R.N.

INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51

Unit- 1 Introduction to Micro Economics 1. Define the following:Scarcity of resources, economizing of resources, economic problem, marginal opportunity cost, economy, 2. Why does an economic problem arises. Explain. 3. Explain central problems related with allocation of resources. 4. Define PPC. Why does it look concave to the origin. 5. Draw PPC, showing (a) Full employment of resources (b) Underemployment of resources (c) Growth of resources. 6. Why is PPC downward sloping? What does a point below this curve indicate. 7. Does production take place only on PPC. Explain. 8. Why is PPC called transformation curve. What does movement from one combination to other combination on PPC indicate? 9. Define resources. State two characteristics of resources which give rise to economic problem. 10. Mention the factors responsible for shift in PPC. Give 2 example of under utilization and growth of resources. 11. Can two PPC intersect each other? Unit: 2 Consumer Equilibrium and Demand 1. Define the followings Marginal utility of one rupee, Utility, Marginal utility, Total utility, Law of diminishing marginal utility, Budget set, Budget line, Indifference curve, Marginal rate of substitution, Indifference map, Demand function, Demand schedule and curve, Market demand, Market demand schedule and curve, Law of demand, Demand, indifference schedule, slope of indifference curve, monotonic preferences, slope of budget line. 2. State the relationship between MU and TU. Use diagram. 3. Starting from an initial situation of consumers equilibrium, suppose MU of rupees increases. Will it increase or decrease the quantity demanded of the product? 4. Ice cream sells for Rs.20. Mohini who likes ice cream, has already consumed 4. Her marginal utility of one rupee is 4. Should she consume more ice cream or stop the consumption? 5. Is law of diminishing marginal utility applicable in case of money. 6. How many units of a commodity a consumer will consume if the commodity is available at free of cost. 7. Which factors are responsible for shift in budget line. Show on diagrams in which budget line can change its position. 8. Distinguish between cardinal and ordinal utility. 9. Why is market rate of exchange constant throughout. 10. State the condition in which determinates of budget line change but budget line does not change. 11. State the properties of indifference curve. 12. Define consumer equilibrium. Explain its condition using utility approach assuming that consumer consumes (a) One commodity (b) Two commodity. 13. Define consumer equilibrium.Explain its conditions using indifference curve tech. 14. Distinguish between budget set and budget line.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 15. List the factors responsible for rightward and leftward shift in DD curve. 16. Explain factors affecting Ed. 17. State the assumption of consumer eq. using IC approach. 18. For a consumer to be in Eq., why must MRS be equal to the ratio of prices of the two goods. Use diagram. 19. How can market demand curve be derived from individual demand curve. 20. How does the following affect the demand of the commodity. (a) Price of related commodity. (b) Income of the consumer. 21. Why does law of demand operate. 22. Distinguish between. (a) Market demand schedule and individual demand schedule. (b) Movement and shift in demand curve. (c) Increase in quantity demand and increase in demand. (d) Contraction and decrease in demand. 23. Explain the following methods for calculate Ed. (a) Percentage method. (b) Expenditure or total outlay method. (c) Geometric or point method. 24. Define those degree of elasticity of demand which has the same elasticity on different point on the curve. 25. Why is unitary elastic demand curve a rectangular hyperbola. 26. Classify the following into elastic and inelastic demand. Give reason. Salt, Brand of lipstick, School uniform, Costly cloth, Highly expensive diamond, Brand of cold drinks, medicine, water, milk. 27. Why is budget line downward sloping. What does a point inside and on the budget line indicate. Unit- 3 Producer Behavior and Supply 1. Define the following Production function, Total product, Average product, Marginal product, Return to factor, Short sum cost, TR, AR, MR, Supply, Supply function, Supply schedule and curve, Market supply, Market supply schedule and curve, Explicit cost, Implicit cost, Cost in economy. 2. Explain the behaviour of output if only one factor input used in production of that commodity is variable and other are kept fixed. Use schedule and diagram. 3. Distinguish between law of diminishing return to a factor and law of variable proportion. 4. State the reasons behind increasing return to a factor and diminishing return to a factor. 5. State the relationship using diagram (a) MP and TP (b) MP and AP (c) MP, TP and AP (d) MR and TR (e) MR and AR (f) MR, TR and AR (g) MC and AC (h) MC and AVC 6. Distinguish between different types of economic cost.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 7. Why does the gap between ATC and AVC come closer to each other. Also state the reason why does the minimum point of AVC come earlier than the minimum point of AC. 8. Draw AC, AVC and MC on diagram. 9. Explain the different types of short run cost curves using diagram. 10. Show different degree of ES on diagram which has positive sloped SS curves. 11. AR is equal to price. Comment on it. 12. State the relationship using diagram between MR TR and AR if (a) Price remains constant (b) Price falls. 13. Explain any three factors affecting SS 14. Distinguish between (a) Change in quantity supplied and change in supply. (b) Expansion and increase in supply. (c) Contraction and decrease in supply. 15. Mention the factors responsible for leftward and rightward shift in SS curve. 16. Explain the following methods for calculation ES. (a) Percentage method (b) Geometric method 17. Define producer Eq. .Explain its condition. Using MC and MR approach. 18. Why is AFC curve rectangular hyperbola. 19. What causes a downward movement along a supply curve. Use diag. 20. Does TFC affects MC or not. Give reason. 21.What is the price elasticity of supply of a commodity whose straight line supply curve passes through the origin forming an angle of 750 ? 22. If a Farmer grows rice and Wheat, How will an increase in the price of Wheat effect the supply curve of (a) Rice (b) Wheat Use diagram 23. Giving reasons, state whether the following statements are true or false: (i) When there are diminishing returns to a factor, marginal product and total product both always diminish. (ii) As output is increased, the difference between average total cost and average variable cost falls and ultimately becomes zero. (iii) Average cost falls only when marginal cost falls. (iv) The difference between average total cost and average variable cost is constant. (v) When there are diminishing returns to a factor, total product always decreases. (vi) Total product will increase only when marginal product increases. (vii) Increase in total product always indicates that there are increasing returns to a factor. (viii) When there are diminishing returns to a factor, marginal and total product both always fall. (ix) When total revenue is maximum, marginal revenue is also maximum. (x) When marginal revenue is positive and constant, average and total revenue will both increase at constant rate? (xi) When marginal revenue is zero average revenue will be constant. (xii) Marginal revenue is always the price at which the last unit of a commodity is sold. 24. Can there be a positive level of output that a profit-maximising firm produces in a competitive market at which market price is not equal to marginal cost? Give an explanation. 25. Will a profit-maximising firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation. 26. Will a profit- maximizing firm in a competitive market produce a positive level of output in the short run if the market price is less than the minimum of AVC? Give an explanation.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 Unit- 4 Form of Market and Price Determination 1. Define Perfect Competition. Explain its features. 2. Define monopolistic Competition. Explain its features. 3. Define monopoly. Explain its features. 4. Define oligopoly. Explain its features. 5. Explain the shape of AR and MR in different Market situation 6. It at a given price there is an excess demand then how can price equilibrium be reached. 7. If at a given price there is excess supply then how can price equilibrium be reached 8. Any movement from the point where DD = would be unstable for price equilibrium. Justify the statement with diagram and schedule. 9 What will be the chain on equilibrium price and quantity if (a) Demand rises. (b) Supply falls (c) Demand and supply both falls in the same rate. (d) Demand rises, supply falls. (e) Demand rises, supply perfectly elastic. 10. Under what circumstances increase in demand will not make any affect on (a) Price Equilibrium (b) Equilibrium quantity Unit- 6 National income and related agreegates 1. Define the followings Macro economics, Circular flow of income, Value added, GNP, NDP, Private income, Personal income, Personal disposable income, GNP deflator. 2. Distinguish between (a) Consumer and capital goods. (b) Final and intermediate goods. (c) Stock and flow concept. (d) Gross and Net investment. (e) Factor income and transfer payment. (f) Real and nominal GDP (g) Domestic and national income. 3. Why is real GDP called real. 4. Define double counting by giving example. How can it be avoided. 5. Social welfare may not increase even when real GDP increases. Explain. Use the reasons. 6. Explain circular flow of income. 7. Give an outline for calculating NY by different method. 8. State the precautions for calculating NY by different method. 9. Under what circumstances (a) NNPMP < NDPMP (b) NNPMP < NDPFC (c) Volume of output = Value added (d) Gross domestic fixed capital formation exceed gross domestic capital formation. 10. How will the following be treated in the estimation to National Income. Give reason. 1) Pocket money. 2) Donation to temple. 3) Help given to flood victim.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 4) Food given to beggar. 5) Purchases of clothes to help the earthquake victim. 6) Expenditure on feeding the beggar. 7) Water taken from river. 8) Wood purchased from shop. 9) Wealth tax. 10) Custom duty. 11) Death duty. 12) Exp. Made by foreign tourist in India. 13) Consultancy fees charge by Indian doctor from foreigner. 14) Lunch taken by Russian in Restaurant situated in Delhi. 15) Wind fall gain. 16) Prize won in a lottery. 17) Increase in the value of stock lying with the traders. 18) Purchases of new shares from company. 19) Increase the price of shares and bonds. 20) Brokerage paid to the dealer on purchase of shares. 21) Dividend paid on debentures. 22) Purchases of land. 23) Rent and royalty. 24) Increase in the price of land. 25) Commission paid to the dealer on sale and purchase of land. 26) Construction of new rooms in the old building. 27) Scholarship to students by Govt. 28) Interest paid by consumer households. 29) Interest received on Govt. loan. 30) Interest paid by Mr. Ramesh on his marriage loan. 31) Interest received by commercial bank from household. 32) Interest received by household from commercial bank. 33) Interest on national debt. 34) Interest paid on educational loan. 35) Interest paid by household on that loan which was taken for the construction of his house. 36) Old age pension. 37) Pension received at the time of retirement. 38) Taxes on capital gain. 39) Prize won is any TV reality show. 40) Purchases of 2nd hand machine from domestic firm. 41) Farm produce for self consumption. 42) Purchases of new car. 43) School fees paid by students. 44) House rent allowance paid to teacher by school management. 45) Examination fees paid by students. 46) Payment of bonus to school employees. 47) Income from smugglings. 48) Income in the form of royalty. 49) Medical expanses of employees borne by employers. 50) Services of a dealer in second hand car. 51) Services rendered by family members to each other. 52) Teacher teaches his son. 53) Leisure time activity.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 54) Vegetable grown in kitchen garden. 55) Sale of an old house. 56) Services of owner occupied house. 57) Free meals given to employees. 58) Exp. on purchase of an old house( Hots). 59) Gift received from abroad. 60) Services of a house wife. 61) Dividend received on debentures. 62) Government expenditure on street lighting. 63) Money received from a worker working abroad by his family. 64) Government expenditure on defense. 65) Profits earned by a branch of an Indian bank in London. 66) Wages received by the Indian employees working in Pakistan High Commission. 67) Expenditure incurred by government on the construction of a new bridge. 68) Commodities used in scientific research. 69) Allowance of a Member of Parliament. 70) Income from gambling. 71) Services of free government dispensary. 72) Purchase of vegetables by a restaurant. 73) Expenses on electricity by a factory. 74) Expenditure on improvement of a fixed capital asset. 75) Direct purchases of goods by government from a foreign country. 76) Bus fare paid by a passenger. 77) Profit earned by foreign banks in India. 78) Durable-use goods purchased by a household. 79) Raw material purchased by an enterprise. 80) Truck purchased by a factory. 81) Food items purchased for office canteen. 82) Readymade clothes purchased by an individual. 83) Book purchased by a student. 84) A refrigerator installed in an office. 85) A sofa-set purchased by a household. 86) Electricity consumption in a school. 87) Water urcfhased for irrigating farms. 88) Tractor purchased by a farmer. 89) Telephone call charges paid by an individual. 90) Postage items purchased by a firm. 91) Stationery items purchased by a government office. 92) Expenditure on research by a firm. 93) Arms and armaments purchased by the defense department. 94) Computer purchased by a self employed chartered accountant. 95) Fertilizers purchased for kitchen garden. 96) Seed purchased by a farmer. 97) Services of an electrician purchased by a bank. 98) House purchased by a family. 99) Salaries paid to non resident Indians working in Indian embassy in America 100) Furniture purchased by households. 101) Payment of fees to a lawyer engaged by a firm. 102) Rent free house to an employee by an employer. 103) Wheat grown by a farmer but used entirely for familys consumption.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 104) 105) 106) Earnings of share holders from the sale of shares. Expenditure by government on providing free education. Payment of income tax by a production unit.

1. 2. 3. 4.

Unit-7 Money and Banking Define money explain its function. Define money supply. Mention its M1 measure. Explain the process of credit creation by commercial bank. Explain the function of central bank. Unit- 8 Determination of Income and Employment

1. Define the following Full employment, Involuntary unemployment, Voluntary unemployment, Aggregate supply, Investment, Induced investment, Autonomous Investment, Autonomous consumption, ex-ante investment, ex-post investment, Investment demand function, 2. Distinguish between (a) Average of propensity to save and marginal propensity to save. (b) Average of propensity to consume and marginal propensity to consume. (c) Full employment equilibrium and under employment equilibrium. (d) Monetary policy or fiscal policy. 3. Define aggregate demand. Explain its component. 4. Explain the working (mechanism) of investment multiplier. 5. Explain the concept of investment multiplier. 6. Define excess demand / deficit demand. How can it be controlled by monitary policy. 7. How can Govt. help in controlling the money supply in an economy. 8. What happens to the equilibrium level of national income and employment if (a) ex-ante agreegate demand exceeds ex-ants agreegate supply. (b) Ex-ante agreegate demand is less than ex-ante agreegate supply. (c) Intended saving exceeds intended investment. (d) Intended saving is less than intended investment. 9. Saving and investment are always equal. True or false. Give reason. 10. Will there always be full employment at the equilibrium level of national income. Give reason. 11. Draw on a diagram a straight line saving curve for an economy. From it derive the consumption curve, explaining the method of derivation. Show a point on the consumption curve at which average propensity to consume is equal to 1 12. State the affect of excess demand deficit demand on output employment and price. 13. Explain the concept of short run equilibrium output withy the help of both approaches.

Unit 9 Govt. Budget and Economy 1. 2. 3. 4. Define Govt. Budget. Explain its objective. State the component of Govt. Budget. Explain the concepts of revenue receipt in Govt. Budget. Distinguish between

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 (a) Capital and revenue receipts (b) Capital revenue expenditure (c) Tax and non Tax revenue receipts (d) Direct Tax and Indirect Tax 5. Define the various measures of Govt. deficiency. 6. Define the following (a) Fiscal year (b) Tax

Highly Important Question

Q - Whether following taxes are direct or indirect? 1. Income tax 2. Entertainment tax 3. Corporate tax 4. Estate Duty 5. Sales tax 6. Service tax 7. Excise tax 8. Gift tax 9. Custom Duty 10. Passenger tax 11. Tax on Securities and Royalty Direct tax Indirect tax Direct tax Direct tax Indirect tax Indirect tax Indirect tax Direct tax Indirect tax Indirect tax Direct tax

Q Whether following items are Revenue Receipts or Capital Receipts? 1. Income tax Revenue receipts 2. Corporate tax Revenue receipts 3. Custom duty Revenue receipts 4. Profits of public sector undertaking Revenue receipts 5. Dividend of public sector undertaking Revenue receipts 6. Disinvestment of public sector undertaking Capital receipts 7. Borrowing from public Capital receipts 8. Money received by govt. Capital receipts 9. Recovery of loans Capital receipts 10. Foreign Aid against earthquake victims Revenue receipts 11. Govt. hospital fees receipts Revenue receipts 12. Grants received from World Bank Revenue receipts 13. Development charges by govt. Revenue receipts Q Whether following items are Revenue Expenditure as Capital Expenditure? 1. Education expenditure Revenue expenditure 2. Pension paid to govt. employees Revenue expenditure 3. Salary paid to high court judges Revenue expenditure 4. Salary paid to air force officers Revenue expenditure 5. Dearness allowance paid to employees Revenue expenditure 6. Grants-in-aid given by state govt. to municipalities Revenue expenditure 7. Interest paid on national debt Revenue expenditure 8. Expenditure made for maintaining industrial Deptt. Revenue expenditure 9. Purchase of machinery and other equipment by Defence Capital expenditure 10. Building erected for Defence personnel Capital expenditure

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 11. Expenditure on currency and coinage 12. Repayment of IMFs Loan 13. Investment in shares 14. Advances to state govt. 15. Expenditure on the development of Railway track 16. Additional share purchased of public company 17. Bonds Purchased Capital expenditure Capital expenditure Capital expenditure Capital expenditure Capital expenditure Capital expenditure Capital expenditure

Unit- 10 Balance of Payment 2. Define the following. (a) Balance of payment A/C (b) Foreign exchange (c) Foreign exchange rate. (d) BOP on current A/C (e) BOP on capital A/C 3. Distinguish between (a) BOP and BOT (b) Balance of trade and current A/C of BOP (c) Current and capital A/C of BOP (d) Autonomous and Accommodating item in BOP (e) Fixed and flexible exchange rate (f) Depreciation and devaluation of currency. 4. What does deficiency in BOP indicate? 5. State the components of current A/C and capital A/C of BOP. 6. Explain the shape of demand curve of foreign exchange. 7. Explain the shape of supply curve of foreign exchange. 8. How is exchange rate determined in free market economy. 9. What determines the flow of foreign exchange into the county. 10. Why are foreign exchange demanded. 11. BOP always balances. Give reason. 12. How is deficit or surplus on current A/C of BOP restored.

Highly Important Question

Some examples of current account and capital account transactions 1. Current Account Transactions of Balance of Payment Account. (i) Import and export of goods. (ii) Import and export of insurance, travel and transport services, expenditure and receipts of embassies etc. (iii) Salaries and allowances of technical experts. (iv) Dividend of domestic and foreign corporate sector. (v) Payment and receipts of educational services. (vi) Payment and receipts against medical treatment. (vii) Gift and donations received from abroad or sent abroad. (viii) Payment or recipts against advertyisement. (ix) Film rental paid or received from abroad. (x) Royalties and commissions received and paid aboard.

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 2. Capital Account Transactions of Balance of Payment Account (i) Short term and long term loans received by corporate sector from foreign bank (ii) Foreign loan sanctioned by a domestic bank (iii) GDR issued abroad by reliance industries. (iv) External Commercial Borrowing (ECB) by corporate sector. (v) Repayment of foreign govt. loans by domestic authorities. (vi) Drawing of loans form IMF. (vii) Increase or fall in gold reserves. (viii) Increase or fall in SDR holdings. (ix) Borrowing by a domestic bank from a foreign bank abroad. (x) Deposits by a NRI in a domestic bank.

TRUE OR FALSE Giving reasons, state whether the following statements are true or false.
1. Money cannot solve the problem of double coincidence of wants. False 2. Silver coins are still prevalent in India? False 3. Money is a liquid store of wealth. True 4. Near money is also known as plastic money. False 5. Transfer of value is one of the primary functions of money. False 6. Cash and coins are also known as bank money. False 7. Money in India is only issued by government of India. False 8. Money as a Common measure of value is a secondary function. False 9. Tax receipts are a capital receipts. False 10. Entertainment tax is direct tax. False 11. Corporate tax is a capital receipts. False 12. Receipt from sale of shares of Bharat Heavy Electricals Ltd. (BHEL) is a revenue receipt. False 13. Payment for the salaries of government employees is capital expenditure. False 14. Interest paid by govt. on bonds is capital expenditure. False 15. Fiscal deficit is always less than revenue deficit. False 16. Fiscal deficit is non-inflationary. False 17. Capital budget relates to current years receipts and payments. False 18. Expenditure made on the development of a railway line is a capital expenditure. True 19. Salary of president of India is a capital expenditure. False 20. Repayment of government loans is revenue expenditure. False 21. Sales tax is an indirect tax. True 22. Receipt on the issue of equity shares by the public undertaking is a revenue receipt. False 23. Import and export of goods are an invisible item of trade. False 24. Salaries and allowances of technical experts is an item of balance of payment on capital account. False 25. Gifts and donations sent abroad or received from abroad is an item of balance of payment on capital account. False 26. Royalities and commissions received and paid abroad is an item of balance of payment on current account. True

R.N. INSTITUTE OF PROFESSIONAL STUDIES

D-12 Main Kanti Nagar Krishna Nagar Delhi 51 27. Increase and fall in gold reserves is an item of balance of payment on capital account. 28. External commercial borrowing is an item of balance of payment on Current account. 29. Deposits by a Non-resident Indian in domestic bank is an item of balance of payment on current account. 30. When there is appreciation of Indian rupee in terms of dollar, Indian exports will increase? 31. When there is depreciation of Indian rupee in terms of dollar, India imports will rise? 32. In case of flexible exchange rate, exchange rate does not change. 33. In modern world, fixed exchange rate prevails. 34. When value of Indian rupee depreciates, 1 Dollar = Rs. 50 will come down to 1 Dollar Rs. 48. 35. Money supply does not include time deposits with commercial banks. 36. Money creation is primarily made by Central Bank of the country 37. Main objective of money creation is the motive of raising money supply. 38. Money creation depends upon primary deposits and rate of interest. 39. If cash reserve ratio is 20% credit creation multiplier would be 5. 40. Govt. of India has monopoly right over the issue of currency. 41. Main motive of central bank is to maximize profitability. 42. Central bank of the country can have public dealings. 43. Monetary Policy is designed by Govt. of India? 44. Bank rate of the country is also known as market rate of interest. True False False False False False False False False False False True False False False False False

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