Indian Economy Quiz: Day: 99

Answer: (d)

• Primary industries: These include all those activities which are concerned with the extraction and production of natural resources and reproduction and development of living organisms, plants, etc.

Hence statement 1 is correct.

• Secondary industries: These are concerned with using materials, which have already been extracted at the primary sector. These industries process such materials to produce goods for final consumption or for further processing by other industrial units. For example, mining of iron ore is a primary industry, but manufacturing of steel by way of further processing of raw irons is a secondary industry.

Hence statement 2 is correct.

• Activities which are meant for assisting trade are known as auxiliaries to trade. These activities are generally referred to as services because these are in the nature of facilitating the activities relating to industry and trade. Transport, banking, insurance, warehousing, and advertising are regarded as auxiliaries to trade, i.e., activities playing a supportive role.

Hence statement 3 is correct.

• Secondary industries may be further divided into Manufacturing, Construction, Assembling industry. Assembling industry which assembles different component parts to make a new product, as in the case of television, car, computer, etc.

Hence statement 4 is incorrect.

Answer: (b)

• The Union Finance Ministry recently clarified certain provisions of Customs (Administration of Rules of Origin under Trade Agreements) CAROTAR Rules.

Customs (Administration of Rules of Origin under Trade Agreements) or CAROTAR Rules

• These Rules came into effect from September 21, 2020.

Hence statement 1 is incorrect.

• It empowers the customs officers to ask the importer to furnish further information, consistent with the trade agreement, in case the officer has reasons to believe that the country-of-origin criteria have not been met.
• Where the importer fails to provide the requisite information, the officer can make further verification consistent with the trade agreement.

Hence statement 2 is correct.

Answer: (d)

• India has inked FTAs with several countries, including UAE, Mauritius, Japan, South Korea, Singapore, and ASEAN members.
• FTAs are arrangements between 2 or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them.
• In other words, a free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them.
• The last two decades have witnessed a spurt in Free Trade Agreements (FTAs) around the world.

Answer: (c)

• Adam Smith is known as Father of Economics and his Economics is wealth Economics.
• He wrote two classic works, “The Theory of Moral sentiments (1759)“ and “An inquiry into the nature and causes of the wealth of Nations (1776)”.

Hence statement 1 is correct.

• Division of labour means dividing the process of production into distinct and several component processes and assigning each component in the hands of a labour or a set of labourers, who are specialists in that particular process.

Hence statement 2 is correct.

Answer: (d)

• Factors of Production: Land, Labour, Capital, Organization/Entrepreneur
• In economics, capital refers to that part of man-made wealth which is used for the further production of wealth. All wealth is not capital but all capital is wealth.

Hence statement 1 is correct.

• Labour is more perishable than other factors of production. It means labour cannot be stored. The labour of an unemployed worker is lost forever for that day when he does not work.

Hence statement 2 is incorrect.

• An entrepreneur is a person who combines the different factors of production (land, labour and capital), in the right proportion and initiates the process of production and also bears the risk involved in it.
• In, modern times, an entrepreneur is called ‘the changing agent of the society’. He is not only responsible for producing the socially desirable output but also to increase the social welfare.

Hence statement 3 is correct.

Answer: (a)

• Examples of indirect taxes are excise duty, customs duty, VAT, and service tax etc.

Hence statement 1 is correct.

• When liability to pay a tax is on one person and the burden of that tax shifts on some other person, this type of tax is called an Indirect tax.

Hence statement 2 is incorrect.

Answer: (c)

Adam Smith’s principles or cannons of taxation still form the basis of the tax structure of a modern state:

1.Canon of Economy: Minimum possible money should be spent in the collection of taxes. Collected amount should be deposited in the Government treasury.

2.Canon of Equality: the government should impose taxes in such a way that people have to pay according to their ability.

3.Canon of Certainty: Certainty creates confidence in the taxpayers cost of collection of taxes and increases economic welfare because it tends to avoid all economic waste.

4.Canon of Convenience: Taxes should be levied and collected in such a manner that it provides a maximum of convenience to the taxpayers.

Answer: (c)

• Commodity Money: In the earliest period of human civilization, any commodity that was generally demanded and chosen by common consent was used as money. Goods like furs, skins, salt, rice, wheat, utensils, weapons etc. were commonly used as money. Such exchange of goods for goods was known as ‘Barter Exchange’.

Hence statement 1 is correct.

• One of the latest type of money is plastic money in the form of Credit cards and Debit cards. They aim for cashless transactions

Hence statement 2 is correct.

• In India, printing, regulating, controlling the paper currencies are done by the Reserve Bank of India (RBI) which was established in 1935.

Hence statement 3 is incorrect.

Answer: (d)

• Market Price = Factor Cost + Indirect Taxes – Subsidies
• Taxes charged by the government will be added onto the factor price while subsides provided will be reduced from the factor price to arrive at the market price.

Hence statement 1 is correct.

• Taxes are added on because taxes are costs that increase the price, and subsidies are reduced because subsidies are already included in the factor cost, and cannot be double counted when market price is calculated.
• The factor cost refer to the cost of production that is incurred by a firm when producing goods and services.

Hence statement 2 is correct.

Answer: (d)

• Lowering rates makes borrowing money cheaper.
• This encourages consumer and business spending and investment and can boost asset prices.
• Lowering rates, however, can also lead to problems such as inflation