Passing Package

I. Choose the correct answer (each question carries 1 mark)

1. The scarce resources of an economy have ---- Competing usages

2. Which of the following is an example of microeconomic study?
(a) National income (b) Consumer behavior
(c) Unemployment (d) foreign trade
Ans: (b) Consumer behaviour
3. Which of the following is a macroeconomic variable?
(a) Individual demand (b) Aggregate demand
(c) Firms output (d) Price of a good
Ans: (b) Aggregate demand
4. Central problems of an economy include
(a) What to produce (b) How to produce
(c) For whom to produce (d) All of the above
Ans: (d) All of the above
5. Traditionally, the subject matter of economics has been studied under the following broad branches.------ Micro
and Macro Economics
6. Utility is------- Subjective
The shape of an Indifference curve is normally ------ Convex to the origin
7. The consumption bundle that is available to the consumer depends on----- Price and income
8. The equation of Budget line is------- P1X1 + P2X2 = M
9. The demand for these goods increases as income increases----- Normal goods
10. A vertical demand curve is -------Perfectly inelastic
11. The formula of production function is----- Q = f(L, K)
12. In the short run, a firm ------Cannot vary all the inputs
13. The change in output per unit of the change in the input is called------- Marginal product
14. Cobb-Douglas production function is------- Q = (x1α, x2β)
15. TC = TFC + TVC
16. In a perfect competition each firm produces and sells ------- Homogeneous products
17. The increase in total revenue for a unit increase in the output is ------- Marginal Revenue
18. The firm’s profit is denoted by------π
19. When the supply curve is vertical, the elasticity of supply is---- es=0
20. The revenue per unit of output of a firm is called as-------AR
21. In perfect competition buyers and sellers are------- Price takers.
22. A situation where the plans of all consumers and firm in the market match.----- Equilibrium situation
23. As a result of increase in the number of firms there is an increase in supply, then supply curve------ Shifts
towards right
24. The firms earn super normal profit as long as the price is greater than the minimum of------Average cost
25. The government imposes upper limit on the price of goods and services is called-----Price ceiling
26. The government imposed upper limit on the price of goods and service is called----- Price floor
27. A market structure which produces heterogeneous products is called------Monopolistic competition
28. The change in TR due to the sale of an additional unit is called--------Marginal revenue
29. When the price elasticity of demand is more than one, MR has a ------ Positive value
30. Profit = TR-TC
31. The individuals or institutions which take economic decisions are----- Economic Agents.
32. In 1936 British economist J.M. Keynes published his celebrated book----- General theory of employment,
interest and Money.
33. All the labourers who are ready to work will find employment and all the factories will be working at their full
capacity, this school of thought is known as------- Classical thought
34. The year of Great Depression------ 1929
35. In a capitalist country production activities are mainly carried out by------ Private enterprises.
36. The study of National income is related to------ Macro Economics.
37. NNP = GNP – Depreciation
38. The value of GDP at the current prevailing prices is------ Nominal GDP
39. By deducting undistributed profit from national income, we get---- Personal Income
40. Measuring the sum total of all factor payments will be called------ Income Method
41. The main function of money is------ Medium of Exchange
42. The bank which acts as monetary authority of India-----RBI
43. The banks which are a part of the money creating system of the economy are------Commercial Banks
44. The rate at which the RBI lends money to commercial banks against securities-----Bank Rate
 45. The important tool by which RBI influences money supply is------ Open market operation
46. Consumption which is independent of income is called------- Autonomous consumption
47. Value of MPC lies between------ 0 and 1
48. The point where ex-ante aggregate demand is equal to ex-ante aggregate supply will be------Equilibrium
49. Easy availability of credit encourages------- Investment
50. In the situation of excess demand---- Demand is more than the level of output.
51. The taxes on individual and firms are------- Direct taxes.
52. Duties levied on goods produced within the country------- Excise duties
53. The tax which acts as an automatic stabilizer------- Proportional income tax
54. Which of the following is an example for ‘paper tax’?
a) Income tax b) Excise taxes c) Wealth tax d) Customs taxes
Ans: (c) Wealth Tax
55. When demand exceeds the available output under conditions of high level of employment, this may give rise to-----
- Inflation
56. The consumers and producers can choose between domestic and foreign goods, this market linkage is called------
Output market linkage.
57. The exchange rate is determined by the market forces of demand and supply is called as---- Flexible exchange
rate
58. The balance of payments (BOP) record these transactions between residents and with the rest of the world
a) Goods b) Services c) Assets d) All of the above
Ans (d) All of the above
59. The rate at which the price of one currency in terms of foreign currency is called----Foreign exchange rate
60. In this standard all currencies were defined in terms of gold-------- Gold Standard
II .Fill in the blanks (each question carries 1 mark)
1. Scarcity of resources gives raise to.....................
Ans: Problem of choice
2. In a centrally planned economy all important decisions are made by ………………
Ans: Government
3. In reality all economies are …………………..
Ans: Mixed economies
4. Wants satisfying capacity of commodity is ……………….
Ans: Utility
5. Two indifference curves never ……………….. each other.
Ans: Intersect
6. As income increases, the demand curve for normal goods shifts towards………………….
Ans: Right
7. The demand for a good moves in the …………………….direction of its price
Ans: Opposite
8. Method of adding two individual demand curves is called as……………………
Ans: Horizontal summation
9. An equation xy = c gives us ……………………hyperbola
Ans: Rectangular
10. In the long run, all inputs are ____________
Ans: Varied
11. ______________ is defined as the output per unit of variable input.
Ans: Average Product
12. Marginal product and average product curves are ________ in shape.
Ans: Inverse U
13. SMC curve cuts the AVC curve at the __________ point from below.
Ans: Minimum
14. ___________ is the set of all possible combinations of the two inputs that yield the same maximum possible level of
output.
Ans: Isoquant
15. Price taking behavior is the single most distinguishing characteristic of ………………market
Ans: Perfect competitive market.
16. …………….is a tax that the Government imposes per unit sale of output.
Ans: Unit Tax

17. For a price taking firm Marginal Revenue is equal to……………………

Ans: Market price

18. The point of minimum AVC where the SMC curve cuts the AVC curves is called as ……………………
 Ans: Shut down point
19. …………………cost of some activity is the gain forgone from the second best activity.
Ans: Opportunity cost
20. In a perfectly competitive market, equilibrium occurs when market demand …………market supply
Ans: Equals
21. If the supply curve shifts rightward and demand curve shifts leftward equilibrium price will be………………..
Ans: Decreasing
22. ……………is determined at the point where the demand for labour and supply of labour curves intersect.
Ans: Wage
23. In labour market……………….are the suppliers of labour.
Ans: Households
24. Due to rightward shifts in both demand and supply curves the equilibrium price remains…………..
Ans: Unchanged (constant or same).
25. It is assumed that, in a perfectly competitive market an ……………………is at play.
Ans: Invisible hand
26. The monopoly firm’s decision to sell a larger quantity is possible only at…………..
Ans: Lower prices.
27. Competitive behavior and competitive market structure are in general…………..related
Ans: Inversely
28. In monopoly market the goods which are sold have no………………..
Ans: Substitutes
29. TR=……………….
Ans: P x q (price x quantity)
30. The revenue received by the firm per unit of commodity sold is called………………….
Ans: Average Revenue
31. With the zero production cost, when the total revenue of monopoly firm is maximum, the profit is …………………..
Ans: Maximum
32. Macroeconomics tries to address situation facing the economy………
Ans: as a whole
33. A part of the revenue is paid out as …………for the service rendered by land.
Ans: Rent
34. The domestic country may sell goods to the rest of the world. These are called…….
Ans: Exports
35. …………….will be called as firms.
Ans: Production units
36. …………Policies are pursued by the state itself or statutory bodies like RBI, SEBI etc.
Ans: Macroeconomic

37. …………..are defined at a particular point of time

Ans: Stocks
38. ………….. goods will not pass through any more stages of production.
Ans: Final Good
39. …………..is an annual allowance for wear and tear of a capital good.
Ans: Depreciation
40. ……………is a stock variable.
Ans: Inventory
41. Pollution is an example for …………..externalities
Ans: Negative
42. The net contribution made by a firm is called its………
Ans: value added.
43. Economic exchanges without the use of money are referred to as ……….
Ans: Barter system
44. …………….is the only institution which can issue currency in India.
Ans: RBI
45. …………issues coins in India
Ans: Government of India
46. The principal motive for holding money is to carry out ………….
Ans: Transactions
47. M1 and M2 are known as ……………
Ans: Narrow money.
48. cY shows the dependence of consumption on ………
Ans: Income.
49. Savings is that part of income that is ………..
Ans: Not consumed.
50. Average propensity to consume (APC) is the consumption per unit of ………..
Ans: Income
51. ……….is defined as addition to the stock of physical capital.
Ans: Investment
52. Size of the multiplier depends on the value of ……………
Ans: marginal propensity to consume (c)
53. I is a positive constant which represents the ……..investment in the economy.
Ans: Autonomous
54. Nonpaying users of public goods are known as ………….
Ans: Free riders.
55. Financial year runs from ………….to………….in India.
Ans: 1st April to 31st March.
56. Taxes imposed on goods imported into and exported out of India re called……….
Ans: Customs duties
57. The Government may spend an amount equal to the revenue it collects. This is known as…………
Ans: Balanced budget
58. Revenue deficit = Revenue expenditure minus ………….
Ans: Revenue Receipts.

59. …………is the record of trade in goods and services and transfer payments
Ans: Current Account
60. ………account records all international transactions of assets.
Ans: Capital
61. The price of foreign currency in terms of domestic currency has increased and this is called …………of domestic
currency.
Ans: Depreciation
62. …………is a mixture of a flexible and fixed exchange rate system.
Ans: Managed floating exchange rate
63. The Bretton Woods conference held in the year ………….
Ans: 1944.
II. Match the following (each question carries 1 mark)
III. A
1. Market economy a. Government
2. Service of a teacher b. Private
3. Centrally planned economy c. Skill
4. Positive economics d. Evaluate the Mechanism
5. Normative economics e. Functioning of Mechanism
Ans: 1-b; 2-c; 3-a; 4-e; 5-d
B
1. Demand curve a) D(p) = a - bp
2. Linear demand curve b) Downward sloping
3. Unitary elasticity of demand c) Pen and ink
4. Complementary goods d) A family of Indifference curves
5. Indifference map e) |ed|=1
Ans: 1-b; 2-a; 3-e; 4-c; 5-d

A B
1. CRS a) ΔTC / ΔC
2. SAC b) Long run average cost
3. LRAC c) Short run average cost
4. TFC + TVC = d) Constant returns to scale
5. SMC e) TC
Ans: 1 - (d); 2 - (c); 3 - (b); 4 – (e); 5 – (a)
 D

A B
1. TR= a) Perfect information
2. π= b) Zero profit
3. AR= c) PxQ
4. Normal profit d) TR-TC
5. Perfect competition e) TR/Q

Ans: 1 – (c); 2 – (d); 3 – (e); 4 – (b); 5 – (a)

E
A B
1. Adam smith a) Attraction of new firms
2. Price ceiling b) Operation of invisible hand
3. Market equilibrium c) Lower limit on price
4. Possibility of supernormal profit d) Upper limit on price
5. Price floor e) QD=QS
Ans: 1 – (b); 2 – (d); 3 – (e); 4 – (a); 5 – (c);

F
A B
1. Labour a) Non-monetary exchange
2. GDP b) Personal disposable income
3. Inventory c) Gross domestic product
4. PDI d) Stock variable
5. Domestic service e) Wages
Ans: 1 – e; 2 – c; 3 – d; 4 – b; 5 – a;

G
A B
1. SLR a) Government of India
2. Circulation of coin b) Statutory Liquidity Ratio
3. Money c) Broad Money
4. M3 and M4 d) Repo
5. Repurchase agreement e) Medium of Exchange
Ans: 1 – b; 2 – a; 3 – e; 4 – c; 5 – d;

H
A B
1. Savings a) APC (Average propensity to consume
2. Raw material b) C + I + cY
3. Consumption per unit of income c) Intermediate good
4. Aggregate demand for final goods d) Leads to rise in the prices in the long run
5. Excess demand e) Y–C
Ans: 1 – (e); 2 – (c); 3 – (a); 4 – (b); 5 – (d);

I
A B
1. SDR a) Dirty floating
2. Balance of payment b) Flexible exchange rate
3. Balance of trade c) Paper gold
4. Floating exchange rate d) Trade in goods
5. Managed floating e) Trade in goods and services
Ans: 1 – c; 2 – e; 3 – d; 4 – b; 5 – a;

IV. Answer the following questions in a sentence/word. (each question carries 1 mark)
1. Why does the problem of choice arise?
An economic problem arises due to limited resources (scarcity of resources) and unlimited wants.
2. Give the meaning of microeconomics.
Microeconomics is the study of the economic actions of individuals and small groups of individuals.
3. What is budget line?
Budget line is a graphical representation of all possible bundles of two goods which cost exactly equal to the income of a
consumer. It slopes from left to right downwards.
4. Expand MRS.
Marginal Rate of Substitution
5. To which side does a supply curve shift due to the technological progress?
The supply curve shifts to the right due to the technological progress.
6. What is price ceiling?
The Government imposed upper limit on the price of a good or service is called price ceiling. Example, price ceiling on
necessary items like selected medicines, kerosene, wheat etc.
7. What is price floor?
The Government imposed lower limit on the price that may be charged for a particular good or service is called price floor.
Example agricultural price support programs and minimum wage legislation.
8. Through which legislation, the government ensures that the wage rate of the labourers does not fall below a
particular level?
Minimum Wage Legislation (Minimum Wages Act)
9. What is monopoly?
It is a market with one seller or firm with many buyers.
10. Write the formula for quantity demanded
QD= 200-p
11. What is duopoly?
It is a special case of oligopoly where there are exactly two sellers or firms.
12. Who are economic agents?
Economic agents are those individuals or institutions which take economic decisions. They can be consumers, producers,
Government.
13. Name the well-known work of Adam Smith.
An Enquiry into the Nature and Causes of Wealth of Nations.
14. What do you mean by wage rate?
The price paid for purchase of labour services is called wage rate.
15. Expand CPI.
Consumer Price Index.
16. Give the meaning of GDP
GDP (Gross Domestic Product) is the market value of all final goods and services produced within a domestic territory of
a country measured in a year.
17. What is depreciation?
It is a deduction made from the value of gross investment in order to accommodate regular wear and tear of capital goods.
18. What do you mean by barter system?
The economic exchanges without the mediation of money, is called Barter system.
19. Give the meaning of money.
Money is the commonly accepted medium of exchange. According to F.A.walker ‘Money is what money does’.
20. What is Fiat money?
Fiat Money is the money which does not have any intrinsic value. Intrinsic value is the value of metal or paper which is
equal to face value of coin or currency note.
21. Expand CRR.
Cash Reserve Ratio.
22. Write the formula of MPC.
It is the change in consumption per unit change in income. Its formula is
MPC = ∆C/∆Y = c
23. Who are free riders?
If some users do not pay and it is difficult and impossible to collect fees for the public good, such nonpaying users are
known as free riders.
24. What are revenue receipts?
Revenue receipts are those receipts that do not lead to a claim on the government. They consist of Tax and non-tax
revenues.
25. Expand FRBMA
Fiscal Responsibility and Budget Management Act.
26. What is primary deficit? Primary deficit is the fiscal deficit minus the interest payments. Or Gross Primary deficit =
Gross Fiscal deficit – Net interest liabilities.
27. What do you mean by open economy?
An open economy is one which interacts with rest of the world through various channels.
28. What is balance of payment?
 The balance of payments is the record of the transactions in goods, services and assets between residents of a country
with the rest of the world for a specified period of time i.e., a year.

Answer the following in 4 sentences. (Each question carries 2 marks)

1. Mention the central problems of an economy.

Ans: The central problems of an economy are as follows:
a) What to produce (what is to be produced in what quantities? - Problem of choice
b) How to produce (how are goods produced)? - Problem of technology
c) For whom to produce (for whom are the goods to be produced? - Problem of distribution

2. What do you mean by inferior goods? Give an example.

Ans: Inferior goods are those goods for which the demand decreases with increase in income of a consumer and vice-versa.
There will be a negative relationship between income of consumer and demand for inferior goods..
Example: Low quality goods like Ragi, Bajra, Sajje etc
3. State the law of demand?
Ans: Law of Demand states that other things remaining constant, (Ceteris Paribus), a fall in price leads to expansion in
demand and rise in price leads to contraction of demand. The law explains the negative relationship between price and
quantity demanded.
4. Mention two different approaches which explain consumer behavior.
Ans: The two approaches which explain consumer behavior are:
a) Cardinal Utility Analysis – Law of Diminishing Marginal Utility
b) Ordinal Utility Analysis – Indifference Curve analysis.
5. Mention the types of returns to scale.
There are three types of returns to scale they are
(a) Increasing Returns to Scale (IRS)
(b) Constant Returns to Scale (CRS)
(c) Decreasing Returns to Scale (DRS)
6. Name the short run costs.
Ans: The short run costs are: 1.Total Fixed cost(TFC), 2.Total Variable cost(TVC), 3.Total Cost(TC), 4.Average Fixed
Cost(AFC), 5.Average Variable Cost(AVC),6. Average Cost (AC) and 7.Marginal Cost (MC).
7. What are long run costs?
The cost of production incurred in the long period is called long run cost. In the long run even fixed cost become variable
cost. Hence there are only three costs. They are
1. Long run Total cost 2) Long run Average Cost 3) Long run Marginal Cost.
8. Mention the two determinants of a firm’s supply curve.
Ans: The two determinants of a firm’s supply curve are as follows:
(a) Technological progress
(b) Input prices.
9. Distinguish between excess demand and excess supply.
Excess Demand Excess Supply
 It is situation where market demand exceeds the  It is a situation where the market supply exceeds
market supply. the market demand.
 Here the price of the product increases.  Here the price of the product decreases.
 Qd > Qs  Qs > Qd.

10. Write the features of a monopoly.

a) Single seller or producer
b) No close substitutes
c) No free entry
d) Discriminate price or Uniform price
e) Monopolist is the price maker.
11. Name and write the meaning of two kinds of trade in external sector.
Ans: The two kinds of Trade in external sector are exports and imports.
 A country may sell goods to the rest of the world – Exports.
 A country may buy goods from other countries – Imports.
12. Mention the factors of Production
Land, Labour, Capital Organisation
13. What are the four factors of production? Mention their rewards.
Ans: The four factors of production are Land, Labour, Capital and Organisation. The rewards of these factors of production
are as follows:
 Land ----Rent
 Labour -----wages
 Capital ----- Interest.
 Organisation ------ profit.

14) Mention 3 methods of measuring GDP(National Income)

The three methods of measuring GDP are
a) Product or Value Added Method
b) Expenditure Method and
c) Income Method.

15. What do you mean by externalities? Mention its two types.

Ans: Externalities refer to the benefits or harms a firm or an individual causes to another for which they are not paid or
penalized. They do not have any market in which they can be bought and sold.
The two types of externalities are Positive Externalities and Negative Externalities.

16. Write the difference between nominal and real GDP.

Ans:
Nominal GDP Real GDP
 It is the value of GDP at current prevailing  It is evaluated at constant set of prices i.e., by
prices. keeping base year’s price index.
 It is not reliable  It is reliable.
 It does not give real picture of economic  It gives real picture of economic development
development of a country. of a country.

17. Mention any two functions of money

Ans: The two functions of Money are
 Medium of exchange
 Measure of value
18. State the credit control instruments of RBI.
Ans: There are two instruments of RBI to control credit viz., Quantitative techniques and Qualitative techniques.
The quantitative techniques include Bank rate, Open market operations, CRR and SLR. The qualitative techniques include
Credit rationing, margin requirements, moral suasion, publicity, direct action and issue of directives.
19. Mention the two motives of demand for money.
Ans: The two motives of demand for money are as follows:
 The transaction Motive
 The Speculative Motive.
20. Mention the three linkages of open economy.
Ans: The three linkages of open economy are as follows:
 Output market linkage
 Financial Market linkage
 Labour market linkage.
21. Why do people demand foreign exchange?
Ans: People demand foreign exchange rate because of the following reasons:
 To purchase goods and services from other countries.
 To send gifts abroad
 To purchase financial assets abroad.
Answer the following questions in 12 sentences. (Each question carries 4 mark)
1. Briefly explain the central problems of an economy.
2. Write a brief note on Returns to scale
3. The following table gives the TP schedule of labour. Find the corresponding Average product and marginal
product schedules.
TPL 0 15 35 50 40 48
L 0 1 2 3 4 5
4. Explain the features of Perfect competition
5. Write a table to show the impact of simultaneous shifts on equilibrium
6. Briefly explain the features of Monopolistic competition
7. Explain how the firms behave in Oligopoly Market
8. Briefly explain in what way Macroeconomics is different from Microeconomics
9. Explain the working of the economy of a capitalist country
10. Write a note on Externalities
11. Explain the functions of Money
12. Briefly explain the functions of R.B.I
13. Write a note on Transactionary and speculative motives of demand for money
14. Write the chart of the Government Budget
15. Write a note on Balance of Trade.
Answer the following questions in 20 sentences
1. Explain the law of diminishing marginal utility with the help of a table and diagram.
2. Explain the features of Indifference curves with the help of diagrams
3. Explain the various short run costs.
4. Explain the macroeconomic identities
5. Explain the classification of receipts

Answer the following questions (Practical oriented questions)

1. A consumer wants to consume two goods. The price of Bananas is Rs.5 and the price of Mango is
Rs.10. The consumer income is Rs.40.
1. How much Bananas can she consumes if she spends her entire income on that good?
2. How much Mangoes can she consume if she spends her entire income on that good?
3. Is the slope of budget line downward or upward?
4. Are the bundles on the budget line equal to the consumer’s income or not?
5. If you want to have more of Bananas you have to give up Mangoes. Is it true?

2. Find the missing products of the following table.

Factor 1 TP MP1 AP1

0 0
1 10
2 24
3 40
4 -
5 -
6 57
0 0
- 10
- 12
16 13.33
10 -
6 11.2
1 9.5

3. Compute the total revenue, marginal revenue and average revenue schedules from the following table
when market price of each unit of goods is Rs.10.

Quantity TR MR AR
sold
0
1
2
3
4
5
6

4. Write a note on Demonetisation.

5. Prepare a budget on monthly income and expenditure of your family

6. Name the currencies of countries of the following

USA, UK, Germany, Japan, China, Argentina, UAE, Bangladesh, Russia

.