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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.
| 1001. |
Government of India has recently launched 'Jan-Dhan Yojna' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country. |
| Answer» Solution :With the 'Jan Dhan Yojna' a greater number of individuals are brought under the ambit of banking system. Those individuals who earlier did not have SAVINGS account now have ACCESS to banking facilities and have opened savings account with the COMMERCIAL banks. In this why, the commercial banks are able to tap greater saving which in turn can be used to lend loans for investment purposes. THUS, the yojna indirectly helps in increasing the investment and production in the economy which in turn would help in improving the NATIONAL income. | |
| 1002. |
Giving reason explain how should the following be treated in estimating GDP_(MP) : Interest paid by an individual on a car loan taken from a bank. |
| Answer» SOLUTION :No, as the loan AMOUNT is used for CONSUMPTION PURPOSE. (not used for PRODUCTION purpose). | |
| 1003. |
What is moral suasion ? |
| Answer» Solution :Moral SUASION refers to combination of PERSUASION and PRSSURE that central BANK uses to get banking SYSTEM inline with its policy | |
| 1004. |
What is the break-Even point? |
| Answer» Solution :Break EVEN POINT refers to the point at which CONSUMPTION is equal to (national) income i.e. SAVING and zero. | |
| 1005. |
What is alega tender? What is a fiatmoney? |
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| 1006. |
Giving reasons comment on the shape of Production Possibilities curve based on the following schedule: {:("Good X (units)","Good Y (units)"),(0,16),(1,12),(2,8),(3,4),(4,0):} |
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Answer» Solution :Based on the schedule given below, we can say that PPC is a downward sloping straight line. This is because the OPPORTUNITY cost of producing one good (i.e. Good X) in terms of another (i.e. Good Y) remains the same, that is, 4 (IGNORING the minus sign). `{:("Good X","Good Y","Opportunity"),("(units)","(units)","Cost"),(0,16,-),(1,12,4),(2,8,4),(3,4,4),(4,0,4):}` The FOLLOWING figure depicts the shape of PPC.  THUS, the shape of PPC is downward sloping straight line WHICHCAN be attributed to the constant opportunity cost. |
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| 1007. |
Ananya makes the following transactions. Discuss the impact of each transaction on the National Income of the country. (i) She sells her car for Rs. 80,000. (ii) She pays Rs. 5,000 as commission to the broker on sale of car. (iii) She imports an Apple i-pod for Rs. 7000 (iv) She buys a new car for Rs. 9,00,000. (v) She purchases an antique painting for Rs. 4500. (vi) She purchased shares of Reliance industries for Rs. 12,000. (vii) She pays interest of Rs. 2,000 on loan taken from ICICI to buy the new car. |
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Answer» Solution :(i) No impact as transactions of second hand goods are not part of National Income. (ii) YES, this amount will be included in National as it is the income of broker for his productive services. (iii) National Income will be less by this amount of import. (IV) Yes, it will be included as it is a part of PRIVATE final consumption EXPENDITURE. (v) No impact as it is not a transaction involving goods produced in the current year. (vi) No impact as it involves a change of title only and does not contribute to any productive activity. (vii) No impact as it is a non-factor payment because the LOAN is not used for production but for consumption. |
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| 1008. |
Explain the term capital expenditure of the government . |
| Answer» Solution :Capital expenditure is the expenditure on creation of assets or REDUCTION in liabilities of the government e.g., CONSTRUCTION of roads , BUILDINGS , BRIDGES and REPAYMENT of loans . | |
| 1009. |
In the short run, when the output of a firm increases, its average fixed cost: |
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Answer» INCREASES. |
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| 1010. |
The price elasticity of demand for a good is 0.4. If its price increase by 5 per cent, by what percentage will its demand fall ? Calculate. |
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Answer» Solution :`E_(p) = ("Percentage change in QUANTITY demanded")/("Percentage change in price")` `-0.4 = ("Percentage change in quantity demanded")/(5)` `-2 =` Percentage change in quantity demanded `:.` Quantity decreases by 2% or Demand FALLS by 2% |
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| 1011. |
Small scale units are differentiated from large scale units on the basis of: |
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Answer» VOLUME of output |
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| 1012. |
State whether monly supply is a stock variable or flow variab,le |
| Answer» SOLUTION :Money supply is a STOCK variable because it is EXPRESSED at a particular point of TIME. | |
| 1013. |
What is the difference between balance of trade and current account balance? |
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Answer» Solution :Balance of trade refers to the difference between EXPORTS and imports of goods(visible items). Where as current account balance is the difference between i) Exports and imports of goods. ii) Exports and imports of services. iii) Receipts and PAYMENTS of UNILATERAL transfers. IV) INCOMES received and paid on investment and work. |
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| 1014. |
Distinguish between current account and capital account of balance of payments account. Is import of machinery recorded in current account or capital account? |
| Answer» Solution :The FOLLOWING are the major differences between current account and capital account:Current account records the trading in goods and services in the current PERIOD. Capital Account records the movement of capital in and out the economy.Current Account shows the net income of the country, whereas Capital Account shows the change in the ownership of the nation’s assets.Current Account is mainly concerned with RECEIPTS and payment of cash and non-capital items. Conversely, Capital Account has thoroughly considered the sources and application of capital.The key components of current account are export and import of goods and services, the investment the income and current transfers. On the other hand, foreign direct investment, portfolio investment and Loans by the government of one country to the government of another country are the key components of Capital Account.Import of MACHINERY is recorded in Capital Account. | |
| 1015. |
Real flow is also known as: |
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Answer» NOMINAL flow |
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| 1016. |
Classify the following as factor income or transfer income Rent received by the owner of a factory building from the industrialist. |
| Answer» SOLUTION :FACTOR INCOME | |
| 1017. |
Calculate APC and MPC. |
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Answer» |
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| 1018. |
Identify the following as Microeconomic study or Macreconomic study Aggregate supply. |
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Answer» |
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| 1019. |
When marginal cost rises, average cost will also rise. |
| Answer» Solution :False: AC can fall even when MARGINAL cost is rising. It is so because MC is confined to single unit, i.e., why it falls RAPIDLY and rise rapidly. As, average cost is shared by all the UNITS of the COMMODITY, i.e., why it falls gradually and rise gradually. | |
| 1020. |
Is the study of sugar industry a Macroeconomic or Microeconomic study ? |
| Answer» SOLUTION :MICROECONOMIC STUDY. | |
| 1021. |
Name two components of government budget . |
| Answer» SOLUTION :The two components of GOVERNMENT budget are : (i) Revenue budget(ii) CAPITAL budget . | |
| 1022. |
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments ? |
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Answer» SOLUTION :Aggregate final EXPENDITURE should be equal to aggregate factor payment i.e., income earned by all factors of production becausee value added at factor cost by all the PRODUCERS is distributed as income to LAND, labour, capital and entrepreneur for their factor services. Important : Treatment of following items in the calculation of Domestic income and National income `**""`While considering a PARTICULAR item a part of domestic income, identify the place i.e., whether it is a part of domestic territory of India. `**""`While considering a particular item a part of National income, identify the person/country who will enjoy/spend it. |
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| 1023. |
For a non-viable industry where does the supply curve lie relative to demand curve? |
| Answer» SOLUTION :SUPPLY CURVE LIES above the DEMAND curve. | |
| 1024. |
Government raises its expenditure on producing goods. Which economic value does it reflect ? |
| Answer» SOLUTION :Increased expenditure on public goods like defence, maintaining LAW and ORDER, expanding educational and medical facilities etc. have POSITIVE impact and raises welfare of the people. | |
| 1025. |
There are train and bus services between New Delhi and Jaipur. Suppose that the train fare between the two cities comes down. How will this affect demand curve for bus travel between the two cities? |
| Answer» Solution :Demand curve for bus travel will shift towards left. It happens because PRICE of substitute (TRAIN fare) has decreased and it will make the bus travel relatively COSTLY. | |
| 1026. |
Value addition can also take place even when the commodity does not go through any transformation. |
| Answer» Solution :TRUE. It happens when a commodity is purchased for resale. For example, if a mobile shop sells a mobile for Rs. 7000 after purchasing it for Rs. 6100 then there is no transformation in mobile, YET VALUE ADDED is Rs. 900. | |
| 1027. |
In aclosed economy,------ isnot included. |
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Answer» Households |
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| 1028. |
Are the following a part of a country's net domestic product at market parice ? Explain. (i) Net indirect taxes (ii) Net exports (iii) Net factor income from abroad (iv) Consumption of fixed capital. |
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Answer» SOLUTION :(i) Yes, net INDIRECT taxes will be included because market price = Factor cost + Net indirect taxes. (ii) Yes, net EXPORTS (a componentof expenditure method) will be included as it includes goods and services produced within the domestic territory of a country. (iii) No, it will not be included as `NDP_(MP)` is confined to domestic product only. (iv) No, it will not be included because Net Product = Gross Product- Consumption of FIXED CAPITAL. |
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| 1029. |
If price falls by 10% and total expenditure rises by 10%, then ED would be one. |
| Answer» Solution :FALSE : If price falls and TOTAL EXPENDITURE rises, ED `GT` 1. For ED = 1, expenditure must be the same. | |
| 1030. |
Slope of Consumptioncurve is indicated by APC . |
| Answer» SOLUTION :False. : SLOPE of Consumption CURVE is indicated by MPC (i.e. `DeltaC//DeltaY`) and not by APC (i.e. C/Y). | |
| 1031. |
Which one of the following is a part of capital expenditure ? |
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Answer» Salary paid to ARMY officers |
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| 1032. |
Name the two sectors in which real flow takes place in a simple economy. |
| Answer» Solution :A simple economy ASSUMES the existence of only TWO SECTORS, i.e. HOUSEHOLD sector and firm sector. | |
| 1033. |
If the Real GDP is Rs.500 and Price Index (base=100) is 125, calculate the Nominal GDP. |
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Answer» SOLUTION :Real GDP=`("Nominal GDP")/("Price INDEX")XX100` `500=("Nominal GDP")/(125)xx100` or, Nominal GDP = Rs.625 |
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| 1034. |
What is meant by cost in economics? |
| Answer» Solution :Cost of PRODUCING a good, in economics, is the SUM TOTAL of explicit cost, implicit cost and CERTAIN minimum profit (normal profit). | |
| 1035. |
Categorise the following into direct tax or indirect tax Public debt. |
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Answer» |
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| 1036. |
Under oligopoly, there are large number of buyers and sellers. |
| Answer» Solution :FALSE: In oligopoly there are a few sellers and a LARGE NUMBER of buyers | |
| 1037. |
In an economy investment increased by 1,100 and as a result of it income increased by 5,500. Had the MPS been 25 percent, what would have been the increase in income ? |
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Answer» Solution :`DELTAY = DELTAI = (1)/(MPS)` `5,500 = (1,100)/(MPS)` `MPS = (1,100)/(5,500) = 0.20` `DELTA Y = (1,100)/(0.25) = 4,400` |
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| 1038. |
Differencebetweenfull employment equilibriumand underemploymentequilibrium. |
| Answer» SOLUTION :Full EMPOLYMENT EQUILIBRIUMIS theequilibrium`(AD=AS)`where all theresurocesin theeconomyarefullyutillsed( emmployend ) there ARENO inused.underemployment equilibriumrefers to asituationwhereaggregatedemandandaggregatesupplyare equalat alevelatwhichall reasourcesarenotfullyused . | |
| 1039. |
whatis excessdemand? |
| Answer» SOLUTION : whenADis FORA LEVELOF outputthanis MORETHAN' fullenpolymentlevelofout PUT', it iscalled excessdemand . | |
| 1040. |
________transactions are undertaken to cover the deficit or surplus in autonomous transactions. |
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Answer» CURRENT account |
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| 1041. |
Diefine concept of value added. |
| Answer» Solution :VALUE added is difined as the DIFFERENCE between total value of output of a firm and value of inputs purchased from other FIRMS. `(GVO_(MP)-I.C.)` | |
| 1042. |
NDP at factor cost is equal to NDP at markets in a two-sector economy. |
| Answer» SOLUTION :True. It happens because the concepts of INDIRECT taxes and subsidies does not ARISE in a two-sector economy due to ABSENCE of government. | |
| 1043. |
What will happen if the price prevailing in the market is (i) Above the equilibrium price? (ii) Below the equilibrium price? or How price and quantity are determined in the market when number of firms are fixed ? Or How is equilibrium price of a commodity determined? (Use diagram). or Explain why equilibrium price is determined at the level of output at which its demand is equal to its supply. Or How will equilibrium price be reached when there is excess demand/ excess supply? Explain with diagram. Or With the help of a suitable diagram, explain the process of determination of equilibrium price of a commodity under perfectly competitive market. Or Market for a good is in equilibrium. Explain the chain of reactions in the market if the price is (i) higher than equilibrium price and(ii) lower than |
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Answer» Solution :(i) Market equilibrium refers to that point which has come to be established under a given condition of demand and supply and has a tendency to stick to that level, i.e. where Demand = Supply. (ii) If due to some disturbance we divert from our position the economic forces will work in such a manner that it could be driven back to its original position, i.e., where Demand = Supply. In short it is the position of rest. (iii)It can be explained with the help of following schedule and diagram: (a) In the below schedule market equilibrium is determined at Price 3 where Market demand is equal to Market Supply. At price 1 and 2, there is excess demand, which leads to rise in price, resulting tendencyis expansion in supply. (b)In the given diagram, price is measured on vertical axis, whereas quantity demanded and supply is measured on horizontal axis. Suppose that INITIALLY the price in the market is `P_(1)` . At this price, the consumer demand `P_(1)`B and the producer supply `P_(1)`A, i.e. Consumers want more than what the producer are willing to supply. There is excess demand equal to AB. So, price cannot stay on` P_(1)` as excess demand will create competition among the BUYERS and push the price up till we reach equilibrium. Due to rise in price from ` P_(1)` to P,there is upward MOVEMENT along the supply curve (expansion in supply) from Ato E and upward movement along the demand curve (CONTRACTION in demand) from B to E. SIMILARLY, at price `P_(2)` the quantity demanded P,K is less than the quantity supplied `P_(2)` L. There is excess supply, equal to KL, which will create competition among the sellers and lower the price. The price will keep falling as long as there is an excess supply. Due to fall in price from `P_(2)` to P there is downward movement along the supply curve (contraction in supply) from L to E and downward curve (expansion in demand) from K to E. The situation of zero excess demand and zero excess supply defines market equilibrium (E). Alternatively, it is defined by the equality between quantity demanded and quantity supplied. The price P is called equilibrium price and quantity Q is called equilibrium quantity. 
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| 1044. |
Define GNP_(MP), N NP_(MP), GNP_(FC) and NDP_(FC). |
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Answer» SOLUTION :`GNP_(MP)` is defined as "market value of all the final GOODS and services produced in the domestic territoryof an economy during an ACCOUNTING year plus net factor income from abroad". `{:(N NP_(MP)=GNP_(MP)-"Depreciation"),(GNP_(FC)=GNP_(MP)-"Net indirect taxes (GST)"),(NDP_(FC)=GNP_(FC)-"Depreciation"-NFIA):}` |
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| 1045. |
Define intermediate consumption. |
| Answer» SOLUTION :Intermediate consumption REFERS to the use of intermediate GOODS in the production process. | |
| 1046. |
What changes will take place to bring an economy in equilibrium if (i) planned savings are greater than planned investment, (i) planned savings are less than planned investment. Or In an economy planned spending is greater than planned output. Explin all the changes that will take place in he economy. |
| Answer» Solution :In an economy if (i) planned saving exceeds planned investment , then that would result in undesired build-up of unsold stock. Consequently, AD falls short of AS. Due to excess supply RESULTING from be stock piling of unsold GOODS, i.e., UNINTENDED inventories, the producers will cut down employment and will produce less. National income will fall and as a result planned saving will start Jailing until it becomes EQUAL to planned investment. It is at this point that equilibrium level of income is determinedon the other hand ,if (ii)planned savings falls short of planned investment , then AD (or CONSUMPTION expenditure) is more than AS. Production will have to be increased to meet the excess demand.Consequently, national income will increase leading to rise in saving until saving becomes equal to investment. It is here that equilibrium level of income is established because what the savers intend to save becomes equal to what the investors intend to invest. | |
| 1047. |
With increase in national income, both APC and APS fall. |
| Answer» SOLUTION :FALSE. : With increase in national income, PROPORTION of income consumed (APC) falls, but proportion of income saved (APS) rises. | |
| 1048. |
Demand for product X is perfectly elastic. What will be the change in price if demand rises from 50 per unit to 70 per unit ? |
| Answer» Solution :There will be no CHANGE in PRICE as DEMAND is perfectly ELASTIC. | |
| 1049. |
In an economy, MPC is 0.75. Investment expenditure increases by 75 crore, calculate total increase in national income. |
| Answer» SOLUTION :300 CRORE | |
| 1050. |
Givingreasons classify the following into direct and indirect tax : (i) Corporate tax , (ii) Goods and Services Tax. |
| Answer» SOLUTION :ReferItems CATEGORISED as DIRECT and INDIRECT TAXES. | |