15 July 2023

 Q. In India, most freight traffic is presently handled by the:

1. Roadways
2. Railways
3. Inland waterways
4. Airways

• Solution:

(A)

• Network expansion in Railways has lagged behind capacity addition in the domestic roads sector. So, significant freight share has gone to the roadways, instead of more efficient Railways.

Q. Consider the following statements regarding Dedicated Freight Corridor:

• Dedicated Freight Corridor Corporation of India Limited (DFCCIL) run by the Ministry of Railways undertakes the operation of the “Dedicated Freight Corridors” (DFC).
• The Western DFC is lengthier than the Eastern DFC.
• Western Dedicated Freight Corridor (WDFC) runs from Uttar Pradesh to Mumbai.

Which of the above statements is/are correct:

1. 1, 2
2. 1, 3
3. 2, 3
4. 1, 2, 3

• Solution:

(B)

• The Dedicated Freight Corridor Corporation of India Limited (DFCCIL) recently announced that Indian Railways will be running its freight trains on 40% of the dedicated freight corridor (DFC) by next year.
• The DFC project is one of the Indian Railways’ largest infrastructure projects.
• The 1,504 kms long Western DFC is from J N Port in Mumbai, Maharashtra to Dadri in the state of Uttar Pradesh and the 1,856 kms long Eastern DFC is from Sahnewal near Ludhiana in Punjab to Dankuni in the state of West Bengal.

Q. The term “Sub Urbanisation” refers to:

1. Movement of population from urban areas to rural areas
2. Movement of people from central urban area to satellite communities
3. Population shift from rural areas into suburbs
4. Reduction of population in lower tier cities

• Solution:

(B)

• Suburbanization is a population shift from central urban areas into suburbs, resulting in the formation of (sub)urban sprawl.
• As a consequence of the movement of households and businesses out of the city centers, low-density, peripheral urban areas grow.
• (Sub-urbanization is inversely related to urbanization, which denotes a population shift from rural areas into urban centres.)
• Many residents of metropolitan regions work within the central urban area, and choose to live in satellite communities called suburbs and commute to work via automobile or mass transit.

Q4. Open Acreage Licensing, often seen in the news, is related to:

1. Hydrocarbon exploration
2. Railways
3. Mining of Iron ore
4. Land Acquisition

• Solution:

(A)

• The OALP, a critical part of the Hydrocarbon Exploration and Licensing Policy, provides uniform licences for exploration and production of all forms of hydrocarbons, enabling contractors to explore conventional as well as unconventional oil and gas resources.
• Fields are offered under a revenue-sharing model and throw up marketing and pricing freedom for crude oil and natural gas produced.

Q5. There will be progressively lesser difference between Gross Domestic Product (GDP) and Net Domestic Product (NDP):

1. If technological growth is slow in a nation and capital depreciation is high
2. If technological growth is high in a nation and capital depreciation is low
3. If technological growth is slow in a nation and capital depreciation is high
4. If technological growth is high in a nation and capital depreciation is high

• Solution:

(B)

• NDP is essentially the GDP discounted for the total value of the ‘wear and tear’ (depreciation) that happened in the assets while the goods and services were being produced.
• It means GDP minus depreciation is NDP. Depreciation is caused due to wear and tear of capital or due to poor technological growth that fails to cut down levels of depreciation.
• Lower the depreciation, lesser will be the difference between GDP and NDP.
• This is achieved best in the case of option (b)

Q6. The market value of intermediary goods is deducted from the calculation of Gross Domestic Product (GDP) to:

• Avoid double counting of goods
• Include the value of depreciation in the capital stock

Which of the above statements is/are correct:

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

• Solution:

(A)

• An intermediate good is a product utilized to produce a final good or finished product.
• These goods are sold between industries for resale or for the production of other goods.
• Since GDP (gross domestic product) is a measurement of the market value of final goods, using intermediate goods in the calculation would result in goods being counted twice, and thus the figure would be inaccurate.
• Depreciation is deducted separately. Moreover, it forms part of the calculation of NDP, not GDP

Q7. “Rent Seeking activities” by business firms often involve:

1. Strategizing to cut down rental costs of factors of production
2. Lobbying the government to change rules for making business profitable
3. Speculating in financial markets to gain competitive advantage
4. Seeking investment from multiple avenues to manage cash burden

• Solution:

(B)

• Trying to get the government to change the rules so as to make one’s business more profitable rather than spending time and money not on the production of real goods and services is called as rent seeking.
• It is like cutting a bigger slice of the cake rather than making the cake bigger trying to make more money without producing more for customers.
• Rent-seeking and crony capitalism are closely related.
• These erode an economy’s competitiveness, leads to concentration of wealth and inequity.

Q. Why ‘Indirect Tax’ is considered as regressive taxation:

1. They are not charged the same for all income groups
2. They are charged at higher rates than direct taxes
3. They are charged at lower rates than direct taxes
4. None of the above

• Solution:

(D)

• Indirect taxes make the distribution of income more unequal because of their regressive effects.
• The poor will get taxed a higher proportion of their income than the rich, making it a regressive tax.
• Higher indirect taxes can cause cost-push inflation which can lead to a rise in inflation expectations.

Q. Which of the following statements best describes ‘Hard Currency’:

1. It is a currency used during the balance of payment crisis.
2. It is a currency having wide circulation in international market.
3. It is a currency widely accepted around the world as a form of payment for goods and services.
4. None of the above are correct.

• Solution:

(C)

• HARD CURRENCY refers to money that is issued by a nation that is seen as politically and economically stable.
• HARD CURRENCIES are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic CURRENCY

Q. Consider the following statements regarding Devaluation of currency:

• Devaluation decreases the prices of imports purchased in the home country.
• Devaluation can be employed to eliminate balance-of-payments deficits.
• Devaluation will not be effective if the balance-of-payments disequilibrium is a result of basic structural flaws in a country’s economy.

Which of the above statements is/are correct:

1. 1, 2
2. 1, 3
3. 2, 3
4. 1, 2, 3

• Solution:

(C)

• Devaluation, reduction in the exchange value of a country’s monetary unit in terms of gold, silver, or foreign monetary units.
• Devaluation is employed to eliminate persistent balance-of-payments deficits.
• For example, a devaluation of currency will decrease prices of the home country’s exports that are purchased in the import country’s currency.
• While making the exported goods cheaper for other countries, devaluation also increases the prices of imports purchased in the home country.
• Devaluation will not be effective if the balance of-payments disequilibrium is a result of basic structural flaws in a country’s economy.