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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.
| 1401. |
Classify the following as Stock and Flow :(i) Amount of bank deposits as on 31. 03. 2018(ii) Losses (iii) Production of cement in the year 2018(iv) Profit(v) Population of india as on 31^(st) March, 2018 (vi) Number of literate people as on 31 . 03. 2018(vii) Savings(viii)National income of a country (ix) Capital (x) Number of persons employedduring December (xi) Balance in a bank account (xii) Raw material in a godown as 31^(st) Jan, 2019(xiii) Production(xiv) Wealth (xv) Gross domestic produt |
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Answer» Solution :(i) Stock as they are related to a point of TIME. (ii) Flow as LOSSES are measured over a period of time. (iii) Flow as production is measured over a period of time . (iv) Flow as profit is related to a point of time, (v) Stock as population is related to a point of time. (vi) Stock as it isrelated to apoint of time. (vii) Flow as savings are related to a period of time. (viii) Flow as national income is related to a period of time. (ix)Stock as capital is related to a point of time. (x) Flow as it is related to a period of time. (XI) Stock as it is related to a point of time. (xii) Stock as it is related to a point of time. (xiii) Flow as production ismeasured over a period of time. (xiv)Stock as wealth is related to a point og time. (xv)Flow as GROSS domestic product is measured over a period of time. |
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| 1402. |
Money supply is a flow concept. |
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Answer» |
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| 1403. |
What is nominal gross domestic product ? |
| Answer» SOLUTION :When GROSS DOMESTIC product (GDP) of a given year is ESTIMATED on the basis of price of the base year, it is called nominal GDP. | |
| 1404. |
From the following data , calculate Fiscal Deficit : |
| Answer» SOLUTION :FISCAL DEFICIT = Borrowing=₹ 32 BILLION. | |
| 1405. |
Explain the causes behind law of demand. |
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Answer» Solution :The INVERSE relationship between price of the commodity and quantity demanded for that commodity is because of the following reasons: (i) Income effect : (a) Quantity demanded of a commodity CHANGES due to change in purchasing power (real income), caused by change in price of a commodity is called Income Effect. (b) Any change in the price of a commodity affects the purchasing power or real income of the consumers although his money income remains the same. (c ) When price of a commodity rise more has to be spent on purchase of the same quantity of that commodity. Thus, rise in price of commodity leads to fall in real income, which will thereby reduce quantity demanded is known as Income effect. (ii) Substitution effect : (a) It refers to substitution of one commodity in place of another commodity when it becomes relatively cheaper. (b) A rise in price of the commodity let coke, also means that price of its substitute, let pepsi, has fallen in relation to that of coke, even though the price of pepsi remains unchanged. So, people will buy more of pepsi and less of coke when price of coke RISES. (c ) In other words, consumers will I substitute pepsi for coke. This is called Substitution effect. Price effect = Income effect+ Substitution effect (iii) Law of Diminishing Marginal Utility: (a) This law states that when a consumer consumes more and more units of a commodity,every additional unit of a commodity giveslesser and lesser satisfaction and marginal utilitydecreases. (b) The consumer consumes a commodity till marginal utility (benefit) he gets equals to the price (cost) they pay, i.e., where benefit = cost. (c ) For EXAMPLE, a thirsty man gets the maximum satisfaction (utility) from the first glass of water. Lesser utility from the 2nd glass of water, still lesser from the 3rd glass of water and so on. Clearly, if a consumer wants to buy more units of the commodity, he would like to do so at a lower price. Since, the utility derived from additional unit is lower. (iv) Additional consumer: (a) When price of a commodity falls, two effects are quite possible: New consumers, that is , consumers that were not able to afford a commodity previously, starts demanding it at a lower price. Old consumers of the commodity starts demanding more of the same commodity by spending the same amount of money. (b) As the result of old and new buyers push up the demand for a commodity when price falls. |
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| 1406. |
What is the significance of circular flow models ? |
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Answer» Solution :Circular flow models are significanr as they : (i) PROVIDE knowledge of INTERDEPENDENCE among different sectors. (II) give knowledge of structure of the ECONOMY. (iii) enable estimation of national income, and (iv) provide knowledge of injections and leakages. |
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| 1407. |
Which of the following clearly represents a movement toward greater productive efficiency? |
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Answer» A MOVEMENT from point A to point B. |
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| 1408. |
From 2017 onwards India has adopted of the period of vision of : |
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Answer» 5 years |
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| 1409. |
Circular flow is of _______ types |
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Answer» four |
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| 1410. |
An increase in investment in an country leads to increase in national income in investment is required so that national income rises by 400 crores? |
| Answer» SOLUTION :50crores | |
| 1411. |
Primary deficit in a government budget refers to : |
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Answer» BORROWING requirements |
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| 1412. |
in aneconomy, actuallevelof incomeIS Rs.500crorewhereasthefullemploymentlevelofincomeisRs. 800crore. TheMPCis 0.75Calculatetheincreasein investmentrequiredto achievefullemploymentlevelofincome . |
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Answer» Solution : `K=(1)/(1-MPC)=(1)/(1-0.75)=(1)/(0.25)=(1)/(1//4)=4` INCREASEIN incomerequired=800-500 =300 CRORE increaseininvestmentrequired= 300`div` 4 `=75 `crore |
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| 1413. |
If the total deposits createdby commercial banks is ₹ 1200 crores and legalreserve requirements is 25%, thencalculatethe amountof intitaldeposits . |
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Answer» SOLUTION :GIVEN , LegalReserveRequirements (LR R) is 25% or 0.25 `"Money MULTIPLIER"=(1)/(LR R)=(1)/(0.25)=4` It the total deposits createdisof ₹ 12,000 CRORES, then: `"InitialDeposits" = ("Total Deposits")/("Money Multiplier") = (12,000)/(4)` = ₹ 3,000 crores |
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| 1414. |
The objective of equity can be achieved by : |
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Answer» REDUCING GAP between rich and POOR |
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| 1415. |
What policyinitiatives can be governmentundertake to increase the demand of milk in the country? Mentionany one. |
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Answer» Solution :UNDERTAKE healthcampaigns to PROMOTE the positive EFFECTS of milk consumption. VALUE:ANALYTIC |
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| 1416. |
What is money supply ? |
| Answer» SOLUTION :Money supply refers to the total volume of money in circulation held by the public at a particular POINT of TIME. | |
| 1417. |
Total product will increase only when marginal product increases. |
| Answer» SOLUTION :False: TOTAL product will ALSO INCREASE when marginal product decreases and when marginal product decreases, the total product increases at diminishing rate. | |
| 1418. |
What is price line under perfect competition? |
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Answer» Solution :(i) The price line shows the relation ship between the MARKET price and a competitive firm.s OUTPUT level. (i) The VERTICAL HEIGHT of the price line is EQUAL to the market price as shown in the given figure. 
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| 1419. |
Giving reasons, categorise the following into revenue receipts and copital receipts. (12C, A14) (i) Recovery of loan, (ii) Corporation tax, (iii) Dividend on investment made by govt., (iv) Sale of public sector undertaking, (v) Interest received on loans, (vi) Dividend received from public interprises, (vii) Grants from foreign govt. (viii) Income tax received by govt. and (ix) Borrowing from public. (x) Loan received from World Bank (xi) Grants received from abroad, (xii) Borrowing from public. |
| Answer» Solution :(i) It is capital receipt as it reduces FINANCIAL assets. (ii) and (iii) are revenue receipts because they create neither liabilities nor assets. (iv) It is capital receipt as disinvestment reduces government assets. (v) It is revenue receipt as it neither creates liablility not reduces ASSET (VI) Divedend is revenue receipt. (vii) and (viii) are revenue receipts (IX) Borrowing is capital receipts as it creates liability. (x) Loan from World Bank is capital receipt as it creates liablility. (xi) Grants received from abroad is revenue receipt as it creates neither liability nor reduces asset. (xii) Borrowing from PUBLIC is a capital receipt as it creates liability for the government. | |
| 1420. |
What is the revenue receipts (or revenue items ) of government ? Mention two sources of revenue receipts . |
| Answer» Solution :Revenue RECEIPTS are government receipts which do not CREATE LIABILITIES or LEAD to reduction in assets . Revenue receipts include tax and non-tax revenue receipts . | |
| 1421. |
Name the monetary measure indicated in the following statements. Also indicate, wheter the following measures will be adopted during excess demand or defcient demand. (i) RBI starts seeling Govemment secur ities to the public. (ii) Instead of 80% now 90% of the security amount will be given as loan. (iii) It resulted in increase in interest rate charged by commercial bank from the borrowers. (iv) RBI advised SBI to stop advertising for home loans in order to discouragelending. (v) Central bank reduces the amount of time and demand deposits required to be kept as reserves. (vi) RBI instructed not to advance loans to people with income above rs 5 lakhs per annum. |
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Answer» Solution :(i)open MARKET OPERATION (ii) Bank RATE (iii) Bank rate (v) Legal RESERVE requirements (vi) Selective Credit Controls Measures adopted during Excess DEMAND will be (i) (iii)(iv) and (vi).Measures adopted during deficient Demand will be (ii) and(iv) |
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| 1422. |
How are following treated in the estimation of domestic factor income ? Salaries to Indian residents working in the Russian Embassy in India. |
| Answer» Solution :No, it WILLL not be included in the domestic factor income as the russian embassy is not a part of the domestic TERRITORY of INDIA. | |
| 1423. |
The demand for good rises by 20% as a result of fall in its price. Its P.e_(D)is (-) 0.8. Calculate the percentage fall in price. |
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Answer» Solution :`{:("% Change in Demand = 20%% Change in PRICE "=?%),("Elasticity of Demand (ED) = "-0.8):}` `(-)0.8=(20%)/("% Change in Price")` Percentage FALL in price = 25 % Price for the GOODS will fall by 25 % |
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| 1424. |
Betweenexcess demandanddeficientdemandwhichis betterand why ? |
| Answer» SOLUTION :Briflyexcessdemand cuusesrisein PRICES (INFLATION ) anddeficientdemandcauses failin economy'slevelof incomeoutputandemploymentSO bothareundesirable( orevils )as bothbringinstabilityinthe economy.Yetexcessis comparaativelylesserevilas deficientdemandcausesserious consequnces . | |
| 1425. |
Outflow of foreign exchange is recorded on the ____sides |
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Answer» CREDIT |
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| 1426. |
A consumer consumes only two good X and Y, both priced at Rs.2 per unit. If the consumer chooses a combination of the two goods with Marginal Rate of Substitution equal to 2, is the consumer in equilibrium? Why or why not? What will be rational consumer do in this situation? Explain. OR A consumer consumes only two goods X and Y whose prices are Rs.5 and Rs.4 respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 4 and that of Y equal to 5, is the consumer in equilibrium? Why or why not? What will a rational consumer do in this situation? Use utility analysis. |
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Answer» Solution :At the point of CONSUMER equilibrium the following equality should be met : MRS=`(P_(x))/(P_(y))` According to the question, MRS=2 `(P_(x))/(P_(y))=(2)/(2)=1` So, MRS is greater than the price ratio. Thus, to reach the equilibrium point a rational consumer would decrease the consumption of good y. OR According to the utility APPROACH, a consumer reaches equilibrium where the following equality is met. `(MU_(x))/(P_(x))=(MU_(y))/(P_(y))` According to the given question `(MU_(x))/(P_(x))=(4)/(5)` `(MU_(y))/(P_(y))=(5)/(4)` So,`(MU_(y))/(P_(y))` is greater than `(MU_(x))/(P_(x))`. Thus, to reach the equilibrium, a rational consumer would increase the consumption of good y and decrease that of good x. |
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| 1427. |
What are secondary deposits ? |
| Answer» SOLUTION :These are demand deposits which ARISE on account of loans given by the BANKS to the PEOPLE. | |
| 1428. |
If due to fall in the price of good X, demand for good Y rises, the two goods are : (choose the correct alternative) |
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Answer» SUBSTITUTES |
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| 1429. |
What is the problem of standard of deferred payment? |
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| 1430. |
The measure of price elasticity of demand of a normal good carries minus sign while price elasticity of supply carries plus sign.Explain why? |
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Answer» Solution :(i)Mathematically speaking,price elasticity of demand in case of normal Good and Quality demand for Normal Good. (ii)Price elasticity of supply in case of normal good is positive ,since the change in quantity supplied is in same direction to the change in price as there exists positive relationship between price of normal good and Quantity supplied for Normal Good. (iii)So ,in Nutshell,.Minus SIGN.ATTACHED with price elesticity of demand shows Law of Demand and .PLUS sign. attached with price elasticity of supply shows Law of supply. |
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| 1431. |
Pure oligopoly is based on the ………………. products. |
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Answer» Differentiated |
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| 1432. |
Labour intensive technique is chosen in a |
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Answer» 1.Labour SURPLUS ECONOMY. |
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| 1433. |
Explain the ‘banker’s banks' and‘ supervisor’ function of the centraI bank. |
| Answer» Solution :‘Banker’s banks' and‘ supervisor’(i) It is the custodian of their cash reserves. Banks of the country are REQUIRED to keep a certain percentage of their deposits with the central bank; and in this way the central bank is the ultimate holder of the cash reserves of commercial banks, (ii) Central bank is lender of last resort. WHENEVER banks are short of funds, they can take loans from the central bank and get their trade bills discounted. The central bank is a SOURCE of great strength to the banking SYSTEM, (iii) It acts as a bank of central clearance, settlements and transfers. Its moral persuasion is usually very EFFECTIVE so far as commercial banks are concerned. | |
| 1434. |
Which of the following is not a part of profits ? |
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Answer» CORPORATE TAX |
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| 1435. |
In which market form does a firm face a perfectly elastic demand curve? |
| Answer» SOLUTION :PERFECTLY COMPETITIVE MARKET. | |
| 1436. |
Explain features of perfect knowledge about the market. |
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Answer» Solution :(i) Perfect Knowledge MEANS both buyers and sellers are fully informed about the market. (ii) The firms have all the knowledge about the product market and the input markets. Buyers also have perfect knowledge about the product market. (iii) Let US first take the product market. The implication of perfect knowledge about the product market is that any attempt by any firm to charge a price higher than the prevailing uniform price will fail. The buyers will not pay because they have perfect knowledge. A uniform price prevails in the market. (iv) Regarding the knowledge about the input markets the implicit assumption is that each firm has an EQUAL access to the technology and the inputs used in the technology (v) No firm has any cost advantage. Cost STRUCTURE of each firm is the same. (vi) Since there is uniform price and uniform cost in case of all firms, and since profit equals revenue less cost, all the firms earn uniform PROFITS. |
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| 1437. |
If disposable income is Rs. 1,000 and consumption expenditure Rs. 750, find out theaverage propensity to save. |
| Answer» SOLUTION :`APS=(Y-C)/(Y)=(1,000-750)/(1,000)=0.25` | |
| 1438. |
What can be the maximum value of marginal propensity to save ? |
| Answer» SOLUTION :The maximum VALUEOF MARGINAL PROPENSITY to save is 1. It is only possible when MPC = 0, i.e., the entire additional income is saved. | |
| 1439. |
How does fixed foreign exchange rate promote capital movements and foreign trade? |
| Answer» Solution :(i) Fixed EXCHANGE rate ensures stability in the exchange rate. So the EXPORTERS and the importers do not have to OPERATE under FEAR of uncertain exchange rate. Thus fixed foreign exchange rate promotes foreign TRADE (ii) It also promotes capital movements as a stable currency removes fear of capital loss caused by fluctuating exchange rate. | |
| 1440. |
Define the types of circular flow. |
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Answer» Solution :Circular FLOW is of two types : (i) Real flow shows flow of goods and SERVICES across DIFFERENT SECTORS. Money flow (or income flow) shows flow of money across different sectors. |
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| 1441. |
What are 'subsidies'? |
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Answer» |
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| 1442. |
In the context of Balance of Payment Account, state whether the following statements are true or false. Give reasons for your answer. (i) Profit received from investment abroad is recorded in capital account (ii) Import of machines is recorded in current account |
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Answer» Solution :(i) False, it is RECORDED in current account as it neither affects FOREIGN exchange assets nor foreign exchange liabilities. (ii) True, all imports and exports of GOODS are recorded in TRADE account which is a part of current account, because it is SIMPLY import/export of a good |
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| 1443. |
Marginal cost is defined as: |
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Answer» The change in TOTAL COST DUE to a ONE unit change in output. |
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| 1444. |
If two demand curves intesect, which one has the higher price elasticity ? |
| Answer» SOLUTION :When TWO demand CURVES INTERSECT, the flatter CURVE is more elastic. | |
| 1445. |
Calculate: (a) Operating Surplus, and (b) Domestic income : |
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Answer» Solution :(a) OPERATING surplus=(ii)+{(iv)+(VII)+(viii)} =800+460+940+300 =₹ 2,500 CRORES (B) Domestic income = (i)+ Operating surplus + (x) =2000+2500+200 =₹4700 crores |
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| 1446. |
Under monopolistic competition price discrimination can be made easily. |
| Answer» Solution :False: There is no possibility of price DISCRIMINATION in the SALES of GOODS in this MARKET because of PRODUCT differentiation. | |
| 1447. |
When marginal revenue is positive and constant, both average and total revenue will increase at constant rate. |
Answer» Solution :False : It is so because when MARGINAL REVENUE is positive and constant, total revenue INCREASES at constant rate and average revenue is equal to marginal revenue. It can be EXPLAIN with the help of the FOLLOWING table. 
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| 1448. |
Give the relationship between the revenue deficit and the fiscal deficit. |
| Answer» Solution :Fiscal deficit is wider TERM than the revenue deficit . Revenue Deficit = Revenue expenditure- Revenue RECEIPTS . On the other hand , Fiscal Deficit = Revenue deficit+ (Capital expenditure - Non-debt capital receipts ). So , revenue deficit FORMS PART of fiscal deficit . | |
| 1449. |
What is meant by effective demand? |
| Answer» SOLUTION :By ‘effective’ DEMAND, Keynes meant the total demand for GOODS and services in an economy at VARIOUS LEVELS of employment. Total demand for goods and services by the people is the sum total of all demand meant for consumption and investment. In other words, the sum of consumption expenditures and investment expenditures constitute effective demand in a two-sector economy. | |
| 1450. |
What is the difference between Rapo Rate, Bank Rate and Reverse Repo Rate ? |
| Answer» Solution :Both repo rate and bank rate ( or discount rate ) are the rates of interest at which commercial banks can borrow money from Reserve Bank of India. Repo rate and bank RETE are almost similar except that Repo rate is applicable for short term whereas bank rate is applicable for long term and emergency. By varying these rates, RBI can increase or decrease the SUPPLY of money. REVERSE Repo rate is the rate of interest PAID by the Central Bank on DEPOSITS by Commercial banks. | |