IMPORTANT QUESTIONS

THEORY OF DEMAND

1. As a result of a 5% fall in the price of a good, its demand rises by 12%. Find out the price elasticity of demand.
2. What is the relation between good X and Y in each case, if with a fall in price of X demand for good Y
(a) rises and (b) falls? Give reason.
3. Discuss any two exceptions to the law of demand.
4. How does an increase in income affect the demand for the following?
a) Inexpensive necessities b) An inferior good.
5. Differentiate between law demand and elasticity of demand.
6.If the price of a commodity rises from rupees 8 to rupees 10 per unit and demand Falls by
50%, what is the price elasticity of demand?
7.A company producing shirts and jeans both. How will an increase in the price of shirt will affect the demand for
Jeans?
8. Draw a Demand Curve showing Unitary elasticity at all points.
9. Explain the following factors affecting demand:-
(a) Future price expectation. (b) Taste and preference pattern of the consumer.
10.What is Income Effect? Is it positive for all goods?
11. What type of demand does milk have and, why?
12. Differentiate between inferior good and Giffen good.
13. Differentiate between decrease in demand and expansion of demand with the help of diagrams.
14.When price of an inferior good falls, what would be the impact on the demand of inferior good- explain with
the help of substitution Effect and Income Effect.
15. Would you advocate expansion or contraction of credit in a situation of excess demand in the economy?
Explain briefly.
16. Milk is used for making curd, sweets and chocolates. What type of demand does milk have? Give a reason.
17. Draw a straight-line demand curve joining both the axes. Indicate the following on the demand curve.
(a) Elasticity of demand is equal to zero
(b) Elasticity of demand is greater than one
18. A consumer buys 160 units of a good at price Rs.8 per unit. Price falls to Rs.6 per unit. How much quantity will
the consumer buy at the new price elasticity of demand is 2.
19. All Giffen goods are inferior but all inferior goods are not Giffen. Justify giving 4 points.
20. Explain the geometric method of measuring the elasticity of demand.
21. The price of cars of a particular brand is expected to fall after winter season. As a result, there is a decrease in
the current demand for car of that particular brand. Explain this relationship between demand for cars and the
factor affecting its demand.
22. What is the price elasticity if the price and the total expenditure are negatively related?
23. Calculate price elasticity as demand rises from 15KG to 20KG due to a price fall from Rs 40 to Rs 30.
24. If ratio of change in quantity (∆Q) to original quantity (Q) is 0.5 and elasticity of demand is 1.25, calculate the
percentage change in price.
 THEORY OF CONSUMER BEHAVIOUR
1. State the Law of Equi- Marginal Utility.
2. With the help of diagram, explain how the consumer will attain equilibrium on consumption of a single
commodity at a given price.
3. Explain the concept of marginal rate of substitution by giving an example. What happens MRS when consumers
move downward along the indifference curve?
4. Explain why consumer's equilibrium is attained when the marginal utility of a product is equal to its price.
5. What do you mean by the consumer equilibrium? show it with the help of budget line and Indifference map
along with the essential condition of it. Also explain how will the consumer behave in the following cases:
MRSxy>Px/Py
MRSxy<Px/Py
6. Explain the Law of Diminishing Marginal Utility with the help of a diagram.
7. What is marginal rate of substitution?
8. Define a consumer's equilibrium.
9. 'The utility maximizing consumer must allocate his income among various commodities in such a way that the
last unit of money (rupee) spent on each commodity gives him the same (equal) marginal utility'. From the above
statement, Identify and explain the law.
10.Explain the Consumer's equilibrium through Indifference curve approach with the help of a diagram.
11. Explain the relationship between Total utility and Marginal utility with the help of a diagram.
12. Distinguish between Cardinal Utility and Ordinal Utility.
13. What is the maximum price that a consumer will be prepared to pay for a commodity? Give reason.
14.Explain the concept of budget line with the help of suitable schedule and graph
15.State the condition of consumer's equilibrium by the cardinal approach, when the consumer consumes only
one commodity. Explain the condition briefly.
16. Explain consumer's equilibrium using the ordinal approach. If a consumer is at a point where MRS is more than
the price ratio of X and Y. How should he adjust consumption of X and Y to attain equilibrium.
17. How does MRS affect the shape of indifference curve?
18. What does MRS between two goods imply?
19. Give the conditions for deriving consumer equilibrium through IC curve approach.
20. Explain how DMRS is responsible for convexity of indifference curve?
21.With the help of a schedule, explain the operation of the law of Equi- Marginal Utility.
22. What does the convexity of an indifference curve imply?
23. Explain an important property of indifference curve through the law of transitivity.
24. What is meant by a stable equilibrium?
 THEORY OF SUPPLY
1. Trendz produces both jeans and shirts. How will an increase in the price of jeans affect the supply curve of
shirts? Illustrate using diagram.
2. Explain the four reasons why the supply curve shift rightwards.
3. Mention any two assumptions of Law of Supply.
4. The GST Council, headed by Union Finance Minister, gave a nod to levy 28% GST on online gaming. horse racing
and casinos at full value.
Source: Economic Times March, 2024. Analyse the impact on the supply of online gaming. Explain with the help of
diagram
5. Reduction in the cost of production due to advancement of the technology - Show graphically the impact on the
supply curve for a commodity.
6.What is the elasticity of supply curve in secular Run? Draw the Supply Curve.
7.Draw the supply curves when Es>1 and Es<1.
8.Trendz produces garments. How the supply curve will be affected when transportation cost increases? Show it in
a diagram.
9. Distinguish between Contraction in supply and decrease in supply.
10. An increase in the number of firms in the market causes a rightward shift in the market supply curve, but the
individual supply curve may shift leftwards. Justify the statement.
11. Explain briefly any two reasons for the slope of supply curve.
12. Explain the concept of labour supply curve with the help of a diagram.
13. Explain any four non-price factors to quantity supplied of a commodity.
14. Give 2 difference between intended and actual supply.
15. Draw the supply curve having same elasticities at all the points.
16.Explain how price elasticity of supply can be measured by using Geometric method.
17. Show how the price elasticity of supply is shown as inelastic by the point method .
 FORMS OF MARKET
1. Briefly discuss the implication of 'freedom of entry and exit' under perfect competition.
2. Per unit price of electricity is higher in the Commercial sector as compared to the Domestic sector. Identify and
briefly describe this phenomenon. Name the market in which it is applicable.
3. There are many manufacturers of pencils in the market who produce pencils in different designs and colours to
attract children. Which market form is referred to here? Briefly explain the feature of this market form indicated in
the given situation.
4. "In a hypothetical market of mobile phones, the brand AWAAZ was leading the market share. Its nearest
competitor VAARTA suddenly changed its strategy by bringing in a new model of the mobile phone at a relatively
lesser price. In response, AWAAZ too slashed its price". Based on the above information, Identify the form of
market represented and discuss any one feature of the market.
5. Explain the implications of large number of buyers in a perfectly competitive Market.
6. Which market practices price discrimination and why?
7. What do you mean by monopsony?
8. In which market form there is indeterminate demand curve?
9. What is Selling Cost?
10.Name a buyer’s market. Give one feature of the market.
11. Give one important feature of Oligopoly.
12. Due to the interdependence of the firms under oligopoly market there is no stable demand curve. State True or
False and give a reason.
13.HUL is one of India's largest FMCG company based in Mumbai. It has made a reputation in soaps and detergent
industries. It is constantly innovating new products to compete with other similar players in the market.
(a) What kind of market structure HUL is operating in?
(b) What is the shape of demand curve under this type of market structure?
14. "A physician may charge different fees for rich and poor patients". Identify the market form an particular
feature said above. Define this particular feature.
15. "The demand curve faced by an oligopolist is indeterminate due to interdependence of firms Justify the
statement above.
16. What do you mean by non - price competition?
17. In India, the Central Government is the sole buyer when it comes to the domestic defence manufacturing
sector. Identify and explain the form of market
18. Explain any two features of Monopoly Competition.
19.What is meant by Interdependence under Oligopoly?
20. How is the market structure of automobiles different from cosmetics?
21. Why are bathing soaps sold in different shapes, colours, fragrances and sizes? Briefly explain your answer.
22. What is meant by price rigidity? In which market is it visible and why?
23. Briefly discuss the implication of 'freedom of entry and exit' under perfect competition.
24. Per unit price of electricity is higher in the Commercial sector as compared to the Domestic sector. Identify and
briefly describe this phenomenon. Name the market in which it is applicable.
25. Briefly discuss the importance of Selling Cost under oligopoly market
26. There are many manufacturers of pencils in the market who produce pencils in different designs and colours to
attract children. Which market form is referred to here? Briefly explain the feature of this market form indicated in
the given. situation.
27. What do you mean by selling costs? To which market is it relevant?
28. The demand curve of a firm is more elastic under monopolistic competition than under monopoly. Explain.
29. What do you mean by ‘pure’ & ‘differentiated’ oligopoly?
30.What is the implication of “free entry and exit” in a market?
31. Give 2 similarity between Monopolistic and Monopoly market.
32. Explain any two causes of restricted entry in a monopoly market structure.
33. How can you say that monopolistic competition market structure is a perfect blend of monopoly and a
competitive element?
 COST
1. The fixed cost of a firm are Rs. 60. Its marginal cost at different level of output is given below. Calculate ATC and
AVC.
Output (Units) 1 2 3 4
Marginal Cost (Rs.) 30 26 28 32
2. Draw a well labelled diagram to show TFC and TC curve. State the nature of each curve.
3. What is the marginal cost of a firm?
4.Calculate AC, AVC and AFC from the following: TFC is 15 at all level of output
Output (units) 1 2 3 4
Total cost 10 19 29 40

5. Why does the difference between ATC and AVC decrease with an increase in the level of output? Can these two
will be equal?
6. Why are there no fixed costs in the long run?
7. Indicate the relationship between AC and MC when AC rises.
8.Explain the shape of all Total cost curves.
9.Show the relationship between AC and MC with the help of a neat diagram.
10. Why does the difference between short run Average Variable Cost and Average Cost curves gradually decrease?
11. Is it ever possible for the total cost curve to start at the origin?
12. What is opportunity cost of a firm?
13. Long-run equilibrium of the firm under perfect competition is only at the minimum point on its LAC curve,
producing the optimum level of output. Explain the above statement.
14.What is Prime Cost?
15. Explain the relationship between Total Cost (TC) and Marginal Cost (MC) with diagram.
16. "Normal profit means zero economic profit." Why? Under what condition can it be noticed in a perfectly
competitive market?
17. Write any one difference between Explicit & Implicit cost.
18. What is fixed cost?
19. Why is the short run average cost curve u-shaped?
20. What are explicit costs and implicit costs?
21. State whether the following is True or False. Give a reason for your answer. TVC is an avoidable cost.
22. Draw and explain Average Fixed Cost curve.
23. Fixed cost is also known as____.
24. Give the formula for social cost.
25. “The distance between TVC & TC is parallel.” Why?
26. With help of well labelled diagram, lay the relationship between TVC and MC.
27. What is meant by average cost?
28. With the help of a diagram, explain why the gap between AC curve and AVC curve decreases with an increase
in the level of output?
29. What is meant by break-even point? Show it in a diagram?
30. What are social costs and private costs?
31. Draw the total cost curve in a short run as the sum of fixed and variable costs.
32. The TVC curve is concave downward up to some point and then concave upward -what does it indicate?
 REVENUE
1. Why AR is the demand curve of a firm?
2. What would be the shape of total revenue curve of a firm under Perfect Competition?
3. Show the relationship between AR and MR under imperfect competition.
4.Why total revenue curve of a competitive firm passes through the origin and AR and MR curves are horizontal?
5. How is Total Revenue under perfect competition different from Total Revenue under imperfect competition?
Give two points to show the difference.
6. Why both ARand MR Curve are downward sloping and MR curve lies below AR curve at all level of output under
imperfect competition?
 LAW OF RETURN
1. Cite any two difference between Returns to a factor and Returns to Scale.
2. Identify the three phases of the law of variable proportions. Give reasons for each.
Variable Input (units) 1 2 3 4 5

Total Product (units) 5 11 15 17 15

3. Using suitable diagram, explain the three stages of production when one factor Input is variable and others are
constant.
4. What is AP?
5.Which stage is the stage of operation under the law of variable proportions?
6. Law of variable proportions ensures that a rational producer will only produce when the total product is at a
phase of diminishing returns- Do you agree? Give reasons.
7. What is the production function called, when only one input is variable and all other inputs are assumed to be
constant? Explain the law governing such production function with the help of a suitable diagram.
8.Briefly explain why 'overcrowding' is considered a cause for negative returns.
9. When MP starts declining, how does AP behave?
10.Explain two cause of diminishing return to a factor.
11. In which stage of production are the producers expected to earn maximum profit? Justify your choice of
answer and give one reason for the operation of this stage.
12. With the help of a diagram, explain plain the relationship between Average Product and Total Product under
the Law of Variable Proportions.
13. What does zero marginal productivity of labour imply?
14. Explain the cause for diminishing returns to factor proportions.
15. Diagrammatically illustrate the relationship between TP & MP.
16. Differentiate between Returns to a factor and returns to a scale.
17. Describe in words the exact shape of the Total Product curve in the short run.
 PRODUCER’S EQUILIBRIUM
1. The equality of marginal cost and marginal revenue is a condition necessary for equilibrium, but it is not by itself
sufficient to assure the attainment of producer's equilibrium. Comment.
2. A firm in pure competition has a price of Rs. 7 per unit, an average cost of Rs. 7.50, average variable cost of Rs. 6
and a marginal cost of Rs. 6.75. Should this firm expand output, contract output or shut down in the short run?
3. What do you mean by Break Even Point?
4. Explain Producer’s equilibrium through TR- TC approach.
5. Producer's equilibrium is a situation of revenue maximisation' - Do you agree? Defend or refute the statement
with reason.
6. Using the MR - MC approach, explain short run profit maximization of a firm under perfect compe with the help
of a suitable diagram.
7. In the short run under perfect competition, a necessary condition for the firm to be producing its profit-
maximising output is that the margin revenue (MR) should be equal to the marginal cost (MC), i.e., MR-MC.
8. Explain the short-run producer's equilibrium of a competitive market using TC - TR approach.
9. Explain, how does producer attain equilibrium through TR-TC approach.
 BALANCE OF PAYMENT
1. How is depreciation of currency different from devaluation of currency.
2. List different component of Balance of Payment on current account and capital account.
3. What are components of Current account of Balance of Payment?
4. What do you understand by fixed exchange rate system of determining foreign exchange rate?
5.Categories the following items into Current Account or capital Account of Balance of Payment of India?"
6. The current account of Balance of Payments (Bop) can be in surplus even though there is a Balance of Trade
(BOT) deficit." Justify.
7. Differentiate between direct foreign investment and portfolio investment.
8.Discuss any two export promotion measures undertaken to correct the disequilibrium in the Balance of
Payments.
9. How is exchange rate determined under flexible exchange rate system? Explain it by using an appropriate
diagram.
10.Where will the sale of machinery to abroad be recorded in the BOP account? Give reasons.
11.What do you mean by deficit in BOP?
12.Explain two causes of disequilibrium in the BOP and suggest two measures to correct it.
13. Read the passage very carefully and answer the questions that follow.
The rupees depreciated by 6 paise to close at 73.02 (provisional) against the US$ on Monday, tracking a rebound in
the American currency overseas. At the Interbank Forex Market, the domestic unit opened at 72.89 against the US
$ and witnessed an intra-day high of ₹72.84, and a low of ₹73.15.
Source: ET Bulletin, 2023
(i) How will the devaluation of Indian rupee affect the imports?
(ii) When domestic currency loses its value in relation to a foreign currency in the international money market?
(iii) Should a current account deficit be a cause for alarm? Explain.
14. Differentiate between Appreciation and Revaluation of the currency. How does persistent BOP deficits create
problem for the fixed exchange rate system?
15. Name the types of transactions recorded in the Capital account of balance of payment.
16. Dirty floating is related to___ system of exchange rate.
17. List two sources of demand for foreign exchange.
18.Differentiate between depreciation and Devaluation.
19. Read the passage given below and answer the questions that follow.
India's foreign exchange reserves increased by $2.82 billion to $606.86 billion for the week ending on December 8,
2023. According to the Weekly Statistical Supplement released by the RBI. Foreign currency assets (FCAs) increased
by $3.09 billion to $536.70 billion. Expressed in dollar terms, the FCAs include the effect of appreciation or
depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
It can be noted that in October 2021, the country's forex kitty had reached an all-time high of USD 645 billion. The
reserves have been declining as the central bank deploys the kitty (pooled money) to defend the rupee amid
pressures caused mainly by global developments. Typically, the RBI, from time to time. intervenes in the market
through liquidity management, including through the selling of dollars, with a view to preventing a steep
depreciation in the rupee. Economic Times. Dec 15, 2023.
(i) What is the benefit for the appreciation of the Indian Rupees?
(ii) How is the exchange rate determined in India?
(iii) Explain two sources of supply for foreign exchange in India?
(iv) How appreciation is different from revaluation? Write two points of differences.
(v) If Indian investors lend abroad, what will be the impact on Capital account of BOP?

20. If there is economic depression in the foreign country which imports goods from India, how will this affect the
demand or supply curve of $ in India?
21. Read the passage given below and answer the questions that following.
The Reserve Bank of India (RBI) today released preliminary data on India's Balance of Payments (BoP) for the first
quarter (Q1) of the fiscal year 2023-24, which spans out from April and June. The data reveals significant
shifts and trends in India's economic standing on the international stage. India's current account deficit (CAD) in
India dropped from US$ 17,9 billion (2.1%) in Q1:2022-23 to US$ 9.2 billion (1.1% of GDP) in Q1:2023-24, according
to a release from the RBI today.
Although net services receipts fell sequentially, they were nevertheless higher compared to previous year same
time period. principally as a result of a reduction in exports of computer, foreign travel, and business services. Net
outflow on the income account, which mostly reflects payments of investment income, decreased to US$ 10.6
billion in Q1:2023-2024 from US$ 12.6 billion in Q4:2022-23, while it was greater than a year earlier. according to
RBI's release.

Net foreign direct investment dropped from US$ 13.4 billion a year earlier to US$ 5.1 billion in the financial
account. In Q1:2022-23, net foreign portfolio investment saw inflows of $15.7 billion compared to net outflows of
$14.6 billion, as per RBI release.
As opposed to an outflow of USS 2.9 billion the previous quarter, India's net external commercial borrowings saw
an inflow of US$ 5.6 billion in Q1:2023-24. Compared to Q1:2022-23, non-resident deposits saw net inflows of US$
2.2 billion, up from US$ 0.3 billion in the previous quarter.
Source: (edited): livemint.com, Posted on 28 September 2023
(a) What is CAD mentioned above? Explain briefly.
(b) What are the components of capital account of BOP?
(c) How can the accommodating account to use in the above situation to bring about a BOP equilibrium?
(d) "Export of computers and foreign travel will be reflected in which accounts of BOP and under which heads.
(e) Is it possible for RBI to use the managed floating policy to try and solve any CAD problem? Explain briefly with
suitable diagram.
22. Why is the demand curve for foreign exchange negatively sloped?
23. Mention any one difference between Balance of Trade and Balance of Payment.
24. Categorise the following items into Current Account or Capital Account of Balance of Payment of India.
(a) Acquisition of land in India by an American firm
(b) Use of transport by Indian tourists in Dubai
(c)Dividend paid to foreigners on their investment in shares in India
(d) Loan taken by India from International Monetary Fund (IMF) to cover its BOP deficit
25. Briefly explain the effect of the following on the Balance of Payment of a country.
(a) Inflationary pressure in the economy
(b) Appreciation in domestic exchange rate.
26. Briefly discuss the fixed exchange rate system of determining foreign exchange rate.
27. The current account transactions of balance of payments are classified into four broad categories. Explain
these four categories with suitable examples.
28. What do you mean by appreciation of currency?
29. What is managed floating in exchange rate system.
30. Name the components of the current account in BOP with examples.
31 State two major differences between Balance of Payment and Balance of Trade.
32. Discuss two cause of an adverse BOP and two measure to correct them.
33. Read the passage given below and answer the questions that follow.
A change in the rupee-dollar exchange rate represents the change in external value of rupee. The value of rupee, in
terms of dollar has been falling continuously over a period of time. Since rupee-dollar exchange rate is determined
by the demand for and supply of dollars, it is possible that the value of rupees slides further if appropriate
measures are not taken.
The Reserve Bank of India, in-charge of both internal and external value of rupee, has repeatedly emphasized on
maintaining stability in the foreign exchange market.
(i) What kind of exchange rate system is being referred to in the passage?
(ii) The value of rupee in terms of dollar has been falling continuously over a period of time. Give the economic
term for this phenomenon.
(iii) How would this phenomenon affect the balance of payment?
(iv) Explain the role of Reserve Bank of India as a custodian of foreign exchange.
(v) Suggest any two measure to correct adverse balance of payments.
 MARKET MECHANISM
1. Show with the help of diagram the effect of change in demand on equilibrium price when supply is perfectly
elastic.
2. Discuss the mechanism of Investment multiplier with the help of a numerical Example.
3. Explain Price Floor with the help of a suitable diagram.
4. What happens when the government fixes the maximum price (or price ceiling) lower than the market
equilibrium price for the commodity? Explain with the help of a diagram.
5. When the equilibrium price not change even if its demand and supply increase?
6. What is Floor price? who gets the benefits of it?
7. Can you indicate a situation where equilibrium price remains the same even after a rightward shift of only the
demand curve.
8. Explain the price ceiling and rationing policy of the government with the help of market demand curve and
supply curve of a commodity.
9.Demand remaining perfectly inelastic, show how change in supply can alter the equilibrium price and quantity.
10. OPEC countries accounted for more than a half of the world & supply of crude oil and other countries could not
quickly enjoys monopoly power in crude oil supply? Justify your answer.
11.In a very short period of time, if the demand increases, what would be the impact on equilibrium price and
quantity? Explain with diagram.
12.Mention any two commodities on which ‘price ceiling’ is imposed in India? What may be the consequences of
price ceiling?
13. New environmental regulations require the pharmaceutical industry to use a more environment friendly
technology whose running costs are higher but which discharges less chemicals than before. How would this affect
the equilibrium price of medicines?
14. How will change in income of consumers affect equilibrium price of tea? Explain the effect on equilibrium
quantity and price with the help of suitable diagram.
15. A huge production of onions and lack of storage facilities have caused a continuous fall in its price. This may
adversely affect the production of onions in the subsequent year. With the help of a diagram, briefly explain the
measure that the government should adopt to combat this situation.
16. “Government has imposed wheat quotas which will lead to disruption of supply in Pakistan” show the effect
with price and supply.”
17. Explain the effect of simultaneous increase with the help of diagrams.
18. What is black marketing?
19. Explain” Price Ceiling “only in terms of a diagram with proper labelling.
 THEORY OF INCOME & EMPLOYMENT
1. With the help of a diagram, determine the equilibrium level of output and income by using Aggregate demand
and Aggregate supply approach.
2. Discuss the mechanism of Investment multiplier with the help of a numerical Example.
3. Show the relationship between APC and APS?
4.What do you understand by deficient demand? Show with diagram?
5. Explain the law of consumption function with the help of diagram?
6. Explain the theory of determination of income and Expenditure with the help of Saving and Investment
approach.
7. Read the passage given below and answer the questions that follow.
India's ability to raise its growth rates will fundamentally depend on lis self-finance investment to maintain macro
stability. The report said that the targeted fiscal combination and better savings by public sector units could
further boost overall gross savings by 4% of GDP.
"Our estimates suggest that the household savings rate can potentially rise by at least 2.7 percentage points by
FY30 as the marginal propensity to consume (MPC) moves slower amid rising per capita income," the report said.
The report added that to achieve higher growth, India needs greater investment, and for that, the country's saving
pool first needs to rise.
Source(edited): The Economic Times, February 2024.
(i) What is the theme of this extract?
(ii) Explain the relationship between MPC, income, and savings rate as stated in the report. Prove it
mathematically as well.
(iii)Define investment.
(iv) Explain briefly two fiscal combination measures which can lead to higher growth rate in the economy.
8. Can an investment multiplier be infinity? Explain.
9. If increase in National Income is equal to increase in consumption, what will be the value of Marginal Propensity
to Save?
10. State whether the following statement is True or False. Give one reason for your answer.
Imports not included in the estimation of national income.
11. State any two differences between a current account and capital account.
12. Explain the equilibrium level of income and output determination by Savings Investment approach with the
help of diagram.
13.What is the maximum value of MPC?
14. Zero MPC implies zero multiplier- write True or False with a reason
15.In an economy, the income increases from Rs 500 crores to Rs 800 crores. If MPS is 0.25, calculate increase in
investment required to achieve full employment level of income.
16.Derive saving function from consumption function. Draw the saving curve.
17. Name the monetary measures of RBI indicated in the following statements and also mention in which situation
these measures will be adopted - excess demand situations or deficient demand situations:
(a) Instead of 80%, now 90% of the security amount will be given as loan.
(b) RBI starts buying Govt., securities to the public.
18. The break-even level of an economy is 16000 Crores. If the economy saves 40% of additional income then
estimate the value of autonomous consumption.
19. What will happen to the level of circular flow of income in the following cases:
(a) I > S
(b) I = S
18. Explain the determination of equilibrium in an economy through AD - AS approach. Can this equilibrium be
attained at less than full employment level of output?
19. In an economy how much additional investment should be generated in the private sector to raise national
income by Rs 450 crore while MPC is 0.6.
20. How is deflationary gap generated in the economy?
21. What is aggregate demand?
22. What are the two types of Investment.
23. What is a closed economy?
24. Mention any one difference between Induced investment and Autonomous investment.
25. How is APS obtained from APC?
26. With reference to Simple Keynesian model, give the meaning of ex-ante demand.
27. What is meant by autonomous consumption expenditure? Show it on a diagram.
28. When National Income rises from 600 cr. to 1000 cr., the consumption expenditure increases from 500 cr. to ₹
800 cr. Calculate MPC and hence the value of Investment Multiplier.
30. What is meant by consumption function?
31. With MPC as 0.6, what is the change in NI if investment rises by Rs 350 cr?
32. As a result of increase in investment by Rs 60 crore, national income rises by Rs 240 crore. Calculate MPC.
33. State the component of Aggregate demand.
34. Explain the concept of excessive demand or inflationary gap with the help of diagram. State two monetary
measure to correct inflationary gap.
 BANK
1. Explain the mechanism of credit creation by the commercial Banks with the help of an example.
2. Explain Banker's Bank and Clearing house' functions of the central bank.
3. What is the difference between demand deposit and time deposit?
4. Explain any two Quantitative methods to control money supply by the Central Bank.
5. To whom does the phrase 'Lender of the last resort' allude?
6. What is CRR?
7. Read the passage given below and answer the questions that follow.
In India, Fixed deposits have long been a favourite investment choice of people especially senior citizens as it
promises steady returns. It attracts those people who are seeking a stable income. But it's an illusion in the period
of inflation.
Inflation is the rate at which the general level of prices for goods and services rises, subsequently eroding the
purchasing power of money. In simple terms, what money could buy today, it might not a few years down the line.
Fixed deposits are financial instruments offered by banks where you deposit a lump sum amount for a fixed period
at a predetermined rate of interest. Consider an investment of Rs 1 crore in a fixed deposit at a 6% annual interest
rate and the annual rate of inflation is 5%. By the 10th year your pre inflation return is 1.79 crore, but post
inflation it's just 1.10 crore. The nominal value of investment in fixed deposits may appear to grow, inflation
significantly diminishes their real value and purchasing power over time.
a) What is the theme of the extract?
b) What are Demand deposits and Time deposits?
c) Differenciate between Demand pull inflation and Cost push inflation.
d) Why is the power of issuing currency given to the Central Bank?
8. Give one pomt of difference in terms of interest repayment on 'outright loans" and "overdraft facilities.
9. Explain the role of Reserve Bank of India with respect to:
(a) Lender of the last resort (b) Promotional and developmental functions
10.Explain the role of ‘Open Market Operations’ in controlling recession.
11. As per the following news published in The Economic Times on 26th December, 2021:
'Reserve Bank of India has sold government securities worth ₹ 8,710 crore in the secondary market, over the last
four weeks, to drain out excessive liquidity'. Identify the likely cause and the consequences behind, this type of
action plan of the Reserve Bank.
12. Explain through the quantitative measures how the central bank can control credit in the economy.
13. Read the passage given below and answer the questions that follow.
The Monetary Policy Committee (MPC) increased the repo rate, at which RBI lends short term funds to the
commercial banks, from 6-25 percent to 6-50 percent. This increase in repo rate is based on the increase in the key
rate by 250 bps. The Committee also decided to continue the withdrawal of money supply in the economy.
[Source (Edited): The Economic Times, Feb. 8, 2023]
(i) Which function of central bank is hinted at, in the passage given above?
(ii) In which situation does central bank adopt the measure given in the above passage?
(iii) Explain any two monetary measures that can be used to accomplish a similar objective, other than the one
given in the above passage.
(iv) Differentiate between Reserve Bank of India and Commercial banks by giving any two points.
14. How are deposits created through lending by Commercial Banks? Explain briefly with the help of a numerical
example.
15.What is Open Market Operation and how is it used?
16. Discuss two major functions of a central bank as the ‘lender of the last resort’ and as the ‘Bank of issue’
17. Explain the process of credit creation as exercised by commercial bank with an example.
18. Explain two selective steps the central bank can adopt a control inflation.
19. State whether the following is true or false give one reason for your answer .Rate of interest on saving account
is more than that of recurring account.
20. How does the central bank maintain the rate of exchange to remain officially fixed?
21. Give any two differences between Demand deposit and Time deposits.
22. State two difference between Outright loan and Cash credit.
 MONEY
1. Discuss any two Secondary functions of Money.
2. What are the components of M1?
3.State True or False- Cost Push inflation is caused by rise in wages.
4.Explain a primary function of money.
5. Why does money serve as a medium of exchange.
6. Justify the statement whether true/false: Money supply includes demand deposits of the people with the
commercial banks.
7.Explain the different measure of money supply in india.
8.A curb on High Powered Money will create what impact in the economy? Explain.
9.Explain one secondary function and one contingent function of money.
10. Differentiate between fiduciary money and near money?
11. Differentiate between demand pull inflation and cost push inflation.
12. Describe four important functions of money.
13. Discuss M1 as a component of money supply.
14. What is meant by ‘monetary base’?
15. Define money. Unlimited legal tender?
16. Read the passage given below and answer the questions that follow.
October inflation was below the RBI upper tolerance band of 2-6 per cent for a second consecutive month but the
central bank last month kept its key lending rate steady for a fourth consecutive policy meeting and said it remains
focused on bringing inflation close to the target of 4 per cent RBI Governor Shakti Kanta Das had said in early
October the Central Bank remains highly alert and prepared to take steps to align inflation to the target. India is
vulnerable to "recurring and overlapping" food price shocks despite the recent moderation in inflation, Das said.
[Source: The Economic Times (ET Online, Last Updated: Nov 13, 2023, 05:45 PM IST)]
i) What is inflation?
ii) Name the two major type of inflation and explain anyone.
iii) What is meant by food price shocks?
17. A mild rise in price level is considered desirable while an excessive price rise is regarded unhealthy for the
economy. Elucidate.
18. What are the 4 measures of money supply by the RBI?
 NATIONAL INCOME
1. Explain three sector model of circular flow of income with saving and investment.
2. Calculate national income by income and output method
₹ (in crores)
Value of output 1200
Wages and salaries 165
Rent. 60
Subsides 15
Mixed Income 180
Employers contribution to social security 15
Value of intermediate consumption 600
Interest. 7
Factor income earned from abroad 15
Indirect Taxes 90
Depreciation 75
Profit 23
Factor Income paid abroad. 30
3.What do you understand by operating surplus?
4.Differentiate between leakage and injection?
5. Draw a well labelled diagram of an Open Economy showing leakages and injection in it.
6. What is the difference between GDPmp and NNPfc?
7. State whether the following items will be included in the estimation of National Income or not? Give one reason
for each.
(a) Interest received on debentures by debenture-holders.
(b) Purchase of vegetables by a restaurant.
8. Explain briefly any two limitations of per capita GDP as an index of economic welfare.
9. State whether the following items will be included in the estimation of National Income or not?
Give one reason for each.
(a) Gains from sale of shares. (b) Monthly allowance received by a college student from home.
10. Distinguish between Real GDP and Nominal GDP.
11. Change in inventory is a stock concept: Justify the statement whether true/false. Give one reason.
12. What does GDPmp -Depreciation signifies?
13. What is the difference between NDPmp and GNPfc?
14.Personal Disposal income = Personal Income .
15. How are the following items included in Domestic Income and National Income? Give reasons.
(a) Profits of Tata industries from its business in Australia.
(b) Old age pension.
16. When is the national product of a country lesser than the domestic product?
17. Define National Income.
18. What is Private Income?
19. Define Net direct taxes?
20. What is net factor income from abroad?
21. What is value added method of measuring National Income.
22. Give 2 examples of income that are excluded from Income method.
23. Draw a well labelled diagram and explain the circular flow of income in a four-sector model.
24.Differntiate between national income and percapita income.
25. Briefly discuss the concept of leakages and injections in the circular flow of income.
26. What do you mean by double to? How to avoid it to gets the correct national income of a country?
27.How is GDPfc different from NNPmp?
28. What is the problem of double counting in national income estimation?
29. Per capita income is not considered a good indicator of the economic welfare. Explain this statement by giving
any two reasons.
30. With the help of diagrams, show the circular flow of income in a two-sector model with saving and investment.
31. Briefly discuss any two precautions to be taken while calculating national income by the value added method.
32. With the help of appropriate examples, briefly discuss Real GDP and Nominal GDP.
 FISCAL POLICY
1. What is meant by public Expenditure? How does public expenditure affect the distribution of income and
wealth?
2. Give two example of direct taxes.
3. Mention any two components of fiscal policy.
4. The burden of debt goes on diminishing annually." Which method of public debt redemption referred to here?
Explain briefly.
5. If one pays municipality tax, it does not mean that the drinking water outside one's home is perfect Which
characteristic of a tax is referred to in the given sentence? Explain.
6. Define tax and identify from the following, whether the centre or the state collects such tax/taxes:
(a) Union excise duties (b) Land revenue (c) Amusement tax (d) Corporate tax
7. "Commodity taxation in India is regressive and unjust". Justify whether true/false and give reason.
8.Explain the following two methods of debt redemption: (a) Conversion and (b) Capital levy.
9. How is receipt from public debt different from other sources of public revenue?
10. Explain any two methods of redemption of internal public debt.
11. What is meant by no quid pro quo of a tax? Name any two direct taxes.
12. Briefly explain terminal annuities, as method of debt redemption.
13. Read the passage given below and answer the questions that follow:
Fiscal policy is made by the Government to meet certain objectives. The one of the tool of fiscal policy is public
expenditure. Public expenditure plays a significant role in resorting economic stability. Particularly, when the
economy is battling economic recessions. The Government expenditure raises the level of AD. Only when AD is
raised that the vicious circle of economic recession is broken. Public expenditure generates investment friendly
environment in the economy. The Government spends money on infrastructural development. It onstructs roads,
dams, bridges. Answer the following questions:
a) Read the following statement:
Assertion (A): Public expenditure generates investment friendly environment in th economy.
Reason (R) : It raises the infrastructural development in the economy.
i) Both Assertion (A) and Reason (R) are true.
ii) Both Assertion (A) and Reason (R) are false.
iii) Assertion (A) is true and Reason(R) is false.
iv) Assertion (A) is false and Reason (R) is true.
b) Define fiscal policy. Give two tools of fiscal policy other than public expenditure.
14.What is repudiation of debt?
15. Discuss one source of tax revenue and one non tax source of revenue accruing to the government.
16. State two difference between direct and indirect taxes.
17. What is meant by deficit financing?
18. Discuss regressive tax for the numerical example.
19. What is public expenditure ? How does public expenditure on social security scheme enhance production in an
economy?
20. differentiate between a tax and a fee.
21. Regressive and Proportionate taxes are not ideal system of taxation whereas Progressive taxation is popular
and is universally accepted as desirable. Give your views.
22. How does the government finance its deficits?
 GOVT BUDGET
1. Read the passage given below and answer the questions given below:
India recorded a fiscal deficit of 9.3% of GDP in 2020-21, 0.2% lower than the revised estimates of 9.5% of GDP,
according to the Controller General of Accounts. Total revenue receipt turned out to be about 88,000 crore higher
than estimated, driven largely by higher excise and customs collections, while total expenditure was₹ 61,000 crore
more than the revised estimates. The revenue deficit for the year was projected at 7.24% of GDP by CGA.
a) What do you mean by budgetary deficit?
b) What is fiscal deficit?
c) A large amount of fiscal deficit proves to be counter productive. Give any two reasons in support of this
statement.
d) Give any two difference between direct and indirect Taxes.
e) Discuss any two methods of debt redemption of public debt.
2. Read the passage given below and answer the questions given below:
The finance Minister Nirmala Sitaraman has proposed a sharp 34.5% hi can expenditure to rupees 5.54 black and
white financial year 2022 in order to push growth. The massive increase comes at a time when the country is
looking to recover from the Covind19, as rising government spending is key to bring the economy back on track.
The government will also provide an additional 2 lakh crores to States for capital expenditure over and above its
own commitment." they will also work out a specific mechanism to nudge states to spend more of their budget on
the creation of infrastructure," Ms. Sitaraman said. The finance minister said that the government will launch in
National asset monetization pipeline which includes the sale of Oil and Gas pipelines, power transmission lines
and operation of toll roads under the National Highway Authority of India.
This year's budget, according to the government, rest on six pillars: health and well- being, physical and financial,
and research and development and "minintum government maximum governance, "the Finance Minister had
asserted. And capital expenditure is the an important component that drive the growth.
a) Why has the Finance Minister hiked the capital expenditure?
b) What is Budget
c) What do you mean by capital expenditure?
d) What problem can the increase in this capital expenditure creates?
e)______________ is the important component that driven the growth.
3.Deficit budget is preferable during periods of deflation." Defend or refute.
4.State whether the following is True or False. Give one reason for your answer. Repayment of loan by the
governments is a capital expenditure.
5.Define and estimate (i) Revenue deficit, (ii) Fiscal deficit and (iii) Primary deficit from the following data.
6. In a government budget, revenue deficit is ₹50,000 Crores. and borrowing is 75,000 Crores How much is the
fiscal deficit? When can such deficit emerge even when there is no revenue deficit.
7. Name any one type of budget.
8. A large amount of fiscal deficit proves to be counter productive. Give any two reasons in support of this
statement.
9. What does the difference between fiscal deficit and interest payments imply? What does ‘zero! difference mean
in this case?
10. In some situation, the Government may consider additional spending to fight inflation? Justify this statement?
11. How are revenue receipt different from capital receipt in a budget? Give one example of each receipt.
 DETERMINATION OF EQUILIBIRUM PRICE & QTY UNDER
PERFECT COMPETITION
1. Explain how a perfectly competitive firm earn supernormal profit in the short run Equilibrium?
2. A firm may choose to operate even without abnormal profits. In this context explain shut down point.
3. Show a well-labelled diagram in which a firm earns supernormal profit in long-run.
4. Explain the equilibrium of a firm when it suffers loss in the short run under perfect competition.
5. Explain the short run equilibrium of a perfectly competitive firm earning supernormal profit with the help of a
diagram.
6. What is a shut-down point?
7. Can firm continue production, despite incurring losses? It yes, when?
8. With a well labelled diagram, show the derivation of supply curve of a firm under short run.
9. Explain with the help of a diagram, how equilibrium price is determined in a competitive market.
10. Under a perfect competition, how can you derive the short run supply curve? Show in diagram also.