12th Standard CBSE Economics Public Exam Model Question 2020
By QB365 on 03 Mar, 2020
12th Standard CBSE Economics Public Exam Model Question 2020
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Important Question Part-I
12th Standard CBSE
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Reg.No. :
Introductory Micro and Macroeconomics
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In a centrally planned economy, all the economic decisions are taken by the:
(a)Consumers
(b)Government
(c)Market forces
(d)Capitalists
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What will be the elasticity of demand curve that is a horizontal line parallel to x-axis?
(a)Zero
(b)Unity
(c)ED > 1
(d)Infinity
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The formula to calculate Marginal product from Total product is:
(a)\(M{P}_{n}=T{P}_{n+1}+T{P}_{n}\)
(b)\(M{P}_{n}=T{P}_{n}-T{P}_{n-1}\)
(c)\(MP=TP\)
(d)\(MP=TP\) / units of variables factor
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The price of coffee decrease.What will be the corresponding effect on the demand and supply of tea?
(a)Demand and supply both will fall
(b)Demand and supply both will rise
(c)Demand will fall and supply will rise
(d)Demand will increase and supply will fall
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The process of adding to physical stock of capital is known as
(a)investment
(b)savings
(c)capitalformation
(d)Both (a) and (c)
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Personal income will equal to personal disposable income if:
(a)Personal Taxes are zero
(b)Direct taxes are zero
(c)Profit Tax is zero
(d)Saving of the private corporate sector are zero
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Bank creates credit
(a)on the basis of their securities
(b)on the basis of their total assets
(c)on the basis of their cash deposits
(d)on the basis of their gross liabilities
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When MPS = 0, then K is:
(a)1
(b)0
(c)\(\infty \)
(d)None
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Which out of the following is an indirect tax?
(a)Corporation tax
(b)Value-Added Tax
(c)Income Tax
(d)Wealth Tax
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In case of currency appreciation, the domestic currency becomes........ .
(a)less valuable
(b)more valuable
(c)rise
(d)fall
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Which of the following statement(s) is/are true for British period?
(a)India attained self-sufficiency in foodgrain production
(b)There were check over famines
(c)Effective administrative setup
(d)All of the above are true
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Which of the following features is not associated with a socialist economy?
(a)The economy has no private property and everything is owned by the state.
(b)The government decides what to produce, how to produce and for whom to produce.
(c)Incomes are equitably distributed
(d)It is called a free market economy
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Which of the following is not a method of privatisation?
(a)Disinvestment
(b)Sale of PSUs to private sector
(c)Contraction of PSUs
(d)Sale of PSUs to government
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JGSY programme of poverty alleviation was submerged into
(a)SGRY
(b)NFWP
(c)PMGSY
(d)All of the above
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How investment in education stimulate economic growth? Select from the following.
(a)It helps to develop responsible citizens
(b)It helps in development of science and technology
(c)It helps in the optimum utilisation of natural, physical and financial resources
(d)All of the above
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Saansad Adarsh Gram Yojana (SAGy) is meant for
(a)adoption of village by members of parliament
(b)adoption of city by members of parliament
(c)adoption of school by members of parliament
(d)adoption of children by members of parliament
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Two months ago, Shyam was working as part time salesman on commission basis in a company. Due to his excellent performance, company appointed him as a permanent sales manager on fixed monthly salary. From the point of view of employment currently he is a
(a)skilled worker
(b)regular salaried worker
(c)unskilled worker
(d)casual wage labour
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From the following, which is/are the non-conventional source of energy?
(a)Hydro
(b)Thermal
(c)Geotherma
(d)All of these
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Global warming is mainly caused by
(a)burning of coal and petroleum products
(b)deforestation
(c)release of methane gas from animal waste
(d)All of the above
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When was 'one-child norm' introduced in China?
(a)Late 1970s
(b)Late 1960s
(c)Late 1980s
(d)None of the above
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Distinguish between microeconomics and macroeconomics. Give examples.
(a) -
How a consumer will reach equilibrium if the ratio of Marginal Utility of X to its price is greater than that of Y. Use diagram to explain.
(a) -
Draw average cost, average variable cost and average fixed cost curves on a single diagram and explain their relation.
(a) -
Elasticity of Demand is affected by the form of market of the commodity.Do you agree?Why or Why not?
(a) -
Explain the circular flow of income.
(a) -
State Bank of India Earned Rs.500 crs from its branch at London. Is it a part of Indian National Income?
(a) -
Although increase in money supply is an effective measure to control economic depression, yet it creates burden of borrowing in an economy. Explain two measures to control economic depression in such a situation.
(a) -
State briefly the various measures to correct excess demand.
(a) -
Explain anyone objective of government budget
or
Discuss any four objecuves of a government budget(a) -
Define foreign exchange rate.
(a) -
Explain the 'Ryotwari' and 'Mahalwari' System of collecting land revenue prevalent under the British rule.
(a) -
Give three characteristics of SSIs
(a) -
In your opinion, what are the advantages of privatisation to the economy?
(a) -
Poverty is the most important problem faced by Indian economy today. In this context, state which human value is needed to deal with the problem of poverty?
(a) -
Write a brief note on National Literacy Mission.
(a) -
What do you understand by the term 'distress sale?
(a) -
How willyou know whether a worker is working in the informal sector?
(a) -
Explain primary and secondary sources of energy.
(a) -
State the strategies for sustainable development in India.
or
Outline the steps involved in attaining sustainable development in India.(a) -
Evaluate the various factors that led to the rapid growth in economic development in China
(a) -
What will likely be the impact of large scale outflow of foreign capital on Production Possibilities curve of the economy and why?
(a) -
Explain why the price a consumer is willing to pay for a good equals the marginal utility of X when in equilibrium.
(a) -
What are the total fixed cost, total variable cost and total cost of a firm?How are they related?
(a) -
Giving reason, state whether the following statement is true or false. 'Excess supply of a commodity exists when its market price is greater than the equilibrium price.'
(a) -
What is the principle of circular flow of income and product?
(a) -
Will the following be a part of domestic factor income of India?Give reasons for your answer.
(i) Factor income from abroad.
(ii) Salaries to Indian residents working in Russian Embassy in India.
(iii) Profits earned by a company in India, which is owned by a non resident(a) -
Explain the significance of 'store of value' function of money.
(a) -
The savings function of an economy is S = - 200 + 0.25Y. The economy is in equilibrium when income is equal to Rs. 2,000. Calculate:
(a) Investment expenditure at equilibrium level of income.
(b) Autonomous consumption.
(c) Investment multiplier.(a) -
Discuss any four objectives of a government budget?
(a) -
'Devaluation and Depreciation of currency are one and the same thing'. Do you agree? How do they affect the exports of a country?
(a) -
Explam the state o] industries in India on the eve of Independence .
(a) -
Distinguish between planning objectives and plan objectives on any four basis.
(a) -
Explain briefly the meaning of economic reforms. What are the main economic reforms?
(a) -
What was Dadabhai Naoroji's concept of poverty line?
(a) -
With a view to discourage hoarding of cash and to solve the problem of black money, the Government of India initiated demonetisation of Indian economy by declaring that Rs.500 and Rs.1,000 notes are no longer legal tender. This situation created a cash crunch and parents were not able to pay school fees of their children
Suggest some measures that the schools could adopt so that this problem is solved and the education of the children is not hindered(a) -
Mention some obstacles that hinder the mechanism of agricultural
marketing.(a) -
Explain the concept of Marginal Rate of Substitution (MRS) by giving an example. What happens to MRS when consumer moves downward along the Indifference Curve?
(a) -
What does the law of variable proportion show? State the behaviour of Marginal Product according to this law.
(a) -
In an economy, 75% of the increase in income is spent on consumption. Investment is increases by RS.1000 crore.
Calculate:
(i) Total increase in income
(ii) Total increase in consumption expenditure.(a) -
The following is a production possibility table for war goods and civilian goods:
Combinations A B C D E Automobiles (Rs 000s) 0 1 2 3 4 Rifles (lacs) 10 9 7 4 0 (a) Show these production possibilities through a Pf'C. What do the points on the curve indicate?
(b) Label point G inside the curve. What does this point indicate?
(c) Label point H outside the curve. What does this point indicate?
(d) What must an economy do to attain the level of production indicated by pointH?(a) -
Explain the difference between decrease in demand and decrease in quantity demanded.Give two cause of decrease in demand
(a) -
Give the meaning of producer's equilibrium. A producer produces that quantity of his product at which MR and Me are equal, is he earning maximum profits, give reason for your answer.
(a) -
Will a profit-maximising firm in a competitive market produce a positive level of output in the short run if the market price is less than the minimum of AVC? Give an explanation.
(a) -
Estimate the following with the help of given data:
(i) GDPMP
(ii) Net Value Added at factor cost; and
(iii) prove that it is equal to the income generated.(Rs. in Crores) (i) Increase in the stock of unsold goods 1000 (ii) Sales 10,000 (iii) Net indirect tax 8000 (iv) Purchase of raw materials from other firms 1650 (v) Purchase of fuel and power 850 (vi) Consumption of fixed capital 500 (vii) Rent 700 (viii) Wages and salaries 3500 (ix) Interest payment 10000 (x) Dividend 1500 (xi) Corporate gain tax 300 (xii) Undistributed profit 200 (a) -
Do you consider a commercial bank as 'creator of money' in the economy?
(a) -
Explain determination of equilibrium level of income using consumption plus investment (C + I) approach. Use diagram.
(a) -
Explain the role the government can play through the budget in influencing allocation of resources.
(a) -
Why does the demand for foreign currency fall and supply rises when its price rises? Explain.
(a) -
Give the negative effects of the British rule in India
(a) -
Enumerate the problems faced by Indian industries in post-independence time.
(a) -
Distinguish between the following
(i) Strategic and Minority sale
(ii) Bilateral and Multi-lateral trade
(iii) Tariff and Non-tariff barriers.(a) -
Illustrate the difference between rural and urban poverty. Is it correct to say that poverty has shifted from rural to urban areas? Use the trends in poverty ratio to support your answer.
(a) -
Bring out the differences between human capital and human development
(a) -
Is it possible to develop information technology as an alternate livelihood option? Give reasons
(a) -
Why are regular salaried employees more in urban areas than in rural areas?
(a) -
Discuss the reforms which have been initiated recently to meet the energy crises in India.
(a) -
Explain the relationship between environment and the economic development.
(a) -
Write a brief note on the following international organisations
(i) SMRC
(ii)ASEAN
(iii) European Union
(iv) G-8
(v) G-20
(vi) BRICS(a)
Section - A
Section - B
Section - C
Section - D
Section - E
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Important Question Part-I Answer Keys
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(b)
Government
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(d)
Infinity
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(b)
\(M{P}_{n}=T{P}_{n}-T{P}_{n-1}\)
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(c)
Demand will fall and supply will rise
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(a)
Personal Taxes are zero
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(c)
on the basis of their cash deposits
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(c)
\(\infty \)
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(b)
Value-Added Tax
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(b)
more valuable
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(d)
All of the above are true
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(d)
It is called a free market economy
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(d)
Sale of PSUs to government
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(a)
SGRY
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(d)
All of the above
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(a)
adoption of village by members of parliament
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(b)
regular salaried worker
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(d)
All of the above
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Basis Microeconomics Macroeconomics (a) Meaning Microeconomics is the study of individual economic units. Macroeconomics is the study of the economy as a whole or its aggregates. (b) Objectives It lays emphasis on the allocation of resources and price determination It lays emphasis on the determination of national income and employment. (c) Examples Consumer's equilibrium , individual demand, pricing of good etc. Economy's equilibrium, national income, aggregate demand, inflation etc. -
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1. AC is the vertical summation of AVC and AFC
2. The difference between AC and AVC falls as output increases but the difference of AC and AFC increases.
3. As output increases AC and AVC tends to be closer but their curves do not interect each other because AFC always remains more than zero. -
Elasticity of Demand measures the degree of responsiveness in quantity demanded due to change in own price of the product(price elasticity) or change in the income of the consumer(income elasticity)or change in the price of related goods(cross elasticity).There are many factors that affect Elasticity of Demand and market form is definitely an important factor affecting Elasticity of Demand.
Elasticity of Demand in different market forms is given below:
Market form Degree of elasticity Perfectly competitive market from (Characterised by the presence of large number of buyers and sellers all dealing in a homogeneous product) Perfectly elastic demand in perfect competition, even a slight increase in price, causes demand to fall to zero.\({ E }_{ d }=\infty \). Monopoly (Characterised by the presence of a single seller dealing in a product which has no close substitutes) Inelastic demand in a monopoly, since the product does not have close substitutes, because of this, change in price does not have much effect on demand.\({ E }_{ d }<1.\) Monopolistic competition (Characterised by the presence of large number of buyers and sellers dealing in a homogeneous but differentiated product) Elastic demand in monopolistic competition, since the product has close substitutes, therefore, its demand tends to be elastic.\({ E }_{ d }>1.\) Oligopoly (Characterised by the presence of few sellers selling an identical or differentiated product) Highly elastic demand in oligopoly, interdependence between firms and availability of close substitutes makes demand highly elastic.\({ E }_{ d }>1.\) (In case of non-collusive oligopoly) -
Circular flow of income refers to the continuous circulation of production, income generation and expenditure involving different sectors of the economy.
Phases of Circular Flow of Income
There are three different phases (generation, distribution and disposition) in circular flow of income, as shown in the given diagram:
(i) Production phase In this phase, firms produce goods and services with the help of factor services.
(ii) Income phase This phase involves the flow of factor income (rent, wages, interest and profits) from firms to the households
(iii) Expenditure phase In this phase, the income received by factors of production, is spent on the goods and services produced by firms.
Income is first generated in production units, then distributed to households and finally spent on goods and services produced by these units to make the circular flow complete its course. -
Yes, it is a part of income of India, since economic interest of SBI at London lies in India
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Decrease in Bank rate, Decrease in SLR and purchase of Government securities by RBI.
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The problem of excess demand can be solved by reducing Aggregate Demand as:
(i) The public expenditure is to be reduced.
(ii) Increase in taxes.
(iii) Increase in bank rate.
(iv) Sale of securities by RBI in the open market.
(v) Increase in imports. -
Budget is a comprehensive statement of the expected receipts and expenditure of the government during a financial year (1st April to 31st march)..
Following are the principal objectives that the government pursues trough the budget:
(i) Reallocation of resources The government,through its budgetary policy reallocate resources, so that social and economic objectives can be met.
(ii) Redistribution of income and wealth Government through facial tools of taxation and transfer payment brings fair distribution of income.Equitable distribution of income and wealth is a way to bring social justice.
(iii) Economic stability The government tries to prevent business fluctuations and maintain price and employment stability. Economic stability stimulates inducement to invest and increases to invest and increases the rate of growth and development.
(iv) Economic growth The growth rate of a country depends on the rate of savings and investment.Therefore the roles that are assigned to budgetary policy in this regard are to create conditions for increase in savings and investment. -
Foreign exchange rate is the price of a foreign currency in terms of demestic currency
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Ryotwari system It was the way of collecting tax revenue (in British controlled areas in India) directly from cultivators of farmland.
Mahalwari system This system consisted of landlords or zamindars representing an entire village or even group of villages. Alongwith the tillers, they were jointly as well as individually responsible for the payment of revenues. The land under this system included the land of the villages as well as adjoining forestland and pastures. -
The three typical characteristics of SSIs are:
(i) Labour intensive SSIs are labour intensive in character, i.e. they require more units of labour and are best suited for solving the problem of unemployment.
(ii) Less capital intensive SSIs are less capital intensive, i.e. they require relatively smaller amount of capital to produce a commodity. In a country like India where capital is scarce, SSI is best suited to bring about industrial development.
(iii)SSIs show locational flexibility SSIs can be established in remote areas also, because their need . for various resources is limited. Therefore, they contribute to growth across different regions of the country. -
Advantages of privatisation are:
(i) It will introduce efficiency and profitability in Public Sector Undertakings (PSUs).
(ii) It promotes consumer's sovereignty. High degree of consumer's sovereignty implies wider choice and better quality of goods and services.
(iii) It will reduce budgetary deficits which result from expenditure on loss making PSUs. -
The value of human welfare is the most important while dealing with the problem of poverty. It is necessary for the government of the country to ensure that the people living below poverty line are adequately taken care of by introducing welfare measures for the poor and the downtrodden.
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In 1988, National Literacy Mission (NLM) was initiated to promote adult education. A women education council was also established to promote women education in our country
The NLM has been recast as 'Saakshar Bharat' with a central focus on female education. The programme covers all citizens in the age group of 15 years and above. -
Lack of agricultural marketing infrastructure often forces the farmers to sell their produce at low prices for fear of spoilage or to payoff an imminent debt. This' is termed as distress sale. Farmers tend to suffer highly on account of these sales, because they not only get a low price for their produce, but are also cheated by use of false weights and are charged a high commission.
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From the following points, we can know whether a worker is working in the informal sector:
(i) The number of workers employed is less than 10.
(ii) The workers are not entitled to social security schemes.
(iii) The workers are not allowed to form trade unions and are not protected by labour law. -
Primary sources They are those sources which do not require any transformation before their use. They are directly used e.g., coat lignite, petroleum, gas, etc.
Secondary sources The sources which involve transformation process before final use are referred to secondary sources e.g., transforming inputs of coal energy into electricity. -
The strategies for sustainable development in India are:
(i) Use of non-conventional sources of energy.
(ii) Use of LPG and gobar gas in rural areas.
(iii) Use of CNG as fuel in urban areas. -
Various factors that led to the rapid growth in economic development in China are given below:
(i) China initiated to implement the economic reforms in 1978 without any compulsion by the World Bank and IMF.
(ii) China established infrastructure in the field of health and education that helped effectively in improving the social and economic indicators.
(iii) China implemented land reforms that increased the productivity.
(iv) There was long existence of decentralised planning.
(v) The size of individual enterprises was kept small.
All the factors mentioned above helped positively towards economic development. -
Large scale outflow of foreign capital from the economy will reduce its resources and thereby its production potential will get adversely affected. This fall in production potential will bring about unemployment, fall in income etc. This will ultimately shift the Production Possibility Curve downwards or inwards.
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Factors determining how many units of a good the consumer will buy are:
(a) Its Marginal Utility (b) Its Price
Consumer compares its marginal utility with its price. If marginal utility is more than price, he will continue to buy more, till the point is reached where marginal utility becomes equal to the price.
Following conditions must be satisfied for a consumer to be in equilibrium (getting maximum satisfaction)
(i) MU of a commodity = Price of the commodity, i.e., MUx = Px
(ii) MU should decrease with increase in consumption. -
Total Fixed Cost (TFC): It refers to the cost which does not change with the change in level of output. It remains constant even if the output is zero. It is independent of the amount of output produced and remains constant for all levels of output. It is the cost incurred to employ fixed inputs.
Total Variable Cost (TVC): It refers to the cost that a firm incurs to employ variable inputs. It varies directly with the change in the level of output, i.e., it increases as level of output increases. When level of output is zero, TVC is also zero
Total Cost (TC): It is the sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC), i.e., TC = TFC + TVC. ' At zero level of output, TC is just the fixed cost, i.e., TC = TFC at zero level of output.
Relationships between TFC, TVC and TC: As output increases, TVC and TC increases. TFC, however, is independent of the amount of output produced, so it remains constant for all levels of output.
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True, this is because at a market price higher than equilibrium price, demand falls while supply rises. This creates 'excess supply' situation.
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The circular flow of income and product involves two basic principles:
(i) Real flow of income implies the flow of factor services from the households sector to the producing sector.
(ii) Flow of income across different sectors always implies the identity between payments and receipts.
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(i) Factor income from abroad will not be part of domestic factor income, but it will be a part of Net Factor Income from abroad, whose value is included in national income.
(ii) No, as salaries are received from Russian embassy which is not included in domestic territory of India.
(iii) Profit earned by a company located in India but owned by a non-resident will be included in domestic income as profits are generated within domestic territory of India. -
Significance of the 'store of value' function of money is stated in the following points:
(i) Money is an asset that retains its value overtime, therefore public store its wealth in the form of money.
(ii) Money overcomes the problem of storing perishable items under barter system of exchange.With money, people hold liquidity and value in a much more convenient manner.
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S = -200 + 0.25 Y given y is equal to Rs. 2,000
(a) Investment Expenditure (1) at equilibrium of income
(b) Autonomous consumption.
(c) Investment multiplier
(a) Substituting to value of Y in the savings function, we get
S = -200 + 0.25\(\times\) 2000
= -200 + 500 = 300
S = 300
as at the equilibrium level S = I
​\(\therefore\) I = Rs.300
(b) When Y = 0, saving = -200
Thus autonomous consumption = Rs.200
(c) k = \(\frac {1 }{MPS } \) = \(\frac {1 }{0.25 } \) = 4 -
Budget is a comprehensive statement of the expected receipts and expenditure of the government during a financial year (1st April to 31st march)..
Following are the principal objectives that the government pursues trough the budget:
(i) Reallocation of resources The government,through its budgetary policy, reallocate resources, so that social and economic objectives can be met.
(ii) Redistribution of income and wealth Government through facial tools of taxation and transfer payment brings fair distribution of income.Equitable distribution of income and wealth is a way to bring social justice.
(iii) Economic stability The government tries to prevent business fluctuations and maintain price and employment stability. Economic stability stimulates inducement to invest and increases to invest and increases the rate of growth and development.
(iv) Economic growth The growth rate of a country depends on the rate of savings and investment.Therefore the roles that are assigned to budgetary policy in this regard are to create conditions for increase in savings and investment
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Devaluation and Depreciation of currency are not one and the same thing. This is because devaluation refers to the fall in the value of domestic currency w.r.t. foreign currency as planned by the government (it is fixed by the government) whereas depreciation refers to the fall in the value of domestic currency in relation to foreign currency w.r.t. a situation where exchange rate is determined by the market forces of supply and demand for foreign exchange in the international money market. No mater both cause a fall in the value of domestic currency. Both of them are measures undertaken to promote exports as the goods become cheaper in the domestic economy, which thereby encourages exports.
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The industrial policy by the British under the colonial administration aimed at promoting the modern industries in Britain.
This was achieved through:
(i) Decay of handicraft industryThe traditional and important handicraft industry in India, in the absence of any patronage and incentive , started to decline. THe decline of handicraft industry not only created massive unemployement but also resulted in a spur of demand in the Indian consumer market which was now deprived of supply of locally made goods. This demand was met through goods produced in British industries.
(ii) Limited growth of public sector enterprises Only those public sector enterprises which subserved the interests of the Britishers were developed such as railways, postage and telegraph, etc.
(iii) Absence of capital goods industries The consumer goods industries were not supported by the capital goods industry. THere was also a dearth of basic and heavy industries.
(iv) Black growth of modern industry Because no initiative was taken by the British Government to industrialise the Indian economy, therefore modern industries registered a negligible growth rate. A few enterprising entrepreneurs opened iron and steel industry, sugar, cement and paper mills. -
Differences between planning objectives and plan objectives
Basic Planning objectives Plan Objectives Aim They are long-term objectives to be achieved over a long period. They are objectives to be achieved in short period say 1 to 5 years. Nature They are common to all plans. They vary from plan to plan. Changes They aim at structural changes. They aim at quantitative changes. Plans They are broad goals. which development plans seek to achieve. They are planned with greater precision. -
Economic reforms refer to the changes made in the economy with a view to deregulate it and to solve the prevailing economic problems of the country.
In India, economic reforms were introduced in 1991, with the implementation of New Economic Policy. These reforms can be categorised as:
(i) Stabilisation reforms These reforms were short-term measures which intended to correct disequilibrium in BoP and to check inflation.
(ii) Structural reforms These are long-term measures which intend to bring efficiency in the working of the economy. These reforms can be categorised as liberalisation, privatisation and globalisation. -
According to Dadabhai Naoroji. the average poverty line was three-fourth of the adult jail cost of living. The computation of jail cost of living can be understood in the following manner:
Adult population = \(\frac { 2 }{ 3 } \)
Food consumed by them = \(\frac { 2 }{ 3 } \times 1=\frac { 2 }{ 3 } \)
Child population = 1 = \(\frac { 2 }{ 3 } \)=\(\frac { 1 }{ 3 } \)
Food consumed by half of the child population
\(\frac { 1 }{ 3 } \times \frac { 1 }{ 2 } \times 0\) = 0
Food consumed by other half of the child population
\(\frac { 1 }{ 3 } \times \frac { 1 }{ 2 } \times 1\times \frac { 1 }{ 2 } =\frac { 1 }{ 12 } \)
Average poverty line = Total food consumed by adult and child population
\(\frac { 2 }{ 3 } +0+\frac { 1 }{ 12 } =\frac { 9 }{ 12 } =\frac { 3 }{ 4 } \)
So, poverty line is 3 / 4th of the adult jail cost of living. -
Some of the measures that the schools could adopt, in view of the demonetisation drive are as follows:
(i) The schools could accept fees by online transfer
(ii) The schools could accept digital cash.
(iii) they could accept fees by a cheque or a bank draft.
(iv) They could also give extension for payment of fees I or those parents who do not have access to either f these means. -
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Marginal Rate of Substitution: MRS of X for Y refers to the number of units of good Y that the consumer is willing to forego for an additional unit of good X, so as to maintain the same level of satisfaction
\(MRS={\Delta Y\over \Delta X}\)
The concept of MRS can be understood with the help of following table:Combinations Units X
(Shirts)Units of Y
(Trousers)MRSXY A 1 20 - B 2 16 4Y:1X C 3 13 3Y:X D 4 11 2Y:1X E 5 10 1Y:1X At combination A, consumer has 1unit of shirt and 20 trousers which represents that MUof shirts is higher than that of trousers due to which consumer becomes willing to sacrifice 4 trousers in order to gain one shirt when he moves from A to B. Assoon as consumer sacrifices trousers to gain shirt, his MU for trousers increases and hence he becomes ready to sacrifice lesser trousers (3) in order to gain one more shirt when he moves from combination B to combination C.
Hence with changes in relative MU for shirts and trousers, MRS keeps on falling with every increase in quality of shirts. -
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(i) \(\triangle\)Y = RS.4000 crore
(ii) \(\triangle\)C = RS.3000 crore -
(a) Points A, B, C, D and E indicate that there is full utilisation of resources.
(b) Point 'G' inside the curve indicates under-utilization of resources.
(c) Point H outside the curve indicates that the economy cannot produce at any such point above the PPC, the reason being that the fixed resources do not allow to do so.
(d) The economy must increase its resources to attain point H. -
Decrease in demand. Decrease in demand is due to change in factors other than price of the given good, e.g., decrease in income, unfavourable change in tastes etc.
Decrease in quantity demanded. Decrease in quantity demanded is'due to rise in own price of the given commodity.
Two causes of decrease in demand are:
(i) Fall in the price of substitute goods. The demand for a good falls with the fall in the price of its substitute good. As a result the demand curve for the commodity shifts to the left with the fall in the price of its substitute good.
(ii) Rise in the price of the complementary good.
Py ↑{Dy↓} Dx↓
As a result, there is a decrease in the demand. -
Producer's equilibrium refers to a situation where the producer gets maximum profit. According to Marginal Cost and Marginal Revenue approach, the producer is in equilibrium when marginal revenue (MR) is equal to the marginal cost (MC).
It is not sufficient condition for earning maximum profit i.e. to produce and reach a level of profit maximization not only MC = MR condition should be met with but also MC > MR after the MC = MR output is reached. Thus both the conditions are essential to be met with for producers equilibrium.
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No, a profit maximizing firm in a competitive market will not produce in the short run if P or AR is less than the minimum of AVC. This is because AR = AVC is the Shutdown point for the given firm. After this point i.e. AR < AVC a firm will suffer acute losses as it will not be able to Price recover its variable cost along with fixed cost. So it will stop further production.
Let us prove it diagrammatically.
Point X in the diagram denotes the point of equilibrium as MR = MC at this point.
To find out the level of total profit, we have to determine TR and TC diagrammatically.
Thus the firm shall stop production whenever Price/AR < SAVC. At profit maximizing level of output the P(AR must always be greater than or equal to SAVC in the short run \(AR\ge \) SAVC. -
GDPMP = Sales + Increase in the stock - Purchase of raw materials - Purchase of fuel and power.
= 10,000 + 1000 -1650 -850
= 11,000 -2500
= 8500 Crores.
Net Value Added at factor cost = Sales + Increase in the stock - Purchase of raw materials
Purchase of fuel and power - Consumption of fixed capital - Net indirect tax.
= 10,000 + 1000 - 1650 - 850 - 500 – 800
= 11,000 – 3800 = 7200 Crores.
Income generated = Rent + Wages and salaries + Interest + Dividend + Corporate gain tax + Undistributed profit.
= 700 + 3500 + 1000 + 1500 + 300 + 200
= 7200 Crores.
Hence it is proved that Net Value Added at factor cost = Income Generated -
A commercial bank is considered a 'creator of money' in the economy on the basis of its basic function of receiving/accepting deposits from the public. The commercial banks use the money in these deposits to give loans. This is the basis of deposit creation. How much is the deposit creation is determined by the amount of initial deposits by the public and the Legal Reserve Ratio (LRR). Let us now explain the process of money creation/deposit creation or credit creation. Suppose initially people deposit Rs 100. The banks use this money for giving loans. But the banks cannot use the whole of the deposit for this purpose. It is legally compulsory for the banks to keep a certain minimum fraction of these deposits as cash. This fraction is called the Legal Reserve Ratio (LRR), which is fixed by the central bank. The part ratio which is kept by the commercial banks with the central bank is called Cash ReserveRatio (CRR). The other part which is kept by the banks themselves is called the Statutory Liquidity Ratio (SLR). Explanation of the process of money creation. Suppose the initial deposit in banks is Rs 100and the LRR is 20%. Further suppose that banks keep only the minimum required, i.e., Rs 20 as cash reserve. So now they are free to lend the remainder Rs 80. Suppose they lend ~ 80, for this, they open deposit accounts in the names of the borrowers Now, as all the transactions are routed through the banks, the money spent by the borrowers comes back into the banks, into the deposit accounts of those who have received this payment. This increases demand deposits in banks by Rs 80, which is 80% of the initial deposit. This deposit of Rs 80 has resulted on account of loans given by the banks. In this sense, the banks are responsible for money creation with this round, increase in total deposits is now Rs180 (l00 + 80). This way, the deposits go on increasing round after round, but each time 80% of the last round deposit. At the same time, cash reserves go on increasing each time, 80% of the last cash reserve. The deposit creation comes to end when total cash reserves become equal to the initial deposit (i.e., Rs 100 in the given case) the total deposit creation comes to Rs 500, i.e., five times the initial deposit as proven by the following schedule.
Round Deposits (Rs) Loans (Rs) Cash Reserves (LRR=0.2) Initial 100 80 20 I 80 64 16 II 64 51.20 12.80 . . . . . . . . . . . . Total 500 400 100 -
Equilibrium level of income is the point where Aggregate Demand equals to Aggregate Supply in an economy.
Let us derive the equilibrium with the help of a schedule:
E represents the equilibrium point and OP represents the equilibrium level of National Income, where AD=AS.
E represents the equilibrium point and OP represents the equilibrium level of National Income, where AD=AS. -
Government can, through the budget, influence allocation of resources via the market mechanism, with the help of taxes, subsidies and by direct participation in production. Production units which produce harmful products like liquor, cigarettes, pan masala etc. can be heavily taxed. Tax concessions and subsidies should be given to encourage those production units which produce products that are useful for the masses.
Government can also directly produce goods and services which are normally ignored by the private sector, on account of lack of enough profit from their production. -
Foreign exchange rate shares an inverse relationship with the demand for the currency. With a fall in the price of foreign exchange, value of domestic currency increases (i.e. appreciation of domestic currency) and that means foreign goods become cheaper and their domestic demand (i.e. imports) increases.
The rising domestic demand for foreign goods implies higher demand for foreign exchanges which increases from OQj to OQ2 as shown in the figure.
The supply of foreign currency is directly proportional to the price of foreign exchanges. When the price of a. foreign currency falls, it leads cheaper imports and exports because it leads to appreciation of domestic currency. The exporters are discouraged due to costlier exports. This results lesser inflow or supply of foreign currency in the economy. As a result supply of foreign exchange decreases from OQ2 to OQ1j as shown in the figure
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The negative effects of the British rule in India are as follows:
(i) Colonila expoitation through trade malpractices The Britishers exploited India by the following the given trade practices:
(a) Thry colllected raw material for British industries from India.
(b) They sold finished goods of British industries in India. To encouraged the above trade, no duty was charged on imports from Britain and subsidy was given for exporting raw material to Britain.
(ii) Use of british capital to export country's resources THe Britishers used their capital and enterpreneurial skills to exploit India's natural resources and cheap labour resources. THe Britishers invested in mining and plantation industries and paid very low wages to the workers inspite of unsafe working conditions.
(iii) Developement of industries which complemented the British industries The Britishers invested only in those industries which complemented the growth of their industries back home. So, they invested in developing railways, post and telegraphs, rubber, tea and coffee plantations, etc. They totally neglected the developement of key and basic industries like iron and steel, machine making industries, etc. Jute and cotton tectile industries, were also discouraged as they could have been a threat for the textile factories of Britain
(iv) Economic drain The Britishers drained the country economically. They took away various wealthy possessions that India possessed, e.g. the famous Kohinoor diamond. Accordigng to an estimate, approximately a trillion to the gems and jewels.
(v) Partition of the country This was the most diastatic consequence of the British rule in India; the effects of which we still face in the form of cross-border terrorism. The Britishers fuelled the Hindu-Muslim dispute for their own benifit, which led to the partition of the country. -
The following problems are faced by Indian industries which ultimately affect industrial growth:
(i) Underutilisation of capacity A large number of our industries suffer from the problem of underutilisation. The extent of underutilisation is between 40 and 50%.
(ii) Absence of world class infrastructure The inadequate transport facilities, frequent power failures and pathetic condition of roads have affected the growth of industry.
(iii) High cost industrial economy The prices of manufactured goods and services in India are generally much higher than international prices.
(iv) Inadequate employment generation The process of industrialisation has failed to solve the problem of unemployment in India. Factory employment absorbed only 2% of the workforce in 1980.
(v) Poor performance of public sector A large number of public sector units are running in losses.
(vi) Sectoral imbalances In India, industrial development suffers due to inadequate support from agricultural sector and poor infrastructural facilities.
(vii) Regional imbalances Industrial development continues to be imbalanced. Tamil Nadu, Maharashtra. Andhra Pradesh and Gujarat account for 50% of total factories and 50% of productive capital. The rest of the country accounts for the balance 50%. -
(i) Differences between strategic and minority sale
Basic Strategic Sale Minority Sale Meaning Strategic sale involves the
sale of minimum 51% stake
of a Public Sector Unit (PSU)
to the private sector.Minoritysale involve
the sale of less than
49% stake of a PSU to
the private sector.Control The control and management
of PSU is transferred
to the private sector.The control and management
of PSU remains withthe
government as it holds
the majority stake.Process It is done through a process
of competitive bidding and
subsequent sales to the partner.Minority disinvestments are
made via public offers.(ii) Differences between multi-lateral trade
Basic Bilateral Trade Multi-lateral Trade Meaning It is a trade agreement
between two countries.It is a trade agreement
among more than two
countries.Negotiations Separate negotiations are
required to be done with different
countries on one to one basis.Negotiations are done
with many countries
together, which saves time.Economic
CooperationEncourages economic
cooperation between
two countries.Encourages globalisation,
integrating many countries
of the world(iii) Differences between tariff and non-tariff barriers
Basic Strategic Sale Minority Sale Meaning It refers to the taxes imposed
on the imports by a country for
providing protection to its domestic industries.It refers to the restrictions
other than taxes, imposed on imports
by a country for providing protection
to its domestic industries.Purpose Tariff barriers are allowed by the
World Trade Organisation (WTO)to be
imposed by its member countries,
though at reasonable rates.Non-tariff barriers like import
quotas and voluntary export
restraints are now abolished
under INTO regime.Nature Tariff barriers are more explicit Non-tariff barriers are not explicit. -
Rural poor are the poor people residing in villages and small towns. The rural poor work mainly as landless agricultural labourers, cultivators with very small land holdings, landless labourers and tenant cultivators.
On the other hand, the urban poor are the poor people living in metros and big cities. Urban labourers do a variety of casual jobs, sell a variety of things on roadsides and are engaged in various other such activities. It can be seen from the given table that poverty ratio has shifted from rural to urban areas.Year-wise poverty Ratio Years Rural (in%) Urban (in%) India (in%) 1973-74 56.4 49.0 54.9 2004-05 28.3 25.7 27.5
It is evident from the above table that rural poverty has declined significantly from 56.4% in 1973-74 to 28.3% in 2004-05 whereas, decline in urban poverty (from 49% to 25.7%) is not that significant.
Moreover, the gap between the rural and urban poverty ratios which 'was around 7% in 1973-74 fell to just around 2% in 2004-05 again signifying the shift in poverty from rural to urban areas. -
Difference between human capital and human development
Basis Human Capital Human Development Concept. It is a narrow concept. It is a broader concept Means of productivity It considers education and health as a means to increase labour productivity. It considers that education and health are integral to human well being because only when people have the ability to read and write and the ability to lead a long and healthy life, they will be able to make other choices they value. Link Human capital treats human beings as a means to an end, the end beinq the increase in productivity. Human capital treats human beings as a means to an end, the end beinq the increase in productivity. Welfare In human capital, investment in education and health is unproductive if it does not enhance output of goods and services In human development, human welfare should be increased through investments in education and health even if such investments do not result in higher labour productivity. Thus, every individual has a right to be healthy and literate. -
Information Technology (IT) has revolutionised many sectors in the Indian economy. This fact is described in the following points:
(i) The role of IT is justified by the increased ability of the government to predict areas of food insecurity .and vulnerability through its use
(ii) It also has a positive impact on the agricultural sector as it disseminates the information regarding emerging technologies and their applications, prices, weather, soil conditions, etc.
(iii) It also has a potential of employment generation in rural areas.
The initiative of private sector along with support from government has made it possible to develop this sector as a sustainable livelihood option. -
Regular salaried employees are more in urban areas than in rural areas due to following reasons:
(i) Education and training Regular salaried employment requires certain educational qualifications and professional skills. Education and training facilities are not as good in rural areas as in urban areas. Therefore, chances of regular employment are higher for urban people.
(ii) Infrastructure Large companies including MNCs are concentrated in the urban areas due to the presence of economic infrastructure and availability of modern facilities like banks, transport, communication, etc. These companies hire regular salaried employees, which results in concentration their in the urban areas.
(iii) Agriculture Rural population is primarily engaged in agricultural sector and are not willing to take the risk of leaving their farms for regular salaried employment. This is also a reason for regular salaried employment to be less prevalent in rural areas. -
The following reforms have been initiated by the government to meet the energy crises:
(i) Privatisation in power generation Power generation sector has been opened up for private sector, and the government monopoly in the generation and distribution of electricity has been eliminated to gain competitive efficiency.
(ii) Privatisation in power transmission and distribution The Indian Government has approved private companies like Tata Power and Reliance Energy alongwith Power Grid Corporation of India for constructing transmission networks and to look after distribution of power supply in certain states.
(iii) Regulatory mechanism The Central Electricity Regulatory Commission (CERC) alongwith State Electricity Regulatory Commission (SERC) has been established in 19 states under the Electricity Regulatory Commission Act, 1998 to regulate tariff and to promote efficiency and competition.
(iv) Rationalisation of tariff Tariff rates have been revised upwards to discourage wasteful consumption of power and bring down the losses of SEBs.
(v) Accelarated Power Development and Reform Programme (APDRP) It was initiated in the year 2000-01 with the objectives of improving financial viability, reducing transmission and distribution losses and promoting transparency through computerisation.
(vi) Creating awareness Government is trying to create awareness among public towards conservation of energy. Various programmes like National Energy Efficiency Programme (NEEP) that aimed at conservation of petroleum products, have been initiated. Use of non-conventional sources of energy like solar energy is being popularised. -
There are two views on how economic development affects environment.
According to first view. economic development degrades our environment by using natural resources for production of goods and services. Economic development results in pollution in the form of air pollution, water pollution and land pollution. According to second view. economic development improves environment quality. The discovery of new materials and sources not only use less of natural resources, but sometimes replace them. Thus, with economic development, degradation of environment decreases.
From the above discussion, we find that relationship between environment and economic development is dynamic and complex. It is difficult to decide whether the economic development leads to degradation of environment or not. Undoubtedly, economic development leads to excessive extraction of natural resources and generation of pollutants, but it introduces new processes, materials and discoveries. We should be careful and ensure that the economic development should not damage the environment. -
(i) SAARC South Asian Association for Regional Cooperation (SAARC) was established on 8th December, 1985 to encourage cooperation among member countries in the fields of agriculture, health, population control, anti-terrorism measurs. rural development, science and technology and narcotics control Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Sri Lanka and Pakistan are its members. It was formed on the proposal of Zia-Ur-Rehman, the then President of Bangladesh. Its head quarter is in Kathmandu.
(ii) ASEAN Association of South East Asian Nation (ASEAN) was created on 8th August, 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand with objectives to accelerate economic growth, social progress, regional stability and to resolve their differences peacefully. Subs equently, Brunei, Cambodia, Laos, Myanmar and Vietnam also joined this association. It is headquartered at Jakarta.
(iii) European union It is a political and economic union of 27 member states that is primarily located in Europe. It was formed to develop an internal single market regulated by a same set of laws to ensure free movement of people, goods and services between the member nations. A common currency 'Euro' circulates in all the member nations. Austria, France, Germany, Italy, Spain and Sweden are important member nations. Brussels is the defacto capital of the European Union.
(iv) G-8 It is an inter-governmental political forum of the industrialised economies of the world, which are democratic in character. Initially, formed in 1975, with six member countries, viz. France, Germany, Italy, Japan, the United Kingdom and the United States, this association came to be known as G-8 with the inclusion of Canada in 1976 and of Russia in 1997. However, in 2014 Russia has been expelled from the membership of G-8, temporalily. This forum represents about 65% of the world economy.
(v) G-20 It is an international form comprising of the governments and Central Bank governors of 20 major economies. It was founded in 1999 with an objective to study, review and promote high-level discussions of measures to promote international financial stabili ty. The members incl ude 19 individual countries, viz. Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, The United States, alongwith the European Union.
(vi) BRICS BRICS is the acronym representing association of five major emerging national economies, viz. Brazil, Russia, India, China and South Africa. All the member countries are leadin developing or newly industrialised countries and are characterised by their Fast growing economies and those who significantly influence their regional affairs. It was formed in 2011 and works on the principles of non-interference, equality and mutual benefit.
Section - A
Section - B
Section - C
Section - D
Section - E