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2151.

Given the following data about an economy estimate Net Domestic product at factor cost by Expenditure method and Product method :

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ANSWER :RS 1130 CRORE
Discussion
2152.

Categorise the following into revenue expenditure or capital expenditure Payment of salary to government employes .

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ANSWER :REVENUE EXPENDITURE
Discussion
2153.

What items are included in the M_(1) measure of money supply

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SOLUTION :`M_(1)`=Currency and coins with Public+Demand of Commercial Banks+Other DEPOSITS with RBI.
Discussion
2154.

Rural population needs long term loans :

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to BUY seeds
For MAKING MINOR improvementon land.
For buting fertilisers
For BUYING AGRICULTURE machinery.

Answer :D
Discussion
2155.

What are Ex-ante savings?

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Solution : Ex-ante savings refers to amount of saving which HOUSEHOLDS PLANS to SAVE at different levels of INCOME in the economy..
Discussion
2156.

What is the meaning of over full employment equilibrium

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Solution :Over full employment EQUILIBRIUM REFERS to a situation, when AD is equal to AS BEYOND the full employment LEVEL.
Discussion
2157.

With the same amount of resources a farmer can feed the following combinationof goats and horses: Taking into consideration the options available with him, find out the opportunity cost of the farmer of feeding one horse.

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Solution :The OPPORTUNITY cost of the farmer of feeding one horse is 3 goatsi.e.,
`(168-150)/(50-44)=(18)/(6)=(3)/(1)`.
THUS, the opportunity cost of feeding one horse is 3 goats.
Discussion
2158.

What causes a dowanward movement along a supply curve ?

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SOLUTION :FALL in price and fall in quantity supplied, i.e., contraction in SUPPLY.
Discussion
2159.

Through carefully planned , government budget reflects because its expenditure exceeds revenue . How can this deficit be reduced ?

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SOLUTION :Government should increase its revenue by controlling TAX evasion.
Government should reduce unproductive expenditure like subsidies , financial ASSISTANCE to all , EVEN when some of them may not require it .
Discussion
2160.

How is purchase of an asset in another country treated in the capital account?

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Solution :Purchase of an asset in a FOREIGN country APPEARS as a negative (DEBIT) item in the capital account (As there is an outflow of foreign EXCHANGE).
Discussion
2161.

Which of the following is not a component of aggregate demand in a two-sector economy?

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NET EXPORTS
Government Expenditure
Consumption
Both (a) and (B)

ANSWER :D
Discussion
2162.

The point at which consumption curve intersects the 45 degree line, APS is zero.

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Solution :TRUE. : It happens because at this point, CONSUMPTION is equal to INCOME and SAVING is ZERO.
Discussion
2163.

Diminishing marginal returns implies:

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Decreasing average variable costs.
Decreasing MARGINAL costs.
Increasing marginal costs.
Decreasing average FIXED costs.

Answer :c
Discussion
2164.

Which one of these is a revenue expenditure?

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Purchase of SHARES
Loans advanced
Subsidies
Expenditure on acquistion of LAND

Answer :C
Discussion
2165.

Government takes measures to restrict autonomousimports of gold. Explain the economic values desired to be achieved from this

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Solution :Restricting AUTONOMOUS imports of gold will reduce the foreign exchange DEMAND. It will reduce the foreign exchange payments. Since autonomous payments decline, BOP DEFICIT will decline. This decline will reduce pressure of deficit and it is the economic VALUE realized.
Discussion
2166.

Identify an instrument of monetary policy:

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Govt.revenue
Govet EXPENDITURE
BANK DEPOSITS
Bank rate

Answer :d
Discussion
2167.

According to law of demand by increasing the price of a good its demand decreases but in caseof petrol, its demand increases with the increases in price why?Explain.

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Solution :Nowadays PETROL has becomea NECESSARY good and its supplyis limited.
VALUE: Critical thinking
Discussion
2168.

Define average propensity to consume.

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SOLUTION : the average PROPENSITY to consume (APC) is the fraction of income spent. It is COMPUTED by dividing consumption by income,
Discussion
2169.

Identify the following as Microeconomic study or Macreconomic study Output produced by a cloth mill.

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ANSWER :MICROECONOMIC STUDY
Discussion
2170.

Classify the following as real flow or money flow Payment made for goods and services to producer sector by the government sector.

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SOLUTION :MONEY FLOW
Discussion
2171.

Derive MU Schedule from TU Schedule.

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SOLUTION :
Discussion
2172.

Which of the following is the consumption sector?

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HOUSEHOLDS
Firms
Foreign
Government

Solution :A. Households is the CONSUMPTION SECTOR.
Discussion
2173.

To control inflation RBI would increase:

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BANK RATE
REPO rate
REVERSE repo rate
all of these

Answer :d
Discussion
2174.

definemarginalpropensityto save(MPS).

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SOLUTION : the ratioofchangeis saving`( DELTA S) `to CHANGEIN INCOME`(Delta Y)`is called MPS . Sybolically: `MPS=Delta S//DeltaY.`
Discussion
2175.

if income of a consumerrisesbyRs. 50,000 , whatwill beitsimpact on hisconsumptionexpenditure?Commenton hisresponse.

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SOLUTION :theconsumerwould liketoincreasehisexpenditurebutby lessthanincreasein INCOME. This isaccrdingto keynesianPsychologicallaw of consumptionwhichstatesAs. Incomeincreases , consumptionexpenditurealsoincrease butby lessthanincrease in incomethereis TENDENCY ofthepeoplenottospendon consumptionthewholein INCREMENTAL income .
Discussion
2176.

Why do export form a part of national income ?

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SOLUTION :Exports are produced WITHIN the COUNTRY's domestic territory, THEREFORE, they are not INCLUDED in the estimation of national income .
Discussion
2177.

Foreign exchangge rates have risen considerably in a country. What is its likely impact on imports of that country and why ?

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Solution :RISE in EXCHANGE rate in a country means that its domestic BUYERS of imports have to pay more for importing goods. It makes the country's imports costlier. DEMAND for country's imports declines.
Discussion
2178.

Market supply of a product is perfectly inelastic.Suppose its demand increases.Explain the likely effect on the price and output of a product.

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Solution :(i)When market supply of a PRODUCT is perfectly inelastic and its demand increases, then equilibrium output remains constant and equilibrium price RISES.
(ii) It can be explained with the help of GIVEN diagram.
(iii) 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 becomes perfectly inelastic and demand INCREASE then,
(a)Equilibrium price rises from OP to OP, and
(b) Equilibrium quantity remains constant at OQ
Discussion
2179.

What is the law of variable proportions? OR Define the law of variable proportion.

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Solution :The law of variable proportion states that as we INCREASE the quantity of only ONE INPUT, keeping other inputs fixed, the total product increases at an increasing RATE in the beginning, then increases at DECREASING rate and after a level the output ultimately falls
Discussion
2180.

Define domestic product

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Solution :It is the value of FINAL goods and SERVICES PRODUCED within the economic territory of the country
Discussion
2181.

An income increase, consumption expenditure does not increase at the same rate as incease" Why?

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Solution : At low.levels of income a consumer SPENDS a large PART of his income on consumption expenditure. to meet his BASIC requirements, however as income INCREASES, consumptionalso increases but at a proportionately lesser rate. It is psychological behaviour of person not to spend the whole incremental income on consumptionAs a rational consumer, he also tends to SAVE a part of his income.
Discussion
2182.

Credit creation by commercial banks is determined by: (Choose the correct alternantive) (a) Cash Reserve Ratio (CRR) (b) Statutory Liquidity Ratio (SLR) (c) Initial Deposits (d) All of the above

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SOLUTION : (d) All of the above
Discussion
2183.

Spot the capital receipt :

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TAX RECEIVED
External GRANTS received
DIVIDEND received
Disinvestment

Answer :D
Discussion
2184.

Its value can be greater than one:

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MPC
MPS
APS
APC

Solution :atinitial LEVELS of income , CONSUMPTION is greater than income. thus , APC>1
Discussion
2185.

Houge international reserves are required to be maintained by the governmentin fixed and flexible exchange rate system

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Solution :FALSE. International reserves are required to be maintained under FIXED exchange rate SYSTEM only
Discussion
2186.

Decreases in the value of domestic currency in terms of foreign currency is

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APPRECIATION of DOMESTIC currency
revaluation of domestic currency
depreciation of domestic currency
none of these

Answer :C
Discussion
2187.

Would the elasticity of demand in the following cases be unity, less than unity or greater than unity ?(i) A rise in the price of a commodity reduces the total expenditure.(ii)A rise in the price of a commodity increases the total expenditure.(iii) A fall in the price of a commodity increase the total expenditure.(iv)A fall in the price of a commodity, the total expenditure remains the same.

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SOLUTION :(i) Greater than UNITY.
(ii)LESS than unity.
(III)More than unity.
(iv)Unity.
Discussion
2188.

Identify the following as Microeconomic study or Macreconomic study Sugar industry.

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ANSWER :MICROECONOMIC STUDY
Discussion
2189.

What monetary system does India follow ?

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SOLUTION :INDIA, at present , FOLLOW a ' managed paper currency STANDARD '.
Discussion
2190.

Define foreign exchange market.

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Solution :The market in which CURRENCIES of various countries are converted or exchanged for one ANOTHER is CALLED foreign EXCHANGE market.
Discussion
2191.

Identifythe non-tax revenue from the following statement: "It refersto claim of the government on the property of a person who dies without leaving behind any legal heir or a will ".

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SPECIAL ASSESSMENT
Escheats
FORFEITURES
Fees

ANSWER :B
Discussion
2192.

Borrowings in government budget is

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REVENUE deficit
Fiscal deficit
Primary deficit
Deficit in taxes

Answer :B
Discussion
2193.

From the following table, calculate average variable cost of each given level of output : |{:("Output","Marginal Cost"),(1,80),(2,70),(3,72),(4,78):}

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SOLUTION :
Discussion
2194.

How is bank rate'used by central bank in influencing credit creation by commercial banks ? ExplainorHow do changesin Bank Rate affect moneysupply in an economy? Explain.

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Solution :When the repo RATE INCREASES, borrowing from RBI becomes more EXPENSIVE. This in turn, raises the interest rate in the economy and therefore reduces the TOTAL MONEY supply. If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate.
Discussion
2195.

Explain the basis of classifying taxes into direct and indirect tax. Give examples.

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Solution :Direct taxes are those taxes the final BURDEN of which falls on that very person who makes the PAYMENT to the government. For EXAMPLE, Income Tax. On the other hand, indirect taxes are those which are PAID to the government by one Person but their burden is borne by another Person. For example, GST
Discussion
2196.

In case of flexible exchange rate, rate of foreign exchange does not change.

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Solution :FALSE as RATE of FOREIGN exchange changes with change in demand and SUPPLY of foreign exchange.
Discussion
2197.

Goods that exhibit directprice-demand relationshipare called:

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1.giffen GOODS
2.complementary goods
3.Substitutes goods
4.None of these.

Answer :a
Discussion
2198.

An increase of Rs. 200 crore in investment leads to a rise in national income by Rs.1000 crores. Find out marginal propensity to consume.

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Solution :Multiplier (k)`=("Change in Income"(DELTAY))/("Change in INVESTMENT"(Deltal))=(1,000)/(200)=5`
We know, Multiplier (k)`=(1)/(1-MPC)`
5`=(1)/(1-MPC)`
Hence ,MPC `=1-0.20=0.80`
Discussion
2199.

Monday Policy is the policy of ___ to control money and credit creation in the economy.

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CENTRAL Govermment
Central Bank
Both a and b
None of these

Solution :B. Monetary POLICY is the policy of Central Bankto control MONEY and credit CREATION in the economy.
Discussion
2200.

Define non-tax revenue.

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Solution :Non- TAX REVENUE refers to the receipts of the GOVERNMENT from sourcesother than those of tax receipts .
Discussion