Tag: capital

Questions Related to capital

The capital which is invested by the government in public sector is called __________.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. private capital

  2. public capital

  3. individual capital

  4. collective capital

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Correct Option: B
Explanation:

Public capital refers to the productive assets owned by the government. 

Capital helps in maintaining defence of the country.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

Several arms and ammunition is necessary to maintain the defence of the country, which is made with the help of capital such as machines, tools etc.Thus capital helps in maintaining the defence of the country.

When the people are provided with more facilities to mobilize the savings, the people save less and invest less. 

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: B
Explanation:

When an economy provides more opportunities to save then people save more, thus in turn investment and rate of capital formation rise.

Lower __________ leads to low savings which lead to a lower rate of capital formation.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. per capita income

  2. gross domestic product

  3. development plan

  4. economic instability

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Correct Option: A

Besides the level of income, the taxation policies of the government also affect the ability to save.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

Even when the income of person is high , he is left with less real income after paying the high taxes levied by the government this then affects both the level of consumption and savings of the person.

When the rates of income tax and sales tax are high, the major portion of the earnings of people goes to the government exchequer and very little remains with people to save and invest.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

When high rate of taxes (income tax and sales tax)  are imposed by the government ,the real income of the consumers go down and hence the purchasing power falls so in turn savings of the people falls accordingly.

Capital formation is highly affected by market conditions of boom and depression.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

During boom market condition, the economy flourishes,investment rises and thus capital formation rises and during depression period , market sinks down and rate of capital formation falls.

Higher income and low taxation lead to higher rate of capital formation.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

Higher income and low taxation  causes the people to save more ,and thus investment rises which in turn leads to higher rate of capital formation.

The prosperity encourages and enhances the saving but depression reduces the saving of people.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

The prosperity of a country helps to provide the citizens with more investment channels and thus people tend to save more but during depression period of an economy ,market sinks down and falls into a low -equilibrium trap which results in less investment,less savings and low rate of capital formation.

The inadequate number of investment channels is one of the reasons for low capital formation in India.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

Insufficient options to invest in an economy results in low net capital accumulation during a period of time in an economy since the people of that economy is left with very few options to invest.