Macro Economics – Value based questions

National Income Aggregates

1. A doctor treats his own son who is not well. Does this service have a
value? Should it be included in National Income? (1)

This service does have a value but we do not include it in National

Income because it is a unilateral transaction or a transfer payment.

* Value:care &concern/empathy

2. Production in an industry results in pollution around that locality. In

such a situation, what should the industry do? (1)

Industries which create pollution should be situated outside city limits or

should install pollution control measures but it will increase the cost of
production.

* value:environmental awareness/social responsibility.

3. The Govt. provides old age pension to people who have no source of
income and are the responsibility of the Govt. How is this justified?(1)

Old age pension increases the expenditure of the Govt. resulting in a

higher deficit in the budget. This is a compulsory expenditure and
cannot be avoided by the Govt.

* Value:social welfare.

4. Non Resident Indians send a lot of money to their families in India and it
increases the foreign exchange reserves of the country. Should this
income be considered while calculating National Income?(3)

Only bilateral transactions or earned income is considered for national

income. Hence remittances of non resident Indians are not considered.

* value:social responsibility/care&concern

5. Govt. expenditure on maintaining the defence sector is large although

we do not have a war threat often. At the same time we have a large
number of people below the poverty line. Is this expenditure
justified?(3)
 Govt. has to spend on both defence and in reducing poverty in the
economy. Both are important areas of expenditure and the Govt. has to
balance between the two.

* value:social welfare/national integrity&security.

Money and Banking

1. India at times has high levels of inflation. What should the Govt. do ?
What is the impact on the people? (3)

Govt. has to implement monetary and fiscal measures to control inflation

and bring it within feasible limits. Inflation affects the standard of living
of the people and results in more people below the poverty line.

 Value: problem solving/economic equality

2. Is money economy better than barter economy?(1)

Money as a medium of exchange helps increase economic transactions

and increase the flow of money in the economy.(maximum liquidity-
convenient)
 Value: empathy

3. Some commercial banks at times have less than the prescribed SLR
reserve.Are they right in their decision?(3)

The right amount of SLR is required to maintain the liquidity of the

bank. Whenever customers approach the bank for money, this need has
to be satisfied.It is a violation of norms.
Value:critical thinking.

4. Commercial banks have increased the credit creating activities in the

economy and it is beneficial for them. Will it be beneficial for the
economy as well?(3)

It may be beneficial for the banks, but it may harm the economy during
Inflation. But it is beneficial during deflation to bring more money into
Circulation.

Value: Analytical thinking.

 5.Do you think povery can be eradicated by increasing the money supply
through printing of more currency by RBI?

It will increase money supply and lead to inflation. Increase in money

Supply will not solve poverty. Employment through productive activity,
Will help to solve the poverty

Value: critical thinking

Theory of Income and Employment

1. Encouraging individuals to save is a virtue but if the entire economy begins

to save then it could be a vice.(3)

Excess saving results in deficient demand because when everyone saves,

the demand in the economy automatically decreases leading to a
deflationary status in the economy.

* value:social responsibility.

2. Should the Govt. concentrate on full employment of resources or bringing

about equilibrium in the economy since achieving both simultaneously is
difficult.(3)

Govt. should first try to achieve equilibrium to attain economic stability

and economic growth and then to focus on achievement of full
employment.
Value:economic stability/social justice and equality.

3)Involuntary unemployment is widespread in India. What is the role to be

played by the Govt. in reducing this problem?(3)

It is the responsibility of the Govt. to provide employment opportunities

for its people.It should bridge the gap between
the urban and rural divide and generate employment everywhere.
It can start more agro-based industries and infrastructure development
to create millions of employment opportunities.

Value: problem solving/social responsibility/social justice.