Economics Test - 33

The correct answer is 1982.

• On July 12, 1982, NABARD was established by transferring the agricultural credit functions of the RBI and the refinancing functions of the former Agricultural Refinance and Development Corporation (ARDC).

Key Points

• The National Bank for Agriculture and Rural Development (NABARD) was created by an Act of Parliament on July 12, 1982. As a Development Bank, NABARD is responsible for providing and regulating credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts, and other allied economic activities in rural areas in order to promote integrated rural development.
• The mission is to promote sustainable and equitable agriculture and rural development through participatory financial and non-financial interventions, innovations, technology, and institutional development.

Hence, the correct answer is NABARD was introduced in 1982.

Key Points

• Globalization is the process of rapid integration of countries.
• This is happening through more significant foreign trade and foreign investment.
• MNCs are playing a significant role in the globalization process. More and more MNCs are looking for locations around the world that are cheap for their production.
• As a result, production is organized in complex ways. Technology, particularly IT, has played a big role in organizing production across countries.
• In addition, the liberalization of trade and investment has facilitated globalization by removing barriers to trade and investment.
• There is the transfer of technology, up-gradation of technology, and sharing of benefits
• Competition has increased and the quality of goods and services has improved.

Explanation:

Globalization does not have a uniform impact on all countries. Its effects vary depending on factors like economic development, political systems, and societal structures in different countries. Some countries benefit more from globalization, while others may face negative consequences such as economic inequality or cultural erosion. Therefore, the statement that globalization has a uniform impact on all countries is incorrect

When the equilibrium price of sugar decreases, the equilibrium quantity will increase. This is because price and quantity have an inverse relationship.

Key Points

• A trade deficit occurs when the total value of a country's imports exceeds the total value of its exports.
• In this scenario, the trade deficit is mentioned to be Rs. 2000 crores. This indicates that the country has spent Rs. 2000 crores more on its imports than it has earned from its exports.
• The value of imports is given as ₹4000 crore. This is the total amount that the country has spent on purchasing goods and services from other countries.
• To calculate the value of exports, one must understand that the trade deficit (the amount by which imports exceed exports) is the difference between the value of imports and the value of exports.
• Therefore, to find the value of exports, we subtract the trade deficit from the value of imports. Mathematically, it is represented as: Value of Exports = Value of Imports - Trade Deficit.
• Applying the given numbers: Value of Exports = ₹4000 crore - ₹2000 crore = ₹2000 crore.
• Thus, the value of exports in this situation is ₹2000 crore, which means the country has earned ₹2000 crore by selling goods and services to other countries.

Additional Information

• A trade deficit is not inherently bad; it can indicate that a country is importing capital goods that could be used to enhance productivity or consumer goods that are not produced domestically.
• However, a persistent trade deficit may lead to debt accumulation or affect the value of the country's currency on the global market.
• Understanding trade dynamics is crucial for policymakers to formulate strategies that enhance export competitiveness and manage import dependencies.

Key Points

Import substitution:

• Import substitution is an economic policy aimed at reducing dependency on imported goods by encouraging the production of these goods domestically.
• The goal is to support local industries in developing their capacity to produce goods that the country has been importing, thereby saving foreign exchange, creating jobs, and fostering industrial growth.
• This approach often involves protective tariffs and other forms of trade barriers to shield domestic industries from foreign competition.

Additional Information

Export promotion

• This is a strategy aimed at encouraging industries within a country to export their products, rather than focusing on replacing imports with domestic production.
• It involves various government measures to assist companies in entering foreign markets, such as subsidies, tax incentives, and support in meeting foreign regulatory requirements.
• Export promotion is not directly related to the concept of replacing imports with domestic production, making it an incorrect answer.

Domestic substitution:

• This term is not commonly used in economic policy discussions in the context provided. While it might imply focusing on the domestic production of goods, it lacks the specific connotation of replacing imported goods with domestic production that is central to import substitution.
• Therefore, it does not accurately describe the policy aimed at reducing imports in favor of domestic production.

Export substitution:

• This term could be confusing and is not standard in economic discussions. It might imply replacing one set of export goods with another but does not convey the specific goal of reducing imports through domestic production.
• The concept is unrelated to the policy of encouraging domestic industries to produce goods that would otherwise be imported, making it an incorrect choice.

(A) Average Fixed Cost (AFC): TFC divided by output; it declines as output increases due to spreading fixed costs. Matches with (I).

(B) Average Variable Cost (AVC): TVC divided by output; it falls initially (efficiency) then rises (diminishing returns). Matches with (II).

(C) Short Run Marginal Cost (SMC): Change in TC per unit of output; U-shaped due to the law of variable proportions. Matches with (III).

(D) Long Run Average Cost (LRAC): U-shaped due to economies and diseconomies of scale (returns to scale). Matches with (IV).

The correct pairing is (A) - (I), (B) - (II), (C) - (III), (D) - (IV), which corresponds to option (a).

(A) Average Fixed Cost (AFC): TFC divided by output; it declines as output increases due to spreading fixed costs. Matches with (I).

(B) Average Variable Cost (AVC): TVC divided by output; it falls initially (efficiency) then rises (diminishing returns). Matches with (II).

(C) Short Run Marginal Cost (SMC): Change in TC per unit of output; U-shaped due to the law of variable proportions. Matches with (III).

(D) Long Run Average Cost (LRAC): U-shaped due to economies and diseconomies of scale (returns to scale). Matches with (IV).

The correct pairing is (A) - (I), (B) - (II), (C) - (III), (D) - (IV), which corresponds to option (a).

Under fixed exchange rate, the most used currency for pegging was US Dollar.

Any outflow of foreign currency is recorded on the debit side of current account while any inflow of foreign currency is recorded on the credit side of current account.

The correct answer is a - iii, b - i, c - iv, d - ii.

Key Points

List of some important books written by these famous writers: