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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.
| 3401. |
Which of the following is not an example of flow variable ? |
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Answer» Number of BIRTHS during a year |
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| 3402. |
The value of average propensity to save can never be greater than 1. |
| Answer» Solution :True. : Average propensity to save can NEVER be greater than 1 as SAVINGS can never be more than national INCOM. | |
| 3403. |
What is money supply? |
| Answer» SOLUTION :Money supply REFERS to TOTAL stock of money in the economy at a point of TIME | |
| 3404. |
State the assumptions on which a PP curve is based. Also explain its properties. Use diagrame |
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Answer» Solution :The concept of PP curve is based on the following assumptions: (i) First, the AMOUNT of resources in the ECONOMY is fixed. (ii) SECOND, the technology is given and UNCHANGED. (iii) THIRD, the resources are efficient and fully employed. |
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| 3405. |
The study of macroeconomics includes |
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Answer» THEORY of EMPLOYMENT |
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| 3406. |
Which of the following transactions is/are recorded in the current account of BOP? |
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Answer» IMPORT and export of goods and services |
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| 3407. |
Increase in foreign exchange rate leads to increase in supply of foreign exchange. |
| Answer» SOLUTION :TRUE because it LEADS to rise in exports and foreign INVESTMENT. | |
| 3408. |
What does balance of payment account of a country record? ORGive the meaning of balance of payments. |
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Answer» |
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| 3409. |
To check inflation, the central bank should reduce the cash reserve ratio. |
| Answer» SOLUTION :FALSE. The CENTRAL bank should increase the cash reserve ratio in order to check INFLATION. | |
| 3410. |
What change in total revenue will result in (i) a decrease in marginal revenue, and (ii) an increase in marginal revenue ? |
Answer» SOLUTION :(i) A DECREASE in MARGINAL revenue LEADS to total revenue increase at a diminshing rate. It can be explained with the help of following schedule :  (ii) An increase in marginal revenue leads to total revenue increase at an increasing rate. It can be explained with the help of following schedule : 
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| 3411. |
In an economyS= - 50+50Y is thesavingfunctionand investmentexpenditure is ₹ 7000. Calculate : (i)Equilibrium level of income (ii) Consumption expenditure at equilibrium level of national income. |
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Answer» Solution :(i) At EQUILIBRIUMLEVEL of INCOME : S =I, I = 7000 , S = -50 + 0.5 Y` `7000- = - 50 +0.5Y` 7050 =0.5Y Hence, `Y = *=(7050)/(5)xx 10₹ 14100` ₹ 14100 is equilibrium level of income. (iii) Consumption EXPENDITURE at equilibrium level of national income Y = C+ S, C = Y -S C = 14100-7000 (S=I =7000) C = ₹ 7100 Hence, Comnsumption expenditure at equilibrium level of national income is ₹ 7100. |
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| 3412. |
sumof MPS andMPCis Equal to 1. |
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Answer» |
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| 3413. |
Find (a) Fiscal Deficit and (b) Primary Deficit from the following : |
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Answer» Solution :REVENUE Deficit = Revenue EXPENDITURE - Revenue Receipts Revenue Deficit = ₹ 70 , 000 CRORES- ₹ 50 , 000 crores = ₹ 20 , 000 crores Interest Payments = `25 %`of Revenue Deficit = ₹ 20 , 000 crores `xx (25)/(100)` = ₹ 5 , 000 crores (a) Fiscal Deficit = Borrowings = ₹ 15 , 000 crores (b) Primary Deficit= Fiscal Deficit - Interest Payment Primary Deficit= ₹ 15 , 000 crores - 5 , 000 crores = ₹ 10 , 000 |
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| 3414. |
Intermediate consumption refers to the value of non-factor inputs which can be used over and over again. |
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Answer» |
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| 3415. |
What is the importance of monopoly? |
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Answer» Solution :(i) Patent RIGHTS encourage discovery and invention of new product and technique. (ii) Public monopolies (like railways, etc) protect the rights and INTEREST of the public and saves them from EXPLOITATION. |
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| 3416. |
Identify the following as Microeconomic study or Macreconomic study Price determination of gold jewellery. |
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Answer» |
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| 3417. |
When income of the consumer falls the impact on price-demand curve of an inferior good is : (Choose the correct alternative) |
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Answer» SHIFTS to the RIGHT |
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| 3418. |
The price of a commodity is 10rs per unit and its quantity supplied at this price is 500 units . If its price falls by 10 per cent and quantity supplied falls to 400 units, calculate its price elasticity of supply. |
Answer» SOLUTION : Percentage change in supply `=(DeltaQ)/(Q)xx100=(100)/(500)xx100=20%` ES`=("Percentage Change in supply")/("Percentage Change in Price")=(20%)/(10%)=2` `ES=2` (Supply is HIGHLY elastic as `ES gt 1`) ES is ALWAYS positive due to direct relationship between price and quantity supplied. |
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| 3419. |
The demand for a good at Rs. 10 per unit is 40 units. Price falls by Rs. 5. If price elasticity of demand is (-)3, calculate the new quantity demanded. |
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Answer» Solution :`{:("Original QUANTITY (Q) = 40 unitsOriginal PRICE (P) = Rs. 10"),("New Quantity "(Q_(1))=? " unitsFall in Price "(Delta P)=-Rs. 5),("Change in Quantity "(Delta Q)=? "New Price "(P_(1))=Rs. 5),("Elasticity of Demand (ED) = "-3):}` Price Elasticity of demand (ED) `=(Delta Q)/(Delta P)XX(P)/(Q)` `(-)3=(Delta Q)/((-)5)xx(10)/(40)i.e.,Delta Q= 60`units As price is decreasing, the quantity demanded will increase. It meas that New Quantity= Original Quantity (Q) + Change in Quantity `(Delta Q)` `=40+60=100` units New Quantity = 100 units. |
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| 3420. |
Explainhow did foreigntrade policyduring Britishrule in India cause drain on India's wealth. |
| Answer» Solution :EXPORTS have been greater than imports during the British rule due to tight controlof Britishrulers over INDIA's exports. Large export earnings were mainly used to FUND Britishadministrationin India and WARS foughtby the Britishers. Exports earnings were also used used forimports of invisibles like SERVICES and transfers to Britain.Allthisdrained India's wealthto Britain. | |
| 3421. |
Give two examples of explicit cost. |
| Answer» Solution :The TWO EXAMPLES are: (i) Wages to WORKER by a firm, and (II) rent to LANDLORD by a firm. | |
| 3422. |
Explain the conditions of a producer's equilibrium in terms of marginal cost and marginal revenue. Use diagram |
Answer» Solution :The conditions must hold if a profit maximizing firm produces positive output in a competitive MARKET when price is constant under MR/MC approach is determined where (i) MR = MC (ii) MC must be rising  According to Table, both the conditions of equilibrium are satisfied at 4 UNITS of output. MC is equal to MR and MC is rising. MC is more than MR when output is produced after 4 units of output. So, Producer.s Equilibrium will be achieved at 4 units of output. However, MR is equal to MC at 2 units of output also. But, second CONDITION is not fulfilled here. Let us understand the determination of equilibrium with the help of a diagram:  Producer.s Equilibrium is determined at OQ level of output corresponding to point E as at this point, MC = MR and MC curve cuts MR curve from below. In FIGURE, output is shown on the horizontal axis and revenue and costs on the vertical axis. Producer.s equilibrium will be determined at OQ level of output corresponding to point E because at this, the FOLLOWING two conditions are met: (i) MC=MR (ii) MC curve cuts the MR curve from below. When `MR gt MC`, then producer will continue to produce as long as MR becomes equal to MC. It is so because firm will find it profitable to raise the output level. When `MRgtMC`, then producer will cut down the production as long as MR becomes equal to MC. It is so because firm will find it unprofitable to produce an extra unit. So, it starts reducing the level of output till MR = MC. |
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| 3423. |
Define marginal revenue |
| Answer» SOLUTION :MARGINAL REVENUE (MR) is an ADDITION to the Total Revenue (TR) from selling an additional unit of output | |
| 3425. |
what is meant by equilibriumlevelinincome ? |
| Answer» SOLUTION : Equilibriumlevelof incomeis thatlevelof incomewhere`AD=ASorS=I`. | |
| 3426. |
At equillibrium level: |
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Answer» Consumption = investment |
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| 3427. |
Which of the following is a flow ? |
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Answer» DEPOSITS in a bank |
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| 3428. |
Categorise the following into revenue expenditure or capital expenditure Loans granted to Haryana state government by Government of India . |
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| 3429. |
Floating exchange rate is determined by : |
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Answer» MUTUAL CONSULTATIONS between countries |
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| 3430. |
State condition of consumer equilibrium in case of a single commodity . |
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Answer» Solution :(i) When purchasing a unit of a commodity a consumer compares its price with the expanted utility from the utility obtained is the benefit, and the pricepayable is the cost , the consumer compares benefit and the cost. He will by the unit of commodity only if the benefit is is greater than or at latest equal to the cost. (ii) Equilibrium conditions for single commodity consumer Equilibrium . (a) Necessary Condition Marginal utility of MONEY = price `""...(1)` Or `(" Marginal Utility of a Product in Util " [MU_x])/("Marginal Utility of One Rupe "[MU_R]) " = Price of X"....(2)` In particular, the condition (1) saya that themarginal utility of a product in terms of Money should be equal to its price. Sometimes this is loosely stated as Marginal Utility is equal to price, i.e. ., MU = price . `"*"`If MU `gt`price `IMPLIES` As a rational consumer he willContinue to purchase an additional unit on a commodity as long as MU = price . `implies` MU `gt`Price impulse benefit is greater than cost and when ever benefit is greater than cost the consumer keeps on consuming additional unit of a commodity till MU = price . `implies` It is so because according to the law of DIMINISHING marginal utility MU falls moreis purchased . As MU falls it is bound to become equal to the price at some point of purchase. `"*"` If MU `lt`Price `implies` As a rational consumer he will have to reduce the consumption of a commodity as long as MU = price . `implies MU lt`price implies when benefit is less than cost , never benefit is less than cost the dressing the additional unit of a commodity till MU = price. `implies` 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 price at some point of purchase . (b) Sufficient condition: Total gain falls as more is purchased after equilibrium . it means that consumer continues to purchase so long as total gain is increasing or at least constant. (iii) It can be explained with the help of the following SCHEDULE :  (a) Suppose , the price of commodity X in the market is Rs3 per unit .It means he has to pay Rs3 per unit for all the units he buys.Suppose, the unility obtained from the first unit is 5 utils(=Rs 5)The consumer will buy this unit because the utility of this unit is greater than the price and this process continues till Marginal utility = price as shown in the above schedule at quantity 3 . (b) Consumer will not buy the fourth unit utility of this unit is 2 unit because utility of this unit is 2 utils (= Rs 2)which is less than the price . It is not worth buying the fourth unit. The consumer will restrict his purchase to only 3 units. |
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| 3431. |
Why is the TVC an inverse S-shaped curve? |
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Answer» Solution :(i) The short run variable COST function (TVC) is derived from the short run production function(total Product). (II) There are two phases on which shape of total variable cost depends.   (a) In the first phase, TVC increase at a diminishing rate, i.e., every additional unit of output PRODUCED leads to lower cost of production. This is because of PROPER utilization of fixed factor by employing more units of variable factor, specialization and division of labour. (b) In the second phase, TVC increase at a increasing rate, i.e., every additional unit of output produced leads to HIGHER cost of production. This is because of non-optimal combination of variable factor with the fixed factor. |
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| 3432. |
How will you treat the following items in the calculation of Domestic Income and National Income of India ? Give reasons for your answer. (i) Profits earned by a branch of Foreign Company in India. (ii) Salaries of Indian employees working in Chinese Embassy in India. (iii) Retained Earnings of Foreign Companies from India. (iv) Salary of residents of Frnace working in Indian Embassy in France. (v) Profits of Tata Industries from its business in Australia. |
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Answer» SOLUTION :(i) It will be included in the DOMESTIC Income as profits are EARNED within the domestic territory of India. However, it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from abroad. (iii) It will be included in the Domestic Income as retained earnings have accrued within the domestic territory of India. However, it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from domestic income to get national income. (iv) It will be included in the Domestic Income as Indian EMBASSY is a part of domestic territory of India. However, it will not be included in the national income as it is a part of factor income paidabroad. It is subtracted from domestic income to get national income. (v) It will not be included in the Domestic Income as Tata Industries is located outside the domesticterritory of India. However, it will be included in the national in the national income as it is a part of factor income from abroad. |
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| 3433. |
A consumer spends Rs. 100 on a good at Rs. 4 per unit. When its price falls by 25 per cent, the consumer spends Rs. 75 on the good. Calculate price elasticity of demand by percentage method. |
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Answer» <P> Solution :`{:("Initial Price (P) = 4","Initial EXPENDITURE = 100","Initial Quantity (Q)"=(100)/(4)=25),("NEW Price "(P_(1))=,"New Expenditure = 75","New Quantity "(Q_(1))=("Exp.")/("Price")=(75)/(3)),(3[4-4xx(25)/(100)],,=25),(Delta P=(-)1,,Delta Q=0):}``PED=(Delta Q)/(Delta P)xx(P)/(Q)=(0)/((-)1)xx(4)/(25)=0` ED is perfectly inelastic as quantity demanded does not change at all in response to change in price. Thus, its demand CURVE will be vertical/parallel to y-axis. |
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| 3434. |
As a result of increase in price from 4 to 5, the quantity demanded decreases by 20%. Comment on PED. |
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Answer» Solution :`{:("Original Price (P) = 4","Percentage CHANGE in quantity demanded "=(-)20%),("New Price "(P_(1))=5,ED=?),(DELTA P=1,):}` Percentage change in price`=(Delta P)/(P)xx100=(1)/(4)xx100=25%` `PED=("Percentage change in Quantity demanded")/("Percentage change in Price ")` `=([-]20%)/(25%)=[-]0.8` NEGATIVE SIGN of ED indicates that inverse relationship between price and quantity demanded. PED = 0.8[Less than unitary elastic demand or inelastic demand]. |
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| 3435. |
How money can be defined ? |
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| 3436. |
Primary deficit is equal to |
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Answer» FISCAL DEFICIT LESS INTEREST Payment |
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| 3437. |
Define Budget Line. |
| Answer» Solution :Budget line is a graphical representation which shows all the POSSIBLE COMBINATIONS of the two goods that a consumer can BUY with the GIVEN INCOME and prices of commodities . | |
| 3438. |
When price of a good falls from Rs. 10 per unit to Rs. 9 per unit, its demand rises from 9 units to 10units. Compare expenditure on the good to find price elasticity of demand. |
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Answer» Solution :`{:("Price (Rs.)","Quantity (in units)","TOTAL Expenditure in Rs."("Price"xx"Quantity")),("10","9","90"),("9","10","90"):}` Demand is UNITARY elastic (ED = 1) as the total expenditure remains same at Rs. 90 with a DECREASE in the price from Rs. 10 to Rs. 9. Demand is unitary elastic (ED = 1). |
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| 3439. |
What is ex-ante consumption? Distinguish between autonomous consumption and induced consumption. |
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Answer» Solution :Ex-ante consumption refers to the consumption EXPENDITURE planned to be INCURRED during a period. 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. |
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| 3440. |
A company located in india receives a loan from a company located abroad. How is this transaction recorded in India's balance of payments account? (Choose the correct alternative) |
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| 3441. |
What will be the effect of foreign investments in India on exchange rate ? Explain |
| Answer» Solution :FOREIGN investment to SUPPLY of foreign exchange . DEMAND remaining UNCHANGED, it brings downward influence on the exchange rate. | |
| 3442. |
Are the following transactions entered on credit or debit side? Give reasons. (i) Exports (ii) Imports (iii) Borrowing from Row (iv) Lending to ROW. |
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Answer» Solution :(i) Exports are ENTERED on credit side because it BRINGS FOREIGN exchange. (ii) IMPORT is entered on debit side in BOP as it leads to outflow of foreign exchange. (iii) Borrowing from Row is a credit item since there is INFLOW of foreign exchange. (iv) Lending to ROW is a debit item since there is inflow of foreign exchange. |
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| 3443. |
What one step can be taken through market to reduce the consumption of product harmful for health ? |
| Answer» Solution :IMPOSING a HIGH tax will increase its cost and thus demand would fall DUE to rise in its price . | |
| 3444. |
Rashid plans to undertake some business venture. After sutudying the various alternatives, he decided to try his luck in retail business of good X. The first thing he needed was busineds premises, a shop. He chooses a location,a local shopping centre. He finds a shop which was availabe for both, outright purchases or for rent. The outright purchase price was Rs. 20m lakh. The monthly rent was Rs.10 thousand per month. Rashid decided to make the outright purchases. The next thing which he has to do was to arrange Rs. 20 lakh for outright purchase, plus some more finance to make the business operative. He needed another Rs. 5 lakh for the same. In all he neede Rs. 25 lakh.: On his owen he could arrange only Rs. 15 lakh. To make up to the short fall he borrows Rs. 10 lakh from the bank at 12 precent interest per annum. Rashid buys the shop for Rs. 20 lakh. He spends Rs. 2 lakh on fittings, furniture, etc. Before, starting the business he has first toget this shop registered with local muncipial corporation and is required to pay Rs. 1,000 every year as registration charges. In addition he has also to pay Rs 2,000 every year as property tax. The nauture of business was such that the most have a helping hand. He employs an assistant at a monthly salary of Rs. 5,000 per month. He has also ot incur an expenditure of Rs. 2,000per month electricity.He had not other expenses to incur. Having made all the arrangemetns he starts the business. When the business was just, three months old Rahsid fell seriously ill. The doctor advised him coplete rest for 3 months. Insteasd of supspendign the business he employs in his place, and paysRs. 10,000 per month for 3 months to do the work which he was doing. After 3 moths Rashid joins the business again and starts working. During the year he made Rs. 60 lalkh, worth of purchases of X from the wholesale market. At the end of the year he finds thathis totoal sale reciptes amounted to Rs. 80 Lakh. He has no stock unsold at the end of the yeat. The consumption of fixed capital is 10% From the following given above calculate NVA_(fc) by (a) production method and (b) income method. (Hints: First solve by production method) |
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| 3445. |
Giving reason explain how should the following be treated in estimation of national income : (i) Expenditure by a firm on payment of fees to a chartered accountant (ii) Payment of corporate tax by a firm (iii) Purchase of refrigerator by a firm for own use |
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Answer» SOLUTION :(a) The services of chartered accountant hired by the firm should not be included in the estimation of national income. This is because it FORMS a part of the firm's intermediate consumption. (b) Payment of corporate tax is not included in the national income as it is a more transfer payment from the firm to the government. It is a part of corporate profits which ALREADY form part of national income, therefore, it should not be separately included in national income (in ADDITION to corporate profits). (c ) PURCHASE of refrigerator by a firm for own use will be included in the national income as it is regarded as final consumption expenditure. |
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| 3446. |
Calculate NDP at FC by expenditure method and GDP at MP by income method. |
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Answer» =(i)+(XIII)+(ii)+{(v)-(vi)}+(viii)-(ix)-{(x)-(xi)} = 130+30+510+{50-60}+70-40-{90-10} = RS. 610 CRORES GDP at MP by Income method =(iii)+(VII)+(xii)+(ix)+{(x)-(xi)} =280+240+90+40+{90-10} = Rs. 730 crores |
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| 3447. |
Accommodating items of trade are undertaken in order to maintain the balance in the BOP account. |
| Answer» Solution :True. Accommodating transacting are COMPENSATING capital transactions which are undertaken to correct DISEQUILIBRIUM in AUTONOMOUS items of BOP. | |
| 3448. |
Currency is issued by central bank yet we say that commercial banks create money. Explain, How is this money creation by commercial banks likely to affect the nationalincome? |
| Answer» Solution :Money supply has two components namely CURRENCY HELD by the people and demand deposits with commercial banks.It is by creating additional demand deposits in the guise of ADVANCING loans with commercial bank are said to create money ( credit ) . When commercial banks LEND money to investors, they invest in productive acitivities leading to rise in national income through multipliereffect. | |
| 3449. |
What is meant by statutory liquidity ratio? |
| Answer» SOLUTION :Statutory Liquidity Ratio refers to the minimum percentage of time and demand DEPOSITS required to be KEPT by every commerical BANK with themseleves in the form of liquid ASSETS | |
| 3450. |
Calculate Marginal Propensity to Consume from the following |
| Answer» SOLUTION :MARGINAL PROPENSITY to Consume=0.8 | |