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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.
| 1351. |
Fiscal deficit in a governn1ent budget refers to : |
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Answer» SHORTFALL in taxes |
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| 1352. |
A firm's revenue rises from Rs 400 to Rs 500 when the price of its product rises from Rs 20 per unit to Rs 25 per unit. Calaculate the price elasticity of supply |
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Answer» SOLUTION :Initital Total REVENUE `(TR_(1)) = Rs 400` Final Total Revenue `(TR_(2)) = Rs 500` Initial Price `(P_(1)) = Rs 20` Initital Price `(P_(2)) = Rs 25` `rArr` Change in Price `(Delta P) = Rs (25 - 20) = Rs 5` Initial QUANTITY Supplied `(Q_(2))` `= (TR_(1))/(P_(1)) = (400)/(20) = 20` units Final Quantity Supplied `(Q_(2))` `= (TR_(2))/(P_(2)) = (500)/(25) = 20` units `rArr` Change in Quantity `(Delta Q) = Rs (20 - 20) = Rs 0` `E_(s) = (((Delta Q))/(Q) xx 100)/(((Delta P))/(P) xx 100) = ((0)/(20) xx 100)/((5)/(20) xx 100) = 0` |
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| 1353. |
Give one example of externality which reduces welfare of the people. "" OR Give one example of negative externalities. |
| Answer» Solution :ENVIRONMENTAL pollution caused by INDUSTRIAL PLANTS. | |
| 1354. |
Why does the central bank intevenn in case of Manged Floatting Exchange Rate systems gt |
| Answer» Solution :In case of Managed FLOATING Exchange Rate System, foreign exchange rate is determined by the market forces of demand and supply. However, the central bank needs to intervene in this system in order to restrict the fluctuation in the exchange rate within certain limits. The aim is to KEEP exchange rate close to desired target VALUES. For this, central bank MAINTAIN reserves of foreign exchanges to ENSURE that the exchange rate stays within the target value. | |
| 1355. |
When does the situation of deificient demand on production an employment? |
| Answer» Solution :When ACTUAL AGGREGATE demand falls SHOT of the aggregate demand required for full employment equilibrium, it GIVES rise to deficient demand. | |
| 1356. |
Distinguish between Cash Reserve Ratio and Statutory Liquidity Ratio. |
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Answer» SOLUTION :CRR is the PERCENTAGEOF deposits whichcommercialbankshave to legallykeep with the CENTRAL bank. SLR is the percentage of depositswhich commercial banks have to legallyrequired to keep as RESERVES with themselves . |
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| 1357. |
Under what circumstances, net export is negative ? |
| Answer» SOLUTION :When IMPORTS EXCEED EXPORTS. | |
| 1358. |
Average Propensity to Consume is …….at point B and Average Propensity to Save is ……..at point A. |
| Answer» ANSWER :B | |
| 1359. |
Elaborate 'economic growth ' as objective of government budget . |
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Answer» Solution :A SUSTAINABLE increasein real GDP signifies ECONOMIC growth . It happens when there is an increase in volume of goods and services produced in an economy . Government budget can be an effective tool to ensure economic growth in the country . Government makes various policies an d provisions through its budgetary policy to stimulate savings and INVESTMENTS in an economy . This is done by providing tax rebates and other INCENTIVES for productive ventures . Government spends on basic services and facilities to have a strong infrastructural base of the economy e.g., government increases its expenditure on HEALTH , education, housing , transport etc . so that level of production rises in private sector and public sector both . Government ensures that while planning its expenditure and revenue policy , financial discipline is maintained under situations of inflation and deflation in the country . |
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| 1361. |
What gives rise to an economic problem? |
| Answer» Solution :If we are not ABLE to SATISFY unlimited WANTS out of limited RESOURCES then the economic problem arises. | |
| 1362. |
inKeyesianmodel , shortperiodequilibruiumis discussedwithreference toconstant( fixed ) pricelevel . |
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Answer» |
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| 1363. |
One of the following is an example of economic infrastructure : |
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Answer» Roads |
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| 1364. |
Give three examples of macroeconomic variables. |
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Answer» Solution :`**""`Total employment in the ECONOMY, `""**""`GENERAL price level in the economy, `**""`AGGREGATE demand in the economy. |
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| 1365. |
Why are borrowings by government capital receipts? |
| Answer» SOLUTION :Because these CREATE LIABILITY of government for REPAYMENT of loan. | |
| 1366. |
Name the three methods of National Income. |
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Answer» SOLUTION :The three ethods of National Income are : `**""`VALUE ADDED Method `**""`Income Method `**""`EXPENDITURE Method |
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| 1367. |
Availability of agricultural land (fixed factor) is limited in the world, but demand of food grain is continuously increasing. Is it possible to increase the supply of food grains by continuously increasing variable factors like seeds, fertilizers etc.? |
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Answer» Solution :Availability of agricultural LAND is limited in the world, production of food grains may be increased by CONTINUOUS increase in VARIABLE factors only upto a optimum combination with fixed factor. After that law of NEGATIVE returns is APPLIED. Value: Critical thinking |
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| 1368. |
from 20 units to 24 units. What can you say about price elasticity of demand of the good through the 'expenditure approach ? |
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Answer» Solution :`{:("Price of the good per UNIT (RS.)","Demand (Units)","Total Expenditure (Rs.)"),("10","20","200"),("8","24","192"):}` Since FALL in price of a good results in a fall in total expenditure on it, the price elasticity of demand of the good is less than unity i.e., INELASTIC. |
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| 1369. |
Explain how 'bank rate is helpful in controlling credit creation |
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| 1370. |
What is the value of MR when the demand curve is elastic? |
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Answer» Solution :When demand curve is elastic `(e gt 1)`, MR is POSITIVE. The RELATIONSHIP is given by, `MR = P(1-1/e)` Graphically, it is SHOWN as is given here. 
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| 1371. |
With a fall in income, demand for normal goods will rise. |
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Answer» |
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| 1372. |
Basic economic activities |
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Answer» (a)PRODUCTION |
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| 1373. |
Balance of Trade equals : |
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Answer» EXPORTS less IMPORTS |
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| 1374. |
Define a direct tax. |
| Answer» SOLUTION :Direct TAX REFERS to the tax that is imposed on the property and INCOME of PERSONS and is paid directly by the consumers to the government . | |
| 1375. |
Dueto increase in the familymembers,harishwants to addonemorefloor to hisoldhouse .Howwill treastthe valueof newfloorwhileestimatingnational income . |
| Answer» Solution :The value of the floorwill beincludedin thenationalas CONSTRUCTION of an ADDITIONAL FLOORIS a PARTOF gross domesticcapital FORMATION . | |
| 1376. |
Why is production possibility curve also called opportunity cost curve? |
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Answer» Solution :(i) Production possibility curve is a curve which depicts all possible combinations of TWO goods which can be produced with GIVEN resources and technologyin an economy. (II) PPC is also called opportunity cost curve because each and every point on PPC measures the opportunity cost of ONE commodity in terms of SACRIFICING other commodity. (iii) The rate of this sacrificed commodity is called the Marginal Opportunity Cost of the expanding good. |
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| 1377. |
Primary deficit equals : |
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Answer» BORROWINGS |
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| 1378. |
What is called Green GNP ? |
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Answer» Solution :Green GNP is defined as GNP which WOULD help to ATTAIN a sustainable use of natural environment ans equitable DISTRIBUTION of national INCOME. Green `GNP=GNP-` NET fall in stock of Natural capital |
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| 1379. |
Show with the help of Cardinal utility analysis ,that consumer will like to buy more of the good on which government has imposed 'maximum price ceiling'. |
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Answer» Solution :(i)Due to maximum proce ceiling,the market price of the product is LESS than the equilibrium price. (II)Assuming initially consumer is in equilibrium when: Marginal Utility of money =price.........(A) OR `("Marginal Utility of a product in Utils" [MU_(x)])/("Marginal Utility of One Rupee" [MU_(R)])=price`........(B) In Particular ,the condition (A) says that the marginal utility of a product on terms of money should be equal to its price. Something,this is loosely stated as Marginal utility is equal to price ,i.e., MU=Price. (iii)(a)With fall in Price ,now MU will be greater than the price , (b)If MU `gt` Price implies When BENEFIT is greater than cost and whenever benefit is greater than cost the consumer KEEPS on consuming additional unit of a ommodity till MU =Price. (c)It is so because according to the law of DIMINISHING marginal utility ,MU falls as more is purchased.As MU falls mit is bound to become equal to the price at some point of purchase. |
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| 1380. |
Calculate 'Sales' from the following data: {:(,"(Rs in lakhs)"),((i) "Subsidies",200),((ii)"Opening stock",100),((iii) "Closing stock",600),((iv) "intermediate consumption","3,000"),((v) "Consumption of fixed capital",700),((vi) "Profit",750),((vii) "Net value added at factor cost","2,000"):} |
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Answer» Solution :`GDP_(MP) = NDP_(FC)-` Subsidies + Depreciation `= 2000 - 200 + 700` `= RS 2,500` lakhs Now, `GDP_(MP)` = SALES + (CLOSING Stock - Opening Stock) - Intermediate Consumption or, Sales `= GDP_(MP)` - (Closing Stock - Opening Stock) + Intermediate Consumption `= 2,500 - (600 - 100) + 300` `= Rs 5,000` lakhs |
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| 1381. |
Foreign exchange rate in India is on the on the rise recently. What impact is it likely to on exports and how ? |
| Answer» SOLUTION :RISE in foreign exchange rate means the one unit of foreign currency is worth more RUPEES than EARILER So one unit of foreign currency can nowbuy more goods and sevieces form india . It makes inidan exports cheaper to the foreign buyers. This is likely to increase exports. | |
| 1382. |
Giving reasons explain where charity to foreign countries is recorded in the Balance of Payments Accounts. |
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Answer» |
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| 1383. |
Industrial policy before 1991 was essentially a : |
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Answer» Pro-PRIVATE sector policy. |
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| 1384. |
If the Real GDP is Rs.300 and Nominal GDP is Rs.350, calculate Price Index (base=100). |
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Answer» Solution :We know, Real GDP = `("No MINAL GDP")/("Price Index of Current year")xx100` `300=(330)/("Price Index")xx100` Price Index=Rs.110 |
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| 1385. |
______ is exercised through discussions, letters and speeches to banks |
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Answer» Moral SUASION |
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| 1387. |
What is margin requirement? |
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| 1388. |
When will GDP of an economy be equal to GNP? |
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Answer» |
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| 1389. |
Market price and Factor cost will be equal when there is : |
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Answer» No direct TAX |
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| 1390. |
What is the behaviour of average fixed cost as output increases? |
| Answer» SOLUTION :The shape of AFC is downward SLOPING Rectangular hyperbola. AFC FALLS as output increases because ` AFC =(TFC)/("Output)` and TFC remains constant. So, as output increases, TFC remains constant, but AFC falls. | |
| 1391. |
When disposable income rises from Rs. 1,000 to Rs. 1,100, savings rise by Rs. 30. Find out marginal propensity to save. |
| Answer» Solution :`MPS = (DELTAS)/(Delta Y)=(30)/(100)=0.30` | |
| 1392. |
A consumer spends Rs.60 on a good priced at Rs.5 per unit. When price falls by 20 percent, the consumer continues to spend Rs.60 on the good. Calculate price elasticity of demand by percentage method. |
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Answer» Solution :Given : Initial Total Expenditure `(TE_(0))`=Rs.60 FINAL Total Expenditure `(TE_(1))`=Rs.60 Initial Price `(P_(0))`=Rs.5 Percentage change in price =-Rs.20 Percentage change in price = `(P_(1)-P_(0))/(P_(0))xx100` `-20=(P_(1)-5)/(5)xx100` `(-100)/(100)=P_(1)-5` `P_(1)=4`  Now, `E_(d)=(-)("Percentage change in quantity DEMANDED")/("Percentage change in price")` `E_(d)=(-)((Q_(1)-Q_(0))/(Q_(0))/(Q_(0))xx100` `E_(d)=(-)((15-12)/(12)xx100)/(-20)` `E_(d)=(-)(25)/(-20)` `E_(d)=1.25` `THEREFORE E_(d)=1.25` THUS, the price ELASTICITY of demand is 1.25. |
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| 1393. |
Explain the problem of double coincidence of wants faced under barter system. How has money solved it? |
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| 1394. |
Unilateral transfer made to abroad will be recorded as a debit item of BOP onaccount account . |
| Answer» Solution :True. It leads to OUTFLOW of FOREIGN EXCHANGE. | |
| 1395. |
What are the main functions of money? How does money overcome the shortcomings of a barter system? |
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Answer» Solution :Money is any good that is widely accepted in exchange of goods and services, as well as payment of debts. Most people will CONFUSE the definition of money with other things, like income, wealth, and credit. Three functions of money are:1. Medium of exchange: Money can be used for buying and selling goods and services. If there were no money, goods WOULD have to be exchanged through the process of barter (goods would be traded for other goods in transactions arranged on the basis of mutual need). For example: If I raise chickens and want to buy cows, I would have to find a person who is willing to sell his cows for my chickens. Such arrangements are OFTEN difficult. But Money eliminates the need of the double coincidence of wants.2. Unit of account: Money is the common standard for measuring relative worth of goods and service.3. Store of value: Money is the most liquid asset (Liquidity MEASURES how easily assets can be spent to buy goods and services). Money’s value can be retained over time. It is a convenient way to store wealth. Money overcomes the shortcomings of barter system in the following manner:i. Money solves the problem of double coincidence of wants. For example, if a person needs wheat in exchange of tea, then he/she must search for a person who is ready to trade wheat for tea. Money made the need for such searches redundant.ii. In barter system, it was very difficult to measure the value of one good in terms of another. For example, it is difficult to calculate the value of a cow in terms of wheat.iii. It was very difficult to store goods, especially perishable goods (fruits, meat, etc.) for the purpose of value storage. Money serves this purpose.iv. The contractual or future payments are much difficult to be made in barter system. For example, a worker working on contract basis could not be paid in terms of rice or CHAIRS. |
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| 1396. |
What is the value added method of measuring national income ? |
| Answer» Solution :Value added METHOD is that method which measures the national income by estimating the value added by each PRODUCING ENTERPRISES within the domestic territory of the country in an accounting YEAR. | |
| 1398. |
(a) Describe value added method. (b) What is double counting ? Name the methods to avoid it. |
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Answer» Solution :(a) Value added method MEASURES the market value of a final goods and services, produced by each producing enterprise, within the domestic territory of the country. `GVA_(MP)=underset((i))(GVO_(MP))-underset((ii))(IC)` Here, (i) Value of output refers to the market value of goods produced in domestic territory during a PERIOD of one year. (ii) Intermediate consumption refers to the value of non-factor INPUTS, which are used up in the process of production. (b) DOUBLE counting refers to including value of same products more than once. Two ways to Avoid Double counting : `**""`Use value of final output, `**""`Use value added of each firm. |
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| 1399. |
Foreign exchange transactions which are independent on other transactions in the Balance of Payments Account are called: |
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Answer» Current TRANSACTIONS |
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| 1400. |
Explain the 'Store of value' function of money .How has it solved the related problem created by barter |
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