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901.

If supply curve touches X-axis, elasticity of supply is greater than one ?

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Solution :False : When SUPPLY curve TOUCHES X-axis, `ES LT 1` ALWAYS.
Discussion
902.

A farmer is getting more profit by producing opium rather than that of wheat. In situation of famine which crop should be produced?

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Solution :Production of wheat. Because in situation of famine, food grain LIKE wheat is REQUIRED more than opium.
VALUE: Social welfare
Discussion
903.

Fiat money is the same as Fiduciary money .

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ANSWER :False as fiat money is the money BACKED by the order ( fiat ) of the government but fiduciarymoney is the money backed by mutual trust between the PAYER and the PAYEE.
Discussion
904.

If equilibrium price of a good is greater than its market price, explain all the changes that will take place in the market. Use diagram.

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Solution :When equilibrium PRICE of a good is more than its market price, then there will be competition among the BUYERS. This is because when the equilibrium price of a good is above the market price then it implies that there is a situation of excess demand.
This is explained with the help of the following diagram:

From the above figure, we can analyse that the market demand curve DD and the market supply curve SS intersects each other at the point 'E', which is KNOWN as equilibrium. The corresponding price and quantity are REGARDED as equilibrium price and equilibrium quantity, `OP_(e) and OQ_(e)`.
In other words, if the market price `P_(s)` is below the equilibrium price then at this price the market demand is more than the market supply. This implies a situation of excess demand. Thus, due to this the competition will exist among the buyers.
Discussion
905.

What is induced consumption?

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Solution :CONSUMPTION expenditure inducedby the LEVELOF INCOME in induced consumption.
Discussion
906.

When price remains constant at all level of output, total revenue

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increase at INCREASING rate
increases at diminishing rate
increases at CONSTANT rate
None of these

Answer :(C )
Discussion
907.

State whether money supply is a stock variable or flow variable

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SOLUTION :It is a STOCK VARIABLE because it is MEASURED at a particualar POINT of time
Discussion
908.

A straight line supply curve cuts the Y-axis in its positive range. What is the elasticity of supply ?

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SOLUTION :HIGHLY elastic `(ES GT 1)`
Discussion
909.

Calculate Total Variable Cost, Total Fixed Cost, Total Cost, Average Fixed Cost, Average Variable Cost, Average Total Cost. {:("(i) Rent","10,000"),("(ii) Number of workers employed","50"),("(iii) Salary paid to each worker","200"),("(iv) Interest on capital","5,000"),("(v) Raw material purchased","6,000"),("(vi) Total quantity produced","100"),("(vii) Insurance premium paid","1,500"):}

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SOLUTION :`"TVC"="RAW material purchased"+"salary " ("no. of workers "xx" salary paid to each WORKER")`
`=6000+(200xx50)=6000+1000=16,000`
`TFC="Rent"+"INTEREST on capital"+"Insurance PREMIUM paid"`
`=10000+5000+1500=16500`
`TC=TVF+TFC=16,000+16500=32,500`
`AFC=165`
`AVC=160`
`ATC=325`
Discussion
910.

Draw TVC, TC, and TFC curves in a single diagram.

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Solution :(i) TC is divided into two PARTS TFC and TVC such that `TC = TFC + TVC`.
(ii) TFC is the overhead cost and it remains constant or fixed whatever be the level of output. TFC curve is a horizontal line parallel to the x-axis.
(iii) TVC is cost due to increased use of VARIABLE FACTORS like RAW material, labour, etc. TVC is inverse S-shaped starting from the origin due to law of variable proportion.
(iv) TC is aggregate of TFC and TVC. TC curve is inverse S-shaped starting from the level of fixed cost. The reason BEHIND it shape is the law of variable proportion.
Discussion
911.

State the effect of rise in the price of foreign currency on the Balance of Payments situation.

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Solution :Rise in price of foreign currency will MAKE imports COSTLIER. So, imports will FALL and it will be favorable for Balance of Payments as demand for foreign EXCHANGE will FAIL.
Discussion
912.

Classify the following as factor income or transfer income Old age pension received by public.

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SOLUTION :TRANSFER INCOME
Discussion
913.

If the PPF is linear, i.e., a straight line, which one of the following statements is true?

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As the production of a good increases, the opportunitycost of that good RISES.
As the production of a good increases, the opportunity cost of that good falls.
Opportunity COSTS are constant.
The economy is not at full employment when operating on the PPF.

Answer :C
Discussion
914.

Give the two approaches for determining equilibrium.

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Solution :Two approaches for determining equilibrium are:
(a) Aggregate DEMAND and aggregate supply APPROACH. Equilibrium is achieved when planned expenditure of the ECONOMY (AD) is EQUAL to the planned supply level of goods and services (AS) ie., when AD=AS ltbgt (b) Savings and investment approach. Equilibrium level of income is determined at the level where plarned savings are equal to the planned INVESTMENTS, ie, when S=I
Discussion
915.

Average revenue is the revenue earned……..

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PER UNIT of input
per unit of output
different UNITS of input
different units of output

Answer :(B)
Discussion
916.

What is the major reason for increase in supply of foreign currency when its prices rises?

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Solution :When price of foreign exchange rises, EXPORTS are ENCOURAGED, as it makes INDIAN goods chepater to other countries e.g., if exchange rate rises from RS 50 to Rs 60 for one dollar, it means America can buy more goods with one dollar, hence supply increases.
Discussion
917.

Mrs Ramgopal says that economists say inconsistent things: as price falls, demand rises but as demand rises, prices rises. Defend or refute.

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Solution :We defend the statement of Mrs Ramgopal. As PRICE falls, demand rises. According to LAW of Demand, there is inverse relationship between demand and price. Lesser price leads to higher demand.
Demand = f (price)
When demand rises, prices also rises. Price is function of twin forces of demand and supply.
Price = f (demand, supply)
In the given FIGURE, price is measured onverticalaxis and quantity demanded and suppliedis measured on horizontal axis. Initially, the equilibrium price is OP and equilibrium quantity is OQ.
But due increase in demand , the demand curve shifts RIGHTWARD from DD to `D_(1) D_(1)` .
With new demand curve ` D_(1) D_(1)` there is excess demand at initial price OP because at price OP, demand is PB and supply is PA, so there is excess demand of AB at price OP.
Due to this excess demand, competition among the consumer will raise the price. With the rise in price, there is upward movement along the demand curve (contraction in demand) from B to C and similarly, there is upward movement along the supply curve (expansion in supply) from A to C. So, finally equilibrium price rises from OP to `OP_(1)`. So, demand rises, price rises.
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Discussion
918.

Expalin the meaning of under-employment equilibrium.

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Solution :Underemployment in an economy IMPLIES that workers have to settle for jobs that REQUIRE less SKILL than they possess, or that offer lower WAGES or fewer hours than they would like. The degree of underemployment is dictated by the strength (or lack thereof) of the job market, and tends to rise when the economy and employment are weak. Advocates of Keynesian economics suggest that a solution to an underemployment equilibrium state is through deficit spending and monetary POLICY to stimulate the economy.
Discussion
919.

As output is increased, the difference between average total cost and average variable cost falls and ultimately becomes zero.

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SOLUTION :False: It is so because the DIFFERENCE between ATC and AVC is AFC and AFC can never be zero.
Discussion
920.

"It is no part of the government's duty to finance the ailing PSUs". Comment.

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SOLUTION :To some extent I would AGREE with the above statement. However, if it is in the LARGER interest of the society/employees or it is of national IMPORTANCE (forexample, Air India) the GOVERNMENT should take possible steps to bail out such PSUs.
Discussion
921.

Are the following statements true or false ? Give reasons.Income tax is a direct tax as its impact and incidence is on the same individual.

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SOLUTION :TRUE. Its BURDEN cannot be SHIFTED on OTHERS.
Discussion
922.

Capital account includes those transactions which

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AFFECT ASSETS and liabilities STATUS of a country
do not affect assets and liabilities status of a country
lead to infow of foreign exchange
all of these

Answer :A
Discussion
923.

A consumer is in equilibrium if he earns the maximum profit.

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Solution :False : Because CONSUMER should GET the MAXIMUM satisfaction from his purchases in the state of EQUILIBRIUM .
Discussion
924.

Surplus in BOP arises when:

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AUTONOMOUS PAYMENTS `GT` Autonomous RECEIPTS
ACCOMMODATING Receipts `gt` Accommodating Payments
Accomodating Payments `gt` Accommodating Receipts
Autonomous Receipts `gt` Autonomous Payments

Solution :D. Autonomous Receipts `gt` Autonomous Payments
Discussion
925.

Direct tax is called direct because it is collected directly form: (Choose the correct alternative)

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The PRODUCERS on GOODS PRODUCED
The SELLERS on goods sold
The BUYERS of goods
The income earners

Solution :The income earners
Discussion
926.

Are the following statements true or false ? Give reasons. National Income is always more than the Domestic Income .

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SOLUTION :FALSE . National Income can also be LESS than domestic income , when net factor income from ABROAD is negative . National Income is always more than the Domestic Income only when net factor income from abroad is positive.
Discussion
927.

What is the slope of budget line ?

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Solution :The slop of BUDGET line
`("Vertical (Y - axis ) INTERCEPT ")/("HORIZONTAL ( X - axis ) intercept")`
`((M)/P_2)/(M/P_1)=P_1/P_2`
Discussion
928.

What is economics?

Answer»

Solution :Economics is about STUDYING economic problems arising due to limited means (having ALTERNATIVE uses) in RELATION to unlimited WANTS.
Discussion
929.

Give the meaning of propensity to save. Discuss, in brief, the two types fo propensities to save.

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Solution :Propensity to save is the proportion of total INCOME or of an increase in income that consumers save RATHER than SPEND on GOODS and services.There are 2 types of propensity to save1. APS2. MPS
Discussion
930.

On a demand curve where it touches X-axis elasticity of demand is Infinity ?

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SOLUTION :FALSE : here ED = 0
Discussion
931.

Price discrimination is one of the features of ……………………. .

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MONOPOLISTIC competition
monopoly
perfect competition
oligopoly

Answer :B
Discussion
932.

Production Possibilities Curve is also known as

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1.Demand CURVE.
2.Supply curve
3.Indifference curve
4.Transformation curve

Answer :d
Discussion
933.

Explain how the level of effective demand is attained In an economy if Aggregate Demand is more than the Aggregate Supply.

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Solution : EFFECTIVE demand refers to that level of output where Aggregate demand is equal to the Aggregate supply. If Aggregate Demand exceedsAggregate Supplyit MEANS buyers are planning to buy more goods and services than producers are planning to produce. Thus, the inventories in hand with the producers will start falling. As a result, producers will plan to raise the production. This will INCREASE the level of INCOME up to the level Aggregate Demand is equal to Aggregate Supply.
Discussion
934.

Draw and define a production possibility curve. Why is it downward sloping left to right ? Or Why is PPC concave to the origin? Explain.

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Solution :Production possibility curve is a curve which DEPICTS all possible combinations of two goods which can be produced with given resources and technology in an economy.
Properties of Production Possibility Curve
(i) PPC is downward sloping: The downward slope of PPC means if the country wants to produce more of one good, it has to produce LESS quantity of the other goods.
(ii) PPC is concave to the point of origin: Concave shape of PPC impliesthat the slope of PPC increases. Slope of PPC is definedas the quantity of goods Y given up in EXCHANGE for additional unit of goods X.
[Slope of Production Possibility Curve]
`=(DeltaY)/(DeltaX)=("Amount of Good Y lost")/("Amount of Good X gained")`
[Slope of PPC] = MRT = [MARGINAL Opportunity COST]
Discussion
935.

In which run some factors of production are fixed and others are variable?

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SOLUTION :SHORT RUN.
Discussion
936.

How can RBI help in bringing down the foreign exchange rate ?

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Solution :RBI can START selling foreign exchange from its reserves raising supply of foreign exchange in the market for foreign exchange. Demand for exchange REMAINING UNCHANGED it will BRING down foreign exchange rate
Discussion
937.

_______ are not included in national income if it is calculated at factor cost.

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ANSWER :INDIRECT TAXES (GST)
Discussion
938.

Explain the implication of the following: The feature of ‘no close substitutes’ under monopoly.

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Solution :No close substitute:
(i) A monopolist produces all the OUTPUT in a PARTICULAR market. So, there is no close substitute in monopoly.
(ii) The monopolist is a .price-maker.. It does not mean that monopolist can fix both price and the quantity demanded. If he fixes a high price, less COMMODITY will be demanded.
(iii) Implication: The result is an inelastic demand curve as shown in Figure. The demand curve is a CONSTRAINT facing a monopoly firm. Demand curve is also the price line and the AR curve. Since AR is downward sloping, MR lies below AR curve and is TWICE as steep as the AR curve.
Discussion
939.

What is meant by depreciation of domestic currency?

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Solution :It is FALL in value of domestic currency in TERMS of foreign currency under a system of MARKET determined rate of exchange.
Discussion
940.

Explain the feature of few firms in an oligopoly market.

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SOLUTION :(i) The number of sellers in an oligopoly market is small-when there are two or more than two, but not many sellers.
(ii) What matters is that these few sellers account for most of the INDUSTRY.s sales.
(iii) These "few" sellers CONSCIOUSLY dominate the industry and indulge in intense COMPETITION. Each firm is aware of that it possesses a large degree of monopoly power.
(iv) For example, the market for MOBILE service provider in India is an oligopolist structure as there are only few producers of mobile service provider. There exists severe competition among different firms and each firm tries to manipulate both prices and volume of production to outsmart each other.
Discussion
941.

Sugar purchased by a Sweet shop is an "_______" good , while is a "______" good when it is purchased by a consumer .

Answer»

capital , FINAL
final , intermediate
intermediate , final
final , producer

Solution :C. Sugar PURCHASED by a SWEET shop is an `"intermediate"` good , while is a `"final "` good when it is purchased by a consumer .
Discussion
942.

Classify the following as intermediate goods or final goods : Machine purchased for installation in a factory.

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SOLUTION :FINAL GOODS
Discussion
943.

Assuming that increase in investment is 1000 crore and marginal propensity to consume is 0.9, explain the working of multiplier.

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Solution :Remember multiplier works through consumption i.e., consumption expenditure of one person is other person's income. For example expenditure of A is income of B, B's expenditure is income of C and so on until expenditure BECOMES nil.
In the above question increase in investment `(DeltaI)` is? 1000 and MPC = 0.9 or 9/10. Income increases in the foUowing sequence.
Round 1 : first impact of investment of Rs 1000 rises income by Rs 1000 of those who supply (produce) goods.
Round 2 : Since MPC = 0.9, income earners spends on consumption Rs 900 (= 9/10 of 1000) lending to income increase of Rs 900.
Round 3: Income earners SPEND Rs 810 (9/10 of 900) on consumption lending to THIRD round of income increase of Rs 810.
In similar way income goes on increasing round after round with each round increasing by 9/10 of PREVIOUS round.
Thus, total increase in income is :
`K=(DeltaY)/(Delta I)or DeltaY=KxxDeltaI=DeltaIxx(1)/(1-MPC)`
`DeltaY=DeltaIxx(1)/(1-MPC)`
`1000xx(1)/(1-0.9)=1000xx(1)/(1//10)=1000" crore"`
Discussion
944.

Let the production function of afirm be Q=2L^(2) K^(2). Find out the maximum possible output that the firm can produce with 5 units of L and 2 units of K. What is the maximum possible output that the firm can produce with zero unit of L and 10 units of K?

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SOLUTION :(i) `Q=2L ^(2) K^(2) ` (Given)
`Q=2 xx 5^(2) xx 2^(2) `
`Q=2 xx25xx4=200` units.
So, the maximum POSSIBLE output
`(Q)=200` units.
(ii) `Q=2L^(2) K^(2)` (Given)
`Q=2 xx 0^(2) xx 10^(2)`
`Q=2 xx 0 xx 20 =0`
So, the maximum possible output (Q) `=0` units.
Discussion
945.

Operating Surplus is:

Answer»

PROFIT
Profit+rent
Profit+rent+interest
Profit+rent+royalty+interest

Answer :D
Discussion
946.

In an econoly, industry P sells output to Q. Q sells output to R for Rs. 600. Q's value added is 1//2 of P's value added. Assuming P's value of inputs are0, caluclate how much P sells to Q.

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Solution :Suppose, Sales by P to Q= x

VALUE added by firm P=x-0=x
Value added by firm Q=600-x
Given, Q's value added is `1//2` of P's value added
It MEANS : `600-x=(1)/(2)x " or " (3)/(2)x=600 " or x=Rs. 400`
Discussion
947.

_________issue 1 currency notes in india:

Answer»

MINISTRY of GOVT and consumer services
Ministry of finance
RBI
COMMERCIAL banks

Answer :B
Discussion
948.

Giveaformulaof investmentmultiplier(k).

Answer»

SOLUTION :`K=(DeltaY)/(Delta I)or(1) /(1-MPC) or (1)/(MPS)`
Discussion
949.

The coefficient of PES is 3. A seller supplies 30 units of this commodity at a price of 10rs per unit. How much quantity of it will he supply when its price rises by 12%.

Answer»

Solution :
PES `=(DeltaQ)/(DeltaP)xx(P)/(Q)`
`3=(DeltaQ)/(1.2)xx(10)/(30)`
`DeltaQ=(108)/(10)=10.8`
As PRICE increases,quantity suppliedalso increases as per law of SUPPLY
New Quantity =INITIAL Quantity+DeltaQ =30+10.8=40.8`
Discussion
950.

Define capital formation.

Answer»

Solution :It refers to ADDITIONS MADE to the axisting stock of CAPITAL during the year.
Discussion