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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.
| 1151. |
Food items purchased by a production unit are : |
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Answer» SINGLE USE CONSUMER goods |
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| 1153. |
Show the behaviour of AC when AVC per unit of output is constant. |
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Answer» Solution :Average cost will fall when AVC per unit of OUTPUT remains constant. It is so because AC includes AFC ALSO and AFC always fall with increase in production. It can be explain with the HELP of given diagram. In the given diagram AVC is constant from the range of output OQ to OQ As we KNOW, AC is sum of AVC and AFC. It can be seen from the above diagram that when AVC is constant AFC is falling which makes the Average Cost to fall. So, when AVC remains constant, AC falls. 
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| 1154. |
In case of foreign exchange, devaluation and depreciation of currency are one and the same thing. Do you agree with the give statement ? |
| Answer» Solution :No, I do not agree with the given statement. Devaluation is reduction in VALUE of DOMESTIC currency by the government under fixed EXCHANGE rate SYSTEM. On the other hand, depreciation is decrease in value of domestic currency DUE to market forces of demand and supply under flexible exchange rate system. | |
| 1155. |
Is it necessary that Domestic Income is always less than National Income . |
| Answer» SOLUTION :No ,DOMESTIC product will be GREATER than national product when NET factor INCOME from abroad is negative. | |
| 1156. |
Demand deposits include (Choose the correct alternative ) |
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Answer» SAVING account deposits andfixed deposits |
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| 1157. |
Market for a good is in equilibrium. There is decrease in demand for this good. Explain the chain of effects of this change. Use diagram. Or How will equilibrium price and quantity be affected when there is decrease in demand? Explain with diagram. or How will equilibrium price and quantity be affected when there is leftward shist of demand curve? Or Explain the chain effects on demand, supply and price caused by leftward shift of demand curve. Or Market for a good is in equilibrium. The demand for the good 'decreases' Explain the chain of effects of this change. |
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Answer» Solution :As given in the examination problem that market for a good is in equilibrium. So, we assume that initial price is OP as shown in given figure. In the given figure price is on vertical axis and quantity demanded and supplied are on horizontal axis. But due to decrease in demand, the demand curve shifts leftward from DD to `D_(1)D_(1)`. With new demand curve `D_(1)D_(1)` there is EXCESS supply at initial price OP because at price OP demand is PB and supply is PA so there is excess supply of AB at price OP. Due to this excess supply, competition among the producer will make the price fall. Due to fall in price there is DOWNWARD movement along the demand curve (Expansion inn demand) from B to C and similarly there is downward movement along the supply curve (CONTRACTION in supply) from A to C. So, finally, the equilibrium price falls from OP to `OP_(1)` and equilibrium quantity ALSO falls from OQ to `OQ_(1)`. Conclusion Due to decrease in demand, (ii) Equilibrium price falls from OP to `OP_(1)`. (ii) Equilibrium quantity also falls from OQ to `OQ_(1)`. ` (##FM_M_ECO_XII_P1_C12_E02_040_S01.png" WIDTH="80%"> |
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| 1158. |
What is meant by deficit in balance of payments? |
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Answer» |
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| 1159. |
Equilibrium between demand and supply helps in determining prevailing price of the product. |
| Answer» Solution :False: An EQUILIBRIUM between DEMAND and SUPPLY determines only equilibrium price. | |
| 1160. |
Give meaning of involuntary unemployment. |
| Answer» Solution :Involuntary UNEMPLOYMENT occurs when a person is willing to WORK at the prevailing WAGE YET is unemployed. | |
| 1161. |
Doesa change in consumer's taste lead to a movement along the demand curve or a shift in the demand curve? Does a change in price lead to a movement along the demand curve or a shift in the demandcurve? |
| Answer» Solution :A change in consumer.s TASTES leads to a shift of the demand curve. A change in price leads to AMOVEMENT ALONG the demand curve. | |
| 1162. |
In an underdeveloped economy why there is the need of efficient utilization of resources? |
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Answer» SOLUTION :Developmental needs are more in UNDERDEVELOPED ECONOMY and these are fulfilled with our LIMITED resources. Value: CRITICAL thinking |
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| 1163. |
Normal residents of India |
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Answer» an OFFICIAL WORKING in Indian embassy in America |
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| 1165. |
sumof APC and MPCis alwaysequalto 1. |
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Answer» |
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| 1166. |
Which cost increases continuously with the increase in production? |
| Answer» Answer :d | |
| 1167. |
When the price of a good rises from 20rs per unit to 30rs per unit, the revenue of the firm producing this good rises from 100rs to 300rs. Calculate the price elasticity of supply. |
Answer» Solution : PRICE Elasticity of SUPPLY (ES) `=(DELTAQ)/(DeltaP)xx(P)/(Q)=(5)/(10)xx(20)/(5)=2` ES=2 [Supply is highly elastic as `ES gt 1` ] |
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| 1168. |
Aggregate demand can be increased by |
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Answer» INCREASING BANK rate |
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| 1169. |
Elasticity of supply explains qualtitative relationship between supplyand price of a commodity. |
| Answer» SOLUTION :FALSE : There exists quantitative RELATIONSHIP between price and SUPPLY. | |
| 1170. |
How are following treated in the estimation of domestic factor income ? Profits earned by a company in India which is owned by a non-resident. |
| Answer» SOLUTION :Yes, it will be INCLUDED in the domestic FACTOR income as PROFITS are earned within the domestic territory of India. | |
| 1171. |
State the main functions of a Central Bank. |
| Answer» SOLUTION :1)Issue of Currency2)Banker to Government3)Banker's Bank and Supervisor4)CONTROLLER of CREDIT and Money Supply5)Exchange Control6)LENDER of LAST Resort7)Custodian of Foreign 8)Exchange or Balances9)Clearing House Function | |
| 1172. |
When does a production function satisfy increasing returns to scale? |
| Answer» SOLUTION :Out of SYLLABUS. | |
| 1173. |
Fiscal deficit equls |
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Answer» INTEREST PAYMENTS |
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| 1174. |
Classify the following as intermediate goods or final goods : Chemical fertilizers used by the farmers. |
| Answer» SOLUTION :INTERMEDIATE GOODS | |
| 1175. |
Distinguish betweenrelative povertyand absolute poverty. |
| Answer» Solution :Relative povertyis povertybased on INCOME LEVEL while absolutepoverty is DEFINED as having INSUFFICIENT incometo maintain a minimum standardof living in terms of health,housingand clothing. | |
| 1176. |
Explainconsumptionpattern of formsof commercial energy in India and comment upon the same. |
| Answer» Solution :DIFFERENT formsof commercialenergy are COAL, oil, NATURALGAS and hydroenenergy. Share OFCOAL in consumption of commercial ENERGY is more than half,that of oil one-third, that of natural gas one-tenth and 2% of hydroenergy.The main cause of concern is strain onforeignexchange resourcesdue to excessive dependence onimport of crude oil and petroleum. | |
| 1177. |
Under monopoly a firm sells the goods at a single price. |
| Answer» SOLUTION :False: Under MONOPOLY a firm can sell all of its output at DIFFERENT prices DUE to it.s complete control over supply and market. | |
| 1178. |
Government incurs expenditure to popularise yoga among the masses. Analyse its impact on gross domestic product and welfare of the people. |
| Answer» SOLUTION :Government expenditure on popularising yoga raises GDPbecause it is government's final CONSUMPTION expenditure. It also raises welfare of the people because YOGIC EXERCISES improve health and thus, raise EFFICIENCY of the people. | |
| 1179. |
A consumer spends Rs.100 on a good priced at Rs.4 per unit. When its price falls by 25 percent, the consumer spends Rs.75 on the good. Calculate the price elasticity of demand by the percentage method. |
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Answer» Solution :GIVEN : Initial Total EXPENDITURE `TE_(0)`=Rs.100 Final Total Expenditure `TE_(1)`=Rs.75 Initial PRICE P0=Rs.4 Percentage change in price =-25 Percentage change in price `=(P_(1)-P_(0))/(P_(0))xx100` `25=(P_(1)-4)/(4)xx100` `100=P_(1)-4xx100` `(100)/(100)=P_(1)-4` `P_(1)=4-1=3` `{:("Price (P)","Total Expenditure TE=Price P"xx"Quantity Q","Quantity Q=TEP"),(P_(0)=Rs.4,TE_(0)=Rs.100,Q_(0)=25),(P_(1)=Rs.3,TE_(1)=Rs.75,Q_(1)=25):}` Now, Ed=Percentage change in quantity demanded `dev` Percentage change in price Percentage change in `Q=(Q_(1)-Q_(0))/(Q_(0))xx100` `=(25-25)/(25)xx100=0` Ed`=(0)/(1)=0` THUS, the price elasticity of demand is 0. |
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| 1180. |
Let slope of demand curve =-0.5. Calculate ED when initial prices is Rs. 20 per unit and initial quantity is 50 units of the commodity. |
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Answer» Solution :Demand curve slopes downward, indicating negative RELATIONSHIP between price of a COMMODITY and its quantity demanded. Slope of the demand curve is estimated as `Delta p//Delta q`. Slope of demand curve `=(Delta P)/(Delta Q)=(-)0.5` So, reciprocal of slope of demand curve `=(Delta Q)/(Delta P)=(-)(1)/(0.5)`. INITIAL price (P) = 20, Initial Quantity (Q) = 50 [given] We know, `ED = (Delta Q)/(Delta P)xx(P)/(Q)=-(1)/(0.5)xx(20)/(50)=(-)(4)/(5)=-0.8` Negative Sign of ED indicates that inverse relationship between price and quantity demanded. P.E.D = 0.8 [Less than Unitary elastic demand or inelastic demand] |
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| 1181. |
What is 'Disinvestment'? |
| Answer» Solution :DISINVESTMENT means selling whole or PART of the shares (i.e., equity) of selected PUBLIC SECTOR enterprises held by the government to the PRIVATE sector. | |
| 1182. |
Give the meaning of marginal cost. |
| Answer» SOLUTION :The cost INCURRED on additional UNIT of output is known as MARGINAL cost. | |
| 1183. |
What is flexible exchange rate? |
| Answer» Solution :Flexible EXCHANGE rate is the rate which is determined by the interaction of DEMAND and supply of FOREIGN exchange in the foreign exchange market. | |
| 1184. |
State the components of supply of money |
| Answer» Solution :The components of SUPPLY of money are the currency COMPONENT and the deposit component. | |
| 1185. |
What would be an effect on equilibrium price and quantity when demand and supply both shifts rightward? Or What would be an effect on equilibrium price and quantity when there is simultaneous increase in demand and supply? "If the demand and supply of a commodity both increase, the equilibrium price may not change, may increase, may decrease." Explain using diagrams. Or Market for a good is in equilibrium. There is simultaneous increase" both in demand and supply of the good. Explain its effect on market price. |
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Answer» Solution : There are THREE cases : Case I: When demand and supply both increase at the same rate In the given diagram price is measured on vertical axis and QUANTITY demanded and SUPPLIED is measured on horizontal axis. Initially, the equilibrium price is OP and equilibrium quantity is OQ. But when "demand and supply both increase at the same rate" then, (i)Equilibrium price remains constant at OP and (ii) Equilibrium quantity rises fromn OQ to `OQ_(1)`. Case II: When demand increases,supply also increases but at a much faster rate In the given diagram price is measured on vertical axis and quantity demanded and supplied is measured on horizontal axis. Initially, the equilibrium price is OP and equilibrium quantity is OQ. But when "demand increases and supply also increases but at a much faster rate", then, (i)Equilibrium price falls from OP to `OP_(1)` and (i) Equilibrium quantity rises from OQ to `OQ _(1)` Case III: When supply increases, demand also increases but at amuch faster rate In the given diagram price is measured on vertical axis and quantity demanded and supplied is measured on horizontal axis. Initially, the equilibrium price is OP and equilibrium quantity is OQ. But when "supply increases and demand also increases but at a much faster rate" then, (i) Equilibrium price rises from OP to `OP_(1)` and (i) Equilibrium quantity also rises from OQ to `OQ_(1)` . ` (##FM_M_ECO_XII_P1_C12_E02_050_S01.png" WIDTH="80%"> ` (##FM_M_ECO_XII_P1_C12_E02_050_S02.png" width="80%"> ` (##FM_M_ECO_XII_P1_C12_E02_050_S03.png" width="80%"> |
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| 1186. |
In a particlualr year ,RBI instructed the commerical banks not to advance loans to people whose annual income is above 6 lakh .Is it justified ? Why? |
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Answer» Solution :Justification of instructions given by RBI will depend on the PHASES of trade CYCLES: If there is infaltion in this particular year in the ECONOMY there is need to REDUCE money supply hence RBI 's instructions to ration CREDIT (lons ) is justified If there is recession in the economy there is need to increase money supply hence RBI's instruction to ration credit (loans) is not justified. |
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| 1187. |
Income from property, rent and entrepreneurial income are respectively Rs. 150, Rs. 75 and Rs. 50. How much is the operating surplus ? |
| Answer» SOLUTION :150+50= Rs. 200. (Note: Rent is a part of INCOME from PROPERTY | |
| 1188. |
'Excess of foreign exchange receipts over foreign exchange payment on account of accommodating transactions equals deficit in BOP''. True or False. |
| Answer» Solution :The above statements is false because excess of foreign exchange PAYMENTS over foreign exchange RECEIPTS on account of autonomus TRANSACTIONS equals deficit in BOP. | |
| 1189. |
Recession and depression leave the economy shattered in the from of falling income and output levels. What should be the effort of a rational individual to recover economy out of depression ? |
| Answer» Solution :Recession and DEPRESSION are caused by low level of overall INVESTMENTS. As a rational consumer, one should take initiative of risking his capital to INVEST in production activities EVEN if profit margins are very low initially but ultimately increase in investment will HELP the economy recover from recession or depression. | |
| 1190. |
How the following tools can be used for credit control by the central bank in an economy: (a) Open Market Operations (b) Margin Requirenments |
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Answer» Solution :(a) Open Market operation (OMO) refers to the sale and purchase of GOVERNMENT securities in the open market by the central bank (RBI). By selling such securities, the central bank soaks liquidity from the economy and by purchasing the government securities central bank releases liquidity. This is an important method of regulating the money supply (liquidity) in the market. (B) Margin requirements of LOAN refers to the difference between the current value of the security offered and amount of loan guaranteed. When margin requirement is lowered by the central bank,the supply in the economy Conversely, a rise in the margin requirements will contract the supply of CREDIT in the economy |
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| 1191. |
How the followingtools can beusedforcreditcontrol by thecentralbankin an economy: (a) OpenMarket Operations , (b) Margin Requirements. |
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Answer» Solution :a) In narrow sense,the Central Bank starts the PURCHASE and sale of Government securities in the money market. But in the Broad Sense,the Central Bank purchases and sale not only Government securities but also of other proper and eligible securities like bills and securities of private concerns. When the banks and the private individuals purchase these securities they have to make payments for these securities to the Central Bank.This gives result in the FALL in the cash reserves of the COMMERCIAL Banks, which in turn reduces the ability of create credit. Through this way of working the Central Bank is able to exercise a check on the expansion of credit.Further, if there is deflationary situation and the Commercial Banks are not creating as much credit as is desirable in the interest of the economy. Then in such situation the Central Bank will start purchasing securities in the open market from Commercial Banks and private individuals.With this activity the cash will now move from the Central Bank to the Commercial Banks. With this increased cash reserves the Commercial Banks will be in a position to create more credit with the result that the volume of bank credit will expand in the economy. b)Marginal requirement refers to the difference between market value of securities and the amount borrowed against these securities. It is done by keeping a margin or difference between the value of security and the amount of advance to cover any possible loss. During inflationary boom businessmen and speculators try to get credit by pledging gold or securities to the bank. A bank does not advance LOAN equal to the value of the security but less, e.g., a commercial bank lends Rs. 800 against a security worth Rs. 1,000 the margin is Rs. 200 or 20 per cent.The central bank can raise this margin requirement to 30 or 50 per cent, or even to 100 per cent, in which case the commercial bank could advance nothing, as was done in USA during II World War. The higher the margin requirement, the lower is the loan one can get on a security of certain value. The central bank may altogether stop the advancing of loans against any particular type of collateral such as foreign securities, commodities like wheat, rice or cotton, the idea being to reduce the hoarding of these commodities with the help of bank credit. |
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| 1192. |
To control excess demand, CRR is |
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Answer» DECREASED |
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| 1193. |
Explain the producer's equilibrium withMR/MC approach (when Price remains constant with the rise in output). |
Answer» Solution :The conditions must hold if a profit maximizing firm produces positive output in a competitive MARKET when price is constant under MR/MC approach is determined where (i) MR = MC (ii) MC must be rising  According to Table, both the conditions of equilibrium are satisfied at 4 units of output. MC is equal to MR and MC is rising. MC is more than MR when output is produced after 4 units of output. So, Producer.s Equilibrium will be achieved at 4 units of output. However, MR is equal to MC at 2 units of output also. But, second CONDITION is not fulfilled here. Let us understand the determination of equilibrium with the help of a diagram:  Producer.s Equilibrium is determined at OQ level of output corresponding to point E as at this point, MC = MR and MC CURVE cuts MR curve from below. In Figure, output is shown on the horizontal axis and revenue and costs on the vertical axis. Producer.s equilibrium will be determined at OQ level of output corresponding to point E because at this, the following two conditions are met: (i) MC=MR (ii) MC curve cuts the MR curve from below. When `MR gt MC`, then producer will continue to produce as long as MR becomes equal to MC. It is so because firm will find it profitable to raise the output level. When `MRgtMC`, then producer will CUT down the production as long as MR becomes equal to MC. It is so because firm will find it unprofitable to produce an extra unit. So, it starts REDUCING the level of output till MR = MC. |
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| 1194. |
The non-tax revenue in the following is: (choose the correct alternative) |
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Answer» Export DUTY |
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| 1195. |
Ice cream is sold for Rs 30Lakshmi who loves eating ice cream , has already eaten 3 iec creams. Her marginal utility from eating . Her marginal utility from eating 3 ice cream is 90 . Suppose, for her ,MU of one rupee is 3 . Should she eat more ice Creams or stop? |
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Answer» Solution :`("MU of ice cream ")/("MU of one rupee")=90/3` = 30 = Price of ice creams. The MEETS the CONDITION of the consumer.s equilibrium state So, she should not eat more ice creams because MU of `4^(TH)`ice cream will be less than 90 as per law of DIMINISHING marginal utility whereas she has to pay Rs 30 (i.e. `30xx3 = 90` utils .) |
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| 1196. |
Average product is defined as: |
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Answer» 1.Total PRODUCT DIVIDED by the total cost. |
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| 1197. |
Balance on 'Balance of Trade' can be: |
| Answer» Solution :D. Balance on 'Balance of Trade' can be Surplus, Balanced and Deficit. | |
| 1198. |
GST was introduced in Indian economy in : |
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Answer» 2008 |
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| 1199. |
Choose the correct alternative in the following questions. Theory of income determination is based on : |
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Answer» Ex-ante variables |
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| 1200. |
If there is increase in quantity supplied supply curve shifts rightwards ? |
| Answer» Solution :False : Increase in QUANTITY supplied SHOW upward movement ALONG the supply curve. It is EXPANSION in supply. | |