QUESTIONS FOR SLOW LEARNERS 1. Define economics. Ans Economics is a subject matter that focus on rational management of scarce resourse in a manner such that our economic welfare is maximized. 2. Define micro economics. Ans Economic problems relating to individual economic units

3. Define macroeconomics. Ans : Economic problems relating to economy as a whole. 4. State reasons why does an economic problem arises. Ans : 1) Resources are scarce .2) Resources have alternative uses. 5. What is meant by production possibility curve? Ans : PPC show the different combination of two goods which can be produced with given technology and resources‟. 6. What does the slope of PPC shows? Ans : Slope of PPC shows marginal opportunity cost. 7. Give one reason for rightward shift in PPC. Ans : When resourses are increased. 8. Define opportunity cost. Ans : Value of the factor in its next best alternative use. 9. Define marginal opportunity cost or MRT. Ans : MOC is the rate at which output of GOOD-Y is to be sacrificed for every additional unit of GOOD-X. it refers to the slope of PPC. 10. Define Marginal utility. Ans. Utility from consumption of one additional unit of a copmmodityic. MUn = TUn – TUn-1

11. What is SC ? Ans. Acurve that shows various combinations of two goods that give a consumer equall level of satisfaction.

12.Why is IC convex to the origin? Ans. Due to diminishing MRS .

13.What is a budget line ?

Ans.A line that shows various combinations of two goods that a consumer can purchase from spending his entire income. 14. What is individual demand? Ans. Demand for a commodity by single consumer. 15. Give two causes of rightward shift in demand curve? Ans. Decrease in price of complementary goods. Increase in price of substitute goods. 16. What causes upward movement of demand/ Ans. Increase in price of commodity. 17 What is shape of demand curve in case of perfectly inelastic demand? Ans. Vertically straight line. 18 Write formula of measuring elasticity of demand . Ans. Ed = Q/p * P/Q. 19 Write two factor affecting elasticity &^ demand? Time Period , Availability & Substitutes. 20. What a production function/ Ans. Technology relationship between physical inputs and physical output. 21. Define marginal product? Ans. Output produced by one additional unit of input (L). 22. What is maginal cost? Ans. Cost of producing one additional unit of commodity. MCn = TVCn – TVCn – 1 Q.23 Define supply? Ans. Quantity supplied of a commodity at various price levels in a given period of time. Q.24 What is individual supply? Ans. Supply of a commodity by single firm.

Q.25 Define market supply? Ans. Sum of individual supplies. Q.26 What is the supply shape of supply curve? Ans.Upward sloping. Q.27 Whatcuased downward movement? Supply Ans.Decrease in price of commodity. Q.28 What is elasticity of supply? Ans.Ratio of percentage change in price. Q.29 Supply curve is upward sloping beging from X axis what is elasticity?supply Ans. Inelastic supply. Q.30. What cause in leftward shift in supply curve? Ans.Increase in taxes by gow, icrease in price outputs. Q. 31.Supply curve in upward sloping at 40. What is elasticity of supply. Ans.supply may be inelastic,elastic or curve elastic. Q. 32.Write two factor affecting elasticity of supply? Ans.Timeperiod,cost of production,nature good. Q.33. What do you mean by producer equilibrium? Ans.A situation where producer get max.profit. Q.35.What happens to equilibrium price of demand increase? Ans.equilibrium price increase Q.36.define perfect comprttion market. Ans.A marketwhaen there are large no. of buyer and seller homogeneous goods at the same price. Q.37 What is the shape of demand curve of perfect competition market? Ans. Horizontal straight line.

Q.38 In which market forms, firm and price taker? Ans. Perfectly competition market. Q.39 In which market firm in price maker? Ans. Monopoly market. Q.40. What is shape of demand curve is care of monopoly market? Ans. Downward sloping inelastic. Q.41. Why is demand curve is care of monopoly market inelastic? Ans. Due to non-availability substuite. Q.42. Why is demand curve under monopolistic competition market elastic? Ans. Due to availability of close substuite. Q.43. What is oligopoly market? Ans. A market which has a few seller. Q.44. What is shape of demand curve in cash of oligopoly market? Ans. Kinked demand curve. Q.45. What is cartel? Ans. A text agreement among a few firm. Q.46 Why is Ac curve U shaped? Ans. Due to increasing and diminishing returns. Q47 Define Marginal revenue. Ans. Revenue from role of one additional unit of a commodity. Q48 What is shape of MR curve in case of perfectly competitive market. Ans. Horizontal Straight line. Q.49 In which market AR= MR. Ans. Perfectly competitive market. 50. What is a production function

Ans. Production function is the relationship between physical input and physical output. 51. Define total product? Ans. It is sum total of output produced by all units of labour. TP=AP*L 52. Define marginal product? Ans. Marginal product is the change in total product as a result of a unit change in the input of a variable factor. MPorMPP=TPn -TPn-1 Questions of 3 and 4 marks 1. What are the three central problems of an economy? Why do they arise? Ans : 1) What to produce. 2) How to produce. 3) For whom to produce. These central problem arises because scarcity of resources. 2. Explain the problem „how to produce‟ with the help of example. Ans : How to produce refer to choice of technique of production. There are two types of technique of production: (i) labour intensive technique (ii) capital intensive technique. The choice between labour intensive and capital intensive becomes a problem because the producers need to minimize their cost and at the same time maximize their efficiency. 3. Why production possibility curve is concave? Ans : it is because of rising marginal opportunity cost that PPC must be concave to the origin. 4. What does a production possibility curve show? When will it shift to the right? Ans : it shows the different combination of two goods which can be produced with given technology and resources. It will shift to right when resources are increased. 5. Explain the problem „What to produce‟ with the help of example. Ans : this problem is related to (i) What goods and services are to be produced and (ii) in what kind of goods and services are to be produced.because of fact resources are limited every society must find an ans to these questions. 6. Explain the problem „For whom to produce‟ with the help of example. Ans : The problem relates to the distribution of output in the economy it has two aspects (i) Factoral distribution (ii) inter personal distribution. 7. Distinguish between a centrally planned economy and a market economy. Ans : (i) Centrally planned economy is one in which central problems are addressed by some central authority of the government. (ii) Marketeconomy is free economy in which central problems are solved by market forces of supply and demand . 8. Distinguish between microeconomics and microeconomics.

Ans : (i) microeconomics study economic variables at the level of an individual-an individual firm and individual household (ii) macroeconomics studies economic variables at the level of economy as wholeAD,AS,NY 9. Which factors lead to a shift of the PPC? Ans : shift in PPC because of resourses and technology. (i) shift in PPC because resourses are increased (ii) efficient technology is used. Q7. Explain the relationship between marginal product and total product?

3

Ans. (i) when MP increases, TP increases at increasing rate. (ii) When MP constant, TP increases at constant rate. (iii) when MP decreases, TP increases at diminishing rate. Q8. Complete the following table:

3

Units of labour

TP

1

40

2

80

3

110

4

130

5

140

6

140

7

130

AP

MP

Ans. Units of labour

TP

AP=TP/units of labour

MP=TPn-TPn1

1

40

40

40

2

80

40

40

3

110

36.66

30

4

130

32.5

20

5

140

28

10

6

140

23.33

0

7

130

18.57

-10

Q9. Identify different stages of production and state the related law?

4

Units of labour:

1

2

3

4

5

6

7

8

Units of output:

2

6

12

16

18

18

14

8

Ans. Units of labour

Q10.

Units of output

MP

1

2

2

2

6

4

3

12

6

4

16

4

5

18

2

6

18

0

7

14

-4

8

8

-6

stages phase/stage I : increasing returns

phase/stage II : diminishing returns

phase/stage III : negative returns

What are the causes of increasing returnsto a factor?

3

ANS. Causes of increasing returns to a factor : 1. Fuller utilization of the fixed factor : in the initial Stages fixed factor remains under utilized. Its fuller utilization cause for greater applicationof the variable factor. Hence initially additional units of the variable factor add more & more to total output . 2. Increased efficiency of the variable factor : Additional Application of the variable factor causes process based division of labour That raises efficiency of the factor. Accordingly MP of the factor tends to

Rise. Q11. What are the causes of decreasing returns to a factor? 3 Causes of decreasing return to a factor : Fixity of the factor: as more & more units the variable factor continue tobe combined with the fixed factor , the latter gets overutilized. Hence the diminishing returns. 2. Imperfect factor substitutability: factors of production are imperfect substitutes of each other. more & more of labour cannot be continuously used in place of additional capital.

TOPIC – NATIONAL INCOME AND RELATED AGGREGATES Q1. Difference between microeconomics and macroeconomics? Q2. Differentiate between thefollowing: (a) (b) (c) (d) (e) (f) (g)

Stock& flow Real flow & Monetary flow. Real stock &monetary stock. Gross investment & Net investment. Intermediate & final good. Nominal GDP & Real GDP. Injection & Leakage.

Q3. Define the following: (a) (b) (c) (d)

GNP MP (Gross national product at market price) NNP MP (Net national product at market price) GNP FC (Gross national product at factor cost) NNP FC (Net national product at factor cost

Q4. Income method    

Definition Formula Steps to be taken in income method Precautions Numerical

Q5. Expenditure method –

    

Definition Formula Steps to be taken in income method Precautions Numerical

Q6. Components of NDP FC or domestic factor income? Q7. Describe the circular flow of income in a two-sector economy? Q8. Distinguish between factor income and transfer payments. Give suitable examples. Q9. What is the problem of double counting? State which method is used to avoid this problem of double counting in the estimation of national income. Q10. Difference between domestic product and national product? Q11. Difference between Gross domestic product at market price and net national product at market price? Q12.Difference between Gross domestic product at market price and net national product at factor cost? Q13. Define the following (a) (b) (c) (d) (e) (f)

National income Domestic territory Depreciation or consumption of fixed capital Normal residents Net national disposable income Gross national disposable income

Q14. What is not included in GDP (Gross domestic product)?

UNIT – 6 Q1 what are the alternative definitions of money supply in India Ans-M1=currency with public+ demand deposits+ other deposits M2= m1+ deposits with post office saving bank account M4=M3 +Total deposit with post office.

Q No 2 Define the commercial bank? ANS: Commercial banks are the institutions that mayu short term loans to business and in the processes to creat money ?According to CULBERTSON . QNo 3. Explain the functions of a commercial bank? Ans: Two important functions of commercial are , 1. Accepting deposits . 2. Advancing loans. QN o 4. Define a central bank Ans : Central bank is a apex institution of a country that control and regulate the moneand financia system of a country. Q No 5 What are the function of central bank. Ans. 1. Issuing of notes. 2.Banker to the govt. 3. Bankers bank. 4. Lenders of last resort. 5. Control of credit.

UNIT – 7 Q1. Define consumption function. Ans. Consumption function or propensity to consume refers to the functional relationship between consumption and national income. Q2. What are Ex-ante savings? Ans. Ex-ante savings refers to the amount of savings which savers plan to save at different levels of income in the economy. Q3.what is saving function? Ans. Saving function refers to the functional relationship between savings and income. Q4. Define investment.

Ans. Investment refers to the expenditure incurred on creation of new capital assets. Q5. Define ex-ante investments. Ans. Ex-ante investment refer to the amount of investments which investors plan to invest at different levels of income in an economy. Q6. Define Ex- post savings. Ans. Ex-post savings refers to the actual savings in an economy during a year.

Relationships: (1)

APC+APS = 1

APC= C/Y,

APS=S/Y

APC+APS= C/Y+S/Y = =

C+S/Y

Y/Y = 1

(2) MPC+MPS = 1

MPC = ∆C/∆Y

MPS = ∆S/∆Y

MPC+MPS = ∆C/∆Y + ∆S/∆Y =

= ∆C+∆S/∆Y

∆Y/∆Y =

1

Q7. What is investment multiplier? Ans. Investment multiplier (K) is the ratio of increase in income (∆Y) due to an increase in investment(∆I) i.e,

K = ∆Y/∆I

Q8. What is meant by effective demand?

Ans. The level of aggregate demand required to achieve full employment equilibrium is called effective demand. Q9. What is Say‟s law of market? Ans. J.B.Say state that “ supply creates its own demand”. Q10. Define excess demand . Ans. Excess demand refers to the situation when aggregrate demand is in excess of aggregrate supply corresponding to full employment in the economy. Q11.what are the measures to correct excesss demand? Ans.measure to correct excess demand are : 1. Decrease in govt. spending. 2. Increase in government revenue. 3. Decrease in availability of credit. Q12. Define deficient demand. Ans. Deficient demand refer to a situation when AD B.R.(B.D.= Budget Deficit,B>E> = Budget Expenditure. B. R.= Budget Revenue b) Fiscal Deficit: It is the difference between the total expenditure of the government,the revenue receipts plus those capital receipts which finally accrue to the government. Formula: F.D. = B. E.-B. R. ( B.E.>B.R. other than borrowings) F.D.= Fiscal Deficit,B.E.= Budget Expenditure,B.R. = Budget receipts. c) Revenue Deficit: It is the excess of government revenue expenditures over revenue receipts. Formula: R. D.= R. E.-R.R., When R.E. > R.R.,R.D.= Revenue deficit, R.E.= Revenue Expenditure, R.R. =Revenue Receipts. d) Primary Deficit: It is the fiscal deficit minus interest payments Formula: P.D. = F.D.-I.P., P.D.= Primary Deficit ,F.D. = Fiscal Deficit, I.P.= Interest Payment.

UNIT – 9 Q1: What do you mean by foreign exchange market? Q2: What do you mean by disequilibrium in BOP? Q3: Why is foreign exchange demanded? Q4: What determines the flow of foreign exchange into the country? Q5: What is meant by appreciation of currencies? Q6: what is equilibrium rate of exchange? Q7: The balance of trade shows a deficit of Rs. 600 crore, the value of export is Rs. 1000 crore. What is value of import? Q8: Name three such items which are not included in Balance of trade? Q9: What are the components of Capital Account?

Q10: what is the difference between Balance of Payment and Balance of Trade?

ANSWERS Ans1: The foreign exchange market is the market where international currencies are traded for one another. Ans2: Disequilibrium in BOP is means either there is surplus or deficit in Balance of payment account. Ans3. Foreign exchange is demanded for the following purposes: a) Payment of international loans. b) Gifts and grants to rest of the world. c) Investment in rest of the world. Ans4: Following factors contribute to the flow of foreign exchange into the country: a) Purchase of domestic goods by the foreigners. b) Speculative purchase of foreign exchange. c) When foreign tourists come to India. Ans5: Appreciation of a currency occurs when its exchange value in relation to currencies of other country increases. Ans6: Equilibrium exchange rate occur when supply of and demand for foreign exchange are equal to each other. Ans7: Balance of trade=Exports of goods – imports of goods Imports of goods = Export of goods – BOP = 1000-(-600) =1600.

Ans8: Three items which are not included in BOT: a) Export and import of services such as shipping, insurance and banking.

b) Interest and dividend funds. c) Expenditure by the tourists. Ans9: Components of Capital Account: 1) Foreign investment: i)FDI (Foreign Direct Investment) ii) Portfolio investment 2) Loans/borrowing: i) Commercial borrowing ii) Borrowings as external assistance. Ans10: BoT is different from BoP. BoT records visible items only. BoP records both visible and invisible items, besides capital transfers.