Growth and Development Economics Questions and Answers

Answer: D

The answer is Only 4.

Human capital formation, as NCERT's economics textbook defines it, is the process of adding to the stock of human capital over time: increasing the knowledge, skill levels and capacities of the people of a country, through investment in education, health, on-the-job training, migration and information.

Statement 4 states this complete idea. Statements 2 and 3 each give only part of it, and statement 1 describes physical or financial capital accumulation by individuals, which is not human capital formation.

Answer: B

Informalisation of labour means that more workers are employed without a contract or social security. Its problems are the lack of social security, the lower wages that such workers get and the narrowing of the tax base, as incomes in the informal sector are not taxed. Increased productivity is not a problem of informalisation, and so it is the item that is not included. The answer is option B. Lower wages and lack of social security result because informal workers have no formal contracts or bargaining power.

Answer: A

A true indicator of economic growth is per capita income, which measures the average income of each person and takes account of the growth in population, so it shows whether people are better off. Real GDP also measures output growth, and many economists use it, but the key prefers per capita income. Inflation and employment are not measures of growth. The key gives option A. Per capita income is total income divided by the population, so it allows for the growth of population.

Answer: B

The improvement is due to the decline in Maternal Mortality Ratio.

Sustainable Development Goal 3, Good Health and Well-being, has as its first target cutting the global maternal mortality ratio to below 70 per 100,000 live births. India's MMR, measured by the Sample Registration System, fell from 130 in 2014-16 to 113 in 2016-18, and that fall is one of the indicators that lifted India's SDG 3 score.

The other options belong to other goals: clean water and sanitation is SDG 6, while housing and waste collection fall under SDG 11 (Sustainable Cities and Communities) and SDG 12. They may help health indirectly, but they are not measures of SDG 3.

Answer: C

The correct statement is Romer's Endogenous Growth model explains technological progress but Solow's Growth model does not.

In the Solow model the rate of technological progress is given from outside the model, so long-run growth per worker is left unexplained. Romer's model makes technology the outcome of deliberate research by profit-seeking firms, with ideas that are non-rival, so the growth of technology is determined within the model.

The returns-to-scale option reverses the models: Solow assumes constant returns to scale, while Romer's model has increasing returns in the aggregate because of non-rival ideas. Capital accumulation is endogenous in both models: in Solow it is driven by saving and depreciation within the model, so the options calling it exogenous in Solow, or in both, are wrong.

Answer: D

The correct order is Per-capita Income, PQLI, HDI.

Per capita income is the oldest measure, in use from the early national income estimates of the first half of the twentieth century. The Physical Quality of Life Index (PQLI), combining literacy, infant mortality and life expectancy, was devised by Morris David Morris in 1979. The Human Development Index was introduced by UNDP in its first Human Development Report in 1990.

Every other order puts HDI before PQLI or before per capita income, which reverses the history.

Answer: A

The leapfrogging transition is a shift from agriculture directly to services, bypassing a massive industrialisation phase.

Most developed economies moved from agriculture to manufacturing and only later to services. India's economy jumped to services, such as information technology and finance, which became the largest contributor to GDP while manufacturing's share stayed relatively small. Economists describe this as leapfrogging the industrial stage.

The other options describe things that have not happened (100 per cent manufacturing employment, total public-sector dependence) or the opposite of the trend (a decline of the digital economy in rural areas).

Answer: A

The key's answer is (iv) alone is correct: the knife-edge problem implies a constant capital-output ratio.

In the Harrod-Domar model the economy grows steadily only if the warranted rate of growth, \(s/v\) (the saving rate over the capital-output ratio), exactly equals the natural rate set by labour-force growth. Because the model fixes the capital-output ratio, technology allows no substitution between capital and labour, so nothing pulls the economy back once the two rates differ. Any deviation grows, which is the knife-edge.

Solow's growth model removed the problem precisely by letting the capital-output ratio vary. The key therefore singles out (iv). Output (ii) is not constant in a growth model at all, and the options that add population growth and the saving rate treat parameters of the model as the source of the instability, which the key does not accept.

Answer: B

The index is the Human Poverty Index.

The Human Poverty Index, introduced by the UNDP in its 1997 Human Development Report, combined measures of deprivation in a long and healthy life, in knowledge and in a decent standard of living to give an aggregate picture of poverty in a community.

The Human Development Index measures average achievement rather than deprivation, the Human Freedom Index measures personal and economic freedom, and 'Human Deprivation Index' is not the name of the UNDP index.

Answer: A

Statements 1 and 2 are correct, so the answer is 1 and 2 only.

NITI Aayog's discussion paper of January 2024 estimated that about 24.82 crore people moved out of multidimensional poverty between 2013-14 and 2022-23, and that all twelve indicators of the index (covering health, education and standard of living) improved over the period.

Statement 3 is wrong. The largest decline in the number of multidimensionally poor people was in Uttar Pradesh (about 5.94 crore), followed by Bihar and Madhya Pradesh; Odisha was not second.