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InterviewSolution
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.
| 3201. |
Define production boundary. |
| Answer» Solution :PRODUCTION boundary is the imaginary line around the production process. All goods and SERVICES which cross this line are CONSIDERED as final goods. Goods within the production boundary are treated as INTERMEDIATE goods which NEED value addition. | |
| 3202. |
Which of the following is an assumption of ProductionPossibility Frontier? |
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Answer» Resources are not FULLY employed. |
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| 3203. |
Explain 'health' as asource of human capital formation in India. |
| Answer» Solution :Expenditure incurredon providingmedicalfacilitiesto people is INVESTMENT inhealth and a SOURCE ofcapitalformation. Theexpenditureis an preventive,curativeand socia medicines. Preventive medicine isvaccines. Curative medicine is treatmentduring ILLNESS. Social medicine is expenditure on spreadinghealth consciousness among people. Good health induces people to work more REDUCE abstinence from work.This raises productivity of workers. | |
| 3204. |
There has been sustained deficit in balance of payments of a country. Suggest some measures which the country should consider. |
| Answer» Solution :The sustained deficit in BOP is not favourable for economy's growth. There should be encouragement to import SUBSTITUTION and export PROMOTION. Government should also put restrictions on imports. Measures should be strengthened to control inflation in the country. These measure will IMPLY increase in inflow and decrease in outflow of foreign exchange and thereby REDUCING the deficit. | |
| 3205. |
RepoRateis fixed by theCentral Bank,whereas, ReverseRepo Rate is fixedby theCommercialBanks. |
| Answer» SOLUTION :False: Both repo RATE and REVERSE repo rate are fixed by the CENTRAL Bank. | |
| 3206. |
Why are borrowing a capital receipt ? |
| Answer» SOLUTION : They CREATE a LIABILITY (in TERMS of REPAYMENT). | |
| 3207. |
What is meant by circular flow of income? Distinguish between Real Flow and Money Flow. |
| Answer» Solution :The circular flow of INCOME or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.Real flows include the factors of production, such as LABOR or land, that flow from INDIVIDUALS to companies, as well as the flow of goods and services from companies to individuals.Meanwhile, money flows occur when companies PAY wages in RETURN for labor or services provided by individuals, as well as when individuals spend money to obtain goods or services produced by companies. | |
| 3208. |
What is demand for foreign exchange for speculative activities? |
| Answer» SOLUTION :DEMAND for FOREIGN exchange for speculatives activities is, when PEOPLE want to specualte on the value of foreign currency, speculators demand foreign exchange at present to sell it in future at higher prices to earn speculative gain. | |
| 3209. |
What are factor incomes ? |
| Answer» SOLUTION :Factor incomes are incomes received by FACTORS of production for their contribution in the production process, e.g., RENT, WAGES etc. | |
| 3210. |
Fiscal deficit is that part of total government expenditure which is met by : |
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Answer» Impsoing more taxes |
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| 3211. |
The fiscal deficit gives the borrowing requirement of the government . Elucidate . |
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Answer» Solution :FISCAL deficit showsthe borrowing requirements of the government during the YEAR . Fiscal deficit = Total expenditure - (Revenue receipts + Non-debt creating capital receipts) It indicates that the total borrowing requirements of the government from all sources (from within country , ABROAD, RBI |
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| 3212. |
Classify the following as real flow or money flow A television set purchased by a consumer. |
| Answer» SOLUTION :REAL FLOW | |
| 3213. |
……………..(Choose the correctalternative) is a revenuereceiptof thegovernment . (a) Fundsrasised bythe governmentby issuingNational SavingCertificates Sale of 40%shareof a publicsector understakingto a privateenterpreise (c)Profitof LIC , a publicenterprise (d) Amountborrwed fromJapanfor constructionof BulletTrain. |
| Answer» SOLUTION :(C) PROFIT of LIC , a PUBLICENTERPRISE | |
| 3214. |
Categorise the following into direct tax or indirect tax Deposits by people in public provident fund and National saving certificates . |
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Answer» |
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| 3215. |
Calculate N NP_(mp) by production income and expenditure methods : {:(,,(Rs."crore")),((i),"Net exports",0),((ii),"Depreication",50),((iii), "Mixexd income of self emplyoed",345),((iv),"Closing stock of (a)Primary sector",15),(,""(b)"Secondary sector",10),((v),"Private final consumption expenditure",630),((vi),"Net domestic fixed capital formation",130),((vii),"Governmnet final consumption expenditure",85),((viii),"Operating surplus",130),((ix),"Openig stock of (a)Primary sector",5),(,""(b)"Secondary sector",5),((x),"Net factor income to abroad",0),((xi),"Sale of goods and services by all sectors",2395),((xiii),"ntermediate consumption of all sectors",1500),((xiv),"Comensation of employee",290):} |
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| 3217. |
What is meant by overdraft facility ? |
| Answer» Solution :Overdraft facility is a facility which allows the CUSTOMER to overdraw his current ACCOUNT up at an agreed limit for ashort period.This facility is provided to reliable customers and firms. The customers have to pay INTEREST to the bank on the amount overdrawn by them. | |
| 3218. |
Value of multiplier is 8. What is the value of MPS ? |
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Answer» |
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| 3219. |
Explain Banker to the Government function of the central bank |
| Answer» SOLUTION :The central bank works as a commercial bank for the government. Central bank provides all services and facilities to the government like ordinay banks provide services to public. Central bank manages all GOVERNEMENT departments UNDERTAKING and the funds of government. It provides loans to government when expenditure exceeds the revenue. This is called DEFICIT financing through borrowing from RBI. It manages public debt also. It also accepts the payment of taxes from the public on behalf of the government and MAKES payment for the cheques issued by government. | |
| 3220. |
Which economic system did China chose for economic development? |
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Answer» CAPITALIST system |
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| 3221. |
Deficit in balance of trade indicates deficit in balance of payments also. |
| Answer» SOLUTION :False. Balance of trade (BOT) is only a PART of balance of payments (BOP) and DEFICIT in BOT does not indicate the NATURE about balance in BOP. | |
| 3222. |
The aggregate demand in an economy is equal to aggreate supply. Can it be said that economysaid that economy has achieved full employment equilibrium ? |
| Answer» Solution :No, equality between aggregate demand (AD) and aggregate supply (AS) only indicates the equilibrium position of the ECONOMY. It is not necessary that this equality is ALWAYS achieved at FULL employment level. It means, equality between AD and AS can OCCUR at full employment level, underemployment level or over full employment level. | |
| 3223. |
Operating Surplus refers to : |
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Answer» INCOME from property |
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| 3224. |
If investment multiplier is 1, what will be the value of marginal propensity to consume? |
| Answer» Solution :We know that , k=1/1-MPC (where k is the INVESTMENT multiplier and MPC is the MARGINAL propensity to consume)So, if k=1, by PUTTING its value in the above equation we will MPC=0. | |
| 3225. |
Can AP rise when MP starts declining? |
| Answer» Solution :Yes, AP can RISE when MP starts declining. It can happen as long as FALLING MP is more than AP. However, when MP becomes equal to AP, further DECLINE in MP will also REDUCE AP. | |
| 3226. |
Giving reason comment on the shape of Production Possibilities Curve based on the following table :{:("Good X (units)","Good Y (units)"),(0,10),(1,9),(2,7),(3,4),(4,0):} |
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Answer» Solution :Based on the below schedule, we can say that PPC is concave to origin. This is because as the production increases, to produce each additional unit of Good X, more and more units of Good Y need to be sacrificed. In other words, the opportunity COST of producing one good in terms of another increases. `{:("Good X","Good Y","Opportunity"),("(units)","(units)","Cost"),(0,10,-),(1,9,1),(2,7,2),(3,4,3),(4,0,4):}` The following figure depicts the shape of PPC.  THUS, the shape of PPC is concave which can be attributed to the LAW of INCREASING opportunity cost. |
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| 3227. |
Explain how 'open market operations are helpful in controlling credit creation |
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| 3228. |
Should a current account deficit be a cause for alarm? Explain. |
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Answer» Solution :No, if DEFICIT in CURRENT ACCOUNT is offset by the capital account(autonomous transactions) otherwise, such deficit has to be met by the following, which is a cause for alarm, i) DEPLETING foreign EXCHANGE reserves. ii) Taking foreign loans. |
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| 3229. |
Selling cost is a nail in the coffin of consumer's sovereignty. How? |
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Answer» Solution :(i) Selling cost is the expenses which are incurred for promoting sales or INDUCING customers to buy a good of a particular brand. (II) Theoretically, a consumer is the king because whatever he desires/ demands is produced/supplied. (III) But in reality this is not so. ADVERTISEMENT and salesmanship bias his mind in favour of certain commodities which otherwise may not be good. |
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| 3230. |
Increases in money supply causes aggregate inflation. Comment. What can be done to reduce the level of money supply at our end? |
| Answer» SOLUTION :Increase in money supply causes aggregate demand to GO up as consumers TEND to SPEND more or aggregate expenditure goes up. If aggregate supply also increases proportionately, prices do not change, but if increase in aggregate demand is more than increase in aggregate supply it causes inflation. As rational households we should try to reduce money supply. We should avoid huge spending on festivals, weddings,Âarticles of distinction etc. We should also try to reduce money supply by USING public transport, encouragingÂcar pools etc (it will save our scarce resources.) | |
| 3231. |
Which one of the following is not an example of final goods ? |
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Answer» CHALK, DUSTERS, ETC. purchased by a SCHOOL |
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| 3232. |
Fiscal deficit can occur even if there is no Revenue Deficit ? Defend or Refute. |
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Answer» Solution :The given statement is DEFENDED. It is POSSIBLE in the FOLLOWING situations . (i) When revenue BUDGET is balanced and capital budget shows a DEFICIT (ii) When there is a surplus in the revenue budget but the deficit in capital budget is greater than this surplus. |
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| 3233. |
High rate of inflation in domestic economy causes 'deficit balance of trade'. |
| Answer» SOLUTION :True because high rate of inflation makes domestic GOODS costlier. This leads to increase in imports and decrease in EXPORTS making a DEFICIT BOT. | |
| 3234. |
What will be the impact of recently launched 'Clean India Mission' (Swachh Bharat Mission) on the Production possibilities curve of the economy and why? ORWhat will likely be the impact of large scale outflow of foreign capital on Production Possibilities curve of the economy and why? |
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Answer» <P> Solution :The 'Clean India Mission' (Swachh Bharat Mission) will lead to better waste-management technique. Consequent to this, there will be drastic reduction in the number of people falling ill. Both these factors will lead to better and efficient utilisation of existing resources of an economy. Accordingly, the economy will move higher and closer to initial PPC. This movement is being depicted in the below graph with the help of the arrow from point P. OR The large scale OUTFLOW of foreign capital will lead to a decrease in the availability of resources, thereby shifting the production Possibility Curve (PPC) parallelly to the left from AB to CD as shown in the following DIAGRAM. Hence, we can say that LEFTWARD shift of PPC results in fall in output and resources.  Impact of Large Scale Outflow on PPC |
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| 3235. |
AD curve is a : |
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Answer» HORIZONTAL straight line PARALLEL to the X-axis |
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| 3236. |
Explain the ' medium of exchange' function of money.How has it solved the related problem created by barter. |
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| 3237. |
Foregin exchange transactions dependent on other foregin exchange transactions are called: |
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Answer» CURRENT ACCOUNT transactions |
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| 3238. |
Which one out of the following is the best indicator of economic growth ? |
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Answer» INCREASE in GNP |
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| 3239. |
Define primary deficit. What is importance of primary deficit ? |
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Answer» Solution :Primary DEFICIT is the difference between FISCAL deficit and interest PAYMENT. Symbolically : Primary deficit = Fiscal deficit - interest payment SIMPLY put primary deficit indicates government borrowings on account of current year expenditure exceeding current year receipts of the government. Its importance is while fiscal deficit reflects BORROWING requirements of the government for financing expenditure inclusive of interest payment on accumulated debt, primary deficit shows borrowing requirements of the governments on account of current year expenditure exceeding current year receipts exclusive of interest payment on accumulated debt. |
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| 3240. |
Define marginalpropensity to consume. |
| Answer» SOLUTION :RATIO of additionalconsumptionexpenditure out of additionto INCOME is MPC. | |
| 3241. |
Explain the precautions that should be taken while estimating national income by expenditure method. |
| Answer» Solution :The various precautions to be taken while USING the Expenditure METHOD are:1. Expenditure on Intermediate GOODS will not be included in the national income as it is already included in the value of final expenditure. If it is included again, it will lead to double counting of expenditures.2. Transfer Payments are not included as such payments are not connected with any productive activity and there is no value addition.3. Purchase of second-hand goods will not be included as such expenditure has already been included when they were originally purchased. Such goods do not affect the current FLOW of goods and services. However, any commission or brokerage on such goods is included as it is a payment made for productive service.4. Purchase of financial ASSETS (shares, debentures, bonds etc.) will not be included as such transactions do not contribute to current flow of goods and services. These financial assets are mere paper claims and involve a change of title only. However, any commission or brokerage on such financial assets is included as it is a productive service.5. Expenditure on own account production (like production for self-consumption, imputed value of owner occupied houses, free services from general government and private non-profit making institutions serving households) will be included in the national income since these are productive services. | |
| 3242. |
From the following data about a government budget , find out (a) Revenue Deficit , (b) Fiscal Deficit and (c) Primary Deficit : |
| Answer» Solution :{(a)₹ 23 ARAB , (B) ₹ 32 arab , (C) ₹ 12 arab } | |
| 3243. |
Explain 'bank of issue' function of central bank. |
| Answer» Solution :The CENTRALBANK is the sole authorityfor the ISSUE of currencyin the COUNTRY . It promotes efficiencyin the financialsystem. FIRSTLY,because it leads to uniformity of the issue of currency. Secondly,because it gives CENTRAL bank direct control over money supply. | |
| 3244. |
A decrease in price will result in an increase in total revenue if : |
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Answer» the percentage change in QUANTITY demanded is less than the percentage change in PRICE. |
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| 3245. |
Define bank rate |
| Answer» Solution :Bank rate refers to the rate at which the CENTRAL bank LENDS MONEY to COMMERICAL banks. | |
| 3246. |
The rising portion of the SMC curve is the firm supply curve of competitive firm".Explain. |
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Answer» Solution :(i)The supply curve of the firm tell us the quantity of the product that a firm is willing and able to produce and sell at each possible price. (ii)The firm wil produce and supply an output at the point at which price is equal to Marginal cost.The derivation of the supply curve is explained with the help of the given figure.  (iii)The SMC of the firm is given.Let us initially assume that the market price is `OP_(1)`.The firm will produce and supply an output of `OX_(1)` because at `e_(1)` price=MC. (`OX_(1) is the equilibrium output supplied ,as MC=MR and MC cuts MR from below). Suppose the market price rises to `OP_(2)` ,then firm will produce and sell `OX_(2)` level ,because at `e_(2)` level price=MC=MR. (V)Similarly the market price increases to `OP_(3)`, quantity increases to `OX_(3)`.However ,the firm will not supply any quantity if the price FALLS below OP. (vi)At OP price ,the firm will produce and sell OX output ,For any price below OP the firm will not produce and sell anything.The supply will be zero units.Having the above information ,the supply SCHEDULE can be determined as. (VII) If the market price falls below the minimum of the SAVX ,the supply curve jumps to the small sehment (OP) on the vertical axis at which there is zero supply .Therefore,two discontinous [(OP)+(e.S)] pieces define the short run supply curve for the perfectly competitive firm. 
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| 3247. |
infiationarygapis measuredbydeficientdemand . |
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| 3248. |
What are the four factors of production and what are the remunerations to each of these called? |
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| 3249. |
In the following diagram, the gap EF is termed as: |
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Answer» INFLATIONARY GAP |
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| 3250. |
Explain any two functions of a central bank or state the main function of a central bank or Explain any one of the following functions of a central bank (i) Currency authority and , (ii) Lender of last resrt Explain Banker to the Governmenet function of the central Bank or Explain the issue of currency currency authority function of a central bank or How does a central Bank perform the function of contraoller of credit ? |
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