Defence Economics Questions and Answers

Q: Defence expenditure of India has remained within the government's desired objectives of ..................... .

The keyed answer is All of the above.Indian defence spending is set within the government's overall fiscal and economic goals. It has been kept within limits that preserve budgetary balance (roughly 2 to 2.5 per cent of GDP in recent decades, well below crisis peaks), so as not to undermine economic stability through inflation or excessive deficits, and so as to leave room for development spending that promotes equitable growth.Since each of the three objectives is a declared aim that defence allocations are expected to respect, the key takes all three together rather than any single one.

Q: ..................... was first economist to consider the implications of defence expenditure for society.

The first economist to do so was Adam Smith.In The Wealth of Nations (1776), Book V opens with 'Of the Expense of Defence', where Smith calls defence the first duty of the sovereign. He discusses how the cost of war had risen with firearms and standing armies, how a commercial society must pay for professional soldiers, and how defence spending is to be financed, making him the first economist to treat defence expenditure systematically.Gavin Kennedy (printed 'Govin') wrote Defense Economics (1983), and Margaret Doxey wrote on economic sanctions; these modern writers came some two centuries after Smith, so none of them can be the first.

Q: By which event, India's Defence expenditure was suddenly increased to almost double due to ................. .

India's defence spending almost doubled after the Sino-Indian War, 1962.Until 1962 India kept defence spending low, at under 2 per cent of GDP, in line with Nehru's emphasis on development and non-alignment. The defeat by China exposed the weakness of the armed forces, and the government launched a major expansion: new mountain divisions, a larger air force and a five-year defence plan. Defence expenditure roughly doubled within two years.The Partition of 1947, and the wars with Pakistan in 1965 and 1971, also raised spending, but none caused the sudden near-doubling that followed 1962.

Q: Who wrote the book, "An Enquiry into the Nature and Causes of the Wealth of Nations ?

The book was written by Adam Smith.An Inquiry into the Nature and Causes of the Wealth of Nations was published in 1776 by the Scottish economist and philosopher Adam Smith. It argues that the division of labour and free markets, guided by self-interest (the 'invisible hand'), create national wealth, and it is regarded as the founding work of classical economics.Thomas Malthus wrote the Essay on the Principle of Population (1798), David Ricardo the Principles of Political Economy and Taxation (1817), and Jean-Baptiste Say the Treatise on Political Economy (1803), source of Say's law.

Q: In which of the following countries was Economic Sanction imposed by US government ?

The country is Cuba.The United States imposed an economic embargo on Cuba after Fidel Castro's revolution and the nationalisation of American property, beginning with trade restrictions in 1960 and a near-total embargo from 1962. It is the longest-running US sanctions regime, kept in force by laws such as the Helms-Burton Act of 1996.South Korea is a US ally that has never faced such an embargo. Afghanistan and Nigeria have at times faced targeted measures, but Cuba is the standard example of US economic sanctions against a country.

Q: Who introduced the concept of 'Public Good' in relation to Defence expenditure ?

The keyed answer is Adam Smith.In The Wealth of Nations Smith argued that defence is the first duty of the sovereign: it benefits the whole society, cannot be left to private individuals to provide for profit, and must therefore be paid for from public revenue. This is the reasoning behind treating defence as the classic public good, a term later formalised by Paul Samuelson in 1954, with national defence as its standard example.Lorne Kavic and Gavin Kennedy are twentieth-century writers on defence policy and defence economics who built on this tradition. Adolf Wagner is known for 'Wagner's law', that public expenditure grows with national income.

Q: Defence economics mostly focussed on .................

The keyed answer is Planning and Budgeting of defence requirements.Defence economics is mainly concerned with how much a country should spend on defence and how that money should be planned, allocated and controlled: assessing threats and force requirements, choosing among weapons systems, and preparing the defence budget efficiently. Planning and budgeting of defence requirements sums up that focus.The post-war and pre-war economy are periods studied in war economics, and the allocation of war-potential is part of mobilisation planning; each is narrower than the field's main concern.

Q: Who coined about the efficient utilisation of defence expenditure in the form of standing army ?

The answer is Adam Smith.In Book V of The Wealth of Nations, Smith compared a militia, in which citizens train part-time, with a standing army of full-time professional soldiers. Applying his principle of the division of labour, he argued that as war becomes more complex, a standing army of specialists is the more efficient use of a nation's defence spending, and that a well-regulated standing army is superior to any militia.Ricardo, Say and Malthus wrote on value, markets and population, not on the economics of the standing army.

Q: Who wrote the book entitled, "The Economics of Defence" ?

The Economics of Defence was written by Gavin Kennedy.The Scottish economist Gavin Kennedy published The Economics of Defence in 1975, one of the early textbooks of defence economics, covering defence budgets, the burden of defence and military resource allocation.The near miss is option D: Charles J. Hitch and Roland N. McKean (spelled 'Mekan' in the paper) wrote the related but different book The Economics of Defense in the Nuclear Age (1960). J. K. Galbraith wrote on the affluent society and the industrial state, not this book.

Q: Which one of the following is Ricardo's contribution to defence expenditure ?

The keyed answer is How to raise Finance Wars ?, that is, how to finance wars.David Ricardo's contribution to the economics of defence was his analysis of war finance, above all in his Essay on the Funding System (1820). He asked whether a war should be paid for by taxes raised at once or by government borrowing repaid later, and argued that in principle the two burden taxpayers equally, since loans only defer taxes. This idea is now called Ricardian equivalence, and Ricardo himself favoured paying for wars out of current taxation.A prohibitive tariff policy is the opposite of Ricardo's free-trade views, and military taxation and external sources of finance are only parts of the wider question he addressed.

21.

Defence expenditure of India has remained within the government's desired objectives of ..................... .

A.Budgetary balance
B.Economic stability
C.Equitable growth
D.All of the above

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: D

The keyed answer is All of the above.

Indian defence spending is set within the government's overall fiscal and economic goals. It has been kept within limits that preserve budgetary balance (roughly 2 to 2.5 per cent of GDP in recent decades, well below crisis peaks), so as not to undermine economic stability through inflation or excessive deficits, and so as to leave room for development spending that promotes equitable growth.

Since each of the three objectives is a declared aim that defence allocations are expected to respect, the key takes all three together rather than any single one.

Discuss in Forum

22.

..................... was first economist to consider the implications of defence expenditure for society.

A.Govin Kennedy
B.Adam Smith
C.Margaret Doxey
D.Jai Narain Sharma

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: B

The first economist to do so was Adam Smith.

In The Wealth of Nations (1776), Book V opens with 'Of the Expense of Defence', where Smith calls defence the first duty of the sovereign. He discusses how the cost of war had risen with firearms and standing armies, how a commercial society must pay for professional soldiers, and how defence spending is to be financed, making him the first economist to treat defence expenditure systematically.

Gavin Kennedy (printed 'Govin') wrote Defense Economics (1983), and Margaret Doxey wrote on economic sanctions; these modern writers came some two centuries after Smith, so none of them can be the first.

Discuss in Forum

23.

By which event, India's Defence expenditure was suddenly increased to almost double due to ................. .

A.Partition of India
B.Sino-Indian War, 1962
C.Indo-Pakistan War, 1965
D.Indo-Pak War 1971

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: B

India's defence spending almost doubled after the Sino-Indian War, 1962.

Until 1962 India kept defence spending low, at under 2 per cent of GDP, in line with Nehru's emphasis on development and non-alignment. The defeat by China exposed the weakness of the armed forces, and the government launched a major expansion: new mountain divisions, a larger air force and a five-year defence plan. Defence expenditure roughly doubled within two years.

The Partition of 1947, and the wars with Pakistan in 1965 and 1971, also raised spending, but none caused the sudden near-doubling that followed 1962.

Discuss in Forum

24.

Who wrote the book, "An Enquiry into the Nature and Causes of the Wealth of Nations ?

A.Adam Smith
B.Malthus
C.David Ricardo
D.Jean Baptiste Say

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: A

The book was written by Adam Smith.

An Inquiry into the Nature and Causes of the Wealth of Nations was published in 1776 by the Scottish economist and philosopher Adam Smith. It argues that the division of labour and free markets, guided by self-interest (the 'invisible hand'), create national wealth, and it is regarded as the founding work of classical economics.

Thomas Malthus wrote the Essay on the Principle of Population (1798), David Ricardo the Principles of Political Economy and Taxation (1817), and Jean-Baptiste Say the Treatise on Political Economy (1803), source of Say's law.

Discuss in Forum

25.

In which of the following countries was Economic Sanction imposed by US government ?

A.South Korea
B.Afghanistan
C.Cuba
D.Nigeria

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: C

The country is Cuba.

The United States imposed an economic embargo on Cuba after Fidel Castro's revolution and the nationalisation of American property, beginning with trade restrictions in 1960 and a near-total embargo from 1962. It is the longest-running US sanctions regime, kept in force by laws such as the Helms-Burton Act of 1996.

South Korea is a US ally that has never faced such an embargo. Afghanistan and Nigeria have at times faced targeted measures, but Cuba is the standard example of US economic sanctions against a country.

Discuss in Forum

26.

Who introduced the concept of 'Public Good' in relation to Defence expenditure ?

A.Kavic, Lorne J.
B.Kannedy, Gavin
C.Adolf Wagner
D.Adam Smith

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: D

The keyed answer is Adam Smith.

In The Wealth of Nations Smith argued that defence is the first duty of the sovereign: it benefits the whole society, cannot be left to private individuals to provide for profit, and must therefore be paid for from public revenue. This is the reasoning behind treating defence as the classic public good, a term later formalised by Paul Samuelson in 1954, with national defence as its standard example.

Lorne Kavic and Gavin Kennedy are twentieth-century writers on defence policy and defence economics who built on this tradition. Adolf Wagner is known for 'Wagner's law', that public expenditure grows with national income.

Discuss in Forum

27.

Defence economics mostly focussed on .................

A.Post-war economy
B.Pre-war economy
C.Allocation of war-potential
D.Planning and Budgeting of defence requirements

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: D

The keyed answer is Planning and Budgeting of defence requirements.

Defence economics is mainly concerned with how much a country should spend on defence and how that money should be planned, allocated and controlled: assessing threats and force requirements, choosing among weapons systems, and preparing the defence budget efficiently. Planning and budgeting of defence requirements sums up that focus.

The post-war and pre-war economy are periods studied in war economics, and the allocation of war-potential is part of mobilisation planning; each is narrower than the field's main concern.

Discuss in Forum

28.

Who coined about the efficient utilisation of defence expenditure in the form of standing army ?

A.David Ricardo
B.Jean Baptiste Say
C.Adam Smith
D.Malthus

Exam Year(s)

MH SET - 2020, SET Exam - 2020,

Answer: C

The answer is Adam Smith.

In Book V of The Wealth of Nations, Smith compared a militia, in which citizens train part-time, with a standing army of full-time professional soldiers. Applying his principle of the division of labour, he argued that as war becomes more complex, a standing army of specialists is the more efficient use of a nation's defence spending, and that a well-regulated standing army is superior to any militia.

Ricardo, Say and Malthus wrote on value, markets and population, not on the economics of the standing army.

Discuss in Forum

29.

Who wrote the book entitled, "The Economics of Defence" ?

A.Galbraith J. K.
B.Kennedy Gavin
C.Kuithara Verghese
D.Hitch Charles J and Mekan Ronald N

Exam Year(s)

MH SET - 2020, SET Exam - 2020,

Answer: B

The Economics of Defence was written by Gavin Kennedy.

The Scottish economist Gavin Kennedy published The Economics of Defence in 1975, one of the early textbooks of defence economics, covering defence budgets, the burden of defence and military resource allocation.

The near miss is option D: Charles J. Hitch and Roland N. McKean (spelled 'Mekan' in the paper) wrote the related but different book The Economics of Defense in the Nuclear Age (1960). J. K. Galbraith wrote on the affluent society and the industrial state, not this book.

Discuss in Forum

30.

Which one of the following is Ricardo's contribution to defence expenditure ?

A.Prohibitive tariff policy
B.Military Taxation
C.External Sources of Finance
D.How to raise Finance Wars ?

Exam Year(s)

MH SET - 2021, SET Exam - 2021,

Answer: D

The keyed answer is How to raise Finance Wars ?, that is, how to finance wars.

David Ricardo's contribution to the economics of defence was his analysis of war finance, above all in his Essay on the Funding System (1820). He asked whether a war should be paid for by taxes raised at once or by government borrowing repaid later, and argued that in principle the two burden taxpayers equally, since loans only defer taxes. This idea is now called Ricardian equivalence, and Ricardo himself favoured paying for wars out of current taxation.

A prohibitive tariff policy is the opposite of Ricardo's free-trade views, and military taxation and external sources of finance are only parts of the wider question he addressed.

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