost falls as resources are shifted from Good - $1$ to Good - $2$.
economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

The slope of production possibility curve is the marginal opportunity cost, which refers to the additional sacrifice that an economy needs to make when it shifts resources and technology from production of one commodity to the other. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost.  

Central problems of an economy are found only in those economies which are not governed or regulated by the government.
economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

The central economic problems rise for the basic fact that the resources in the economy is scarce whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy and regulations/intervention of the government can do little about central economic problems.

Problem of resource allocation is automatically solved in a free market economy.
economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

In a free market economy, prices of commodities in the market are affected by the forces of demand and supply. This generates open competition in the market which leads to optimum allocation and utilization of resources in the economy without any planning or intervention of any authority.