[DAY 9] 60 DAY RAPID REVISION (RaRe) SERIES for UPSC Prelims 2022 – ECONOMICS, CURRENT AFFAIRS & CSAT; Test Series, Videos & Notes!

Solution (c)

Basic Info:

– The Gross Domestic Product (GDP) deflator is a measure of general price inflation.

– It is calculated by dividing nominal GDP by real GDP and then multiplying by 100. 

– There are other measures of inflation too like Consumer Price Index (CPI) and Wholesale Price
Index (or WPI); however GDP deflator is a much broader and comprehensive measure. 

– Since Gross Domestic Product is an aggregate measure of production, being the sum of all final uses of goods and services (less imports), GDP deflator reflects the prices of all domestically produced goods and services in the economy whereas, other measures like CPI and WPI are based on a limited basket of goods and services, thereby not representing the entire economy (the basket of goods is changed to accommodate changes in consumption patterns, but after a considerable period of time).

– The GDP deflator also includes the prices of investment goods, government services and
exports, and excludes the price of imports.

– Changes in consumption patterns or the introduction of new goods and services or structural
transformation are automatically reflected in the deflator which is not the case with other inflation measures.

– However WPI and CPI are available on monthly basis whereas deflator comes with a lag (yearly or quarterly, after quarterly GDP data is released). Hence, monthly change in inflation cannot be tracked using GDP deflator, limiting its usefulness.

– Ministry of Statistics and Programme Implementation (MOSPI) comes out with GDP deflator in National Accounts Statistics as price indices. The base of the GDP deflator is revised when base of GDP series is changed.  

Solution (c)

Statement Analysis:

Solution (b)

Basic Info:

National Income (NI)
NI is the total value of all final goods and services produced by the country in a certain year. A total of national income measures the flow of goods and services in an economy.

 The growth of NI helps to know the progress of the country. It includes payments made to
all resources in the form of wages, interest, rent, and profits.

 It is also defined as “the net output of commodities and services flowing during the year from the country’s productive system in the hands of the ultimate consumers.

NNP at factor cost ≡ National Income (NI) ≡ NNP at market prices – (Indirect taxes – Subsidies) ≡ NNP at market prices – Net indirect taxes (Net indirect taxes ≡ Indirect taxes – Subsidies

Solution (b)

Basic Info:

Personal Disposable Income (PDI)
Out of Personal Income (PI), what finally reaches the households is known as PDI, which excludes personal tax payments and non-personal tax payments.  It is the part of the aggregate income which belongs to the households for disposal. They may decide to consume a part of it and save the rest.

 PI = National Income (NI) – Undistributed Profits – Net interest payments made by households – Corporate tax + Transfer payments to households from the government and firms.

PDI = PI – Personal tax payments – Non-tax payments. The government sector affects the PDI of households by making transfers and collecting taxes. It is through this that the government can change the distribution of income and bring about a distribution that is considered ‘fair’ by society.

Solution (c)

Statement Analysis:

Solution (c)

Statement Analysis:

Solution (c)

Basic Info:

Economic Reforms in India:
It has compromised the welfare and identity of people belonging to poor countries.

Market-driven globalisation has widened the economic disparities among nations and
people.

The crisis that erupted in the early 1990s in India was basically an outcome of the deep-rooted inequalities in Indian society and the economic reform policies initiated as a response to the crisis by the government, with externally advised policy package, further aggravated the
inequalities.

Further, it has increased the income and quality of consumption of only high-income groups and the growth has been concentrated only in some select areas in the services sector such as
telecommunication, information technology, finance, entertainment, travel and hospitality services, real estate and trade, rather than vital sectors such as agriculture and industry which provide livelihoods to millions of people in the country.

Solution (d)

Basic Info:

Gross National Product (GNP): GNP refers to the GDP of a country added with its ‘Net Factor Income from abroad’.

Here, the trans-boundary economic activities of an economy are also taken into account. 

‘Net Factor Income from abroad’ includes the following:

Private Remittances: The net outcome of the money which inflows and outflows on account of the ‘private transfers’ by Indian nationals working outside of India (to India) and the foreign
nationals working in India (to their home countries).

Interest on External Loans: The net outcome on the front of the interest payments, i.e., the balance of inflow (on the money lent out by the economy) and outflow (on the money borrowed by the economy) of external interests.

External Grants: The net outcome of the external grants i.e., the balance of such grants which flow to and from India.

Ultimately, the balance of all the three components of the ‘Net Factor Income from Abroad’ segment may turn out to be positive or negative. In India’s case, it has always been negative (due to heavy outflows on account of trade deficits and interest payments on foreign loans). This means that India’s GNP is always lower than its GDP.

Solution (a)

Basic Info:

Real and Nominal GDP:
GDP stands for Gross Domestic Product (GDP) and is the measure of the total economic output of the goods and services of a country. It is usually expressed on an annual basis but is sometimes expressed on a quarterly basis within a year.

Real GDP is equal to the economic output adjusted for the effects of inflation. Nominal GDP is economic output without the inflation adjustment.

Real GDP is calculated in a way such that the goods and services are evaluated at some
constant set of prices (or constant prices). When comparing the GDP of two or more
years, real GDP is used because, by removing the effects of inflation, the comparison of the
different years focuses solely on volume.

The year-to-year comparison for real GDP requires what is called a base year.  The base year is nothing more than the year to which all the other years are adjusted.

Nominal GDP is simply the value of GDP at the current prevailing prices.

Nominal GDP is usually higher than Real GDP because inflation is typically a positive number.

Nominal GDP is used when comparing different quarters of output within the same year.

Solution (a)

Basic Info:

Primary Sector: The economic activities which take place while exploiting the natural resources fall under it, such as mining, agricultural activities, oil exploration, etc. When agriculture sector (one of the sub-sectors of the primary sector) contribute minimum half of the national income and livelihood in a country it is called an agrarian economy.

Secondary Sector: It contains all of the economic activities under which the raw materials extracted out of the primary sector are processed (also called industrial sector). One of its sub-sectors, manufacturing, has proved to be the largest employer across the western developed
Economies. 

Tertiary Sector: All of the economic activities where services are produced falls in this sector, such as education, healthcare, banking, communication, etc. When this sector contributes minimum half of the national income and livelihood in a country it is called a service economy. 

Later on, experts created two more sectors of economy—quaternary and quinary. Though, they are subsectors of the tertiary sector.

Quaternary Sector: Known also as ‘knowledge’ sector, the activities related to education, research and development, etc. come under it. The sector plays the most important role in defining the quality of the human resources an economy has.

Quinary Sector: All activities where top decisions are made fall under it. The highest level of
decision makers in governments (inclusive of their bureaucracy) and the private corporate sector fall under it. The number of people involved in this sector is very low rather they are considered the ‘brain’ behind socio-economic performance of an economy.

Solution (a)

Basic Info:

Gross value added is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry or sector. At its simplest it gives the rupee value of goods and services produced in the economy after deducting the cost of inputs and raw materials used. 

GVA can be described as the main entry on the income side of the nation’s accounting balance sheet, and from an economics perspective represents the supply side. 

While India had been measuring GVA earlier, it had done so using ‘factor cost’ and GDP at ‘factor cost’ was the main parameter for measuring the country’s overall economic output till the new methodology was adopted. 

In the new series, in which the base year was shifted to 2011-12 from the earlier 2004-05, GVA at basic prices became the primary measure of output across the economy’s various sectors and when added to net taxes on products amounts to the GDP.

Solution (d)

Basic Info:

Giffen Good:  The good for which the demand increases as its price increases.

It is a product that people consume more as the price rises and vice versa violating the basic law of demand in microeconomics.

It applies to the large proportion of the goods belonging to the household goods (as flour, rice, pulses, salt, onion, potato, etc. in India)—an increase in their prices produces a large negative income effect completely overcoming the normal substitution effect with people buying more of the goods.  Examples: Bread, Rice and Wheat

Solution (b)

Basic Info:

Per Capita Income is a measure of the income earned by a per person per year in a certain area. It can apply to the average per-person income for a city, region or country, and is used as a means of evaluating the living conditions and quality of life in different areas. 

Per capita income shows only the average income. A nation may have a high Gross Domestic Product (GDP), but the distribution of income may be confined to a few rich people and the
remaining population may be living under poverty.

It can be calculated for a country by dividing the country’s national income by its population.

Although per capita income is a reliable and widely used economic metric, it also comes with a few limitations. Some of these limitations are its instability to account for inflation, poverty, income disparity, savings or wealth. As per capita income considers the overall income of a population and divides it by the number of people without taking into account the inequality in income of people from different parts of the society and different work backgrounds, it cannot always be considered as an accurate representation of the standard of living or prosperity of a particular area or nation. This is why per capita income doesn’t really give you a true or clear picture about the living conditions of all people in a certain area.

Solution (d)

Basic Info:

Capital Goods: These are tangible assets that a manufacturing sector uses to produce final goods or services. In other words, these goods are used as inputs for other businesses to produce consumer goods.

For example, tools, implements and machines make production of other commodities feasible.
Manufacturers of capital goods sector are the crucial backbone of any production process because their products are used by companies involved in manufacturing, shipping and providing other services as a final goods and services.

Packaging machine in wafer chips and wafers manufacturing factory, Warehouse in a bottling plant, Oil rig owned by oil company and Battleship owned by defence forces are the examples of Capital Goods.

Solution (c)

Basic Info:

Economic Reforms:  A total of three generations of reforms have been announced till date.
First Generation Reforms (1991–2000): The broad coordinates of the First Generation of reforms may be seen as under:

• Promotion to Private Sector
• Public Sector Reforms
• External Sector Reforms
• Financial Sector Reforms
• Tax Reforms

It was in the year 2000–01 that the government, for the first time, announced the need for the Second Generation of economic reforms and it was launched in the same year.

The ones which had been initiated by then (i.e., from 1991 to 2000) were called by the government as the reforms of the First Generation.

Solution (a)

Basic Info:

Net Domestic Product (NDP) is the GDP calculated after adjusting of the of ‘depreciation’.
This is, basically, the net form of the GDP, i.e., GDP minus the total value of the ‘wear and tear’ (depreciation) that happened in the assets while the goods and services were being produced.

Every asset (except human beings) goes for depreciation in the process of their uses, which means they ‘wear and tear’.

The governments of the economies decide and announce the rates by which assets depreciate (done in India by the Ministry of Commerce and Industry) and a list is published, which is used by different sections of the economy to determine the real levels of depreciation in different assets.

NDP is not used in comparative economics, i.e., to compare the economies of the world. This is due to different rates of depreciation which is set by the different economies of the world.

Solution (d)

Basic Info:

Inclusive Growth: The growth is inclusive when it is socially inclusive, regionally balanced, which enables every state to do better than in the past, which narrows the gap between different communities, which also brings in our concern for gender equality, upliftment of women, improving their educational condition and social status.

 Inclusive growth is to include the poor and lagging socio-economic groups such as ethnic/tribal groups, weaker sections as well as lagging regions as partners and beneficiaries of economic growth. It should diversify livelihood for tribal population.

It addresses the constraints of the excluded and the marginalised. It has to open up opportunities for them to be partners in growth.

Inclusive growth has to ensure access of people to basic infrastructure and basic services/capabilities such as basic health and education. This access should include not only the quantity but also the quality of these basic services.

Solution (d)

Note: Incorrect statements have been asked. 

Basic Info:

Middle Income Trap (MIT) refers to countries that have experienced rapid growth and quickly
reached middle-income status and are unable to compete with low-income, low-wage economies in manufactured exports and unable to compete with advanced economies in high-skill innovations.

It is associated with a relatively sustained growth slowdown with both direct effects (e.g. income losses) as well as indirect effects (e.g. social conflicts).

Causes of MIT:
If a country tends to be resource driven growth, with low-cost labor and capital, rather than productivity driven growth, it leads to the situation of a middle-income trap.

In any economy, income inequality decreases the domestic demand, which results in stagnation. It further slows down the upward mobility of families that are at lower levels, into the middle class that is prepared to pay more for quality and differentiated products.

Solution (c)

Basic Info:

Lorenz Curve
It is a graph showing the degree of inequality in income and wealth in a given population or an economy. The curve’s slope is thus proportional to per capita income at each point of the population distribution. 

It shows the proportion of overall income earned by the cumulative proportion of the population. The line at the 45degree angle shows perfectly equal income distribution, while the other line shows the actual distribution of income. The further away from the diagonal, the more unequal the size of the distribution of income.

In the case of complete equality of income, this curve will be straight line with greater curvature the inequality rises proportionally-the Gini Coefficient measures this inequality.

The Lorenz curve cannot rise above the line of perfect equality.

Solution (c)

Basic Info:

The global MPI was developed by OPHI (Oxford Poverty and Human Development Initiative) with the UN Development Programme (UNDP) for inclusion in UNDP’s flagship Human Development Report (HDR) in 2010. It has been published in the HDR ever since.

 Multidimensional Poverty Index (MPI) is an international measure of acute multidimensional poverty covering over 100 developing countries.

 It complements traditional monetary-based poverty measures by capturing the acute deprivations that each person faces at the same time with respect to education, health
and living standards.

 The MPI assesses multiple deprivations at the household and individual level. If someone is deprived in a third or more of ten (weighted) indicators, the global index identifies them as ‘MPI poor’, and the extent – or intensity – of their poverty is measured by the percentage of deprivations they are experiencing.

The MPI reflects both the incidence of multidimensional deprivations (a headcount of those in multidimensional poverty) and its intensity (the average deprivation score experienced by poor people).

Solution (b)

Over ground workers (OGWs) are people who help militants, or terrorists, with logistical support, cash, shelter, and other infrastructure with which armed groups and insurgency movements such as Hizbul Mujaheddin and Jaish-e-Muhammad in Jammu and Kashmir can operate.

Context – Jammu and Kashmir (J&K) police recently arrested three overground workers (OGWs) for a grenade attack on a Central Reserve Police Forces (CRPF) camp.

Solution (a)

Statement Analysis:

Context – India’s first Indigenously Designed High Ash Coal Gasification Based Methanol Production Plant was inaugurated

Solution (c)

Statement Analysis:

Context – The Archaeological Survey of India (ASI) has found remains of an ancient temple dating back to the Gupta Period, 5th Century CE in Uttar Pradesh.

Solution (d)

Statement Analysis:

Context – Migrant workers can avail a free cooking gas connection on the basis of a self-declaration without any need for documents like address proof under Pradhan Mantri Ujjwala Yojana.

Solution (c)

Statement Analysis:

Context – India Plastic Pact was in news

Solution (c)

Let “x” be the third number

Then, the first number is

=  (100+20)% of x  

=  120% of x  

=  1.2x

The second number is

=  (100+40)% of x  

=  140% of x  

=  1.4x

The ratio between the first number and second number is

=  1.2x : 1.4x 

=  1.2 : 1.4

=  12 : 14

=  6 : 7

Hence, the ratio of two numbers is 6 : 7.

Solution (b)

Ratio of milk and water in the total quantity

[ 3 : 2 ——> 3+2 = 5,   M—-> 3/5,   W—-> 2/5 ]

In 25 liters of mixture, 

Number of liters of milk  =  (25* 3)/5  =  15

Number of liters of water  =  (25 *2)/5  =  10

Now, 10 liters of mixture removed. 

In this 10 liters of mixture, milk and water will be in the ratio 3:2

No. of liters of milk in this 10 liters  = 10 * 3/5  =  6 litres

No. of liters of water in this 10 liters  = 10 *2/5  = 4 litres

After removing 10 liters (1st time),  

No. of liters of milk in the vessel  =  15 – 6  =  9

No. of liters of water in the vessel  =  10 – 4  =  6

Now,  we add 12 liters of pure milk in the vessel, 

No. of liters of milk in the vessel  =  9 + 12  =  21

No. of liters of water in the vessel  =  6 + 0  =  6

After removing 10 liters of mixture and adding 12 liters of pure milk, the ratio of milk and water is 

=  21 : 6

=  7 : 2

Hence, the required ratio is 7 : 2.

Solution (d)

From the given ratio 5 : 7 : 12, 

Share of P  =  5x

Share of Q  =  7x

Share of R  =  12x

Difference between the shares of P and Q is $ 3600 

That is,

Share of Q – Share of P  =  3600

7x – 5x  =  3600

2x  =  3600

x  =  1800

Difference between the shares of Q and R is

=  12x – 7x

=  5x

=  5 *1800

=  9000

Hence, the difference between the shares of Q and R is $9000. 

Solution (a)

Let total marks in each subject be 100. 

Therefore, total marks for all 5 subjects = 500 

Overall marks scored = 55% of 500 = 275 

According to the question, 3x + 4x + 5x + 6x + 7x  =275 or 25x = 275 or x = 11

So, marks in the given 5 subjects must be: 

3 × 11 = 33 

4 × 11 = 44

5 × 11 = 55 

6 × 11 = 66 

7 × 11 = 77

Hence, in 2 subjects the student has scored more than 55% marks.

Solution (b)

The point of the Supreme Court order was to make the States share their distress and not to magically fulfill the needs of farmers on both sides….

The passage clearly states that the Supreme Court acknowledges the shortage of water in both states and wanted them to share their problems and mitigate them by sharing river water.

Hence, option b is correct.