DAVSKVBHSS

Jawalakhel, Lalitpur
4th week Examination
Class:12 F.M.:80
Subject: Economics P.M.:40

SECTION A
1. Statement I: Current account is the record of trade in goods and services and transfer payments.
Statement II: Capital account records all international transactions of assets, e.g. money, stocks, bonds,
government debt.
1
a) Both the statements are false.
b) Both the statements are true.
c) Statement II is true and statement I is false.
d) Statement I is true and statement II is false.
2. What type of loan is advanced by Commercial Banks? 1
a) Loan and Advance
b) All of these
c) Cash Credit
d) Overdraft
3. According to the theory of Keynesian Economics, the value of Average Propensity to Consume can never be .1
a) unity
b) Less than one
c) More than one
d) zero
4. If there is an increase in income abroad the domestic currency will be . 1
a) Appreciating
b) Increasing
c) Depreciating
d) Decreasing
5. Which of the following is not a function of Central Bank?
a) AD, AS
b) Consumption, National Income
c) National income, personal income
d) Consumption, AD
6. In order to correct the situation of deficient demand 1
 a) cost of credit should be reduced
b) taxes to be raised
c) none of these
d) cost of credit should be raised
7. If Marginal Propensity to Save (MPS) is 0.25 and the initial change in investment is ₹ 250 crores, then the final
change in income would be . 1
a) ₹ 1,000 crores
b) ₹ 1,200 crores
c) ₹ 500 crores
d) ₹ 3,500 crores
8. In intermediate goods 1
a) Values are already added
b) Value cannot be added anymore
c) Value is yet to be added
d) None of these
9. Deposit creation by banks comes to an end when . 1
a) money multiplier becomes zero
b) legal reserve ratio becomes zero
c) total reserves equal initial deposits
d) fresh deposits with banks become zero
10. When the value of a currency is fixed in terms of some other currency, it is called: 1

a) Money value
b) Parity value
c) Free value
d) None of these

11. Giving reason, explain the treatment assigned to the following while estimating national income: 3
i. Expenditure on the maintenance of an office building.
ii. Expenditure on adding a floor to the office building.
12. What does a Balance of Payments account show? Name the two parts of the Balance of Payments account. 3

OR

Giving two examples, explain the relation between the rise in the price of a foreign currency and its demand.
13. What is Fiscal Policy? What possible fiscal policy measures can be taken with respect to expenditure and
income tocorrect (i) Excess demand and (ii) Deficient demand in the economy. 4
14. In the given figure, what does the gap KT represent? State and discuss any two fiscal measures to correct the
situation. 4

OR

Complete the following table:

Level of Consumption
Marginal Propensity to Marginal Propensity to
Income Expenditure
Consume Save
(₹) (₹)
400 240 - -
500 320 - -
600 395 - -
700 465 - -
15. Explain the lender of last resort function of the Central Bank. 4
16. Answer the following questions: 6
1. i. How can estimates of GDP using income method and expenditure method be identical when households
do notspend their entire income on the purchase of goods and services, and a part of them remain unsold
during an accounting year?
ii. Calculate national income from the following:
(₹ in
arab)
Private final consumption expenditure 600
Subsidies 20
Government final consumption expenditure 100
Indirect tax 120
Net imports 20
Consumption of fixed capital 35
Net change in stocks (-) 10
Net factor income to abroad 5
Net domestic capital formation 11
2. OR
i. Calculate Net Value Added at Factor Cost.
S.no. Contents (Rs. in Crores)
(i) Consumption of Fixed Capital 500
(ii) Import Duty 300
(iii) Output Sold (units) 3,000
(iv) Price Per Unit of Output 10
 (v) Net Change in Stocks (-) 100
(vi) Intermediate Cost 20,000
(vii) Subsidy 300
ii. Why are (a) net exports and (b) net change is stocks included in national income? Explain.
17. Answer the following questions: 6
1. Is the following a revenue receipt or a capital receipt in the context of government budget and why?
i. Tax receipts
ii. Disinvestment
2. Distinguish between revenue receipts and capital receipts in a government budget. Give Examples.

SECTION – B

1. Read the following statements carefully. 1

Statement 1: Car purchased by a hotel for the purpose of tourism facilitation is
capital good.
Statement 2: Refrigerator used at home is considered as non-durable consumer
good.
In the light of the given statements, choose the correct alternative:
(a) Statement 1 is true and statement 2 is false
(b) Statement 1 is false and statement 2 is true
(c) Both statements 1 and 2 are true
(d) Both statements 1 and 2 are false

2. Read the following statements carefully. 1

Statement 1: 𝑀1 is the most liquid measure of money supply.
Statement 2: Government of India regulates and directs the entire monetary structure
(a) Statement 1 is true and statement 2 is false
(b) Statement 1 is false and statement 2 is true
(c) Both statements 1 and 2 are true
(d) Both statements 1 and 2 are false
3. is the primary function of money. 1
a) a store of value b) a unit of value
c) Standard of deferred payments d) Transfer of value

(OR)
Which of the following statement is correct:
a) ₹1 note is issued by the RBI
b) Coins are issued by the Government of India.
c) Both statements are true
d) Both statements are false

4. An economy is at full employment and AD is greater than AS, what will be the impact on price
level in such an economy? 1
a) Rise b) Fall
c) No change d) both rise and fall

5. Domestic Currency appreciation takes place when:

(a) Domestic currency loses its value in relation to a foreign currency.
(b) There is an increase in the price of a foreign currency in terms of the
domestic currency.
(c) There is a decrease in the price of a foreign currency in terms of the
domestic currency.
(d) There is no change in the exchange rate.
OR
Foreign Exchange Transactions which are independent of other transactions in the Balance ofPayments
Accounts are called:
a) Current transactions b) Capital transactions
c) Accommodating transactions d) Autonomous transactions

6. Suppose in a hypothetical economy, the income rises from ₹6,000 crores to ₹7,000 crores.
As a result, the consumption expenditure rises by 600 crores. Marginal Propensity to
Consume in such a casewould be 1
a) 0.8 b) 1.6 c) 0.2 d) 0.6
(OR)
If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000crores,
the value of savings will be
a) ₹100 crores b) ₹200 crores c) ₹800 crores d) ₹500 crores
7. Read the following statement – Assertion (A) and Reason (R). Choose one of
the correct alternatives given below: 1
Assertion (A): There is an inverse relationship between the
value of marginalpropensity to save and
investment multiplier.
Reason (R):Saving is a leakage in the circular flow of income. Greater the
saving, greater the leakage and lower the value of investment multiplier.
(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, but Reason (R) is
not the correctexplanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.

8. Identify which of the following statement is true? 1

a) The flexible exchange rate system gives the government
more flexibility to maintain large stocks of foreign
exchange reserves.
b) In the Managed floating exchange rate system, the
government intervenes tobuy and sell foreign currencies.
c) In the Managed floating exchange rate system, the central
bank intervenes to moderate exchange rate fluctuations.
d) In the Fixed exchange rate system, market forces fix the exchange rate.

9. Read the following statements – Assertion (A) and Reason (R). Choose one of
the correct alternatives given below: 1
Assertion (A): When income is zero, consumption is also zero.
Reason (R) :There is always some minimum level of consumption in the economy
even whenincome is zero.
(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, but Reason (R) is
not the correctexplanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.

10. How will the devaluation of Indian Rupee affect the exports? 1
a) Exports will fall. b) Exports will rise
c) Exports will remain same d) Exports will fall first and then rise

11. Calculate GVA fc from the following data. 3

i) Intermediate cost - ₹ 12,000
ii) Closing stock - ₹ 12,000
iii) Output sold (units) - ₹ 600
iv) Opening stock - ₹ 2000
v) Price per unit - ₹ 20
vi) Corporate tax - ₹ 3000
vii) Consumption of fixed capital - ₹ 2000
viii) Subsidy - ₹ 160

12. What are official reserve transactions? Explain their importance in the Balance of
Payments. 3
 (OR)
Are the following entered; (i) On the credit side or debit side; and (ii) In the Current
Account or Capital Account in the Balance of Payments Account? Give reasons for your
answer.
(i) Investments from Abroad
(ii) Transfer of funds to relatives Abroad
(iii) Sale of machinery to abroad

13. Given consumption function is C = 80 + 0.75 Y(where C = consumption function,

Y = National income) and investment expenditure ₹ 200 crores. 4
a) What will be equilibrium level of income?
b) What will be the new equilibrium level of income if investment
increases by ₹50 crores?

14. 'Central Bank acts as the banker and as an agent to the government'. Elaborate the
given statement. 4

15. What is deflationary gap? Represent with a neat diagram. Discuss any one
fiscal measure to correct the situation of deflationary gap. 4
OR

Describe the adjustment mechanism if in an economy, the ex-ante savings are lesser
than ex- ante investments.
16. a) The Government has different slabs of tax rate for different income group.
What is the objective behind this? 3
b) Explain the components of capital Receipts. 3

17. a) Given the following data, find the missing value of 'Private Final Consumption
Expenditure'.
4

S. No. Particulars Amount (in crores)

(i) National Income 50,000
(ii) Net Indirect Taxes 1,000
(iii) Private Final Consumption Expenditure ?
(iv) Gross Domestic Capital Formation 17,000
(v) Profits 1,000
(vi) Government Final Consumption Expenditure 12,500
(vii) Wages & salaries 20,000
(viii) Consumption of Fixed Capital 700
(ix) Mixed Income of Self-employed 13,000
(x) Net Factor Income from Abroad 500
(xi) Net Exports 2,000
b)State and discuss any three precautions to be considered while estimating national
income by Expenditure method. 2