xii economics question bank 2016-17davrtcodisha2.org/questions/qns_1480535446.pdf · give two...

QUESTION BANK

SUB – ECONOMICS

CLASS – XII 2016-17

UNIT 1: INTRODUCTION

Very Short Answer Type Questions (1 mark)

1. What is meant by economizing resources?

2. Why does the problem of choice arise?

3. What does a rightward shift of production possibility curve indicate?

4. Define microeconomics

5. Define opportunity cost.

6. Why does an economic problem arise?

7. Give meaning of ‘opportunity cost’.

8. Give two examples of microeconomic studies.

9. Give the meaning of opportunity cost.

10. Give the meaning of microeconomics.

11. Give the meaning of an economy.

12. Unemployment is reduced due to the measures taken by the government. State its economic

value.

13. In the context of production possibilities frontier.

14. Give two examples of micro economic variables.

15. What is economics about?

16. What factor leads to rightward sift of the PPC?

17. Can there be an economy without economic problem?

18. Can PP curve be a straight line?

19. Why is there need for economizing problem?

20. What is the subject matter of economics?

21. What is meant by normative economics?

22. What are the problems of resources allocation?

23. State two characteristics of resources.

24. Define micro economics.

25. Give two examples of microeconomics.

26. What is PPC?

Short Answer Type Questions (3/ 4 marks)

1. Explain the problem of ‘How to produce’ with the help of an example.

2. What does a production possibility curve show? When will it shift to the right?

3. Explain the central problem ‘what to produce’.

4. Explain the central problem ‘how to produce’.

5. Explain the central problem ‘for whom to produce’.

6. Why does an economic problem arise? Explain.

7. Explain how scarcity and choice go together.

8. Why is a production possibilities curve concave? Explain

9. What is opportunity cost? Explain with the help of a numerical example.

10. What is ‘Marginal Rate of Transformation’? Explain with the help of an example.

11. State reasons why does an economic problem arise?

12. Explain the central problem ‘for whom to produce’.

13. Explain the problem of ‘what to produce’ with the help of an example.

14. Explain ‘what to produce’ with the help of an example

15. Why does an economic problem arise? Explain the problem of ‘how to produce’.

16. Explain the problem of ‘what to produce’

17. Explain any two main features of a centrally planned economy.

18. Production in an economy is below its potential due to unemployment. Government starts

19. Employment generation schemes. Explain its effect using production possibilities curve.

20. Differentiate between positive economics and normative economics.

21. ’Make in India’ campaign would shift the PPC to the right. How?

22. What is the likely impact of ‘Sarva Shiksha Abhiyan’ and ‘Skill India Campaign’ on PPC of the

Indian Economy?

23. For those working under MGNREGA, the government has raised minimum employment from

24. 100 days during a year. How would it impact the actual and potential level of output in the

economy?

25. Does production possibility frontier indicate the actual level of output or potential level of

output?

26. Why is a production possibilities curve concave? Explain.

27. Explain properties of a production possibilities curve.

28. Explain the problem of ‘what to produce’.

29. What is ‘Marginal Rate of transformation’? Explain with the help of an example.

30. Explain the problem ‘How to produce’.

31. Define; economics is all about making choices in the presence of scarcity.

32. In the mixed economy, production decisions are guided only by the consideration of profit.

33. PPC is affected when resources are inefficiently employed in an economy. Defend or refute.

34. Does massive unemployment shift the PPC to the left?

35. What does increasing marginal opportunity cost along a PPC mean?

36. When does PPC shift to the right ?(3)

37. Explain the central problem for whom to produce ?(3)

HOTS

1. Draw a production possibility (PP) curve when MRT is constant. Give reason

2. Is the study of cotton textile industry a macro economic study o a micro economic study?

3. A doctor has a private clinic in New Delhi and his annual earnings are Rs10 lakhs. If he works in a

Government Hospital in New Delhi, his annual earnings is Rs 8 lakhs. What is the opportunity?

Cost of having a clinic in New Delhi?

4. If PPC relates to wheat and rice (on the X-axis and Y-axis respectively) draw diagram showing

change in PPC when resources remain constant and technology improves only for wheat.

5. If resources are scarce, how do you explain massive unemployment in India?

6. Unemployment is reduced due to the measures taken by the government. State its economic

value in the context of production possibilities frontier?

7. What will likely be the impact of large scale inflow of foreign capital in India on Production

possibilities curve and why?

8. Explain the concept of opportunity cost with the help of a numerical example.

9. Find marginal opportunity cost of Good-I when production of Good-I increase from 10 units 15

units while the production of Good -2 decreases from 500 units to 100 units.

10. Union Health Minister of India has recently launched “Mission Inradhanush”:Full Immunization

for All Children by 2020.State its impact on production possibility curve of the economy.

11. Explain with help of a diagram the situations of inefficient and efficient utilization of resources in

an economy.

12. State the economic problems relating to allocation of resources.

UNIT 2: CONSUMER’S EQUILIBRIUM AND DEMAND

Very Short Answer Questions (1 mark)

1. Define utility.

2. What is meant by consumer’s equilibrium?

3. Define marginal utility (MU).

4. Define an indifference curve.

5. Define Budget line.

6. Define budget set.

7. What are monotonic preferences?

8. Define an indifference map.

9. What is MRS?

10. Give the reason behind a convex indifference Curve.

11. What does a rightward shift in demand curve indicate?

12. When does a demand curve shift?

13. What is meant by inferior goods in economics?

14. What causes a movement along the demand curve of a commodity?

15. How wills an increase in the price of tea affects the demand for sugar?

16. Give the meaning of ‘inelastic demand’.

17. Why is demand for water inelastic?

18. Whether demand for luxurious goods is elastic or inelastic?

19. Why is demand for electric power elastic?

20. Why the indifference is Curve convex to the origin?

21. Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your

friend monotonic?

22. Explain why is the budget line downward sloping?

23. Give the formula for calculating slope of Budget Line?

24. What does the slope of indifference Curve indicate?

25. Does the convexity of IC curve indicate the operation of the law of diminishing marginal utility?

26. What happens to marginal utility when total utility is maximum?

27. What does the movement on same demand curve indicate?

28. A rise in the income of the consumer leads to a rise in demand for the good-X by the consumer.

What is good –X called?

29. What are giffen good?

30. What is cardinal utility?

31. Define a consumer.

32. What is Marginal utility?

Short Answer Type Questions (3/4 marks)

1. Explain the Diminishing Marginal Rate of Substitution with the help of a numerical example.

2. Define a budget line. When can it shift towards right?

3. Define Indifference Curve. Why is it convex to the origin?

4. A consumer consumes only two goods. Explain consumer’s equilibrium with the help of Utility

analysis.

5. A consumer consumes only two goods X and Y and is in equilibrium. Show that when the price of

good X rises, the consumer buys less of good X. Use utility analysis.

6. Explain the impact of fall in the price of good X on consumer’s equilibrium, when a consumer

consumes only two goods, i.e. X and Y, using Indifference Curve approach.

7. How a consumer will reach to the equilibrium point if market rate of exchange is not equal to

MRS? 18. As a consumer, would you equate price of a commodity with total utility or marginal

utility? Give reason in support of your answer. (Refer VK Pub.P-56)

8. Explain the economic value of the following equation, MUx/Px =MUm when X happens to be a

Domestic fuel (LPG) and Px is lowered by way of subsidy by the government. (Refer VK Pub.P-57)

9. When onion price hits hard, the poor man simply stops buying it. Explain the Economics of it,

using utility analysis. (Refer VK Pub.P-57)

10. Distinguish between ‘increase in demand’ and ‘increase in quantity demanded’ of a commodity.

11. Given price of a good, how does a consumer decide as to how much of that good to buy?

12. Comment on the elasticity of demand when 8% decrease in the price of a commodity causes 2%

increase in the expenditure of the commodity.

13. A consumer consumers only two goods X and Y. State & explain the conditions of consumer’s

equilibrium with the help of utility analysis.

14. Explain how the demand for a good is affected by the price of its related goods. Give examples.

15. Distinguish between normal goods and inferior goods. Give example also.

16. Explain any four factors that affect price elasticity of demand.

17. Explain relationship between total utility and marginal utility with the help of a schedule.

18. Do you agree with the view that law of demand need not necessarily fall in case of inferior

goods?

19. Define marginal utility. State the law of diminishing marginal utility.

20. How does income of the consumer affect the demand for a commodity?(3)

21. Distinguish between inferior good and normal good.(4)

22. State and explain the Law of Demand with a diagram.(4)

23. Distinguish between increase in demand and increase in quantity demanded.(4)

24. Explain the degrees of elasticity of demand.(3)

25. Explain the graphic method of measuring Ep.(4)

26. When price of a good rises from Rs4 to Rs5 its demand falls by 25 units. Calculate Ep if the

consumer was buying 70 units before the fall in price.(3)

27. Explain the factors affecting price elasticity of demand. (4)

28. Explain consumer’s equilibrium in one commodity case.(4)

29. What is market demand for a good? Name the factors determining market demand.

30. Explain the meaning of change in quantity demanded. How does it affect demand curve?

31. Distinguish between decrease in demand and decrease in quantity demanded.

32. How does change in price of a substitute good affect the demand of the given good? Explain with

the help of an example.

33. What are conspicuous necessities and how it is different from conspicuous good?

34. Explain any two factors that affect the Price Elasticity of Demand? Give Suitable examples.

35. Explain the geometric method of measuring Price Elasticity of Demand.

36. Explain the relationship between Price Elasticity of Demand and Total Expenditure.

Long Answer Type Questions (6 marks)

1. Explain the three properties of the Indifference Curves.

2. Explain the conditions of consumer’s equilibrium with the help of Indifference Curve analysis.

3. Explain the difference between cardinal utility and ordinal utility. Give example.

4. Explain why an indifference curve is (a) downward slope and (b) convex.

5. Explain the conditions of consumer’s equilibrium using indifference curve analysis. Use

diagram.

6. Determine how the following changes (or shifts) will affect market demand curve for a

product.

a) A new steel plant comes up in Jharkhand people who were previously

unemployed in the area are now employed. How will this affect the demand for colour T.V.

and Black and White T.V. in the region?

b) In order to encourage tourism in Goa. The Government of India suggests Indian

Airlines to reduce air fare to Goa from the four major cities of Chennai, Kolkata, Mumbai

and New Delhi. If the Indian Airlines reduces the fare to Goa, How will this affect the

market demand curve for air travel to Goa?

c) There are train and bus services between New Delhi and Jaipur. Suppose that the

train fare between the two cities comes down. How will this affect demand curve for bus

travel between the two cities?

7. Given eD= - 0.02, and percentage increase in price = 20%, find change in expenditure on the

commodity.

8. Explain the factors that affect the price elasticity of demand.

9. Give four causes of a left ward shift in demand curve of a commodity.

10. Distinguish between substitute and complementary goods with example.

11. State the domestic method of measuring price elasticity of demand.

12. How does the availability of close substitutes of a good affect the price elasticity of demand

of that good? Explain.

13. State the relationship between total expenditure and price elasticity of demand.

14. Why is the slope of the demand curve of the commodity negative?

15. Explain the causes of a leftward shift in demand curve of a commodity.

16. Explain the causes of a rightward shift in demand curve of a commodity of an individual

consumer.

17. A consumer consumes 2 goods and is in equilibrium. Price of good X rises. Explain the

reaction of the consumer using utility approach.

18. Explain Indifference curve approach to consumer’s equilibrium.

HOTS

1. The elasticity of demand for X is twice the elasticity of demand for Y. Price of X falls by 5%

and Price of Y rises by 5%. What will be the % change in the quantity demanded of X and Y?

2. If prices of salt and cigarettes, both rises by10%, will the qt. demanded of both goods

affected in an equal manner?

3. If prices of salt and cigarettes, both rises by10%, will the qt. demanded of both goods

affected in an equal manner?

4. If a good can be used for many purposes, the demand for it will be elastic. Why?

5. A dentist was charging Rs. 300 For a standard cleaning job and per month it used to generate

TR is equal to Rs. 30,000. She has since last month increased the price of dental cleaning to

Rs.350. As a result fewer customers are now coming for dental cleaning, but the TR is now Rs.

33,250. From this, what can we conclude about the elasticity of demand for such a dental

service?

6. Which of the following commodities have inelastic demand:

1. Salt 2. A particular brand of lipstick 3. Medicines 4. Mobile phone

5. School uniform

UNIT 3: PRODUCER’S BEHAVIOUR AND SUPPLY

Very Short Answer Questions (1 mark)

1. Define production function.

2. Define Marginal Product.

3. How does fall in Marginal Product affect Total Product?

4. Give meaning of ‘return to a factor’

5. Should both TP and MP be declining in a situation of diminishing returns?

6. What do you understand by the term ‘point of inflexion’?

7. Define marginal cost.

8. Do ATC and AVC curves intersect? Give reason.

9. Fixed cost exists in the long-run. Do you agree?

10. What is meant by cost in economics?

11. Define variable cost.

12. What is the behavior of Average Fixed Cost as output increases?

13. Define marginal revenue.

14. Give the meaning of revenue in microeconomics.

15. What is other name of AR?

16. Under which market form, a firm’s Marginal Revenue is always equal to price?

17. What is meant by producer’s equilibrium?

18. State two conditions of a producer’s equilibrium.

19. Define Supply.

20. What does the upward sloping supply curve indicate?

21. State the law of supply.

22. What is the Price Elasticity of supply associated with a straight line supply curve passing?

Through origin?

23. What is production function.(1)

24. Define marginal product.(1)

25. State the relationship between AP and MP.(1)

26. As the variable input is increased by one unit total output falls. What would you say about of

marginal productivity labour?

27. Why MC curve is in short run U-shaped?

28. What leads to diminishing returns to a factor?

29. When a seller sells his entire output at a fixed price, what will be the shape of AR & MR curves?

30. What effect does a cost saving technical progress have on the supply curve?

31. What effect does an increase in excise tax have on the supply curve?

32. Define sub normal profit.

33. State two conditions of producer’s equilibrium for a competitive firm.

34. What is meant by producer’s equilibrium?

35. What is meant by market supply?


1. Explain the relationship between TP and MP of an input.

2. State giving reasons, whether the following statements are true or false:

(I)Increase in Total Product always indicates that there are increasing returns to a factor.

(ii) When there are diminishing returns to a factor, Marginal and Total product both fall.

3. Explain the relation between Marginal Cost and Average Cost.

4. As output increases, AC tends to be closer to AVC. Why?

5. Why is AC curve ‘U’ shaped?

6. Explain the relationship between Total Cost and Marginal Cost.

7. What are the implicit cost and explicit cost?

8. 25. Why is Average Revenue always equal to price.

9. Explain the relationship between Marginal Revenue (MR) and Average Revenue (AR).

10. ‘Average Revenue curve represents Law of Demand’. Discuss.

11. Draw a single diagram of the Average Revenue and Marginal Revenue curves of a firm which can

sell any quantity of the good at a given price. Explain.

12. Draw Average Revenue and Marginal Revenue curves in a single diagram of a firm which can sell

more only by lowering the price of that good. Explain.

13. Explain producer’s equilibrium with the help of a diagram.

14. Why should MC be rising at the point of equilibrium

15. Explain how technological progress is a determinant of supply of a good by a firm.

16. Explain how input prices are a determinant of supply of a good by a firm.

17. State any three causes of rightward shift in supply curve.

18. State any three causes of leftward shift in supply curve.

19. Can supply increase at the same price?

20. Distinguish between change in supply and change in quantity supplied. Which of these causes a

shift of supply curve?

21. Explain the situation of zero elasticity of supply with the help of a diagram.

22. ‘A loss- making firm has inelastic supply.’ Do you agree? If yes, why?

23. What do you understand by returns to factor? Why do diminishing returns to a factor operate?

24. Explain the relationship between AC & MC with diagram.

25. What will be the price elasticity of supply if the supply curve is a positively sloped straight line?

26. Explain how do the following determine price elasticity of supply:

(i) Nature of the good (ii) Time period.

27. Define marginal revenue. State the relation between marginal revenue and average revenue

when a firm:

a. is able to sell more quantity of output at the same price.

b. is able to sell more quantity of output only by lowering the price.

28. Explain 3 factors affecting supply of a commodity.(3)

29. Distinguish between change in supply and change in quantity supplied.(4)

30. Explain the stage of operation of a rational producer.(4)

31. Distinguish between Fixed cost and Variable cost.(4)

32. Explain the cost curves of a firm in the short run.(4)

33. Explain the relationship between AR and MR under perfect competition.(4)


1. What does the law of variable proportion show? State the behavior of Total Product according to

this law.

2. Explain the condition of a producer’s equilibrium in terms of Marginal Cost and Marginal

Revenue. Use diagram and schedule.

3. Using diagrams, explain various degrees of Price Elasticity of Supply.

4. Explain the geometric method of measuring Price Elasticity of supply.

5. State and explain the law of variable proportions in a diagram(6).

6. Explain the MR-MC approach to p[producer’s equilibrium.(6)

7. Explain the likely behavior of total product under the stage of increasing return to a factor with

the help of numerical example.

8. Explain the relation between average revenue and marginal revenue when a firm can sell an

additional unit or a good by lowering the price.

9. Explain how does change in price of input affect the supply of a good

10. What is the likely behavior of total product/marginal product when only one input is increased

for increasing production? Use diagram/ schedule.

11. What is producer’s equilibrium? Explain the conditions of produce’s equilibrium through the

‘marginal cast and marginal revenue’ approach. use diagram/schedule.

HOTS

1. Because of cyclone in a coastal area, the sea water covers a lot of rice fields. This reduces the

productivity of land. How will it affect the supply curve of that region?

2. Due to improvement of technology, the marginal costs of televisions have gone down. How will it

affect the supply curve of television?

3. If a farmer grows rice and wheat, how will an increase in the price of wheat affect the supply

curve of rice?

UNIT: 4 FORMS OF MARKET AND PRICE DETERMINATION UNDER PERFECT COMPETITION


1. Define Market.

2. When is a firm called price maker?

3. Under which market form, firm is a price maker?

4. What is perfect oligopoly?

5. Define monopoly.

6. What is product differentiation?

7. What is cartel?

8. Define perfect competition.(1)

9. What is monopoly?(1)

10. What is patent right?

11. In which market form, there is a need for selling/advertising costs?

12. What is that market called wherein there are a only two sellers (firms)?

13. When do we say there is excess demand for a commodity in market? When do we say there is

excess supply for the commodity in the market?

14. What is cartel?

15. What is the shape of marginal curve under monopoly?

16. What do you mean by price discrimination?

17. Price discrimination is a characteristic feature of which form of market?

18. What is the basic profit maximizing condition for a monopoly firm?

19. What is product differentiation?


1. Explain the implications of large number of sellers in a perfectly competitive market.

2. Explain any two features of monopoly.

3. Explain why there are only a few firms in an oligopoly market?

4. Explain the implications of freedom of entry and exit of the firms under perfect completion.

5. Giving reasons, distinguish the behavior of demand curves of firms under perfect completion,

Monopoly and monopolistic competition.

6. Firms under oligopoly are involved in non-price competition. Why?

7. Why a firm’s demands curve indeterminate under oligopoly?

8. Equilibrium price of an essential medicine is too high. Explain what possible steps can be taken to

Bring down the equilibrium price, but only through the market forces. Also explain the change

that will occur in the market.

8. State the implication of homogenous product under perfect competition (3).

9. Explain the concept of non price competition.(4)

10. Why is the demand curve under oligopoly indeterminate?(3)

11. Explain the concept of price ceiling. Use diagram.(4)

12. Explain the implication of large number of buyers in a perfectly competitive market.

13. Explain why firms are mutually interdependent in an oligopoly market.

14. Explain the implication of ‘freedom of entry and exit to the firms’ under perfect competition.

15. Explain the implication of ‘perfect knowledge about market’ under perfect competition.

16. Why is the demand curve more elastic under monopolistic competition than under monopoly

17. Why is a firm under perfect competition a price taken while under monopoly a price maker?

Explain in brief.

18. Differentiate between price discrimination and product differentiation.

19. Distinguish between perfect competition and monopoly.

20. Differentiate between monopoly & monopolistic competition


1. 16. Explain the implications of the following features of monopolistic competition.

[i]Product differentiation

[ii] Free entry or exit of firms

2. Market of a commodity is in equilibrium, demand for the commodity increases,. Explain the chain

of effects of this change till the market again reaches equilibrium. Use diagram.

3. Market of a commodity is in equilibrium, demand for the commodity decreases. Explain the

chain of effects of this change till the market again reaches equilibrium. Use diagram.

4. Market for a good is in equilibrium. There is simultaneous increase in both demand and supply of

the good. Explain its effect on market price.

5. Market for a good in is in equilibrium. There is simultaneous decrease in both demand and

supply of the good. Explain it effect on market price.

6. X and Y are complementary goods. Explain the sequence of a fall in the price of X on the

equilibrium price and quantity of Y.

7. Market for a good was in equilibrium. Demand in the market rises. Explain the chain of effects

that occurs in the market.(6)

8. Distinguish between perfect competition and monopoly.(6)

9. All the inputs used in production of a good are increased simultaneously and in the same

proportion.

What are its possible effects on Total Product? Explain with the help of a numerical example.

10. If price elasticity of supply of a commodity is 5. A producer supplies 500 units of this product at a

price

of Rs 5 per unit. How much quantity of this product will be supplied, at the price of Rs. 6 per unit?

11. Due to a 10 per cent rise in the price of a commodity, its quantity supplied rises from 400 units to

450

units. Calculate its price elasticity of supply. Is the supply elastic?

12. Calculate the TVC, AFC,AVC, and MC

Output 0 1 2 3 4 5 6

Price 60 80 100 111 116 130 150

13. Complete the following table:

Output 1 2 3 4

Price 9

MR 10 4

TR 24

14. Distinguish between collusive and non-collusive oligopoly. Explain how the oligopoly firms are

interdependent in taking price and output decisions.

15. Market for a good is in equilibrium. There is an ‘increase’ in demand for this good. Explain the

chain of effects of this change. Use diagram.

16. Market for a good is in equilibrium. There is simultaneous ‘decrease’ both in demand and supply

of the good. Explain its effect on market price.

17. Explain why the equilibrium price of commodity is determined at that level of output at which its

Demand equals its supply.

HOTS & VBQs

1. Why is an industry under perfect competition a price maker?

2. What is price floor? What may be the consequences of price floor?

3. What is price ceiling? What may be the consequences of price ceiling?

4. Write your opinion on the formation of cartels is an oligopolistic market structure.

5. Explain the economic value of support price policy in India?

6. Despite the fact that perfect competition offers maximum output at minimum price, it is not a

perfect from of the market. Do you agree?

UNIT: 5 NATIONAL INCOME AND RELATED AGGREGATES


1. Define current transfers. [1]

2. Is the study of cotton textile industry a macroeconomic study or a microeconomic study? [1]

3. Give two examples of macroeconomic studies. [1]

4. Define macroeconomics. [1]

5. Give two examples of microeconomic studies. [1]

6. Why is the study of the problem of unemployment in India considered a macroeconomic study?

7. What is nominal gross domestic product? [1]

8. Define flow variables. [1]

9. Define stock variable. [1]

10. Define capital goods. [1]

11. Give one example of “externality” which reduces welfare of the people. [1]

12. Define macroeconomics.(1)

13. 40. Wh Define stock variable.

14. Define ‘real’ gross domestic product.

15. Define flow variables.

16. What is nominal gross domestic product?

17. When will be NDP MP be less than NDP FC?

18. State the meaning of consumption of fixed capital?

19. State the meaning of injection in income flow, with the help of an example.

20. What do you mean by leakage in income flow?

21. State whether the following are stock or flow :

i. Losses (ii) Capital (iii) Production (iv) Wealth

22. Define Nominal GNP. at is real flow?(1)


1. Distinguish between a factor income and transfer receipt.

2. Explain the problem of double counting in the estimation of national income by the value added

method. [3]

3. What is meant by circular flow of income? Distinguish between real flow and money flow.

4. From the following data about a firm ‘x’ for the year 2000-01.calculate the net value added at market

price during that year:

Particulars Rs In crores

(i) Sales 90

(ii) Closing stock 25

(iii) Opening stock 15

(iv) Indirect taxes 10

(v) Depreciation 20

(vi) Intermediate consumption 40

(vii) Purchase of raw materials 15

(viii) Rent 5

5. Calculate Gross National Disposable Income from following data


(i) National income 2000

(ii) Net current transfer from rest of the world 200

(iii) Consumption of fixed capital 100

(iv) Net factor income abroad (-)50

(v) Net indirect taxes 250

6. Calculate Gross National Disposable income from the following data:


(i) Net national product at factor cost 3000

(ii) Net factor income from abroad (-)50


(iv) Net indirect taxes 250

(v) Net current transfers from rest of the world 300

7. Calculate Gross National Disposable income from the following data:


(i) Net factor income from abroad (-)10

(ii) National income 1000

(iii) Net indirect taxes 80

(iv) Net current transfer from rest of the world 150

(v) Consumption of fixed capital 100

8. From the following data about firm ‘x’ calculate gross value added at factor cost by it.

Particulars Rs In

thousands

(i) Sales 500

(ii) Opening Stock 30

(iii) Closing Stock 20

(iv) Purchase of intermediate products 300

(v) Purchase of machinery 150

(vi) Subsidy 40

(Rs. 230 thousands)

9. From the following data about firm ‘x’ calculate gross value added at factor cost by it. [3]

Particulars Rs In

thousands

(i) Opening stock 50

(ii) Closing stock 40

(iii) Subsidy 60

(iv) Purchase of intermediate products 450

(v) Sales 750

(vi) Purchase of machinery 200

(Rs. 350 thousands)

10. From the following data about firm ‘x’ calculate gross value added at factor cost.

Particulars Rs In

thousands

(i) Sales 800

(ii) opening stock 40

(iii) Closing stock 30

(iv) Subsidy 50

(v) Purchase of intermediate products 400

(vi) Purchase of machinery 200

(Rs. 440 thousands)

11. From the following data about firm ‘x’ calculate gross value added at factor cost.


(i) Sales 180

(ii) Rent 5

(iii) Subsidy 10

(iv) Change in stock 15

(v) Purchase of raw materials 100

(vi) Profit 25

(Rs. 105 crores)

12. Calculate ‘private income’ from the following data. [3]


(i) National debt interest 30

(ii) Gross national product at market price 400

(iii) Current transfers from government 20

(iv) Net indirect taxes 40

(v) Net current transfers from the ROW ( - ) 10

(vi) Net domestic product at factor cost accruing

to govt.

50

(vii) Consumption of fixed capital 70

(Rs. 280 crores)

13. Calculate Gross Value Added at factor cost:

Particulars Amt.Rs

(i) Units of output sold (units) 1000

(ii) Price per unit of output (Rs) 30

(iii) Depreciation(Rs) 1000

(iv) Intermediate cost(Rs) 12000

(v) Closing Stock(Rs) 3000

(vi) Opening Stock(Rs) 2000

(vii) Excise(Rs) 2500

(viii) Sales tax(Rs) 3500

(Rs13000)

14. Calculate Net Value Added at factor cost:

Particulars Amt.Rs

(i) Consumption of Fixed Capital(Rs) 600

(ii) Import duty(Rs) 400

(iii) Output sold(Units) 2000

(iv) Price per unit of output(Rs) 10

(v) Net change in stock(Rs) (-50)

(vi) Intermediate cost(Rs) 10,000

(vii) Subsidy(Rs) 500

(Rs. 9450)

15. Calculate Net Value Added at Market Price:

Particulars Amt.Rs

(i) Output sold (units) 800

(ii) Price per unit of output(Rs) 20

(iii) Excise (Rs) 1600

(iv) Import duty(Rs) 400

(v) Net Change In stocks(Rs) (-)500

(vi) Depreciation(Rs) 1000

(vii) Intermediate cost(Rs) 8000

(Rs. 6500)

16. Calculate ‘value of output’ from the following data(3)


(i) Net value added at factor cost 100

(ii) Intermediate consumption 75

(iii) Excise duty 20

(iv) Subsidy 5

(v) Depreciation 10

(Rs. 200lakh)

17. Calculate ‘intermediate consumption’ from, the following data:


(i) Value of output 200

(ii) Net Value of output at factor cost 80

(iii) Sales tax 15

(iv) Subsidy 5

(v) Depreciation 20

(Rs.90 lakhs)

18. . Calculate ‘sales’ from the following data:


(i) Net Value of output at factor cost 300

(ii) Intermediate consumption 200

(iii) Indirect Taxes 20

(iv) Depreciation 30

(v) Change in stock (-)50

(Rs600 lakh)

19. Define operating Surplus. State its components.

20. From the following data, calculate national income by (a) Income Method (b) Expenditure Method


(i) Private final consumption expenditure 2,000

(ii) Net capital formation 400

(iii) Change in stock 50

(iv) Compensation of employees 1900

(v) Rent 200

(vi) Interest 150

(vii) Operating surplus 720

(viii) Net indirect taxes 400

(ix) Employers’ contribution to social security

schemes

100

(x) Net exports 20

(xi) Net factor income from abroad (- ) 20

(xii) Govt. final consumption expenditure 600

(xiii) Consumption of fixed capital 100

(Rs. 2600 crore)

21. Calculate “sales” from the following data

Particulars Rs In lakhs

(i) Net value added at factor cost 560

(ii) Depreciation 60

(iii) Change in stock ( - ) 30

(iv) Intermediate cost 1000

(v) Exports 200

(vi) Indirect taxes 60

(Rs. 1710 lakhs)

22. Calculate “sales” from the following data:

Particulars Rs In lakhs

(i) Intermediate cost 700

(ii) Consumption of fixed capital 80

(iii) Change in stock ( - ) 30

(iv) Subsidy 60

(v) Net value added at factor cost 1300

(vi) Exports 50

(Rs. 2070 lakhs)

23. Giving reasons classify the following into intermediate products and final products.

(i) Furniture purchases by a school

(ii) Chalks, dusters, etc, purchased by a school

24. Giving reasons classify the following into intermediate products and final products.

(i) Computers installed in an office.

(ii) Mobile sets purchased by a mobile dealer.

25. Giving reason identify whether the following are final expenditures or intermediate expenditure:

(i) Expenditure on maintenance of an office building.

(ii) Expenditure on improvement of a machine in a factory.

26. Giving reason explain how should the following be treated in estimating national income

(i) Expenditure on fertilizers by a farmer.

(ii) Purchase of tractor by a farmer.

27. Giving reason explain how should the following be treated in estimating national income:

(i) Payment of bonus by a form.

(ii) Payment of interest on a loan taken by an employee from the employer

28. Giving reason explain how should the following be treated in estimating national income:

(i) Interest paid by banks on deposits by individuals.

(ii) National Debt interest.

29. Giving reasons categories the following into stock and flow: (i) Capital (ii) Saving

(iii)Gross domestic product (iv) Wealth.

30. Define externalities. Give an example of negative externality. What is its impact on welfare? (3)

31. Explain how ‘distribution of gross domestic product’ is a limitation in taking gross domestic product

as an index of welfare.(3)

32. Explain the basis of classifying goods into intermediate and final goods. Give suitable examples.(3)

33. Explain circular flow of income.(3)

34. Distinguish between factor income and transfer income.(3)

35. State the precautions of expenditure method. (4)

36. Explain the limitation of GDP as an index of welfare.(4)

37.Calculate gross value added of factor cost :

(i) Units of output gold (units) 1000

(ii) Price per unit of output (Rs.) 30

(iii) Depreciation (Rs.) 1000

(iv) Intermediate cost (Rs.) 12000

(v) Closing stock (Rs.) 3000

(vi) Opening stock (Rs.) 2000

(vii) Excise (Rs.) 2500

(viii) Sales Tax 3500

38. Calculate Net Value added at factor cost :

(i) Consumption of Fixed capital (Rs.) 600

(ii) Import duty (Rs.) 400

(iii) Output sold (units) 2000

(iv) Price per unit of output (Rs.) 10

(v) Net change in stock (Rs.) (–) 50

(vi) Intermediate cost (Rs.) 10000

(vii) Subsidy (Rs.) 500

39. Find Net Value added at market price :

(i) Output sold (units) 800

(ii) Price per unit of output (Rs.) 20

(iii) Excise (Rs.) 1600

(iv) Import duty (Rs.) 400

(v) Net change in stock (Rs.) (–) 500

(vi) Depreciation (Rs.) 1000

(vii) Intermediate cost (Rs.) 8000

40. Giving reasons classify the following into intermediate products and final products

(i) Furniture purchased by a school.

(ii) Chalk, duster, etc, purchased by a school.

41. Giving reasons, explain the treatment assigned to the following which estimating national income.

(i) Family members working free on the farm owned by the family.

(ii) Payment of interest on borrowings by general government.

42. Giving reasons, explain the treatment assigned to the following which estimating national income.

(i) Payment of income tax by a firm

(ii) Festival gifts to employees

43. Explain the basis of classifying goods into intermediate and final goods. Give suitable examples.

44. Calculate ‘National Income” and ‘Gross National Disposable Income’ from the following:

(i) Net imports 60

(ii) Net current transfer to abroad (-)10

(iii) Net domestic fixed capital formation 300

(iv) Government final consumption expenditure 200

(v) Private final consumption expenditure 700

(vi) Consumption of fixed capital 70

(vii) Net change in stocks 30

(viii) Net factor income to abroad 20

(ix) Net indirect tax 100

45. Giving reason classify the following into intermediate and final goods.

a. Machine purchased by a dealer of machine.

b. A car purchased by a house hold.

46. How will you treat the following in estimating rational income of India? Give reasons for your

answer.

(i) Value of bonus shares received by shareholders of a company.

(ii) Interest received on loan given to a foreign company in India.

47. Calculate “Net Domestic Product at Market Price “and “Private Income” from the following:

(i) Income from domestic Product accruing to government 120

(ii) Wages and salaries 400

(iii) National debt interest 60

(iv) Profit 200

(v) Net factor income to abroad (-)20

(vi) Rent 100

(vii) Current Transfers from government 30

(viii) Interest 150

(ix) Social security contribution by employers 50

(x) Net indirect tax 70

(xi) Net current transfer to abroad (-)10


1. Explain the income method of measuring national income.(6)

2. Calculate from the following data: (a) Net National Disposable Income. (b) Private Income. (c) Personal

disposable income (6)


(i) National Income 800

(ii) Indirect Taxes 70

(iii) Subsidies 10

(iv) Savings of non departmental enterprises 30

(v) National debt interest 50

(vi) Net factor income from abroad -20


(viii) Current transfers from ROW 45

(ix) Income from property and entrepreneurship

accruing to Govt. administrative departments

60

(x) Direct taxes paid by households 40

(xi) Profits 100

(xii) Savings of private corporate sector net of

retained earing of foreign companies

80

(xiii) Current transfer from Govt. administrative

departments

90

(xiv) Corporation tax 25

{(a) Rs. 905 crore (b) Rs. 895 core (c) Rs. 750 crore.

3. From the following data, calculate gross national product at market prices by (a) income method (b)

expenditure method.


(i) Government final consumption expenditure. 250

(ii) Change in stocks 65

(iii) Net domestic capital formation 150

(iv) Interest 90

(v) Profits 210

(vi) Corporation tax 50

(vii) Rent 100

(viii) Factor income from abroad 20

(ix) Indirect taxes 55

(x) Factor income to abroad 40

(xi) Exports 60

(xii) Subsidies 25

(xiii) Imports 80

(xiv) Consumption of fixed capital 20

(xv) Private final consumption expenditure 500

(xvi) Compensation of employees 450

(xvii) Value of rent for free accommodation to

employees

40

(Rs. 880 crore)

4. From the following data Calculate GNPmp by Income method and expenditure method :


(i) Mixed Income of self- employed 400

(ii) Compensation of employees 500

(iii) Private Final Consumption Expenditure 900

(iv) Net factor income from abroad (-)20

(v) Net Indirect Taxes 100

(vi) Consumption of fixed capital 120

(vii) Net Domestic capital Formation 280

(viii) Net Exports (-)30

(ix) Profits 350

(x) Rent 100

(xi) Interest 150

(xii) Government final consumption expenditure 450

(Rs 1700 crore)

5. From the following data, calculate GNPmp by income method and expenditure method:


(i) Compensation of employees 400

(ii) Profits 250

(iii) Mixed Income of self employed 300

(iv) Rent 80

(v) Interest 70

(vi) Private final consumption expenditure 700

(vii) Net Domestic capital Formation 120

(viii) Consumption of fixed capital 100

(ix) Net exports (-)10

(x) Government final consumption expenditure 350

(xi) Net indirect taxes 60

(xii) Net factor income from abroad (-)10

(Rs1250 crores)

6. From the following data, calculate GNPmp by income method and expenditure method:


(i) Net domestic capital formation 375


(Rs2250 crores)

7. From the following data, calculate (a) Personal disposable income and (b) National income:

(a) Rs1750 crore; (b) Rs3050 crore)

8. From the following data, calculate (a) Personal disposable income and (b) National income: (6)

{(a)Rs.2350 Cr.(b)Rs. 4540 Cr.}

9. From the following data, calculate (a) Personal disposable income and (b) National income: (6)

(iii) Net indirect taxes 150

(iv) Profit 450

(v) Rent 200

(vi) Private final consumption expenditure 1100


(viii) Government final consumption expenditure 700

(ix) Interest 250

(x) Mixed income of a self employed 500

(xi) Net factor income from abroad (-)15

(xii) Net exports (-)25


(i) Private income 3000


(iii) Mixed income of self- employed 900

(iv) Net factor income from abroad (-)50

(v) Net retained earnings of private enterprises 600

(vi) Rent 350

(vii) Profit 600

(viii) Consumption of fixed capital 200

(ix) Direct taxes paid by households 300

(x) Corporation tax 350

(xi) Net indirect taxes 250


(xiii) Interest 3000



(ii) Net retained earnings of private enterprises 800

(iii) Net factor income from abroad (-)60

(iv) Corporation tax 450

(v) Direct taxes paid by household 400

(vi) Compensation of employees 1500

(vii) Mixed income of self-employed 1400

(viii) Rent 300

(ix) Interest 400

(x) Profit 1000

(xi) Consumption of fixed capital 250

(xii) Net indirect taxes 400

(xiii) Net exports (-)40


{(a)Rs3250Cr. (b)Rs4450 Cr.}

10. Calculate national income and gross national disposable income from the following data: (6)

(Rs550 crores; Rs680 Crores)

11. Calculate ‘Net Domestic Product at Factor Cost’ and ‘Gross National Disposable Income’ from the

Following data. (6)


12. Calculate Gross National Product at Market Price and Net National Disposable Income from the

following Data. (6)


(ii) Mixed income of self-employed 1200

(iii) Net factor income from abroad (-)50


(v) Net retained earnings of private enterprises 200

(vi) Profit 800

(vii) Rent 600

(viii) Corporation Taxes 400

(ix) Interest 700

(x) Net Indirect Taxes 500

(xi) Net exports (-)100

(xii) Direct Taxes paid by households 150

(xiii) Consumption Of fixed capital 180


(i) Current transfers by government 15

(ii) Private final consumption expenditure 400

(iii) Net Current Transfers from the ROW 20


(v) Net factor income from abroad (-) 10

(vi) Net domestic Capital Formation 80


(viii) Net Exports 40

(ix) Net Indirect Taxes 60


(i) Net Current transfers from Abroad (-)5

(ii) Private final consumption expenditure 250

(iii) Net factor income from abroad 15



(vi) Net Exports (-)10

(vii) Subsidies 10

(viii) Net Domestic Capital Formation 30

(ix) Indirect Taxes 20


(i) Net Current transfers from Abroad (-)5

(ii) Profits 70


(iv) Rent 40


13 . Calculate National Income and Net National Disposable Income from the following Data. (6)

(Rs.495Crore;Rs.505 Crore)

14. Calculate “gross national product at factor cost” from the following data by (a) Income Method, and

(b) expenditure method: (6)


(i) Private Final Consumption Expenditure 1000

(ii) Net Domestic capital Formation 200

(iii) Profits 400


(v) Rent 250

(vi) Government final consumption expenditure 500


(viii) Interest 150

(ix) Net Current transfers from ROW (-)80

(x) Net factor income from abroad (-)10

(xi) Net Exports (-)20

(xii) Net Indirect Taxes 80

(Rs 1650 crores)

15. Calculate “gross national product at factor cost” from the following data by (a) Income Method,

and (b) expenditure method: (6)


(i) Net Domestic capital Formation 500




(v) Private Final Consumption Expenditure 2600

(vi) Rent 400

(vii) Dividend 200

(v) Indirect tax 20

(vi) Interest 100

(vii) Royalty 10

(viii) Compensation of employees 600

(ix) Subsidies 5

(x) Net factor income from abroad (-)25


(i) Net Current transfers from Abroad 15

(ii) Net exports (-)20

(iii) Private final consumption expenditure 400

(iv) Net factor income from abroad 10

(v) Government final consumption expenditure 100

(vi) Indirect tax 30

(vii) Net Domestic Capital Formation 50

(viii) Change in stocks 7

(ix) Subsidy 5

(viii) Interest 500

(ix) Net Export (-)100

(x) Profits 1100

(xi) Net factor income from abroad (-)50

(xii) Net Indirect Taxes 250

(Rs 3900 crore)

16. From the following data, calculate (a)Gross Domestic Product at Factor Cost and (b)Factor

Income to Abroad : (6)


(i) Compensation of employees 800

(ii) Profits 200

(iii) Dividend 50

(iv) Gross national product at market price 1400

(v) Rent 150

(vi) Interest 100

(vii) Gross Domestic capital Formation 300

(VIII) Net fixed capital Formation 200

(ix) Change in stock 50

(x) Factor income from abroad 60

(xi) Net Indirect Taxes 120

{(a)Rs.1300 crore; (b)Rs.80 crore}

17. Calculate “Net national product at factor cost” and Gross National Disposable Income from the

following data : (6)


(i) Saving of non-departmental enterprises 50

(ii) Income from property and entrepreneurship


70

(iii) Personal taxes 90

(iv) National Debt Interest 20

(v) Retained Earnings of private corporate sector 10

(vi) Current Transfer payments by government 40


(viii) Corporation tax 30

(ix) Net Indirect Taxes 80

(x) Net Current transfers from ROW (-)10

(xi) Personal Disposable Income 1000

{(a) Rs.1200 crore; (b) Rs.1330 crore}

18. From the following data, calculate (a) Gross Domestic Product at Factor Cost and

(b)Factor Income to Abroad: (6)


(i) Gross Domestic capital Formation 600

(ii) Interest 200

(iii) Gross national product at market price 2800

(iv) Rent 300

(v) Compensation of employees 1600

(vi) Profits 400

(vii) Dividends 150

(viii) Factor Income From Abroad 50

(ix) Change in stock 100

(x) Net Indirect Taxes 240

(xi) Net Fixed capital formation 400



19. Calculate “Net national product at factor cost” and Gross National Disposable Income from

the following data : (6)


(i) Net Current transfers to ROW 10

(ii) Savings of non-departmental enterprises 60

(iii) Net Indirect tax 90

(iv) Income from property and entrepreneurship


80


(vi) Personal taxes 100

(vii) Corporation tax 40

(viii) National Debt interest 30

(ix) Current transfer payments by government 50

(x) Retained Earnings of private corporate sector 10

(xi) Personal Disposable Income 1100


20. Calculate National Income and Gross National Disposable Income from the following data: (6)


(i) Net Current transfers to ROW (-)5

(ii) Private Final Consumption Expenditure 500


(iv) Net factor income to abroad (-)10

(v) Government Final Consumption Expenditure 200

(vi) Net Indirect tax 100

(vii) Net domestic fixed capital formation 120

(viii) Net Imports 30

(ix) Change in stocks (-)20


21. Calculate Gross National Product at Market Price and Net National Disposable Income from the

following data: (6)


(i) Opening Stock 50


(iii) Net Current Transfers to Abroad 5

(iv) Closing Stock 40

(v) Net factor income to abroad (-)10

(vi) Government Final Consumption Expenditure 300


(viii) Net Imports 20

(ix) Net domestic fixed capital formation 150

{(a) Rs1460 crore; (b) Rs.1425 crore}

22. From the following data, calculate net national product at market price and Gross National

Disposable Income: (6)


(i) Consumption of fixed capital 40

(ii) Change in stocks (-)10

(iii) Net imports 20

(iv) Gross domestic fixed capital formation 100

(v) Private Final Consumption Expenditure 800

(vi) Net current transfers to rest of the world 5

(vii) Government Final Consumption Expenditure 250


(ix) Net Indirect tax 130


23. Find out (a) national income and (b) net national disposable income: (6)


(i) Factor income from abroad 15



(iv) Government Final Consumption Expenditure 200

(v) Net current transfers to rest of the world (-)5

(vi) Net domestic fixed capital formation 110

(vii) Government Final Consumption Expenditure 250


(ix) Net Indirect tax 130


24. Giving reason explain how should the following be treated in estimating gross domestic Product at

market price. (6)

(i) Fees to a mechanic paid by a firm.

(ii) Interest paid by an individual on a car loan taken from a bank.

(iii) Expenditure on purchasing a car for use by a firm.

25. How will you treat the following which estimating national income of India? Give reasons.

i. Dividend received by an Indian from his investment in shares of a foreign company.

ii. Money received by a family in India from relatives working abroad.

iii. Interest received on loans given to a friend for purchasing a car.

iv. Dividend received by a foreigner from investment in shares of an Indian company.

v. Profit earned by a branch of an Indian bank in Canada.

26. How will you treat the following which estimating domestic factor income of India? Give reasons.

i. Remittances from non-resident Indian to their families in India

ii. Rent paid by the embassy of Japan in India to a resident Indian.

iii. Profit earned by branches of foreign bank in India.

iv. Payment of salaries to its staff by embassy located in India.

v. Interest received by an Indian resident from firms abroad

27. Are the following parts of a country’s net domestic product at market price? Explain

i. Net indirect tax

ii. Net export

iii. NFIA

iv. Consumption of fixed capital

HOTS

1. Which of the two NVA FC and NVA MP is equal to sum of factor income?

2. Why is money received from sale of shares is not included in domestic factor income.

3. What aggregate do we get, when we add up the net value added of all producing sectors of an

economy?

4. How value added method solve the problem of double counting?

5. What is per capita real GDP?

6. Explain why subsidies are added to and indirect taxes deducted from domestic product at market

price to arrive at domestic product at factor cost.

7. Giving reasons, explain how the following are treated in estimating national Income by the income

method.

(a)Interest on a car loan paid by an individual

(b)Interest on a car loan paid by a Govt. owned company

8. Why do we include the imputed value of goods but not services while estimating production for self

consumption?

9. Define operating surplus, write its components.

10. Distinguish between domestic product and national product. When can domestic product be more

than National Product?

11. State giving reasons whether the following are included in domestic income of India- (6)

a. Scholarship to students

b. Profits of a foreign bank in India

c. Income of the stock brokers in India

UNIT: 6 Money And Banking


48. What is money supply? (1)

49. State the components of money supply. (1)

50. What is barter system or C-C economy? (1)

51. Name two primary function of money. (1)

52. What do you mean by fiat money? (1)

53. What are demand deposits? (1)

54. What are time deposits? (1)

55. What is cash credit? (1)

56. What do you mean by overdraft facility? (1)

57. What is Repo Rate? (1)

58. What is Reverse Repo Rate? (1)

59. Define money.(1)

60. 51. Define Central Bank.(1)

61. What is barter system?

62. Mention two drawbacks of barter system?

63. What is the function of money in an economic system?

64. What do you mean by barter system?

65. What is legal tender of money?

66. What is ‘Fiat money”?

67. What are time deposits?

68. Define cash reserve ratio.

69. What is reverse repo rate?

SHORT ANSWER TYPE QUESTIONS (3-4 MARK)

1. Explain the significance of the ‘standard of deferred payment’ function of money.(3)

2. Explain the significance of ‘medium of exchange’ function of money. (3)

3. How does the money overcome the problems of barter system? Explain. (3)

4. What is a barter system? What are its drawbacks? (4)

5. Explain the process of money creation by commercial banks with the help of a numerical example.(4)

6. Explain the ‘lender of last resort’ function of the central Bank. (4)

7. What are open market operations? How do these work as a method of credit control? (4)

8. What is bank rate policy? How does it work as a method of credit control? (4)

9. Explain the unit of account function of money.(3)

10. State 3 contingent functions of money.(3)

11. Explain the process of credit creation by commercial banks.(6)

12. Explain the Banker’s Bank function of Central Bank.(4)

13. Distinguish between Repo Rate and Reverse Repo Rate.(3)

14. Explain the significance of the ‘Store of Value’ function of money.

15. Explain the ‘Unit of Account’ function of money?

16. Explain the ‘Medium of Exchange’ function of money?

17. Explain the “Lender of Last Resort’ function of the central bank.

Long Answer Type Questions (6mark)

1. How can ‘Jan-Dhan Yojana’ be used as an instrument to increase supply of money by the

commercial banks?

2. What do you mean by credit/money creation? Explain the process of money creation by the

commercial banks with the help of a numerical example.

3. Define money supply. Explain different measures of money supply used by RBI of India.

4. How does the use of money over come the drawbacks of barter system?

UNIT: 7 DETERMINATION OF INCOME AND EMPLOYMENT


1. Give meaning of full employment.

2. Define Marginal Propensity to Consume.

3. Give the meaning of Marginal Propensity to Save.

4. Give the meaning of Aggregate Demand.

5. Give the meaning of ex-ante Aggregate Demand.

6. Give the meaning of ex-ante savings.

7. When will there be equilibrium level of National Income?

8. Give the meaning of deflationary gap.

9. If the mps is 0.1, calculate the value of the multiplier.

10. Autonomous consumption indicated buy ____ in the consumption function.

(a) C (b) AC (c) s (d) c

11. What is the value of MPC when MPS is zero?

(a) 1 (b) 0 (c) ∞ (d) 0.5

12. What can be the maximum value of MPS?

(a) 0 (b) 1 (c) 2 (d) 3

13. What are ‘desired stocks’ with the producers? (Refer VK Publi.P-203 for Q.13-17)

14. What are ‘actual stocks’ with the producers?

15. What is autonomous investment?

16. When are actual stocks greater than the desired stocks?

17. When are actual stocks less than the desired stocks?

18. What Aggregate Demand?(1)

19. Explain the components of AD.(1)

20. Define consumption function.(1)

21. What is MPC?(1)

22. State the relation between APC and APS.(1)

23. Give the meaning of ex-ante savings.

24. Give the meaning of deflationary Gap.

25. What is Ex-ante aggregate demand?

26. Give the meaning of Inflationary Gap.

27. What is meant by ex-ante investment?

28. Define aggregate demand.

29. What is propensity to consume?

30. Define marginal propensity to consume.

31. What is involuntary unemployment?

32. What is meant by excess demand in macro economics?

33. What can be the minimum value of investment multiplier?

34. Give the meaning of aggregate supply?

35. Can the value of APS be negative?

36. Write the relationship between MPS and multiplier?

Short Answer Type Questions (3-4 mark)

1. Explain the steps taken in derivation of consumption curve from the saving curve.

2. Distinguish between Average Propensity to Consume and Marginal Propensity to Consume. The

value of which of these two can be greater than one and when?

3. High propensity to consume is a virtue, while high propensity to save is not. Why or why not?

4. Out of the values of APC and APS, which can be greater than one and when?

5. Is saving(S) always a virtue, as it is a source of investment? (Refer VK Publi.P-206)

6. Underemployment is a critical feature of the Indian economy. can we really explain it in terms of

deficiency of demand.

7. Explain the concept of involuntary unemployment.(3)

8. In an economy the MPC is 0.75. Investment expenditure in the economy increase by Rs.75 crore.

Calculate total increase in national income.

9. An economy is in equilibrium. Its consumption function is C=300 +0.8Y and investment is 700 find

national income.

10. Giving reasons, state whether the following statements are true or false.

a. When MPC is zero, the value of investment multiplier will also be zero.

b. Value of APS can never be less than zero

c. When MPC>MPS, the value of investment multiplier will be greater than 5.

d. The value of MPS can never be negative

e. When investment multiplier is 1, the value of MPC is zero.

f. The value of APS can never be qreater than 1.

11. Explain the distinction between voluntary and involuntry employment.

12. Explain the relationship between investment multiplier and MPC?

Long Answer Type Questions (6 mark)

18. Explain the concept of excess demand in macroeconomics. Also explain the role of Open Market

Operation in correcting it.

19. Explain the concept of deficient demand in macroeconomics. Explain the role repo rate in

correcting it.

20. Explain the concept of inflationary gap. Also explain the role of legal reserve in reducing it.

21. Explain the meaning of underemployment equilibrium. Explain two measures by which full

employment can be reached.

22. In an economy, the equilibrium level of income is Rs. 12000 Cr. The ratio of MPC and MPS is 3:1.

Calculate the additional investment needed to reach new equilibrium level of income of Rs. 20000

Cr. (Ans:-Rs.2000)

23. Explain the derivation of saving curve form a consumption curve. Use diagram.(6)

24. Explain the determination of equilibrium level of income using S-I approach.(6)

25. What is multiplier? Explain the process of working of multiplier.(6)

26. Explain the concept of Deficient Demand in a diagram. What measures can be taken to correct it?

(6)

27. Explain the role of the following in correcting deficient demand in an Economy.

a. Open market operation

b. Bank rate

28. Explain the role of following in correcting the deflationary gap in an economy.

a. Govt. Expenditure

b. Legal Reserve Ratio

29. Explain the role of following in correcting the deflationary gap in an economy.

a. Govt. Expenditure

b. Legal Reserve Ratio

30. In an economy 75% of the increase in income is spent on consumption. Investment increased by

Rs.1000 Crore. Calculate

a. Total increase in income

b. Total increase in consumption exp

31. In an economy the equilibrium level of income is Rs.1200 Crore. MPC: MPS = 3:1 , k=?

32. Differentiate between full Employment and underemployment equilibrium.

33. What is the effect of excess demand on output, employment and prices?

34. Explain the working of investment multiplier with the help of a numerical example.

35. What is the effect of deficient demand on output, employment and prices?

36. Give reason why the value of average propensity to save can never be 1.

HOTS

1. Does full employment occur when AD = AS or S = I?

2. If in an economy intended investment is greater than intended savings, what is the effect of it on

national income?

3. What happens to the level of national income if AD is greater than AS?

4. In a two sector economy, the saving and investment functions are:

S= -10+0.2Y

I= -3+0.1Y

5. If in an economy intended investment is greater than intended savings, what is the effect of it on

national income?

UNIT: 8 GOVERNMENT BUDGET


1. Which part of the government budget shows the current receipts?

[a]Capital budget [b] Revenue budget, as they are recurring in nature

[c] Both (a) and (b) [d] Neither (a) nor (b)

2. ______ items are those items which do not create a liability or do not lead to reduction in assets.

[a] Capital [b] Development [c] Non-development [d] Revenue

3. Loans granted to State Governments are an example of ……………

[a] Revenue Receipts [b] Capital Receipts [c] Revenue Expenditure [d] Capital Expenditure

4. Define tax.

5. What is non- plan expenditure?

6. What are the sources of non-tax revenue of govt.(1)

7. Give the meaning of government budget.

8. What are the non-tax revenue receipts?

9. What is non-plan expenditure?

10. What is budgetary deficit?

11. What does zero primary deficit means?

12. Name the two ways in which budgetary deficit is financed.

13. What is balanced budget theory?

14. Define a surplus government budget.

15. Define regressive tax.

16. What is meant by fiscal year in India?

Shot Answer Type Questions (3 or 4 marks)

1. Distinguish between revenue receipts and capital receipts in a government budget.

2. Tax rates on higher income group have been increased. Which value does it reflect? Explain.

3. Distinguish between revenue expenditure and capital expenditure in a government budget.

Give an example of each.

4. A person claims that he should be exempted from tax payment as he does not use any government

services in general. Should the person be allowed to do so?

5. Classify the following receipts into revenue receipts and capital receipts. Give reason in support of

your answer.

[i] Recovery of loans [ii] Interest received on loans [iii] dividends received from public enterprises

[iv] Grants from foreign government.

6. Distinguish between fiscal deficit and primary deficit.

7. What does a zero primary deficit indicate?

8. What is revenue deficit? Explain its implications.

9. Are fiscal deficit necessarily inflationary?

10. Can there be a fiscal deficit without revenue deficit?

11. Define Government budget. Explain the various objectives of government budget.

12. Explain the allocation of resource objective of govt. budget.(4)

13. Define fiscal deficit and explain its implications.(4)

14. State 3 measures to correct primary deficit.(3)

15. Distinguish between direct tax and indirect tax.(3)

16. Explain the ‘redistribution of income’ objective of a government budget.

17. Explain the “Reallocation of resources” objective of a government budget.

18. Distinguish between revenue receipts and capital receipts with the help of example.

19. Distinguish between revenue expenditure and capital expenditure with the help of example.

20. Distinguish between direct and indirect tax. .

21. What is meant by fiscal deficit? Write its implications

HOTS

1. Why are the borrowings by the Government as capital receipts?

2. Why is interest received, categorized as revenue receipt?

3. Why are receipts from taxes categorized as revenue receipts?

4. How is flexible rate of exchange determined?

5. Explain the relationship between the fall in price of a foreign currency and its demand. Give two

examples.

6. When price of a foreign currency rises, its demand falls. Why?

7. Supply of a foreign currency rises in response to a rise in the exchange rate. Explain why?

8. Giving reason, explain the relationship between foreign exchange rate and demand for foreign

exchange.

9. How is external commercial borrowing different from external assistance?

10. Giving reason, explain the relation between foreign exchange rate and supply of foreign exchange.

Unit: 9 BALANCE OF PAYMENTS & Foreign Exchange Rate

Very Short Answer Questions: (1 mark)

1. Give the meaning of managed floating exchange rate.

2. How can increase in foreign Direct Investment (FDI) affects the price of foreign exchange?

3. What is the likely effect of depreciation of currency on the country’s foreign trade?

4. Define foreign exchange market.

5. State the type of exchange rate which has no official intervention.

6. Which two transactions determine Balance of Trade?

7. Rising reserves of India’s foreign exchange is a sign of rising exports. Do you agree.

8. Define Balance of Payments on Current account.

9. Define Balance of Payments on capital account.

10. Define autonomous items of BoP.

11. What is dirty floating?

12. Give the alternative name of balance of trade.

13. Define foreign exchange rate.

14. Name the items which are not included in the current account account of India’s Balance of

Payment.

15. What is foreign exchange?

16. What is balance of payment Accounts?

17. State two sources of supply of foreign exchange.

18. State two sources of demand of foreign exchange.

19. What does a deficit in balance of trade indicate?

20. What is fixed exchange rate?

21. Define flexible exchange rate.

22. Define balance of payments.(1)

Short Answer Type Questions (3/4 marks)

1. How does giving incentives for exports influence foreign exchange rate? Explain.

2. How is foreign exchange rate determined under flexible exchange rate regime or FE market?

3. Explain the effect of appreciation of domestic currency on imports and export.

4. Explain any three factors which are responsible for inflow of foreign currency.

5. Give the meaning of foreign exchange and foreign exchange rate. Give reason, explain the relation

between foreign exchange rate and demand for foreign exchange.

7. Explain the meaning of Balance of Payments deficit.

8. Explain the distinction between autonomous and accommodating transactions in the BoP.

9. Can there be a deficit in the Balance of Trade without a deficit in Balance of Payments.

10. If inflation is higher in country A than in country B and the exchange rate between the two

countries is fixed. What is likely to happen to the trade balance between the two countries?

11. Should a current account deficit be a cause for alarm? Explain.

12. Define managed floating exchange rate.

13. State the components of capital account of balance of payment

14. Which transactions determine the balance of trade?

15. When is balance of trade in surplus?

16. What are the components of current account of the BOP account?

17. Explain the meaning of deficit in BOP

18. Distinguish between devaluation and depreciation of domestic currency.

19. When price of a foreign currency rises its supply also rises. explain why?

20. Differentiate between devaluation and depreciation?

21. Distinguish between balance of trade and balance of current account.

22. Explain the components of current account (3).

23. What is meant by balance on capital account?(3)

24. State 3 economic causes of deficit in BoP.(3)

25. Distinguish between fixed and flexible exchange rates.(4)

26. Explain the determination of flexible exchange rate .Use diagram.(4)

27. Narrate the sources of supply of foreign exchange.(3)

Long Answer Type Questions (6 mark)

1. Should a current account deficit be a cause of alarm? Explain with example.

2. Distinguish between autonomous transaction and accommodation transaction.

3. The three categories in which BOP transactions are classified. Describe.

4. State the rules of recording transaction in BOP account.

5. State Explain any four causes of disequilibrium in BOP.

HOTS

1. A country’s balance of trade is Rs. 75 crores. Value of imports of goods is Rs. 100 crores. How

much is the value of exports of goods?

2. A country’s balance of trade is Rs.500 crores . Value of exports of goods is Rs. 650 crores. How

much is the value of imports of goods?

3. Ten US dollars are exchanged for five hundred Indian rupees. What is the exchange rate for Indian

currency?

4. Are the concept of demands for domestic goods and domestic demand for goods are same?

5. The balance of trade shows a deficit of Rs.5000 crores and the value of imports are Rs.9000

crores. What is the value of export?

6. Balance of payment is always balances. Discuss.

SUGGESTED QUESTIONS

CLASS-XII SUBJECT-ECONOMICS

Section A Micro Economics

A. Each Question Carry 1 Mark

1. Define Budget Line.

2. Give the formula for price elasticity of demand.

3. Define fixed cost.

4. There is ‘no fixed cost in the long run’. The statement is true or false.

5. Write the formula for MC.

6. Write the formula for MR.

7. What is the other name of AR?

8. Draw a straight line supply curve with unitary price elasticity.

9. Under which market form, a firm is a price taker?

10. In which market form, there is no need of selling cost.

11. Define oligopoly.

12. In which market situation we can find price discrimination.

a) Perfect c) Monopoly

b) Monopolistic d) Oligopoly

B. Each question carry 3 mark.

1.Distinguish between a normal good an inferior good. Give example in each case.

2.Discuss three properties of indifference curve.

3. Give three reason of a leftward shift of demand.

4. Explain with the help of diagrams the effect of the rise in the price of complementary good. changes on the

demand of commodity.

5.Define the following (each in one sentence):

(a) Marginal Utility

(b) Law of demand

(C)Law of Supply

C.Each question carry four Marks

1.Explain the relation between AC and MC with the help of diagram.

2.Define Monoplistic competition? Explain four features.

D. Each question carry 6 marks.

1. Define TR and AR. Calculate TR, AR and MR from the following data:

Units

Sold

2 3 4 5 7 8 9

Price (in

rupees)

4 6 8 10 14 16 18

2. Explain three features of perfect competition and how firm act as price taker explain with diagram.

SECTION –B (MACRO ECONOMICS)

A. (Each Question carry 1 mark)

1. What is Macro Economics?

2. Define GNP ?

3. What is ‘open market operation’?

4. What is fiscal policy?

5. What is a tax?

6. What is inflationary gap?

7. What is budgetary deficit?

8. What is meant by depreciation of currency?

9. What is fixed exchange rate?

10. Define current account of balance of payment.

11. Which one of the following is revenue expenditure of the government?

(a) Payment on interest (c) Purchase of machinery

(b) Purchase of building (d) Loans granted to a state government

12. How is Primary Deficit Calculated? (Give formula only)

B. (Each Question Carry 3 Marks)

1. Distinguish between a factor payment and a transfer payment.

2. Give the meaning of (i) bank rate (ii) open market operation (iii) cash reserve ratio.

3. Explain any three or four causes of disequilibrium in BOP.

4. Distinguish between balance of trade and balance of payment.

5. Calculate revenue deficit, fiscal deficit and primary deficit from the given data:

i. Revenue receipt…………………… 200 cr.

ii. Revenue expenditure…………… 300 cr.

iii. Capital Receipt………………………. 160 cr.

iv. Capital Expenditure………………. 60 cr.

v. Recovery of loan…………………. 300 cr.

vi. Borrowings………………………….. 130 cr

vii. Interest Payment ………………… 90 cr.

C. (Each question carry 4 marks)

1. Explain the concept of deflationary gap. Explain two fiscal measures to correct this gap.

2. Explain any four causes of disequilibrium in BOP.

D. (Each Question Carry 6 Mark)

1. Explain with the help of a numerical example how an increase in investment in an economy affects its level of

income.

2. Distinguish between inflationary gap and deflationary gap. Show deflationary gap on a diagram. Can this gap

exist at equilibrium level of income? Explain.

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