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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.
| 2401. |
Scarcity of resources is a universal phenomenon and is not confined to poor and backward countries only. Comment. |
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Answer» Solution :All COUNTRIES, rich and POOR, face the problem of choice due to scarcity of RESOURCES to fulfil unlimited wants. VALUE: Critical thinking |
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| 2402. |
Where will sale of machinery to abraod be recorded in BOP accounts? Give reason. |
| Answer» Solution :Sale of machinery to abroad refers to EXPORTS of goods. Therefore entered on the CREDIT side of current ACCOUNT of BOP as it CORRESPONDS to infow of foreign exchange. | |
| 2403. |
Whichone of the following statements is incorrect? |
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Answer» Revenue receipts are regular in NATURE . |
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| 2404. |
Name the cooperative institutions meetingshort-term and medium term requirements of rural credit. |
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Answer» SOLUTION :1. STATE Cooporative Banks. 2. DistrictCentral Cooporative Banks. 2. PRIMARY Agricultural Credit Sources. |
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| 2405. |
Indian investors borrow from abroad. Answer the following (a) In which sub -account and on which side of BOP account will this borrowing be recorded ? Give reason. (b) Explain what is the impact of this borrowing on exchange rate |
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Answer» Solution :(a) It will be recorded in the capital account because it increases India's FOREIGN exchange liability. It will be recoreded on the credit side because it brings in foreign exchange into India. (b) Borrowing from abroad brings in foreign exchange. This RAISES supply of foreign exchange. Demand for exchange REMAINING unchanged, the exchanged RATE is LIKELY to fall. |
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| 2406. |
Other things reamining the same, when in ac country the market price of foreign currency falls, natinal income is liekely : |
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Answer» to RISE |
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| 2407. |
Giving reasons categorise the following into stock and flow : (i) Capital (ii) Saving (iii) Gross domestic product (iv) Wealth |
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Answer» Solution :(i) Capital is a stock. This is so because capital is measured at a POINT of time. (ii) SAVING is a flow. This is so because it RELATES to a period of time. (iii) Gross domestic product is a flow because it relates to a time period which is GENERALLY one fiscal year. (iv) WEALTH is a stock because it is measured at a point time. |
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| 2408. |
What is the marginal propensity to consume? How is it related to marginal propensity to save? |
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Answer» Solution :Marginal propensity to Consume (MPC) is DEFINED as the ration of change in consumption to change in INCOME. `MPC=(DeltaC)/(DeltaY)` The VALUE of MPC always lies betweeen 0 and 1, i.e. `0 lt MPC le 1`. Marginal propensity to Save (MPS) is the RATIO of change in savings to change in income. `MPS=(DeltaS)/(DeltaY)` Relationship between MPC and MPS : The sum of the MPC and MPS is always equal to one or MPC+MPS=1 The relationship is derived as follows: We have Y=C+S or `DeltaY=DeltaS` DIVIDING both sides by `DeltaY`, we have `(DeltaY)/(DeltaY)=(DeltaC)/(DeltaY)+(DeltaS)/(DeltaY)` or MPC+MPS=1 or MPC=1-MPS MPS=-1MPC The value of MPS depends on the value of MPC. If MPC=0.70, then MPS=0.30 |
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| 2409. |
Which of the following sources of receipts in govt. budget increases its liabilities ? |
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Answer» DIRECT TAXES |
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| 2410. |
Elasticity of supply refers to the degree of responsiveness of supply of a good to changes in its : |
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Answer» Demand |
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| 2411. |
Explain the law of diminishing marginal utility with the help of a total utility schedule . |
Answer» Solution :The law states that marginal UTILITY derived from the consumption of a commodity decline as more units of that commodity are CONSUMED.  It can be SEEN from the above schedule that total Utility INCREASES at a diminishing rate , which leads to FALL in marginal utility. |
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| 2412. |
howis valueof ex-anteADderivedunder fixedpriceandconstantrateofinterest ? |
| Answer» SOLUTION : in aneconomywithoutgovernment, EX-anteADisthesumof Ex- anteconsumptionexpendiltureand ex-ante INVESTMENT( minimumrateofunemployment ) alwaysexistsin THEECONOMY . | |
| 2413. |
Massive unemployment will shift PPC to the left. Defend or refute. |
Answer» Solution :The GIVEN statement is refuted. Massive unemployment does not decrease the capacity of economy to produce. So, there will be no shift of PPC. However, DUE to UNUTILISATION of human resources, economy will operate at some point inside PPC as shown in the ADJACENT figure at point U. 
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| 2414. |
Give one example of negative extarnalities. |
| Answer» SOLUTION :POLLUTION CREATED by factories/vehicles. | |
| 2415. |
What is revenue deficit ? |
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Answer» SOLUTION :REVENUE deficit refers to the EXCESS of revenue EXPENDITURE over revenue receipts. Revenue Deficit = Revenue Expenditure- Revenue Receipts . |
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| 2416. |
Which of the following flowchart correctly establishes the treatment of'Depreciation'? |
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Answer» |
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| 2417. |
An economy is in equlibrium. Calculate the national Income from the following : Autonomous Consumption =120 Marginal Propensity to Save = 0.2 Investment Expenditure = 150 |
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Answer» SOLUTION :a=120 MPS=0.20 (B) MPC=1-MPS=1-0.20=0.86 I=150 Y=? Y=C+I C=a+by =120+0.8Y Y=120+0.8Y+150 1Y-0.8Y=270 0.2Y=270 `THEREFORE""Y=(270)/(0.20)=1350` |
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| 2418. |
National income is the sum of factor incomes accruing to : |
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Answer» Nationals |
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| 2419. |
Explain how the levelof effective demand is attained in an economy it. Aggreate Demand is more than the Aggregate Supply |
| Answer» Solution :So long as the aggregate demand price is higher than the aggregate supply price, the prospects of getting additional profits are greater when more workers are PROVIDED EMPLOYMENT. The proceeds expected (revenue) rise more than the proceeds necessary (COSTS).This process will continue till the aggregate demand price equals the aggregate supply price and the point of effective demand are reached. This point determines the level of employment and output in the economy. The point of effective demand is, however, not NECESSARILY one of FULL employment but of underemployment equilibrium. | |
| 2420. |
Borrowing is government budget is : (choose the correct alternative) |
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Answer» REVENUE deficit |
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| 2421. |
Budget Deficit means : |
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Answer» TOTAL EXPENDITURE- Total Receipts |
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| 2422. |
Explainthe followingfunctions of thecentralbank : (i) Bank of issue , (ii)Banker's bank. |
| Answer» Solution :i) Bank of Issue: The central bank is given the sole monopoly of issuing currency in order to secure control over volume of currency and credit. These notes circulate throughout the country as legal tender money. It has to keep a reserve in the form of gold and foreign securities as per statutory rules against the notes issued by it.It may be noted that RBI issues all currency notes in India except one rupee note. Again, it is under the directions of RBI that one rupee notes and small coins are issued by government MINTS. Remember, the central government of a country is usually authorised to BORROW money from the central bank.When the central government expenditure exceeds government revenue and the government is unable to reduce its expenditure, then it borrows from the RBI. This is done by selling security bills to RBI which creates new currency notes for the purpose. This is called monetisation of budget deficit or deficit financing. The government spends new currency and puts it into circulation to meet its expenditure.ii) Banker's Bank: Central bank acts as banker’s bank in three capacities:(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. | |
| 2423. |
Expenditure method of estimating national income takes into account: |
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Answer» Trasnfer EXPENDITURE |
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| 2424. |
Explain the lender of last resrot function of central bank. |
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| 2425. |
Define store of value |
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| 2426. |
How can Reserve Bank of India help in bringing exchange rate which is very high ? |
| Answer» Solution :Reserve Bank of India can increase the SUPPLY of foreignexchange by SELLING foreign exchange from its RESERVES to bring down its VALUE. | |
| 2427. |
List the three different ways in which oligopoly firms may behave. |
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Answer» Solution :Oligopoly firm may- (i) COOPERATE with each other and formally have a contract or written document of their POLICIES. (II) cooperate with each other but have TACIT (informal) understanding. (III) not cooperate with each other. |
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| 2428. |
What is meant by total cost? |
| Answer» SOLUTION :During production the EXPENDITURE incurred on various factors of production is KNOWN as TOTAL COST. | |
| 2429. |
Explainthe functionof a commercial bank. Hint : Discuss Functionof a Commerical Bank. |
| Answer» Solution :COMMERCIAL Banks performs various primary functions some of them are given belowAccepting Deposits : Commercial bank accepts various types of deposits from public especially from its clients. It includes saving account deposits, recurring account deposits, fixed deposits, etc. These deposits are payable after a certain TIME period.Making Advances : The commercial banks provide loans and advances of various forms. It includes an over DRAFT facility, cash CREDIT, bill discounting, etc. They also give demand and demand and term loans to all types of clients against proper security.Credit creation : It is most SIGNIFICANT function of the commercial banks. While sanctioning a loan to a customer, a bank does not provide cash to the borrower Instead it opens a deposit account from where the borrower can withdraw. In other words while sanctioning a loan a bank automatically creates deposits. This is known as a credit creation from commercial bank. | |
| 2430. |
Sum of average propensity to consume and marginal propensity to consume is always equal to 1. |
| Answer» Solution :False. : There is no such relation between average PROPENSITY to CONSUME (APC) and marginal propensity to consume (MPC). APC is the RATIO of consumption and income while MPC is the ratio of CHANGE in consumption and change in income. | |
| 2431. |
An increase in the bank rate makes borrowing costlier for the general public. |
| Answer» SOLUTION :True. Increase in bank RATE forces the commercial banks to increase their lending RATES. Which makes borrowings costlier for the general PUBLIC. | |
| 2432. |
The quantity demanded of a commodity at a price of Rs. 8 per unit is 600 units. Its price falls by 25 per cent and the quantity demanded rises by 120 units. Calculate the price elasticity of demand. Is its demand elastic ? Give reason for your answer. |
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Answer» Solution :`{:("Original Quantity (Q) = 600 units","% Change in Price "=-25%),("Change in Quantity "(Delta Q)=120" units","ELASTICITY of Demand (ED) = ?"),("New Quantity "(Q_(1))=720" units",):}` Percentage change in demand `=(Delta Q)/(Q)xx100=(120)/(600)xx100=20%` Price Elasticity of Demand `(ED)=("% Change in quantity demanded")/("% Change in price")=(20%)/(-25%)` Price Elasticity of Demand `(ED)=(-)0.8` `ED=(-)0.8`, Demand is LESS ELASTIC because `ED LT 1`. |
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| 2433. |
A firm is producing 20 units. At this level of output, ATC and AVC are respectively equal to Rs 40 and Rs 37. Find out TFC of this firm. |
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Answer» SOLUTION :`AFC=AC-AVC="Rs. 40 "-"Rs. 37"=Rs.3 "` `TFC=AFCxx"units PRODUCED"="Rs. 3"XX"20 units"=Rs. 60"` |
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| 2434. |
When marginal propensity to consume is greater then marginal propensity to save, the value of investment multiplier will greater than 5 |
| Answer» SOLUTION :We will understand this with the help of a hypothetical example:We know that MPC+MPS =1.Now, LET's say MPC is 0.6 , then from the above EQUATION, MPS will be 0.4cosider, K=1/1-MPC .... (1) and if we put MPC as 0.6 in equation(1) we will GET investment multiplier (K) = 2.5 which is indeed not greater than 5.hence, the GIVEN statement is not true. | |
| 2435. |
" An increase in the demand for notebooks raises the quantity of notebooks demanded, but not the quantity supplied ". Is this statement true or false? Explain. |
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Answer» SOLUTION :The statement that "an increase in the demand for notebooks raises the quantity of notebooks demanded, but not thc quantity supplicd," in GENERAL, is false. As given FIGURE SHOWS, the increase in demand for notebooks RESULTS in an increased quantity supplied. ` (##FM_M_ECO_XII_P1_C12_E02_065_S01.png" width="80%"> |
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| 2436. |
National income is equal to: |
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Answer» DOMESTIC productplus factor incomes earned from ABROAD |
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| 2437. |
What is the difference between fiscal policy and monetary policy? |
Answer» SOLUTION :
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| 2438. |
Discuss the significance of 45 degree line in Keynesian Economics. |
Answer» Solution :Aggregate Supply is OBTAINED by adding consumption and saving schedules. The straight line obtained which will originate from point of origin will form a 45 DEGREE ,angle there by establishing the relation of Y=C+S.   At all points on 45 degree line, Consumption is equal to Income. It helps under the Keynesian Economic analysis. Since the two variables (consumption/Aggregate Expenditure and Income) are measured in the same UNITS, the 45-degree line has a slope of one and it BISECTS the 90- degree angle formed by the two axes. |
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| 2439. |
Giving reason explain how the following should be treated in estimation of national income : (i) Payment of interest by a firm to a bank. (ii) Payment of interest by a bank to an individual. (iii) Payment of interest by an individual to a bank |
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Answer» (b) Included, as it is a factor payment. (c) Not included, as the capital is used for CONSUMPTION purpose. |
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| 2440. |
Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called: |
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Answer» CURRENT transactions |
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| 2441. |
Is the following revenue expenditure or capital expenditure in the context of govt. budget ? Give reason. (i) Expenditure on collection of taxes (ii) Expenditure on purchasing computers |
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Answer» Solution :(i) Expenditure on collection of taxes is a revenue expenditure since it neither creates ASSETS nor reduces liability of the government. (ii) Expenditure on PURCHASING COMPUTERS is a CAPITAL expenditure because it creates assets for the government. |
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| 2442. |
Fees of the government college is a revenue receipt because : |
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Answer» It CREATES liability of the government |
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| 2443. |
Mention the three methods of measuring national income. |
| Answer» SOLUTION :(i) Value ADDED method (II) Income method (iii) Expenditure method. | |
| 2444. |
Rent received by an American from Reliance Industries with repect to building located in India will neither be included in national income nor in domestic income of India . |
| Answer» Solution :False. Such RENT will be included in domestic income of INDIA as BUILDING is LOCATED within the domestic TERRITORY of India. | |
| 2445. |
Net Exports is calculated as : |
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Answer» EXPORTS + IMPORTS |
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| 2446. |
What change will take place in marginal product when total product increases at a diminishing rate? |
| Answer» SOLUTION :MARGINAL product will decline but REMAINS positive. | |
| 2447. |
Mention the effect of exchange depreciation on exports |
| Answer» SOLUTION :CURRENCY depreciation LEADS to INCEASES in EXPORTS | |
| 2448. |
Define flow variable. |
| Answer» SOLUTION :FLOW VARIABLE refers to the variable, which is measured over a period of time. | |
| 2449. |
Suppose that the supply of cameras increases due too an increase in imports. Which of the following statements will most likely occur? |
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Answer» The EQUILIBRIUM PRICE of cameras will INCREASE. |
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| 2450. |
Name three phases of circular flow of income. |
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Answer» Solution :Three phases of CIRCULAR FLOW of income are : (i) PRODUCTION phase. (ii) Distribution phase. (iii) Disposition phase. |
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