Download Highly Important Question National Income and

R.N Institute of Professional Studies
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Highly Important Question
National Income and Related Aggregates
1. Define macroeconomics.
2. Give two examples of macroeconomic studies.
3. Is the study of the problems of agricultural labour in India a macro economic study?
4. What is nominal gross domestic product?
5. Define flow variables.
6. What are stock variables?
7. Define ‘depreciation’.
8. Define ‘capital goods’.
9. Define ‘real’ gross domestic product.
10. Define consumption goods.
11. Explain the terms compensation of employees and its components. Giving reasons state whether
the following are treated an compensation of employees:
(i) Gift by employers
(ii)Bonus
12. Explain the distinction between ‘domestic product’ and ‘national product’ on the basis of concepts
of resident and domestic territory.
13. Distinguish between GNPmp and NDPfc.
14. Explain the circular flow of income.
15. Distinguish between intermediate products and final products. Give examples.
16.How will you treat the following while estimating domestic factor income of India? Give reasons
for your answer.
(i) Remittances from non-resident Indians to their families in India.
(ii) Rent paid by the embassy of japan in India to a resident Indian.
(iii) Profits earned by branches of foreign bank in India.
17. Explain how distribution of gross domestic product is its limitation as a measure of economic
welfare.
18. Distinguish between real and nominal gross domestic product.
19. Distinguish between stocks and flows. Give an example of each.
20. How will you treat the following while estimating national income of India?
(a) Dividend received by an Indian from his investment in shares of a foreign company.
(b) Money received by a family in India from relatives working abroad.
(c)Interest received on loan given to a friend for purchasing a car.
21. How will you treat the following while estimating national income of India? Give reasons for your
answer.
(i) Divided received by a foreigner from investment in shares of an Indian company.
(ii) Profits earned by a branch of an Indian bank in Canada.
(iii) Scholarship given to Indian students studying in India by a foreign company.
22. Distinguish between real gross domestic product and nominal gross domestic product. Can gross
domestic product be used as an index of welfare of the people? Give two reasons.
23. Giving Reasons classify the following into intermediate products and final products:
(i) Furniture purchased by a school.
(ii) Chalks, dusters, etc. purchased by a school.
24. Giving reasons classify the following into intermediate products and final products:
(i) Computers installed in an office.
(ii) Mobile sets purchased by a mobile dealer.
25. Giving reason identify whether the following are final expenditures or intermediate expenditure:
(i) Expenditure on maintenance of an office building.
(ii) Expenditure on improvement of a machine in a factory.
26. Explain how ‘non-monetary exchanges’ are a limitation in taking gross domestic product as an
index of welfare.
27. Giving reasons, explain the treatment assigned to the following while estimating national income:
(i) Social security contributions by employees.
(ii) Pension paid after retirement.
28. Giving reasons, explain the treatment assigned to the following while estimating national income:
(i) Expenditure on maintenance of building
(ii) Expenditure on adding a floor to the building.
29. Explain how ‘externalities’ are a limitation of taking gross domestic product as an index of welfare.
30. Giving reasons, explain the treatment assigned to the following while estimating national income:
(i) Payment of income tax by a firm
(ii) Festival gift to employees
31. Giving reasons, explain the treatment assigned to the following while estimating national income:
(i) Subsidy on the output produced
(ii) Contribution to provident fund by the employees
32. Giving reasons, explain the treatment assigned to the following while estimating national income:
(i) Contribution to provident fund by the employers
(ii) Free dress provided to nurses by the hospital
33. Giving reason explain how should the following be treated in estimating national income:
(i) Expenditure on fertilizer by a farmer.
(ii) Purchase of tractor by a farmer.
34. Giving reason explain how should the following be treated in estimating national income.
(i) Payment of bonus by a firm
the employer.
(ii) Payment of interest on a loan taken by an employee from
35. Giving reason explain how should the following be treated in estimating national income:
(i) Interest paid by banks on deposits by individuals.
(ii) National debt interest.
36. Giving reason, explain how the following should be treated while estimating national income:
(i) free medical facilities by the employer.
(ii)Contribution to provident fund by employees
37. How should the following be treated while estimating national income? Give reasons for your
answer.
(i) Festival gift from an employer
(ii) Rent free house from an employer
38. Giving reason, explain how the following should be treated while estimating national income:
(i) Payment of excise duty by a firm
(ii) Payment of interest by a firm
39. Describe the steps involved in the estimation of national income by value added method. State
any two precautions that must be taken while estimating national income by this method.
40. Explain the income method of estimating national income.
41. Explain the expenditure method of estimating national income.
42. Giving reasons explain how the following are treated while estimating national income:
(i) Payment of fees to a lawyer engaged by a firm.
(ii) Rent free house to an employee by an employer.
(iii) Purchases by foreign tourists.
43. Are the following a part of a country’s ‘net domestic product at market price’? Explain.
(i) Net indirect taxes
(ii) Net exports
(iii) Net factor income from abroad
(iv) Consumption of fixed capital
44. Giving reasons, explain how the following are treated in estimating national income:
(i) Wheat grown by a farmer but used entirely for family’s consumption.
(ii) Earning of the shareholders from the sale of shares.
(iii) Expenditure by government on providing free education
45. Giving reasons, explain how the following are treated in estimating national income:
(i) Purchase of a truck to carry goods by a production unit.
(ii) Payment of income tax by a production unit.
(iii) Services rendered by family members to each other.
Money and Banking
1. What is barter system?
2. What is meant by money?
3. Define commercial bank.
4. What is a Central Bank?
5. What is a bank rate?
6. State the components of money supply.
7. Define cash reserve ratio.
8. Define ‘Statutory Liquidity Ratio’.
9. Define Legal Reserve Ratio.
10. Define money supply.
11. Explain the components of Legal Reserve Ratio.
12. Explain the distinction between ‘Statutory liquidity ratio’ and ‘Legal reserve ratio’.
13. Explain the process of money creation by Commercial Banks.
14. Explain the meaning of cash reserve ratio and statutory liquidity ratio.
15. How does money overcome the main problem of exchange in the barter system? Explain.
16. Distinguish between a commercial bank and a Central Bank.
17. Explain any two drawbacks/problems of barter system. How does money help in removing these
drawbacks?
18. State the main functions of a Central Bank.
19. State the main functions of money.
20. How money can be defined?
21. State any three methods by which a Central Bank tries to control the quantity of credit.
Determination of Income and Employment
1.What is average propensity to save?
2. What is underemployment equilibrium?
3. What is deflationary gap?
4. What is inflationary gap?
5. What is deficient demand?
6. What is meant by aggregate demand?
7. What is meant by aggregate supply in Macroeconomics?
8. What is propensity to consume?
9. What is propensity to save?
10. What is meant by involuntary unemployment?
11. What is meant by full employment?
12. What can be the minimum value of investment multiplier?
13. Draw a diagram showing deflationary gap.
14. What is average propensity to consume?
15. What is marginal propensity to consume?
16. Define marginal propensity to save.
17. What is the relationship between marginal propensity to save and multiplier?
18.What does deflationary gap measure?
19. Give the meaning of ex-ante savings.
20. Give the meaning of deflationary gap.
21. Give the meaning of ex-ante investment.
22. What is ex-ante aggregate demand?
23. Give the meaning of inflationary gap.
24. Give the meaning of marginal propensity to save.
25. When is there the equilibrium level of national income?
26. Give the meaning of autonomous consumption.
27. What is meant by ex-ante investment?
28. Give meanings of (i) involuntary unemployment (ii) full employment and (iii) under employment
equilibrium
29. What is meant by investment multiplier? Explain the relationship between marginal propensity to
save and investment multiplier.
30. Explain the meanings of investment multiplier. What can be its minimum value and why?
31. Give meanings of (i) aggregate demand (ii) aggregate supply and (iii) excess demand.
32. What is the consumption function?
33. Explain with the help of a diagram the situation of excess demand in an economy. Explain any one
measure of correcting it.
34. Explain and graphically represent the concept of inflationary gap. Explain any one measure of
removing this gap.
35. Explain the concept of deflationary gap. Explain two measures by which a central bank can
attempt to reduce this gap.
36. State whether the following statements are true or false. Give reasons for your answer:
(a) When marginal propensity to consume is greater than marginal propensity to save, the value of
investment multiplier will be greater than 5.
(b) The value of marginal propensity to save can never be negative.
37. Giving reasons, State whether the following statements are true or false:
(i) Average propensity to save is always greater than zero.
(ii) Value of investment multiplier varies between zero and infinity.
38. Giving reasons, state whether the following statements are true or false:
(i) When marginal propensity to consume is zero, the value of investment multiplier will also be zero.
(ii) Value of average propensity to save can never be less than zero.
39. Giving reasons, state whether the following statements are true or false:
(i) There is an inverse relationship between the value of marginal propensity to save and investment
multiplier.
(ii) When the value of average propensity to save is negative, the value of marginal propensity to save
will also be negative.
40. State whether the following statements are true or false. Give reasons for your answer.
(i) When investment multiplier is 1, the value of marginal propensity to consume is zero.
(ii) The value of average propensity to save can never be greater than 1.
41. Explain the relationship between investment multiplier and marginal propensity to consume.
42. Explain the distinction between voluntary and involuntary unemployment.
43. Outline the steps taken in deriving saving curve from the consumption curve. Use diagram.
44. Outline the steps taken in deriving Consumption Curve from the Saving Curve. Use diagram.
45. Draw consumption curve and saving curve in a single diagram and mark the ‘break-even point’.
46. Explain the concept of ‘excess demand’ in macroeconomics. Also explain the role of ‘open market
operation’ in correcting it.
47. Explain the concept of ‘inflationary gap’. Also explain the role of ‘legal reserves’ in reducing it.
48. Explain the role of the following in correcting ‘deficient demand’ in an economy:
(i) Open market operations.
(ii) Bank rate.
49. Explain the role of the following in correcting the inflationary gap in an economy.
(i) Legal reserves
(ii) Bank rate
50. Explain the role of the following in correcting deficient demand in an economy:
(i) Government expenditure
(ii) Legal reserve
51. In an economy the equilibrium level of income is Rs 12,000crore. The ratio of marginal propensity
to consume and marginal propensity to save 3:1. Calculate the additional investment needed to reach
a new equilibrium level of income of Rs 20,000crore.
52. Explain determination of national income based on aggregate demand and aggregate supply. Use
diagram.
53. Explain with the help of a diagram and using ‘Saving = Investment’ approach the determination of
equilibrium output and income level in an economy. What happens when the economy is not in
equilibrium and saving exceeds investment?
54. Distinguish between inflationary gap and deflationary gap. Show deflationary gap on a diagram.
Can this gap exist at equilibrium level of income? Explain.
55. Explain the problem of ‘excess demand’ in an economy with the help of a diagram. Explain the role
of bank rate in correcting it.
56. What is ‘deficient demand’ in macroeconomics? Show it on a diagram. Explain the role of open
market operations in correcting it.
57. Explain the concept of underemployment equilibrium with the help of a diagram. Show on the
same diagram the additional investment expenditure required to each full employment equilibrium.
Government Budget and the Economy
1. What is a balanced government budget?
2. Define primary deficit in government budget.
3. Give two examples of non-tax revenue receipts.
4. What is a government budget?
5. Explain the term revenue expenditure of the government.
6. Explain the term capital expenditure of the government.
7. What is plan expenditure?
8. What is non-plan expenditure?
9. What is developmental expenditure in a government budget?
10. How is primary deficit calculated?
11. What is meant by revenue deficit?
12. Give two examples of direct tax.
13. Define a tax.
14. Define a ‘direct tax’.
15. Define indirect tax.
16. Distinguish between tax and non-tax revenue.
17. Distinguish between revenue receipts and capital receipts in a government budget. Give two
examples of each.
18. Define a government budget. State its three objectives.
19. Distinguish between direct and indirect tax. Give two examples of each.
20. Explain the terms ‘plan’ and ‘non-plan’ expenditure of government. Give two examples of each.
21. Explain the terms ‘development’ and ‘non-development’ expenditure of government. Give two
examples of each.
22. Explain the meaning and implications of fiscal deficit.
23. Distinguish between revenue expenditure and capital expenditure in a government budget. Give
two examples of each.
24. Explain the ‘redistribution of income’ objective of a government budget.
25. Explain the allocation function of a government budget.
26. Explain the two components of the government budget.
27. Distinguish between:
(i) Capital expenditure and Revenue expenditure
(ii) Fiscal deficit and Primary deficit
28. Giving reasons classify the following into direct and indirect tax:
(I) Wealth tax
(II) Value added tax
29. Explain the ‘economic stability’ objective of a government budget.
30. Explain ‘revenue deficit’ in a Government budget? What does it indicate?
31. Explain the concept of ‘fiscal deficit’ in a government budget. What does it indicate?
32. Explain the concept of ‘primary deficit’ in a government budget. What does it indicate?
Balance of Payments
1. Name the items included in balance of trade account.
2. List two items of the capital account of BOP account.
3. Define foreign exchange market.
4. What do you mean by Balance of Trade (BOT)?
5. Give meaning of equilibrium foreign exchange rate.
6. Define foreign exchange rate?
7. What is fixed rate?
8. What is meant by flexible exchange rate?
9. What is meant by Balance of Payments?
10. What does a deficit in balance of trade account indicate?
11. What is meant by foreign exchange rate?
12. Name two sources of supply of foreign exchange.
13. State two sources of supply of foreign exchange.
14. State two sources of demand of foreign exchange.
15. Give the meaning of foreign exchange rate.
16. Define foreign exchange rate.
17. What is foreign exchange?
18. What is balance of payments?
19. Give meaning of managed floating exchange rate.
20. What is a fixed exchange rate?
21. What is a flexible exchange rate?
22. Distinguish between visible trade and invisible trade in balance of payments. Give one example of
each.
23. “Balance of payments always balances”. Discuss.
24. When exchange rate of foreign currency falls, its demand rises. Explain, how.
25. Distinguish between current account and capital account of balance of payments account. State
two components of each.
26. Explain the main merits of fixed exchange rate.
27. Explain the main merits of flexible exchange rate.
28. Explain the relation between foreign exchange rate and supply of foreign exchange.
29. Explain how foreign exchange rate is determined in a foreign exchange market? Use diagram.
30. Distinguish between Balance of Trade and Balance of Payments on Current Account.
31. What is foreign exchange rate? Distinguish between fixed and flexible exchange rates.
32. Explain the main demerits of fixed exchange rate.
33. Explain the meaning of deficit in balance of payments.
34. Distinguish between devaluation and depreciation of domestic currency.
35. Distinguish between autonomous and accommodating transactions of balance of payments
account.
36. Giving two example, explain why there is a rise in demand for a foreign currency when its price
falls.
37. Explain the meaning of the managed flexible foreign exchange rate.
38. Distinguish between fixed and flexible foreign exchange rate.
39. Distinguish between balance of trade and balance on current account.
40. Distinguish between current account and capital account of balance of payments account.
41. State the components of capital account of balance of payments.
42. When price of a foreign currency rises, its demand falls. Explain why.
43. State the components of current account of Balance of Payments.
44. Which transactions determine the balance of trade? When is balance of trade in surplus?
45. When price of a foreign currency falls, the supply of that foreign currency also falls. Explain, why.
46. List the transactions of Current Account of the Balance of Payments Account.
47. Distinguish between balance of trade and balance on current account of balance of payments.
48. Distinguish between autonomous and accommodating transactions in the balance of payments.
49. Explain the distinction between autonomous and accommodating transactions in balance of
payments. Also explain the concept of balance of payments ‘deficit’ in this context.
50. Give the meaning of ‘foreign exchange’ and ‘foreign exchange rate’. Giving reason, explain the
relation between foreign exchange rate demand for foreign exchange.
51. Give two sources each of demand and supply of foreign exchange. Giving reason explain the
relation between foreign exchange rate and supply of foreign exchange.