UPSC Prelims Mock Test – ECONOMY 1

The UPSC Prelims Mock Test for Economy is a crucial component of the preparation process for aspirants aiming to excel in the Civil Services Examination conducted by the Union Public Service Commission (UPSC). This specialized mock test focuses on evaluating candidates’ comprehension and application of economic concepts relevant to the examination syllabus. Covering a wide spectrum of topics, ranging from micro and macroeconomics to economic policies and current affairs, the Economy Mock Test provides candidates with a simulated exam environment, allowing them to assess their knowledge, time management, and problem-solving skills. With an emphasis on the economic aspects integral to the UPSC Prelims, this mock test serves as a valuable tool for aspirants to identify their strengths and areas requiring improvement, ultimately enhancing their preparedness for the challenging economic segment of the actual examination.

Q1 Which of the following statements is/are true about the Multidimensional Poverty Index?

1. It was developed by the World Bank in collaboration with the OECD.
2. It tracks deprivation across three dimensions i.e health, education, and happiness.
3. With everything else being the same, a household with access to clean cooking fuel will be less multidimensionally poor than those that do not have access.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 3 only

(d) 1, 2, and 3

Answer – C

• Statement 1 is incorrect: The Multidimensional Poverty Index (MPI) was developed by UNDP and Oxford Poverty & Human Development Initiative (OPHI).
• Statement 2 is incorrect and 3 is correct: MPI tracks deprivation across three dimensions and 10 indicators: health (child mortality, nutrition), education (years of schooling, enrollment), and living standards (water, sanitation, electricity, cooking fuel, floor, assets).

Q2. Which of the following statements defines the term elasticity of employment?

(a) It is a measure of change in employment with respect to change in demand.
(b) It is a measure of change in the workforce with respect to change in supply.
(c) It is a measure of change in employment with respect to change in economic growth.
(d) It is a measure of change in the labour force with respect to change in inflation

Answer – C

• Option (c) is correct: Employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. The employment elasticity indicates the ability of an economy to generate employment opportunities for its population as a percentage of its growth (development) process.

Q3. Which of the following statements is/are true about the Gini coefficient?

(a) Gini coefficient of 0 representing perfect equality and 1 representing perfect inequality.
(b) A country with higher per capita income will necessarily have a higher Gini coefficient.
(c) A higher Gini coefficient indicates the success of re-distributive policies of the state.
(d) All of the above

Answer – A

• The Gini index, or Gini coefficient, is a measure of the distribution of income across a population developed by the Italian statistician Corrado Gini in 1912. It is often used as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population.
• Option (a) is correct: The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. Values over 1 are theoretically possible due to negative income or wealth.
• Option (b) is incorrect: A high-income country and a low-income one can have the same Gini coefficient, as long as incomes are distributed similarly within each.
• Option (c) is incorrect: A higher Gini coefficient indicates failure of re-distributive policies of the state

Q4. Consider the following statements about the type of unemployment:

1. Disguised employment is a type of employment in which more workers are employed than the amount that is actually
   required.
2. The agriculture sector of India has both seasonal and disguised employment.
3. Frictional unemployment happens when workers lack the requisite job skills

Which of the statements given above is/are correct?

(a) 2 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Answer – B

• Statement 1 is correct: Disguised employment is a type of employment in which more workers are employed than the amount that is actually required. For example, a family of five is working together in a field that requires only three laborers.
• Statement 2 is correct: When a worker moves to urban centers for employment but return back to the village in sowing or harvesting season is an example of seasonal employment. The agriculture sector in India has both seasonal and disguised form of employment.
• Statement 3 is incorrect: Frictional unemployment is the result of voluntary employment transitions within an economy. Frictional unemployment naturally occurs, even in a growing, stable economy. Workers choosing to leave their jobs in search of new ones and workers entering the workforce for the first time constitute frictional unemployment. Structural unemployment is a longer-lasting form of unemployment caused by fundamental shifts in an economy and exacerbated by extraneous factors such as technology, competition, and government policy. Structural unemployment occurs because workers lack the requisite job skills or live too far from regions where jobs are available and cannot move closer. Jobs are available, but there is a serious mismatch between what companies need and what workers can offer.

Q5. Which of the following statements is/are true about malnutrition?

1. The global hunger index uses both Child wasting and child stunting as indicators
   of malnutrition.
2. The National Family Health Survey Data (NFHS-5) shows that the percentage of children who are stunted and wasted has gone down in India.
3. Children who have low weight for their height are called stunted.

Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 2 only
(d) 1 and 3 only

Answer – A

• Statement 1 is correct and 3 is incorrect: Global Hunger Index (GHI) values are determined by using four indicators:
• UNDERNOURISHMENT: the share of the population that is undernourished (that is, whose caloric intake is insufficient);
• CHILD WASTING: the share of children under the age of five who are wasted (that is, who have low weight for their height, reflecting acute undernutrition);
• CHILD STUNTING: the share of children under the age of five who are stunted (that is, who have low height for their age, reflecting chronic undernutrition);
• CHILD MORTALITY: the mortality rate of children under the age of five (in part, a reflection of the fatal mix of inadequate nutrition and unhealthy environments).
• Statement 2 is correct: The NFHS-5 data shows that the percentage of children who are stunted (low height-for-age), wasted (low weight-for-height), and underweight (low weight-for-age) has gone down. There is a slight increase in the percentage of severely wasted and overweight children.

Q6. Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In this context what do you understand by Built-in Inflation?

(a) It is mainly caused by an increase in aggregate demand due to increased government spending.

(b) It is caused by a drop in aggregate supply due to natural disasters

(c) It is induced by adaptive expectations, the idea that people expect current inflation rates to continue in the future.

(d) It is primarily caused by large-scale hoarding of food grains which leads to artificial scarcity of food grains.

Answer – C

• Demand-pull inflation is caused by increases in aggregate demand due to increased private and government spending, etc. Cost-push inflation, also called “supply shock inflation,” is caused by a drop in aggregate supply (potential output). This may be due to natural disasters, or increased prices of inputs.
• Option (c) is correct: Built-in inflation is related to adaptive expectations, the idea that people expect current inflation rates to continue in the future. As the price of goods and services rises, workers and others come to expect that they will continue to rise in the future at a similar rate and demand more costs or wages to maintain their standard of living. Their increased wages result in a higher cost of goods and services, and this wage-price spiral continues as one factor induces the other and vice versa.

Q7. Which of the following are part of fiscal policy decisions?

1. Changes in income tax slabs.
2. Increasing repo rate to manage inflation
3. Rationalizing subsidies

Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1 and 3 only

Answer – D

• Monetary policy refers to central bank activities that are directed toward influencing the quantity of money and credit in an economy. By contrast, fiscal policy refers to the government’s decisions about taxation and spending. Both monetary and fiscal policies are used to regulate economic activity over time.
• Statements 1 and 3 are correct: Since these are part of the government’s decisions about taxation and spending.
• Statement 2 is incorrect: Since fixing the repo rate is part of the monetary policy action taken by the Reserve Bank of India.

Q8. Consider the following about the Zero Base Budgeting:

1. It involves a review and justification of each and every ministry’s expenditure in order to receive funding at the beginning of each financial year.
2. It was promoted in the seventh five-year plan.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer – C

• As the name suggests, a zero-based Budget refers to planning and preparing the Budget from scratch or ‘zero bases’. It is different from a traditional Budget that is based on previous Budgets.
• Statement 1 is correct: The process of zero-based budgeting involves the review and justification of each and every ministry’s expenditure in order to receive funding at the beginning of each financial year. As the name suggests, a zero-based Budget refers to planning and preparing the Budget from scratch or ‘zero bases’. It is different from a traditional Budget that is based on previous Budgets. The process of zero-based budgeting involves the review and justification of each and every ministry’s expenditure in order to receive funding at the beginning of each financial year. In India, the ZBB was adopted by the Department of Science and Technology in 1983. In 1986, the Indian government implemented ZBB as a system for determining Expenditure Budget. The government made it compulsory for all ministries to review their activities and programs and prepare their expenditure estimations based on the concept of ZBB.
• Statement 2 is correct: In the seventh Five Year Plan, the ZBB system was promoted. However, not much progress could take place later.

Q9. Consider the following statements related to Social Audit in India:

1. Only government officials and elected members of local government bodies are involved in the social audit process.
2. Social audits of all the projects undertaken under the Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA) are a legal requirement

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Answer – B

• Statement 1 is incorrect: Social Audit is the examination and assessment of a program/ scheme conducted with the active involvement of people and comparing official records with actual ground realities. Social Audit is a powerful tool for social transformation, community participation, and government accountability.
• Statement 2 is correct: Section 17 of the MGNREGA has mandated a Social audit of all Works executed under the MGNREGA.

Q10. Automatic stabilizers are a type of fiscal policy designed to offset fluctuations in a nation’s economic activity through their normal operation without additional, timely authorization by the government or policymakers.

Which of the following is/are associated with the concept of Automatic stabilizers?
(a) Progressive tax
(b) Unemployment insurance
(c) Transfer payments
(d) All of the above

Answer – D

• Automatic stabilizers are a type of fiscal policy designed to offset fluctuations in a nation’s economic activity through their normal operation without additional, timely authorization by the government or policymakers. These are government programs that are usually already in place and respond to the fluctuations in the business cycle by increasing and decreasing
  spending as income rises or decreases. Examples of Automatic Stabilizers are:
  Progressive Tax: This is the type of tax that increases as the income of a person increases. This helps control spending because
  automatically, as people’s income grows, their spending will be limited due to their increased tax rate.
  Transfer payment: This is a payment that one person receives that is funded by the taxes that other people pay. Because a person’s eligibility to receive these payments depends highly on income, which also helps maintain stability in the business cycle and prevent extreme fluctuations from occurring.
• Unemployment insurance: This is money that unemployed people receive for a certain amount of time while they are looking for another job. This serves as an automatic stabilizer because as unemployment rises, more people have access to this and it helps prevent a lot of people from going into poverty and having the economy’s business cycle fluctuate and enter in a recession due to the unemployment rate.

Q11. Which of the following statements is/are true about the Labour Bureau of the Government of India?

1. It comes under the administrative control of the Ministry of Social Justice & Empowerment.
2. The Labour Bureau is responsible for the publication of statistics and related information on industrial relations, working, and living conditions.
3. It is the storehouse of Consumer Price Index Numbers for Industrial, Agricultural and Rural Laborers.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 1 and 3 only

(c) 3 only

(d) 2 and 3 only

Answer – D

Statement 1 is incorrect and 2 is correct: Labour Bureau under the Ministry of Labour and Employment is responsible for the collation, collection and publication of statistics and related information on wages, earnings, productivity, absenteeism, labour turnover, industrial relations, working and living conditions and evaluation of working of various labour enactments etc.
Statement 3 is correct: It is a storehouse of important economic indicators like Consumer Price Index Numbers for Industrial, Agricultural and Rural Labourers; wage rate indices and data on industrial relations, socio-economic conditions in the organized and unorganised sectors of industry, etc.

Q12. Which of the following statements is/are correct related to Capital gains tax in India?

1. If the stock of a company doubles in a years’ time, all stockholders will have to pay capital gains tax.
2. Capital gains taxes are not applicable in case the transfer of property is by inheritance.

Select the correct answer using the code given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer – B

• The capital gains tax is a levy on the profit from an investment that is incurred when the investment is sold.
• Statement 1 is incorrect: The tax doesn’t apply to unsold investments or “unrealized capital gains,” so stock shares will not incur taxes until they are sold, no matter how long the shares are held or how much they increase in value.
• Statement 2 is correct: In India, Capital gains are not applicable to an inherited property as there is no sale, only a transfer of ownership. The Income Tax Act has specifically exempted assets received as gifts by way of an inheritance or will. However, if the person who inherited the asset decides to sell it, capital gains tax will be applicable.

Q13. Which of the following statements is/are true about the taxation system in India?

1. Income Tax is both direct and progressive tax.
2. People below the poverty level are exempted from all kinds of taxes in India.

Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Answer – A

• Statement 1 is correct: A progressive tax is based on the taxpayer’s ability to pay. It imposes a lower tax rate on low-income earners than on those with a higher income. This is usually achieved by creating tax brackets that group taxpayers by income range. Income tax in India is a direct tax and it is progressive in nature
• statement 2 is incorrect: While everybody below a certain income level is exempted from income tax, they do pay indirect taxes when they buy any product from the market.

Q14. Which of the following are not among the features of Goods and Services Tax (GST) as implemented in India?

1. Under the GST regime, exports are zero-rated in the entirety
2. All taxes will be collected by the Center alone and then will be shared with the states.
3. GST rates are high in states with higher consumption and low in states with lower consumption to incentivize responsible consumption.

Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer – C

• Statement 1 is correct: Under the GST regime, exports are zero-rated in entirety, unlike the earlier system where refund of some of the taxes did not take place due to the fragmented nature of the indirect taxes between the Centre and states. HenceStatement 1 is a feature of GST.
• Statement 2 is incorrect: India has adopted dual GST. There would be two components of GST viz. Central GST (CGST) and State GST (SGST). The Centre will collect CGST and States/Union Territories will collect SGST/UTGST on all transactions of supply of goods or services or both. Owing to the 101st Constitutional Amendment, Central, as well as States/Union Territories, could simultaneously levy tax on the supply of goods & services. Hence statement 2 is not a feature of GST. Integrated GST is leviable on inter-state transactions. It is levied & collected by the Central Government. It is equal to CGST + SGST.
• Statement 3 is incorrect: Uniformity Tax Rates & Structures/Development of Common National Market: GST will ensure that indirect tax rates and structures are common across the country. It would increase the certainty and ease of doing business. In other words, GST would make doing business in the country tax-neutral, irrespective of the choice of place of doing business

Q15. Which of the following statements is/are correct about the Tax to GDP ratio in the context of India?

1. A high rate of taxation and a multitude of taxes make India a country with the highest tax-to-GDP ratio in the world.
2. Low tax-to-GDP ratio makes it difficult for the government to invest in social security and infrastructure creation.

Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer – B

• Tax-to-GDP ratio represents the size of a country’s tax kitty relative to its GDP. It is a representation of the size of the government’s tax revenue expressed as a percentage of the GDP. The higher the tax-to-GDP ratio the better financial position the country will be in.
• Statement 1 is incorrect: India’s tax-to-GDP ratio, the universal measure for a state’s revenue-raising ability, for centers and states combined was 17.1% in 2018-19, lower than the average of its emerging market peers (20.9%).
• Statement 2 is correct: A low tax-to-GDP ratio poses significant challenges for the government to spend money on creating necessary infrastructure in the economy and raising investment.

Q16. Consider the following statements:

1. E-way bill must be generated when there is a movement of goods and services of more than Rs 50,000 in value to or from a Registered Person.
2. Unregistered persons are never required to generate an e-Way Bill.

Which of the above statement(s) is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Answer – D

• Statement 1 is incorrect: The e-Way Bill is an Electronic Way bill for the movement of goods (not services) to be generated on the eWay Bill Portal. A GST-registered person cannot transport goods in a vehicle whose value exceeds Rs. 50,000
• (Single Invoice/bill/delivery challan) without an e-way bill that is generated on ewaybillgst.gov.in.
• Statement 2 is incorrect: Who should Generate an e-Way Bill?
• Registered Person: E-way bill must be generated when there is a movement of goods of more than Rs 50,000 in value to or from a registered person. A Registered person or the transporter may choose to generate and carry an e-way bill even if the value of goods is less than Rs 50,000.
• Unregistered Persons: Unregistered persons are also required to generate an e-Way Bill. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier.
• Transporter: Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the supplier has not generated an e-Way Bill

Q 17. With reference to the ‘Cess’, consider the following statements:

1. It is a type of tax that is levied to fulfill a specific purpose.
2. Cess imposed by the central government must also be shared with the State Governments as well.

Select the correct answer using the code given below
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer – A

• Statement 1 is correct: A cess is a form of tax levied by the government on tax with specific purposes till the time the government gets enough money for that purpose. Different from the usual taxes and duties like excise and personal income tax, a cess is imposed as an additional tax besides the existing tax (tax on tax). For example, the Swachh Bharat cess is levied by the government for cleanliness activities that it is undertaking across India. A cess is different from taxes as it is imposed as an additional tax besides the existing tax (tax on tax). Another difference lies in the way the revenue recovered from cess is maintained. While revenue from taxes like income tax is kept in the Consolidated Fund of India (CFI) and the government can use it for any purpose it deems fit, the revenue coming from cess is first credited to the Consolidated Fund, and the government may then, after due appropriation from Parliament, utilize it for the specified purpose.
• Statement 2 is incorrect: Another major difference between central taxes and cess is that the proceeds of a cess may or may not be shared with the state governments, while that of taxes have to be shared.

Q18. Which of the following statements related to Effective Revenue Deficit is correct?

(a) It is the difference between revenue expenditure and revenue receipts without an increase in the assets of the
Government.
(b) It is the difference between the revenue deficit and the grants for the creation of capital assets.
(c) It refers to the grants-in-aid given by the Central Government to the State
Governments for the creation of capital assets that are owned by the said entities.
(d) It is referred to as that component of the Revenue deficit which is transferred a liability for the coming generation.

Answer – B

• Option (b) is correct: Effective Revenue deficit is a new term introduced in the Union Budget 2011-12. While revenue deficit is the difference between revenue receipts and revenue expenditure, the present accounting system includes all grants from the Union Government to the state governments/Union Territories/other bodies as revenue expenditure, even if they are used to create assets. Such assets created by the sub-national governments/bodies are owned by them and not by the Union Government. Nevertheless, they do result in the creation of durable assets. Effective Revenue Deficit is the difference between revenue deficit and grants for the creation of capital assets.

Q19. Which of the following falls under the capital receipts component of the government of India?

1. Interest Receipts.
2. Recovery of loans and advances made by the union government to PSUs.
3. User charges
4. Disinvestment proceeds
5. Dividends from PSUs.

Select the correct answer using the code given below:

(a) 1, 3 and 5 only

(b) 1, 2 and 3 only

(c) 4 and 5 only

(d) 2 and 4 only

Answer – D

• Revenue receipts are recurrent receipts including taxes and non-tax sources.
  Revenue account expenditure is essentially the expenditure that does not create assets i.e. interest payments, defense, subsidies, and public
• Capital account receipts are recoveries of loans and advances made by the Union Government to States, UTs, and PSUs; fresh
  borrowing from inside the country and from abroad; disinvestment proceeds etc.
  Capital account expenditure is loans made to States, UTs and PSUs.
  Dividends from PSUs and user charges are non-tax revenue components of Revenue receipt.

Q 20. The N.K Singh committee has provided for ‘escape clauses’, for deviations up to 0.5% of GDP, from the stipulated fiscal deficit target.

Which of the following is/are among the criteria identified for invocation of the escape clause?

1. National Security Considerations.
2. Calamities of national proportions.
3. The severe collapse of agriculture.
4. Fall in real GDP for two consecutive
   years.

Select the correct answer using the code given below:
(a) 1, 2 and 3 only
(b) 1, 3 and 4 only
(c) 1, 2 and 4 only
(d) All of the above

Answer – A

• In 2017, the FRBM Review Committee headed by NK Singh said that the exceptional circumstances cited in the FRBM Act, 2003 were defined opaquely and were liable to misuse. In 2018, the FRBM Act was amended to specify three conditions upon which the escape clause can be invoked. First, overriding considerations of national security, acts of war, and calamities of national proportion and collapse of agriculture severely affecting farm output and incomes. Second, far-reaching structural reforms in the economy with unanticipated fiscal implications. Three, a sharp decline in real output growth of at least 3 percentage points below the average for the previous four quarters.

Q21. Consider the following statements about Incremental Capital Output Ratio (ICOR):

1. It is the additional capital required to increase one unit of output.
2. The lesser the ICOR, the more efficient the organization.

Which of the above statement(s) is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer – C

• Statement 1 is correct: Incremental Capital Output Ratio (ICOR) is the additional capital required to increase one unit of output. This ratio is used to measure the efficiency of an industrial unit or country as an economic unit.
• Statement 2 is correct: The lesser the ICOR, the more efficient the organization.

Q22. Which of the following is not accounted for in the estimation of Gross Domestic Product?

1. Services by housewives
2. Transaction of goods and services through barter
3. Service provided by an IT company

Select the correct answer using the code given below:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 2 only

Answer – B

• Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. Economists use gross domestic product to measure economic activity. However, despite the best efforts of the statisticians, some important parts of the economy never find their way into GDP estimates because they just aren’t counted even though they produce significant amounts of goods and services.
• Statements 1 and 2 are incorrect: The three most important parts of the economy that are left out of such analyses are black-market activities, barter, and unpaid work.

Q23. Which of the following terms correctly explains the meaning of the term GDP Deflator?

(a) The ratio of nominal GDP to real GDP is called GDP Deflator.
(b) The difference between nominal GDP and real GDP is called GDP Deflator
(c) The ratio of real to nominal GDP is called GDP Deflator.
(d) The difference between real GDP and nominal GDP is called GDP Deflator

Answer – A

• Option (a) is correct: Nominal GDP is calculated on the current prices while the Real GDP is calculated on the price of the Base year. GDP Deflator is the ratio of nominal to real GDP The GDP deflator, also called implicit price deflator is a measure of inflation. This ratio helps show the extent to which the increase in gross domestic product has happened on account of higher prices rather than an increase in output.

Q24. Consider the following statements:

1. Personal Disposable Income is the amount of money that an individual or household has to spend or save after income taxes have been deducted.
2. Real GDP is the value of GDP at the current prevailing prices.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer – A

• Statement 1 is correct: Disposable income, also known as disposable personal income (DPI), is the amount of money that an individual or household has to spend or save after income taxes have been deducted.
• Statement 2 is incorrect: Real gross domestic product (real GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (expressed in base-year prices) and is often referred to as constant-price GDP, inflation-corrected GDP, or constant-dollar GDP

Q25. Which of the following statements is/are correct about the Gender Inequality Index (GII)?

1. The Gender Inequality Index (GII) reflects women’s disadvantage in three dimensions – reproductive health, Nutrition and the labor market.
2. The share of parliamentary seats held by each gender is one of the parameters taken into account to prepare the index.

Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer – B

• Statement 1 is incorrect: The GII is a composite measure, reflecting inequality in achievements between women and men in three dimensions: reproductive health, empowerment, and the labor market. The health dimension is measured by the maternal mortality ratio and the adolescent fertility rate.
• Statement 2 is correct: The empowerment dimension is measured by the share of parliamentary seats held by each gender, and by secondary and higher education attainment levels. The labor dimension is measured by women’s participation in the workforce. The GII varies between 0 (when women and men fare equally) and 1 (when men or women fare poorly compared to the other in all dimensions). It is designed to reveal the extent to which national human development achievements are eroded by gender inequality and to provide empirical foundations for policy analysis and advocacy efforts.

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