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12th CBSE Economics Unit 5 Macroeconomics and Circular Flow of Income Important Question Paper | QB365

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12th CBSE Economics Unit 5 Macroeconomics and Circular Flow of Income Important Question Paper

Published on: 29/07/2019

Macroeconomics and Circular Flow of Income

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Questions + Answers key

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Questions:

Multiple Choice Question

5 x 1 = 5

.......... refers to the flow of money across different sectors of the economy.

(a)

Real flow

(b)

Circular flow

(c)

Money flow

(d)

Both (a) and (c)

When households and firms borrow from the financial market, they constitute .........

(a)

leakage

(b)

flow

(c)

injection

(d)

None of these

Which variables are defined as any quantity measured at a particular point of time?

(a)

Stock

(b)

Flow

(c)

Investment

(d)

Inventory

The goods which are ready to be used by the producers are called..........

(a)

final goods

(b)

consumer goods

(c)

producer goods

(d)

Both (a) and (c)

Which concept is known as the study of aggregates?

(a)

Microeconomics

(b)

Macroeconomics

(c)

Market demand

(d)

Aggregate Demand

Generic 4

9 x 4 = 36

Distinguish between stock and flow. Give two examples of each. (or) Distinguish between stocks and flows. Give an example of each.

Describe the four major sectors in an economy according to the macroeconomics point of view.

State whether the following are a stock or a flow.
(i) Population of a country
(ii) Number of births

What is the difference between depreciation and depreciation reserve fund?

10.

What is the difference between intermediate goods and final goods?

11.

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

12.

Giving reason, classify the following into intermediate products and final products.
(i) Computers installed in an office.
(ii) Mobile sets purchased by a mobile dealer.

13.

What is the difference between microeconomics and macroeconomics?

14.

Describe 'the Great Depression' of 1929.

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Answers Key:

Multiple Choice Question

5 x 1 = 5

Money flow

injection

Stock

Both (a) and (c)

Macroeconomics

Generic 4

9 x 4 = 36

Difference between stock and flow

Basis	Stock	Flow
Meaning	It is that quantity of an economic variable which is measured at a particular point of time.	It is that quantity of an economic variable which is measured during a period of time.
Time	It has no time dimension.	It has time dimension as per hour, per day, per month.
Concept	It is a static concept.	It is a dynamic concept.
Examples	Quantity of money, wealth, etc.	Consumption, investment, etc.

An economy is generally classified into the following four sectors:

(i) Household sector It engaged in the consumption of goods and services.

(ii) Producing sector It engaged in the production of goods and services.

(iii) Government sector It engaged in such activities which are related to taxation and subsidies as well as consumption and production.

(iv) Rest of the world It engaged in exports and imports.

(i) Population of a country is an example of stock as it is measured at a point of time.
(ii) Number of births is an example of flow as it is measured per unit of time.

Difference between depreciation and depreciation reserve fund

Basis	Depreciation	Depreciation reserve fund
Concept	It is the loss of value of fixed assets in use, on account of normal wear and tear.	It is a provision of funds created by producers to cope up with depreciation losses
Effect	It leads to correct computation of profit.	These funds are used for the replacement of fixed assets when these are worn out.
Reason	Expected or foreseen obsolescence, normal wear and tear.	Obsolete/outdated assets need to be replaced.

10.

Difference between intermediate and final goods

Basis	Intermediate goods	Final goods
Meaning	They are those goods which are still within the production boundary, i.e. either value need to be added or are meant for resale.	They are those goods which are out of the production boundary and available for direct consumption by their buyers.
Purpose or use	These goods may be resold by the firms to make profits during the accounting year.	These goods are not resold by the firms to make profits during the accounting year.
Consumption	These goods are not ready for use by their final users.	These goods are ready for use by their final users.
Value addition	Value is yet to be added to these goods.	Value is not to be added to these goods.

11.

The basis of classification is the end-use of the product. Goods which are used by the producers in the process of production such as raw material or goods purchased for resale are known as intermediate goods, e.g. shirt purchased by a firm for resale. These goods are still within the production boundary. Goods which are outside the boundary line of production and are ready for use by their final users are called final goods, e.g. shirt purchased by a consumer.

12.

(i) Computers installed in an office are final products.
Reason Offices buy computers as long-term durable products and make investment for them. That's why it is considered as a final product.
(ii) Mobile sets purchased by a mobile dealer are intermediate products.
Reason A mobile dealer purchase mobile sets for reselling purpose. That's why it is an intermediate product.

13.

Basis	Microeconomics	Macroeconomics
Meaning	It studies economic problems at an individual level.	It studies economic problems at the level of an economy as a whole.
Determines	It determines the output and price for an individual firm.	It determines an aggregate output and general price level in the whole economy.
Tools	Demand and supply are its main tools.	Aggregate Demand and Aggregate Supply are its main tools.
Dependence	It assumes all the macro variables to be constant as National Income, consumption, saving, etc.	It assumes all the macro variables to be constant as demand of households, supply of firms, prices of individual products, etc.

14.

The Great Depression took place in 1929 which adversely affected the developed economies of Europe and North America. There was extreme fall in Aggregate Demand due to fall in income, which led to a vicious circle of poverty. Demand for goods in the market was low. Many factors of production were lying idle, workers were thrown out of their jobs. The consequences of Great Depression gave birth to the study of macroeconomics.