Macro Ar Questions

MACRO CHAPTERWISE A/R QUESTIONS CBSE
CHAPTER-1 INTRODUCTION TO MACROECONOMICS
1. ASSERTION and REASONING

ASSERTION (A):
The goods which are used either for resale or for further production in the same year are Intermediate Goods.
REASONING (R):
Intermediate Goods are included in National Income.
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Ans: (c) Assertion (A) is true but Reason (R) is false.

ASSERTION (A):
An item that is meant for final use and will not pass through any more stages of production or transformations is called a final
good.
REASONING (R):
It will not undergo any further transformation at the hands of any producer,but many such final goods are transformed during
their consumption.
Alternatives:
Ans: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

ASSERTION (A):
Purchase of a car always means the purchase of a final good.
REASONING (R):
It depends on the end-use of the car. If it is purchased by a household, it is a final good. It is like a consumer durable, If it is
purchased by taxi.
Alternatives:
Ans: (d) Assertion (A) is false but Reason (R) is true.

ASSERTION (A):
Services are non material goods which cannot be seen or touched.
REASONING (R):
Goods satisfy human wants directly whereas Services satisfy human wants indirectly.
Alternatives:
M-AR 1

ASSERTION (A):
Value addition can also take place even when the commodity does not go through any transformation.
REASONING (R):
It happens when a commodity is purchased for resale.
Alternatives:

ASSERTION (A):
Intermediate goods refer to those goods which are used for resale or for further production in the same year.
REASONING (R):
These goods are purchased by firms for capital formation.
Alternatives:

ASSERTION (A):
Purchase of wheat in the wholesale market done by the traders is to be treated as the purchase of intermediate good and by
the households is to be treated as the purchase of final good.
REASONING (R):
Both traders and households purchase wheat from the wholesale market in bulk but traders are not the final users of wheat.
Alternatives:

ASSERTION (A):
Expenditure on replacement of engine in a car owned by a corporate enterprise is final expenditure.
REASONING (R):
Expenditure on new parts of the fixed assets is included in intermediate consumption.
Alternatives:
Ans: (c) Assertion (A) is true but Reason (R) is false
M-AR 2

ASSERTION (A):
All capital goods are producer goods, but all producer goods are not capital goods.
REASONING (R):
Producers goods are defined as all those goods which are used in the production of others goods which includes capital and
intermediate goods, whereas, capital goods are the fixed assets (like machinery, building, etc) used by the producers in the
production of goods and services.
Alternatives:

ASSERTION (A):
Machine bought by a firm for its own use is a final good.
REASONING (R):
Final goods include both consumption and investment expenditure.
Alternatives:
M-AR 3
CHAPTER-2 NATIONAL INCOME

ASSERTION (A):
The problem of double counting leads to under estimation of the national income of the country.
REASONING (R):
Double counting arises when value of a good is counted more than once while measuring the value of national income during
the production process.
Alternatives:

ASSERTION (A):
Domestic income of a country can be more than its National income.
REASONING (R):
It is possible when factor income paid abroad is more than factor income received from abroad.
Alternatives:

ASSERTION (A):
Growing vegetables in a kitchen garden of the house is included in national income.
REASONING (R):
It is difficult to estimate value of production as it is non market transaction.
Alternatives:

ASSERTION (A):
Compensation to flood victims is not included while computing national income.
REASONING (R):
Transfer income does not contribute to the current flow of good and services.
Alternatives:
M-AR 4

ASSERTION (A):
National Income is always greater than domestic income.
REASONING (R):
National Income is greater than domestic income only when net factor income from abroad is some positive number.
Alternatives:

ASSERTION (A):
Nominal Value is money value or value measured in term of prices that prevail at the time of measurement.
REASONING (R):
A Russian worker who lives and works in Spain and sends a large part of her income to her family in Russia. The value of
output is included in Spain’s GDP, but her income sent to Russia is part of Russia’s GNI.
Alternatives:
Ans: (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)

ASSERTION (A):
NDPFC is the income earned by the factors of production in the form of wages, profits, rent, interest, etc. within the domestic
territory of a country.
REASONING (R):
Domestic income generated in the production process within the domestic territory of the country get distributed among the
factors of production.
Alternatives:

ASSERTION (A):
Finance Minister Nirmala Sitharaman has announced another “Rahat package programme” to revive GDP of country.
REASONING (R):
IMF says, India’s GDP may contract 10.3% in FY21.
Alternatives:
M-AR 5

ASSERTION (A):
Change in taste and preference of Indian consumers towards MNCs and imported goods leads to decrease in its GDP.
REASONING (R):
Expenditure on imports of goods is subtracted from final expenditure in order to estimate GDP.
Alternatives:

ASSERTION (A):
Part of the output produced by a farmer and used for his own family consumption is not included under product method.
REASONING (R):
One of the ways to avoid double counting, is to take only value added instead of total output.
Alternatives:
M-AR 6
CHAPTER-3 MONEY

ASSERTION (A):
High powered money is money produced by the RBI and the government.
REASONING (R):
It consists of two things Currency held by public and Cash and Vault reserve with the banks.
Alternatives:

ASSERTION (A):
Money is a link between the present and the future.
REASONING (R):
Money is a store of value.
Alternatives:

ASSERTION (A):
Supply of money is a stock variable
REASONING (R):
Supply of money is measured over a period of time, usually a fiscal year.
Alternatives:

ASSERTION (A):
Money Supply is a flow concept.
REASONING (R):
Money Supply is measured at a particular point of time.
Alternatives:
M-AR 7

ASSERTION (A):
Money is a good servant but a bad master.
REASONING (R):
Without the additional supply of goods and services, the purchasing power of money falls.
Alternatives:

ASSERTION (A):
Money supply does not include money held by Government and Commercial Banks.
REASONING (R):
Government and Commercial Banks are themselves the supplier of money.
Alternatives:

ASSERTION (A):
Money Supply refers to total volume of money held by public at a particular point of time in an economy.
REASONING (R):
Money Supply serves as the base for the generation of demand deposits.
Alternatives:
Ans: (c) Assertion (A) is true but Reason (R) is false

ASSERTION (A):
Money is the commonly accepted medium of exchange.
REASONING (R):
An economy with one individual has no role of money.
Alternatives:
M-AR 8

ASSERTION (A):
Money supply in money in circulation at a given time in an economy.
REASONING (R):
Money supply is a flow concept.
Alternatives:

ASSERTION (A):
Since the end of March, currency held by the public rose 8.2% compared with a 4.1% increase in term deposits.
REASONING (R):
Money Supply will increase.
Alternatives:
M-AR 9
CHAPTER-4 BANKING

ASSERTION (A):
Commercial banks contribute to quantum of money supply in the economy through credit creation.
REASONING (R):
As they do have note-issuing authority.
Alternatives:

ASSERTION (A):
Money Multiplier refers to the process of creation of credit by the commercial Bank.
REASONING (R):
Money creation by commercial bank raises the National Income.
Alternatives:

ASSERTION (A):
Central bank as a banker to the government, works as a custodian of cash reserves.
REASONING (R):
The central bank acts as a clearing house for transfer and settlement of mutual claims of commercial banks.
Alternatives:

ASSERTION (A):
Central bank uses many tools to control money supply in the economy.
REASONING (R):
Commercial bank is the apex Bank of India.
Alternatives:
M-AR
10

ASSERTION (A):
Size of multiplier is given by the inverse of LRR.
REASONING (R):
There is direct relationship between LRR and value of money multiplier.
Alternatives:

ASSERTION (A):
The central bank issues currency on the basis of CRR.
REASONING (R):
The CRR impacts credit creation capacity of the commercial bank.
Alternatives:

ASSERTION (A):
The Reserve bank of India had in march 2020,offered a three month moratorium on loans enabling borrowers to defer
repayments on EMI and other loans.
REASONING (R):
The loan moratorium was aimed at providing borrowers relief aimed the economic impact of the covid-19 pandemic.
Alternatives:

ASSERTION (A):
Central Bank is the ‘Lender of last Resort’.
REASONING (R):
It is ready to lend to banks, when bank faced severe crises. If central bank refuses, there is no option for the banks but to shut
down.
Alternatives:
M-AR
11

ASSERTION (A):
Currency held by public is a monetary liability of central bank.
REASONING (R):
Central bank controls credit, whereas commercial banks creates credit with the currency held by public.
Alternatives:

ASSERTION (A):
In India, CRR is determined not by the commercial banks themselves but by the RBI (Reserve Bank of India).
REASONING (R):
The commercial banks are required to keep the stipulated (legally required) cash reserves not with themselves, but with the
RBI (of course, the banks can keep excess reserves as 'vault cash' with themselves.
Alternatives:
M-AR
12
CHAPTER-5 AD and AS

ASSERTION (A):
Inflationary pressure takes place when the economy is in full employment.
REASONING (R):
Due to the rise in demand and rigid supply, price of the goods tends to rise.
Alternatives:

ASSERTION (A):
The point at which consumption curve intersects the 45 degree line, APS is zero.
REASONING (R):
It happens because at this point, consumption is equal to income and saving is zero.
Alternatives:

ASSERTION (A):
The point at which saving curve intersects the x axis is known as break even point.
REASONING (R):
At this point, S=0 and C=Y
Alternatives:

ASSERTION (A):
APS can never be one or more than one.
REASONING (R):
APC increases with increase in income.
Alternatives:
M-AR
13

ASSERTION (A):
Presence of autonomous consumption expenditure ensures that increase will definitely increase in initial phases of
development.
REASONING (R):
Due to Autonomous consumption expenditure, Aggregate demand is always greater than income in initial phases due to
which income and output increases in the initial level.
Alternatives:

ASSERTION (A):
If a family's marginal propensity to consume is 0.70, then it will necessarily consume seven-tenths of its total income.
REASONING (R):
Average Propensity to Consume represents the ratio of absolute consumption expenditure to the corresponding level of
income.
Alternatives:

ASSERTION (A):
MPC of poor is more than that of rich.
REASONING (R):
MPC falls with successive increase in Income.
Alternatives:

ASSERTION (A):
Higher income group has lower propensity to consume as compared to lower income group.
REASONING (R):
Consumption expenditure can never be zero as minimum expenditure to be incurred for survival even at zero level of
income.
Alternatives:
M-AR
14
ASSERTION (A):
In residential real estate, both sales and new launches contracted in 2020-21
REASONING (R):
One of major impact of lock down is sluggish consumer sentiments.
Alternatives:

ASSERTION (A):
Higher income group has lower propensity to consume as compared to lower income group.
REASONING (R):
Consumption expenditure can never be zero as minimum expenditure to be incurred for survival even at zero level of
income.
Alternatives:
M-AR
15
CHAPTER-6 SHORT RUN

ASSERTION (A):
If aggregate demand exceeds aggregate supply, income rises.
REASONING (R):
Excess of aggregate demand will reduce planned inventory and firms would tend to increase the employment and output.
Alternatives:

ASSERTION (A):
Full employment implies zero unemployment when nobody is ever unemployed in the economy.
REASONING (R):
There is always some minimum level of unemployment called natural unemployment or voluntary unemployment.
Alternatives:

ASSERTION (A):
Multiplier explains how many times the income increases as a result of an increase in the investment.
REASONING (R):
There is an inverse relationship between the value of marginal propensity to save and investment multiplier.
Alternatives:

ASSERTION (A):
Higher the value of MPC, more is the value of multiplier.
REASONING (R):
Multiplier is directly related to MPC.
Alternatives:
M-AR
16

ASSERTION (A):
Full employment is that situation in the economy when AS = AD along with fuller utilisation of the resources. But it does not
mean a situation of zero unemployment in the Economy.
REASONING (R):
Full employment means absence of unemployment in the economy.
Alternatives:

ASSERTION (A):
Keynes pointed out that during depression, private investment is not induced.
REASONING (R):
The marginal productivity of capital is high in depression.
Alternatives:

ASSERTION (A):
Multiplier assumes value between zero and infinity.
REASONING (R):
The value of the multiplier is determined by the value of the marginal propensity to consume.
Alternatives:

ASSERTION (A):
Full employment means zero unemployment.
REASONING (R):
Natural rate of unemployment always exist in the economy.
Alternatives:
M-AR
17

ASSERTION (A):
Full employment implies absence of involuntary unemployment
REASONING (R):
During full employment all willing and capable people get work without any undue difficulty and there is no involuntary
unemployment.
Alternatives:

ASSERTION (A):
When Investment Multiplier is 1, the value of MPC is also 1.
REASONING (R):
Consumption can exceed Income but Savings cannot.
Alternatives:
M-AR
18
CHAPTER-7 PROBLEMS OF ED and DD

ASSERTION (A):
Inflationary pressure takes place when the economy is in full employment.
REASONING (R):
Due to the rise in demand and rigid supply, price of the goods tends to rise.
Alternatives:

ASSERTION (A):
In a situation of deficient demand, there is underemployment in the economy.
REASONING (R):
Excess demand raises the real value of the output.
Alternatives:

ASSERTION (A):
Tax increases by state governments during recessions often reduce the expansionary impact of fiscal policy by the central
government.
REASONING (R):
Tax increases lead to decrease in disposable income due to which consumption expenditure in the economy falls.
Alternatives:

ASSERTION (A):
Increase in public expenditure will improve AD.
REASONING (R):
Public expenditure incurred by government will increase the money supply in the hands of public.
Alternatives:
M-AR
19

ASSERTION (A):
During deficient demand, central bank advises the commercial banks to advance loan at easy terms in order to minimize the
condition of deficient demand in the country.
REASONING (R):
Recently the Reserve Bank of India has announced the policy of Demonetization in order to reduce the excess demand and to
absorb the excess and unauthorized money from the market.
Alternatives:

ASSERTION (A):
Inflationary gap is the amount by which the actual aggregate demand exceeds aggregate supply at the level of full
employment which causes a rise in price level and measure the excess demand.
REASONING (R):
Inflationary gap exists when aggregate demand is greater than aggregate supply.
Alternatives:

ASSERTION (A):
Deficient demand causes inflation and full employment.
REASONING (R):
When AD fails to catch up with AS of full employment all goods and services produced in the economy cannot be sold.
Alternatives:

ASSERTION (A):
In a situation of excess demand, there is underemployment in the economy.
REASONING (R):
In case of excess demand, equilibrium between desired AD and desired AS is determined at a higher level of income at full
employment in the economy.
Alternatives:
M-AR
20

ASSERTION (A):
In a situation of excess demand, there is underemployment in the economy.
REASONING (R):
Fiscal and monetary policies are complementary to each other. Both are simultaneously pursued to combat the situation of
inflationary or deflationary gap.
Alternatives:

ASSERTION (A):
Cash reserve ratio refers to that portion of total deposits of a commercial bank which it has to keep with central bank in the
form of cash reserves.
REASONING (R):
Cash reserve ratio can vary between 3 to 15 per cent
Alternatives:
M-AR
21
CHAPTER-8 GOVERNMENT BUDGET

ASSERTION (A):
A surplus budget will be made in the time of inflationary pressure in the economy.
REASONING (R):
Surplus budget will create surplus by increasing taxes and reducing government expenditure (G), this will reduce disposable
income for people and eventually reduce aggregate demand.
Alternatives:

ASSERTION (A):
GST is an indirect tax.
REASONING (R):
All indirect taxes are imposed on the production and sale of goods and services
Alternatives:

ASSERTION (A):
Interest paid on National Debt is a revenue expenditure.
REASONING (R):
Revenue expenditure refer to those expenditure which neither create any liability nor causes any reduction in the assets of the
government.
Alternatives:

ASSERTION (A):
Capital receipts of the government leads to decrease in assets or increase in liabilities.
REASONING (R):
Tax and non tax receipts are the two sources of capital receipts.
Alternatives:
M-AR
22

ASSERTION (A):
Fiscal deficit is greater than budgetary deficit.
REASONING (R):
Fiscal deficit is the borrowing from the RBI plus other liabilities of the Government to meets it's expenditure.
Alternatives:

ASSERTION (A):
If the budget presented to the Rajya sabha iS not passed in the stipulated period , the budget proposals are not affected.
REASONING (R):
The Lok sabha is more powerful , in financial matters than the Rajya sabha.
Alternatives:

ASSERTION (A):
Tax payments to the government do not provide any direct benefit to the tax payer.
REASONING (R):
Government spends tax receipts for common benefit of the society.
Alternatives:

ASSERTION (A):
Government earns profit through public sector undertakings like LIC, BHEL etc.
REASONING (R):
Non-tax revenue refers to receipts of the government from all sources other than those of tax receipts.
Alternatives:
M-AR
23

ASSERTION (A):
The fiscal deficit in the economy will be zero if there is no provision for borrowing in the budget.
REASONING (R):
Fiscal deficit is equal to total borrowing requirement of the economy.
Alternatives:

ASSERTION (A):
Repayment of loan is a capital expenditure.
REASONING (R):
Because it leads to reduction in liabilities.
Alternatives:
M-AR
24
CHAPTER-9 FOREIGN EXCHANGE RATE

ASSERTION (A):
Appreciation of domestic currency means a rise in the price of domestic currency.
REASONING (R):
Appreciation leads to increase in Exports.
Alternatives:

ASSERTION (A):
Devaluation and depreciation of currency is one and the same thing.
REASONING (R):
Devaluation is reduction in the value of domestic currency by the government order under the fixed exchange rate system on
the other hand depreciation is decrease in the value of domestic currency due to market forces of demand and supply under
flexible exchange rate system.
Alternatives:

ASSERTION (A):
Depreciation of domestic currency leads to rise in exports.
REASONING (R):
Depreciation of domestic currency makes domestic goods relatively cheaper, which leads to increase in exports.
Alternatives:

ASSERTION (A):
Due to rise in demand for foreign exchange rupee is depreciating.
REASONING (R):
Government devalues its own currency sometimes.
Alternatives:
M-AR
25

ASSERTION (A):
Due to fall in value of rupee against dollar, American goods become costlier.
REASONING (R):
Increase in value of imports is not beneficial for the BOP condition of India.
Alternatives:

ASSERTION (A):
Managed Floating exchange rate system is also called as 'Dirty Floating'
REASONING (R):
Clean Floating rate is influenced by the intervention of the Central Bank in the Foreign Exchange Market.
Alternatives:

ASSERTION (A):
Demand for American goods will rise in India due to appreciation of Indian currency.
REASONING (R):
Increase in foreign exchange rate raises the supply of foreign exchange due to rise in exports, foreign investment, transfers
from abroad and speculative activities.
Alternatives:

ASSERTION (A):
Exporters do not favour appreciation of Indian currency.
REASONING (R):
Appreciation of Indian currency implies strengthening of Indian rupee.
Alternatives:
M-AR
26

ASSERTION (A):
During depreciation of country’s currency , its exports tend to rise while import tends to decrease.
REASONING (R):
As with same amount of dollars more goods can be purchased.
Alternatives:

ASSERTION (A):
Currency appreciation refers to increase in the value of domestic currency in terms of foreign currency.
REASONING (R):
Indian rupee appreciates when price of 1$ falls from Rs. 75 to Rs. 70.
Alternatives:
M-AR
27
CHAPTER-10 BALANCE OF PAYMENT

ASSERTION (A):
A country always tries to balances the BOP i.e balance in current account equals to balance in capital account.
REASONING (R):
Balance BOP indicates stable economic relation with rest of the world.
Alternatives:

ASSERTION (A):
Trade surplus and current account deficits may coexist.
REASONING (R):
A country may have a deficit because it is importing the inputs it needs to produce goods and services it will export in the
future.
Alternatives:

ASSERTION (A):
Buying foreign goods is expenditure from our country and it becomes the income of that foreign country.
REASONING (R):
The purchase of foreign goods or imports decreases the domestic demand for goods and services in our country.
Alternatives:
ASSERTION (A):
Buying foreign goods is expenditure from our country and it becomes the income of that foreign country.
REASONING (R):
The purchase of foreign goods or imports decreases the domestic demand for goods and services in our country.
Alternatives:
M-AR
28

ASSERTION (A):
Services trade includes both factor and non-factor income.
REASONING (R):
Invisibles include services, transfers, and flows of income that take place between different countries.
Alternatives:

ASSERTION (A):
If an Indian buys a UK Car Company, it enters capital account transactions as a debit item.
REASONING (R):
Sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account.
Alternatives:

ASSERTION (A):
Balance of payment represents better picture of a country economic transactions with the rest of the world than balance of
Trade.
REASONING (R):
Balance of payment takes into account the exchange of both visible and invisible items whereas balance of trade does not.
Alternatives:

ASSERTION (A):
Accommodating items of trade are undertaken in order to maintain the balance in the BOP account.
REASONING (R):
Accommodating items are net consequences of autonomous transactions that are undertaken to correct disequilibrium in
autonomous items of BOP.
Alternatives:
M-AR
29

ASSERTION (A):
Rent received by an Indian real estate company from Google in New York, would be recorded on credit side of capital
account.
REASONING (R):
Capital account of BOP records all those transactions, between residents of a country and rest of the world, which causes a
change in the assets or liabilities of the residents of the country or its government.
Alternatives:

ASSERTION (A):
Balance of Payment may be adversely effected .
REASONING (R):
Import of pulses is leading to outflow of foreign exchange.
Alternatives:
M-AR
30

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MACRO CHAPTERWISE A/R QUESTIONS CBSE

CHAPTER-1 INTRODUCTION TO MACROECONOMICS

1. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

2. ASSERTION and REASONING

3. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

4. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

Ans: (d) Assertion (A) is false but Reason (R) is true.

6. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

7. ASSERTION and REASONING

8. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false

9. ASSERTION and REASONING

10. ASSERTION and REASONING

CHAPTER-2 NATIONAL INCOME

1. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

2. ASSERTION and REASONING

3. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

5. ASSERTION and REASONING

6. ASSERTION and REASONING

7. ASSERTION and REASONING

8. ASSERTION and REASONING

9. ASSERTION and REASONING

10. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

1. ASSERTION and REASONING

2. ASSERTION and REASONING

3. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

4. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

5. ASSERTION and REASONING

6. ASSERTION and REASONING

7. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false

8. ASSERTION and REASONING

9. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

10. ASSERTION and REASONING

1. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

2. ASSERTION and REASONING

3. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

4. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

5. ASSERTION and REASONING

Ans: (c) Assertion (A) is true but Reason (R) is false.

6. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

7. ASSERTION and REASONING

8. ASSERTION and REASONING

9. ASSERTION and REASONING

10. ASSERTION and REASONING

1. ASSERTION and REASONING

Ans: (d) Assertion (A) is false but Reason (R) is true.

2. ASSERTION and REASONING