3524 + Interview Questions in Economics in Class 12 Page 63 InterviewSolution

3101.	The non-tax revenue in the following is _______:
Answer» EXPORT DUTY Import duty Dividend Excise Answer :C

Discussion

3102.	Choose the correct alternative in the following questions. Aggregate supply is same as :
Answer» NATIONAL output National income Both (a) and (B) NONE of the above Answer :C

Discussion

3103.	Ina government budget , primary deficit is ₹ 12 , 000 crores and interest payment is ₹ 7 , 000 crores . How much is the fiscal deficit ?
Answer» SOLUTION :PRIMARY Deficit = Fiscal Deficit - INTEREST Payment ₹12 , 000 crores =Fiscal Deficit- ₹7 , 000 crores Fiscal Deficit= ₹12 , 000 crores + ₹7000 crores = ₹19 , 000 crores .

Discussion

3104.	Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is Q=5L + 2K
Answer» SOLUTION :`Q=5L + 2K` (Given) `Q=5 XX 0+2 xx 10` `Q=0+ 20 =20` units. So, the maximum POSSIBLE output (Q) `=20` units.

Discussion

3105.	Suppose a consumer's preferences are monotonic . What can you say about her preference ranking over the bundles (10,10) ,(10,9),(9,9) .
Answer» Solution :If a CONSUMER has MONOTONIC preferences then, (i) BUNDLE (10,10) is monotonically preferred to bundle (10,9) and bundle (9,9) (ii) Bundle (10,9) is monotonically preferred to bundle (9,9).

Discussion

3106.	Economics territory of a country is also called :
Answer» GEOGRAPHICAL territory Political frontiers Domestic territory All the above Answer :C

Discussion

3107.	What is over full employment cquilibrium ?
Answer» Solution :Over full employment EQUILIBRIUM refers to a SITUATION when AD is EQUAL to AS beyond the full employment level.

Discussion

3108.	What is circular flow of income/product ?
Answer» Solution :Circular FLOW of income/product implies the flow of goods and SERVICES or the flow of money across DIFFERENT SECTORS of an economy. Each flow SHOWS interdependence among sectors.

Discussion

3109.	Classify the following as real flow or money flow Services provided by a teacher in a government school.
Answer» SOLUTION :REAL FLOW

Discussion

3110.	An increasein thestockof goodsheld bya consumerwill contribute to capitalformataion.Do youagreewiththe givenstatement ?
Answer» Solution :NO ,I do not agreewith the GIVENSTATEMENT any increasein thestockof goods held by a consumer doesnot CONTRIBUTE to CAPITAL to capitalformation as it isassumed thatsuchgoodsareconsumed the momenttheyare PURCHASED .

Discussion

3111.	Show with the help of Cardinal utility analysis ,That a buyer of a good or service will like to buy less of that good or service on government has put minimum price ceiling.'
Answer» Solution :(i)Due to minimum Price CEILING ,the market of the product is more than the equilbrium price. (ii)Assuming initially consumer is in equilibrium when: Marginal Utility of MONEY=Price……..(A) OR `("Marginal Utility of a product in utils" [MU_(x)])/("Marginal Utility of One RUPEE" [MU_(R)])=Price`......(B) In particular ,the condition (A) syas that the marginal utility of a product in terms of Money should be equal to its price. Something ,this is loosely stated as Marginal utility is equal to price, i.e., MU=Price. (iii)(a)With rise in price ,Now MU will be lesser the price. (B)If MU `GT` Price implies when BENEFIT is less than cost and whenever benefit is less than cost,consumer keeps on decreasing the additional unit of a commodity till MU=Price. (c)It is so because according to the law of diminishing marginal utility,MU rises as less units are consumed .As MU rises ,it is bound to become equal to the proce at some point of purchase.

Discussion

3112.	An economy is in equilibrium. From the following data about an economy investment expenditure. (i) Income=1000 (ii) Marginal propensity to consumption=0.9 (ii) Investment expenditure=100
Answer» SOLUTION :Y=C+I `Y=bar(C)+bY+I` `Y=bar(C)+bY+I` `10000=100+9000+I` I=10000-9100 I=900

Discussion

3113.	If MPC = 1, the value of multiplier is : (a) 0(b)1 (c ) between 0 and 1 (d) infinity
Answer» Solution :If MPC=1,then we KNOW that k=1/1-MPCwe obtain k=infinity by PUTTING THEVALUE of MPC

Discussion

3114.	What are the two essential conditions for .a financial institution to become a bank?
Answer» SOLUTION :(I) ACCEPTING DEPOSITS, (ii) ADVANCING of loans.

Discussion

3115.	What is tax ?
Answer» Solution :A TAX is a COMPULSORY payment imposed by the GOVERNMENT on public or FIRMS .

Discussion

3116.	What are measures of money supply ?
Answer» Solution :Measures of Money supply are `M_(1),M_(2),M_(3) and M_(4)` . (i) M1= currency and coin+ Demand deposits of commerical bank, (ii) `M_(2)=M_(1)`+ SAVING deposits with Post Office, Saving banks, (iii) `M_(3)=M_(1)+` Net time deposits with commerical banks and (IV) `M_(4) =M_(3)`+ total deposits with Post Office Saving ORGANISATION (excluding NSC ).

Discussion

3117.	What is transfer income ?
Answer» SOLUTION :It refers to the income received WITHOUT rendering any PRODUCTIVE service in EXCHANGE.

Discussion

3118.	State the components of current account of the Balance of Payments account.ORName the broad categories of transactions recorded in the 'current account' of the Balance of Payments Accounts.ORList the items of the current account of balance of payments account. Also define 'balance of trade'.
Answer» Solution :The Bureau of ECONOMIC ANALYSIS divides the current ACCOUNT into four components: trade, NET INCOME, direct transfers of capital, and asset income.

Discussion

3119.	whathappensto thedemandforcreditintheeconomywhen reporateis increased ?
Answer» SOLUTION : ByvaryingreporatecentralBankincrease/decreasesupplyof MONEY and availablityofcredit,How ?WhencentralBankreporatethisraiescostofborrowingwhichdiscourgescommmercialbankinborrowingfromcentralBank . COMMERCIALBANKS, ASA FOLLOW upactionraisetheirlendingrateofinterestto consumersandinvestorsdemand iscomparaticvelylesserevil asdeficientdemandcausesseriousconsequences .

Discussion

3120.	Are the following statements true or false ? Give reasons . In a closed economy , gross domestic product is always equal to gross national product .
Answer» Solution : It happens because net FACTOR INCOME from ABROAD is zero due to no interaction with the RESTOF the world.

Discussion

3121.	How is the exchange rate determined under a flexible exchnage rateregime ?
Answer» SOLUTION : DISCUSS "DETERMINATION of EXCHANGE RATE"

Discussion

3122.	Why must aggregate demand be equal to aggregate supply at the equilibrium level of income ? Explain
Answer» Solution :AD must be equal to AS, OTHERWISE changes will take place in the economy till AD equals AS,i.e., till the economy REACHES the equilibrium level. Suppose AD is greater than AS. This will lead to decline in the desired or PLANNED level of stocks with producers. To bring back the STOCK, or inventories, to the desired level, the producers will raise output, i.e., AS, till AD and AS are equal again. If AD is less than AS, the opposite will happen.

Discussion

3123.	Deficient demand leads to:
Answer» Deflation fall in output Fall in employment all of these Answer :D

Discussion

3124.	Explain mixed income of self-employed and give an example.
Answer» Solution :when total FACTOR payments can be estimated , but cannot be segregated into separate heads , then an ADDITIONAL factor payment , known as mixed income of SELF -employed.eg-this PROBLEM arises mainly in cash of self-employed PEOPLE like doctors, CAetc

Discussion

3125.	Currency is issued by the central bank yet we say theat commerical banks create money. Explain How is this money creatin by commerical banks likely to affect the national income ? Explain
Answer»

Discussion

3126.	If Marginal Rate of Substitution is increasing throughout , the Indifference curve will be :
Answer» Downward sloping CONVEX Downward sloping CONCAVE. Downward sloping STRAIGHT LINE. UPWARD sloping convex. Answer :b

Discussion

3127.	How many firms are there in a monopoly market?
Answer» SOLUTION :ONE FIRM.

Discussion

3128.	The quantity supplied of a piece of goods or service is the amount that
Answer» is actually BOUGHT during a given TIME period at a given price. producers WISH that they could sell that at a higher price. producers plan to sell during a given time period at a given price. people are WILLING a buy during a given time period at a given price. ANSWER :(c )

Discussion

3129.	Will the commission given to a broker for sale of an old house be included in national income ?
Answer» SOLUTION :Yes, it will be INCLUDED in national income as it is a PAYMENT for productive SERVICE RECEIVED.

Discussion

3130.	Define involuntary unemployment
Answer» Solution :INVOLUNTARY unempolyment refers to a situation in which all those PEOPLE, who are willing and ABLE to work at the existing wage rate do not get work.

Discussion

3131.	Classify the following as intermediate goods or final goods : Computers installed in an office.
Answer» SOLUTION :FINAL GOODS

Discussion

3132.	Suppose the price of pepsiincreases,we will expectthe demand curve of Coca-Cola to:
Answer» shift TOWARDS LEFT. shift towards right. initiallyshift towards left and thento right. remain at the same level. ANSWER :B

Discussion

3133.	The nominal GDP of a country for the year 2007-08 is Rs. 150 billion and price index 120. Final real GDP.
Answer» Solution :`"Real GDP"=("NOMINAL GDP")/("Price INDEX")XX100` `=(15)/(120)xx100="Rs. 125 billion"`

Discussion

3134.	Describe income method.
Answer» Solution :According to income METHOD, national income is measured in terms of payment made to the primary FACTORS of production. The main components of factor income are , COE, OS and MI Here, (a) Compensation of amployees (CoE) refers to the amount paid to the employees for rendering productive services, it is wages in cash and kind amployer's contribution to SSS. (B) Operating surplus (OS) is the sum total of income from property and income from entrepreneurship. Its components are : (i) Rent refers to the income earned for use of capital assets like land, BUILDINGS, machinery etc. (ii) Royalty refers to the income received for leasing the rights of mining and for granting the rights of using patents, copyrights and trandemarks. (iii) Interest refers to the amount received for lending capital for production purpose. (iv) Profit is the reward to the entrepreneur for his factor services in the production of goods and services. It is Dividend + Corporation TAX + Corporate savings (c) Mixed income (MI) refers to the income generated by own account workers and unincorporated enterprises who do not maintain books of accounts. `N NP_(FC)=COE+OS+MI+NFIA`

Discussion

3135.	Discuss the concept of Value Added Method.
Answer» SOLUTION :Value added refers to the addition of value to the RAW MATERIAL (intermediate goods) by a FIRM, by virtue of its productive ACTIVITIES. It is the contribution of an enterprise to the current flow of goods and services. It is calculated as the difference between value of output and value of intermediate consumption.

Discussion

3136.	Why is recovery of loan a capital receipt ?
Answer» SOLUTION :Because it LEADS to REDUCTION in the ASSET of the GOVERNMENT.

Discussion

3137.	Calculate GNP m : {:(,,(Rs."crore")),((i),"Mixed incomeof the self emplyoed", 800),((i),"Consumption of fiex capital",50),((ii),"Wages and salaries",700),((iv),"Copensation of employees from abroad",20),((v),"Rent on land ",20),((vi),"Royalty on sub-soil assets",30),((vii),"Interset paid by production units",150),((viii),"Inteset paid by consumes",100),((xi),"Profits",300),((x),"Social security contribnutation by emplyoes",100),((xi),"Propert and enterpreneurial incom form abroad.",(-)20),((xii),"Net indirect tazx.",200):} (1) Rent payment if notqulified whetherit is on land, subsoil assests or any other assest shoule be treated as rent on land only (2) Interest payment, if not qualified whether it is by production units or by consumer should be treated as interset paid by productin units only
Answer» ANSWER : RS. 2750 CRORE

Discussion

3138.	Are the following statements true or false ? Give reasons. Tax payments to the government do not provide any direct benefit to the tax payer.
Answer» SOLUTION :True . GOVERNMENT spends tax receipts for COMMON BENEFIT of the SOCIETY. Tax payer cannot expect that the tax amount will be used for his direct benefit.

Discussion

3139.	In case of excess supply, equilibrium price is greater than prevailing price.
Answer» Solution :False: When there is excess SUPPLY, equilibrium PRICE is LESS than PREVAILING price.

Discussion

3140.	Calculate national income from production, income and expenditure methods : {:(,,(Rs."crore")),((i),"Value of output by(a) Primary sector",100),(,""(b)"Secondary sector",500),(,""(c)"Tertiary sector",450),((ii),"Compensation of employees",245),((iii),"Net factor incomreto abroad",5),((iv),"Private final consumption expenditure",515), ((v),"Indermediate cost of (a) Primary sector",630),(,""(b)"Secondary sector",310),(,""(c)"Tertiary sector",265),((vi),"Operarting surplus",95),((vi),"Government final fconsumption expenditure ",75),((vii),"Net domestic fixed capital formation",90),((ix),"Net exports",(-)5),((x),"Net indirect tax",80),((xi),"Mixed income of slef emplyed",285),((xii),"Change in stocks",30):}
Answer» ANSWER : RS. 620 CRORE

Discussion

3141.	Define Investment multiplier. How is it related to marginal propensity to consume?
Answer» SOLUTION :Investment MULTIPLIER Is a measure of the effect of change in initial investment on change In final national income. There exist a DIRECT relation between MPO and multiplier, i.e. higher the value of MPC, higher will be investment multiplier. `K=1/(1-MPC)`

Discussion

3142.	Estimate the value of ex-ante AD, when autonomous investment and consumption expenditure (A) is Rs 50 crores, and MPS is 0.2 and level of income is Rs 300 crores.
Answer» SOLUTION :MPC=1-MPSMPC = 1-0.2MPC = 0.8 AD=C+1 AD=A+by AD= 50 + 0.8(300) AD = RS 290 CRORES

Discussion

3143.	What are the two alternative names of the balance of trade?
Answer» SOLUTION :ALTERNATIVE names of the BALANCE of Trade are: (i) Balance of visible trade; (ii)Trade balance.

Discussion

3144.	A country's Balance of payment on current account showed deficit. Should it be a cause for alarm for the country? Comment.
Answer» Solution :DEFICIT in current account of Balance of payments is unfavourable as it shows that outflow of foreign exchange is more than its inflow on account of goods, services and unilateral transfers. This deficit is financed by capital account surplus, it should not be cause for alarm for the country if it can be financed from NET capital inflow from ROW. However if capital account is in deficit itself then efforts should be TAKEN to offset the deficit (RBI may intervene to control the deficit).

Discussion

3145.	Direct taxes have limited reach as compared to the indirect taxes. Comment
Answer» SOLUTION :The GIVEN statement is CORRECT. It happens because direct TAXES do not reach all sections of the society, while indirect taxes have a wide COVERAGE as they reach all sections of the society.

Discussion

3146.	If a farmer grows rice and wheat, how will a decrease in the price of wheat affect the supply curve of rice ?
Answer» Solution :SUPPLY CURVE of rice will SHIFT to the RIGHT

Discussion

3147.	Primary deficit equals ________ :
Answer» Borrowings INTEREST PAYMENTS Borrowing LESS interest payments Borrowings and interest payments both ANSWER :C

Discussion

3148.	Disinvestment by government means :
Answer» SELLING of its fixed capital ASSETS Selling of SHARES of public enterprises held by it Selling of its BUILDINGS All the above Answer :B

Discussion

3149.	Give meaning of producer's equilibrium.
Answer» Solution :A producer is SAID to be in EQUILIBRIUM when he produces that level of output at which his PROFITS are maximum. Producer.s equilirium is also known as PROFIT maximisation situation.

Discussion

3150.	_______ is the reward of factor services received by a worker from his employer.
Answer» ANSWER :COMPENSATION of EMPLOYEES

Discussion

Explore topic-wise InterviewSolutions in .

The non-tax revenue in the following is _______:

Choose the correct alternative in the following questions. Aggregate supply is same as :

Ina government budget , primary deficit is ₹ 12 , 000 crores and interest payment is ₹ 7 , 000 crores . How much is the fiscal deficit ?

Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is Q=5L + 2K

Suppose a consumer's preferences are monotonic . What can you say about her preference ranking over the bundles (10,10) ,(10,9),(9,9) .

Economics territory of a country is also called :

What is over full employment cquilibrium ?

What is circular flow of income/product ?

Classify the following as real flow or money flow Services provided by a teacher in a government school.

An increasein thestockof goodsheld bya consumerwill contribute to capitalformataion.Do youagreewiththe givenstatement ?

Show with the help of Cardinal utility analysis ,That a buyer of a good or service will like to buy less of that good or service on government has put minimum price ceiling.'

An economy is in equilibrium. From the following data about an economy investment expenditure. (i) Income=1000 (ii) Marginal propensity to consumption=0.9 (ii) Investment expenditure=100

If MPC = 1, the value of multiplier is : (a) 0(b)1 (c ) between 0 and 1 (d) infinity

What are the two essential conditions for .a financial institution to become a bank?

What is tax ?

What are measures of money supply ?

What is transfer income ?

State the components of current account of the Balance of Payments account.ORName the broad categories of transactions recorded in the 'current account' of the Balance of Payments Accounts.ORList the items of the current account of balance of payments account. Also define 'balance of trade'.

whathappensto thedemandforcreditintheeconomywhen reporateis increased ?

Are the following statements true or false ? Give reasons . In a closed economy , gross domestic product is always equal to gross national product .

How is the exchange rate determined under a flexible exchnage rateregime ?

Why must aggregate demand be equal to aggregate supply at the equilibrium level of income ? Explain

Deficient demand leads to:

Explain mixed income of self-employed and give an example.

Currency is issued by the central bank yet we say theat commerical banks create money. Explain How is this money creatin by commerical banks likely to affect the national income ? Explain

If Marginal Rate of Substitution is increasing throughout , the Indifference curve will be :

How many firms are there in a monopoly market?

The quantity supplied of a piece of goods or service is the amount that

Will the commission given to a broker for sale of an old house be included in national income ?

Define involuntary unemployment

Classify the following as intermediate goods or final goods : Computers installed in an office.

Suppose the price of pepsiincreases,we will expectthe demand curve of Coca-Cola to:

The nominal GDP of a country for the year 2007-08 is Rs. 150 billion and price index 120. Final real GDP.

Describe income method.

Discuss the concept of Value Added Method.

Why is recovery of loan a capital receipt ?

Are the following statements true or false ? Give reasons. Tax payments to the government do not provide any direct benefit to the tax payer.

In case of excess supply, equilibrium price is greater than prevailing price.

Define Investment multiplier. How is it related to marginal propensity to consume?

Estimate the value of ex-ante AD, when autonomous investment and consumption expenditure (A) is Rs 50 crores, and MPS is 0.2 and level of income is Rs 300 crores.

What are the two alternative names of the balance of trade?

A country's Balance of payment on current account showed deficit. Should it be a cause for alarm for the country? Comment.

Direct taxes have limited reach as compared to the indirect taxes. Comment

If a farmer grows rice and wheat, how will a decrease in the price of wheat affect the supply curve of rice ?

Primary deficit equals ________ :

Disinvestment by government means :

Give meaning of producer's equilibrium.

_______ is the reward of factor services received by a worker from his employer.