Daily Quiz: UPSC Prelims Marathon – February 13, 2018

The marginal propensity to save (MPS) is the fraction of an increase in income that is not spent on an increase in consumption. That is, the marginal propensity to save is the proportion of each additional dollar of household income that is used for saving. It is the slope of the line plotting saving against income.[1] For example, if a household earns one extra dollar, and the marginal propensity to save is 0.35, then of that dollar, the household will spend 65 cents and save 35 cents. Likewise, it is the fractional decrease in saving that results from a decrease in income.

The term unorganized sector when used in the Indian context is defined by the National Commission for Enterprises in the Unorganized Sector, in their report on conditions of work and promotion of livelihoods in the unorganized sector as consisting of all unincorporated private enterprises owned by individuals or households engaged in the sale or production of goods and services operated on a proprietary or partnership basis and with less than ten total workers.

Section 2 (l) of the Unorganized Workers Social Security Act, 2008 defines an unorganised sector as a  production or service oriented enterprise owned by individuals or self employed workers (one who is not working for an employer and is engaged in an unorgnised sector job earning an income below a threshold or owning land below a notified limit) and if workers are employed, then the total number of workers cannot exceed 10.

Both the statements are correct.

Intermediary goods are used to produce final goods. If the value of intermediary goods is counted along with final goods, it will double the counting.

Key points

The size of a nation’s economy is commonly expressed as its gross domestic product, or GDP, which measures the value of the output of all goods and services produced within the country in a year.

GDP is measured by taking the quantities of all goods and services produced, multiplying them by their prices, and summing the total.

GDP can be measured either by the sum of what is purchased in the economy or by what is produced.

Demand can be divided into consumption, investment, government, exports, and imports. What is produced in the economy can be divided into durable goods, nondurable goods, services, structures, and inventories.

To avoid double counting—adding the value of output to the GDP more than once—GDP counts only final output of goods and services, not the production of intermediate goods or the value of labor in the chain of production.

The gap between exports and imports is called the trade balance. If a nation’s imports exceed its exports, the nation is said to have a trade deficit. If a nation’s exports exceed its imports, it is said to have a trade surplus.

Usual Principal Status (UPS) or Usual Status (PS)

The status of activity on which a person has spent relatively longer time of the preceding 365 days prior to the date of survey is considered to be the usual principal activity status of the person.The Usual Principal Activity status (UPS), written as Usual Status (PS), is determined using the majority time criterion and refers to the activity status on which h/she spent longer part of the year. Principal usual activity status is further used to classify him in/out the labour force. For instance, if an individual was ‘working’ and/or was ‘seeking or available for work’ for major part of the year preceding the date of survey then h/she is considered as being part of the ‘Labour Force’. For example if an individual reports as having worked and sought/available for work for seven months during the year or having sought or available for work for seven months then h/she is classified as being in the Labour Force.

Gross Domestic Product measures the aggregate production of final goods and services produced within the domestic economy during a year. GNP (Gross National Product) takes into account the economic activities performed by its citizens outside the geographic borders of the country also.

GNP defined as GNP – GDP + Factor income earned by the domestic factors of production employed in the rest of the world- Factor income earned by the factors of production of the rest of the world employed in the domestic economy Hence, GNP – GDP + Net factor income from abroad (Net factor income from abroad = Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy).

GNP can be greater than, equal to or lesser than the GDP depending on the magnitude of Net Income from abroad.

Primary activities are directly dependent on environment as these refer to utilisation of earth’s resources such as land, water, vegetation, building materials and minerals. It, thus includes, hunting and gathering, pastoral activities, fishing, forestry, agriculture, and mining and quarrying.

People engaged in primary activities are called red-collar workers due to the outdoor nature of their work.

A Giffen good is a good for which demand increases as the price increases, and falls when the price decreases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand which states that quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve.