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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.
| 1751. |
What does it mean that "money is a bearer of options"? |
| Answer» SOLUTION :Money is a bearer of options , implies that it has generlaised purchasing power. It INDICATES the FREEDOM of choice thatthe use of money OFFERS. | |
| 1752. |
Differentiate between devaluation and depreciation. |
| Answer» Solution :Both devaluation and depreciation IMPLY a FALL in the value of domestic currency in TERMS of foreign currency. The effect of depreciation is the same as that of devaluation as both means higher price of foreign currency in terms of domestic currency. Notable DIFFERENCE between the two is that devaluation takes place in Fixed Exchange Rate system whereas depreciation occurs in Flexible Exchange Rate system. Devaluation occurs when government of a country officially lowers the value of domestic currency in terms of foreign currency. As against it depreciation occurs when fall in value of domestic currency in terms of foreign currency is the result of interaction between market forces of DEMAND and supply of domestic currency in the foreign exchange market. | |
| 1753. |
Give two examples of non-debt capital receipts. |
| Answer» SOLUTION :Recovery of LOANS, SALE proceeds of PUBLIC enterprises (i.e., disinvestment). | |
| 1754. |
Classify the following as direct and indirect taxes : (i) Income tax""(ii) Entertainment tax "" (iii) Profit tax ""(iv) Wealth tax . |
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Answer» SOLUTION :DIRECT taxes : (i) , (iii) , (IV) . They are direct taxes as their BURDEN cannot be shifted .i.e., their impact and incidence are on the same person or firm. Indirect taxes: (ii) This is an indirect tax as its burden can be shifted , i.e., impact and incidence are on different PERSONS. |
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| 1755. |
Suppose a ban is imposed on consumption of liquor in the country. Examine its effects on (a) GDP, and (b) welfare. |
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Answer» SOLUTION :(a) Ban on consumption of liquor will bring down consumption of liquor. Since production of liquor is counted in GDP, GDP will FALL. (b) Fall in consumption of liquor will improve health causing rise in welfare. |
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| 1756. |
It is used to make payments for goods and services |
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| 1757. |
A presistent slow-down of an economy could lead to revenue deficit.' Comment. |
| Answer» Solution :Economic recession is a SITUATION when low AD leads to low investment and therefore low growth rate of GDP falls, TAX REVENUE of the government (through direct as well as indirect taxation) is bound to remain low, IMPLYING slowdown of revenue receipts of the government during recession | |
| 1759. |
In an economy equilibrium level of income is Rs. 12,000 crore. The ratio of MPC to MPS is 3 : 1. Calculate the additional investment needed to reach a new equilibrium level of Rs. 20,000 crore. |
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Answer» Solution :GIVEN `MPC` to `MPS=3 :1` i.e. `MPC=0.75` and `MPS=0.25` `DELTA Y=20,000-12,000=8,000` crore `DeltaY=DeltaI 1/(MPS)` `8,000=DeltaI 1/(0.25)` `=4 Delta I` `Delta I= Rs. 2,000` crore. |
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| 1760. |
Foreign exchange rate is determined by: |
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Answer» DEMAND for FOREIGN exchange |
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| 1761. |
Does production take place only on PPC? |
Answer» Solution :Both Yes and No.  Yes, production will take PLACE on PPC, if the given resources are FULLY and efficiently utilised. In such case, production will take place at any point on the curve AB, LIKE point F. No, Production will take place on PPC, if the resources are either underutilised or inefficiently utilised or both. In such case, production will take place on any point below the curve AB, like point H. Any point below the PP curve, thus highlights the problem of unemployment and INEFFICIENCY in the ECONOMY. |
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| 1762. |
When price and demand fall in equal proportion, elasticity of demand is unity. |
| Answer» Solution :FALSE : Because when price and demand change NEGATIVELY with EQUAL proportion, elasticity of demand is unity. | |
| 1763. |
The condition for shutdown point is, the price is equal to minimum of short run average cost. |
| Answer» SOLUTION :FALSE: It is so because the condition for shutdown point is the price equal to minimum of short RUN average variable COST. | |
| 1764. |
Which among the following are final goods and which are intermediate goods ? Give reasons. (a) Milk purchased by a tea stall. (b)Bus purchased by a school. (c) Juice purchased by a student from the school canteen. |
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Answer» (b) It is a final good as bus is treated as an investment for the SCHOOL. (c) It is a final good as JUICE purchased by a student is meant for consumption PURPOSE. |
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| 1765. |
Comment on the following statement: "Diminishing returns occur when total output falls as additional unitsof labour are combined with fixedinputs in the production process." |
| Answer» SOLUTION :The statement is false because diminishing returns occur when MARGINAL product falls as additional units of labour are COMBINED with fixed inputs in the production process. | |
| 1766. |
What is factor income ? |
| Answer» SOLUTION :Factor income is the income received by the FACTORS of production for RENDERING factor service in the PROCESS of production. | |
| 1767. |
Supply is the |
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Answer» limited resources that are available with the seller |
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| 1768. |
Define injections. |
| Answer» Solution :GOVERNMENT expenditure, consumption expenditure, investment and exports are the important injections into the circular flow. INCREASE in these variables raises the LEVEL of production in the economy or MAGNITUDE of circular flow as these are ADDITIONS to the circular flow. | |
| 1769. |
Modernization refers to change in : |
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Answer» Technology |
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| 1770. |
Out of induced investment and autonomousn investment, which one is influenced by the level of income ? |
| Answer» SOLUTION :INDUCED INVESTMENT. | |
| 1771. |
The licensing policy aimed at: |
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Answer» PROMOTING REGIONAL equality |
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| 1772. |
Explain the condition of consumer's equilibrium with the help of utility analysis. |
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Answer» Solution :CONSUMER's equilibrium will be attained at a point where marginal utility of a COMMODITY is equal to its price. HOWEVER, MU is expressed in terms of utils and price is expressed in money form. Therefore, EQUALITY of MU in utils and price cannot be the basis of consumer's equilibrium. Hence, marginal utility also needs to be expressed in money form. Marginal utility in money form can be obtained by dividing it (MU) by marginal utility of one rupee. Marginal utility of 1 is the extra utility when an additional rupee is spent on other available goods in general. Suppose that for an addition rupee we get two units of some other commodity, then marginal utility of rupee, we can find out marginal of a commodity in Marginal Utility in Money terms = `("Marginal Utility (in units)")/("Marginal Utility of Rs 1")` |
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| 1773. |
Economic problem arises due to plenty of resources. |
| Answer» SOLUTION :False: Economic problem arises due to SCARCITY of resources and alternativeuses of various MEANS. | |
| 1774. |
In an economy C = 200 + 0.5 Y is the consumption functionwhere C is the consumptionexpenditure and Y is the national income. Investment expenditure is Rs. 400 crores. Is the economy in equilibrium at anincome level Rs. 1,500 crores? Justify your answer. |
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Answer» Solution :At the EQUILIBRIUM level `Y=C+I` Substitutingthe values `Y={200+0.5 Y}+400` `Y-0.5Y=600` `0.5Y=600` `Y=(600)/(0.5)=1,200` The EQUILIBRIUMLEVEL of INCOME is Rs. 1,200 crores. THEGIVEN income Rs. 1,500 CRORE is greater thanequilibriumlevel of income. Therefore, the economy is not equilibrium. |
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| 1775. |
Which of the following is not included in compensation of employees ? |
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Answer» Wages and salaries in cash |
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| 1776. |
Identify the following as revenue expenditure or capital expenditure . Give reasons : (i) Salary paid to government employees . (ii) Purchase of a machine from Korea. (iii) Repayment of loan taken from IMF . (iv)Interest paid on national debt . (v) Interest paid on national debt . (vi) Expenditure on construction of dams. (vi) Social security benefits paid to retired government employees. |
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Answer» Solution :(i) It is a REVENUE expenditure as it neither CREATES any ASSET nor reduces any liability of the government . (ii) It is a CAPITAL expenditure as it increases assets of the government . (iii) It is a capital expenditure as it reduces the liability of the government . (IV) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the govt. (v) It is a capital expenditure as it increases asset of the government . (vi) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government . |
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| 1777. |
_______ refers to the income generated by self employed workers and unincorporated enterprises. |
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Answer» |
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| 1778. |
Distinguish between real and nominal gross domestic product. |
| Answer» Solution :NOMINAL GDP is the sum-total of the ECONOMIC output produced in a year VALUED at the current market price while REAL GDP is the sum-total of the economic output produced in a year values at a predeterminedbase market price. | |
| 1779. |
How can budgetary policy be used to reduce inequalities of income ? |
| Answer» Solution :Budgetary policy can be USED by government for reducing inequalities of income. To achieve its TARGET, government should formulate suitably its fiscal policy. Through its fiscal policy government should put tax on rich people and spend that revenue for the benefit of poor people. Goverment should levy more direct taxes because these are paid by rich people. SCHEMES for providing health SERVICES and education to poor people should be ENCOURAGED. | |
| 1780. |
In which form of the market structure is the degree of control over the price of its product by a firm very large? |
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Answer» Monopoly |
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| 1781. |
Which ofthefollowingagencyis responsiblefor issuing₹ 1 currencynote in India ? |
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Answer» Reserve BANK of india |
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| 1782. |
Contraction of demand is theresult of: |
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Answer» 1.decrease in the NUMBER of consumers. |
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| 1784. |
How does central bank control credit creation by commerical banks through open market operations? Explain. |
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| 1785. |
What is a capital budget ? |
| Answer» SOLUTION :CAPITAL BUDGET contains the DETAILS of the capital RECEIPTS and capital expenditure of the government . | |
| 1787. |
Complete the following table: |
Answer» SOLUTION :
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| 1788. |
Complete the following table: |
Answer» SOLUTION :
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| 1789. |
Giving reasons , categorise the following into revenue expenditure and capital expenditure : (i) Subsidies , (ii) Grants given to State Governments , (iii) Repayment of loans , (iv) Constructionof school buildings. |
| Answer» SOLUTION :REFER Items categorised as REVENUE and Capital EXPENDITURE. | |
| 1790. |
Complete the following table. |
Answer» SOLUTION :
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| 1791. |
Complete the following table. |
Answer» SOLUTION :
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| 1792. |
Current Account of BOP account records only imports and exports of goods and services. |
| Answer» SOLUTION :False because in addition, it ALSO records imports and EXPORTS of UNILATERAL TRANSFERS. | |
| 1793. |
Explain the role of 'marginal requirements' in correcting deficient demand |
| Answer» SOLUTION :A marginal requirements is the DIFFERENCE between the amount of the loan and market value of security offered by the borrower aginst the loan. If the margin imposed is 40%, then the BANK is allowed to give loan only upto 60% of the value of security. By reducing margin the lending capacity of the BANKS can be raised. More lending will lead to more aggregate demand that is helpful in reducing DEFICIENT demand. | |
| 1794. |
Which one of the following is not an objective of government budget ? |
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Answer» REALLOCATION of resources |
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| 1795. |
Give reasons for the followinngstatements : (i) A decrease in supply will not result in a change in equilibrium quantity if the demand for a commodity is perfectly inelastic. (ii) An decrease in supply will not result in a change in equilibrium price if the demand for a commodity is perfectly elastic. |
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Answer» Solution :(i) If the demand for a commodity is perfecthly inelastic, i.e., if the demand curve is a VERTICAL straight line, a DECREASE in SUPPLY curve will result only in a change in the equilibrium PRICE, but no change in the equilibrium quantity. (ii) If the demand for a commodity is perfectly elastic, i.e., if the demand curve is a horizontal straight line, a decrease in supply curve will result only in change equilibrium quantity, but no change in equilibrium price. |
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| 1796. |
a) What is the depreciation of domestic currency in terms of US dollar? Explain with a diagram. b) How will it affect your cost of education, if you are planning to go to USA for higher studies? |
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Answer» Solution :a) Depreciation of domestic currency REFER to decrease in the value of domestic currency in terms of foreign currency (here US dollar) B) Depreciation of domestic currency for me would imply that there is an increase in the domestic currency price to buy one unit of US currency (US DOLLARS) for exmaple, if price of one dollar rises from Rs 55 to Rs 62, it will increase the cost of education in USA (implying more expenditure/burden on my parents). |
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| 1797. |
Government raises its expenditure on producing public goods . Which economic value does it reflect ? Explain . |
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Answer» Solution :Increased expenditure by government on public GOODS LIKE DEFENSE , maintaining LAW and order etc. Increases their availabilityto the people of the country . For example more expenditure on maintaining glaw and order raises the sense of security among the people . Any such expenditure raises welfare of the people . |
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| 1798. |
What is the relationship between the revenue deficit and the fiscal deficit ? |
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Answer» Solution :Fiscal deficit is a WIDER CONCEPT than REVENUE deficit . Revenue deficit is defined as the excess of government's revenue expenditure over revenue receipts . Interms of formula : Revenue deficit = Revenue expenditure (RE) - Revenue receipts (RR) whereas fiscal deficit is defined as the excess of total expenditure over total receipts excluding borrowings .It does not TAKE into account borrowings . In terms of formula : Fiscal deficit = (Total budgetary expenditure) - (Total budgetary receipts - Borrowings) . |
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| 1799. |
State any three causes of a rightward shift of a demand curve of a commodity. |
Answer» Solution :The conditions are :  (i) Price of substitute gods rises. (ii) Price of COMPLEMENTARY goods falls. (iii) Income of a consumer rises in CASE of normal goods. (iv)Income of ACONSUMER falls in case of INFERIOR goods. (v) When the PREFERENCES are favourable. |
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| 1800. |
If dueto fall in the price of good X, demand for good Y rises, the twogoods are: |
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Answer» 1.Substitutes |
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