MCQ ON HUMAN CAPITAL FORMATION

1. “Skill India” programme launched by the Government is not an attempt to increase ___________ in India. (Choose the correct alternative to fill up the blank) 

(a) human capital formation 

(b) efficient utilisation of inputs 

(c) increase in GDP growth 

(d) inadequate spread of vocational education 

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

Assertion (A): Human capital is not traded in the market; however, its services are traded.

Reason (R): Human capital is intangible in nature. 

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. 

3. Benefits of physical capital accrue only to private entities, whereas human capital provides private as well as _____________benefits. (Fill up the blank with correct alternative)

(a) profitable 

(b) social 

(c) fiscal 

(d) monetary 

4. Identify the sources of Human Capital Formation and choose the correct alternative to fill in the blanks.

Alternatives: 

(A) Expenditure on Health and Expenditure on Schools 

B) Expenditure on Technology and Expenditure on Knowledge

(C) Expenditure on Migration and Expenditure on Knowledge 

(D) Expenditure on Health and Expenditure on Migration 

5. Identify which of the following does not reflect a direct relationship between human capital formation and economic growth.

(a) Employability of an educated person is higher than that of an uneducated person. 

(b) On-the-job training will reduce the skills of labour.

(c) Healthy workforce is a boon to the economy. 

(d) Digital information helps in taking real time decisions. 

6. Read the following statements carefully:

Statement 1: Human development is based on the idea that education and health are integral to human well-being.

Statement 2: Human capital treats humans as a means to an end.

In light of the given statements, choose the correct alternative from the following:

(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.

7. Read the following statements carefully:

Statement 1: Economic growth means the increase in real national income of a country.

Statement 2: Human capital formation and Human development are one and the same concepts.

In light of the given statements, choose the correct alternative from the following:

(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.

8. Identify, which of the following are associated with the problem of human capital formation in India?

(i) Brain drain

(ii) Low academic standards

(iii) Rising population

(iv) Changes in social outlook

Alternatives:

(a) (i) and (ii)

(b) (ii) and (iii)

(c) (i), (ii) and (iii)

(d) (i) and (iv)

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

Assertion (A): Human capital cannot be traded in the market, whereas its services can be traded.

Reason (R): Human capital is intangible in nature.

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, but 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.

10. Read the following statements carefully.

Statement 1: On-the-job trainings help to bridge a gap between theoretical concepts and practical experiences.

Statement 2: On-the-job trainings update the employees, with the latest changes in their work field.

In the light of the given statements, choose the correct alternative:

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

11. Distinguish between human capital and physical capital.

Ans. Human capital refers to the stock of knowledge, skill and ability imbibed in the owner of the same, i.e.,human capital is inseparable from its owner. It cannot be sold in the market, only its services can be sold in the market. Whereas; Physical capital are the assets (plant and machinery, building etc.), which are tangible in nature. It is separable from its owner. It can be transacted in the market.

12. Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below: 

Assertion (A): The Education Commission (1964–66) had recommended that at least 4 % of Gross Domestic Product (GDP) be spent on education.

Reason (R): The Union and State Governments, have been stepping up expenditures in the education sector over the years to fulfil the objective of attaining cent per cent literacy.

Options:

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, but 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.

13. Dr. Khurana, a dentist, ran his clinic in an economically backward area. He was 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.

Ans. The expenditure incurred by Dr. Khurana on shifting his clinic from economically backward area to the city comes under the category of “Expenditure on migration”.

Expenditure on migration is the source of human capital formation. People migrate in search of jobs that fetch them higher salaries. Technically qualified persons like engineers and doctors, migrate to other areas because of higher incomes and better opportunities.

14. “In India, National Education Policy 2020 has stressed a lot on in-service training of the teachers.”

a. Identify the source of Human Capital Formation (HCF) indicated in the aforesaid statement.

Ans. On-the-job training is the source of Human Capital Formation (HCF) indicated in the aforesaid statement.

b. Elaborate the likely impacts of this source on the economic development of India.

Ans. On-the-job training has become an integral part of work environment in the recent times as it enhances the productive capacity of employees. It enables employees to develop skills and adapt to modern technologies. As a result of on-the-job training, an employee is likely to contribute more productively leading to the economic development of India.

15. “Active Government intervention is essential in education and health sectors in India.” Do you agree with the given statement? Give reasons in support of your answer.

Ans. Yes. Government intervention is essential in education and health care services as it creates both private and social benefits. Expenditure on education and health make substantial long-term impacts. Since, such impacts cannot be easily reversed the government intervention becomes essential.

16. "Expenditure on On-the-job training is an important means of human capital formation in an economy." Give valid reasons to justify the given statement.

Ans. On-the-job training has become an integral part of work environment in the recent times as it adds to the productive capacity of employees. Firms encourage such trainings, as the benefits outweighs the cost of these trainings. It enables employees to adapt newer technologies and modern ideas and is an important source of human capital formation.

17. “There exists a positive correlation between human capital formation and economic growth of a nation.” Justify the given statement with valid explanation.

Ans. Investment in human capital formation enhances efficiency, skill, and capabilities implying economic growth. Human Capital formation stimulates innovation and creates the ability to absorb new technology. Technical skills acquired through sources of human capital formation such as education, training, sound health, etc. add to productivity and production. Thus, human capital formation may accelerate economic growth.

18. Distinguish between 'Human Capital' and 'Human development'.

Ans. Human capital considers education and health as a means to increase labour productivity. Human capital treats human beings as a means to achieving the ultimate end of an increase in productivity. Whereas;Human development is based on the idea that education and health are integral to human well-being. Human development treats human beings as ends in themselves.

19. State and discuss any one recommendation of the Education Commission (1964-66).

Ans. The Education Commission (1964–66) had recommended that at least 6 % of GDP should be spent on education. This is required to make a noticeable rate of growth in educational achievements. This was expected to raise the academic standard in the post-independence era.

20. Explain the role of education in the economic development of the nation.

Ans. Education provides knowledge to understand changes in society and scientific advancements. It stimulates inventions and innovations in the economy. Similarly, the availability of educated labour force facilitates adaptation to new technologies. Technical skills acquired through education provide an opportunity to make better use of given resources thereby promoting economic development of the nation.

21. State, with valid reasons whether, the following statements are true or false:

(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.

Ans. (a) True. Investment in human resource stimulates innovation and creates ability to absorb new technology.

Technical skills acquired through sources of human capital formation such as education, training and sound health etc. helps labour supply to make better use of given resources. Hence, productivity and production increases.

(b) False. Rapid rise in population adversely affects the quality of human capital. It reduces per head availability of existing facilities that results in a fall in quality of life. In turn, this leads to a reduction in the capacity to acquire specialised skills and knowledge.

22. Explain the role of affordable healthcare facilities in promoting human capital in a country.

Ans. A healthy mind lives in a healthy body. The provision of affordable healthcare facilities adds to the supply of a healthy labour force. The productivity of a healthy person is relatively higher than that of an unhealthy person.

Hence, the availability of affordable healthcare facilities ensures an increase in labour productivity which leads to the promotion of human capital in a country.

23. “Expenditure on different levels of education in India is in the same proportion.” Defend or refute the given statement, giving valid reasons.

Ans. The given statement is refuted. In India, elementary education takes a major share of total education expenditure and the share of the higher/tertiary education is the least. Though, on an average, the government spends less on tertiary education, ‘expenditure per student’ in tertiary education is higher than that of elementary.

Moreover, the revenues from education cess have been earmarked for spending on elementary education. In addition to this, the government sanctions a large outlay for the promotion of higher education and new loan schemes for students to pursue higher education.

24. State whether the following statements are true/false, with valid arguments:

a) Human Capital and Human Development are one and the same thing

b) India has a poor stock of technical manpower

Ans (a) The given statement is not true to perfection. These two may sound similar but are not exactly same.Whereas, human capital considers education and health as a means to increase labour productivity, human development is based on the idea that education and health are integral to human wellbeing.

b) The given statement is not true. India has a rich stock of scientific and technical manpower in the world. Also, India has taken a number of steps to improve it qualitatively and ensure that they are optimally utilized.

25. “India has failed to implement the recommendations of Education Commission of 1964 -66.” Give valid arguments in support of the given statement

Ans The given statement is appropriate. Over the years India has not been able to raise the educational standards to the desired level. Education Commission of 1964-66 had recommended that at least 6 % of GDP should be spent on education so as to make a noticeable rate of growth in educational achievements. However, the current expenditure level has been quite inadequate. Thus, necessary steps must be taken by the government in this direction.

26. Ravya was initially working as an office clerk in a firm. In the pursuit to attain a higher position and income,she attended a few on-the-job training sessions. These sessions contributed positively to her skills and expertise.”

Explain the impact of Ravya’s decision on human capital formation.

Ans. On-the-job trainings have become an integral part of work environment in the recent times as they add to the productive capacity of employees. Firms encourage such trainings, as the benefits outweighs the cost of these trainings. It enables employees to develop skills and adapt modern technologies/ideas. Thus, Ravya’s decision to attend on-the-job training sessions will have a positive impact on human capital formation.

27. ‘It would be unclear to say that, the growth of human capital lays the ground for economic growth of a nation.’ Do you agree with the given statement? Support your answer with valid illustrations.

An increase in human capital causes economic growth is unclear, owing to the problems pertaining to the estimation of quantifiable relation between the two. Educational yardsticks like years of schooling, teacher-pupil ratio, enrolment rates etc. may not reflect educational quality accurately. Whereas, human capital measures may show convergence between developing and developed nations, however, there's no empirical evidence to prove income per capita convergence. Hence, education may improve, but cannot guarantee similar progress in real income across different countries.

Answer Keys

1. Ans. (d) inadequate spread of vocational education

2. Ans. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

3. Ans. (b) social

4. Ans. (D) Expenditure on Health and Expenditure on Migration

5. Ans. (b) On-the-job training will reduce the skills of labour.

6. Ans. (C) Both Statements 1 and 2 are true.

7. Ans. (a) Statement 1 is true and Statement 2 is false.

8. Ans. (c) (i), (ii) and (iii)

9. Ans. (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

10. Ans c). Both statements 1 and 2 are true

12. Ans. D. Assertion (A) is false, but Reason (R) is true.