Saved Bookmarks
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.
| 2851. |
If marginal cost equals to average total cost, |
|
Answer» AVERAGE TOTAL cost is FALLING |
|
| 2852. |
The price elasticity of demand is defined as the responsiveness of : |
|
Answer» PRICE to a change in quantity demanded. |
|
| 2853. |
A consumer has Rs. 10 and both goods X and Y are price at Rs. 2 and are available in integer units .(a) give the bundles that this consumer can afford to buy (b) give the bundle that cost exactly Rs. 10 (c) give two bundles that this consumer connect afford to buy . |
|
Answer» SOLUTION :( a) The bundles that this CONSUMER can afford to buy , (0,0),(0,1),(0,2),(0,3),(0,4),(0,5),(1,0),(1,1),(1,2),(1,3),(1,4),(2,0),(2,1),(2,2),(2,3),(3,0),(3,1),(3,2),(4,0),(4,1) and (5,0) . (b) Bundles that cost exactly Rs 10 are, (0,5) , (1,4) , (2,3) , (3,2) , (4,1) ,(5,0). (c)Two bundles that the consumer cannot afford to buy are, (3,3),(4,2). |
|
| 2854. |
Differentiate between collusive and non-collusive oligopoly. |
Answer» SOLUTION :
|
|
| 2855. |
Explain any one objectve of Government Budget |
| Answer» SOLUTION :To maintain economic stability is an important objective of government budget. Some economic FLUCTUATIONS like BOOM and depression affects the economy of a country. Because of these CHANGES country faces some benefits and HARMS. In this situation, appropriate policy measures will be required by the government to affect the levels of aggregate demand. These meassures are called stabilization measures. These are for avoiding unemployment and inflation. | |
| 2856. |
Other things remainingthe same, when foreign currency becomes cheaper, the effect on national incomes is likely to be: |
|
Answer» POSITIVE |
|
| 2857. |
Why does the demand for foreign currency fall and supply rises when its price rises'? Explain. |
| Answer» Solution :When price of foreign exchange rises, import becomes costlier and demand TOR imports FALL. As a result, demand for foreign CURRENCY falls. On the contrary when price of foreign exchange rises, domestic goods become cheaper for foreign buyers. As a result, demand for exports rises, leading to increase in SUPPLY of foreign exchange. | |
| 2858. |
Categorise the following into revenue expenditure or capital expenditure Construction of school buildings . |
|
Answer» |
|
| 2859. |
Other things reamining unchanged, when in a country the price of foreign currency rises, national income is : |
|
Answer» LIKELY to RISE |
|
| 2860. |
What Is investment multiplier? Explain Its working using a suitabie numerical example. |
|
Answer» Solution :Investment multiplier is a MEASURE of the effect of change in the Initial Investment on change in final income. Numerical example Suppose`DelatI`=₹100 croresMPC=0.8 Initial investment of₹100 crores raises the income by ₹ 100 crores. In the FIRST round, this additional income causes an increase in consumption expenditure, which in turn, generates more income (as one man’s expenditure is ANOTHER man‘s Income). This process continues TILL the total income is equal to multiplier times the initial investment.  `K=(1)/(1-MPC)` `K=(1)/(1-0.8)` `K=5` So, `DeltaY=K.DeltaI` `=5xx100` `=RS500` Crores |
|
| 2861. |
An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following:National income = 1,000 Autonomous consumption=100 Investment=120 |
|
Answer» Solution :GIVEN : National Income (Y) = 1000 Autonomous Consumption (a) = 100 Investment (I) = 120 Y=C+I C=a+bY Y=100+`bxx1000+120` 1000-120=100+B 880=100+1000b 880-100=1000b 780=1000b `b=(780)/(1000)=0.78` `THEREFORE MPC=0.78` MPS=1-MPC =1-0.78 =0.22 |
|
| 2862. |
With a rise in price, total expenditure also rises, elasticity of demand for such goods will be more. |
| Answer» Solution :FALSE : With a rise in price, total expenditure ALSO rises, ELASTICITY of demand is less. | |
| 2863. |
What happen wherethere isan increase in the margine reuirements ? |
|
Answer» It reducesthe borrowingcapacityand MONEY supply |
|
| 2864. |
If the marginal product of labour is below the average product of labour, it must be true that: |
|
Answer» 1.The MARGINAL PRODUCT of LABOUR is negative. |
|
| 2865. |
Explain “difficulty in storing wealth” problem faced in the barter system of exchange |
| Answer» Solution :Individuals tend to store a part of their wealth or earnings as savings to be used for future needs or as an investment. However, it is very difficult to store many types of commodities. For example, perishable goods such as grains, milk, meat, ETC. could not be stored to EXCHANGE goods in future. In addition to this, transportation of goods from one place to ANOTHER was tedious and also difficult. Therefore, the transfer of value and wealth STORAGE was one of the MAJOR difficulties in the Barter system. | |
| 2866. |
Explain effect of 'change in prices' of other products on supply of a given product. |
Answer» SOLUTION :Case I- Rise in Price of other Goods : As we KNOW price of other goods are inversely related to the SUPPLY of given COMMODITY. So, when there is rise in price of other product, the supply curve of given commodity decrease and shifting the supply curve to the LEFT as shown in the given figure.  Case II - Fall in price of other goods : As, against it, if there is fall in price of other product, the supply curve of a given commodity increases and shifting the supply curve to the right as shown below : 
|
|
| 2867. |
Define APS and MPS. Can the value of average propensity to save be negative? Give reason for your answer. |
|
Answer» Solution :APS is the ratio of saving to income`APS=(S)/(Y)` Marginal PROPENSITY to save is the ratio of CHANGE in saving to change in income `MPS=(DeltaS)/(DeltaY)`. APS is negative when consumption is greater than income Savings BECOME negative and so APS will also be negative, i.e., when `C gt Y`. Suppose 15,000 crore are spent on consumption. When aggregate income was 12,000 crore, then savings would be ,3,000 crore as negative and `APS=(-300)/(12000)=(-)0.25` |
|
| 2868. |
Is the following revenue receipt or capital receipt in the context of government budget and give reason ? (i) Tax receipts (ii) Disinvestment |
|
Answer» SOLUTION :(i) TAX receipt is a revenue receipt as it neither creates liability nor reduces ASSETS. (ii) Disinvestment (SELLING shares of PUBLIC Sector Undertaking) is a capital receipt because it reduces assets. |
|
| 2869. |
State the treatment of following measures by central bank during excess demand. (i) Bank rate: (ii) Margin requirements (iii) Open m arket operation. |
|
Answer» SOLUTION :(i) Bank RATE will be INCREASED. (ii) Margin requirements will also be increased (III) Central bank will START sealing the securities in the open market. |
|
| 2870. |
Which of the following is a part of Expenditure Method ? |
|
Answer» RENT and Royalty |
|
| 2871. |
Explain any two methods of credit control used by central bank |
| Answer» | |
| 2872. |
Identify the coefficient of price elasticity of demand when the percentage increase in the quantity of good demanded is smaller than the percentage fall in its price : |
|
Answer» Equal to ONE |
|
| 2873. |
What is the impact of excess demand and deficient demand on the price level? |
| Answer» Solution :EXCESS demand raises the general price level (inflation), WHEREAS, DEFICIENT demand REDUCES it (DEFLATION). | |
| 2874. |
Calculate theP.e_(D) for a commodity when its price increases by 25% and quantity demanded falls from 150 units to 120 units. |
|
Answer» Solution :`{:("Original QUANTITY (Q) = 150 units","% Change in Price "=25%),("New Quantity "(Q_(1))=120" units","Elasticity of Demand (ED) = ?"),("Change in Quantity "(DELTA Q)=-30" units",):}` Percentage change in demand `=(Delta Q)/(Q)xx100=(-30)/(150)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`. |
|
| 2875. |
Why is it said that the balance of payments is always balanced? |
| Answer» Solution :Since the balance of payment is based upon system of double-entry book-keeping, the total debits must equal to total CREDITS. This is because two aspects of each transaction recorded are equal in amount but appear on OPPOSITE sides of the balance of payments account. In this accounting sense, balances of payments for a country must always balance.The debit side shows the use of total foreign exchange ACQUIRED in a particular period.The credit side shows the sources from which the foreign exchange is acquired during a particular period.Against every credit entry, there is an offsetting debit entry & vise-versa, so the receipts and payments on these two sides must be equal. HENCE the two sides must necessary balance.If X imports from Y, Y would also import from X. Hence there would be a debit and credit entries in the balance of payments of both the countries X & Y.The individual items in the balance of payments may not balance. But the total credits of the country must be equals to its total debits.If there is any deficit in any individual account, it would be covered by a SURPLUS in other accounts, if there is any difference between total debits and total credits, it would be settled under 'errors & omissions'. Hence in the accounting sense, the balance of payments of a country always balances. | |
| 2876. |
What does inflationary gap measure? |
| Answer» SOLUTION :The inflationary GAP measures the QUANTITY of excess demand. | |
| 2877. |
Managed floating exchange rate is called 'managed' because it is influenced by the steps taken by : |
|
Answer» Government |
|
| 2878. |
An Indian company located in India invests in a company located abroad. This transaction is entered in India's balance of payments account on:(Choose the correct alternative) |
|
Answer» CREDIT side of Current ACCOUNT |
|
| 2879. |
"Only 'Scarce Goods' attract price." Comment. |
|
Answer» Solution :(i) The given statement is correct. (ii) All resources are not scarce in the economy. For example, the WATER taken from river or air we breathe is aboundant in relation to wants. Such GOODS are available FREE of COST. These goods are known as Non-Economic Goods. (iii) On the other hand, some goods are scarce in relation to their wants. For example, DIAMONDS, petrol, electricity, etc. are scarce in relation to wants. These goods command price and are known as Economic Goods. |
|
| 2880. |
Identifythe following items are visible items or invisinble items: i) Exports of machines. ii) import of TV sets from Japan. iii) Banking services in England iv) Exportof tea to Sri Lanka. |
| Answer» Solution :VISIBLE items: i), (ii), (IV), INVISIBLE itmes, (iii) | |
| 2881. |
What is the causes for demand (outflow) of foreign exchange? |
|
Answer» SOLUTION :The causes are: i) Imports of GOODS and servicesii) Repayment of LOANS iii) UNILATERAL transfers from abroadiv) Touism ETC. |
|
| 2882. |
Find multiplier if: (a) MPC=0.5 (b) 0.75% of increased income is consumed. |
|
Answer» SOLUTION :`(a) K=(1)/(1-MPC)` `=(1)/(1-0.5)` `THEREFORE K=(1)/(0.5)=2` (b) `(b) K=(1)/(1-MPC)` `=(1)/(1-0.75)` `thereforeK=(1)/(1-0.25)=3` (MPC=0.75 as 75% of INCREASED income is spent on CONSUMPTION) |
|
| 2883. |
Aggregate consumption expenditure includes this type of expenditure : |
|
Answer» AUTONOMOUS |
|
| 2884. |
If two supply curves intersect , which one has the higher price elasticity ? |
| Answer» SOLUTION :The flatter SUPPLY CURVE is more ELASTIC at the point of intersection as COMPARED to the steeper curve. | |
| 2885. |
Define replacement of capital. |
| Answer» Solution :A PRODUCER maintains a depreciation RESERVE fund over the EXPECTED life time of the capital asset to replace it at the end of its life. This is called replacement of capital and ESTIMATED VALUE of depreciation is called current replacement cost. | |
| 2886. |
Why are autonomous items called 'above the line' items? |
| Answer» Solution :Because they are RECORDED in BOP account as first items before calculating deficit and SURPLUS. Infact deficit or surplus OCCURS DUE to AUTONOMOUS items. | |
| 2887. |
The government decides to give budgetary incentives for making investments in backward regions. Explain these possible incentives and the reasons for the same |
|
Answer» SOLUTION :Budgetary incentives REFER to concession in taxation and granting subsidies to those production units which set up their units in economically BACKWARD areas. Tax concessions, like lower EXCISE duties ain at reducing cost and thus raising profits. Subsidides aim at reduing PRICE of products to ecounrage sales and earning more profits Thus both ain at raising profits. |
|
| 2888. |
Name any one step the government can take through the budget to reduce the gap between the rich and the poor |
| Answer» Solution :GOVERNMENT can put a higher RATE of tax on the rich and the products consumed by the rich, and spend the AMOUNT so collected on providing free services to the POOR | |
| 2889. |
Which of the following cannot have a negative value ? Give reasons. (i) Average propensity to save (ii) Marginal propensity to save Hint : (i) APS can have a negative value because at very low level of income, there isdissaving, (ii) MPScannot have a negative value as it is the ratio of DeltaSandDeltaYandDeltaS can never be negative. |
| Answer» Solution :APS can be negative because at very low level of INCOME, there is dissaving i.e when income is LESS than consumption.MPS can NEVER be negative because it tells the ratio of change in SAVINGS to change in income. | |
| 2890. |
Balance of Payments of a country is a statement that records: |
|
Answer» Sources of FOREIGN exchange |
|
| 2891. |
If investment falls to zero, national income does not fall to zero because of : |
|
Answer» AUTONOMOUS CONSUMPTION |
|
| 2892. |
Why are TC and TVC curves parallel to each other? |
| Answer» Solution :TC and TVC CURVES are parallel to each other because the vertical gap between them REPRESENTS TFC which remains constant at all levels of output. | |
| 2893. |
From the following data about an economy, calculate (a) equilibrium level of national income and (b) total consumption expenditure at equilibrium level of national income. (i) C = 200 + 0.5 Y is the consumption function where C is consumption expenditure and Y is national income. (ii) Investment expenditure is 1,500 |
|
Answer» Solution :Given, consumptin function, C= 200 + 0.5Y. Investment, I = 1,500 We know that, `Y = C + I` `Y = 200 + 0.5 Y + 1,500 or Y = 1,700 + 0.5Y` or `0.5Y = 1,700 " " or Y = 1,700 XX (10)/(5) = 3,400` (a) Equilibrium LEVEL of National Income, `Y = 3,400` (b) Total Consumption EXPENDITURE, `C = 200 + 0.5Y` `= 200 + 0.5 (3,400)` `= 200 + 1,700 = 1,900` |
|
| 2894. |
How doesan initialincreasein investment affect the level income of the economy? Show its working with a suitable numerical example. |
|
Answer» Solution : Initialincrease in investmentleads to multiple times increasein income of the economy. Investment multiplierexplains this Multiplier(k) is the ratio of the INCREASE in National income `(Delta Y)` due to a given increase in investment `(Delta I)`. `k = ((Delta Y)/(Delta I))` Suppose, there is an additional investment of Rs. 1,000 crores is made by governmentfor a bullet train project in a country. Also, it is assumed that Marginal Propensityto Consumeof hte countryis 0.8 . This additional investment of Rs. 1,000 crores `(Delta I)` made by government will generatean extra income of Rs. 1,000 crores in first round. It is because expenditure of one isincome of another. If MPC of this country is 0.8, those who are receivingthis additionalincome will SPEND 80% of this i.e. Rs. 800 crores which in return becomes additionalincome during the second round. Similarly, inthird round Rs. 640 crores of income is generated . In this way income generation goes on increasinground by round and in EVERY round will be 0.8 times of additional incomegenerated in the previous round.  `Delta Y = Delta I XX (1)/(1-MPC) ("where"(1)/(1-MPC) " is multiplier") ` `=1,000xx(1)/(1-0.8)` = Rs. 5,000 crore |
|
| 2895. |
Define consumption goods ? |
|
Answer» |
|
| 2896. |
What happens when the credit availablity is restricted and credit costiler? |
| Answer» SOLUTION :Limited and costly CREDIT leads to contraction of credit and it has a DEFLATIONARY IMPACT on theeconomy | |
| 2897. |
How is the quilibrium level of income through saving and investment apprach? |
| Answer» Solution :According to this approach, equilibrium level of income is DETERMINED at the level when planned saving (S) is equal to planned investment (I), i.e. when S =IAD = AS … (1)We know, AD is the sum total of Consumption (C) and Investment (I):AD = C + I … (2)Also, AS is the sum total of consumption (C) and saving (S):AS = C + S … (3)Substituting (2) and (3) in (1), we GET:C + S = C + IOr, S = I | |
| 2898. |
The difference between average total cost and average variable cost decreases with the decrease in the level of output. |
| Answer» Solution :False: It is so because the difference between ATC and AVC is AFC and AFC must decrease with the increase in production. (or must increase as OUTPUT DECREASES) | |
| 2899. |
Calculate multiplier if MPC is : (i) 0.75, (ii)0.90. |
|
Answer» SOLUTION :(i) Multiplier (k) `=(1)/(1-MPC)=(1)/(1-0.75)=(1)/(0.25)=4` Multiplier (k) `=(1)/(1-MPC)=1/(1-0.90)=1/(0.10)=10` |
|
| 2900. |
At a price of 8rs per unit, the quantity supplied of a commodity is 200 units. Its price elasticity of supply is 1.5. If its price rises to 10rs per unit, calculate its quantity supplied at the new price. |
Answer» Solution : PRICE ELASTICITY of Supply (ES) `=(DeltaQ)/(DeltaP)xx(P)/(Q)` `1.5=(DeltaQ)/(2)xx(8)/(200)`, i.e., `DeltaQ=75` As price DECREASES, then quantity supplied will also decrease. It means, New Quantity =ORIGINAL Quantity (Q)+Change in Quantity `(DeltaQ]` `=200+75=275` units New Quantity `=275` units |
|