3524 + Interview Questions in Economics in Class 12 Page 3 InterviewSolution

101.	Government of India has recently launched 'Jan -Dhan Yojna' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.
Answer» Solution :`-`OPENING more BANK accounts means more bank deposits. `-`More deposits means increase in the lending capacity of the commerical BANKS. `-`More lending by banks means more investment in the COUNTRY. `-`More investment means more national INCOME

Discussion

102.	What are the instruments of monetary paolicy of RBI? How does RBI stabilise moneysupply against exogenous shocks?
Answer» Solution :The main instruments of monetarry policy of RBI are: 1 Quantitative MEASURES Bank rate policy ,Repo rate Reverse repo rate. ,Open market OPERATION (varying reserve requirement (i) Cash reserve ratio (ii) statutory liquidity ratio 2.Quialitative measures Margin requirement , Moral suasiuon ,Selective creidti CONTROLS Money stabilisation by RBI .RBI often USES its instruments of money creation for STABILISING the supply of money in the economy.

Discussion

103.	Define Balance of Payments. Discuss briefly the components of current account.
Answer» Solution :Balance Of Payment (BOP) is a statement which records all the monetary transactions made between residents of a COUNTRY and the rest of the world during any given period. This statement includes all the transactions made by/to individuals, corporates and the government and helps in monitoring the flow of funds to develop the economy. When all the elements are correctly included in the BOP, it should sum up to zero in a perfect scenario. This means the inflows and outflows of funds should balance out. However, this does not ideally happen in most cases.The main components of Current Account are:1. Export and Import of Goods (Merchandise Transactions or Visible Trade):A major PART of transactions in foreign trade is in the form of export and import of goods (visible items). Payment for import of goods is written on the negative side (debit items) and RECEIPT from exports is shown on the positive side (credit items). Balance of these visible exports and imports is known as balance of trade (or trade balance).2. Export and Import of Services (Invisible Trade):It includes a large variety of non- factor services (known as invisible items) SOLD and purchased by the residents of a country, to and from the rest of the world. Payments are either received or made to the other countries for use of these services.3. Unilateral or Unrequited Transfers to and from abroad (One sided Transactions):Unilateral transfers include gifts, donations, personal remittances and other ‘one-way’ transactions. These refer to those receipts and payments, which take place without any service in return. Receipt of unilateral transfers from rest of the world is shown on the credit side and unilateral transfers to rest of the world on the debit side.4. Income receipts and payments to and from abroad:It includes INVESTMENT income in the form of interest, rent and profits.

Discussion

104.	A meaningful comparisonbetween two countries is possible on the basis of :
Answer» COMMON currency Common PRICE level Both (a) and (B) Any other Answer :C

Discussion

105.	Identify qualitative instrument to check money supply
Answer» CRR SLR open MARKET OPERATION MURAL SUASION ANSWER :d

Discussion

106.	What are the alternative definitions of money supply in india ?
Answer»

Discussion

107.	MPC is zero when:
Answer» `DELTAC lt DeltaY` `DeltaS = DeltaY` `DeltaS lt DeltaY` NONE of these Solution :when all of the additional INCOME is saved , then none is left for CONSUMPTION.

Discussion

108.	The following activity leads to human capital formation :
Answer» Walking Physical exercises Yoga Any ONE of the above Answer :D

Discussion

109.	Normal residents of India working in an American company in England add to :
Answer» Domestic product of India Domestic product of England National product of England None of these Solution :NORMAL residents of India working in an AMERICAN company in England add to :Domestic product of England because heworked in england .

Discussion

110.	Increase in per capita real income means increase in per capita availability of goods and services. Does it necessarily mean rise in the welfare of the people of the country ? Give any one argument in support of your answer and explain the same.
Answer» Solution :Increase in per capita availability of goods and services does raise the standard of LIVING and consequently welfare. But it may not necessarily always be so. For example, manufacturing ETC. does raise OUTPUT but at the same time also leads to water and air pollution which reduces welfare of the people. Such a REDUCTION in welfare may outweigh the increase in welfare and thus lead to overall reduction in werlfare.

Discussion

111.	The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are:
Answer» 1.normals GOODS 2.complements 3.substitutes 4.inferior goods Answer :C

Discussion

112.	Inwards foreign direct invesstment is useful because:
Answer» BRINGS in FOREIGN exchange Brings in MODERN technology Brings in MANAGEMENT EXPERTISE All the above. Answer :D

Discussion

113.	Industries producing goods, are a part of
Answer» PRIMARY sector Secondary sector Tertiary sector None of the above Answer :B

Discussion

114.	Components of govt. budget
Answer» REVENUE RECEIPT revenue EXPENDITURE CAPITAL receipt and expenditure all of these. Answer :D

Discussion

115.	If marginal product rises, average product must also rise.
Answer» Solution :True: Rising of marginal product IMPLIES that the total product increases at an INCREASING rate. This pulls up the average product ALSO.

Discussion

116.	What is the relationship between APC and APS ?
Answer» Solution :The SUM of APC and APSis EQUAL to one, i.e., APC + APS = 1.

Discussion

117.	Devaluation and depreciation of currnency are one the same thing
Answer» Solution : False. Devaluation is REDUCTION in value of domestic currency by the government under fixed exchange RATE system. One the other, HAND,depreciation is decrease in value of domestic currency due to market FORCES of demand and supply under flexible exchange rate system.

Discussion

118.	Which of the following is a characteristic feature of tax ?
Answer» PENALTY for breaking TRAFFIC rules Compulsory or LEGAL payment Payment for SPECIAL payment Direct payment for purchase of goods Answer :B

Discussion

119.	High powered money includes:
Answer» currency and demand deposits demand deposits and saving deposits currency held by PUBLIC and cash RESERVES with BANKS NONE of these Answer :C

Discussion

120.	Which one of the following options is not a characteristic of a perfectly competitive market?
Answer» Large NUMBER of firms in the industry Outputs of the firms are PERFECT substitutes for one another. Firms FACE downward-sloping demand curves. Resources are very mobile. Solution :Firms face downward-sloping demand curves.

Discussion

121.	State the impact of excess demand onproduction and employment.
Answer» Solution :Production and EMPLOYMENT remain UNCHANGED during excess demand as the economy is already OPERATING at the full employment level.

Discussion

122.	Define dear money policy.
Answer» Solution :It refers to a situation when credit is not easily AVAILABLE as there is HIGH rate of interest. People get discouraged to BORROW and SPEND, it controls inflation as AD falls.

Discussion

123.	Spot the revenue receipt :
Answer» Recovery of LOANS BORROWINGS External grants DISINVESTMENT Answer :C

Discussion

124.	Rural develoment implies :
Answer» Development of agriculture Spread of education AMONG the rural people Providing HEALTH FACILITIES in rural areas Everything that rises QUALITY of LIFE of rural people Answer :D

Discussion

125.	What is meant by full equallity employment?
Answer» Solution :FULL employment equilibrium REFERS to a SITUATION when aggregate DEMAND is equal to the aggregate supply at full employment level .

Discussion

126.	Under monopolistic competition there is only one seller of the product.
Answer» SOLUTION :FALSE: Under monopolistic competition, there are large NUMBER of buyers and ALSO large number of sellers.

Discussion

127.	GDP as index of welfare may understate or overstate welfare. Explain the statement using examples of a positive and a negative externality.
Answer» Solution :GDP doesn't account for externalities. Positive Externality : Example Saving commuting time DUE to construction of a fly- over, increases welfare, GDP as an index understates welfare. NEGATIVE Externality : Example: Pollution from factories, DECREASES welfare, GDP overates welfare.

Discussion

128.	What steps can be taken through the market to reduce consumption of product harmful to health ?
Answer» Solution :IMPOSE heavy taxes LIKE excise DUTY and customs duty on the product. Value - Problem SOLVING.

Discussion

129.	To correct the deflationary gap, money supply should be decreased.
Answer» Solution :FALSE. MONEY supply should be increased to raise the level of AGGREGATE DEMAND.

Discussion

130.	In an economy, the actual level of income is ₹ 500 crores whereas full employment of Y is ₹ 800 crore. MPC = 0.75. Calculate how much change in investment is required to achive full employment level in the economy.
Answer» SOLUTION :`""K= (1)/(1-MPC)= (100)/(25) = 4` `""K=4` `""K= (Delta Y)/(Delta I)` `""4= (800-500)/(Delta I)` `""Delta I = (300)/(4) = ₹ 75` crore `{:(,"(RS. in crores)"),("FULL employment level of Y","=800"),("Actual level of Y","=500"),("DESIRED increase in Y",barul"=Rs. 300"):}`

Discussion

131.	Two - sector economy consists of :
Answer» HOUSEHOLDS, FIRMS Firms, Foreign sector Households, Government Firms, Government Solution :A. Two - sector ECONOMY CONSISTS of Households, firms.

Discussion

132.	Give reasons for the following statements :(i) Demand for salt is highly inelastic.(ii) Consumer's expenditure on milk rises with an increase in the price of milk.(iii) A household's budget on entertainment make its elasticity equal to unity.
Answer» Solution :(i) Demand for SALT is highly inelastic because of the following two reasons : (a) Smaller proportion of total income is spent on the consumption of this commodity. (b) There are no substitutes AVAILABLE of this commodity which is otherwise a necessity. (ii) An increase in the price of milk will compel a househod to spend more money on milk since its consumption cannot be reduced significantly. (iii) Normally, EVERY househould has a fixed budget to spend on entertainment. It adjusts the quantity demanded to different PRICES. At different prices, total EXPENDITURE remains unchanged.

Discussion

133.	Differentiate between gross domestic product at market price and national income.
Answer» SOLUTION :

Discussion

134.	Which of the followingstatements is true ?
Answer» FISCAL deficit is the difference between total expenditure and total RECEIPTS . Primary deficit is the difference between total receipt and INTEREST payments . Fiscal deficit is the sum of primary deficit and interest payment. ANSWER :C

Discussion

135.	What is Repo Rate?
Answer» SOLUTION :Reporate istherate atwhichthe central banksof a countrylendsmoney to commercial BANKS in the event of any SHORTFALL of FUNDS.

Discussion

136.	The price of a commodity rises from 5rs per unit to 6rs per unit. Consequently, its supply increases by 20% . Comment on PES.
Answer» Solution :We have, PERCENTAGE change in price =`(DeltaP)/(P)XX100=(1)/(5)xx100=20%` PES `=("Percentage change in QUANTITY supplied")/("Percentage change in price")` `=(20%)/(20%)=1` PES `=1` [Unitary Elastic supply]

Discussion

137.	Classify the following as intermediate goods or final goods : Construction of houses by the consumer households.
Answer» SOLUTION :FINAL GOODS

Discussion

138.	The part of profits which is distributed among shareholders as per the ratio of their shareholding is called ______.
Answer» ANSWER :DIVIDEND

Discussion

139.	Recentlytherehas beena drasticfallin priceofcrudeoilin theinternationalmarket. Howfar it willadverselyaffectindia 'sexportofgoodsandservies? Whatvalue isviolatedif theovt. Doesnotreducethe priceofcrudeoilin thecontry?
Answer» SOLUTION :A drasticfall inpriceof curdeoil WITHNOT onlyimpactoilproducingeconimies, butalsoindianeconomyasfarindia's EXPORTS are concernedA . FALLIN thepriceofcrudeoilwouldlead to a drasticfall in thelevelof incomeofoilproducingconutrices towhichindia has beenexporting goodsandsevices As .a resultdemandfor importofforeigingoodsby theseconuntriceswillfallwhichwilladverselyaffectindia 'sexportof goodsandsevices . Valuesviolated-(i)SOCIALRESPONSIBILITY(ii)Fairdealings

Discussion

140.	What is monetary policy? State any three instruments of monetary policy.
Answer» SOLUTION :POLICY adopted by the Central Bank of an economy in the direction of credit control or money supply is known as Monetary Policy. Instruments of Monetary Policy are Bank Rate, Repo Rate, REVERSE Repo Rate, Cash Reserve Ratio. (Any THREE)

Discussion

141.	Foreign Investments are recorded In Capital account of BOP.
Answer» Solution :TRUE because they affect FOREIGN assets and foreign liabilities of a COUNTRY during a YEAR.

Discussion

142.	In an economy, investment expenditure is increased by 700 crore and MPC is 0.9. Calculate total increase in income and consumption expenditure
Answer» Solution :`K=(1)/(1-MPC)=(1)/(1-0.9)=(1)/(0.1)=(1)/(1//10)=10` Total INCREASE in income=Increase in investment`xxK` =`700xx10=7000crore` Total increase in consupmtion expenditure=0.9 of 7000 `=(9)/(10)=7000=6300crore`

Discussion

143.	What is ex-ante consumption ? Distinguish between autonomous consumption and induced consumption.
Answer» Solution :Ex-ante consumption REFERS to the consumption expenditure planned to be incurred during a peroid. Autonomous Consumption refers to the consumption expenditure which does not DEPEND upon the level of INCOME, i.e. the consumption at zero level of income. Whereas, Induced Consumption expenditure is DIRECTLY determined by the level of income.

Discussion

144.	Urban areas of India suffer most from :
Answer» OPEN unemployment Seasonal unemployment Disguised unemployed None of the above. Answer :A

Discussion

145.	How is currency issued in india ?
Answer» Solution :Currency in india is issued onthe basis of Minium Reserve SYSTEM .RBI has to maintain a minimum reserve of 200 crore in the form of GOLD and foregn securities .Out of this reserve,VALUE of gold must be 115 crore Currency issued by RBI is inconveritble i.e currency issued by RBI is not converitble into gold . All notes except one rupee notes are issued by RBI. One rupee note and all the COINS are issued by (minstry of finance) Govt of India .However, putting all currency notes and coins in to circualtion , is done by RBI.

Discussion

146.	Identify the missing item in the following expression : …………… = Fiscal Deficit - Interest Payments
Answer» REVENUE deficit PRIMARY Deficit Both (a) and (B) NEITHER (a) nor (b) Answer :B

Discussion

147.	Money supply includes demand deposits of the pople with the commerical banks.
Answer» Answer :True because the DEMAND DEPOSITS of the people with COMMERCIAL BANKS is one of the components of money SUPPLY.

Discussion

148.	Explain the "bankers' bank" function of the central bank.
Answer» Solution :Central BANK KEEPS the cash balances of commercial banks and issues loans to them on requirements, in the same manner as the commercial banks do for its customers. A Central Bank has almost the same RELATION with the other commercial banks of the country that the commercial banks have with the common public. That is why, the Central Bank is ALSO CALLED as bankers’ bank.

Discussion

149.	A doctor has a private clinic in New Delhi and his annual earnings are Rs. 10 lackh. If he works in a governmenthospital in New Delhi, his annual earning will be Rs. 8 lakh. What is the opportunity cost of having a clinic in New Delhi?
Answer» SOLUTION :The opportunity cost of opening a clinic in NEW Delhi is Rs. 8 LAKH, that he could have earned in the next best alternative USE, by WORKING in a government hospital in New Delhi.

Discussion

150.	Why are taxes received by government not capital receipts ?
Answer» SOLUTION :TAXES received by government are not capital receipts because they neither CREATE any liability nor cause a REDUCTION in the assets of the government .

Discussion

Explore topic-wise InterviewSolutions in .

Government of India has recently launched 'Jan -Dhan Yojna' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.

What are the instruments of monetary paolicy of RBI? How does RBI stabilise moneysupply against exogenous shocks?

Define Balance of Payments. Discuss briefly the components of current account.

A meaningful comparisonbetween two countries is possible on the basis of :

Identify qualitative instrument to check money supply

What are the alternative definitions of money supply in india ?

MPC is zero when:

The following activity leads to human capital formation :

Normal residents of India working in an American company in England add to :

Increase in per capita real income means increase in per capita availability of goods and services. Does it necessarily mean rise in the welfare of the people of the country ? Give any one argument in support of your answer and explain the same.

The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are:

Inwards foreign direct invesstment is useful because:

Industries producing goods, are a part of

Components of govt. budget

If marginal product rises, average product must also rise.

What is the relationship between APC and APS ?

Devaluation and depreciation of currnency are one the same thing

Which of the following is a characteristic feature of tax ?

High powered money includes:

Which one of the following options is not a characteristic of a perfectly competitive market?

State the impact of excess demand onproduction and employment.

Define dear money policy.

Spot the revenue receipt :

Rural develoment implies :

What is meant by full equallity employment?

Under monopolistic competition there is only one seller of the product.

GDP as index of welfare may understate or overstate welfare. Explain the statement using examples of a positive and a negative externality.

What steps can be taken through the market to reduce consumption of product harmful to health ?

To correct the deflationary gap, money supply should be decreased.

In an economy, the actual level of income is ₹ 500 crores whereas full employment of Y is ₹ 800 crore. MPC = 0.75. Calculate how much change in investment is required to achive full employment level in the economy.

Two - sector economy consists of :

Give reasons for the following statements :(i) Demand for salt is highly inelastic.(ii) Consumer's expenditure on milk rises with an increase in the price of milk.(iii) A household's budget on entertainment make its elasticity equal to unity.

Differentiate between gross domestic product at market price and national income.

Which of the followingstatements is true ?

What is Repo Rate?

The price of a commodity rises from 5rs per unit to 6rs per unit. Consequently, its supply increases by 20% . Comment on PES.

Classify the following as intermediate goods or final goods : Construction of houses by the consumer households.

The part of profits which is distributed among shareholders as per the ratio of their shareholding is called ______.

Recentlytherehas beena drasticfallin priceofcrudeoilin theinternationalmarket. Howfar it willadverselyaffectindia 'sexportofgoodsandservies? Whatvalue isviolatedif theovt. Doesnotreducethe priceofcrudeoilin thecontry?

What is monetary policy? State any three instruments of monetary policy.

Foreign Investments are recorded In Capital account of BOP.

In an economy, investment expenditure is increased by 700 crore and MPC is 0.9. Calculate total increase in income and consumption expenditure

What is ex-ante consumption ? Distinguish between autonomous consumption and induced consumption.

Urban areas of India suffer most from :

How is currency issued in india ?

Identify the missing item in the following expression : …………… = Fiscal Deficit - Interest Payments

Money supply includes demand deposits of the pople with the commerical banks.

Explain the "bankers' bank" function of the central bank.

A doctor has a private clinic in New Delhi and his annual earnings are Rs. 10 lackh. If he works in a governmenthospital in New Delhi, his annual earning will be Rs. 8 lakh. What is the opportunity cost of having a clinic in New Delhi?

Why are taxes received by government not capital receipts ?