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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.
| 3351. |
A consumer consumes only two goods X and Y. At a consumption level of these two goods , he finds that the ratio of marginal utility to price in case of X is higher than that in case. of X is higher than that in case of Y . Explain the reaction of consumer. |
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Answer» Solution :As, we know conditions for consumer equilibrium is , Necessary Condition Marginal UTILITY of last rupee spent on each commodity is same . SUPPOSE there are two commodities, X and Y respectively. So , for commodity X, the condition is, Marginal Utility of Money = Price of X Or `(" Marginal in Util Product in Util " [MU_x])/( "Marginal Utility of One Rupee " [MU_R])` = Price of X or `(MU_x)/(P_x) = MU_R "".....(1)` Similarly, for commodity Y , the condition is, `(MU_y)/P_y=MU_R ""....(2)` Putting EQUATION (2) in (1), we get `(MU_x)/(P_y)=(MU_y)/P_y` But as given in the question that the ratio of marginal utility to price in CASE of X is HIGHER than that in case of Y, i.e., `(MU_x)/P_x gt (MU_y)/P_y` It means marginal utility from the last rupee spent on commodity X is more than marginal utility from the last rupee spent on commodity Y. So, to attain the equilibrium consumer must increase the quantity of X, which decreases the `MU_x` and decreases the quantity of Y, which will increase the `MU_y` Increase in quantity of X and decrease in quantity of Y continue till `(MU_x)/P_x = (MU_y)/P_y` . |
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| 3352. |
Which of the following is a correct measure of primary deficit ? |
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Answer» fiscal DEFICIT minus revenue deficit |
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| 3353. |
Suppose a ban is imposed on consumption of liquor in the country. Examine its effects on (a) gross domestic product and (b) welfare. |
| Answer» SOLUTION :Following are the effectsofban on consumption ofliquor in the country1. Gross domestic product :If a ban is imposed on the consumption of liquor , gross domestic product will will be adversely affected ATLEASTIN short run . Alcohol industryis one of the BIGGEST industries. It would result in problem of unemployment and decline in tourism . The sale of liquor contributes to the economy through tax to the government2. Welfare-It a ban is imposed on consumption of liquor , welfare of the countrywould improve . A number of social PROBLEMS originate from the consumption pf liquor , there would be a decline in number of accidents ,RAPES and murders | |
| 3354. |
A consumer buys 20 units of a good at Rs. 10 per unit. The price elasticity of demand of this good is (-)1. Calculate quantity demanded by the consumer when price falls to Rs. 8 per unit. |
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Answer» <P> Solution :`{:("PED" =[-]1),("Initial Price (P) = 10Initial Quantity "(Q)=20),("New Price "(P_(1))=8 "New Quantity " (Q_(1))=?),(Delta P=[-]2 "" Delta Q=?):}``PED=(Delta Q)/(Delta P)xx(P)/(Q) "or" (-)1=(Delta Q)/((-)2)xx(10)/(20)` `Delta Q=4` As, Price is falling, than DEMAND must rise by `Delta Q`. So, New Quantity = Initial Quantity `+Delta Q=20+4+24` |
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| 3355. |
What is meant by margin requirement? |
| Answer» Solution :The difference between the MARKET value of SECURITY OFFERED and the value of amount LENT is called margin requirement. | |
| 3356. |
What is the meant by excess demand in Macroeconomics? |
| Answer» Solution :Excess DEMAND REFERS to the SITUATION when AGGREGATE demand is more than the aggregate supply CORRESPONDING to the full employment level in the economy. | |
| 3357. |
What is devaluation ? |
| Answer» SOLUTION : DEVALUATIONS issaid tooccur when the exchange RATE is INCREASED by the governmentunder fixedexchange rate SYSTEM | |
| 3358. |
Define barter exchange |
| Answer» SOLUTION :It REFERS to EXCHANGE of GOODS for goods (C-C ECONOMY) | |
| 3359. |
What is foreign exchange rate? |
| Answer» Solution :Foreign exchange rate refers to the rate at which the currency of one country is EXCHANGED with the currency of another country, for example, if RS 60 are to PAID to buy one US dollar, then the exchange rate between two CURRENCIES is `$1 = Rs 60.` | |
| 3360. |
Which of the following is an indirect tax ? |
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Answer» CORPORATION tax |
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| 3361. |
Define Fiscal deficit . |
| Answer» SOLUTION :Fiscal DEFICIT refers to the excess of TOTAL budgetary EXPENDITURE over total budgetary receipts excluding BORROWINGS . | |
| 3362. |
Following will be included in national income |
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Answer» EXPENDITURE on CONSTRUCTION of a house |
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| 3363. |
In case of Giffengoods, the demand curve will be : |
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Answer» HORIZONTAL. |
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| 3364. |
Value added is: |
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Answer» Sale PRICE MINUS pruchase price |
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| 3365. |
With a rise in real national income, welfare of the people: (Choose the correct alternative) |
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Answer» RISES |
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| 3366. |
Explain the meaning of deficit in a Balance of Payments account. ORHow is balance of payment 'deficit' measured? Explain. |
| Answer» Solution :DEFICIT in BOP account arises when total INFLOWS on account of autonomous TRANSACTIONS are LESS than total OUTFLOWS on account of such transactions. | |
| 3367. |
In an economy with every increase in income 15% of the increased income is saved. Suppose a fresh investment of600 crore takes place in the economy, calculate the following: (1) Change in income (ii) Change in consumption. |
| Answer» SOLUTION :4000 CRORE, 3400 crore | |
| 3368. |
Calculate the elasticity of demand by total expenditure method.{:("Price (Rs.)Total Expenditure (Rs.)"),("550"),("650"):} |
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Answer» SOLUTION :Demand is unitary elastic (ED = 1) as the total EXPENDITURE remains constant at Rs. 50 with an increase in price from Rs. 5 to Rs. 6. Demand is unitary elastic (ED = 1). |
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| 3369. |
Import of machines is recorded in current account. |
| Answer» Solution :True. All imports and EXPORTS of goods are recorded in TRADE account which is a PART of current account, because it is simply import/export of a good. | |
| 3370. |
In order to reducescreditin the country ,RBI may: |
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Answer» Buysecuritiesin THEOPEN MARKET |
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| 3371. |
Define operating Surplus. State its components. |
| Answer» Solution :Operating surplus refers to the sum of total of income from propertyand income from entrepreneurship.its components :RENT, ROYALTY, INTEREST , profit | |
| 3372. |
Explain how can governmentbudget be helpful in reducinginequalities in incomes. |
| Answer» Solution :Governmentcan achieve objective by imposinghigher RATE of tax on income of the rich and on GOODS and services CONSUMED by the rich. This will REDUCE disposableincome of the rich. Themoney so collected can be spent on poor byreducing tax on income and on providingsubsidizedor free goods and servicesto the poor. This will RAISE disposable incomeof the poor. In this way the extent of inequalitybetween rich and the poor can be reduced. | |
| 3373. |
A 5 per cent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand. |
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Answer» SOLUTION :Given, the initial quantity `Q_(1) = 300` New quantity `Q_(2) = 318` So, `DQ = 318 - 300 = 18` Now, percentage fall in price `= (Delta P)/(P)xx 100 = (-) 5%` We KNOW, `E_(d) = (-) ((Delta Q)/(Delta_(1)) xx 100)/((Delta P)/(P) xx 100) = (-) ((18)/(300) xx 100)/((-)5) = (-) (6)/((-) 5) = 1.2` Thus, price elasticity of demand is 1.2 |
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| 3374. |
Whether the followingchangesby theReserve Bankwill increasethe moneysupplyor decreasethe money supply ?(i) Rise In Repo rate. (ii) Purchase of SecurItIes In the open market (iii) RBI Increases the margin from 20% to 30% (iv)RBI reduces the Cash reserve ratio. |
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Answer» Rise in REPO rate . |
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| 3375. |
What is autonomous investment ? |
| Answer» Solution :INVESTMENT EXPENDITURE not influencedby the level of national INCOME is CALLED autonomous investment. | |
| 3376. |
In an economy, a 20 percent increase in investment results in a 100 percent increase in income. Calculate marginal propensity to consume. |
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Answer» SOLUTION :MULTIPLIER `= 1/(1-MPC)=100/20=1/(1-MPC)` `5=1/(1-MPC)` `5-5 MPC=1` `5 MPC=5-1=4` `MPC=4/5 =0.8` |
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| 3377. |
Demand curve of foreign exchange is _____ |
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Answer» downward SLOPING |
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| 3378. |
Inflationary gap exists when aggregate demand i sgreater tha aggregate supply. |
| Answer» SOLUTION :False, INFLATIONARY gap exists inflationary gap exists when AGGREGATE Demand is GREATER than Aggregate supply at FULL employment | |
| 3379. |
Under monopoly new firms can enter the industry to raise the supply. |
| Answer» Solution :FALSE: In MONOPOLY, no other firm can enter into industry because of BARRIER created by monopoly firm. | |
| 3380. |
New Agricultural Strategy was also knonw as : |
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Answer» White REVOLUTION |
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| 3381. |
Why autonomous investment is essential? |
| Answer» Solution : It is DONE by the government for social welfare or overall DEVELOPMENT of the country. During depression, level of demand is low and thus inducement to invest is also low. The ECONOMY suffers backwardness and stagnation as there is less flow of money. In such a situation, the government should make autonomous investment which is expected to give a boost to the economic system by breaking the VICIOUS CIRCLE of low demand, low investment and low level of income and employment. | |
| 3382. |
To economists, the main difference between short run and long run is that: |
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Answer» 1.In short RUN all inputs are FIXED, while in long run all inputs are variable. |
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| 3383. |
The demand for good rises by 20 percent as a result of all in its price. Its price elasticity of demand (-) 0.8. Calculate the precentage fall in price. |
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Answer» Solution :`E_(d) = ("Percentage Change in QUANTITY Demanded")/("Percentage Change in Price")` or `0.8 = (20)/("Percentage Change in Price")` or, Percentage Change in Price `= (20)/(0.8) = 25%` Thus, the percentage fall in the price 25% |
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| 3384. |
Given nominal income, how can we find real income ? Explain. |
| Answer» Solution :Nominal income is the income one gets in money terms and real income is the amount of GOODS and services a person can buy from the nominal income. Nominal income is calculated with CURRENT year price and real income is calculated with base year' price. Real income is calculated by DIVIDING nominal income by the price level. For example:If Real income is Rs.400 and Price Index is 105,Nominal Income will be Real Income = (Nominal Income,/Price Index of the Current Year) x 100400= (Nominal Income/105) x 100 nominal income= Rs.420 | |
| 3385. |
State and explain the steps to be taken in deriving saving curve from the given consumption curve. Use diagram |
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| 3386. |
Quantity supplied of a commodity increases by 50% when its price rises from 8rs per unit to 10rs per unit. Calculate elasticity of supply. |
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Answer» <P> SOLUTION : Percentage change in price `= (DELTAP)/(P)xx100=(2)/(8)xx100=25%` ES=`("Percentage Change in supply")/("Percentage Change in Price")=(50%)/(25%)=2` `ES=2` (Supply is elastic as `ES gt 1`) ES is ALWAYS positive due to direct relationship between price and quantity supplied. |
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| 3387. |
Define total utility . |
| Answer» SOLUTION :TOTAL utility is the sum of all the utilities DERIVED from consumption of all the UNITS of a particular commodity . | |
| 3388. |
Explain the circular flow of income. |
Answer» Solution :The Circular flow of income can be better understood with the HELP of following diagram: Income are generated in production units DUE to the joint efforts of factor owners from households. These incomes are distributed to the factor owners who in turn SPEND the income on purchasing goods and services produced in production units. This makes the circular flow of income COMPLETE. |
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| 3389. |
Market supply of a product is prefectly elastic.Suppoe its demand increases .Explain the likely effect on the price and output of a product. |
Answer» Solution :When market supply of a PRODUCT is perfectly elastic and its demand increases, then equilibrium price REMAINS CONSTANT and equilibrium quantity rises. (it) It can be explained with the help of given diagram. (iii)In the given diagram price is measured on vertical axis and quantity DEMANDED and supplied is measured on horizontal axis.Initially,the equilibrium price is OP and equilibrium quantity is OQ.But when "Supply BECOMES perfectly elastic and demand increases then, (a)Equalibrium price remains constant at OP, and (b)Equilibrium quantity rises OQ to `OQ_(1)` |
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| 3390. |
Under which one of the following forms of market structure does a firm have no control over the price of its product? |
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Answer» Monopoly |
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| 3391. |
Purchase of refrigerator by a restaurant is : |
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Answer» CONSUMPTION EXPENDITURE on DURABLE good |
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| 3392. |
Define utility . |
| Answer» Solution :UTILITY is the POWER or capacity of a commodity to satisfy human WANTS . | |
| 3393. |
Foreign exchange received on account of export of jute will be recorded in capital account. |
| Answer» SOLUTION :FALSE. It is a COMPONENT of CURRENT ACCOUNT. | |
| 3394. |
Primary deficit is equal to : |
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Answer» Fiscal Deficit LESS INTEREST Payments |
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| 3395. |
What is menat by money ? |
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| 3396. |
Deflationarygapcan becorrectedby increasingthe levelof AD. |
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Answer» |
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| 3397. |
Fiscal deficit is always greater than revenue deficit. |
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Answer» |
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| 3398. |
Define money |
| Answer» Solution :Money is any item or verifiable record that is GENERALLY accepted as payment for GOODS and SERVICES and repayment of debts, such as taxes, in a particular COUNTRY or socio-economic context. | |
| 3399. |
Why is recovery of loans treated as a capital receipt ? |
| Answer» Solution :RECOVERY of loans is TREATED as a capital receipt because it reduces ASSETS of the GOVERNMENT . | |
| 3400. |
How should the following be treated in estimating national income of a country ? Give reasons. Purchase of taxi by a taxi driver. |
| Answer» Solution :Yes, as taxi will be USED for providing SERVICES, THEREFORE, it is part of investment expenditure. | |