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This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 601. |
Why has power crisis increased inIndia? |
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Answer» SOLUTION :Because its DEMAND is GREATER thanof SUPPLY. Value: Awarencess about efficient USE of power. |
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| 602. |
A situation in which a person is not willing to work at the existing wage rate |
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Answer» FULL employment |
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| 603. |
Give meaning of deficient demand in macroeconomics |
| Answer» SOLUTION :DEFICIENT demand refers to the situation when aggregate demand is less than aggregate SUPPLY corresponding to the FULL employment level in the economy. | |
| 604. |
Suppose the demand and supply curves of a Commodity-X is given by the following two equations simultaneously: Qd = 200 - p Qs =50 + 2p (i) Find the equilibrium price and equilibrium quantity. (ii) Suppose that the price of a factor of production producing the commodity has changed, resulting in the new supply curve given by the equation Qs' = 80 + 2p Analyse the new equilibrium price and new equilibrium quantity as against the original equilibrium price and equilibrium quantity. |
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Answer» Solution :(i) We know that the equilibrium price and quantity are achieved at, Qd = OS 200 - p = 50 + 2p (-) 3p = (-) 150 Therefore, Equilibrium Price p = 50 And, Equilibrium Price P = 50 And, Equilibrium Quantity q= 200 - 50 = 150 units (iii) If the price of factor of production has changed then under the new conditions, Qd = Os 200 - p = 802p (-) 3p = (-) 120 Therefore, Equilibrium Price p = 40 And, Equilibrium Quantity q = 200 - 40 = 160 units As, Intercept on X-axis of Supply equation , Os = 50 + 2p is 50 [By Putting Price (P) = 0] andIntercept on X-axis of supply equation, Os. = 80 + 2p is 80 [ By Putting Price (p) = 0 ]. Since, Intercept of X-axis INCREASES, Supply curve shiftsRightward as shown below: SO, equilibrium price falls from ₹ 50 to ₹40 and equilibrium Quantity rises from 150 units to 160 units. ` (##FM_M_ECO_XII_P1_C12_E02_070_S01.png" WIDTH="80%"> |
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| 605. |
When investment multiplier is 1, the value of marginal propensity to consume is zero. |
| Answer» Solution :Consider the following EQUATION:K = 1/1-MPCIf investment MULTIPLIER(K) is 1 we will get,1=1/1-MPCwhich implies Marginal propensity to consume(MPC) =0Thus, the above statement is true. | |
| 606. |
If the revenue receipts are ₹ 1, 000 crores and revenue expenditure is ₹ 1, 200 crore , how much will be the revenue deficit? |
| Answer» SOLUTION :REVENUE Deficit = Revenue Expenditure- Revenue Receipts = 1 , 200- 1, 000 = ₹ 200 crores. | |
| 607. |
Giving reasons, explain how the following are treated while estimating national income. (i) Purchase of a truck to carry goods by a production unit. (ii) Payment of income tax by a production unit. (iii) Services rendered by family members to each other. |
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Answer» (ii) It is a transfer PAYMENT to government and so not included. (iii) There are productive service because similar services are also AVAILABLE in the market. Conceptually the value of these services MUST be included, but in practics, IGNORED due to non-availability of data. |
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| 608. |
Whether the following changes by the ReserveBank will increase the money supply or decrease the money supply ? (i) Rise in CRR. (ii) Pruchase of securties in the open market (iii) RBI increses the margin from 40% to 60% (iv) RBI reduces the statutrory liquidity ratio (v) Decrease in bank rate. |
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Answer» Solution :INCREASE in MONEY SUPPLY:(ii),(iv),(V) Decrease in money supply:(i),(III) |
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| 609. |
Write down some of the limitations of using GDP as an index of welfare of a country. |
| Answer» Solution :Gross domestic product is the value of all good and services produced in a nation.It is being used by countries since 1930s to described the macroeconomic health ofa country. But its efficacy to be a parameter of development is coming underattacks by many economists and institutions all over the world. Its limitations asan index of welfare of a country can be summarised as:- It is the sum product of values of all good and services which can witness agrowth rate due to price rise.- Social indicators like level of education, health and position of women insociety are not part of GDP.- The growth may result from the growth of few and there can be an increasing GAPBETWEEN poor and rich.- Climatic factors are not included in GDP. The unsustainable exploitation mayresult in growth of GDP but can be dangerous for future generation.Level of freedom enjoyed by people and their personal well being andsatisfaction are not added to GDP.- As much of unorganised sector is beyond the calculation of GDP, it can not beregarded as representating the true nature of health of an economy.GDP is considered as an indicator of growth and not the development, which differsfrom growth in terms of quality of LIFE. GDP measures quantity and not quality.Also EFFECTS on different section can not be discerned by looking at GDP. This thereason why many institutions are coming with different indexes to measure thequality of life in a country. Although none of them can be considered aspresenting the whole PICTURE but they are much closer to the real situation ofsociety than GDP. | |
| 610. |
What is the difference between balance of trade and balance of payments? |
| Answer» Solution :Balance of trade records VISIBLE only WHEREAS balance of PAYMENTS records visible ITEMS, invisible items, unilateral TRANSFERS and capital transfers. | |
| 611. |
Police department is a part of this sector of the economy: |
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Answer» Primary SECTOR |
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| 612. |
Borrowing in government budget is : |
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Answer» REVENUE deficit |
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| 613. |
The most important change in Foreign Trade policy from 1991 onwards was: |
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Answer» Reducing RESTRICTIONS on imports |
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| 614. |
In an economy, investment increases by 120 crore. The value of multiplier is 4. Calculate MPC. |
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Answer» SOLUTION :`K=(1)/(1-MPC)` `4=(1)/(1-MPC) or 4-4MPC=1` `4MPC=4-1=3` `"HENCE" MPC=(3)//(4)=0.75` |
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| 615. |
What is meant by demand ? |
| Answer» SOLUTION :DEMAND is a quantity of a commodity that a consumer wishes to PURCHASE at a given level of price and during a specified period of TIME. | |
| 616. |
Giving reason explain how should the following be treated in estimating GDP_(MP) : Fees to a mechanic paid by a firm. |
| Answer» SOLUTION :No, as it is an INTERMEDIATE COST for the FIRM. | |
| 617. |
Government raises its expenditure on producing public goods. Which economical value does it reflect ? Explain |
| Answer» Solution :Increased expenditure by government on PUBLIC GOODS LIKE DEFENSE, maintaining law and order etc. increase their availability to the people of the country. For EXAMPLE more expenditure on maintaining law and order raises the sense of security among the people. any such expenditure raises welfare of the people. | |
| 618. |
Would a firm decide to invest if ROI=12% and MEI=8% |
| Answer» Solution :No, a FIRM would not DECIDE to INVEST iof ROI=12%and MEI=8% `ROI gt MEI` | |
| 619. |
Market for a good is in equilibrium. The supply of good "decreases". Explain the chain of effects of this change. |
Answer» Solution :When the market is in equilibrium, this implies that the market demand is equal to the market supply at the equilibrium point. Now, in case the market supply decreases, this leads to a leftwards shift in the market supply curve. This is because a decrease in supply refers to a fall in the supply of the given commodity due to change in factors other than price. Thus, in the given case the supply curve will shift towards LEFT. As a result, there will EXIST a situation of excess demand at the equilibrium point. This can be shown in the following diagram.  As the market supply decreases, the initial supply SHIFTS leftwards to the new supply curve `S_(2)P_(2)` from `S_(1)S_(1)`. Now at the initial market price of `OP_(1)`. There exists excess demand. This excess demand will increase competition among the buyers and they will now be ready to pay a higher price to acquire more units of a good. This will further raise the market price. The rise in the price will continue till the market price becomes `OP_(2)`. The new market supply curve intersects the initial demand curve. The total quantity SUPPLIED will fall to `Oq_(2)` and the new equilibrium price will rise to `OP_(2)`. |
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| 620. |
Because of cyclone in a coastal area the sea level covers a lot of rice fields. This reduces the productivity of land. How will it affect the supply curve of that region ? |
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Answer» Solution :With a fall in the productivity of the LAND the output of rice will fall. Less stocks will not be in a position to offer for sale. EVEN if the price of rice RISES, producers will not be in a position to offer more quantity for sale. Thus, the supply curve of rice will shift to the left. VALUE : ANALYTIC |
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| 621. |
How are following treated in the estimation of domestic factor income ? Compensation of employees to the residents of Japan working in Indian Embassy in Japan. |
| Answer» Solution :YES, it will be INCLUDED in the domestic factor INCOME as the Indian Embassy is a part of the domestic TERRITORY of India. | |
| 622. |
Differentiate between increase in supply and expansion in supply [increase in quantity supplied] |
Answer» SOLUTION :
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| 623. |
Calcualate MNP_(mp) {:(,,(Rs."crore")),((i),"Gross domestic fixed capital formation",80),((ii),"Government final consumption expenditure",150),((iii),"Closing stock",20),((iv),"Private final consumption expenditure",350),((v),"Net domestic capital formation ",70),((vi),"Opening stock",20),((vii),"Net imports",(-)30),((viii),"Factor income paid to abroad",15),((ix),"Net indirect tax",40),((x),"Facotor income recieved from abroad.",10):} |
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Answer» |
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| 624. |
Appreciation of domestic currency encourages |
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Answer» imports |
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| 625. |
Piyush's mother is a teacher. She also teaches Piyush. How would you treat this while calculating national income and domestic income ? |
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Answer» It will be INCLUDED in the national income, but not in the DOMESTIC income. |
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| 626. |
State the various components of the Expenditure Method that are used to calculate national income. |
| Answer» Solution :the various COMPONENTS of the Expenditure Method that are used to CALCULATE national income-1. PRIVATE Final Consumption Expenditure2. Government Final Consumption Expenditure3. Gross Domestic Capital Formation (GDCF) or Gross Investment:4. Net EXPORTS (X – M)5.depreciation6. Net factor income from abroad7. Net INDIRECT test | |
| 627. |
Are fiscal deficits necessarily inflationary ? |
| Answer» Solution :FISCAL deficits are not necessarily . However , if output is less because of lack of demand and high fiscal deficit is accompanied by higher demand and greater output and therefore it would not be inflationary as it is COVERING the gap REQUIRED for smooth FUNCTIONING of the economy by raising the level of aggregate demand . | |
| 628. |
Give the meaning of market supply |
| Answer» SOLUTION :It is the sum of the supply of a GOOD by all its producers at a given PRICE and for a given PERIOD of time | |
| 629. |
Distinguish between stock and supply . |
Answer» SOLUTION :
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| 630. |
Mention one main difference between a central bank and commerical bank |
| Answer» SOLUTION :The CENTRAL bank has SOLE currency authority wheras this authority is not enjoyed by a commercial bank | |
| 631. |
What is the rationale for not taking into account value of intermediate goods in the measure of GDP ? |
| Answer» SOLUTION :To AVOID the PROBLEM of DOUBLE COUNTING. | |
| 632. |
Explain with the help of diagrams, the effect of the following changes on the demand of a commodity: (i) A fall in price of Substitute good. (ii) A fall in price of Complementary good. |
Answer» Solution :(i) A fall in price in Substitute good:  (a) Substitutegoods are the goodsthan can be used in place of another goods and give the same satisfication to a consumer. (b) There would always exist a direct relationship between the price of substitute goodsand demandfor given commodity. (C) Due to fall in price of substitute (SayCoffeefrom Rs 550 to Rs 500), the demandof tea shift leftward from DD to `D_(1)D_(1)` as SHOWN in adjacement FIGURE: (ii) A fall in price of Complementary good  (a) Complementary goods are those which are useless in the absence of another good and which are demanded jointly. (b) There wouldalways exist an inverse realtionship between price of complementary goods anddemand for given commodity. (c) Due to fall in price of Complementary good (SAY Tea from Rs 550 to Rs 500),the demand of sugar shiftrightward from DD to `D_(1)D_(1)`asshown in given figure. |
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| 633. |
Explain with the help of diagrams, the effect of the following changes on the demand of a commodity: (i) A rise in price of Substitute good. (ii) A rise in price of Complementarygood. |
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Answer» Solution :(i) A rise in price of Substitute good (a)Substitute goods are the goods that can be used in place of another goods and give the same satisfication to a consumer.  (b)There would always exist a direct relationship between the price of substitute goods and demand for given commodity. (C ) Due to rise in price of substitute (Say Coffee from Rs 500 to Rs 550), the demand of tea and SHIFT rightward from DD to `D_(1)D_(2)` as shown in given figure: (II) A rise in price in Complementary good  (a)Complementary goods are those which are useless in the absence of another good and which are demanded jointly. (b) There would always exist an inverse relationship between price of complementary goods and demand for given commodity. (c ) Due to rise in price of Comple mentary good (Say Tea from Rs 500 to Rs 550), the demand of SUGAR shift LEFTWARD from DD to `D_(1)D_(1)` , as shown in given figure. |
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| 634. |
When the price of a commodity falls by Rs. 2 per unit, its quantity demanded increases by 10 units. Its price elasticity of demand is (-)1. Calculate its quantity demanded at the price before change which was Rs. 10 per unit. |
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Answer» Solution :`{:("PED" =[-]1" Given"),("Price before change [Initial Price] P = 10Initial QUANTITY "(Q)=?),("New Price "[P_(1)]=8 "New Quantity " (Q_(1))=?),(Delta P=-2" [Given]" Delta Q=10):}` `PED=(Delta Q)/(Delta P)xx(P)/(Q) "or" (-)1=(10)/((-)2)xx(10)/(Q)` `Q=(100)/(2)=50` So, the quantity demanded at price before change [P], i.e., 10, is equal to 50. |
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| 635. |
In a government budget , revenue deficitis ₹ 50 , 000 crores and borrowings are ₹ 75 , 000 crores . How much is the fiscal deficit ? |
| Answer» SOLUTION :₹ 75 , 000 CRORES (as fiscal DEFICIT is equal to the borrowings). | |
| 636. |
Explainthe workingof moneymultiplerwith helpof a numberical example. |
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Answer» Solution :Moneymultiplier refersto theprocessof CREATION of creditby thecommercial banks, with the help of initial depositmade bythe public and legal reserve ratio. It is calculated as : `"Money MULTIPLIER"=("1")/("Legal Reserve Ratio(LR R)")` Suppose there is an initial depositof ₹ 1,000 crores and the legalreserve ratio is 10 %, then `"Money Multiplier"=("1")/("LR R")=(1)/(0.1)=10` TOTAL Deposit = Initial Deposit `xx` Money Multiplier `= 1,000 xx 10= ₹ 10,000` crores |
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| 637. |
Which of the following instrumentcannotbe usedby Central Bank to control money supply ? |
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Answer» Open marketoperation |
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| 638. |
What role of RBI is known as lender of last resort? |
| Answer» Solution :This FUNCTION of the central bankis regarded as the basic IMPORTANT function of central banking system. The central bank acts as a LENDER of the last resort for COMMERICAL bannks .When commerical banks fail to meet obligations of their depositors the central bank hepls them .The central bank advances rquired credit against APPROVED securities .It gives financial accommodation to commerical banks | |
| 639. |
If the total product curve is a straight line through the origin, what would be the shape of the average product and marginal product curves look like? |
Answer» SOLUTION :When total product curve is the straight line through the origin, total product increases at a CONSTANT rate and the average and MARGINAL product CURVES would coincide and be a horizontal line, Average Product and Marginal product are constant regardless of the amount of input used. It can be seen with the help of following schedule and diagrams. 
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| 640. |
Can purchase of a new car be categorised as an intermediate good? |
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Answer» |
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| 641. |
How should the following be treated in estimating national income of a country ? Give reasons. Taking care of aged parents. |
| Answer» Solution :Yes, as it is GENERATION of services towards aged parents and expenditure INCURRED thereon is a part of private FINAL CONSUMPTION expenditure. | |
| 642. |
Deficient demand can be corrected by reducing |
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Answer» CRR |
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| 643. |
An economy is in equilibrium. From the following data about an economy calculate autonomous consumption. (a) lncome = 5000 (b) Marginal propensity to save = 0.2 (c) Investment expenditure = 800 |
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Answer» Solution :`Y=C+I` `Y=OVERSET(-)C+MPC(Y)+I` `5000=overset(-)C+(1-0.2)(5000)+800` `overset(-)C=5000-8//10xx5000-800` `overset(-)C=5000-4000-800` `=200` |
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| 644. |
An increase in the supply of a good is caused by : |
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Answer» IMPROVEMENTS in its technology. |
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| 645. |
If marginal revenue is equal to the total cost, producer is in equilibrium. |
| Answer» SOLUTION :False: Producer is in EQUILIBRIUM when MARGINAL revenue is equal to marginal COST. | |
| 646. |
Distinguish between balance of trade and balance on current account. |
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Answer» Solution :Balance of TRADE is CONFINED to the DIFFERENCE between Export of Goods and Imports of Goods. On the other hand, the Balance of current account of a country includes payments and receipts relating to visible trade (export and import of goods), invisible (services) and unilateral transfers. Thus, Balance of trade is a RESTRICTED term in coomparison to Current account balance. |
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| 647. |
Explain the concept of buffer stock as a tool of price floor. |
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Answer» Solution :(i) Government ensures price Floor/ minimum Support price with the tool called buffer stock. (ii) If government feels market price is LOWER than what it ought to be, it WOULD PURCHASE the commodity at higher price from the farmers, PRODUCERS so as to maintain stock. (iii) Government maintain this buffer stock with itself and they real eased in case of shortage of the commodity in future. |
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| 648. |
Primary Deficit is borrowing requirements of government for making "___________" : (Choose the correct alternative ) |
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Answer» INTEREST payments |
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| 649. |
Give the formula for measuring price elasticity of demand according to point method. |
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Answer» Solution :Elasticity of DEMAND (ED) Lower SEGMENT of `=("demand curve (LS)")/("Upper Segment of demand curve (US)")` |
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| 650. |
Which one of the following statements is true to the relationship among the average cost functions? |
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Answer» `ATC = AFC - AVC.` |
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