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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.
| 1051. |
Giving reason explain how the following should be treated in estimation of national income : (i) Payment of interest by a firm to a bank (ii) Payment of interest by a bank to an individual(iii) Payment of interest by an individual to a bank |
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Answer» Solution :(i) Payment of interest by a firm to BANK will be included in the national income. This is because the firm would have taken loan for PRODUCTIVE purposes. (ii) Payment of interest by a bank to an INDIVIDUAL will be included in the national income. This is because the bank would have used the savings of the individuals (on which the loan is paid) for productive purposes. (III) Payment of interest by an individual to a bank will not be included in the national income. This is because the individual is expected to have taken a loan for consumption purposes rather that for productive purposes. |
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| 1052. |
When does a production function satisfy decreasing returns to scale? |
| Answer» SOLUTION :Out of SYLLABUS. | |
| 1053. |
What is the difference between ex-ante investment and ex-post investment ? |
| Answer» SOLUTION :Ex-ante investment REFERS to amount of investment which FIRMS plan to invest at different levels of income in the ECONOMY, whereas, ex-post investment refers to the REALISED or actual investment in an economy during a year. | |
| 1054. |
If MPS is 0.8 and increase in investment in 10000, national income will increase by. |
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Answer» 5000 |
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| 1055. |
"_________" (choose the correct alternative) isa revenue receipt of the government |
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Answer» Funds raised by the government by ISSUING National Saving CERTIFICATES |
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| 1056. |
When income of the consumer falls the impact on price-demand curve of an inferior good is : |
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Answer» Shift to the right |
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| 1057. |
Why does marginal cost eventually rise as output increases? |
| Answer» Solution :Marginal cost EVENTUALLY rises as output increases because of diminishing returns. If each additional unit of a variable input ADDS LESS and less to total output (total product increases at diminishing rate), it MUST require more of that variable input to produce each additional unit of output (total variable cost increases at increasing rate) and when TVC increases at increasing rate, MC rises. | |
| 1058. |
Why does difference between ATC and AVC decrease with increase in level of output? Explain. |
Answer» Solution :As, we know the difference between Average Total Cost and Average Variable Cost is average fixed cost `(AFC = ATC - AVC)` and AFC always decreases with the INCREASE in output. It can be explained with the HELP of the following diagram and schedule.  It can be seen from the above diagram that there is a huge gap between AC and AVC with the STARTING of production.  The gap between them decreases with the increase in production. It is so because the gap between AC and AVC is AFC and AFC always decreases with the increase in production. The POINT to be remembered is that AVC can NEVER touch AC curve because AFC cannot be Zero. 
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| 1059. |
Given reasons, state why the following two conditions must be satisfied when a consumer is in equilibrium. (i) A budget line must be tangent to an indifference curve. (ii) Marginal rate of substitution must be diminishing. |
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Answer» Solution :(i) Only when the budget line is tangent to an indifference CURVE, it indicates the highest LEVEL of satisfaction that a consumer can attain given his money income and the price of two commodities. (ii) DIMINISHING marginal rate of substitution ENSURE that the indifference curve is CONVEX to the origin. Only then the point of tangency becomes the point of consumer.s equilibrium . |
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| 1060. |
Under whatconditions a consumer would like to demand less at a given level of price ? |
Answer» Solution :The condition are : (i) Price of SUBSTITUTE GOODS falls. (ii) Price of complementary goods rises. (iii) Income of a consumer falls in case of NORMAL goods. (iv) Income of a consumerr rises in case of inferior goods. (V) When a preference BECOMES unfavourable. |
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| 1061. |
Ceteris paribus, if price rises, quantity supply of good will fall. |
| Answer» Solution :False : It is so because PRICE and QUANTITY SUPPLIED is POSITIVELY related. | |
| 1062. |
Find change in investment if multiplier is 2 and increase in income 8 crore. |
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Answer» SOLUTION :`K=(DeltaY)/(DELTAI)` `2=(8)/(DeltaI)` `Rightarrow DeltaI=4 CRORE` |
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| 1063. |
Explain the distinction between autonomous and accommodating transactions in balance of payments. Also explain the concept of balance of payments 'deficit' in this context. |
| Answer» Solution :Autonomous transactions are the transactions between the residents of TWO COUNTRIES which take place due to the consideration of profit. Autonomous items are not conditioned by the BOP status of the country, i.e. these are independent. These transactions are not done to establish identity of BoP. These are also known as ‘above the line items’ and take place in both the ACCOUNTS of BoP, i.e. current and capital account.Accommodating . transactions are those transactions which are not done due to the consideration of profit but to restore identity of BoP. These are undertaken to maintain BALANCE in the BoP account. These transactions correct the disequilibrium in autonomous items of BoP account. Accommodating transactions are also known as ‘below the line items’ and include foreign exchange reserves and borrowings to meet BoP deficit.BoP deficit When the payments of a country on account of autonomous transactions exceed the receipts of the country on account of autonomous transactions, this difference is termed as BoP deficit.BoP Deficit = Receipts on Account of Autonomous Transactions < Payments on Account of Autonomous Transactions | |
| 1064. |
Can the value of APC be greater than one ? |
| Answer» SOLUTION :Yes, the value of APC can be more than 1. At low levels of INCOME, consumption TENDS to be more than income. So, APC GT 1 before the break-even POINT is attained. | |
| 1065. |
Whatis thedefferencebetweenvoluntaryunemploymentandinvoluntaryunemployment? Statethesignificance of thisdistinction . |
| Answer» SOLUTION :Volunartyunemploymentoccurswhenpeoplearenotnotwillingto doworkalthoughsuitablework isavilableforthem i.e.,they arevoluntarilyunemployed involunratyunemploymentoccurswhenoccurswhenthosewhoareableandwillingto workattheprevailingwageratedo notgetworkthedistinctionis importantto determinethetotalunemploymentin anecionomyVoluntarilyunemployedarenot includedin thelabourforcewhileestimatingsizeofunemploymentwhereasinvoluntaryaredulyconsidered fordeterminingtheoverrallstatusof unemploymentin theconutry . | |
| 1066. |
willconsumptionfunctioncurvebea straightline(i.e.,linear)in caseMPCisconstant? Justifyyouranswerwithreasons. |
| Answer» SOLUTION :Consumptionfunctioncurvewill bestraightlineorlinearif MPCIS CONSTANT , itsreasonis thatslopeofthecurveis constantdueto MPCbeingconstantsinceconstantMPCimpliesconstantslope, thereforeconsumptionfunctioncurveis LINEAR. | |
| 1067. |
Are the following statements true or false ? Give reasons. Revenue Receipts from non- tax revenue are always more as compared to tax revenue . |
| Answer» Solution :False . Tax revenue has the largest share in revenue RECEIPTS of the GOVERNMENT . | |
| 1068. |
State the features/characteristics of money. |
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Answer» Solution :Features are: (i) Acceptability. Money is commonly/generally accepted measure of value as it is a mdeium of exchange (ii) Measure/unit of value. Money makes the evaluation of goods and SERVICES possible in terms of price of the COMMODITIES .As a unit of value it has made accounting posible Liquidity. Money is the ost liquid ASSET, i.e it can be easily CONVERTED into cash which makes the sale and purchase easy and convenient Reduces trading cost. UNLIKE barter system, money reduces search cost and disutility of waiting . So withmoney ,complex economic transactions have smoothened and modernisation could happen. |
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| 1069. |
Write adverse effect of deficit financing. |
| Answer» SOLUTION :DEFICIT financing leads to increase of money SUPPLY in the economy which leads to rise in AD and thus creating inflationary TRENDS in the economy. | |
| 1070. |
Suppose, there was 4% decrease in the price of a good and as a result, the expenditure on the goods increased by 2%. What can you say about the elasticity of demand ? |
| Answer» Solution :As total expenditure has increased with the DECREASE in price, the DEMAND is said to be HIGHLY elastic. | |
| 1071. |
Distinguish between revenue expenditure and capital expenditure in government Budget. Give an example of each |
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Answer» Solution :Capital expenditure : An expenditure which resuts in the creation of assets or reduction in LIABILITIES is TREATED as Capital expenditure, such as expenditure incurred on CONSTRUCTION of BUILDINGS, roads, bridges, etc. Reverue expenditure: An expenditure which does not RESULT in creation of assests or reduction in liabilities, is called revenue expenditure such as payments of salaries, pensions, etc. |
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| 1072. |
ArrangeIndia, Pakistan and China in world ranking of Human DevelopmentIndex (2016) in descendingorder. Which country out of India, China and Pakistanhas the lowest growth rate of population ? |
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Answer» SOLUTION :CHINA, INDIA , PAKISTAN OR China |
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| 1073. |
What is the average product of an input? |
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Answer» Solution :Average Product of an INPUT is per unit product of variable factors. It is CALCULATED by dividing the total Product by the units of variable FACTOR. Average Product `=("Total Product")/("Unit of Variable Factor")` |
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| 1074. |
Explain the relation between marginal revenue and average revenue when a firm is able to sell more quantity of output : (i) at the same price. (ii) Only by lowering the price |
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Answer» Solution :(i) RELATIONSHIP between Average Revenue and Marginal Revenue at a same price. (a) When price remains the same at all outputs levels, the firm cannot influence the prevailing market price of the commodity. The price is given to it. (b) It can sell any amount of the commodity at this given price. Under such a case firm.s average and marginal revenue remains equal and their CURVES coincide as shown in given figure.  (ii) Relationship between Average Revenue and Marginal Revenue by lowering the price (a) When price falls, with rise in OUTPUT,then AR falls, MR also falls but at a much faster RATE. As a result, the revenue from every ADDITIONAL unit (i.e.MR) will be less than AR. (b) As a result, both AR and MR curves slope downwards from left to right. This can be explained with the help of given Figure. 
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| 1075. |
Explain how government reallocates resources to achieve its objectives. |
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Answer» SOLUTION :Government provides more resources into socially PRODUCTIVE sectors where PRIVATE sector initiative is not forthcoming, e.g., PUBLIC sanitation, rural electrification, health, etc. Moreover, government allocates more funds to the production of socially useful goods (like khadi) and draws away resources from some other areas to PROMOTE balanced economic growth of regions. |
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| 1076. |
Keynesian school of through advocates possibility of : |
| Answer» Answer :D | |
| 1077. |
How are these included in Domestic income and National income ? |
Answer» SOLUTION :
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| 1078. |
Classify the following as intermediate goods or final goods : Milk purchased by a hotel. |
| Answer» SOLUTION :INTERMEDIATE GOODS | |
| 1079. |
High propensity to consume is a virtue, while high propensity to save is not. Explain. |
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Answer» Solution :High propensity to consume is a virtue , as greater consumption implies greater demand and thus greater inducement to invest. Thus, the LEVEL of investment, production and employment tends to RISE. `AD uparrow to downarrow "Investment" to downarrow "Production" to downarrow "National income"` High propensity to save is not a virtue, as greater SAVINGS MEAN LESSER consumption, lesser demand and thus lesser inducement to invest. This would mean lower level of investment, production and employment. `AD downarrow to downarrow "Investment" to downarrow "Production" to downarrow "National income"` |
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| 1080. |
Other things remaining the same, when foreign currency becomes cheaper, the effect on national income is likely to be |
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Answer» Positive |
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| 1081. |
On 19 December 2013, the following news item was printed in the Economic Times: Households in Southern India prefer to eat oranges for breakfast as banana plantations in Kerala have been destroyed and price of apples and grapes have also risen. Use a diagram and economic theory to analyse the impact of the rise in price of apples and grapes on the market of oranges. |
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Answer» Solution :When the price of apples and grapes RISES, CONSUMERS will SUBSTITUTE with these fruits with the relatively cheaperT oranges. Thus, demand for oranges will increase and the demand curve shifts rightwards from DD to `D_(1)D_(1)`. With new demand curve D,D,, 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)` and equilibrium quantity also rises from OQ to `OQ_(1)` Note: Therefore, the equilibrium price of oranges increases and the equilibrium quantity also increases when the price of apples and grapes rises in Southern India. Value: ANALYTIC ` (##FM_M_ECO_XII_P1_C12_E02_063_S01.png" width="80%"> |
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| 1082. |
The deflationary gap can be corrected by raising the level of aggregate demand. |
| Answer» Solution :True. Because deflationary GAP occurs when AGGREGATE demand falls SHORT of aggregate supply. | |
| 1083. |
How will you treat the following while estimating domestic product of a country ? Give reasons for your answer : (a) Profits earned by branches of country's bank in other countries. (b) Gifts given by an employer to his employees on independence day. (c ) Purchase of goods by foreign tourists. |
| Answer» Solution :.1.Profits earned by branches of COUNTRY's BANK in other countries are not included in the estimation of NATIONAL income because the branches of country's bank in other countries are outside the domestic territory.ii. Gifts given by an employer to his employees on Independence Day are included in the domestic income because the gifts given by the employer are compensation in kind.iii. PURCHASE of goods by foreign tourists is included in the estimation of domestic income because they are exports and part of domestic income | |
| 1084. |
If MPC =1 the value of multiplier is: |
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Answer» 0 |
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| 1085. |
Borrowing are equivalent to ____________. |
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Answer» PRIMARY deficit |
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| 1086. |
Howwill 'Reverse Repo Rate' and 'Open MarketOperations' conrtolexcess moneysupplyin an economy? |
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Answer» Solution :Reverse repo rate is the rate at which RBI borrows money from the commercial banks. The increase in the repo rate will increase the cost of borrowing and lending of the banks which will discourage the public to borrow money and will encourage them to deposit. When the central bank wants to increase the money supply in the economy, it PURCHASES the GOVERNMENT securities, i.e., bills, and bonds. On the other hand, the central bank sells the government bonds and securities if the money supply is to be CURTAILED. The open market operations are one of the most widely USED measures of monetary CONTROL. |
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| 1087. |
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments ? Explain. |
| Answer» SOLUTION :The sum of final expenditures in the ECONOMY must be equal to the income received by all the factors of PRODUCTION. It is because that the revenues earned by all the firms put TOGETHER must be distributed among the factors of production as salaries, wages, profits, interest and rent in the economy as their servies are exchanged for FACTOR payments. | |
| 1088. |
What was annual growth rate of real GDP of India during last 50 years before independence? |
| Answer» SOLUTION :2.0 PERCENT. | |
| 1089. |
A firm's average fixed cost is 20 at 6 units of output. What will it be at 4 units of output? |
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Answer» RS. 60 |
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| 1090. |
Which one of the following elements is not a determinant of the firm's cost function? |
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Answer» The PRODUCTION FUNCTION. |
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| 1091. |
How should the following be treated in estimating national income of a country ? Give reasons. Bonus paid to employees. |
| Answer» SOLUTION :YES, as it is a PART of COE. | |
| 1092. |
What is spot exchange rate? |
| Answer» SOLUTION :It is the EXCHANGE rate which happens to prevail in the market when TRANSACTIONS are INCURRED. | |
| 1093. |
Define a cheque |
| Answer» Solution :A CHEQUE is an INSTRUMENT that insturcts the bank to transfer funds from the cheque ISSUER 's account to the cheque RECEIVER's account. | |
| 1094. |
Financial sector reforms are undertaken by |
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Answer» Government of India |
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| 1095. |
Name any one step that thegovernmentcan takethrough its budget to check inflationthatis causinghardships to the people . |
| Answer» SOLUTION :the GIVEN STATEMENTIS reduceunproductivepublicexpenditureinflationthatis causinghardships to THEPEOPLE . | |
| 1096. |
When aggregate demand equal the output produced such that the resources are fully employed the economy acheives full employment equilibrium. |
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Answer» |
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| 1097. |
Categorise the following into revenue expenditure or capital expenditure Expenditure on buildinga bridge . |
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Answer» |
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| 1098. |
Will the following be included in the domestic product of India ? give reason for your answer (i) Profits erned by foreign companies in India. (ii) Salaries of Indians working in the russian Embassy in India. (iii) Profit earned by a branch of State Bank of Indian in Japan. |
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Answer» Solution :(i) Profits earned by foreign companies will be a part of domestic product of India as Foreign companies in India are a part of fomestic TERRITORY of India. (ii) Salaries of INDIANS working in the RUSSIAN Embassy in India will not be a part of domestic product of India as Russian Embassy in India is not a part of domestic territory of India. (iii) Profits earned by a BRANCH of State BANK of India in Japan will not be a part of domestic product of India as the bank is located out of the domestic territory of India. |
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| 1099. |
Defferentiate between quantitative instruments of credit control and qualitative insutruments of credit control |
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Answer» SOLUTION :(i)QUANTITATIVE instruments affect the SUPPLY of money directly whereas qualitative MEASURES affect the supply of money indirectly. (ii) Quantitaive instruments are general in nature, qualitative instruments are specific in nature. (III) Quantitative controls regulate the total volume of credit qualitative controls regulate the direction of credit. |
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| 1100. |
Which of the following statement is not true for fiscal deficit ? A fiscal deficit : |
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Answer» represents the borrowing of the GOVERNMENT . |
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