3524 + Interview Questions in Economics in Class 12 Page 71 InterviewSolution

3501.	How Is depreciation of Indian rupee likely to affect Indian exports? Explain.
Answer» Solution :Depreciation of Indian rupee means FALL in the VALUE of rupee in terms of foreign CURRENCY (say US dollar). It makes Indian goods cheaper which encourages foreign countries to IMPORT more goods from INDIA. As a result, Indian exports will rise.

Discussion

3502.	Explain the concepts of Real GDP and Nominal GDP, using a suitable numerical example.
Answer» Solution :NOMINAL GDP: It is calculated considering the prices of the current year, hence it is also known are GDP at Current Prices. It is GENERALLY used to estimate the current GDP and is not used for calculating the growth RATE. It is generally higher than Real GDP.Nominal GDP = total investments + Government spending + Consumption + (exports â€“ imports)Real GDP: It is calculated using prices in a particular base year. In other words, it is the Nominal GDP ADJUSTED for inflation and is known as GDP at Constant Prices. Real GDP is used for calculating the growth rate.When price increases, and to normalize the effect of increased price Nominal GDP is converted into Real GDP. For this CONVERSION, GDP deflator is used.The GDP deflator is the average value of the prices of all goods and services that contribute to GDP.So, GDP deflator=Nominal GDP/Real GDP * 100Example: If nominal GDP =Rs10000Cr and real is 1000CrThen, GDP deflator=10000/1000 * 100= 1000Real GDP=10000/1000 *100= 1000Cr

Discussion

3503.	A change from Rs 60 =1$ to Rs 62 = 1$ indicates that Rs has ____
Answer» appreciated DEPRECIATED neither (i) nor (II) either (i) or (ii) ANSWER :B

Discussion

3504.	Identify the following as Normal Residents of India : Students from India going to Australia for higher studies.
Answer» SOLUTION :NORMAL RESIDENTS.

Discussion

3505.	An increase in price will result in an increase in total revenue if :
Answer» the percentage CHANGE in quantity DEMANDED is less than the percentage change in price. the percentage change in quantity demanded is greater than the percentage change in price. Demand is elastic. The consumer is OPERATING along a linear demand CURVE at a point at which the price is very HIGH and the quantity demanded is very low. Answer :a

Discussion

3506.	Explain the "medium of exchange" function of money.
Answer» Solution :The primary function of money is to act as a medium of exchange between two parties involved in a transaction. It avoids the practical problems of wastage of time and resources involved in the barter system of exchange and it improves the efficiency of the transaction. It promotes allocation efficiency in the trade and production of goods and services. In case of the barter system, the SALE and purchase of goods occurs at the same time. Their sale and purchase value also REMAINS equal at that point. A person can purchase or sell goods with cash without SELLING or purchasing any good at that point, after money came into existence. THUS, the act of purchase and sale has been separated. Thereby the medium of exchange facilitated sale and purchase very easily in terms of MONETARY value.

Discussion

3507.	According to recent media reports: 'USA has accused China of currency devaluation to promote its exports'. In the light of the given media report comment, how exports can be promoted through the Currency devaluation?
Answer» SOLUTION :USA has a point of argument as devaluation of a currency encourages exports of a country. As exports goods become cheaper in the international MARKET giving a competitive edge for the goods of domestic country (China). Devaluation of the value of domestic currency promotes the exports of the country and may adversely IMPACT the production and SALE of importing country (USA).

Discussion

3508.	If in an economy saving function is given by S = (-) 50 + 0.2 Y and Y = Rs 2,000 crore, consumption expenditure for the economy would be Rs 1,650 crore and the autonomous investment is Rs 350 crore and the marginal propensity to consume is 0.8. True or False? Justify your answer with proper calculations OR Distinguish between aggregate demand adn aggregate supply in macroeconomics
Answer»

Discussion

3509.	Direct purchases made abroad by resident households.
Answer» ANSWER :PRIVATE FINAL CONSUMPTION EXPENDITURE

Discussion

3510.	What is a government budget ?
Answer» Solution :Government budget is a detailed statement of the ESTIMATES OFGOVERNMENT receipts and government expenditure during a FINANCIAL YEAR.

Discussion

3511.	When total revenue is constant, average revenue will also be constant.
Answer» SOLUTION :FALSE : It is so because when total revenue is CONSTANT, AVERAGE revenue should be DIMINISHING as shown in the table given below.

Discussion

3512.	Diminishing returns occur:
Answer» 1.When UNITS of a variable INPUT are added to a fixed input and TOTAL product falls. 2.When units of a variable input are added to a fixed input and marginal product falls. 3.When the size of the plant is increased in the long run. 4.When the QUANTITY of the fixed input is increased and RETURNS to the variable input falls. Answer :b

Discussion

3513.	Explain the 'Bankers' Bank' functionn of central bank
Answer»

Discussion

3514.	Identify the following items as visible items or invisible items: (i) Export of computer software.(ii) Import of LCD screen from Malaysia.(iii)Banking service to NRI.(iv)Export of Tea to Thailand.(v) Consultancy services of TCS used by a foreign firm.
Answer» Solution :VISIBLE ITEMS:(ii), (iv); Invisible Items:(i),(III), (V).

Discussion

3515.	State any two factors affecting elasticity of supply.
Answer» Solution :(i) Nature of commodity (II) TIME PERIOD.

Discussion

3516.	Given that MPC=0.8 and investment at all levels of income is Rs 40, complete the following table.
Answer» ANSWER :Do it yourself

Discussion

3517.	Primary deficit in a government budget equals:
Answer» INTEREST PAYMENTS Interest payments LESS borrowings Borrowings less interest payments None of these Answer :C

Discussion

3518.	Name the items included in balance of trade account.
Answer» SOLUTION :(i) EXPORTS of visible items (GOODS); (II) Imports of visible items (goods).

Discussion

3519.	A consumer consumes only two goods. Explain the Conditions of the consumer's equilibrium with the help of Utility Analysis.
Answer» Solution :According to the two commodity consumer EQUILIBRIUM or law of Equimarginal utility , a consumer gets maximum satisfaction , when RATIOS of MU of two commodities and their respective prices are EQUAL. Conditions of Consumer.s Equilibrium in case of two commodities (i) Necessary Condition Necessary Condition Marginal utility of last RUPEE spend 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 Utility of a Product in Utile " [MU_x])/("Marginal Utility of One Rupee "[MU_R])` = Price of X Or `(MU_x)/P_x=MU_R""....(1)` Similarly , for commodityY , the condition is , `(MU_x)/(P_y)=MU_R""....(2)` Putting equation (2) in (1) , we get `(MU_x)/(P_x) = (MU_y)/(P_y)` (a) If, `(MU_x)/(P_x) gt (MU_y)/(P_y)` : It means, marginal utility from 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 decrease the `MU_x` and decrease the quantity of Y which will increase the `MU_y` . Increase in quantity of X and decrease in quantity of X and decrease in quantity of Y continue till `(MU_x)/P_x = (MU_y)/(P_y)` . (b) If, `(MU_x)/P_x lt (MU_x)/P_y` :It means , marginal utility from the last rupee spent on commodity X is less than marginal utility from the last rupee spent on commodity Y. So , to attain the equilibrium the consumer must decrease the quantity of X which will increase the `MU_x`and increase the quantity of Y , which will decrease the `MU_y`Decrease in quantity of X and increase in quantity of Y continues till`(MU_x)/(P_x) = (MU_y)/P_y` (ii) Sufficient Condition Expenditure on commodity X+ Expenditure on commodity Y = Money Income . In other words Marginal Utility falls as more units of a commodity are consumed. This condition must be satisfied to attain the necessary condition , i.e., `(MU_x)/(P_x)=(MU_y)/(P_y) `. If. MU does not falls as Consumption of a commodity increases, the consumer will spend all his income on one commodity, which is highly unrealistic.

Discussion

3520.	A policy initiatedby the indialn Government had an adverse inpacct on the value of of Rupee in relation to foreign exchange. What does this indicate ? Discuss this with the help at a numerical example. Aslo explain its effect on the exports and imports of the economy.
Answer» Solution :Adverse Impact on the value of Rupee in relation to FOREIGN Exchange is know asDepreciation of domestic CURRENCY Numerical EXAMPLE : Suppose earlier, `1$=Rs. 70. ` If after the policy, the exchange rate changes to `1$=Rs 75`, then it indicates that rupee has depreciated. Effect on Exports : Due to depreciation of domestic currency, more good can be purchased from India with same amount of foreign currency. It means exports from India increases as they will BECOME RELATIVELY cheaper. Effect on Import : It result in decreases in imports as foreign goods will become costlier now.

Discussion

3521.	Economic slowdown in some parts of the world has adversely affected demand for Indian exports. What will be its effect on the production Possibilities frontier of India? Explain.
Answer» SOLUTION :There will be no EFFECT on Production Possibility Frontier (PPF). It is because PPF shows only what a country can potentially produce, and not what it actually produces. Slowdown by reducing demand for exports may ultimately bring down OUTPUT. Assuming that the country.s actual production is somewhere on PPF, Slowdown may result in the country PRODUCING at a POINT somewhere below PPF as shown in the figure at point U. Value: Analytic

Discussion

3522.	Depreciation of domestic currency leads to rise in:
Answer» EXPORTS IMPORTS Both (a) and (B) NEITHER (a) nor (b) SOLUTION :N//A

Discussion

3523.	Why are LIC and UTI not termed as banks?
Answer» Solution :LIC and UTI are not banks as they do not accept checkable DEPOSITS (ALTHOUGH they ADVANCE LOANS).

Discussion

Explore topic-wise InterviewSolutions in .

How Is depreciation of Indian rupee likely to affect Indian exports? Explain.

Explain the concepts of Real GDP and Nominal GDP, using a suitable numerical example.

A change from Rs 60 =1$ to Rs 62 = 1$ indicates that Rs has ____

Identify the following as Normal Residents of India : Students from India going to Australia for higher studies.

An increase in price will result in an increase in total revenue if :

Explain the "medium of exchange" function of money.

According to recent media reports: 'USA has accused China of currency devaluation to promote its exports'. In the light of the given media report comment, how exports can be promoted through the Currency devaluation?

Direct purchases made abroad by resident households.

What is a government budget ?

When total revenue is constant, average revenue will also be constant.

Diminishing returns occur:

Explain the 'Bankers' Bank' functionn of central bank

Identify the following items as visible items or invisible items: (i) Export of computer software.(ii) Import of LCD screen from Malaysia.(iii)Banking service to NRI.(iv)Export of Tea to Thailand.(v) Consultancy services of TCS used by a foreign firm.

State any two factors affecting elasticity of supply.

Given that MPC=0.8 and investment at all levels of income is Rs 40, complete the following table.

Primary deficit in a government budget equals:

Name the items included in balance of trade account.

A consumer consumes only two goods. Explain the Conditions of the consumer's equilibrium with the help of Utility Analysis.

A policy initiatedby the indialn Government had an adverse inpacct on the value of of Rupee in relation to foreign exchange. What does this indicate ? Discuss this with the help at a numerical example. Aslo explain its effect on the exports and imports of the economy.

Economic slowdown in some parts of the world has adversely affected demand for Indian exports. What will be its effect on the production Possibilities frontier of India? Explain.

Depreciation of domestic currency leads to rise in:

Why are LIC and UTI not termed as banks?