Economics

Rule: any transaction that brings foreign exchange into the country is a credit; any that takes it out is a debit.
Exports (inflow) → credit ✓. Imports (outflow) → debit ✓. Transfer payments made abroad (outflow) → debit ✓.
Transfer receipts (gifts, remittances received) bring money in → credit, not debit. So (D) is incorrect.

Income from entrepreneurship = profit → (b)–(ii) is correct.
Check the others: income from property is rent/interest, not old-age pension (a transfer payment); mixed income is income of self-employed, not rent-free accommodation (which is compensation of employees in kind); compensation of employees is wages/salaries, not interest.

In managed floating, the market (demand and supply) sets the rate, as in a flexible system, but the Central Bank intervenes to keep it within limits, as in a fixed system. Being a mix of the two, it is called a hybrid system (also 'dirty floating'). Both true → (C).

A loan taken now and repaid in the future is a deferred payment. Money serves as the standard in which such future payments are stated and settled – standard of deferred payments.

20% of additional income is saved, so MPS = 0.2.
\( K = \dfrac{1}{MPS} = \dfrac{1}{0.2} = 5 \).
The intercept (−50, i.e. autonomous consumption of 50) does not affect the multiplier – it is extra information.

A is true: public goods like defence, parks and street lights are consumed collectively.
R is false: public goods are NON-excludable (no one can be kept from using them) and NON-rivalrous (one person's use does not reduce another's). Excludable and rivalrous describe private goods. Answer (C).

APS = 1 − APC = 1 − 0.8 = 0.2.
S = APS × Y = 0.2 × 4,000 = ₹800 crore.
(Equivalently C = 0.8 × 4,000 = 3,200; S = 4,000 − 3,200 = 800.)

(I) Correct – deposits are owed back to depositors, so they are liabilities of the bank.
(II) Correct – through lending, banks create deposits many times the primary deposit (credit creation).
(III) Correct – accepting deposits from the public is their primary function.
(IV) Wrong – commercial banks accept deposits on their own account; they do not collect deposits for the RBI. Answer (A).

Balance of Trade = Exports of goods − Imports of goods = 600 − 450 = +150.
Positive → surplus of ₹150 crore.
(Adding exports and imports, 1,050, has no meaning here.)

Private goods are rivalrous – one person's use reduces what is left for others → (d)–(iv) is correct.
Others: GST is a tax revenue (indirect tax), not non-tax revenue; free-rider problem relates to public goods, not indirect tax; borrowings are capital receipts, not capital expenditure.

Value of output = Sales + Change in stock = 10,625 + 600 = 11,225.
GVA_MP = Output − Intermediate consumption = 11,225 − 2,625 = 8,600.
NVA_MP = GVA_MP − Depreciation = 8,600 − 500 = 8,100.
NIT = Indirect taxes − Subsidies = 1,200 − 400 = 800.
NVA_FC = 8,100 − 800 = ₹7,300 crore.
Note: operating surplus is a part of factor income (income side) and is NOT used in this method – a distractor.

NFIA:
• Difference between factor incomes (wages, rent, interest, profit) earned by normal residents from the rest of the world and factor incomes paid to non-residents.
• Used to convert domestic income into national income (GNP = GDP + NFIA).
Net exports (X − M):
• Difference between the value of exports and imports of goods and services.
• It is a component of final expenditure (GDP = C + I + G + X − M).

1. The campaign attracts more foreign tourists, who spend foreign currency on hotels, travel and shopping in India.
2. Spending by foreign tourists is an export of services; the inflow is recorded on the credit side of the current account of the BoP.
3. The supply of foreign exchange rises, adding to India's foreign exchange reserves.
4. Higher current account receipts reduce the current account deficit, improving the overall BoP position of the country.

Nature of expenditure: revenue expenditure – spending that neither creates an asset nor reduces a liability of the government. Paying for medical treatment is a current service; no asset is created for the government.
Objective: redistribution of income.
• Free treatment lowers the medical expenses of poor families, leaving more disposable income in their hands.
• It is financed from taxes paid largely by the better-off.
• This narrows the gap between rich and poor – an equitable distribution of income.

Money multiplier = \( \dfrac{1}{LRR} = \dfrac{1}{0.25} = 4 \).
Total deposits = Primary deposits × multiplier = 500 × 4 = ₹2,000.
Total lending = Total deposits − Primary deposits = 2,000 − 500 = ₹1,500.
Check: reserves = 25% of 2,000 = 500 = primary deposit, so the process ends here.

(i) At equilibrium, Y = C + I.
\( Y = 200 + 0.75Y + 4{,}000 \)
\( 0.25Y = 4{,}200 \Rightarrow Y = ₹16{,}800 \) crore.
(ii) \( C = 200 + 0.75 \times 16{,}800 = 200 + 12{,}600 = ₹12{,}800 \) crore.
Check: C + I = 12,800 + 4,000 = 16,800 = Y ✓.

1. Ex-ante S > ex-ante I means households plan to consume less than firms expected them to (AD < AS).
2. Firms are left with unsold goods – unplanned accumulation of inventories.
3. To bring inventories back to the desired level, producers reduce output and employment.
4. As output and income fall, saving also falls.
5. This continues until planned saving equals planned investment again – equilibrium is restored at a lower income.

(a) 140 new price-monitoring centres.
(b) (1) Banning exports of wheat, broken rice, non-basmati white rice, onions etc. keeps more supply at home. (2) Reducing import duties on edible oils and pulses makes imports cheaper and increases supply.
(c) Increase in repo rate (rate at which the RBI lends to commercial banks):
• Borrowing from the RBI becomes costlier for banks.
• Banks raise their lending rates; loans become expensive.
• The public borrows less for consumption and investment → aggregate demand falls → price rise is checked.
(Other valid measures: raising bank rate/CRR/SLR, selling government securities in open market operations.)

(i) Stock variable: measured at a particular point of time; has no time dimension. Examples: national wealth, stock of capital, money supply, bank balance on 31 March.
Flow variable: measured over a period of time; has a time dimension. Examples: national income, investment, depreciation during a year.
(ii) Profit, the reward of the entrepreneur, is divided into:
1. Corporate (profit) tax – tax paid by companies to the government on their profits.
2. Dividend – part of profit distributed among shareholders.
3. Undistributed profit (retained earnings) – part kept by the firm for future use/expansion, not distributed to anyone.

The Great Leap Forward (1958) aimed at rapid, large-scale industrialisation of China – people were even encouraged to set up industries in their backyards. So its focus was the industrial sector.

When the demand for environmental resources and services (raw materials, waste absorption) exceeds the rate at which the environment can regenerate or absorb them, the carrying capacity is crossed. Pollution, smoke and dirty rivers are the signs – this is the environmental crisis of today.

Statement 1: workers are self-employed or hired; hired workers are either casual wage labourers or regular salaried employees. True.
Statement 2: in rural India, self-employment (mainly farming) is the largest source of jobs; regular salaried jobs are a small share and are more common in urban areas. False. Answer (A).

Modernisation as a plan goal meant adopting new technology AND a change in social outlook (e.g. recognising equal rights of women) → (iv)–(d) correct.
Others: maximum quantity of imports is a quota, not a subsidy; land ceiling means a maximum limit on land owned (land to the tiller is the abolition of intermediaries); SSIs are not linked with 'land to the tiller' and IPR 1956 is not about land ceiling.

Frictional unemployment is temporary unemployment while workers search for or shift between jobs.
Disguised: more workers than needed (zero marginal product). Seasonal: no work in certain seasons (farm off-season). Open: willing and able but no job at all.

A is true: pre-reform China invested heavily in education, health, land reforms and decentralised planning, which improved human development indicators.
R is true: China leads India and Pakistan in life expectancy, literacy, lower infant mortality, etc.
But R is a statement of a comparison today; it does not explain WHY pre-reform public investment improved HDI. Answer (B).

The government is blocking imports so that domestic production can take their place. Replacing imported goods by goods produced at home is import substitution – India's inward-looking trade strategy (1950–1990), enforced through tariffs and quotas.

Special Economic Zones were set up (in China, and later India) to attract foreign investment and generate additional economic activity – (c)–(iii) is correct.
Others: HDI measures life expectancy, education, income (not rule of law); demographic indicators are population, growth rate, sex ratio, etc.; the Commune system was collective farming (cultivation of land collectively), not collective industrialisation.

A is true: an educated, healthy and skilled population is more employable, so more people take part in production, which raises output and growth.
R is true: it simply defines the participation rate.
A definition does not explain why human capital raises participation and growth, so R is not the correct explanation. Answer (B).

India is a member of BRICS (Brazil, Russia, India, China, South Africa + new members), SAARC (South Asian association) and G-20.
G-7 consists of USA, UK, France, Germany, Italy, Canada and Japan; India is only invited as a guest, not a member.

1. Cooperative marketing societies (e.g. milk cooperatives in Gujarat) helped farmers get fair prices by selling collectively and reducing middlemen.
2. Recently, they have faced setbacks:
• Inadequate coverage – many farmers are not members.
• Lack of proper linkage between marketing and processing cooperatives.
• Inefficient financial management, leading to losses.
Hence their role has weakened.

1. Most of the rural workforce is engaged directly or indirectly in its own farm and allied activities, i.e. self-employment; rural people own land and cultivate it.
2. Regular salaried jobs (offices, factories, services) are mostly located in urban areas.
3. Such jobs require education, technical skills and qualifications, which are less accessible to rural people.
So the share of regular salaried employment is much lower in rural areas.

1. Human capital is the stock of knowledge, skill and health of a nation's people.
2. Investment in education, health and on-the-job training raises the efficiency and productivity of workers → more output → higher GDP.
3. Human capital encourages innovation and increases the capacity to adopt and use new technologies, which further boosts growth.
4. The relation works both ways: higher income allows more spending on education and health, building more human capital. Hence they are positively correlated.

(a) 1. The Green Revolution increased the use of chemical pesticides, which contaminated soil, water bodies and groundwater and harmed livestock and humans.
2. Bio-pesticides, made from plants like neem, are an eco-friendly alternative – they control pests without poisoning the soil and water.
3. Encouraging natural predators of pests (snakes, birds, owls, frogs) also controls pests and supports the ecosystem.
4. Thus farming continues without harming resources for the future – sustainable development.
(b) Absorptive capacity: the ability of the environment to absorb degradation (waste and pollution) without losing its quality.

1. Self-reliance meant avoiding imports of goods that could be produced within the country, especially food.
2. It was necessary to reduce dependence on foreign nations, so the stress was on mobilising domestic resources.
3. The newly independent nation feared that depending on imported food, foreign technology and foreign capital would make India's sovereignty vulnerable to foreign interference in its policies.
4. Self-reliance was also expected to build domestic industry and save foreign exchange.

1. GST (from July 2017) is a single, comprehensive indirect tax on goods and services.
2. It is levied on the value added at each stage of the supply chain; tax paid on inputs is credited, so tax is not charged on tax (no cascading).
3. It replaced a large number of indirect taxes such as central excise, service tax, VAT, octroi and entry tax.
4. Result: uniform tax across the country (one nation, one tax), lower overall tax burden, and greater ease of doing business – a common national market.

1. Pakistan adopted a mixed economy, with public and private sectors co-existing.
2. In the late 1950s, a regulated policy framework was used for import-substitution-based industrialisation, with tariff protection to consumer goods industries.
3. The Green Revolution (1960s) led to mechanisation of agriculture and more public investment in infrastructure, which changed the agrarian structure greatly.
4. In the 1970s, capital goods industries were nationalised.
5. From the late 1970s–80s policy shifted: denationalisation and encouragement of the private sector; economic reforms began in 1988.

(a) 1. Low productivity: precision farming, IT-based monitoring and data-driven decision tools raise yields and use water, fertiliser and other resources efficiently.
2. Poor marketing and low prices: by streamlining supply chains and creating direct market linkages, startups get farmers better prices and reduce dependence on traditional intermediaries.
3. Rural unemployment: these enterprises generate jobs in rural areas, supporting diversification away from pure farming.
(b) The government gives continuous policy and financial support to agri-startups and entrepreneurs through programmes such as RKVY-RAFTAAR, the Agri-Infrastructure Fund and Agri-SURE (funding, incubation, infrastructure). This lowers risk for new ventures and encourages innovation in agriculture.