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2051.

At the time of independence private sector did not come forward to start capital goods industries due to :

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LACK of capital
Lack of demand
Both (a) and (B)
NONE of the above

Answer :C
Discussion
2052.

Compare where India, Pakistanand China relativelystand with respect to (a) growth rate population, and (b) sex ratio. Also give reason.

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SOLUTION :Growth rate of population
It is lowest in China DUE to state policy of limiting population growth. It is highest in Pakistan due toabsence of any state policy on family planning.
India is in between because India has some state policy on family planning bu not as strict as China has.
Sex Ratio
`*` It refers to number of femalesper1000 of males.
`*` It is nearly the same on the LOWER SIDE in all the three countrieswith lowest in India.
`*` It is mainly due to PREFERENCE for son and adoptingillegalmeansto stop birth of female child by many .
Discussion
2053.

The fiscal deficit gives the borrowing requirement of the government. Elucidate.

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Solution :We know , Fiscal Deficit = Total Expenditure- Revenue RECEIPTS - Non-dept creating capital receipts . It means , fiscal deficit is financed by debt-creating capital receipts , i.e., fiscal deficit is met through borrowings.
So , it is RIGHTLY SAID that fiscal deficit gives the borrowing REQUIREMENT of the government .
Discussion
2054.

Why is Goods and Services Tax (GST), an indirect tax ?

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SOLUTION :The burden of GST can be SHIFTED to other persons (ULTIMATE consumers).
Discussion
2055.

PPC is concave shaped as production of one good can be increased only by reducing quantity of another good.

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SOLUTION :False: PPC is concave shaped DUE to INCREASING marginal opportunity cost.
Discussion
2056.

Outline the steps taken in deriving Consumption Curve from Saving Curve. Use diagram.

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Solution :
Step 1. GIVES S CURVE, take OC as EQUAL to OS
Step 2. Take a POINT `B_(1)` on the `45^(@)` line exactly above point B
Step 3. Join C and `B_(1)` and extend
Discussion
2057.

Define money supply

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SOLUTION :Money SUPPLY refers to the total VOLUME of money held by public at a PARTICULAR POINT of time in economy.
Discussion
2058.

How can the productivity of Human resources be increased?

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Solution :The productivity of human resource can be increased with the help of human capital formation by providing training and SKILL to available LABOUR FORCE.
Value: Creative THINKING.
Discussion
2059.

What is the behaviour of Total Variable Cost, as output increases?

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SOLUTION :TVC first INCREASES at a diminishing rate and then increases at an INCREASING rate.
Discussion
2060.

Calculate the elasticity of demand by total expenditure method.{:("Price (Rs.)Total Expenditure (Rs.)"),("440"),("650"):}

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Solution :Demand is LESS elastic `(ED lt 1)` as the total expenditure increases from Rs. 40 to Rs. 50 with the rise in price from Rs. 4 to Rs. 6.
Demand is less elastic `(ED lt 1)`.
Discussion
2061.

The consumer is in equilibrium when the following condition is satisfied :

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`(MUX)/(MU_y)GT(P_x)/(P_y)`
`(MUx)/(MU_y)LT(P_x)/(P_y)`
`(MUx)/(MU_y) = (P_x)/(P_y)`
NONE of these.

Answer :C
Discussion
2062.

What is the relationship between marginal cost and fixed cost?

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Solution :There is no relationship between marginal cost and FIXED cost. Marginal cost examines the change in TOTAL cost from a change in output. Fixed cost REMAINS the same even when output CHANGES.
Discussion
2063.

Define 'depreciation'. OR What is meant by 'Consumption of fixed capital '?

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Solution :Depreciation refers to a fall in the value of fixed assets due to NORMAL normal WEAR and tear , PASSAGE of time or EXPECTED obsolescence (CHANGEIN technology).
Discussion
2064.

A teacher is getting Rs. 6,000 per month as salary. If he leaves the job and starts tuition work, he is expected to earn Rs. 5,000 per month. What would be his opportunity cost?

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Solution :The opportunity COST of school job is Rs. 5,000 p.m., that the TEACHER COULD have earned in the ALTERNATIVE USE, by doing tuition work.
Discussion
2065.

Deficit or Disequilibrium in BOP may occur either due to autonomous transactions or due to accommodating transactions.' Defend or refute.

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SOLUTION :The GIVEN STATEMENT is REFUTED. Deficit or disequilibrium occurs DUE to autonomous transaction. To remove the deficit, accommodating transactions are carried out.
Discussion
2066.

Growthof resources shifts PPC towards left.

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Solution :FALSE: Growth of resources INCREASES the CAPACITY of ECONOMY to produce more. It shifts PPC TOWARDS right and not left.
Discussion
2067.

What is full employment

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Solution :FULL EMPLOYMENT REFERS to a situation in which all those people, who are willing to work at the existing wage rate GET work
Discussion
2068.

Calculate autonomous consumption expenditure from the following data about in an economy which is in equilibiru: National income=500, MPS=0.3, Investment expenditure=100.

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SOLUTION :`S=-bar(C )+(1-b)Y`
`100=-bar(C )+(0.3)500`
`100=-bar(C )+150`
`-50=-bar(C ) or bar(C )=50`
Hence, Autonomous Consumption EXPENDITURE =50
Discussion
2069.

On the basis of given diagram, answer the following questions: (i) What is the value of autonomous consumption ? What is the break-even level of income or at what level of income saving is zero ? (iii) How much is APC corresponding to point E ? (iv) If MPC = 0.6, determine the consumption and saving function.

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Solution :(i) Consumption curve makes an itercept of ₹ 40 crores on the Y-axis. So, Autonomous Consumption (`barc`) = ₹ 40 crores.
(II) Break-even point occurs when Consumption = Income (or Saving = 0)
So, Break-even LEVEL of income = ₹ 100 crores.
(iii) At point E, C = Y = ₹ 100 crores. So, APC = `("Consumption(C)")/("Income(Y)")=(100)/(100)` = 1
Consumption FUNCTION is given as: C= `barc` +b(Y)
Autonomous Consumption (`barc`)= ₹ 40 crores and b or MPC = 0.6
Putting value of b and (`barc`) in consumption function, we get: C= 40+0.6Y
Saving Function in given as: S= -`barc`+(1-b)Y
(1-b) or MPS = 1-MPC=1-0.6=0.4
Putting values of (1-b) or MPS and -(`barc`), we get: S=-40+0.4Y
Discussion
2070.

Full employment implies absence of involuntary unemployment.

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Solution :True. : During full employment, all WILLING and capable people get WORK WITHOUT any undue DIFFICULTY and there is no INVOLUNTARY unempolyment.
Discussion
2071.

National income includes :

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TRANSFER INCOME
Factor income
Both (a) and (B)
Neither (a) nor (b)

Solution :NATIONAL income INCLUDES : bothTransfer income and Factor income.
Discussion
2072.

Explainthe concept of human capitalformation .

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SOLUTION :Expenditure on education, HEALTH, on -the -JOB training,migrationand seeking information is INVESTMENT in human capital or human capital FORMATION.
Discussion
2073.

Explain the concept of normal residents.

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SOLUTION :A resident is said to be a person (or INSTITUTION) who ordinarily resides in a COUNTRY and whose centre of economic interest lies in that country. He is called a normal resident since he NORMALLY lives in the country of his economic interest. The period of stay should be at least ONE year or more.
Discussion
2074.

Discuss the various steps of expenditure method for calculating national income.

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Solution :The steps involved in calculating National Income by Expenditure METHOD are:Step 1: Identify the Economic Units incurring Final Expenditure:Step 2: Classification of Final Expenditure:Final expenditures incurred by the above mentioned economic units are estimated and classified under the following heads:1. Private Final Consumption Expenditure (PFCE)2. Government Final Consumption Expenditure (GFCE)3.Gross Domestic CAPITAL Formation (GDCF)4. Net .EXPORTS (X-M).The sum total of four components of final expenditure gives Gross Domestic Product at Market Price (GDPMP), i.e. GDPMP = PFCE + GFCE + GDCF + (X-M)Step 3: Calculate Domestic Income (NDPFC)By subtracting the amount of depreciation and net indirect TAXES from GDPMP, we get domestic income, i.e. NDPFC = GDPMP – Depreciation – Net Indirect Taxes.Step 4: Estimate net factor income from ABROAD (NFIA) to arrive at National Income:In the final step, NFIA is added to domestic income to arrive at National Income.National Income (NNPFC) = NDPFC+ NFIA
Discussion
2075.

From the data given below about ·an economy calculate: (a) Investment-expenditure (b) Consumption expenditure (i) Equilibrium level of income 5000 (ii) Autonomous consumption 500 (iii) Marginal propensity to consume 0.4

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SOLUTION :25002500
Discussion
2076.

Suppose output increases in the short run, than the Total cost will:

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increase DUE to an increase in FIXED costs only.
increase due to an increase in variable costs only.
increase due to an increase in both fixed and variable costs.
DECREASE if the firm is in the region of DIMINISHING returns.

Answer :B
Discussion
2077.

Explain the behaviour of average fixed cost using numerical example.

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SOLUTION :(i) The PER unit cost INCURRED on fixed factors of production is KNOWN as average fixed cost.
`AFC= (TFC)/("Output")`
AFC falls as output increases because `AFC= (TFC)/("Output")`and TFC REMAINS Output constant. So, as output increases, TFC remains constant, AFC falls.
Discussion
2078.

Will the following be included in the domestic product of India? Give reasons for your answer. (a) Profits earned by foreign companies in India (b) Salaries of Indians working in the Russian Embassy in India (c) Profits earned by a branch of State Bank of India in Japan

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Solution :(a) YES, it will be included in domestic product because it is a FACTOR income earned within domestic territory of India.
(B) No, it will not be included in domestic product because Russian EMBASSY is not a part of domestic territory of India.
(c) No, it will not be included in domestic product as profits are not earned within domestic territory of India.
Discussion
2079.

Identify the following as revenue expenditureand capital expenditure . Givereasons. (i) Salary paid to Army officers. (ii) Purchase of Metro coaches from Japan. (iii) Repaymentof loans. (iv) Grants given by central government to state Government . (v) Loan given to Union Territories. (vi) Interest paid on National Debt. (vii) Expenditure on construction of Metro. Pension paid to retired Government employees. (ix) 10 % shares purchased by the Government in a private company. (x) Subsidies . (xi) Expenditure on collection of taxes. (xii) Expenditure on building a bridge .

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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 asset of the government .
(iii)ITIS a capital expenditure as it reduces the liability of the government.
(IV) It isa revenue expenditure as it neither creates any asset nor reducesany liabilityof the government .
(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 .
(VII) It is a capital expenditure as it increases asset of the government.
(viii) It is a revenue expenditure as it neither creates any asset norreduces any liability of the government .
(ix) It is a capital expenditure as it increases asset of the government .
(x)It is a revenue expenditureas it neither creates any asset nor reduces any liability of the government .
(xi) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government
(xii) It is a capital expenditure as it increases asset of the government .
Discussion
2080.

Name any one step the government can take through its budget to reduce the gap between the rich and thepoor.

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SOLUTION :Government can reduce the gap between the rich and the poor by imposingtaxes on the rich and SPENDING more on the WELFARE of the poor.
Discussion
2081.

If price of a commodity falls from 50rs per unit to 45rs per unit, its supply falls from 1000 units to 800 units. Find out its elasticity of supply.

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Solution :
Price ELASTICITY of Supply (ES) `=(DeltaQ)/(DeltaP)xx(P)/(Q) =(200)/(5)xx(50)/(1000)=2`
ES=2(Supply is highly elastic as ES gt 1)
ES is always positive due to direct relationship between price and QUANTITY SUPPLIED.
Discussion
2082.

Explain education as a source of human capitalformation in India.

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SOLUTION :Expenditure incurredon acquiringeducation is investment in human capital . The objective is to enhance future prospects of earnings.It increases learning capacity,SOCIAL standing and knowledge. Itstimulates innovations,FACILITATES inventions and quickadoption of new technologies,and thus INCREASE productivity.
Discussion
2083.

Briefly discussthe concept of over full employment. Use diagram.

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Solution :Above full-employment EQUILIBRIUM is a macroeconomic term used to describe a SITUATION in which an ECONOMY’s real gross DOMESTIC product (GDP) is in EXCESS of its long-run potential level.
Discussion
2084.

What is the value of MPC when MPS= 0 ?

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SOLUTION :We know thatMPC+ MPS =1, Then ifMPS=0 , VALUE of MPS WOULD be 1
Discussion
2085.

Expenditure by a firm on buyinga bus for use of employeesis : (Choose the correct alternative )

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COMPENSATION of employees
Intermediate EXPENDITURE
FINAL expenditure
Transfer expenditure

Solution :Final expenditure
Discussion
2086.

What is high Powered Money ?

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Solution :High Powered MONEY REFERS to the moneyproduced by RBI and GOVERNMENT of INDIA.
Discussion
2087.

Goods purchased for the following purpose are final goods : (choose the correct alternative )

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For satisfaction of WANTS
For investment in firm
Both (a) and (B)
None of the above

Solution :C.GOODS purchased forsatisfaction of wants and For investment in firm are final goods .
Discussion
2088.

Give equation of Budget Line .

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SOLUTION :`P_1X_1 +P_2X_2=M`
Discussion
2089.

To the right of middle point of a line AB touching X and Y - axes, E_(d) would be more than one.

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SOLUTION :False : It WOULD be less than one. Lower PORTION is smaller than upper portion, `E_(d)=("Lower portion")/("Upper portion")`.
Discussion
2090.

What would be an effect on equilibrium price and quantity when demand and supply both increase at the same rate? Or Explain with the help of a diagram a situation when demand and supply curves shift to the right but equilibrium price remains the same. Or Market for a good is in equilibrium. What is the effect on equilibriumn price and quantity if both the market demand and the market supply of the goods increase in the same proportion? Use diagram.

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Solution :When demand and supply both increase at the same RATE, equilibrium price remains constant and equilibrium quantity RISES. It can be SHOWN with the help of the following diagram.
In the above 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 as given in the examination problem, "demand and supply both increase at the same rate", then,
(i) Equilibrium price remains constant OP and
(ii) Equilibrium quantity rises from OQ to `OQ_(1)`.
` (##FM_M_ECO_XII_P1_C12_E02_048_S01.png" width="80%">
Discussion
2091.

Equilibrium price of an essential1 medicineis too high. Explain what possible steps can be taken to bringdown the equilibrium price but only through the market forces. Also explain the series of changes that will occur in the market.

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Solution :Following are the POSSIBLE steps that can be taken to bring down the equilibrium price:
(i) The government should provide subsidy on the production of such medicines.
(ii) The government should cut down or abolish all the taxes on such medicine.
(iii) The government should offer various facilities to industrialists to motivate them for the production of such medicine. These facilities will REDUCE the cost of inputs used in the production of medicines.
The effect of above steps will be that SUPPLY of such medicines will increase and as the result of, the equilibrium price of medicines will reduce as shown in the given figure.
In the given figure price is on vertical axis and quantity demanded and supplied is on horizontal axis. But due to increase in supply the supply curve shifts rightward from SS to `S_(1)S_(1)` . With new supply curve `S_(1)S_(1)`, there is exces_ supply at initial price OP because at price OP, supply is PB and demand 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 this fall in price there is downward movement alongg the supply curve (Contraction in supply) from B to C and similarly, there is downward movement along the demand curve (Expansion in demand) from A to C. So, finally, equilibrium price falls from OP to `OP_(1)` and equilibrium quantity RISES from OQ to `OQ_(1)`.
Conclusion
Duw to increase in supply
(i) Equilibrium price falls from OP to `OP_(1)`.
(ii) Equilibrium quantity rises from OQ to `OQ_(1)`
Value : Analytic
` (##FM_M_ECO_XII_P1_C12_E02_061_S01.png" width="80%">
Discussion
2092.

Which of the following is not a revenue receipt?

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RECOVERY of loans
Foreign grants
Profit of PUBLIC enterprise
Wealth tax

Answer :A
Discussion
2093.

Define the term 'multiplier'. How do we measure it?

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Solution :The INVESTMENT multiplier (K) tells US how much increase in income occurs when autonomous investment increases by 1.Thus the investment multiplier may be defined as the ratio of the change in national income to the ini­tial change in planned investment expenditure that brings it about. We can measure it USING the following FORMULA:K = deltaY / DELTA I
Discussion
2094.

Define a Central Bank .

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SOLUTION :A Central BANK is the apexinstitution of the monetaryand banking SYSTEM that controls and regulates the MONETARY and financial system of the COUNTRY.
Discussion
2095.

A phase of circular flow of income :

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production
distribution
disposition
all of these.

Answer :D
Discussion
2096.

How is primary deficit calculated ?

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SOLUTION :PRIMARY Deficit = FISCAL Deficit - INTEREST Payments
Discussion
2097.

Currencyis issuedby thecentral bank, yetwe saythat commercialbankscreate money. Explain. How is this moneycreationby commercialbankslikelyto affectthe national income ? Explain.

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SOLUTION :Money supply has two components: CURRENCY and demand deposits with commercial banks . Currencypeople . In thisway, commercial banks also create money
Commercial banks LEND money mainly to investors. The riseinthe economyleadsto RISEIN national income throughthe multipliereffect.
Discussion
2098.

Besides the sun rays global warming is also caused by

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BURING of coal
Burning of oil
Burning of gas
All the above

Answer :D
Discussion
2099.

Which of the three countries has the highest growth rate of GDP?

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INDIA
Pakistan
China
All equal

Answer :C
Discussion
2100.

What are (i) Spot Market and (ii) Forward Market in foreign exchange?

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Solution :(i) If operation is of daily nature, it is called SPOT market or current market. The exchange rate which prevails in the spot market is called Spot rate. (ii) A market for FOREIGN exchange for future delivery is known as FORWARD market. It deals with forward transactions (SALE and purchase of foreign exchange) which are contracted today but implemented on a specified future date at a rate agreed upon today.
Discussion