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1 Dr.M.AMARNATH REDDY,
PGT Economics,
Kendriya Vidyalaya
Barkuhi, M.P..
2 Smt. SARBASREE MAJUMDAR
PGT Economics,
Kendriya Vidyalaya, No.2
Bhopal..
INDEX
2. For CBSE Outside Delhi, March 2008, 2007 and 2009 sample papers. Both
question papers and expected answers are also available in this site.
WEIGHTAGE OF MARKS
S.NO CONTENT MARKS
1. Part – A Introductory Micro Economics 50
UNIT a. Introduction 04
b. Theory of Consumer Behaviour & Demand 13
c. Producer's Behaviour & supply 23
d. Firms of Market and Price Determination 10
e. Simple application of tools of demand and supply curves **
2. Part – B Introductory Macro Economics 50
UNIT a. National Income Accounting & related aggregates 15
b. Determination of Income and Employment 12
c. Money & Banking 08
d. The government budget and the Economy 08
e. Balance of Payment 07
TOTAL 100
Design of sample Question Paper
Knowledge 30 %
Understanding 50 %
Application 20 %
Time Management:-
Form of Questions No . of. Mark for Total Marks Estimated Time
questions each (in minutes)
Question
Long answer (L.A) 6 6 36 66 Mins
Short answer (S.A.I) 6 4 24 42Mins
Short answer (S.A.II) 10 3 30 50 Mins
Very Short answer 10 1 10 10 Mins
Total 32 100 (Four parts each)
168 + 12
minutes for
revision
25. A Rs. 200 crore increase in investment leads to a rise in national income by
Rs. 1000 crores. Find out marginal propensity to consume. 3m
26. What are causes for disequilibrium of balance of payments /
What are the components of current account
27. State any two merits and demerits of fixed exchange rate
system. (4)/
Explain how foreign exchange rate is determined in a foreign exchange market ?
28.Distinguish between ‘revenue receipt’ and ‘capital receipt’ and give two
examples of each. (4)
29. What are the FUNCTIONS OF COMMERCIAL BANKS: (4)
RBI functions Issue of Currency: / Bankers to Government/ Lender of Last Resort
30. How will you treat the following while estimating domestic
product of India?
(i) Rent received by a resident Indian from his property in
Singapore.
(ii) Salaries to Indians working in Japanese Embassy in India.
(iii) Profits earned by a branch of an American Bank in India.
(iv) Salaries paid to Koreans working in Indian embassy in Korea.
OR
Explain any two precautions that should be taken while estimating
national
income by (a) value added method, and (b) income method. (6)
31. Can an economy be in a state of under employment equilibrium?
Explain
with the help of a diagram. (6) / Equilibrium of income under Agg.D
and Agg.S
1.An economic problem is basically the problem of choice, which arises because of
scarcity of resources. Human wants are unlimited but resources to satisfy them are
limited. In such a situation every individual and society have to make a choice as to
which wants should be satisfied by making use of scarce resources which have
alternative uses.
7. a. Price of a commodity: With the fall in the price of a commodity, its demand
extends. b. Price of other related goods: Demand for a commodity is also
influenced by
the change in the price of other related goods.
(i) Substitute goods: Increase in the price of one causes increase in
demand for the other and decrease in the price of one causes decrease in
demand for the other.
(ii) Complementary goods: A fall in price of one causes increase in the
demand of the other and a rise in the price of one causes decrease in the
demand for the other.
c. Income of the consumer: Change in the income of the consumer also
influences his demand for different goods. The demand for normal goods
tends to increase with increase in income, and vice-versa. On the other hand,
the demand for inferior goods like coarse grain tends to decrease with increase
in income and vice-versa.
8.
CHANGE IN SUPPLY:- A change in supply of a commodity caused by factors other than (Income of the
consumer ii) Price of related goods and iii) Tastes and preferences of the individual/ consumer) the price of a
commodity. Change in supply is represented graphically by a rightward or leftward shift. Decrease is due to fall
in other factors than the price. Leftward shift shifting of supply curve leads to decrease the supply. .(see fig.(B))
10. MONOPOLY: 1) Monopoly means single seller/firm, where buyers are many 2)
There is no close substitute available, The goods sold by the monopolist does not face
any competition. 3) Entry is rigid; There are some restrictions on the entry of new
firm into monopoly industry. 4) Price maker, a monopolist has full control over he
supply of commodity. He can fix the price, which maximizes its profits.5) The ‘DD’
slopes down ward because price of the good has to reduce if the monopolist wants to
sell more
DQ P 8 X − 160 X − 140
11. Ed = x , −2 = x = , X = 160 = +80 , X = +80
DP Q 160 −2 − 40
+ 160 = 240 The Consumer will buy 240 units
16. The factors affecting market supply are : . The factors affecting market supply are
1. Technological changes : Technological advancement in the field of production
lower the marginal cost of production Since, MC curve is essentially the
supply curve, technological progress shifts supply curve to the right.
2. Input price changes :- Increase in the price of factor inputs leads to an decrease
in supply & the supply curve shifts to the left conversely, if the price of factor
factor inputs decreases, the supply increases and the supply curve shifts to the
right.
3. Change in the excise tax rate : If product the marginal cost, which curve to the
left. If the ensue duty decreases, the Mc would decrease and the supply
curve would shift to the right.
Changes in the prices of related goods : An increase in the price of a substitute good
in predictor shifts the supply curve of a good to the right, white a decrease in the price
of a substitute good, would shift the supply curve of a good to the left
4. No. of suppliers.:- When suppliers more, the supply will be more of any
commodity other wise less.
Diagrams may be used.
17. Deficient demand:- Deficient demand refers to the situation when AD is
less than AS at full employment.
18.. Barter System: The direct exchange of goods for goods without the use of money
called barter system.
19. Excess demand leads to inflationary gap, it is the situation when AD is more
than AS at full employment
20.The sum of average propensity to consume and average propensity to save is equal
to one because
Y=C+S
Dividing both sides by Y we get
Y C S
= +
Y Y Y
1 = APC + APS
i.e. APC = 1-APS
APS = 1-APC and K = 2 when MPC and MPS is same.
21. Primary Deficit – Difference between fiscal deficit and interest payments.
(PD=FD-Interest payments
. Revenue Deficit = Difference between revenue expenditure and revenue recipts
23. Functions of Money:- I) A unit of value – The values of different goods can be
expressed through money. ii) A medium of exchange – People can exchange goods
and services through the medium of exchange. iii) Standard deferred payments-
Future truncations can be carried on in terms of money. iv) A store of value – Value
of goods can be stored in the form of money. (or)
:Lack of double coincidence of wants – it is very difficulties to get the same persons
who can be exchanged each other with their goods
Lack of a common measure of value – no proper counting system possible in the
absence of common measure of value .
Lack of standard of deferred payments, - Future payments by goods create many
problems, they have to be stated in specific goods or services which may
involve disagreement over the quality of goods etc., and
Lack of store of value- storing commodities leads deterioration or appreciation in the
value of goods. Only durable goods can be stored others cannot be done or
stored in the same way.
24. Plan Expenditure – which is incurred for current development and
investment outlays due to plans proposals: Non plan expenditure –which is
incurred on routine functions of the govt. like interest payments, defence services.
Development Expenditure – which is incurred on provision of economic and
social services(development of agriculture ad industries, transport, road,
communication, health and education, medical etc.
Non-development expenditure – which is incurred on the provision of general
services like police, defence, administration, grants to state govts . etc (or)
DEMERITS :-
Huge International Reserves: Fixed exchange rate system is often supported with
huge international reserves of gold. This is because different currencies are directly
or indirectly convertible into gold.
Restricted Movement of Capital: Fixed exchange rate (owing to huge back-up of
international reserves) restricts the movement of capital across different parts of the
world.:
Discourages ventures Capital: Fixed exchange rate discourages venture capital in
the international money market.
28. Revenue Receipts:- It refer to the receipts of the govt. which don’t create any
liability and cause any reduction in the assets of the govt. It may be divided into two,
tax revenue ( direct tax, e.g. income tax and indirect tax, e.g. excise duty) and non-tax
revenue( eg. Fees,fines and penalties)
CAPITAL RECEIPTS:- It refers to those receipts of the govt. which create a liability /
cause reduction in its assets. Loans raised by the govt. from the public( market loans)
b) borrowing’s by the govt. from the central bank and other parties through the sale of
treasury bills. C) Loans received from foreign govt and international financial
institutions(world bank / IMF) D) Recoveries of loans granted to state and UT govts.
And other parties E) small savings and deposits in PPF F)PSU disinvestment – selling
shares /securities of PSU..
Give reasons, categorise the following into revenue receipts and capital receipts ?
( 4M )
i) Recovery of Loans., Capital receipts as it decrease assets
ii) Income tax. Revenue receipts as neither increase liability nor reduce
assets
iii) Dividends on Investments made by Government.
evenue receipts as neither increase liability nor reduce assets
iv) Sale of public sector undertaking. Capital receipts as it decrease assets
29. . Commercial banks are those financial institutions which accept deposits from
the general public, and make advances( or offer loans) to he consumers and investors
with a view to earn profits.
FUNCTIONS OF COMMERCIAL BANKS:
1. Accepting of deposits – accept money in the form of deposits from the public.
People can deposit their cash balances with bank in either of the following accounts:
a) Fixed Deposits Account, b) Current Deposits Account, No interest is paid by banks
on the money kept in current account c) Saving Deposits Account d) Recurring
Deposits Accounts etc.
2. Advancing of Loans: Commercial banks provide various types of loans to the
borrowers in either of the following forms: a) Cash Credit b) Term Loans/ Demand
Loans c) Overdraft, d) discounting of Bills of Exchange and e) Investment of Funds
in govt. securities.
3. Agency functions:- Transfer of funds through cheques, drafts etc ii) Collection and
payments of cheques, bills of exchange on behalf of their customers, iii) Sale and
purchase of shares, securities etc., iv Purchase and sale of foreign exchange , Locker
facility, Gift cheques, Traveller’s Cheques etc. ( or)
Issue of Currency: The Central Bank is given the monopoly of issuing currency in
order to secure control over volume currency and credit. These notes are circulated
through out due country as legal tender money. It has to keep a reserve in the form if
gold and foreign securities as per the statutory rules against the notes issued by it. It
issues notes above Rs.2/-. One Rupee coins and other small coins are issued by the
mints of Government.
Bankers to Government: Central Bank acts as the bank of Central and State
governments. It carries out al banking business of Government. Government keep
their cash balances in the current account with Central Bank. Similarly central bank
accepts receipts and makes the payment on behalf of the Government. Also Central
bank carries out exchange, remittances and other banking operation on behalf of
Government. Central Bank gives the loans and advances for a short period to the
Governments. It also manages the public debt of the country.
Bankers Bank & Supervisor: All the scheduled banks are controlled and
supervised by the Central Bank. These banks are required to keep certain percentage
of their deposits with Central Bank. They can take loans from the Central Bank.
Controller of Credit & Money Supply: Central Bank regulates the supply of
money and credit according to the interest of the country. It follows various
instruments like (i) Bank rate, (ii) Open Market operations (iii) Cash reserve ratio, (iv)
Moral suasion (v) Marginal requirements. They are the instruments of Monitory
policy
.Exchange Control: It maintains the external value of currency. Every citizen
should deposit foreign currency they earn with RBI and they can get foreign currency
from RBI with application.
Lender of Last Resort: Scheduled banks can take the loans by rediscounting
first class bills or short term approved securities, whenever they do not get funds from
any other sources.
Custodian of Foreign Exchange Balance: Central Bank maintains the balance of
foreign exchange gold and bullions.
Clearing house function: Central Bank clears the cheques received by a bank
belongs to other banks issued by the customers without delay.
Collection and publication of data: It collects, completes the data regarding the
other banks and publishes this information
30. i) Income is creating in the domestic territory of Singapore and
not in India .
(ii) No, It is a part of domestic territory of Japan not in India .
(iii) Yes, Income is creating in the domestic territory in India .
(iv) Yes, (Indian embassy )It is a part of domestic territory of in
India .
Product method / Value added method:- . Precautions:
1) Sale and purchase of second hand goods are not included. Because it is not a part
of current production.
2) The value of intermediate goods should not be included. Because it will
lead to the problem of double counting.
3) Production for self consumption should be included. Because it is a part of
national income. Hence its imputed value should be included.
4) Services of owner occupied houses / imputed rent should be included in
national income because these are part of the current years production.
5) Own account production of fixed capital should be included; it is a part of
final investment expenditure.
Income method:- Precautions:
1. Transfer Incomes: These should not be included in national income.
Because these are not part of factor incomes.
2. Income from illegal activities: It is not included in national income.
Because these activities are not part of productive activities.
3. Income from sale of Second hand goods: It is not included in national
income. Because it is not part of current productions.
4. Windfall gains: These are not included in national income. Because
there is no corresponding increase in production.
5. Income received from sale of shares/bonds: It should not be included in
national income. Because they are financial transactions.
31. DETERMNATION OF EQUI. LEVEL OF INCOME & Employmnt:
There are two approaches a) Consumption and Investment(C+I) b) Investment and
Saving approach Determination of Income and EMPLOYEMENT: Full employment
equilibrium is a situation, where all the resources of the country get employment.
Graphically at this level of national income AD and AS. It implies that the volume of
AD is just sufficient for the full utilization of country’s available resources and the
production is being done to the maximum possible resources and the production is
being done to the maximum possible limit. It means AD is neither in excess nor
deficient. This is an ideal situation. Hence there is no gap(neither inflationary and
deflationary gap) . Equilibrium:- At equilibrium , the total output of goods and
services produced equals the total demand for those goods and services.( Agg.’D’ =
Agg.’S’) The particular price level at which equilibrium occurs is known as the
equilibrium price level, The level of agg. Employment corresponding to the
equilibrium level of agg. Supply is the equilibrium level of employment.
Yes, there can be a state of under employment equilibrium. In the below given
diagram it is shown at OM output/income .
A brief explanation about the schedule along with a diagram and its explanation
31. The equilibrium level of income and output is that level at which planned saving
and planned investment are equal. (1)
SS. is the saving curve that shows planned saving at different levels of
income. I I. shows fixed level of investment as it is assumed that investment
is given and is constant, OQ is the equilibrium level of income and output as
at this level, planned saving and investment are equal If planned expenditure
is less than planned output inventories will Y (C) (S) (I) Remarks
increase. So output will be reduced till planned
expenditure and planned output are equal. (see
schedule in the next paragraph).. 0 50 -50 10
What happens if savings exceed planned 0
investment? In the diagram, at ON level of
income (output), RN amount of saving exceeds 10 100 0 10
SN amount of investment by an amount equal 0 0 S<I
to RS. This shows households are consuming 20 150 50 10
lesser than the investment of firms ( i.e, level of 0 0
30 200 10 10 S=I
0 0 0
40 250 15 10 S>I
0 0 0
output). As a result firm’s stock of unsold goods will pill up, i.e., there will be
undesired and unplanned build-up of inventories, firms will cut back production and
reduce employment leading to fall in income. The tendency of reducing out put and
income to fall will continue until it reaches the OQ equilibrium level of income
(output) at which planned saving EQ is exactly equal EQ planned investment EQ.
32. a) 205 Crores b) 205 Crores
12. Explain the effect of rise in the prices of related goods on the
demand
for a good X. Use diagrams.
OR
Explain the effects of rise in income on demand for a good. Use
diagram. (4)
SECTION : B
17. What do you meant by Excess demand? 1M
18. Define APC and APS./ consumption function / saving function. 1M
19. What do you meant by SLR / Cash Reserve Ratio(CRR) / BANK RATE .1M
20. What do you meant by . Revenue Deficit ? 1M
21.Define macroeconomics ? 1M
22. From the following data relating to a firm, calculate its net value added
at factor cost :
(Rs. in Crores)
(i) Subsidy 40
NVAfc=ii+(v-vi)-vii-iii+i
(ii) Sales 800
=800+(20-50)-500-30-(-
(iii) Depreciation 30
(iv) Exports
40)
100
=280
(v) Closing stock Note=
20 NIT(Ind.Tax_Sub)
(vi) Opening stock Sales
50 included exports.
(vii) Intermediate purchases 500
23. Categorise the following government receipts into revenue and capital
receipts Give
reasons for your answer.
(a) Receipts from sale of shares of a public sector undertaking.
(b) Borrowings from public.
(c) Profits of public sector undertaking (3)
24. List three sources each of demand and supply of foreign exchange (3)
25. Account any three types of deposits in commercial banks. ( 3)
26. Explain the deflationary gap through diagram. ( 3)
27. Describe the following functions of money :- 4M
(a) Medium of exchange
(b) Standard of deferred payment
28. Distinguish between current account and capital account of balance of payments
accounts mention two items of each of these accounts? 4M
30..Explain
the steps involved in estimation of national income by
income and expenditure methods . ( 6M)
31.Calculate Personal Disposable Income (or) GNP at MP from the
following data
(Rs. crores)
1. Net factor income from abroad (.) 60
2. Gross national disposable income 1050
PDI=13-7-4-3-12
3. Personal Tax 110
=700-90-40-110-30=430
4. Savings of private corporations 40
5. National income 900at MP=5+6+(2-8)
GNP
6. Indirect tax 100
=900+100+50 =1050
7. Corporation tax 90
8. Net national disposable income 1000
9. National debt interest 30
10. Net current transfers from abroad 20
11. Current transfers from government 50
12. Miscellaneous receipts of the
government administrative departments. 30
13. Private income 700
32. Explain the meaning of equilibrium level of income and output with the
help of
saving and investment curves. If planned expenditure is less than planned
output,
what changes will take place in the economy? (or)
30. Will the following be included in Gross National Product? Give reasons for your
answer:
1. Profits earned by a foreign company in India. No, it is factor income to abroad
2. Money received from sale of shares. No, It is a financial tractions / money claims
3. Salary paid to Americans working in Indian embassy in America.,
Yes, it is a part of domestic territory of India,
4. Money received from sale of old house., No it makes double counting
5. Scholarships received by a student., No, it is a transfer income
6. Remittances from abroad. No , It is also transfer income to India
Expected Answers
1. The Opportunity cost of a given activity is defined as the value of next best activity.
2. When there is a direct relation between price and expenditure, there should be
inelastic in demand.
3. An additional Utility/Product/Revenue/cost to the total
Utility/Product/Revenue /Cost by consumption of extra good/employing extra labour/
selling extra good/making extra output.
4. The cost which does not change according to output e.g Rent, Minimum telephone
bill, wages to permanent staff, interest on capital and b) The cost which varies /
changes according to output E.g. Labour costs and raw material costs, power etc.
5. Equilibrium Price /Market equilibrium: - It is a price at which its quantity
demanded and quantity supplied are equal.
6. 1. What to produce:-If refers to which goods and services will be produced and
in what quantities with the limited resources i.e. consumption goods or capital goods.
2. How to produce :- It refers to the choice of methods of production of goods &
services i.e. whether labour intensive or capital intensive technique is to be adopted
taking into consideration the proportion of capital and labour in an economy.
3. For whom to produce.:- It concerns with the distribution of income & wealth
which refers to who earns how much or who has more assets than others.
7. Marginal revenue is the addition to total revenue from producing one more unit of
output (1),
(i) MR = AR at all the output levels (1)
(ii) MR will be less than AR at all the output levels (1)
8. The consumer will purchase 4 units because at this consumption level
marginal utility equals price. (1)
At consumption level of less than 4 units MU is greater than price. Therefore there is
scope of increasing gain by purchasing more. (1)
If he buys more than 4 units MU becomes less than the price. Therefore, there is
scope of increasing gain by purchasing less. (1)
(or)
RELATED GOODS: (Both Substitute goods and Complementary goods)
Substitute goods are those goods, which can be used in place of each other. E.g
coffee and tea, and gur and sugar. An increase in the price of a substitute good
(Coffee) causes an increase in the demand for the commodity (Tea) Its demand curve
shifts to rightward,
Complementary goods are those goods, which jointly satisfy
a given want. E.g. car and petrol; pen and ink. Etc., In case of complementary goods ,
the demand for a commodity rises wit the fall in the price of other commodities. Cars
and petrol are Complementary goods. If the price of the petrol falls its demand will
rise, also will raise the demand for cars..
13.
Output Price MR TR
(Units) (Rs.) (Rs.) (Rs)
1 10 10 10
2 9 8 18
3 8 6 24
4 7 4 28
14. Increase in supply means more quantity supplied at the given price. Supply
curve shifts to the right from S1 to S2. This creates excess supply (=E, A) at price
OP. Since the firms are not able to sell what they produce, Competition among
firms lead to fall in price. Fall in price leads to rise in demand and fall in supply.
These changes continue till price falls to OP2 OP2 is the new equilibrium price
and OQ2. equilibrum quantity. See equilibrium price diagram.
15. . The producer of a good is in equilibrium at that level of output of the good at
which he earns maximum profit. (1)
There are two conditions of producer.s equilibrium :
(i) The difference between TR and TC is maximum.
(ii.) Total profit falls if one more unit of output is produced. (2)
In the diagram, OQ is the equilibrium output with profit equal to AB = AQ . BQ.
AB is the maximum vertical distance between TR and TC. If more than OQ output is
produced total profits fall.
Total cost and total revenue schedule
Output TR TC Profit
(Units The producer will
) produce 2 units because
1 10 15 5 his profits are maximum
2 18 12 6 at this
3 24 21 3 level of output.
4 28 32 4
(OR)
SECTION : B
17. EXCESS demand:- EXCESS demand refers to the situation when AD is
greater than AS at full employment.
28. Current account: It is that a /c which records imports & exports of goods &
services & unilateral transfers. It records the following transactions :
Exports & imports of goods (or of visible items).b) Export & import of services
(or of invisible items).c) Unilateral transfers from one country to the other.
CAPITAL ACCOUNT: It is that a /c which records all such transactions
between residents of a country & rest of the world which cause a change in the
asset or liability status of the residents of a country or its government. When
balance of payment is not balanced by current account, it has to be balanced by
capital account. It includes short term as well as the long-term international
borrowing and lending gold transactions, it any, also forms part of the capital
account.
29. Tax Revenue:- A tax is a legally compulsory payment by the people to govt.
( Direct Tax and Indirect Tax). The taxes are classified according / on the basis of
incidence and impact of a tax.. For example
Direct Tax– When the incidence and impact of a tax is on the same person .
(or)Those taxes levied immediately on the property and income of persons, and that
are paid directly by the consumer to the govt. Which are not shiftable, Eg. Income
tax, Corporation tax, wealth tax etc. Indirect Tax – When the incidence and impact
of a tax is on the different persons. (or) When liability to pay a tax is on one person
and the burden of that tax falls on some other person, which are shiftable to others
Eg. Custom duties, excise duties, sales tax, service tax etc.
30. Steps of income method:The following steps are involved in the estimation of
national income by using income method.
1. Identification and classification of producing enterprises.
2. Classification of factor income.
3. Estimation of factor income.( CE, OP, MI )
4. Estimation of domestic factor income ( SUM OF above three)
5. Estimation of national income (i.e. NNP at FC) by adding NFIA
Expenditure method:-
Under this method national income is estimated by aggregating all the final
expenditure in an economy during a year. This expenditure method is also
known as consumption and investment method, or income disposable method.
Steps of expenditure method:- To identify economic units incurring final
expenditure.
1. Classification expenditure: -
a) Private final consumption expenditure
b) Government final consumption expenditure
c) Gross fixed capital formation (or) Gross fixed investment
expenditure
d) Change in stock or change in inventories or inventory
investment.
e) Net acquisition of valuables
f) Net exports.
2. Measurement of final expenditure on domestic product.
3. Estimation of net factor income from abroad. AND Estimation of
national income.
31. Ans is given in the question paper : 32.. Ans is given in the previous
mock paper.
.
7. Define law of demand? Draw a unitary elasticity of demand with the help of a
demand schedule. 1,1,1 =3
8. Draw the supply curves showing a) elasticity of supply equal to1 b) elasticity of
supply greater than 1 c) elasticity of supply lessthan 1. 1,1,1 =3
10. Explain the relationship between average variable cost and marginal cost with he
help of diagram. 3M (or)
What is the relationship between Total revenue and Marginal revenue with diagram?
11.. The total fixed cost of a firm is Rs. 12. given below is its marginal cost schedule.
Calculate total cost and average variable cost for each given level of output. 2,2 =4
Output(units) 1 2 3 4
Marginal Cost (Rs.) 9 7 2 4
12.The quantity demanded of a commodity at a price of Rs. 10 per unit is 40 units. Its
price elasticity of demand is (-2). Its price falls by Rs. per unit. Calculate its
quantity demanded at the new price. 4M
13. . What is equilibrium price? What happens to equilibrium price of a commodity
when its demand increases? 4M
26. . Define (a) Fiscal deficit (b) Budget deficit (c) Revenue deficit ?
27. . Give any four functions of a Central Bank (RBI)?
28.. Give reasons, categorise the following into revenue receipts and capital receipts ?
( 4M )
i) Recovery of Loans. , ii) Income tax.
iii) Dividends on Investments made by Government.,
iv) Sale of public sector undertaking.
29. State the four function of Money. Describe any one of them ? ( 4M )
30. Explain how foreign exchange rate is determined in a foreign exchange market ?
( 4M )
OR
Distinguish between current account and capital account of balance of payments
accounts. mention two items of each of these accounts ?
31. Explain with the help of diagram the determination of equilibrium. Can the
economy be in equilibrium at less than full employment ?
32.. Distinguish between:
a) Value of output and value added
b) Factor income and transfer receipt
c) Intermediate goods and final goods
OR
Explain the components of factor income ( NDP at fc )
MARKING SCHEME
Q.No Distribution
EXPECTED ANSWERS / VALUE POINTS of Marks.
1-5 1)An additional revenue made to total revenue 1
by sale of an extra unit of output.
2) Underutilization of resources( see two points inside PPC) 1
3) MR=MC=P and MC is rising 1
4) Fixed cost 5) Diagram. 1M 1
6 a)What to produce :-e.g:-Type goods whether consumer goods or capital goods with in 1
available resources; b) How to produce :- e.g:Type of technique – Whether capital 1
intensive where capital more than labour and Labour intensive techniques where labour 1
is more than capital c) Whom to produce :-e.g. Distribution of income by way of
wages , interest , rent and profits ( any two ) brief explanations diagram see Q.No.1
7 a) Inverse relation between price and demand i.e., 1
when price increase and demand for (P) (D)
1,1
a commodity decreases and vice verse 1 100
b) Schedule :-Shows q. of demand at different 2 80
3 60
price c)Demand curve :- ‘DD’ curve 4 40
slopes downward from left to right. 5 20
OR
Determinants of market demand: i) Price of the commodities, ii) Income of the
consumers iii) Price of related goods and iv) Tastes and preferences of the market/ 2,2,2
consumers (Give a brief explanation for each points
29 Foreign Exchange Rate:– It is a rate at which the currency of one country is exchanged 1
with the currency of other country eg., $1 = Rs.48
or one Indian rupee 1/48 th $. 1
Determination of the FER – The rate is determined in the
foreign exchange market by the interaction of the demand for 1
and supply of foreign exchange currencies.
Demand for Foreign exchange comes from 1
a) domestic resident to purchase goods and services from
other countries b)for sending gifts to foreigners c) by the domestic residents to purchase
financial assets in a particular country d) Speculation purpose
Supply of Foreign exchange comes from a) the foreigner’s purchasing home currency
goods and services through exports b) the foreigners who invest in home country through
joint ventures
OR
Current account: It is that a /c which records imports & exports of goods & services &
unilateral transfers. It records the following transactions :
Exports & imports of goods (or of visible items).b) Export & import of services (or of
invisible items) like travel, transport, banking @insurance etc.c) Unilateral transfers from
one country to the other.
CAPITAL ACCOUNT: It is that a /c which records all such transactions between
residents of a country & rest of the world which cause a change in the asset or liability
status of the residents of a country or its government. When balance of payment is not
balanced by current account, it has to be balanced by capital account. It includes short
term as well as the long-term international borrowing and lending gold transactions, it
any, also forms part of the capital account.
Final goods:- Those goods which are meant for final use by consumers or firms. These
goods are not required to enter into further stages of production or no resale is required. 1
They are called finished goods. E.g., Bread, shirt or scooter etc.,
Intermediate goods:- Those goods that are used to produce other goods and therefore
they always move from one stage of production to another in the manufacturing of a final
product. It is required to resale to make final production. E.g., Wheat, flour, cotton, any
part for scooter etc.,
© Factor income are receipts received by factors of production with tendering/producing
any type of goods or services ,in the form of wages, rent, interest and profits etc.,. These
are bilateral receipts and are included in the national income
Transfer receipts are receipts received without tendering/producing any goods or
services, e.g., old age pension scholarships, gifts etc.,. These are unilateral receipts and
are not included in the national
OR
EMPLOYEE COMPESATION:- Compensation to employees in the form of wages,
salaries and benefits ( employers contribution to social security scheme) makes up the
largest single component of factor income. Wages and salaries are payable in cash , kind
or both.. It includes 1. wages & salaries, 2. Rent free quarter 3. Commissions, bonus,
D.A., Sick Leave Allowances, CPF, LTC ETC.,
operating surplus:-: Definition: It is the income from both property and
entrepreneurship.
Components of Operating Surplus:- Income from property, a) Rent, 2)Interest, 3)
Royalty and Income from entrepreneurship (Profits),Dividends, Undistributed profits,
Corporation Tax
Income of self-employed people is known as mixed income of self-employed such as
farmers, small shop keepers, and manufactures, doctors, lawyers and charted accountants
etc. Income of such self employed persons cannot be distinguished between wage
income and property income. A part of their income is related to wage income. While
the other part to property income. So we can call it a mixed income. It is because of this
problem, the separate concept of mixed income has been coined in the national income
accounting.
32 Income method : xiv+(ix-xii)+xvi+(iv+v+vii)+(viii-x)
20+(55-25)+450+(90+210+100)+(20-40) =880
MODEL PAPER
SUB:-ECONOMICS Max.Marks:100
Time : 3 Hours
General Instructions:
i. All questions in both the sections are compulsory.
ii. Marks for questions are indicated against each.
iii. Question Nos. 1-5 and 17-21 are very short-answer questions carrying
1 mark each. They are required to be answered in one sentence each.
iv. Question Nos. 6-10 and 22-26 are short-answer questions carrying 3
marks each. Answer to them should not normally exceed 60 words each.
v. Question Nos. 11-13 and 27-29 are also short-answer questions carrying
4 marks each. Answer to them should not normally exceed 70 words each.
vi. Question Nos. 14-16 and 30-32 are long-answer questions carrying 6
marks each. Answer to them should not normally exceed 100 words each.
vii. Answers should be brief and to the point and the above word limit be
adhered to as for as possible.
24. Explain Briefly the meaning inflationary gap and deflationary ?(3M)
25.. As a result of increase in investment by Rs 75 crores, national income rises by Rs.
300 crores. Calculate a marginal propensity to save (MPS)?
26. . Define (a) Fiscal deficit (b) Budget deficit (c) Revenue deficit ?
27. . Give any four functions of a Central Bank (RBI)?
28.. Give reasons, categorise the following into revenue receipts and capital receipts ?
( 4M )
i) Recovery of Loans. , ii) Income tax.
iii) Dividends on Investments made by Government., iv) Sale of public sector
undertaking.
29. State the four function of Money. Describe any one of them ? ( 4M )
30. Explain how foreign exchange rate is determined in a foreign exchange market ?
( 4M )
OR
Distinguish between current account and capital account of balance of payments
accounts. mention two items of each of these accounts ?
31. Explain with the help of diagram the determination of equilibrium. Can the
economy be in equilibrium at less than full employment ?
32.. Distinguish between:
d) Value of output and value added
e) Factor income and transfer receipt
f) Intermediate goods and final goods
OR
Explain the components of factor income ( NDP at fc )
HIGH ORDER THINKING SKILLS
(BRAIN STORMING QUESTIONS)
Introduction
Q1) How can the central problem be solved with the help of PPC?
Q2) Why is PPC concave to the origin?
Q3) . Explain the problem of opportunity cost with an example?
Q 4) Draw a PPC and show the following on this curve. Give reasons of this shift. (i)
Q5) Q 5) Growth of Resource., (ii) Underutilization of resource.
(iii) Fuller utilization of resource. .
Q 6) Calculate marginal opportunity cost of good X.
Production Marginal
Production
Of Good Opportunity
of Good X
Y cost
0 100
1 90
2 70
3 40
4 0
8 X − 160 X − 140
−2 = x =
160 −2 − 40
X = 160 = +80
X = +80 + 160 = 240
The Consumer will buy 240 units
Q.12. As a result of 5% fall in price of a good its demand rises by 12 % find out
elasticity of dd & say whether demand is elastic or inelastic & Why ?
A. Ed = % change in qly dd
% change in price
12%
= = 2.4
5%
Demand is elastic because percentage
Change in demand is greater than percentage
Change in price
Producer Behaviour & Supply
COST FUNCTION : Output – Cost Relationship of a firm is the cost function of that
firm. When Output increases it is IRS , when decreases it is DRS and when
production function remains unchanged it exhibits CRS.
TOTAL COST: The cost that a firm incurs to employ fixed input is called Total
Fixed Cost and the cost that a firm incurs to employ variable input is called
TVC. Addition of TVC and TFC is called Total Cost .
TFC = TC - TVC
TC = TVC + TFC TVC = TC - TFC
Q1) Complete the folloing table and identify the 3 phases of the law of variation
proportion variation.
Q20) Given below is the cost schedule of a firm. Its total fixed cost is Rs. 100.
Calculate average variable cost and marginal cost at each given level of output.
Output (units) 1 2 3 4
Total cost (Rs.) 350 450 610 820
Q21Calculate total variable cost and marginal cost at each given level of output
from the following table.
Output (units) 0 1 2 3 4
Total cost (Rs.) 40 60 78 97 124
Q23. Calculate total cost and average variable cost of a firm at each given level of
output from its cost schedule given below:
Output (units) AFC (Rs.) MC (Rs.)
1 60 32
2 30 30
3 20 28
4 15 30
5 12 35
6 10 43
Explain why MC cuts AC and AVC at their minimum values
Q24. Explain the fallacies in each of the following:
(a) AC is minimized when MC is at its lowest point.
(b) Because fixed costs never change, AFC is constant for each level of output.
(c) AC is rising whenever MC is rising.
(d) The opportunity cost of drilling for oil is zero because no firm produces
anything there.
Q25. At the market price of Rs. 10 a firm supplies 4 units of output. The market
price increases to Rs. 30. The price elasticity of the firm’s supply is 1.25. What
quantity will the firm supply at the new price?
Q26. The price of a commodity is Rs. 12 per unit and its quantity supplied is 500
units. When its price rises to Rs 15 per unit, its quantity supplied rises to 650
units. Calculate its price elasticity of supply. Is supply elastic?
Q27. Due to a 10 per cent rise in the price of a commodity, its quantity supplied
rises from 400 units to 450 units. Calculate its price elasticity of supply. Is its
supply elastic?
Unit 4:Forms of Market and Price Determination
Q1) Why a firm under perfect competition will not lower the price to increase its
sales?
Hint:- (a) An individual firm - a small supplier in the market can not ever cater to
the
entire market demand for the commodity.
(b) Uniform price –
Q2) Perfect competition is no competition. How?
Hint:- (a) Uniform price
(b) No price war
(c) Homogeneous product
Q3) Both under monopoly and under monopolistic competition firms demand curve
slopes downwards. Is there any differences? Reasons.
Hint:- (a) No close substitutes
(b) Single seller
Q4) Does price never change under perfect competition, given the fact that a firm
under
perfect competition is a price taker?
Hint:- Industry will determine the price with the help of Demand and Supply
force
Q5) What is the reason for the long run equilibrium of a firm in monopolistic
competition
to be associated with zero profit?
Q6) What happens when demand and supply curve don’t intersect each other?
Hint:- Economically non-viable.
Q7. ‘what is the relationship between control price and equilibrium price ?
From the following data calculate ‘gross value added at factor cost’:
(Rs. in lakhs)
(i ) Net indirect taxes 20
(ii) Purchase of intermediate products 120
(iii) Purchase of machines 300
(iv) Sales 250
(v) Consumption of fixed capital 20
(vi) Change in stock 30
From the following data calculate net national product at factor cost by
(a) income method, and (b) expenditure method.
(Rs. in
crores)
(i ) Current transfers from rest of the world 100
(ii) Government final consumption expenditure 1,000
(iii) Wages and salaries 3,800
(iv) Dividend 500
(v) Rent 200
(vi) Interest
150
(vii) Net domestic capital formation 500
(viii) Profits 800
(ix) Employers’ contribution to social security schemes 200
(x) Net exports (-) 50
(xi) Net factor income from abroad (-) 30
(xii) Consumption of fixed capital 40
(xiii) Private final consumption expenditure 4,000
(xiv) Net indirect tax 300
Calculate (a) private income, and (b) personal disposable income from the
following data:
(Rs. in
crores)
(i ) Income from property an entrepreneurship accruing to
government administrative department 500
(ii) Savings of the non-departmental public enterprises 100
(iii) Corporation tax 80
(iv) Income from domestic product accruing to private sector 4,500
(v) Current transfers from government administrative departments 200
(vi) Net factor income from abroad (-) 50
(vii) Direct personal taxes 150
(viii) Indirect taxes 220
(ix) Current transfers from rest of the world 80
(x) Savings of private corporate sector 500
15. Will the following factor income be a part of domestic factor income of India?
Give reasons for your answer.
(i) Profit earned by foreign banks from their branches in India.
(ii) Salary received by Indian residents, working in American embassy in
India.
(iii) Profits earned by an Indian company from its branch in Singapore.
(iv) Compensation of employees given to residents of China working in Indian
embassy in China.
16. What is double counting? How can it be avoided?
17. How the sum of net factor income is equal to the sum of factor income?
18. What is effective demand? How will you derive the autonomous
expenditure multiplier when price of final goods and the rate of interest are
given?
Calculate Gross National Disposal Income from the following data: Rs.
(Crores)
(i) National income. 2,000
(ii) Net current transfers from rest of the world. 200
(iii Consumption of fixed capital. 100
)
(iv) Net factor income from abroad. (-) 50
(v) Net indirect taxes. 250
(3
marks)
Ans. G.N.D.I. = GNPmp + NCT R/W
= (N.I. + CFC + NIT) + NCT R/W
= (2000 + 100 + 250) + 200
= 2350 + 200 = Rs. 2550.
Calculate Gross National Disposal Income from the following data:
Rs.
(Crores
)
(i) Net national product of factor cost. 3,000
(ii) Net factor income from abroad. (-) 50
(iii Consumption of fixed capital. 150
)
(iv) Net indirect taxes. 250
(v) Net current transfers from rest of the world. 300
(3
marks)
Ans. G.N.D.I. =(I + iii + iv) + (v)
= (GNPmp) + (NCT R/W)
= (3000 + 150 + 250) + (300)
= 3400 + 300 = Rs. 3700 crores.
Calculate Net National Disposal Income from the following data: Rs. crores)
(i) Gross national product at factor cost. 800
(ii) Net current transfers from rest of the world. 50
(iii Net indirect taxes. 70
)
(iv) Consumption of fixed capital. 60
(v) Net factor income from abroad. (-)10
(3 marks)
Ans. G.N.D.I. = GNPmp + NCT R/W
= (GNPFC + NIT) + NCT R/W
= ( i + iii) + ii
= (800 + 70) + 50
= Rs. 920 crores.
Calculate Net National Disposal Income from the following data:
Rs. (Crores)
(i) Gross domestic product at the market price. 1,000
(ii) Net factor income from abroad. (-)20
(iii Net indirect taxes. 120
)
(iv) Consumption of fixed capital. 100
(v) Net current transfers from rest of the world. 50
(3 marks)
Ans. NNDI = NNPMP + NCT R/W
= (GNPMP - CFC + NFIA) + NCT R/W
= i – iv + ii + v
= 1000 + 100 + (-20) + 50
= Rs. 930 crores.
Rs.
(Crores)
(i) Private final consumption expenditure 2,000
(ii) Net capital formation 400
(iii) Change in stock 50
(iv) Compensation of employees 1,900
(v) Rent 200
(vi) Interest 150
(vii) Operating surplus 720
(viii Net indirect tax 400
)
(ix) Employees’ contribution to social security schemes 100
(x) Net exports 20
(xi) Net factor income from abroad (-)20
(xii) Government final consumption expenditure 600
(xiii Consumption of fixed capital 100
)
Ans:
(i) It is a part of domestic factor income of India because the Indian
embassy in Japan is a part of domestic territory of India.
(ii) It is a part of domestic factor income of India because the foreign
bank is located in the domestic territory of India.
(iii) It is not a part of domestic income of India because Russian
embassy in India is not a part of domestic territory of India.
2. From the following data, calculate National Product at Market Price by (i) income
method and (ii) expenditure method: (6 marks) Rs. (Crores)
(i) Mixed income of self- employed 400
(ii) Compensation of employees 500
(iii) Private final consumption expenditure 900
(iv) Net factor income from abroad (-) 20
(v) Net indirect tax 100
(vi) Consumption of fixed capital 120
(vii) Net domestic capital formation 280
(viii Net exports (-)30
)
(ix) Profits 350
(x) Rent 100
(xi) Interest 150
(xii) Government final consumption expenditure 450
Ans:
(i) Profit earned by a foreign bank is included in domestic product of India because
the bank’s branches are located in the Indian domestic territory.
(ii) Scholarships is a transfer payment because no service is provided in return. So, it
is not included in domestic income.
(iii) Profits earned by an Indian company in Singapore is not included in domestic
product of India because company is located outside the economic (domestic)
territory of India.
(iv) Salaries received by Indians working in American Embassy in India is not
ssssS
included because the embassy is treated as a part of American domestic territory
and not of India.
Q23. Isn an economy, investment expenditure is increased by Rs. 400 crores and
MPC is 0.8 calculate total increase in income and savings
Hints. : Increase income Rs. 2000 Crores, Increase saving Rs. 400 crores .
Q24. Find out MPC and MPS if an additional investment of Rs. 100 crores generates
and additional income of Rs. 500 crores .
Hints. : MPC = 0.8 and MPS=0.2
Money and Banking
Q1) What is high powered Money
(a) cash with people, B) cash reserve with
Q2) What is money multiplier? How do you determine its value? What ratios paly an
important role in the determination of the value of money multiplier?
ANS: See Mock / sample papers marking scheme
Q3) What are the instruments of monetary policy of RBI? How does RBI stabilize
money
supply giant exogenous shocks?
Q4) How does central bank perform the function of controller of credit?
ANS: See Mock / sample papers marking scheme
Q5) What is the difference between a commercial bank and central bank.
Q6) What is liquidity trap?
Q7) Why is speculative demand for money inversely related to the rate of interest.
Q8. What are the main functions of money? How does money over come the
shortcomings of a barter system?
ANS: See Mock / sample papers marking scheme
Q10. What are the alternative definitions of money supply in India?
ANS: See Mock / sample papers marking scheme
Q1) If inflation is higher in country a than in country B and the exchange rate between
the 2 countries is fixed, what is likely to happen to the trade balance between the
countries.
Q2) What is meant by visible and invisible items in the balance of payments account?
Give 2 examples of invisible items
Q3) Balance of Payment always balance : Does it mean a situation of zero net
financial
obligation for a country?
Hint:- It should not be interpreted as zero net financial obligation for a country.
A
-ve balance on the current account is equated with the balance in the
capital account. But +ve balance in capital account has to be achieved through loans
from ROW.
Q4) How is deficit or surplus on current account BOP restored?
Hint:- Through surplus on capital account, and surplus on current account is
restored
through deficit on capital account.
Q4. The Balance of trade shows a deficit of Rs.300 Crore. The Value of exports are
Rs.500 Crore. What is the value of imports? Hint: 800
COMMON ERRORS WHICH ARE GENERALLY SEEN
IN ECONOMICS ANSWER SCRIPTS
2. Due to the same problem, they are unable to convey the answers suitably.
4. Inadequate skills in presenting the diagrams due to lack of practice. For eg.,
drawing of demand curve for supply curve and vice versa; drawing of cost
curves instead revenue curves and vice-versa.
6. Formulae in National Income Accounting and Micro Economics are not leant
thoroughly.
7. Omission of some answers is commonly seen among the students. One should
attempt all the questions.
1. Motivation and encouragement of the students are the best tonic for higher or
better scoring.
3. While writing the answers, students must be trained to write only the value
points.
9. The teacher has to pay more attention in rectifying the common errors which
are being normally made by the students, while writing. Hence, the teacher
can discuss these points, in the class room with the help of corrected answer
scripts of the students after every test.
10. Xerox copy of the best students’ answer papers can be distributed to other
students after discussion
ECONOMICS
Time allowed : 3 hours Maximum marks: 100
Note:
(i) All questions in both the sections are compulsory.
(ii) Marks for questions are indicated against each.
(iii) Question Nos. 1 and 13 are very short-answer questions carrying 1 mark for
each
part. They are required to be answered in one sentence each.
(iv) Question Nos. 2-5 and 14-17 are short-answer questions carrying 3 marks each.
Answer to them should not normally exceed 60 words each.
(v) Question Nos. 6-9 and 18-21 are also short-answer questions carrying 4 marks
each. Answer to them should not normally exceed 70 words each.
(vi) Question Nos. 10-12 and 22-24 are long-answer questions carrying 6 marks
each. Answer to them should not normally exceed 100 words each.
(vii) Answers should be brief and to the point and the above word limits be adhered
to as far as possible.
(viii) All parts of a question should be answered at one place.
Section A
1. Answer the following questions :
(i) Why does an economic problem arise ?
(ii) Define opportunity cost.
(iii) What does a rightward shift of production possibility curve indicate ?
(iv) Define microeconomics. 1×4=4
2. Explain the effect of increase in income of the consumer on the demand for a
good. 3
6. A consumer buys 40 units of a good at a price of Rs. 3 per unit. When price
rises to Rs. 4 per unit he buys 30 units. Calculate price elasticity of demand by
the total expenditure method. 4 OR
A consumer buys 80 units of a good at a price of Rs. 5 per unit. Suppose price
elasticity of demand is (-)2. At what price will he buy 64 units ?
Section :B
13. Answer the following questions : 1×4
(i) Define macroeconomics.
(ii) Give two examples of macroeconomic studies,
(iii) What does balance of payments account of a country record ?
(iv) Name the items included in balance of trade account.
18. Give meaning of money. Explain the ‘store of value’ function of money. 4 M OR
What is ‘barter’? Explain ‘standard of deferred payment’ function of money.
24. Explain the problem of ‘excess demand’ in an economy with the help of a
diagram. Explain the role of bank rate in correcting it. 6
.
EXPECTED ANSWERS M: Section – A
1. (i) Economic problem arises because of unlimited wants and scarcity of resources
having alternative uses. 1
(ii) Opportunity cost is the value of the next best alternative foregone. 1
(iii) It indicates growth of resources. 1 OR Advancement of technology.
(iv) A study of the single economic unit of the economic system / economy. 1
11. Statement of three phases of law of variable proportion in terms of total physical
product using the diagram. 3
12. (i) Explanation 3, (ii) Explanation 3
SECTION – B
13. (i) Macro economics is a study of the aggregates of the economic system. 1
(ii) Study of aggregate demand, aggregate supply, unemployment, inflation , etc.
(any two)
(iii) BOP records transactions between residents of the given country and the
residents of the foreign countries. 1
(iv) (a) Exports of goods (b) Imports of goods. 1
17. Sources for demand for foreign exchange (any three) ½×3
Sources of supply of foreign exchange (any three) ½×3
18. Meaning of money 1
Explanation of the function 3, OR
Meaning of barter 1
Explanation of the function 3
20. The receipts which neither create any liability nor lead to any reduction in assets
are called revenue receipts while the receipts which lead to either increase in
liability or to reduction in assets are called capital receipts 2
Examples (two each) ½×4
Section –A
7. Price elasticity of demand of a good is 9-01. At a given price the consumer buys 60
units of the good. How many units will the consumer buy if the price falls by 10
percent?
8. Given the market price of a good, how does a consumer decide as to how many
units of that good to buy? Explain.
9. What is the likely effect on the supply of a good if the prices of the inputs used in
the production of that good fall? Explain.
10. Explain what happens to the profit in the long run if the firms are free to enter the
industry.
OR
Explain what happens to looses in the long run if the firms are free to leave the
industry.
11. Explain producer's equilibrium using a schedule. Use total cost and total revenue
approach.
OR
Distinguish between (I) Fix cost and variable cost giving examples and
(II) Revenge cost and marginal cost giving an example.
12. Draw supply curves with price elasticity of supply throughout equal to
(I) zero , (II) one
(II) infinity, (IV)less than one
13.
Price (Rs) Output(units) Total revenue(Rs) Marginal Cost(Rs)
- 1 6 -
4 - - 2
- 3 6 -
1 - - -2
14. Explain with the help of numerical example, the effect on total output of a good
when all the inputs used in production of that good are increased simultaneously and
in the same proportion.
15. Given market equilibrium of a good what are the effects of simultaneous increase
in both demand and supply of that good on the equilibrium price and quantity?
OR
Explain the implication of the following
1) The feature differentiated product under monopolistic competition.
2) The feature large numbers of buyers and sellers under perfect competition.
SECTION B
17. Define aggregate supply. 1
18. Give meaning of deficient demand. 1
19. What is commercial bank? 1
20. Define Government Budget. 1
21. What is fixed exchange rate system? 1
22. Calculate net value added at factor cost from the following
data. 3
a) Depreciation 20
b) Intermediate cost 90
c) Subsidy 05
d)Sales 140
e) Export 07
f) Change in stock -10
g) Import of raw material 03
6. Price elasticity of demand foa a good is 9-) 2. The consumer buys a certain
Quantity of this goode at a price of Rs. 8 per unit. When price falls he buys 50% more
quantity. What is the new price.? 3M
8. What is the likely effect on the supply of a good if a unit tax imposed on that good?
Explain.
10.. Explain the central problems of choice of products to be produced. 3M
11.
Price (Rs.) Output (Units) TR(Rs.) MR (Rs.)
10 1 -- --
-- 2 14 --
-- 3 -- 1
-- 4 12 --
SECTION : B
26. Calculate Gross Value Added at MP from the following data. 3M
Sl.No Items Rs. In lakhs
1 CFC/ Deprecfition 15
2 Sales in domestic market 250
3 Exports 50
4 Opening stock 20
5 Purchase of raw material 150
6 Closing stock 30
7 Import of raw material 25
31. Calculate 'Gross National Product at MP' and Personal Income" from
The following data. 3,3 M
Sl.No Items Rs. In Crores
1 Corporation tax 35
2 Wages and salaries 200
3 National debt interest 25
4 Operating surplus 400
5 Net current transfers from abroad 152
6 Net factor income from abroad (-)10
7 Consumption of fixed capital 20
8 Social security contributions by employers 30
9 Net indirect tax 40
10 NDP at FC accruing to the private sector 500
11 Current transfers from govt.s 5
7. What is the likely effect of technological progress on the supply of a good? Explain.
9. Explain the central problem of distribution of income 3M
10 Price elasticity of demand of a good is (-) 3. If the price rises from Rs. 10 per
unit to Rs. 12 per unit, what is the percentage change in demand. 3M
12. Complete the following table:
Price (Rs.) Output (Units) TR(Rs.) MR (Rs.)
7 -- 7 --
-- 2 10 --
-- 3 -- (-)1
1 -- -- (- ) 5
SECTION : B
26. Calculate Gross Value Added at FC from the following data. 3M
Sl.No Items Rs. In lakhs
7 CFC/ Deprecfition 9
2 Sales 400
4 Excise duty 30
1 Sales tax 20
3 Purchase of raw material 250
5 Change in stock (-) 40
6 Import of raw material 12
32. Calculate 'Net National Product at MP' and Private Income" from
The following data. 3,3 M
Sl.No
Items Rs. In Crores
1 Net factor income from abroad (-)5
2 Private final consumption expenditure 100
3 Personal tax 20
4 Gross domestic capital formation 170
5 Govt final consumption expenditure 20
6 Corporation tax 15
7 Gross domestic capital formation 30
8 Personal Disposable Income 70
9 Net exports (-) 10
10 Saving of pvt corporate sector 5
11 Net national disposable income 145
1 / B 2 / B3
Section – A
1 5 4 1
MRT is the ratio of units of one good sacrificed to produce one more unit
of the other good.
2 1 5 Demand schedule is a table showing prices and the quantities demanded at 1
each price.
4 3 2 Market supply refers to the sum of outputs of all the producers of a good at 1
a price during a given period of time.
5 4 3 Equilibrium price is the price at which market demand equals market 1
supply.
6 10 9 1
Meaning of the problem
2
Explanation of the problem
- - 10 E = % Change in demand 1
% Change in price
- 8 - Imposition of a unit tax raises cost. This reduces profit which results in 3
producer supplying less (Explanation)
10 9 8 When existing firms are earning profit, freedom of entry induces new firms 3
to enter the industry. This raises market supply which in turn leads to fall in
market price. Profits fall and continue to fall till each firm is earning zero
economic profit / normal profit / Zero profit.
OR
When existing firms are incurring losses, the firms start leaving the
industry. This reduces the number of firms. The market supply is reduced
which in turn leads to rise in market price. Losses fall and continue to fall
till they are wiped out and each firm left in the industry is earning zero
economic profit / normal profit / Zero profit.
11 12 13 Schedule 2
Explanation in terms conditions of equilibrium based on TR/TC approach. 2
OR
(i) FC vs VC Distinction
Examples ½ × 2 1
1
(ii) AC vs MC Distinction
Numerical example ½ × 2 1
1
12 13 11 Supply curve, elasticity of supply – degrees diagrams
15 14 16 C. R. S. Meaning 1
Numerical Example 1
I. R. S. Meaning 1
Numerical Example 1
D. R. S. Meaning 1
Numerical Example 1
OR
(i) Meaning 1
Implication : in terms of power to influence price by a firm. 2
(ii) Meaning 1
Implication : in terms of on individual firm having no
influence over the market price. 2
1
Section – B
17 21 20
Aggregate supply refers to the value of final products planned to be
produced in an economy during a given year.
22 - - NVA fc = iv + vi – ii – i + ii 1
= 140 + (-10) -90-20 + 5 1½
= 25 (Rs. lakhs) ½
- 26 - GVA mp = ii + iii + vi – iv - v 1
= 250 + 50 + 30 – 20 - 150 1½
= Rs 160 lakhs. ½
- - 25 GAV fc = ii + v – iii – i - iv 1
= 400 + (-40) – 250 – 20 - 30 1½
= Rs 60 lakhs ½
23 22 26 When exchange rate falls imports become cheaper. Demand for imports 3
rises and so rises the demand for foreign exchange to purchase more
imports.
OR 3
Evaluation of money in terms of commodity money, metallic money paper
money, bank money.
26 25 24 Capital expenditure is the expenditure by government that either creates 1
an asset or reduces a liability.
Example : construction, repayment of loan, etc. ½
any one
Revenue expenditure is the expenditure by government that neither
creates an asset nor reduces a liability 1
Example: interest payment, subsidy, etc. ½
any one
- 28 - ∆ Y = ∆ I 1__ 2
MPS
600 = ∆ I 1_
0.2 1
∆ I = 600 × 0.2
= 1200 1
- - 29 2
∆ Y = ∆ I 1__
MPS
∆ Y = 125 1_
0.25 1
= 125 × 4
= Rs 500 crores 1
½
- 31 - G. N. Pmp = (ii + viii) + iv + vii + ix + vi 1
= 200 + 30 + 400 + 20 + 40 (-10) 1
= Rs. 680 crores ½
½
31 32 30 Schedule
Explanation based on schedule 2
OR 2
Schedule 2
Explanation based on schedule 2
OR
2
Schedule 2
Explanation based on schedule 2
MPS in schedule
32 30 31 (i) Self consumed output is a part of total output and therefore,
accounted for through the production method. 2