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This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 3151. |
Whether the cotton textile industry is an example of micro or macroeconomics? |
| Answer» SOLUTION :MACROECONOMICS. | |
| 3152. |
What is meant by foreign exchange ? |
| Answer» Solution :Foreign exchange refers to all currencies other than th domestic CURRENCY of a GIVEN COUNTRY. For EXAMPL, US dollar is foreign exchange for INDIA. | |
| 3153. |
What is under employment equilibrium? |
| Answer» SOLUTION :Underemployment equilibrium refers to a SITUATION when aggregate demand is equal to the aggregate supply (i.e., AD=AS) at a level where the RESOURCES are not fully EMPLOYED. | |
| 3154. |
What is barter exchange ? |
| Answer» Solution :Barter EXCHANGE is the SYSTEM in which COMMODITIES are EXCHANGED for commodities . | |
| 3155. |
The following table gives total product schedule of labour. Find average product and marginal product schedules of labour. |
Answer» SOLUTION :
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| 3156. |
Commercial banks pay no role in the stock of money supply in the economy. |
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| 3157. |
Dfferentiate between current transfers and capital transfers. |
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Answer» Solution :Transfer RECEIPTS are of two types : `**""`Current TRANSFERS `**""`Capital transfers 1. Current transfers are made out of current income, whereas, capital transfers are made out of the accumulated WEALTH of the payer. 2. Current transfers are MEANT for consumption purposes, whereas, capital transfers are meant for capital fomation. Examples of current transfers : Old age pension, unemployment allowance etc. Examples of capital transfers : Investment grant, capital GAINS tax, compensation for war damages etc. |
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| 3158. |
What is the basis of classifying transactions into credit and debit items? Give two examples of each. |
| Answer» Solution :The basis in such cases is whether a transaction results in INFLOW of foreign exchange or OUTFLOW of foreign exchange. Any transaction which brings in foriegn exchange is recorded as a credit ITEM e.g. export of goods and foreign loan are credit items. On the contrary, any transaction that results in outflow of foreign exchange is recorded as DEBIT item. Examples are IMPORT of goods and services as well as capital repayment to abroad. | |
| 3159. |
Borrowing in government budget is: (choose the correct alternative) |
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Answer» Revenue DEFICIT |
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| 3160. |
Why are subsidies treated as revenue expenditure ? |
| Answer» Solution :SUBSIDIES are treated as REVENUE expenditure because they neither create any ASSET nor cause a reduction in any liability of the government . | |
| 3161. |
A consumer has Rs 40 and both goods X and Y are price at Rs 20 it and are available in integer units. (a) Given the bundles that this consumer can afford (b) give the bundles that cost exactly Rs 40. |
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Answer» SOLUTION :(a) Affordable bundles are , (0,0), (0,1),(0,2),(1,0),(1,1),(2,0) (B) Bundles that COST exactly Rs 40 are, (0,2),(1,1),(2,0) |
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| 3162. |
What are two alternatives ways of determing equilibrium level of income. How are these related? |
| Answer» Solution :Two ALTERNATIVE ways of DETERMINING equilibrium level of incomes are: (i) Aggregate Demand Aggregate SUPPLY Approach (AD-AS Approach) in which AD=AS (ii) SAVING INVESTMENT Approach (S-I Approach) in which S=I | |
| 3163. |
IIIustratewith thethe help of anhypothetical numericalexapmle the process of creditcreation |
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Answer» Solution :The money (or deposit or credit) CREATION by the commercial BANKS is determined by the amount of initialdeposit and the legalreserve ratio (LRR). Suppose the amount of initial depositis₹10,000 and LRR is 0.20. The bankswillkeep20% i.e ₹ 2,000 as reserve and lend the remaining ₹ 8,000 Those who borrow, will spend this money.‘lt is assumed that₹ 8,000 comes backtothe banks.This raises total deposits to ₹18,00. Banksagain KEEP 20% of ₹ 8,000, i.e, ₹ 1,600 as reserve and lend ₹ 6,400. This further raises the amount of deposits with the banks. in this way, deposits goon increasing @ 80% of the last deposit. The number of times, the total deposits will BECOME, is determined by the deposit or money multiplier: `"Money Multiplier"=(1)/(LR R)=(1)/(0.2)=5` The total deposits will be: `"initial deposit" xx "Money Multiplier" = 10,000 xx 5 = r 50,000`. |
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| 3164. |
Why is Production Possibilities Curve concave? Explain |
Answer» Solution : (i) PPC is concave because of increasing marginal opportunity cost (MOC). (ii) The behavior of the MOC is based on the assumption that all resources are not equally EFFICIENT in production of all goods. (iii) Rise in opportunity cost occurs when factors (rsources) which are specialized or more adopted for PRODUCTIONOF a PIECE of particular good (say, tanks), is TRANSFERRED to the production of another good (say, wheat) for which they are less productive orless specialized. (IV) Thus, transfer of resources from more productive to less productive uses indirectlymeans fall in their productivity, with the result more of such resources are needed to produce an additional unit of the other commodity. Thus marginal opportunity cost goes on increasing making the PP curve concave in shape. |
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| 3165. |
According to micro-macro parabox, saving is virtue at micro level but at macro level it leads to fall in income. How in your opinion this paradox may be proved wrong ? |
| Answer» Solution :It is right to SAY that savings at macro level will lead to fall in national investment, production, employment and income. This happens when savings REMAINS idle. However if we make efforts to make our savings ideal by investing them through proper PRODUCTIVE CHANNELS, savings will back to the circular flow of system causing rise in macro aggregates. | |
| 3166. |
Define revenue |
| Answer» Solution :Revenue of a firm refers to receipts from the sale of OUTPUT in a GIVEN PERIOD. | |
| 3167. |
Which one of the following statement is not a characteristic of monopolistic competition? |
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Answer» EASE of ENTRY into the industry. |
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| 3168. |
In a government budget , revenuedeficit is ₹ 50 , 000 crores and borrowings are ₹ 75 , 000 crores . The fiscal deficit will be : |
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Answer» ₹ 25 , 000 CRORES |
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| 3169. |
What are the two main components of the Balance of Payments account? |
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| 3170. |
Explain the components of the equation C=bar(C )+bY |
| Answer» Solution :Consumption function formulaC = cbar + b YdThe Keynesian consumption function expresses the level of consumer SPENDING depending on three factors.Yd = disposable INCOME (income after government intervention – e.g. benefits, and taxes)a or c BAR = AUTONOMOUS consumption (consumption when income is zero. (e.g. EVEN with no income, you may borrow to be able to buy food))b = marginal propensity to consume (the % of extra income that is spent). Also known as induced consumption. | |
| 3171. |
What determines the quantity of a good that the buyers demand for? |
| Answer» Solution : The quantity of a good that the buyers DEMAND for is DETERMINED by the price of the goods, INCOME, the PRICES of related goods, tastes, expectations, and the number of buyers. | |
| 3172. |
What is meant by visible items and invisible items in the Balance of Payments account? Give examples of invisible items. |
| Answer» SOLUTION :Visible items refer to items relating to trading in goods with other countries. For example export and import of goods (like machinery, tea, etc.) are called visible items because goods are visible items and can be verified by Custom officials. INVISIBLE items refer to items relating to trading of services with other countries and unilateral transfers. Export and import of services are called Invisible items because services are not SEEN crossing the border. All TYPES of services like services of shipping, banking, tourism, investment services and unilateral transfers are invisible items. | |
| 3173. |
Classify the following as intermediate goods or final goods : Purchase of sugar by a grocery shop. |
| Answer» SOLUTION :INTERMEDIATE GOODS | |
| 3174. |
Price of commodity A is 10rs per unit and total revenue at this price is 1600rs. When its price rises by 20 percent, total revenue increases by 800rs. Calculate its price elasticity of supply. |
Answer» SOLUTION :We have,  PES `=(DeltaQ)/(DELTAP)xx(P)/(Q)=(40)/(2)xx(10)/(160)=(400)/(320)=1.25` PES`=1.25` [More than unitary elastic supply or elastics supply] |
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| 3175. |
An excess of aggregate demand over aggregate supply always a situation of inflationary gap Defend or refute. |
| Answer» Solution :The given statement is refuted. Excess of aggregate DEMAND (AD) over aggregate supply (AS) will lead to inflationary gap only when Ad is more then AS corresponding to FULL employment LEVEL of OUTPUT if AD is more than AS before that level, then it will not lead to inflationary gap. | |
| 3176. |
Mention the primary functions of money |
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| 3178. |
Define cost. State the relation between marginal cost and average variable cost. OR Define revenue. State the relation between marginal revenue and average revenue. |
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Answer» Solution :Cost or cost of production refers to the expenditure incurred or payments made by a firm to various factors of production (such as, land, labour, capital and ENTREPRENEUR) and also non-factors of production (such as, raw materials, etc.) Relationship between AVC and MC (1) When AVC is falling, MC falls at a faster rate and stays below AVC CURVE. When AVC is rising, MC rises at a faster rate and remains above AVC curve. (3) When AVC is at minimum point (y), MC is equal to AVC. MC curve cuts AVC curve at its minimum point. (4) The minimum point of MC curve (x) will always lie left to the minimum point of AVC curve (y). (5) AVC and MC both are derived from TVC. `AVC=(TVC)/(Q)` `MC=(DeltaTVC)/(DeltaQ)=(DeltaTVC)/(DeltaQ)`  OR Revenue is the money income for a firm which it receives from the sale of goods produced. In other words, revenue refers to the sale proceeds or sales receipts. Relationship between MR and AR The relationship between AR and MR can be studied under two forms of market-under Perfect Competition market and under Imperfect Competition market. 1. Under perfect competition market : AR equals MR throughout all output levels. GRAPHICALLY, MR curve is a straight horizontal line parallel to the x-axis and coincides with the AR curve.  2. Under imperfect competition market : As output increases both AR and MR falls. However, AR remains greater than MR at all levels of output. Also, when AR curve becomes zero, then the MR curve is negative. Graphically, both AR curve and MR curve are downward sloping but the AR curve remains above the MR curve. 
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| 3179. |
Suppose your friend is indifferent to the bundles (5,6) and (6,6) . Are the preferences of your friend monotonic ? |
| Answer» SOLUTION :No , the preferences of my FRIEND are not MONOTONIC since bundle (6,6) should be MONOTONICALLY PREFERRED to bundle (5,6) | |
| 3180. |
A car purchased by a dealer of cars is : |
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Answer» CONSUMER good |
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| 3181. |
Excess money supply is necessary for economic development but it also creates inflationary situation. Suggest any two monetary measures to control inflationary situation. |
| Answer» SOLUTION :TWO monetary measures adopted by RBI are (i) INCREASE in CRR and (II) selling securitiesin the Open Market operation. When CRR rises , commercial banks have less money for lending. As a result, excess supply of money is curtailed. Similarly sale of government securities by RBI brings flow of money of RBI from commercial banks absorbing LIQUIDITY from the system. Thus, excess money supply is curtailed. | |
| 3182. |
How has introduction of money separated the acts of sale and purchase ? |
| Answer» Solution :Under barter system, it was difficult for the owner of a cow to exchange it for a BULLOCK cart as the act of sale and purchase (i.e, exchange ) were to happen at the same point of time . MONEY, as a medium of exchange, has solved ths problem as it has SEPARATED the acts of sale and purchase. How? The owner of cow can now simply shell his cow to the person who offers him the highest payment (price) for it an with this moneyhe can buy bullock cart from a person who offers him the best bargain. Money by itself has no utility but its use facilitates exchange. Thus, money has separated sale and purchase of a good ( and service) and reduced time and ENERGY spent in barter. | |
| 3183. |
Change in Government Spending is a part of : |
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Answer» Monestary Policy |
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| 3184. |
Define primary deposits. |
| Answer» Solution :Primary DEPOSITS are the initial CASH deposts by the PUBLIC with COMMERCIAL BANKS. | |
| 3185. |
Define CRR. |
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| 3186. |
Calculate Gross National disposable Income from the following data : |
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Answer» Solution :`GNDI=N NP_(FC)+NIT+"Net CURRENT transfers from REST of the world"+"Consumptio of FIXED CAPITAL"` `=3000+250+300+150= Rs 3700` CRORE |
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| 3187. |
Calculate Gross National Disposable Income from the following data : |
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Answer» SOLUTION :`GNDI=N NP_(FC)+NIT+"Current TRANSFERS from abroad"+"DEPRECIATION"` `=2000+250+(200)+100= RS 2550` crore |
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| 3188. |
What is voluntaruy unemployment? |
| Answer» Solution :VOLUNTARY unemployment REFERS to a situation when a PERSON is unemployed because he is not willing to work at the existing wage RATE . | |
| 3189. |
Explain 'paradlox of thrift'. |
| Answer» Solution :Paradox of THRIFT. If all the people of the economy increase the PROPORTION of savings (ie, if the MPS of the economy increases) the total value of savings in economy will not increase it will either decline or remain unchanged. It is because of fall in level of INCONE as people have STARTED saving more. This will cause leakage to the circular flow of income. As level of income falls, further saving will either decline or remain same. This is paradox of thrift. | |
| 3190. |
What is balance of payment (BOP) account? |
| Answer» Solution :It is a SYSTEMATIC record of all economic TRANSACTIONS between residents of a country and residents of other COUNTRIES during a GIVEN PERIOD. | |
| 3191. |
How will you treat the following while estimating domestic product of a country ? Give reasons for your answer: (a) Profits earned by branches of country's bank in other countries (b) Gittsgiven by an employer to his employees on independence day (c) Purchase of goods by foreign tourists |
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Answer» Solution :(a) PROFIT will not be included in domestic PRODUCT as it is not generated in the domestic territory of the country. (b) Gifts being TRANSFER payment will not be included in domestic product. (c) GOODS purchase by foreign tourists are produced in domestic territory. So will be included in domestic product. |
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| 3192. |
What are commerical banks ? |
| Answer» Solution :Commerical banks are the institutions which performm the functions of ACCEPTING deposits GRANTING LOANS and MAKING investments with the aim of making profits | |
| 3193. |
Foreign embassies in India are apart of India's :(Choose the correct alternative ) |
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Answer» Economic TERRITORY |
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| 3194. |
When price of a commodity falls by 20%, the quantity demanded of it increases by 80%. Find out its price elasticity of demand. |
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Answer» Solution :`{:("% Change in DEMAND = 80%% Change in Price "=-20%),("Elasticity of Demand (ED) = ?"):}` Price Elasticity of Demand (ED) `=("% Change in quantity DEMANDED")/("% Change in Price")` `=(80%)/(-20%)=-4` `ED=(-)4` (Demand is HIGHLY ELASTIC as `ED gt1`). |
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| 3195. |
Explain the meaning of diminishing marginal rate of substitution with the help of a numerical example. |
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Answer» Solution :MRS is the rate at which a consumer is WILLING to sacrifice ONE commodity for an extra unity of another commodity without AFFECTING his total satisfaction. In other words, of `x_1` for `x_2(MRS_(x_1x_2))`will be the quantity of `x_1` which will just compensate the consumer for the loss of Marginal unity of `x_2 . "MRS"_(x_1x_2)` can be expressed as the ratio between the change in commodity `x_2(Deltax_2)` and change in commodity `x_1(Deltax_1)` without affecting the consumer level of satisfaction. Therefore, `MRS_(x_1,x_2)` can be expressed as, `MRS_(x_1.x_2)=("UNITS of "x_2 " willing to sacrifice")/("Units of "x_1 "willing to gain")=(Deltax_2)/(Deltax_1)` `MRS_(x_1x_2)` can also be written as, `MRS_(x_1,x_2) = ("Marginal Utility of "x_1[MU_(x_1)])/("Marginal Utility of "x_2[MU_(x_2)])""..(1)` As we KNOW, Change in `MU_(x_1)=("Total Utility")/("Change in Commodity "x_1)=(DeltaTU)/(Deltax_1)""...(2)` `MU_(x_2)=("Total Utility")/("Change in "x_2)=(DeltaTU)/(Deltax_2)""...(3)` commodity `x_2` Putting (2) and (3) in (1), `MRS_(x_1.x_2)=(Deltax_1)/((DeltaTU)/(Deltax_2))=(Deltax_2)/(Deltax_1)` So, `MRS_(x_1.x_2)=(Deltax_2)/(Deltax_1)=(MU_(x_1))/(MU_(x_2))`  It can be seen from the above schedulethat the consumer substitute `X_1` for `X_2` but continues to get the same satisfaction. But for every increase of 1 unit of `X_1` , the consumer gives up lesser and lesser quantity of `X_2`. Therefore, this is called the law of diminishing marginal rate of substitution. |
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| 3196. |
In the Government of India's budget for the year 2013-14, the Finance Minister proposed to raise the excise duty on cigarettes. He also proposed to increase income tax on individual earning more than Rupees one crore per annum. Identify and explain the types of taxes proposed by the Finance Minister. Was the objective only to earn revenue for the government ? What possible welfare objectives could the government be considering ? |
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Answer» Solution :Income tax is a type of DIRECT tax whereas excise duty is a type of indirect tax. The object was not only to earn revenue. The income tax was PROPOSED to reduce the INEQUALITY in the COUNTRY and excise duty was imposed on cigarettes with a objective of reducing its demand as cigarette consumption is harmful for health. |
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| 3197. |
Which of the following is must for anything to be called money ? |
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Answer» MEASURE of DEFERRED payment |
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| 3198. |
Which of the following is included in domestic income ? |
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Answer» PROFITS |
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| 3199. |
Dividend is a component of |
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Answer» Compensation of employee |
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| 3200. |
Suppose the demand and supply curves of salt are given by: q^(D) = 1, 000 - P q^(s) = 700 + 2p (i) Find the equilibrium price and quantity. (ii) Now suppose that the price of an nput used to produce salt has increased so that the new supply curve is q^(s) = 400 +2p. How does the equilibrium price and quantity change? Does the change conform to your expectation? (iii)Suppose the government has imposed a tax of₹3 per unit on sale of salt. How does it affect the equilibrium price and quantity? |
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Answer» <P> Solution :(i)At EQUILIBRIUM , `q^(D) = q^(s)`It means , 1,000 - p = 700 + 2p p =₹ 100 Putting the value of equilibrium price in the equation of demand curve or supply curve, we get `q^(D)`1,000-100 =900 Equilibrium Price = ₹100, Equilibrium Quantity = 900 units (ii) When price of input increases, the new supply curve becomes `q^(s) ` =400+2p To calculate new equilibrium price and quantity, equating `q^(D) and q^(s)` 1,000- p = 400 + 2p p - ₹ 200 Putting the value of equilibrium price in the equation of demand curve or supply curve, we get: `q^(D)` = 1,000 -200 =800 Equilibrium Price = 200 = ₹ 200, Equilibrium Quantity = 800 units Thus, the equilibrium price increases and equilibrium quantity falls due to RISE in the price of inputs. (iii)When tax of ₹ 3 per unit of sale is imposed on the commodity, the new supply curve becomes `q^(s) ` = 700 + 2 (p - 3) `q^(s) ` = 700 + 2p - 6 `q^(s)`= 694 +2p To calculate new equilibrium price and quantity equating `q^(D) and q^(s)` 1,000 -p =694 + 2p p =₹102 Putting the value of equilibrium price in the equation of demand curve or supply curve, we get `q^(D)` =1,000 - 102 = 898 Equilibrium Price =₹ 102, Equilibrium Quantity = 898 units Thus, the equilibrium price increases and equilibrium quantity falls due to tax of₹ 3 per unit on sale of salt. |
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