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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.
| 2501. |
If price is above then equilibrium price , there is : |
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Answer» EXCESS DEMAND |
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| 2502. |
Give one/two examples of microeconomics study. |
| Answer» SOLUTION :(i) Individual demand, (II) Individual supply, and (iii) Individual INCOME. | |
| 2503. |
Higher the lega reserve ratio _____will be the credit creation: |
| Answer» Answer :b | |
| 2504. |
Reduction in production of junk food : |
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Answer» REDUCES walfare |
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| 2505. |
Excess of foreign exchange receipts over foreign exchange payment on account of autonomous transaction leads to deficit in the balance of payments. Comments. |
| Answer» Solution :The given statement is incorrect. Excess of FOREIGN exchangereceipt over foreign exchange payments on ACCOUNT of autonomous transaction leads to surplus in the balance of payments. Deficit in the balance of payments OCCURS when foreign exchange RECEIPTS fall short of foreign exchange payments. | |
| 2506. |
How is TVC derived from MC schedule? |
| Answer» SOLUTION :`TVC=SigmaMC` | |
| 2507. |
Current account of BOP records |
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Answer» EXPORTS and import of GOODS |
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| 2508. |
Which of the following willl be included in National Income ? |
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Answer» Sale of BONDS by a company |
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| 2509. |
Which one of the following statements is correct concerning the relationships among the firm's cost functions? |
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Answer» `TC = TFC - TVC.` |
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| 2510. |
Thisbankoperates in publicinterestwithout any profitmotive. |
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Answer» RESERVE BANK of INDIA |
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| 2511. |
Through the process of _ commerical banksare ableto create credit, whichis in far excess of theinitial deposits. |
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Answer» ADVANCING ofloans |
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| 2512. |
An employee takes a house on rent and pays the same to the landlord. The employer reimburses this amount. Such a payment by the employer is: |
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Answer» GIFT to the EMPLOYEE |
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| 2513. |
In spot market, sale and purchase of foreign currency is settled immeediately |
| Answer» Solution : False. In SPOT market, SALE and purchaseof foreign CURRENCY is SETTLED immediately. | |
| 2514. |
The net value of balance of visible trade, invisible trade and of unilateral transfers is |
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Answer» Balance of capital account |
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| 2515. |
Is it necessary thar equility between AD and AS is established at the full employment level? |
| Answer» Solution :No, it is not necessary that full EMPLOYMENT occurs when AD =AS. EQUILIBRUIM can be achieved at full employment LEVEL, under employment level or at over full employment level. | |
| 2516. |
If the marginal (additional) opportunity cost is a constant, PPC would be |
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Answer» Convex. |
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| 2517. |
Explain that area under marginal cost (MC) is total variable cost (TVC). |
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Answer» Solution :As we know that MC is addition to the total variable cost when an additional unit is PRODUCED. This means that total variable cost (TVC) is the sum of marginal cost, since total fixed cost remains the same. This is proved with the HELP of given figure. Assuming output at OQ, an imaginary marginal cost (MC) is drawn in diagram. Thus, under ASSUMPTION of marginal cost CURVE, total variable cost (TVC) is equal to the AREA under marginal cost curve. For example, at OQ units of output, TVC is equal to the shaded area OPEQ. It can be explained with the help of the following table.  
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| 2518. |
How much is the marginal propensity to consume in an economy in which the marginal propensityto save is 0.2 ? |
| Answer» SOLUTION :`MPC=1-MPS=1-0.2=0.8` | |
| 2519. |
Balance of trade is the difference between |
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Answer» determined by profit |
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| 2520. |
What is meant by Cash Reserve Ratio ? |
| Answer» SOLUTION :CASH reserve ratio REFERS to the MINIMUM percentage of time and demand deposits required to be kept by EVERY commercial bank with the central bank. | |
| 2521. |
Raymond's management is discussing a proposal to offer a discount sale on its products to boost its revenue. Will such a discount sale definitely work to boost up the revenue ? |
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Answer» SOLUTION :No. The needs to know the elasticity of demand for its product. Only if the price elasticity of demand for firm.s products is more than UNIT ELASTIC then the DISCOUNT sale will be a success. Value : ANALYTIC |
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| 2522. |
Using the 'saving and investment' apprachexplain how is the equilibrium level of national income determined? Also explain what will happen if the equilibrium is not fulfilled. |
| Answer» Solution : when injection (I) equals leakage (S) in a two-sector economy, EQUILIBRIUM level of national income is determined. When at a certain level of national income, intended investment by the entrepreneurs is more than intended saving by the people, this would mean that aggregate EXPENDITURE is GREATER than aggregate supply of output. This will lead to the decline in inventories below the desired level. This would induce the firms to increase production, raising the level of income and employment.The result will be that national output will be increased on account of which national income will go up. Further, when at any level of income, investment is less than saving. It means that aggregate DEMAND is less than aggregate supply. The result will be that national output will be increased on account of which national income will go up. Further, when at any level of income, investment is less than saving. It means that aggregate demand is less than aggregate supply.As a result, the entrepreneurs will not be able to sell their entire output at GIVEN prices. The result will be that output will be reduced which will result in the reduction of national income. | |
| 2523. |
Name the branch of economics which deals with aggregates. |
| Answer» SOLUTION :MACROECONOMICS. | |
| 2524. |
What is the Vertical (Y- axis) intercept of budget line ? |
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Answer» Solution :Vertical INTERCEPT of BUDGET line = `("Money INCOME")/("PRICE of the commodity on verticalaxis")=M/P_2` |
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| 2525. |
Name the market exchange rate system in which the Central Bank can actively intervene |
| Answer» SOLUTION : MANAGED FLOATING EXCHANGE RATE | |
| 2526. |
"Scarcity and choice go all together" Defend or refute. |
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Answer» SOLUTION :(i) We DEFEND this statement because scarcity ARISES as resources are limited. The resources to produce goods and services to satisfy human wants are available inlimited quantities. Land, labour, capital and entrepreneurship are the basic scarce resources. (ii) These resources are available in limited quantities in every economy, big or small, developed or underdeveloped, rich or pooer. Some ECONOMIES may have more of ONE or two resources but not all resources. (iii) For example, the Indian economy has relatively more labour but less capital and land. The U.S. economy has relatively more land but less labour. No economy in the world is comfortable in all the resources. (iv) Since resources are limited, then we have to make a choice because resources have an alternative use. Generally a resource has many alternative uses. A worker can be employed on a farm, in a factory, in a school, in a government office, self-employed and so on. Like this nearly all resources have alternative uses. But the problem is that which resource should be put to which use. |
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| 2527. |
Price discrimination will be profitable only if the elasticity of demand in different sub markets is: |
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Answer» Uniform |
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| 2528. |
Explain the ‘lender of last resort’ function of the Central Bank. |
| Answer» Solution :When commercial banks have EXHAUSTED all resources to supplement their funds at times of liquidity crisis, they APPROACH central bank as a last resort. As lender of last resort, central bank GUARANTEES solvency and PROVIDES financial accommodation to commercial banks (i) by rediscounting their eligible securities and bills of exchange and (ii) by providing loans against their securities. This saves banks from possible failure and banking system from a possible breakdown. On the other hand, central bank, by providing temporary financial accommodation, saves the financial STRUCTURE of the country from collapse. | |
| 2529. |
When the demand for a good rises due to a fall in its own price, what is the change in demand called? |
| Answer» SOLUTION :EXPANSION in DEMAND. | |
| 2530. |
Are the following statements true or false ? Give reasons. Government budget is a statement of actual receipts and payments of the government . |
| Answer» SOLUTION :FALSE. It is a statement of ESTIMATED (and not ACTUAL) receipts and PAYMENTS of the government . | |
| 2531. |
Valueof APSand MPC canneverbe lessthanzero. |
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Answer» |
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| 2532. |
Other things remaining the same, when in a country market price of foreign currency falls , national income is likely: |
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Answer» to RISE |
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| 2533. |
Differentiate between fixed and flexible. exchange rates. |
| Answer» SOLUTION :Fixed exchange RATE is of officially fixed and DETERMINED by the GOVERNMENT of a country and the government alone can change it. Flexible (floating) exchange is the rate which is determined by the interaction of supply and DEMAND of foreign exchange in the international money market. | |
| 2534. |
Human capital formation means incurring expenditure on: |
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Answer» Education |
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| 2535. |
Distinguish between a commerical bank and a central bank |
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| 2536. |
Fiscal deficit equals : (Choose the correct alternative ) |
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Answer» PRIMARY DEFICIT minus interest payments |
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| 2537. |
When will the vlaue of APC, APS, MPC and MPS be |
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Answer» Solution :(a) zero (i) AP C is never zero because of C at zero level of income (ii) APS is zero when consumption (C ) = Income (Y). (iii) MPC is zero when `DELTAS= DeltaY` (iv) MPS is zero when `DeltaC=DeltaY` (b) One (i) APC is one when C = Y (Break-even point) (ii) APS is never one because of positive consumption expenditure even at zero level MPC is one when `DeltaC=DeltaY` (iv) MPS is one when `DeltaS=DeltaY` (c )greater than one (i) APC is more than one when `C gt Y` APS is never more than one because savings cannot be more than income MPC is never more than one because `DeltaC` can never be more than to `DeltaY` (iv) MPS is never more than one because `DeltaS` can never be more than `DeltaY` (d) less than zero (negative) APC can never be negative because of `BAR(C)`. (ii) APS can negative when `C gt Y`. (iii) MPC can never be negative because `DeltaS`can never be more than `DeltaY`. (iv) MPS can never be negative because `DeltaC` can never be more than `DeltaY`. |
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| 2538. |
Explains the changes that two take place when aggreagate demand and aggregate supply are not equal. |
| Answer» Solution : When AD is not equal to AS , i.e., (i)AD falls short of AS. Due to excess supply resulting from be stock piling of UNSOLD goods, i.e., unintended inventories, the producers will cut down EMPLOYMENT and will produce less. National income will FALL.(II)AD (or consumption expenditure) is more than AS. Production will have to be INCREASED to meet the excess demand.Consequently, national income will increase | |
| 2539. |
Define net investment. |
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Answer» SOLUTION :NET INVESTMENT is the actual ADDITION to the stock of assers. It is gross inverstment - Depreciation, ltbegt [Depreciation is substracred to assess the actual value of fixed capital] |
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| 2540. |
What is moral suasion? |
| Answer» | |
| 2541. |
If there is inflation in a particular country, which type of government budget - surplus or deficit - is advisable ? Explain. |
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Answer» Solution :In case of INFLATION (continuous rise in prices), surplus budget is appropriable because in a surplus budget, TOTAL receipts (revenues) is more than total expenditure. This will lead to fall in aggregate demand which may REMEDY the situationof inflation to some extent VALUE - ANALYTICAL. |
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| 2542. |
Deficient demand result in |
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Answer» FALL in empolyment |
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| 2543. |
What are stock variables ? |
| Answer» Solution :Stock variables REFER to those variables, which are MEASURED at a PARTICULAR point of TIME. | |
| 2544. |
Break-even point in the following diagram is represented by : |
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Answer» POINT B |
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| 2545. |
Why is payment of interest a revenue expenditure ? |
| Answer» Solution :PAYMENT of interest is treated as a revenue expenditure because it neither CREATES any asset nor causes a reductionin any LIABILITY of the government . | |
| 2546. |
A producer is in equilibrium when total cost and total revenue are equal. |
| Answer» SOLUTION :FALSE: A producer is in equilibrium when DIFFERENCE between TOTAL revenue and total cost is maximum so that maximum profit may be earned. | |
| 2547. |
Are the following statements true or false ? Give reasons. Capital expenditure increases the liabilities of the government . |
| Answer» Solution :FALSE . Rather it decreases the LIABILITIES of the GOVERNMENT. For EXAMPLE , repaymentsof BORROWINGS. | |
| 2548. |
Refrigerator purchased by a confectionery shop is an example of : |
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Answer» FINAL Good |
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| 2549. |
Classify the following as intermediate goods or final goods : Textbook purchased by a student. |
| Answer» SOLUTION :FINAL GOODS | |
| 2550. |
Market for a good is in equilibrium. The demand for the good 'increase'. Explain the chain of effects of this change. |
Answer» Solution : Suppose `D_(1)D_(1)` and `S_(1)S_(1)` are the initial market demand curve and market supply curve, RESPECTIVELY. The initial EQUILIBRIUM is established at point `E_(1)`, where the market demand curve and the market supply curve intersects each other. Accordingly, the equilibrium price is `OP_(1)` and the equilibrium quantity demanded is `O_(q1)`. Now, assume that market demand increases (may be due to an increase in the consumer's income). This shifts the market demand curve parallel rightwards to `D_(2)D_(2)` from `D_(1)D_(1)`. While the market supply curve remains unchanged at `S_(1)S_(1)`. This imples that at the initial price `OP_(1)`. There exist excess demand equivalent to `(O_(q1)-O_(q3))` units. This excess demand will increase competition among the buyers and they will now be ready to pay a higher price to acquire more units of good. This will further raise the market price. The RISE in the price will continue till the market price becomes `OP_(2)`. The NEW equilibrium is established at point `E_(2)` where the new demand curve `D_(2)D2` intersects the supply curve `S_(1)S_(1)`. Observe that at the new equilibrium both market price and quantity demanded are more than the initial equilibrium. The new equilibrium quantity supplied `O_(q2)` and the new equilibrium with supply remaining constant, results in rise in the equilibrium price as well as the equilibrium quantity. To summarise, Increase in demand implies Excess demand at the existing price implies Competition among the buyers implies Rise in the price level implies New equilibrium implies Rise in both quantity demanded as well as price. |
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