1. Which of the factors affecting the development of Equatorial Regions?
- Excessive heat and high humidity
- Rapid deterioration of tropical soil
- Prevalence of bacteria and insect pests
Select the correct code using the option given below
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
2. Consider the following statements:
1. Physical capital is more mobile than Human capital.
2. Human capital is tangible and Physical capital is intangible.
3. Human capital is sold in the market whereas Physical capital is not.
Which of the statements given above is/are correct?
(a) 3 only
(b) 1 only
(c) 1 and 2 only
(d) 2 and 3 only
3. Consider the following statements:
1. The Primary Deficit is the difference between the fiscal deficit of the current year and the interest paid on the previous borrowings.
2. A shrinking primary deficit indicates progress towards fiscal health.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
4. An economy can be termed as 'Open Economy' if
1. The country's trade-to-GDP ratio is always 50 per cent of the GDP.
2. The country's Investors have the opportunity to choose between domestic and foreign assets.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
5. Which of the following transaction is/are counted in the Current Account of a country?
1. Trade in services
2. Trade in financial assets
3. Trade in goods
4. Transfer payments
Select the correct answer using the code given below:
(a) 2 and 3
(b) 1 and 2 only
(c) 1, 3 and 4 only
(d) 1, 2, 3 and 4
Answers
1. (b)
Equatorial climate and health
Excessive heat (sun-stroke) and high humidity create serious physical and mental handicaps. High humidity feeds many tropical diseases such as malaria and yellow fever. Communicable diseases are rampant as germs and bacteria are transmitted through moist air. Insects and pests not only spread diseases but are injurious to crops.
Jungle hinders development
The construction of roads and railways is a risky business as workers are exposed to wild animals, poisonous snakes, insects and most important tropical diseases. Once completed, they have to be maintained at a high cost.
The rapid deterioration of tropical soil
The fertility of topsoil in rainforest regions is very poor. Torrential downpours wash out most of the topsoil nutrients [leaching == percolation and draining way of nutrients due to rainwater action].
The soil deteriorates rapidly with subsequent soil erosion and soil impoverishment.
It takes decades to replenish the soil of lost nutrients.
So a seed doesn’t usually germinate and even if it does, its development is hindered due to little availability of sunlight.
2. (b)
Statement 1 is correct. Physical capital implies the non-human assets of the company, such as plant and machinery, tools and equipment, office supplies etc. that help in the process of production. Human capital refers to the stock of knowledge, talent, skills and abilities brought in by the employee, to the organization. Human capital is intangible and Physical capital is tangible. Human capital is not sold in the market whereas Physical capital is. Physical capital is completely mobile across countries but Human capital is not. Both forms of capital depreciate over a period of time but the nature of depreciation differs between the two.
Continuous use of machine leads to depreciation along with change in technology makes a machine obsolete. In the case of human capital, depreciation takes place with ageing but can be reduced, to a large extent, through continuous investment in education, health, etc. Hence, statements 2 and 3 are incorrect.
3. (c)
Statement 1 is correct. The primary deficits are the government's borrowings exclusive of interest payment. Generally, the loan raised by the government is inclusive of the interest amount, and if that amount is deducted from the principal loan amount, the balance amount is called as the primary deficit. The purpose of measuring such deficit is to know the amount of borrowings that the government can utilize in the expenses other than the interest payments.
It can be represented as:
Primary Deficit = Fiscal Deficit – Interest payments on the previous borrowings
Statement 2 is correct. A shrinking primary deficit indicates progress towards fiscal health. The fiscal deficit could be financed only through borrowings and with more and more borrowings the debt obligations increase. The government has to repay the loan amount along with the interest that results into the increase in the revenue expenditure and as a result, the revenue deficit increases. Thus, this compels the government to resort to external borrowings.
4. (b)
Total foreign trade (exports + imports) as a proportion of GDP is a common measure of the degree of openness of an economy. In 2004-2005, this was 38.9 per cent for the Indian economy (imports constituted 17.1 per cent and exports 11.8 per cent of GDP). This is substantially higher than a total of 16 per cent that prevailed in 1985-86. However, in comparison to other countries, India is relatively less open. There are several countries whose foreign trade proportions are above 50 per cent of GDP.
An open economy is one that trades with other nations in goods and services and, most often, also in financial assets. Interaction with other economies of the world widens choice in three broad ways
Consumers and firms have the opportunity to choose between domestic and foreign goods. This is the product market linkage which occurs through international trade.
Investors have the opportunity to choose between domestic and foreign assets. This constitutes the financial market linkage.
Firms can choose where to locate production and workers to choose where to work. This is the factor market linkage. Labour market linkages have been relatively less due to various restrictions on the movement of people through immigration laws. Movement of goods has traditionally been seen as a substitute for the movement of labour.
5. (c)
Current Account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for'free', without having to provide any goods or services in return. They consist of gifts, remittances and grants. They could be given by the government or by private citizens living abroad.
Capital Account records all international transactions of assets. An asset is any one of the forms in which wealth can be held, for example money, stocks, bonds, Government debt, etc. The purchase of assets is a debit item on the capital account.
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