PRACTICE TEST SERIES (2023-2024)

Test 6 | IED Economic Reforms & Human Capital Formation |

Time allowed: 1.5 hours Maximum Marks: 40

General instructions:
 This paper contains 10 Multiple Choice Questions type questions of 1 mark each.
 This paper contains 2 Short Answer Questions type questions of 3 marks each to be
answered in 60 to 80 words.
 This paper contains 3 Short Answer Questions type questions of 4 marks each to be
answered in 80 to 100 words.
 This paper contains 2 Long Answer Questions type question of 6 marks to be
answered in 100 to 150 words.

Q.
Questions Marks
No.
1 Statement – 1 : Human capital formation gives birth to innovation, invention 1
and technological improvements.
Statement – 2 : Elementary education covers both primary and middle level
education.
(a) Statement 1 is true and Statement 2 is false
(b) Statement 1 is false and Statement 2 is true
(c) Both statements 1 and 2 are true
(d) Both statements 1 and 2 are false
2 Statement – 1 : The policy of liberalization changed the role of Reserve Bank 1
of India (RBI) from ‘a facilitator’ to a regulator in the
financial sector.
Statement – 2 : The tax reductions in the economic reform period negatively
impacted the development and welfare expenditure of
government.
(a) Statement 1 is true and Statement 2 is false
(b) Statement 1 is false and Statement 2 is true
(c) Both statements 1 and 2 are true
(d) Both statements 1 and 2 are false
3. Assertion (A) : Human capital treats human beings as means to an end 1
(increase in productivity).
Reason (R) : Human capital formation decreases by way of investments in
education and health.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
4. Assertion (A) : Every year government fixes a target for disinvestment of 1
public sector enterprises (PSEs).
Reason (R) : Disinvestment is an excellent tool for discarding the loss
incurring public sector enterprises (PSEs).
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
5. Match the situation in Column I with their respective implication given in column 1
II.
Column I Column II
A Migration i Reduced in per capita economic
growth
B Low level of academic ii Imbalance between demand and
standards supply of human resource
C Population High Growth Rate iii Brain Drain
D Lack of proper manpower iv Mismatch between required skill
planning and academic standards

(a) A – ii ; B – iii ; C – iv ; D – i (b) A – iii ; B – iv ; C – i ; D – ii

(c) A – i ; B – ii ; C – iii ; D – iv (d) A – ii ; B – iv ; C – i ; D – iii
6. In 1991, was the immediate impact of devaluation of Indian Rupee. 1
(a) Increase in inflow of foreign exchange
(b) Decrease in inflow of foreign exchange
(c) Increase in outflow of foreign exchange
(d) Fall in foreign exchange reserve
7 Identify the incorrect statement in context of human capital. 1
(a) Human capital is intangible in nature
(b) Human capital is perfectly mobile
(c) Human capital is inseparable from its owner
(d) Human capital cannot be sold in market like commodity
8 Which of the following statements correctly represents actions taken by the 1
government towards liberalization?
P : levying high tariffs to discourage import and promote the consumption
of domestic goods and services
Q : devaluation of the rupees to encourage the inflow of foreign exchange
R : allowing for private banks to make decisions independent of the RBI
restrictions
S : fixing prices of certain industrial goods in order to support increased
consumption of these goods to boost the manufacturing industry
(a) P and Q only (b) P and R only
(c) Q and R only (d) Q and S only
9 The vaccination campaign for containing COVID-19 is an example of 1
medicine.
(a) Preventive (b) Curative
(c) Social (d) Emotional

OR
From the set of the events given in column I and corresponding facts given in
column II, chose the correct pair of statement:
Column I Column II
A WTO i 1997
B GATT ii 1948
C Removal of Quantitative Restriction iii 2005
D GST Act iv 2018
(a) A – i (b) B – ii
(c) C – iii (d) D – iv
10 Assertion (A) : There is a need to bridge the skill-gap in India in order to 1
enhance human capital and bring about more productive
labour force.
Reason (R) : Skills are tangible in nature.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
11 Read the following text carefully and answer the given questions on the basis of 3
the same.
In the late 1980s, government expenditure began to exceed its revenue by such
large margins that meeting the expenditure through borrowings became
unsustainable. Prices of many essential goods rose sharply. Imports grew at a
very high rate without matching growth of exports. Foreign exchange reserves
declined to a level that was not adequate to finance imports for more than two
weeks. There was also not sufficient foreign exchange to pay the interest that
needs to be paid to international lenders. Also, no country or international funder
was willing to lend to India. India approached to World Bank and the
International Monetary Fund (IMF), and received $7 billion as a loan to manage
the crisis. India agreed to the conditions of World Bank and IMF and announced
the New Economic Policy (NEP).This new set of policy measures changed the
direction of our development strategies.
(i) What does the New Economic Policy of 1991 means in context of the Indian
economy? Enlist some reasons for its introduction?
(ii) "IMF and World Bank granted $7 billion loan to India with a major
restriction to follow a closed economy model." Do you agree with the given
statement? Justify
12 Dr. Khurana, a dentist, ran his clinic in an economically backward area. He was 3
earning a comparatively low income. So, he decided to move to a city and spent a
huge amount for the same." Identify and explain the type of expenditure incurred
by Dr. Khurana, which directly contributed to the process of human capital
formation.
13 (i) Government introduced a set of stabilization and structural reforms to solve 2
the economic crisis. State the key initiatives and objectives of these policies
adopted by the Government of India.
(ii) Public sector was given a leading role in industrial development during the 2
planning period. Defend or refute the given statement with valid reasons.
14 (i) India is often called as ‘outsourcing hub’ of the world. State and discuss the 2
prime reason for this name given to India.
(ii) ‘The opening up of the Indian Economy has led to a rapid increase in 2
Foreign Direct Investments and Foreign Exchange Reserves of the country’.
Defend or refute the given statement.

OR

(i) Why should (a) migration and (b) social medicine be viewed as investments 2
in human capital? Justify with reasons.
(ii) Identify the casual relationship between Human Capital and Economic 2
Growth.
15 State, with valid reasons whether, the following statements are true or false: 4
(a) Higher productivity and production are the outcome of investment in human
resources.
(b) Rising population is not the cause for quality of human capital formation.
(c) Brain drain is a serious bottleneck in human capital formation and growth
process in India.
16 (i) The implementation of economic reforms in the agriculture sector has 3
resulted in a decelerating growth rate. Do you agree with the given
statement? Support your answer with valid reasons.
(ii) Throw light on significance of Disinvestment during New Economic Policy 3
era and its impact on PSUs.
17 Justify the following statements with valid explanation:
(i) “The vision of New Education Policy 2019, suggests how human capital 3
formation in India will move its economy to a higher growth trajectory”.
(ii) Expenditure on ‘on the job training’ is an essential source of human capital 3
formation in an economy.