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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.
| 1101. |
Derive the inverse relation between price of the good and its demand from single commodity equilibrium condition " marginal utility = price". |
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Answer» Solution :As we know a CONSUMER purchases a good up to the point where marginal utility of the good becomes equal to the price of that good. MU=Price (i) It can be explained with the HELP of the following figures . It can be seen from the given figure that Figure B is derived from Figure A. (ii) In figure A, initially , Consumer equilibrium is attained at point E, where let MU ( 10 ) = Price ( 10 ) . Corresponding to point E, we derive point `E_1` , in figure B .  (iii) Due to fall in price (suppose from 10 to 8 ) , MU ` gt`Price at the given QUANTITY . So we can say that BENEFIT is greater than cost and the consumer increases the quantity TILL MU = Price condition is attained at F . Corresponding to point F , we derive the point `F_1`in figure B. So, by joining point `E_1 and F_1`together , we derive the demand curve . |
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| 1102. |
Aggregate Supply and ___ are always equal. |
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Answer» NATIONAL Income |
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| 1103. |
Which of the following is a synonym of Undistributed Profits ? |
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Answer» SAVINGS of PRIVATE CORPORATE sector |
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| 1104. |
Why are indifference curves always convex to the origin ? |
| Answer» Solution :Indifference CURVES are always convex to the ORIGIN because of the DIMINISHING marginal rate of SUBSTITUTION. | |
| 1105. |
Recently government of India has doubled the import duty on gold. What impact is it likely to have on foreign exchange rate and how ? |
| Answer» SOLUTION :Increasing import duty on GOLD will MAKE import of gold costly which in turn will REDUCE demand for gold and foreign exchange. SUPPLY of foreign exchange remaining the same, price (rate) of foreign exchange will fall. | |
| 1106. |
Which of the following items is part of compensation of employees ? Give reasons for your answer. (i) Entertainment allowance to an employee to entertain business guests. (ii) Employees contribution to gratuity fund of the employees. (iii) Employee's contribution to provident fund. (iv) Payment of claim of insurance claim by LIC to the injured worker. (v) Old age pension. (vi) Medical expenses of a firm on treatment of employee's family. |
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Answer» Solution :(i) It is not a PART of compensation of employees (COE) as it is paid for the benefit of business and not for the employee. In fact, it is intermediate consumption expenditure. (ii) It is a part of compensation of employees as such contribution is for the benefit of employees and is paid for his productive services. (iii) It is not a part of compensation of employees as such contribution is MADE by the emplyee from COE only. (IV) It is a part of compensation of employees as LIC is not the employer of INJURED worker. (v) It is not a part of compensation of employees as it is paid to old people due to their old AGE and not because of any productive contribution. Moreover, it is paid by agency other than employer. In fact, it is a transfer payment. (vi) It is a part of compensation of employees as such expenditure is incurred by the firm in return of productive services of employee. |
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| 1107. |
How is foreign exchange rate determined? |
| Answer» Solution :The rate of foreign EXCHANGE is determined at a point where DEMAND for and SUPPLY of foreign exchange are equal. | |
| 1108. |
Explain the concept of 'deficit' in the Balance of Payments |
| Answer» Solution :Foreign EXCHANGE transactions in the BOP can be classified into autonomous transaction and ACCOMMODATING transactions for the PURPOSE of calculating defict. Autonomous transactions in BOP are those which are not influenced by other transactions in BOP. Accommodating transactions are those which are undertaken to cover up DEFICIT/surplus in the autonomous transactions only. Deficit occurs when autonomous foreign exchange receipts fall SHORT of autonomous payments | |
| 1109. |
A job guarantee scheme will lead to a rightward shift of PPF. |
| Answer» SOLUTION :FALSE: A job guarangee sheme does not add ANYTHING new to a country.s RESOURCES. This will only ensure that available unutilised or unemployed resources are PRODUCTIVELY emmployed. | |
| 1110. |
What determines the level of consumption expenditure ? |
| Answer» SOLUTION :LEVEL of DISPOSABLE INCOME. | |
| 1111. |
What is the difference between Ex-ante investmeent and Ex-post investment |
| Answer» SOLUTION :Ex-ante investment : It is the PLANNED or intended investment during a particular period. Ex-post investment : It is ACTUAL investment, It is EQUAL to Ex-ante investment+unplanned investment. | |
| 1112. |
Operating surplus includes |
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Answer» wages |
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| 1113. |
What is meant by capital account? Explain its various components. |
| Answer» Solution :The capital account, on a national level, represents the balance of payments for a country. The capital account keeps track of the net change in a NATION's assets and LIABILITIES during a year.Components of Capital account are as follows:1)Capital Transfers:The subaccount of capital transfers records transactions that INVOLVE a change in ownership of assets that do not cause a MONETARY compensation. When a government or bank forgives foreign debt, it generates an outflow of capital for which the country receives no compensation. Therefore, these movements go to the subaccount of capital transfers.2)Acquisition and Disposal of Non-produced, Non-financial Assets:Acquisition and disposal of non-produced, non-financial assets groups the operations with assets that don't CURRENTLY generate income but might do in the future. These assets can be intangible and tangible. | |
| 1114. |
MPC is the slope of |
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Answer» SAVING FUNCTION |
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| 1115. |
How to reduce the incidence of selling cost under monopolistic competition because of which price tends to be higher than what it would have been if production cost would have been the sole basis? |
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Answer» Solution :The cost incurred on advertisement and salesmanship constitutes selling cost which affects the MINDS of buyers in FAVOUR of CERTAIN commodities. In this situation buyers should care for INTRINSIC VALUE and utility. This way the role of selling cost will be reduced. Value: Analytic |
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| 1116. |
Explain the implication of non-price competition in an oligopoly market. |
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Answer» Solution :Non-Price Competition: (i) In OLIGOPOLY firms try to avoid price competition for the fear of price war. (ii) They use non-price competition methods like better services to customers, advertising, etc. to compete with each other. (iii) Under oligopoly firms are in a position to influence the prices. However, they follow the policy of price stability or price rigidity. (iv) Price rigidity REFERS to a SITUATION in which whether there is change in demand and supply the price tends to stay fixed. (v) If a firm tries to reduce the price the rivals will also react by REDUCING their prices. LIKEWISE, if it tries to raise the price, other firms will not do so. It will lead to loss of customers for the firm which intended to raise the price. (v) So, firms prefer non-price competition instead of price competition. |
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| 1117. |
Which of the following sector comes under the category of tertiary sector ? |
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Answer» Primary SECTOR |
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| 1118. |
Identify which of the following statements is true ? |
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Answer» Fiscal deficit is difference between PLANNED revenue expenditure and planned revenue RECEIPTS |
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| 1119. |
Income method measures national income from: |
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Answer» INCOME generation ANGLE |
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| 1120. |
Explain the condition of equilibrium of income with the help of injections and leakages. |
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Answer» Solution :The flow of national income will be in equilibrium when the injections are just equal to the leakages. If there is any DIFFERENCE between these two, then there will be fluctuations in the flow of income as there will be either expansion or contraction incircular flow. 1. Injections. Injections are the amount of money ADDED to the flow of income in an ECONOMY which increase national income. It consists of (i) Investment (I) (ii) Government expenditure (G) on services, purchases of goods, transfer payments, subsidies. (iii) Exports (X) i.e., Injection `=I+G+X` 2. Leakages. It refers to the amount of money withdrawn from the flow of income. These reduce the circular flow of income as these are withdrawals. It consists of (i) Savings (S) of households, firms and government. (ii) Taxes (T) by government. (iii) Imports (M) i.e., Leakages `=S+T+M` The condition of equilibrium of income can be shown as, Injections=Leakages `I+G+X=S+T+M` `**""`of injections `gt` Leakages, then flow of income increases. (Expansion of circular flow) `**""`If leakages `gt` injections, then flow of income DECREASES. (Contraction of circular flow) |
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| 1121. |
Listthe componentsofarrregatedemand (AD). |
| Answer» SOLUTION : componentsofaggregatedeamandin a foursectoreconomyare : (i) PRIVATE( house HOLD)consumptondemand (C ),(ii)privateinvestment DEMAND(i) ,(iii)Governmentdemand forGoodsandservicess (G) and (iv)Netexport( Export - import ) Demand (X-M)AD is thesumof abovementioned fourtypesofdemandsymbolically:ADC+I+G+(X.M). | |
| 1122. |
Explain briefly the evolution of money. |
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| 1123. |
A lot of people die and many factories are destroyed due to floods in a country. How will it affect the productionpossibility curve? |
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Answer» PPC will SHIFT TOWARDS RIGHT |
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| 1124. |
Define marginal rate of substitution . |
| Answer» Solution :MRS is the RATE at which a consumer is willing to give up one commodity for an extra UNIT of other commodity for an extra unit of other commodity without AFFECTING his TOTAL SATISFACTION. | |
| 1125. |
What is meant by factor income to abroad ? State its components. |
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Answer» Components of factor income to abroad : (i) Compensation of employees paid to the non-resident workers working within the economic territory. (ii) Income from property (rent , interest) and entrepreneurship (dividend) paid to the REST of the world . (iii) RETAINED earnings of enterprises OWNED by non-residents within the domestic territory. {Note : It must be NOTED that components of 'Factor income to abroad' are asked and not of 'Net factor income from abroad'} |
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| 1126. |
The market price of good changes from 5rs to 20rs. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm's supply curve is 0.5. Find the initial and final output levels of the firm. |
Answer» Solution : Price elasticity of supply (PES) `=(DELTAQ)/(DeltaP)xx(P)/(Q)` `0.5=(15)/(15)xx(5)/(Q)`, i.e., `Q=10` As price increases, then quantity supplied also increase. It means, Final Output =Initial Output (Q) +Change in Quantity (DeltaQ] `=10+15=25` units Initial Output (Q)=10 units, Final Output `(Q_(1))=25` units. |
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| 1127. |
What do you mean by duopoly? |
| Answer» Solution :When there are only two FIRMS producing a product, it is called duopoly. Under duopoly it is assumed that the product sold by the two firms is homogeneous and there is no SUBSTITUTE for it. It is a special case of OLIGOPOLY. | |
| 1128. |
Commodity Service method is another name for : |
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Answer» EXPENDITURE method |
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| 1129. |
When marginal propensity to consume is zero, the value of investment multiplier will also be zero. |
| Answer» SOLUTION :No , the above statement is not true.Consider the following equation:K = 1/1-MPC ( where K is the investmentmultiplier and MPC is MARGINAL PROPENSITY to consume)if we put MPC=0 in the above equation , we will get investment multiplier (k) as 1, not 0 | |
| 1130. |
Income method is also known as : |
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Answer» DISTRIBUTIVE share METHOD |
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| 1131. |
A person's marginal utility schedule is given below. Derive their total utility schedule. |
Answer» Solution :As we known total utility is the SUM total of MARGINAL UTILITIES as SHOWN below . 
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| 1132. |
Classify whether the following transactions will be recorded in current account or capital account. (i) Purchase of shares of Reliance by Microsoft.(ii) Imports of computer spare parts from Germany.(iii)Borrowings from World Bank.(iv) Repayment of loan by Indian Government taken from japan.(v) Gifts received from a relative in America. (vi)Purchase of Land in England.(vii)Shipping service by an Indian company to a foreign company. |
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Answer» |
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| 1133. |
Which one of the following equations is not a characteristic of a "price taker"? |
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Answer» <P>`TR = P XX Q ` |
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| 1134. |
The price elasticity of demand for hamburger is : |
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Answer» the change in the QUANTITY demanded of hamburger when the hamburger increases by 30 paise PER rupee. |
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| 1135. |
A firm supplies 10 units of a good at a price of Rs 5 per units. Price elasticity of supply is 1.25. What quantity will the firm supply at a price of Rs 7 per units ? |
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Answer» Solution :As given in the question, `Q^(s) = 10, P = 5 and E^(s) = 1.25` At new price of Rs 7 PER unit `DELTA P = 7 - 5 = 2` We know, `E_(s) = (Delta Q)/(Delta P) xx (P)/(Q)` or, `1.25 = (DeltaQ)/(2) xx (5)/(10)` or, `Q = 1.25 xx 4 = 5` Thus, the new quantity that the firm WOULD supply at a price of Rs 7 per units is 15 (5 + 10). |
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| 1136. |
Distinguish between inflationary gap and defiationary gap. Show defiationary gap on a diagram Canthis gap exist at equilibrium level of income? Explain. |
Answer» Solution : For diagrammatic explanation of deflationary gap, refer FIG. 9.2. Yes, deflationary gap can exist at equilibrium LEVEL of income. ACCORDING to KEYNES, equilibrium level of income indicates mere equality between AD and AS, regarding of whether the equilibrium is at full EMPLOYMENT or underemployment of resources. If the resources are employed to their full limit, i.e. equilibrium is at full employment level, then deflationary gap cannot exist at equilibrium level of income. However if resources are not fully employed, i.e. it is an under-employment equilibrium, then deflationary gap can exist at equilibrium level of income. |
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| 1137. |
Identify the following as Microeconomic study or Macreconomic study Allocation of resources. |
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Answer» |
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| 1138. |
What is equilibrium income? |
| Answer» Solution :Equilibrium level of income is that level of income where AGGREGATE demand equals aggregate Supply (AD=AS) and planned savings is EQUAL to planned INVESTMENT (S=I). | |
| 1139. |
Explain how the government can use the money supply policy in reducing inequalities in incomes. |
| Answer» Solution :The government through its budgetary policy attempts to promote fair and right DISTRIBUTION of income in an economy. This is done through taxation and expenditure policy. On ONE HAND, through its taxation policy, the government taxes the higher income group and on the other hand, through the expenditure policy (subsidies, TRANSFER PAYMENTS, etc.), it transfer the purchasing power in the hands of the poor sections of society. With the help of these policies, the government aims at fair distribution of income in the society. | |
| 1140. |
What is meant by legal reserve requirements? |
| Answer» Solution :Legal RESERVE REQUIREMENTS refer to the minimum PERCENTAGE of total deposits (time deposits and demand deposits), required to be KEPT by the commercial banks with themselves and with the central bank. | |
| 1141. |
Categorise the following into direct tax or indirect tax Borrowing from public |
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Answer» |
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| 1142. |
Compensation given to victims of Uttrakhand tragedy is a good measure taken by government. Why is it not included in national income ? |
| Answer» SOLUTION :Compensation GIVEN to victims of Uttrakhand tragedy is a welfare MEASURE taken by GOVERNMENT of India but it is a transfer PAYMENT which does not lead to corresponding flow of goods and services. | |
| 1143. |
Which of the following flowchart is incorrect ? |
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Answer»
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| 1144. |
Classify the following as intermediate goods or final goods : Paper purchased by a publisher. |
| Answer» SOLUTION :INTERMEDIATE GOODS | |
| 1145. |
What do the short run marginal cost, average variable cost and short run average cost curves look like? |
| Answer» Solution :The SHORT RUN marginal cost, average variable cost and short run average cost CURVES are U-shaped because of Law of variable proportion. | |
| 1146. |
The market price of US dollar has increased considerably leading to rise in prices of the imports of essentials goods. What can central bank do to ease the situation? |
| Answer» SOLUTION :In order to control the rising price of US DOLLARS in TERMS of INDIAN rupee, central bank can START selling US dollars from its reserves to increase the supply of US dollars. | |
| 1147. |
Where is 'borrowings from abroad' recorded in the Balance of Payments Accounts ?Give reasons. |
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Answer» |
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| 1148. |
Define 'resident '? |
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Answer» |
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| 1149. |
Explain the reason for inverse relationship between price of a foreign currency and its demand |
| Answer» Solution :When price of foreign CURRENCY FALLS, the domestic economy has to pay less for imports. As a result demand for imports INCREASES leading to RISE in demand for foreign EXCHANGE | |
| 1150. |
Distinguish between revenue deficit and fiscal |
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Answer» Solution :Revenue defict is equal to the excess to total revenue EXPENDITURE over the total revenue RECEIPTS. On the other hand, fiscal deficit is equal to the excess of total expenditure over the sum of revenue and capital receipts EXCLUDING borrwoings. THUS, it is clear fromm the above statement, revenue deficit relates to total revenue receipts and total revenue expenditure. whereas, fiscal deficit relates to the difference in total expenditure (revenue and capital) and total receipts (revenue and capital) excluding borrowings. Revenue Deficit = Total Revenue Expenditure-Total Revenue Receipts. Fiscal Deficit = Total Budget Expenditure `(-)` (Revenue Receipts + Capital Receipts excluding borrowings) |
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