Accounts & Economics Classes ph.

8527354501
Physical Capital includes all those inputs which are required for further production, like
plant and machinery, factory, buildings, raw materials, etc.

Human Capital refers to the skills which a person acquires through education, training
and / or experience, adding to his/her value to the production process. It is the stock of
skill, ability, expertise education and knowledge embodied in the people.

Human Capital Formation refers to the process of addition made to the stock of skilled
and cape people in the country over a period of time.

Sources of Human Capital Formation: The different sources are:

i. Expenditure on Education: Labour skill of an educated person is more than that of

an uneducated person. Individuals invest in education to increase their future
income and raise the living stand ()
ii. Expenditure on Health It is important to build and maintain productive labour
force and to quality of life of people in the society (a)
iii. On-the-Job-Training: It increases the skill and efficiency of the workers and leads
to an increase in production and productivity.
iv. Expenditure on Migration. It is a source of human capital formation as enhanced
earnings in the migrated place is more than the increase in costs due to migration.
v.Expenditure on Information: It is necessary to make decisions regarding investments
in human capital as well as for efficient utilisation of the acquired human capital
stock. .

Importance or Role of Human Capital Formation: It will be clear from the following
points

i. Effective use of Physical Capital

ii. Higher Productivity and Production
iii. Stimulates Innovations and creates ability to absorb new Technologies
iv. Modernization of Attitudes Increases Life Expectancy
v. Improves Quality of Life

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 Accounts & Economics Classes ph. 8527354501
vi. Control of Population Growth –

Problems of Human Capital Formation

i. Insufficient Resources
ii. Serious inefficiencies
iii. Brain Drain
iv. High Growth of Population
v. Several Imbalances
vi. Lack of Proper Manpower Planning
vii. Weak Science and Technology

Human Capital Vs Human Development

 Human Capital considers education and health as a means to increase labour

productivity, while according to human development, education and health are
integral to human well-being.

 Human Capital treats human beings as a means to increase in productivity, while

according human development, human beings are ends in themselves

Question.1 "Human Capital benefits only the owner and not the society: Defend or
Refute.

Ans. The given statement is refuted Human Capital benefits not only the owner but also
the society in general For example, an educated person can effectively take part in a
democratic process and contribute to the socio-economic progress of a nation Similarly,
a healthy person prevents spreading of contagious diseases and epidemics by
maintaining personal hygiene and sanitation.

Question.2. Education contributes to Economic Growth. Do you agree?

Ans. Yes, I agree with the given statement. Education contributes to economic growth
because Education confers higher earning capacity on people;

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1. it gives better social standing and pride;
2. It enables one to make better choices in life;
3. It provides knowledge to understand the changes taking place in society;
4. It also stimulates innovations.
5. It facilitates adaptation of new technologies.

Question.3. How does Expenditure on Migration is a source of human capital

formation?

Ans. Expenditure on Migration is a source of human capital formation as enhanced

earnings in the migrated place is more than the increase in costs due to migration.

Question..4. Cause and Effect relation between Human Capital and Economic Growth
can be easily proved. Comment?

Ans. The given statement is incorrect. Due to measurement problems, it is difficult to

establish a relation of cause and effect from the growth of human capital (education and
health) to economic growth. For example, education measured in terms of years of
schooling, teacher-pupil ratio and enrolment rates may not reflect the quality of
education. Similarly, health services measured in monetary terms, life expectancy and
mortality rates may not reflect the true health status of the people in a country.

Question.5. How can the productivity of human resources be increased?

Ans. The productivity of human resources can be increased with the help of human
capital formation by providing training and skill to available labour force.

Question.6. Education Commission 1964-66 had recommended that at least 6 per cent
of GDP must be spent on education How far India has been able to achieve the said
goal?

OR

"India has failed to implement the recommendations of Education Commission of

1964-66" Give valid arguments in support of the given statement.
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 Accounts & Economics Classes ph. 8527354501
Ans. Investment in education system in India has been a woeful failure. The fact of the
matter is that, in 1952, we were spending a meager 0.6% of our GDP on education that
rose to only 4% in 2014. This has fallen well short of 6% target as proposed by the
Education Commission, 1964. Moreover, throughout this period the increase in
education expenditure has not been uniform and there has been irregular rise and This
shows the apathy of the government towards investment in the education system. One
can imagine if the recommended 6% p.a of the GDP would have been spent properly, the
present education would have reached unforeseen heights .

GUIDELINES TO NCERT QUESTIONS

Question. 1. What are the two major sources of human capital in a country?

Ans. The two major sources of human capital are: (i) Investment in education; (ii)
Investment in health

Question. 2. What are the indicators of educational achievement in a country?

Ans. The indicators of educational achievement in a country are (1) Adult Literacy Rate;
(ii) Youth Literacy Pa (a) Primary Completion Rate

Question.3. Why do we observe regional differences in educational attainment in

India?

Ans. Regional differences in educational attainment in India can be due to (1) Regional
Inequality in incomes; and (0) Disparities in expenditure by government on development
of educational facilities

Question.4. Bring out the differences between human capital and human
development.

Ans. The differences between human capital and human development are:

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 Accounts & Economics Classes ph. 8527354501
(i) Human capital considers education and health as a means to increase labour
productivity On other hand, according to human development, education and health are
integral to human well-being.

(ii) Human capital treats human beings as a means to increase in productivity Any
investment education and health is unproductive if it does not enhance output of goods
and services. Howe according to human development, human beings are ends in
themselves. Human welfare should be increased through investments in education and
health even if such investments do not result higher labour productivity.

Question.5. How is human development a broader term as compared to human

capital?

Ans. Human development is a broader term as compared to human capital

because: Human capital treats human beings as a means to an end, whereas, according
to human development human beings are ends in themselves.

The concept of human capital asserts that any investment in education and health is
unproductive does not enhance output of goods and services. However, according to
human development, hum welfare should be increased through investments in
education and health even if such investments do not result in higher labour
productivity.

So, it can be concluded that human development is a broader term as compared to

human capital

Question.6. What factors contribute to human capital formation?

Ans. The following factors contribute to human capital formation: (1) Expenditure on
Education; (ii) Expenditure on Health: (iii) On-the-job-Training; (iv) Expenditure on
Migration; and (v) Expenditure on Information For a detailed discussion on all these
factors, refer "Sources of Human Capital Formation".

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Question.7. How government organisations facilitate the functioning of schools and
hospitals in India?

Ans. The government organisations play an important role in the functioning of schools
and hospitals in India To boost the education and health facilities, the government has
set up various organisations:

In Education, the ministries of education at the union and state level and departments of
educator and various organisations like National Council of Educational Research and
Training (NCERT)University Grants Commission (UGC) and All India Council of Technical
Education (AICTE) regulate the education sector.

to Health the ministries of health at the union and state level, departments of health and
various organisations like Indian Council for Medical Research (ICMR) regulate the health
sector.

Question.8 Education is considered an important input for the development of a nation

How?
Ans. Education is considered an important input for the development of a nation
because:
i. Education confers higher earning capacity on people
ii. It gives better social standing and pride.
iii. I enables one to make better choices in life.
iv. It provides knowledge to understand the changes taking place in society
v. It also stimulates innovations.
vi. It facilitates adaptation of new technologies.

Question.9. Discuss the following as a source of human capital formation:

i. Health infrastructure
ii. Expenditure on migration
Ans. (i) Health infrastructure Health is a source of human capital formation as it directly
increases the supply of healthy labour force .

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 Poor health and undernourishment adversely affect the quality of manpower A
sick labour, without access to medical facilities, is compelled to abstain from work
and there is loss of productivity

 Therefore, expenditure on health is important to build and maintain productive

labour force and to improve quality of life of people in the society.

 Adequate food and proper nourishment to people, along with adequate health
and sanitation facilities leads to qualitative improvement in human capital.

 Forms of Health Expenditure: The various forms of health expenditures include: (a)
Preventive Medicine known as vaccination, (b) Curative medicine, i.e. medical
intervention during illness: (c) Social Medicine, ie spread of health literacy. (d)
Provision of clean drinking water. (e) Good Sanitation facilities.

(ii) Expenditure on migration: People migrate from one place to another in search of jobs
that fetch them higher salaries,

 Unemployed people from rural areas migrate to urban areas in search of jobs

 Technically qualified persons (like engineers, doctors, etc) migrate to other

countries because of higher salaries that they may get in such countries.

 Migration in both these cases involves two kinds of cost: (a) Cost of transportation
from one place to another; and (b) Higher cost of living in the migrated places.

 Expenditure on migration is a source of human capital formation as enhanced

earnings in the migrated place is more than the increase in costs due to migration.

Question.10. Establish the need for acquiring information relating to health and
education expenditure for the effective utilisation of human resources.

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Ans. The expenditures on education and health make substantial long-term impact and
they cannot be easily reversed. For example, if a child is admitted to a school or health
care centre and required services are not provided in such institute, then substantial
amount of damage would have been done before the decision is taken to shift the child
to another institution.

So, information is needed in case of health and education expenditure for the effective
utilisation of human resources.

Question.11. How does investment in human capital contribute to growth?

Ans. Investment in human capital contributes to growth of the economy:
(i) Higher production and productivity. The contribution of an educated person to the
output or production is more than that of an iterate person Similarly a healthy person
also contributes to econ growth by providing uninterrupted labour supply for a longer
period of time.

(ii) Promotes inventions, innovations and technological improvements: The human

capital forma (HCF) not only increases the productivity of human resources but also
stimulates innovations creates ability to absorb new technologies. Education provides
knowledge to understand char in society and scientific advancements, thus, facilitate
inventions and innovations. Similarly availability of educated labour force facilitates
adaptation to new technologies.

Question.12. There is a downward trend in inequality world-wide with a rise in the

average education le Comment.
Ans. The given statement is correct Labour skill of an educated person is more than that
of an uneducated person, which enables him to generate more income than the
uneducated person. The higher income earning capacity and greater acceptability of
modem techniques raise the standard and quality of As a result, the gap between the
rich and the poor is narrowing slowly. So, rise in average education reduces the
inequality of income worldwide.

Question. 13. Bring out the need for on-the-job-training for a person.

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Ans. The productivity of physical capital is substantially enhanced with the improvement
in human capita to this reason, many firms provide on-the-job training to their workers.

 Such training has the advantage that it can be provided fast and without much
cost.

 It increases the skill and efficiency of the workers and leads to an increase in
production productivity

 On-the-job-training may take different forms. (a) Workers may be trained in the
firm itself under the supervision of a skilled worker, (b) Workers may be sent for
off-campus training.

 After on-the-job training of employees, firm insist that the workers should work
for a specific period of time, so that it can recover the benefits of the enhanced
productivity owing to the training.

 It is a source of human capital formation as return of expenditure on such training,

in the form of enhanced labour productivity, is more than the cost of it.

Question. 14 Discuss the need for promoting women education in India.

Ans: Women education needs to be promoted:
 To improve economic independence and social status of women, and

 Women education makes a favourable impact on fertility rate and health care of
women and child

Question. 15 Argue in favour of the need for different forms of government

intervention in education and health sectors

Ans. The expenditures on education and health assume great importance on the
formation of human cap To ensure favourable benefits of such expenditure, government
intervention is important because following reasons:

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i. The expenditures on education and health make substantial long-term impact and
they cannot o easily reversed. For example, if a child is admitted to a school or
health care centre and required services are not provided in such institute, then
substantial amount of damage would have been done before the decision is taken
to shift the child to another institution.

ii. Individual consumers of these services do not have complete information about
the quality of services and their costs.

iii. The providers of education and health services may acquire monopoly power and
may get involved in exploitation.

So, the role of government is important to ensure that the private providers of these
services adhere to the standards stipulated by the government and charge the correct
price.

Question.16. What are the main problems of human capital formation in India?
Ans. The various problems of human capital formation are:

i. Insufficient resources: The resources allocated to the formation of human capital

have been much less than the resources required. Due to this reason, the facilities
for the formation of human capital have remained grossly inadequate.
ii. Serious inefficiencies: There is a lot of wastage of society's resources as capabilities
of educated people are either not made use of (in case of unemployment) or are
underutilized (in case of underemployment), Massive illiteracy, non-education of
many children, poor health facilities are other inefficiencies, which have not been
attended to adequately and properly.

iii. Brain Drain: People migrate from one place to another in search of better job
opportunities and handsome salaries. It leads to the loss of quality people like
doctors, engineers, etc who have high caliber and are rare in a developing country.
The cost of such loss of quality human capital is very high.

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iv. High growth of Population. The continuous rise in population has adversely
affected the quality of human capital. It reduces per head availability of the
facilities.

v. Several imbalances: A greater proportion of resources have been diverted towards

higher education, which is meant for few people as compared to primary and
secondary education. Due to this reason general productivity of the economy has
remained low.

vi. Lack of proper manpower planning There is an imbalance between the demand
and supply of human resources of various categories, especially in case of highly
skilled personnel The absence of such balancing has resulted in the wastage of
resources.

vii. Weak science and technology. In respect of education, the performance is

particularly unsatisfactory in the fields of science and development of modern
technology.

Question.17 In your view, is it essential for the government to regulate the fee
structure in education and health care institutions? If so, why? s.

Yes, it is essential for the government to regulate the fee structure in education and
health care institutions because

i. Individual consumers of these services do not have complete information about

the quality of services and their costs or fees structure.

ii. The providers of education and health services may acquire monopoly power and
may get involved in exploitation by charging excessive fees.

So, the role of government is important to ensure that the private providers of these
services adhere to the standards stipulated by the government and charge the correct
fees.
Fill in the banks
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1._________capital refers to the stock of skill, ability, expertise education and
knowledge, in the people.
2_________ capital is tangible, while _________ capital is intangible.

3._________formation refers to development of abilities and skills among the population

country
4.___________ is the percentage of students completing the last year of primary school
5. The revenues from education cess is spent on ________(Elementary/Higher)
education
6. Youth Literacy Rate is the percentage of people ages_________(15-24/18-24) who can
with understanding, read and write a short simple statement on their everyday life.
7.__________ capital cannot be separated from the owner, whereas, _______capital can
be separated from its owner
8.________ rate refers to the ratio of iterate adult population to the total adult
population in a country.

9. A form of training that takes place during the working is called _______training.

Ans. 1 Human: 2 Physical Human, 3. Human Capital, 4 Primary Completion 5.

Elementary 6. 15-24, 7 Human Physical; 8. Adult literacy, 9. On –the-job.

TRUE OR FALSE
1. Human capital is tangible and can be easily sold in the market.
False. Human capital is intangible and cannot be sold in the market.
2. Use of physical capital does not depend on human capital
False. Human Capital is needed to make effective use of physical capital
3. Right to Education Act was enacted in the year 2010.
False. Right to Education was enacted in the year 2009
4. Expenditure on migration is a source of human capital formation.
True. Expenditure on migration is a source of human capital formation as enhanced
earnings in the migrated place is more than the increase in costs due to migration
5. Human capital formation leads to higher productivity and production.

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True. Human capital formation raises the productivity and production as knowledgeable
and skilled worker makes better use of the resources
6. Human capital and human development are similar terms.
False. The terms Human Capital and Human Development sound similar, but there is a
clear distinction between them.
7. Right to Education Act was enacted to make free education a fundamental right of all
children in the age group of 12-18 years
False. Right to Education Act was enacted to make free education a fundamental right of
all children in the
On-the-Job-Training is not a source of human capital formation
False. On the Job-Training u is a source of human capital formation as return of
expenditure on such training in the form of enhanced labour productivity is more than
the cost of it.
9. in India, higher education takes a major share of total education expenditure
False. Elementary Education (primary school education) takes a major share of total
education expenditure.
10. Human Capital Formation gives birth to innovation, invention and technological
improvements.
True. Human Capital Formation (investment in education/health) not only increases the
productivity of the available human resources, but also stimulates innovations and
creates ability to adopt and adapt to the new technologies.
11. "Elementary education covers both primary and middle level education.
False. Elementary education covers only primary level education.
12. A skilled worker generates more income than an unskilled worker.
True. The productivity of a skilled person is higher than an unskilled one Skilled workers
possess technical or specialized skills. Due to this reason, there is a great demand for
skilled workers and they command higher earnings
13. Both Human Capital and Physical Capital benefit not only the owner but also the
society.
False. Benefits of Physical Capital accrup to the owner only. However, Human Capital
benefits not only the owner but also the society in general
14. Skill formation is a key factor for ensuring economic development'.
True. Addition to the skills have a direct relation with the earning capacity of the masses.
Skill-rich population of a nation may enhance the standards of living of the people. Skill
formation improves the rate of participation in the process of growth. Benefits of
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 Accounts & Economics Classes ph. 8527354501
economic growth are shared by a larger percentage of the population which may lead to
greater economic development.

Question.1 Match the statements given under A with the correct options given under B.

(A) (B)
(i) Youth Literacy Rate a. It refers to the ratio of literate adult population to the
total adult population in a country.
b. It refers to percentage of people ages 15-24 who can,
with understanding, read and write a short, simple
statement on their everyday life
Ans. (i) b.
Q.2. Match the statements given under A with the correct options given under B.
(A) (B)
(i) Human Capital a. It is tangible and can be easily sold in the market
(ii) Physical Capital b. It is intangible and cannot be sold in the market
Ans. (i) b; (ii) a.

Question.3. Match the statements given under A with the correct options given under B
(A) (B)
((i) Right to Education Act, a. Enacted to make free education a fundamental right of
2009 all children in the group of 6-14 years
b. Enacted to make free education a fundamental right of
all children in the a group of 9-13 years
Ans. (1) a.
Q. 4. Match the statements given under A with the correct options given under B.

(A) (B)
(i) Human Capital a. It considers education and health as a means to
increase labour product
(ii) Human Development b. It considers education and health are integral to
human well-being
Ans.(i) (a);(ii) ( b)

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Question.5. From the following given sets of statements in column I and II, choose the
correct pair of statements

Column I Column II
A Migration i Reduced in per capita economic growth
B Low level of academic standards ii Imbalance between demand and supply of
human resource
C Population High Growth rate iii Brain Drain
D Lack of proper manpower iv Mismatch between required skill and academic
planning standards
Alternatives:
(a) A-, B-li C-iv, D-I (b) A-iii; B-iv; C-i; D-ii

(A-1;B-ii;C-iii;D-iv (d) A-ii; B-iv, C-i, D-iii

Ans.(b) A-iii; B-iv; C-i; D-ii

MULTIPLE CHOICE QUESTIONS (MCQs)

1. _____________.five year plan recognised the importance of Human capital.

(a)Seventh (b) Third

(c) Eight (d) Sixth

2. Which of the following is not an example of physical capital?

(a) Machinery (b) Raw Material
(c) Building (d)Education and knowledge in people

3. Which of the following is the problem of human capital formation?

(a) High growth of population (b) Brain Drain
(c) Insufficient resources (d) All of these

4.The expenditure by the government on education is expressed as:

(a) Percentage of total government expenditure (b) Percentage of GDP
(c) both (a) and (b) (d) Neither (a) nor (b)
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5.Which one of the following is an indicator of educational achievement in a country?
a) Youth Literacy Rate (b) Adult Literacy Rate
(c) Primary Completion Rate (d) All of these

6. The Government of India enacted the Right to Education Act to make free education a
fundamental right of all children in the age group of _______year.
(a) 5-13 (b) 6-12
(c)6-14 (d) 5-14
7.Which one of the following is a reason for poor human capital formation in India?
(a) Brain drain (b) Insufficient resources
(c) High growth of population (d) All of these
8._________.refers to the stock of skill, ability, expertise, education and knowledge
embodied in the people.

(a) Human Resource (b) Physical Capital

(c) Human Capital (d) None of these
9. Which of the following is not an importance of human capital formation?
(a) Modernization of attitudes (b) Increases cost of production
(c) Increases life expectancy (d) Effective use of Physical Capital
10. How much educational cess has been imposed by the government on all union taxes?
(a) 1 percent (b) 2 percent
(c) 4 percent (d) None of these

11. What is the full form of ICMR?

(a) International Council of Medical Research (b) Indian council of Medical Resources
(c) International council of Medical Resources (d) Indian Council for Medical Research
12. Which one of the following is a major source of human capital formation in a
country?

(a)Expenditure on education (b) Expenditure on Infrastructure

(c)Expenditure on Defense (d) None of these

13. In the year the Indian Government made education free and compulsory for all
children between 6-14 years (Choose the correct alternative)
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 Accounts & Economics Classes ph. 8527354501
(a) 2001 (b) 2009
(c) 2003 (d) 2007

14. Which one of the following organisations regulates the health sector in India?
(Choose the correct alternative)
(a) ICMR (b) UGC
(c) AICTE (d) RBI

15. Expenditure on health can be done in the form of

(a) Curative Medicine (b) Social Medicine
(c) Preventive Medicine (d)All of the above

16. Which of the following is the benefit of On-the-Job Training?

(a) Enhances the productivity of labour
(b) Keeps the employees updated with the latest changes
(c)Both (a) and (b)
(d) Neither (a) nor (b)

17. Which of the following statement is incorrect?

(a) Productivity of physical capital is substantially enhanced with the improvement in
human.
(b) Cause and Effect relationship can be easily established from the growth of human
capital to growth.
(c) Expenditure on education turns human beings into human capital,
(d) Poor health and undernourishment adversely affect the quality of manpower

18. Which of the following cast is included in Migration?

(a) Cost of transportation from one place to another (b) Higher cost of living in the
migrated places
(c) Psychic Cost (d) All of these

19. Which level of education takes a major share of total education expenditure in India?
(a) Secondary (b) Tertiary
(c) Elementary (d) None of these

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20. _______.capital like plant and machinery, are tangible assets used in the production
process
_________.capital represents the brain behind the design and built of the machines.
(a) Human, Physical (b) Physical, Financial
(c) Physical, Human (d) Financial, Human

21. Out of the following statements, which one is correct?

(a) Government spends more on Tertiary Education as compared to Elementary
Education.
(b) The Education Commission (1964-66) had recommended that at least 6% of GDP
should be spent on education.
(c) In 2007 the Government of India enacted the Right to Education Act.
(d)All of these

22. Human Capital creates both ________ and__________ benefits.

(a) Physical, Social (b) Private, Economical
(c) Private, Social (d) None of these

23. For economic growth,_____ is needed.

(a) Physical Capital (b) Human Capital
(c) Both (a) and (b) (d) Neither (a) nor (b)

24. In which state, the per capita education expenditure is highest?

(a) Madhya Pradesh (b) Uttar Pradesh
(c)Himachal Pradesh (d) Haryana

25. Ms Ramanpreet has started a new business venture, she intends to spend a huge
amount tow on-the-job training of her workers before putting them to work. It exhibits
the right step in the direction of Human Capital Formation. Spot which of the following
does not directly contributes to the process of human capital formation by Ms
Ramanpreet:
(a) Adds Skills and Expertise (b) Improves Efficiency
(c) Ensures Gender Equity (d) Increases Output Productivity

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26. Who amongst the following, has received the greatest investment in human capital
formation?
(a) A nurse in a clinic who is frequently absent because of his ill health.
(b) A 12-year-old who helps her mother with construction work.
(c) A 10-pass girl who works as a store manager in a mall.
(d) A computer science graduate who works at a call centre.

27.Which of the following is the correct difference between physical and human capital?
(a) Physical capital can be sold but human capital cannot be sold.
(b) Physical capital cannot be separated from its owner white human capital can.
(c) Physical capital provides both private and social benefits while human capital
provides only social benefits provides only social benefits.
(d) The depreciation of physical capital can be arrested with more investment while
human capital will continue to deplete.

28. Which of the following could aid in human capital formation?

(a) Expanding the labour market by increasing supply of jobs.

(b) Creating larger industries with more complex equipment
(c) Creating open markets with increased stability.
(d) Promoting gender equality in the family
29. Since independence, India has witnessed a considerable fall in the Infant Mortality
Rate in India' Identify which of the following may not be one of the reasons for the fall in
the Infant Mortality Rate? (Choose the correct alternative)

(a) Improvement in health facilities over the years

(b) Improvement in educational standards over the years.
(c) Fall in standard of living of the population of the nation over the years.
(d) Technological expansion over the years

30. Select Indicators of Development in Education and Health Sectors

Particulars 1951 1981 1991 2001 2016-17

Real Per Capita Income (in Rs) 7,651 12,174 15,748 23,095 77,659
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Crude Death Rate (Per 1,000 Population) 25.10 12.50 9.80 8.10 6.30
Infant Mortality Rate 146 110 80 63 63
Life Expectancy of Males at Birth (in 37.20 54.10 59.70 63.90 67
Years)
Life Expectancy of Females at Birth (in 36.20 54.70 60.90 66.90 70
Years)
Literacy Rate (%) 16.67 43.57 52.21 65.20 76
Source: Economic Survey for various years, Ministry of Finance National Statistical Office
& Ministry of Statistics and Programme Implementation, Government of India.

On the basis of the above-mentioned information answer the following question: The
Real Per Capita Income of India (as per the given data) has increased
by______(approximately) between 1951 and 2016-17 (Fill up the blank with correct
alternative)
(a)915% (b) 1,015%
(c) 815% (d) 715%

Ans. 1. (a), 2. (d), 3. (d), 4. (c), 5. (d): 6. (c). 7. (d): 8. (c), 9. (b), 10. (b), 11. (d), 12. (a): 13.
(b); 14. (a): 15. (d), 16. (c), 17. (b); 18. (d); 19. (c), 20. (c), 21. (b) 22. (c), 23. (c): 24. (c):
25. (c): 26. (d): 27. (a); 28 (d). 29. (c), 30. (a)

ASSERTION RAASON QUESTION (ARQs)

Read the following statements. Assertion (A) and Reason (R). Choose one of the correct
alternative given below:

Assertion (A): Education contributes to economic growth.

Reason (R): Education confers higher earning capacity on people.
Alternatives:
(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 (A) is not the correct
explanation of Assertion (A)

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(c) Assertion (A) is True but Reason (R) is False.

(d) Assertion (A) is False but Reason (R) is True

2. Read the following statements: Assertion (A) and Reason (R). Choose one of the
correct alternatives given below.
Assertion: (A): Expenditure on migration is a source of human capital formation.

Reason (R): Migration to other countries involves cost of transportation from one place
to another and higher cost of living in the migrated places.

Alternatives:

(a) Bath 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.

3. Read the following statements. Assertion (A) and Reason (R) Choose one of the correct
alternatives given below:
Assertion (A): Both education and health increases the income generating capacity of an
individual.
Reason (R): Contribution of an educated and healthy person to the economic growth is
more than that of an illiterate and unhealthy person.
Alternatives: (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. given below!
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 Accounts & Economics Classes ph. 8527354501
4. Read the following statements. Assertion (A) and Reason (R). Choose one of the
correct alternatives given below.

Assertion (A): The facilities for the formation of human capital have remained adequate.
Reason (R): The resources allocated to human capital formation have been much less
than the resources required.

Alternatives:

(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. Read the following statements Assertion (A) and Reason (R) Choose one of the correct
alternative given below:

Assertion (A): On-the-Job-Training is a source of human capital formation.

Reason (R): After on-the-job training of employees, firm insist that the workers should
work for a specific period of time.
Alternatives:
(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.

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 Accounts & Economics Classes ph. 8527354501
6 -Read the following statements: Assertion (A) and Reason (R) Choose one of the correct
alternatives given below:
Assertion (A): Spread of education is necessary to control the population growth rate
Alternatives
Reason (R): Human Capital Formation decrease quality of life.

(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.

7.Read the following statements Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Human Capital Formation is required for effective use of physical capital.
Reason (R): Formation of human capital raises life expectancy of the people.

Alternatives :

(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.

8. Read the following statements Assertion (A) and Reason (R). Choose one of the correct
alternatives given below.

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 Accounts & Economics Classes ph. 8527354501
Assertion (A): Human capital treats human beings as a means to an end (increase in
productivity).

Reason (R): Human Capital Formation decreases by way of investments in education and
health.
Alternatives:

(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.

Ans. 1. (a), 2. (b); 3. (a), 4. (d). 5. (b), 6. (c), 7. (b): 8. (c)

STATEMENT BASED QUESTIONS

Question1. Read the following statements carefully and choose the correct alternative
from the following:
Statement 1: Human Capital is needed to make effective use of physical capital.
Statement 2: Human Capital creates both private and social benefits.

(a) Both the statements are true

(b) Both the statements are false
(c) Statements true and Statement 2 is false
(d) Statement 2 is true and Statement 1 is false.

2. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: It is easy to prove cause and effect relation between human capital and
economic growth.
Statement 2: Human Capital Formation promotes inventions, innovations and
technological improvements.
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 Accounts & Economics Classes ph. 8527354501
Alternatives
(a) Both the statements are true
(b) Both the statements are false
(c) Statement1 is true and Statement 2 is false
(d) Statement 2s true and Statement t is false

3. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Both education and health increases the income generating capacity of an
individual.
Statement 2: Spread of education plays no role in controlling the population growth rate.
Alternatives
(a) Both the statements are true
(b) Both the statements are false.
(c)Statement 1 is true and Statement 2 is false.
(d)Statement 2 is true and Statement 1 is false.

4. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Human Capital is a broader concept as compared to Human Development.
Statement 2: Human Development considers education and health as a means to
increase labour productivity
Alternatives
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

5. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Human Capital benefits not only the owner but also the society in general.
Statement 2: Human capital and human development are similar terms.
Alternatives
(a) Both the statements are true.
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 Accounts & Economics Classes ph. 8527354501
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false
(d) Statement 2 is true and Statement 1 is false.

Ans. 1. (a); 2. (d), 3. (c), 4. (b)5.(c)

Question.1.What is meant by physical capital?

Ans. Physical capital refers to all those inputs which are required for further production,
like plant and machinery factory buildings, raw materials, etc

Question.2. Define Human Capital .

Ans. Human Capital refers to the skills which a person acquires through education
training and/or experience, adding to his/her value to the production process

Question.3. Why do we need to invest in human capital?

Ans. We need to invest in human capital to make effective use of physical capital and to
increase productive capacity of the country.

Question.4. Define Human Capital Formation

Ans. Human Capital Formation refers to the process of addition made to the stock of
skilled and capable people in the country over a period of time.

Question.5. How does expenditure on health act as a source of human capital

formation?

Ans. Health expenditure is a source of human capital formation as it directly increases

the supply of healthy labour force.

Question.6. Which are the various forms of health expenditures?

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 Accounts & Economics Classes ph. 8527354501
Ans. Preventive medicine, curative medicine, social medicine, provision of clean drinking
water and good sanitation are the various forms of health expenditures.

Question.7. How is on-the-job-training a source of human capital formation?

Ans. On-the-job-training is a source of human capital formation as it increases the skill

and efficiency of the workers and leads to an increase in production and productivity.

Question.8. How expenditure on migration is a source of human capital formation?

Ans. Expenditure on migration is a source of human capital formation as enhanced

earnings in the migrated place is more than the increase in costs due to migration.

Question.9. Why are workers required to work for a certain period after the on-the-job-
training?

Ans. Workers are required to work for a certain period after the on-the-job-training so
that firm can recover the benefits of the enhanced productivity owing to the training .

Question.10. Why has India not been able to achieve 100 per cent literacy even bill
today?

Ans. India has not been able to achieve 100 per cent literacy because of its failure to
provide free and compulsory education for all children up to the age of 14 years.

Question.11. What do the differences in male and female literacy rates indicate?

Ans. The differences in male and female literacy rates indicate that education in India is
gender biased.

Question.12. Why do individuals invest in education?

Ans. Individuals invest in education because labour skill of an educated person is more
than that of an uneducated person, which enables him to generate more income than
the uneducated person.

Question.13. Which five year plan recognised the importance of human capital?
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 Accounts & Economics Classes ph. 8527354501
Ans. The Seventh Five Year Plan.

Question.14. Why do people spend money to acquire information?

Ans. is necessary to make decisions regarding Investments in human capital as well as for
efficient utilisation of the acquired human capital stock

Question.15 How much education cess was imposed by the government on all union
taxes.

Ans. 2 per cent.

Question.16 State the desired level of public expenditure on education as per Education
Commission (1964-66).

Ans. 6% of GDP.

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