Tag: capital

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Questions Related to capital

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

Capital helps in maintaining defence of the country.

  1. True

  2. False
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A Correct answer
Explanation

Several arms and ammunition is necessary to maintain the defence of the country, which is made with the help of capital such as machines, tools etc.Thus capital helps in maintaining the defence of the country.

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

Lower __________ leads to low savings which lead to a lower rate of capital formation.

  1. per capita income

  2. gross domestic product

  3. development plan

  4. economic instability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Low per capita income limits the ability of individuals to save, which in turn reduces the pool of funds available for investment and capital formation.

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

Besides the level of income, the taxation policies of the government also affect the ability to save.

  1. True

  2. False
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A Correct answer
Explanation

Even when the income of person is high , he is left with less real income after paying the high taxes levied by the government this then affects both the level of consumption and savings of the person.

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

When the rates of income tax and sales tax are high, the major portion of the earnings of people goes to the government exchequer and very little remains with people to save and invest.

  1. True

  2. False
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A Correct answer
Explanation

When high rate of taxes (income tax and sales tax)  are imposed by the government ,the real income of the consumers go down and hence the purchasing power falls so in turn savings of the people falls accordingly.

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

Capital formation is highly affected by market conditions of boom and depression.

  1. True

  2. False
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A Correct answer
Explanation

During boom market condition, the economy flourishes,investment rises and thus capital formation rises and during depression period , market sinks down and rate of capital formation falls.

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

The prosperity encourages and enhances the saving but depression reduces the saving of people.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The prosperity of a country helps to provide the citizens with more investment channels and thus people tend to save more but during depression period of an economy ,market sinks down and falls into a low -equilibrium trap which results in less investment,less savings and low rate of capital formation.

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

The inadequate number of investment channels is one of the reasons for low capital formation in India.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Insufficient options to invest in an economy results in low net capital accumulation during a period of time in an economy since the people of that economy is left with very few options to invest.