Tag: capital

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Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Real Capital Formation requires ___________________.

  1. An entrepreneurial class which is prepared to bear the risk of business

  2. Economic and industrial policies in which Investment is given initiative

  3. An inducement to invest, e.g. prospective rate of profit

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Real capital formation requires a conducive environment that includes risk-taking entrepreneurs, supportive government policies, and economic incentives like the potential for profit to encourage investment.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Inducement to Invest is influenced by _______________________.

  1. Prospective Rate of Profit

  2. Rate of Interest

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The decision to invest is primarily driven by the expected return on the investment (prospective rate of profit) compared to the cost of borrowing the funds (rate of interest).

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

In the pre-reforms period (i.e. before 1991), import permission was available primarily for _______________.

  1. Consumer Goods

  2. Capital Goods

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the pre-1991 era, India followed a policy of import substitution. Import permissions were strictly regulated and prioritized for essential capital goods and machinery needed for industrialization, rather than consumer goods.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Under Cobb- Douglas production function contribution of capital and labour respectively _________________.

  1. $3/4^{th} , 1/4^{th}$
  2. $1/4^{th} , 3/4^{th}$

  3. 1/2, 1/2

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The standard Cobb-Douglas production function is often written as Y = A * K^alpha * L^(1-alpha). In many empirical applications, the output elasticity of capital (alpha) is estimated to be around 1/4 (0.25) and labor (1-alpha) around 3/4 (0.75).

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

In the pre-reforms period (i.e. before 1991), import permission was available primarily for ________________.

  1. Capital Equipment

  2. Machinery

  3. Industrial Raw Material

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

During the pre-reform period, the import regime was highly restrictive. Permissions were granted primarily for essential inputs required for domestic industrial production, which included capital equipment, machinery, and raw materials, while restricting consumer goods.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Which capital includes durable consumer goods, inventories and intermediate goods?

  1. Human capital.

  2. Physical capital.

  3. External capital.

  4. Floating capital.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Floating capital (also known as circulating capital) refers to assets that are consumed or transformed during the production process, such as raw materials, inventories, and intermediate goods, as opposed to fixed capital.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

"Capital is the produced means of production". Who gave this definition?

  1. Bohm Bawerk

  2. J.K. Hicks

  3. Von Sickle and Roger

  4. Prof. Samuelson
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bohm Bawerk proclaimed that "Capital is the produced means of production". Capital is already a produced means as other factors of production are used to produce capital in an economy.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Which of the following is/are the stages of capital formation?

  1. Creation of savings

  2. Effective mobilization of savings

  3. Investment in savings

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The three stages of capital formation are:-
1) Creation of savings-Collective savings of individuals in an economy leads to creation of savings.
2) Effective mobilization of savings-Savings should be properly allocated to different purposes.
3) Investment in savings-Savings should be properly invested by the economy which will yield better productivity and help to increase the rate of existing capital formation.
Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Why is capital a passive factor of production?

  1. Because it becomes ineffective without cooperation of labour

  2. Because it becomes ineffective without land

  3. Because it becomes ineffective without entrepreneurs

  4. Because it becomes ineffective without natural resources
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Without the presence of labour factor of production ,capital is of no use,hence capital is a passive factor of production. Without labour , capital will not get utilized in the production mechanism. Capital without the accompany of the labour cannot produce any goods and services in an economy.