II PUC

ECONOMICS
2024
QUESTIONS WITH
ANSWERS FOR
MINIMUM PASSING TO
RESULT
UPGRADATION

DHARMENDRA.B.G,
ECONOMICS LECTURER,
G.I.P.U.COLLEGE, VIJAYANAGARA EXTN. HASSAN.
MOB:9449494737
1 MARK, 2 MARKS,
AND 5 MARKS
QUESTIONS WITH
ANSWERS FOR
MINIMUM PASSING
OF THE STUDENTS
TO RESULT
UPGRADATION

DHARMENDRA.B.G,
ECONOMICS LECTURER,
G.I.P.U.COLLEGE, VIJAYANAGARA EXTN. HASSAN.
MOB:9449494737
 II PUC - ECONOMICS

PART-A INTRODUCTORY MICRO ECONOMICS

Chapter-I: Introduction
I. Choose the correct answer (each question carries 1 mark)
1. The scarce resources of an economy have
a) Competing usage b) Single usage c) Unlimited usage d) none of the above
2. Which of the following is an example of micro Economic Study?
a) National income b) Consumer behavior c) Unemployment d) Foreign trade
3. Central problems of an economics includes
a) What to produce b) How to produce c) For whom to produce d)All of the above
4. Traditionally, the subject matter of economics has been studied under the following broad
branches.
a) Micro and macro economics b)Positive & Normative
c) Deductive & Inductive d)None of the above

Answers: 1(a), 2(b), 3(d), 4(a)

II. Fill in the blanks (each question carries 1 mark)

1. Scarcity of resources given raise to ________
2. In a centrally planned Economy all important decisions are made by ________
3. ______ is a set of arrangements where economic agents can freely exchange their endowments or
products with each other
4. In reality. All Economics are ___________

Answers: 1. the problem of choice, 2. Central Government, 3. Market, 4. Mixed Economies

III. Match the following (each question carries 1 mark)

1. Market Economy – a. Government
2. Service of a Teacher – b. Private ownership
3. Centrally planned Economy - c. Skill
4. Positive Economics - d. Evaluate the mechanism
5. Normative Economics – e. Functioning of Mechanism

Answers: 1(b), 2(c), 3(a), 4(e), 5(d)

IV. Answer the following questions in a sentence/word (each question carries 1 mark)
1. Why does the problem of choice arise?
The problem of choice arises because unlimited wants of human beings and scarce resource which are having
alternative uses.
2. What is Market Economy?
All Economic activities are controlled and managed by buyers and sellers is called market economy.
3. What do you mean by centrally planned Economy?
Economic activities are controlled by the Government or Central authority is called centrally planned
Economy.
4. Give the meaning of Micro Economics.
The study of small units of the economy such as individual consumer, producer or firm, etc. is called Micro
Economics.
5. What do you mean by positive Economics?
The study of different mechanisms functions of an economy that is how are the economic activities and what
are the economic activities is called positive economics.
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6. What is Normative Economics?
The study of evaluation of different mechanisms functions of an economy that is how should be the
economic activities and what should be the economic activities is called normative economics.

V. Answer the following questions in 4 sentences.

1. Mention the central problems of an Economy.
a. What is produced and in what quantities?
b. How are these goods produced?
c. For whom are these goods produced?
2. Distinguish between Micro and Macro Economics.
Micro Economics Macro Economics
1. Micro Economics studies the behavior of Macro economics is that part of economic theory
individual Economic units of an economy. which studies the economy as a whole.
2. For example: An individual, A producers, A For example: Aggregate demand, Aggregate
firm etc. production, Aggregate price level etc.
3. It has narrow scope It has broad scope
4. It is partial equilibrium analysis It is general equilibrium analysis.
3. Distinguish between positive and Normative Economics.
Positive Economics Normative Economics
1. Positive economics studies the different Normative economics studies the evaluation of
mechanisms functions of an economy that is different mechanisms functions of an economy that is
how are the economic activities and what are the how should be the economic activities and what
economic activities should be the economic activities.
2. It is the study of real facts. It is the study of economic activities, which is good?
or which is bad?
3. For example: If the government cuts back For example: Government should provide free and
subsidies on basic education, many of poorest compulsory education and health service to all
children will leave school
4. What do you mean by production possibility set?
“The collection of all possible combinations of the goods and services that can be produced from a given
amount of resources and given stock of technological knowledge is called the production possibility set.”
5. What is opportunity cost?
The most attractive forgone or the next best choice sacrificed the production of a commodity is called
opportunity cost or Opportunity cost of some activity is the gain foregone from the second best activity.
6. What is production possibility frontier?
The Production possibility frontier (PPF) refers to a curve that shows various alternative combinations of
two goods that can be produced with efficient utilization of given resource and technology. It is also
called production possibility curve (PPC).

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 II PUC - ECONOMICS

Chapter-II: THEORY OF CONSUMER BEHAVIOUR

I. Choose the correct answer (Each question carries 1 marks)

1. Utility is
a) Objective b) Subjective c) Both a & b d) None of the above.
2. The Shape of and indifference curve is normally
a) Convex to the origin b) Concave to the Origin c)Horizontal d) Vertical
3.The consumption bundles that are available to the consumer depend on
a) Colour & shape b) Price and income c) Income & Quality d) None of the above
4. The equation of budget line is
a) Px+P1=M b) M=P0X0+Px c) P1X1+P2X2=M d) Y=MX+C
5. The demand for these goods increases as income increases.
a)Inferior goods b) Geffen goods c)Normal goods d) None of the above
6. A vertical demand curve is
a) Perfect elastic b) Perfect inelastic c) Unitary elastic d) None of the above
7. Ordinal utility analysis expresses utility in
a)Numbers b) Returns c)Ranks d) Awards

Answers: 1(b), 2(a), 3(a), 4(c), 5(c), 6(b), 7(c)

II. Fill in the blanks (each question carries 1 mark)

1. Want satisfying capacity of a commodity is ______
2. Two indifference curves never _______each other.
3. As income increases, the demand curve for normal goods shifts towards _______
4. The demand for a good moves in the ________ direction of its price.
5. Method of adding individual demand curve is called _________

Answers:1. Utility, 2. Intersects, 3. Right side, 4. Opposite, 5. Horizontal summation

III. Match the following (Each question carries 1 mark)

A B
1. Demand curve - a. d(p)=a-bp
2. Linear demand curve - b. Down ward sloping
3. Unitary elasticity of demand - c. Pen & Ink
4. Complementary goods - d. A family of indifference curve
5. Indifference map - e. ed=1

Answers: 1(b), 2(a), 3(e), 4(c), 5(d)

IV. Answer the following questions in a sentence / word.(each questions carries 1 mark)
1. What is budget line?
Budget line is a locus of different combinations of the two goods which consumer consumes and whose cost
exactly equals to his income.
2. What do you mean by cardinal utility analysis?
Cardinal utility analysis represents that level of utility can be expressed in number like 1.2.3.4 Etc. Or
Cardinal method is possible to measure utility in terms of numbers such as 1.2.3.4 etc. cardinal approach is
also known as utility approach.

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3. Give the meaning of Marginal utility?
Marginal utility is the change in total utility derived from consumption of an additional unit of commodity.
4. What is utility?
Utility means the wants – satisfying power of a commodity or a service.
5. Expand MRS?
Marginal Rate of Substitution
6. What do you mean by indifference curve?
Indifference curve refers to the graphical representation of various combinations of the two goods that
provide the same level of satisfaction to a consumer.
7. What is demand?
The Quantity of a good that a consumer purchases in a market at a particular price and at a particular time

V. Answer the following questions in 4 sentence (Each questions carries 2 Marks)

1. What is MRS?
Marginal Rate of substitution is the rate at which a consumer is willing to give up one commodity for an
extra unit of other commodity
MRS
2. What do you mean by inferior goods? Give example.
There are the goods for which the demand is inversely related to consumer’s income, means some goods for
which when the consumers income increases, demand decreases. When income decreases demand increases.
Ex: coarse cereals like. pearl millet(sajje),finger millet (Ragi),fox tail millet (navane), kodo millet (Aarka)etc.
These goods are also called giffen goods.
3. What is monotonic preference?
Monotonic preference means The consumer prefers the bundles which has more of at least one of the goods
and no less of the other good as compared to the other bundle, which gives higher level of the satisfaction to
the consumer. Example (10.10).(9.8).(9.7) in this example monotonic preference bundle is(10.10)
4. State the law of demand.
The law of demand states that “ other things being equal or constant (ceteris paribus ),there is a
negative(inverse) relationship between demand for a commodity and its price in other words, when price of
the commodity increases, demand for commodity is decreases(falls)and when price of the commodity
decreases, demand for commodity increases”.
5. Mention two different approaches which explain consumer behavior.
There are two basic approaches to study the consumer behavior they are.
1. Cardinal approach
2. Ordinal approach
6. What do you mean by price elasticity of demand?
Price elasticity of demand is a measure of the responsiveness of the demand for a good to change in its price.
Or Ped for a good is defined as the percentage change in demand for the good divided by the percentage in its
price.
or

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VIII. Assignment and project oriented questions. (Each question carries 5 marks)
1. A consumer wants to consumes two goods. The Price of Bananas is Rs 5 and the price of mango is
Rs.10 The consumer income is Rs 40.
a) How much Bananas Can she consumes if she spend her entire income on that good?
b) How much manes can she consumes if she consumer if she spend her entire income on that good?
c) Is the slope of budget line downward or up word?
d) Are the Bundles on the budget line equal to the consumer’s income or not?
e) If you want to have more of Bananas you have to give up mangoes. Is it true?
Answers:
a) = = 8 Bananas can she consume

b) = = 4 Bananas can she consume.

c) Slope of Budget line is “Downward”
d) Yes. Bundles on the Budget line are Equal to the consumer’s income
e) True

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 II PUC - ECONOMICS

Chapter-III: PRODUCTION AND COST

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

1. The formula of production function is
a) q = f (L.K) b) q=d(p)
c) Y=f(x) d) none of the above
2. In the short run, a firm
a) can change all the inputs c) can keep the inputs fixed
b) cannot vary all the inputs d) none of the above
3. The change in output per unit of change in the input is called
a) Marginal product c) Average product
b) Total product d) product
4. Cobb-douglas production function is
a) q= (x,x) b) q= (x1, x2)
b) c) q= d) q=0
5. TC = __________
a) TVC b) TFC
b) c) TFC+TVC d) AC+MC

Answers: 1(a), 2(b), 3(a), 4(c), 5(c)

II. Fill in the blanks (Each questions carries 1 mark)

1. In the long run, all inputs are ________
2. _________ is defined as the output per unit of variable input.
3. Marginal product and Average product curves are _______in shape.
4. SMC curves cuts the AVC curves at the _______ point of AVC curve from below.
5. ______ is the set of all possible combinations of the two inputs that yield the same maximum possible
level of output.

Answers: 1. Varied, 2. Average product, 3. Inverse U, 4. Minimum, 5. Isoquant

III. Match the following (Each question carries 1 mark)

A B
1. CRS - a. TC/ Q
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

Answers: 1(d), 2(c), 3(b), 4(e), 5(a)

IV. Answer the following questions in a sentence/ word. (Each questions carry 1 mark)
1. What do you meant by total product?
The relationship between the variable input and output, keeping all other inputs constant, is often referred to
as Total product. Or
The total product indicates the total volume of goods and services produced during a given period of time
generally a year.
2. What is average product?
Average product is defined as the output per unit of variable input.

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3. Give the meaning of Marginal product.
Marginal product of an input is defined as the change in output per unit of change in the input when all other
inputs are held constant (capital).
MP2 = or MP = Or MP = TPn – TPn-1
4. Write the meaning of cost function of the firm.
The cost function describes the least cost of producing each level of output given prices of factors of
production and technology.
5. What is total fixed cost?
In the short run, some of the factors of production cannot be varied, and therefore, remain fixed. The cost
that a firm incurs to employ these fixed inputs is called the total fixed cost (TFC).
TFC = TC - TVC
6. What is average fixed cost?
Average fixed cost is a per unit of output of fixed cost.
AFC =

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

1. What is Isoquant?
An Isoquant is the set of all possible combinations of the two inputs that yield the same maximum possible
level of output.
2. Give the meaning of the concept of short-run and long run.
Short run: At least one of the factor can be varied and other factors remaining constant. The factor that
remain fixed (constant) is called fixed inputs. whereas the other factor which the firm can vary is called the
variable factor.
Long run: All the factors of production can be varied. A firm in order to produce different levels of outputs
simultaneously. So in the long run there is no fixed input.
3. Mention the types of Return to scale.
The three types of return to scale are:
1. Increasing returns to scale. (IRS)
2. Constant returns to scale. (CRS)
3. Diminishing returns to scale. (DRS)
4. Name the short run costs.
The costs involved in short-run are:
• TFC : Total Fixed Cost
• TVC : Total variable cost
• STC : Short run Total cost
• AFC : Average fixed cost
• AVC : Average fixed cost
• SAC : Short run Average cost
• SMC: Short run Marginal cost
5. What are long run costs?
The cost of output in the long run is called long costs. In long run since all factors are variable, therefore all
costs are variable.
The cost Involved in the long run are:
• Total cost (TC)
• Long run average cost. (LRAC)
• Long run marginal cost. (LRMC)

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VIII. Assignment and project oriented questions. (Each question carries 5 marks)
1. Find the missing products in the following table.
Factor 1 TP MPL APL Factor 1 TP MPL APL

0 0 0 0 0 0 0 0
1 10 - 10 1 10 10 10
2 24 - 12 2 24 14 12
3 40 16 13.33 3 40 16 13.33
4 - 10 - 4 50 10 12.5
5 - 6 11.2 5 56 6 11.2
6 57 1 9.5 6 57 1 9.5

(For blind students only)

1. Explain the meaning of TP,MP and AP)
1.Total product: The relationship between the variable Input and output, keeping all other inputs constant,
is often referred to as total product(TP) of the variable Input.
As illustrated in the table, total product by 4 units of labour are 50 units.
TP = MP Or TP = AP L
In other words, The total volume of goods and service produced during a specified period of time generally
a year is called TP.
2.Average product: Average product is defined as the output per unit of variable input. Or
Per unit of production of the variable factor, we can get average product.
Formula: APL= .
3.Marginal product: Marginal Product of an input is defined as the change in output per unit of change in
the input when all other inputs are held constant. when capital is held constant, the marginal product of labor is
MPL = or MPL =
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 II PUC - ECONOMICS

Chapter-IV: THE THEORY OF FIRM UNDER PERFECT COMPETITION

I. Choose Correct Answer (Each Question Carries 1 Mark)

1. The product in a perfect competition are
a) Heterogeneous products b) Homogeneous products
c) I luxury goods d) Necessary goods
2. The increase in total revenue for a unit increase in the output is
a) Marginal revenue b) Average revenue
c) Total Revenue d) Fixed Revenue
3. The firm’s profit is denoted by
(a) ∑ (b) ∆ (c) ∅ (d) π
4. When the supply curve is vertical the elasticity of supply is
a) es =1 b) es > 1 c) es = 0 d)ex =00
5. The revenue per unit of output of firm is called as
a) TR b) MR c) AR d) None of the above

Answers: 1(b), 2(a), 3(d), 4(c), 5(c)

II. Fill in the Blank (each Question carries 1 Mark)

1. Price taking behavior is the single most distinguishing characteristic of _________Market.
2. ________ is tax that the government imposes per unit sale of output
3. For price taking firm marginal revenue is equal to _______
4. The point of minimum AVC where the SMC curves cuts the AVC curves is called ______
5. ______ Cost of some activity is the gain forgone form the second best activity.

Answers: 1. Perfect Competition 2. Unit Tax 3.The Market Price 4. Shutdown Point
5. Opportunity

III. Match the following (each questions carries 1 mark)

A B
1 TR= - a. Perfect Information
2 - b. Zero profit
3 AR= - c. PxQ
4 Normal Profit - d. TR-TC
5 Perfect competition - e.

Answers: 1(c), 2(d), 3(e), 4(b), 5(a)

IV. Answer the following question in a sentence/word (each question carries 1 marks)
1. Define marginal revenue.
Marginal revenue of a firm is defined as the increase in total revenue for a unit increase in the firm’s output.
2. To which side does supply curve shift due to the technological progress?
Supply curve shift from left to right due to the technological progress.
3. Write the formula to calculate average revenue.
The average revenue is calculated as follows, AR =

4. What is normal profit?

A firm will be earning normal profits, if its revenue is sufficient to cover all its costs. Normal profit is a
situation where the revenue will be equal to its cost.

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5. Give the meaning of super normal profit.
Profit that a firm earns over and above the normal profit is called the super-normal profit.

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

1. Mention the conditions needed for profit by a firm under perfect competition.
For profits to be maximum three conditions must hold at q 0
a) The price p must be equal to MC
b) MC must be non – decreasing at q0
c) For the firm to continue to produce, in the short run, price must be greater than the average
variable cost (p>AVC) in the long run price must be greater than the average cost (p>AC)
2. Give the meaning of shut down point.
A firm continues to produce as long as the price remains greater than or equal to the minimum of AVC.
Below the minimum point of AVC there will be no production so the point where SMC curve cuts AVC
curve at the minimum is called the shut down point of the firm. In longrun, the shutdown point is the
minimum point of LRAC which cuts LRMC.
3. Write the meaning of opportunity cost with an example.
Opportunity cost of some activity is the gain forgone from the second best activity. For example if a person
is having 2 acre of land he can cultivate paddy or wheat. By cultivating paddy he earns Rs 40,000. If he
cultivates wheat, he may earn Rs 35, 000. In the process of cultivating paddy, he has to sacrifice Rs 35,000
So the opportunity cost of cultivating paddy is Rs 35000.
4. Mention the two determinates of a firm’s supply curve.
The following are the determinants of supply:
1. Technological progress
2. Input prices
3. Tax Policy of the Government
4. Goals of the Firm
5. Give the meaning of price elasticity of supply and write its formula.
Price elasticity of supply is defined as the ratio of proportionate change in the supply of a commodity to
that of proportionate change in the price of the commodity
Pes= Or Pes=

initial price; Q =initial quantity supplied

=Change in price of good =Change in quantity of supply

VIII. Assignment and project oriented questions.

1. Compute the total revenue, marginal revenue and average revenue schedules in the following table
when market price of each unit of good is RS 10.
ANSWER:
Quantity TR MR AR Q P TR=P*Q AR MR=TRn-TRn-1
sold =TR/Q
0 0 10 0 0 0
1 1 10 10 10 10
2 2 10 20 10 10
3 3 10 30 10 10
4 4 10 40 10 10
5 5 10 50 10 10
6 6 10 60 10 10

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 II PUC - ECONOMICS

Chapter-V: MARKET EQUILIBRIUM

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

1. in perfect competition, buyers and sellers are.
a) Price makers b) Price takers c) Price analysts d) none of the above.
2. A situation where the plans of all consumers and firms in the market match.
a) In equilibrium situation b) Equilibrium situation
c) Maximization situation d) Partial Equilibrium situation
3. As a result of increase in the number of firms there is an increase in supply, then supply curve.
a) Shifts towards left b) Shifts towards Right
c) Shifts towards both sides d) none of the above
4. The firms earn super normal profit as long as the price in greater than the minimum of
a) Marginal cost b) Total Cost c) Average cost d) Fixed cost
5. The government imposing upper limit on the price of goods and service is called.
a) Price ceiling b) selling price c) Price floor d) none of the above
6. The government imposed lower limit on the price of good and service is called
a) Goods floor b) Service floor c) Price floor d) none of the above.

Answers: 1(b), 2(b), 3(b), 4(c), 5(a), 6 (c)

II. Fill in the blanks (each question carries 1 mark)

1. In a perfectly competitive market, equilibrium occurs when market demand _______market supply.
2. If the supply curve shifts rightward and demand curve shifts leftward equilibrium price will be ________
3._____ is determined at the point where the demand for labor and supply of labor curves intersect.
4. In a market _______ are the suppliers of labor
5. Due to rightward shifts in both demand and supply curves the equilibrium price remains __________
6. It is assumed that, in a perfectly competitive market an ______is at play.

Answers: 1. is equal to 2. Decreasing 3. Wage Rate 4. Households

5. May increase or decrease or remain unchanged 6. invisible hand

III. Match the following (Each Question carries 1 Mark)

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

Answera: 1(b), 2(d), 3(e), 4(a), 5(c)

IV. Answer the following Question in a Sentence / word (Each Question carries 1 mark)
1. Define market equilibrium.
Market equilibrium is situation where market demand is equal to market supply.
2. What is equilibrium price?
The price at which the quantity demanded of a commodity is equal the quantity supplied is called
equilibrium price.

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3. What is price ceiling?
The government-imposed upper limit on the price on the price of a good or service is called price ceiling
fixing the maximum price of a commodity at a level; lower than the equilibrium price is called price ceiling.
4. What is price floor?
Price floor means the minimum price fixed by the government for a commodity in the market to protect the
interest of the producers. Or the minimum price,(above the equilibrium price), fixed by the government,
which the producers must be paid for their produce is called price floor.
5. Through which legislation, the government ensures that the wage rate of the laborers does not fall
below a particular level?
Through the minimum wage legislation, the government ensures that the wage rate of the laborers does not
fall below a particular level. (Minimum wage policy)

V. Answer the following question in 4 sentences (each Question 2 Marks)

1. Define equilibrium price and quantity.
The price at which equilibrium is reached is called equilibrium price, whereas, the quantity bought and sold
at the equilibrium price is called equilibrium quantity.
2. How price is determined, when fixed number of firms exist in perfect competition?
Price is determined with the help of supply and demand forces when the number of firms is fixed in perfect
competition. If there any imbalance in the equilibrium price invisible hand guides both producers and
consumers towards equilibrium.
3. Write any two possible ways in which simultaneous shift of both demand and supply curves.
The two possible ways are
a. Both supply and demand curves shift rightwards.
b. Both supply and demand curves shift leftwards.
c. Supply curve shift leftward and demand curve shift rightward
d. Supply curve shift rightward and demand curve shift leftwards
4. What is marginal Revenue product of labor (MRPL)?
For each extra unit of labor, he gets an additional benefit equal to marginal revenue time’s marginal product
which is called Marginal Revenue product of labor (MRPL)
5. Distinguish between excess demand and excess supply.
If at a price, market supply is greater than market demand, we say that there is an excess supply in the
market at that price.
If market demand exceeds market supply at a price, it is said that excess demand exists in the market at the
price.
6. How wage is determined in the labor market?
The wage rate is determined at the intersection of the demand and supply curves of labor where the demand
for labor and supply of labor balance.

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PART-B: MACRO ECONOMICS

Chapter-I : INTRODUCTION
I. Choose the correct Answer (Each question carries 1 mark)
1. The individuals or institutions which take economic decisions are
a) Economic Variables c) Economic Agents
b) Economists d) None of the above
2. In 1936 British economist J.M Keynes published his celebrated book
a) Wealth of nation b) General theory of employment interest and Money
c) Theory of Interest d) Theory of Employment
3. All the laborers 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
a) Modern thought b) Contemporary thought
c) Classical thought d) none of the above
4. The year of Great Depression
a) 1920 b) 1889
c) 1929 d) 2018
5. In a capitalist country production activities are mainly carried out by
a) Private enterprises b) Government authority
c) Planning authority d) none of the above

Answers: 1(c), 2(b), 3(c), 4(c) 5(a)

II. Fill in the Blanks (Each question carries 1 mark)

1. __________ tries to address situation facing the economy as a whole.
2. Sale of goods by the domestic country to the rest of the world is called _____
3. The domestic country may sell goods to the rest of the world. These are called ______________
4. ____________ will be called as firms
5. ____________ Policies are pursued by the state itself or statutory bodies like the RBI, SEBI etc.

Answers: 1. Macro economics 2. Export 3. Exports 4. The production units

5. Macroeconomic policies

III. Answer the following questions in a sentence/word (Each question carries 1 mark)
1. Who are economic agents?
By economic agents, we mean those individuals or institutions which take economic decisions.
Consumers, producers, government, corporations and banks etc.
2. What does classical school of thought say?
The classical school of thought says that all the laborers who are ready to work will find employment and all
the factors will work their full capacity.
3. Give the meaning of imports.
An economy which busy goods from rest of the world are called as imports.
4. Name the well known work of Adam Smith
“An Enquiry into the Nature and Causes of the Wealth of Nations” Published in the year 1776.
5. What do you mean by wage rate?
Wage rate refers to the rate at which the sale and purchase of labor service is going to happen.

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IV Answer the following Question in 4 Sentences (Each Question carries 2 marks)
1. What are the features of capitalistic economy?
Capitalist economy can be defined as an economy, in which most of the economic actives have the
following characteristics.
a) There is private ownership of means of production.
b) Production takes place for selling the output in the market
c) There is sale and purchase of labor services at a price which is called the wage rate.
2. Name and write the meaning of two kinds of trade in external sector.
Trade with the external sector can be of two kinds.
a) Exports: The domestic country may sell goods to the rest of the world.
b) Imports:The economy may also buy goods from the rest of the world.
3. Who are the macroeconomic decision makers?
The macroeconomic decision makers are a) Government, b) Corporations c) reserve bank of India (RBI) d)
The security and stock exchamge board of india (SEBI) and other financial institutions.

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Chapter-II: NATIONAL INCOME ACCOUNTING

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

1. The Study of National income is related to
a) Micro economics b) Macro economics c) Both micro & Macro d) none of the above
2. NNP=GNP
a) Deduction b) Depreciation c) Investment d) None of the above
3. The value of GDP at the current prevailing prices is
a) Real GDP b) GDP at factor cost c) Nominal GDP d) NDP
4. by deducting undistributed profit from national income, we get
a) Personal disposable income b) Personal income c) Private income d) Subsidies
5. Measuring the sum total of all factor payments will be called
a) Product method b) Expenditure method c) Income method d) none of the above

Answers: 1(b), 2(b), 3(c), 4(b), 5(c)

II. Fill in the Blanks (Each question carries 1 mark)

1. ___________ are defined at a particular point of time
2. __________ goods will not pass through any more stages of production
3. ___________ is an annual allowance for wear and tear of a capital good.
4. ___________ is a stock variable.
5. Pollution is an example for _____________ externalities.
6. The net contribution made by a firm is called its ________

Answers: 1. Stocks 2. Final 3. Depreciation 4. Inventory 5. Negative 6. Value added

III. Match the following (each question carries 1 mark)

A B
1 Labor - 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

Answers: 1(e), 2(c), 3(d), 4(b), 5(a)

IV. Answer the following question in a sentence/word. (Each question carries 1 mark)
1. What do you mean by final goods?
The good that will not pass through any more stages of production or transformations is called a final good.
2. Expand CPI.
Consumer Price Index
3. Expand GNPMP.
Gross National Product at market price.
4. How do you get net value added?
If we deduct the value of depreciation from gross value added we obtain net value added.
5. Give the meaning of GDP.
Gross domestic product measures the aggregate production of final goods and services taking place within
the domestic economy during a year.

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6. Give the meaning of intermediate goods.
Intermediate goods are those goods used as raw materials or inputs for production of other commodities
7. What is depreciation?
The deletion which is made from the value of gross investment in order to accommodate regular wear and
tear of capital is called depreciation.
8. How do we get personal Disposable income?
If we deduct the personal tax payments and Non-payments from personal income we obtain personal
disposable income.
9. Write the equation of GVA at market prices.
GVA at basic prices + net product taxes = GVA at Market prices.
10. What is GDP deflator?
The ratio of nominal to real GDP is a well known index of prices. This is called GDP deflator.

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

1. What are the four factors of production? Mention their rewards.
The four factors of production are lands, Labor, Capital and organization. The rewards of factors of
production are Rent, wages, interest and profit.
2. Distinguish between stock and flow. Give example.
Stock is defined at a particular point of time. Flows are defined over a period of time. For example:
Stocks flows
1 Stock variable refers to that variable, which is Flow variable refers to that variable, which is
measured as a particular point of time. measured over a period of time.
2 Stock is a static concept Flow is dynamic concept.
3 Stock does not have a time dimension. Flow has a time dimension as his magnitude can
be measured over a period of time.
4 Example: bank deposits, wealth , food grains etc. Example: national income, import, export etc.
3. What is the difference between consumer goods and capital goods?
Goods like food and clothing, services like recreation that are consumed when purchased by their ultimate
consumers are called consumer goods.
Goods which are used in the production of some other goods are capital goods. For example, machinery,
tools, equipments etc.
4. Mention 3 methods of measuring GDP (National Income).
The three methods of measuring national income are
a)Product Method b) Income method c) Expenditure Method
5. What do you mean by externalities? Mention its two types.
Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not
paid (or penalized). There are two types of externalities,
a) Positive Externalities b) Negative Externalities
6. Write the equation of GDPMP and GDPFC”
The equation of GDPMP is GDPMP = C+I+G+X-M
The equation of GDPFC is GDPFC=GDPMP - net indirect taxes (NIT)
7. Write the difference between nominal and real GDP.
Real GDP is calculated in a way such that goods and services are evaluated at some constant prices.
Whereas, Nominal GDP is simply the value of GDP at the current prevailing prices.

*****

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Chapter-III: MONEY AND BANKING

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

1. The main function of money is
a) Saving b) expenditure
c) medium of exchange d) investment
2. The bank which acts as monetary authority of India.
a) RBI b) NABARD
c) RRB d) IDBI
3. The banks which are a part of the money creating system of the economy are
a) Bankers b) commercial banks
c) RBI d) none of the above
4. The rate at which the RBI lends money to commercial banks against securities
a) Bank rate b) Repo rate
b) c) Reverse Repo rate d) None of these
5. The important tool by which RBI influences money supply is
a) Open market operation c) money operation
b) Closed market operation d) none of the above

Answers: 1(c), 2(a), 3(b), 4(b), 5(a)

II. Fill in the blanks (Each question carries 1 mark)

1. Economic exchanges without the use of money are referred to as ______.
2. ________ is the only institution which can issue currency in India.
3. ________ Issues coins in India.
4. The principal motive for holding money is to carry out ________.
5. M1 and M2 are known as _________.

Answers: 1. Barter Exchanges 2. Reserve Bank 3. Government of India 4. Transactions

5. Narrow Money

III. Match the following (Carries five marks)

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

Answers: 1(b), 2(a), 3(e), 4(c), 5(d)

IV. Answer the following questions in a sentence/word. (Each question carries 1 mark)
1. What do you mean by barter system?
Economic exchanges without the mediation of money are referred to as barter system or barter exchanges.
2. Give the meaning money.
Anything that is commonly accepted as the medium of exchange is called as money.

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3. What is Time deposit?
The deposits that have a fixed period to maturity are referred to as time deposits.
4. What is Fiat Money?
Currency notes and coins are therefore called fiat money. They do not have intrinsic value like a gold or
silver coin.
5. Write the meaning of ‘High powered Money’.
The currency notes supplied by RBI and coins issued by the government of India together called as High
Powered Money.
6. Expand CRR.
Cash Reserve Ratio.
7. What is Bank Rate?
Bank rate refers to the rate at which RBI gives loans to the commercial banks. (The rate of interest charged
by the RBI for providing loans to the commercial banks as the lender of last resort is called bank rate.)

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

1. Mention any two functions of money.
The two functions of money are,
a) Medium of exchange
b) Measure of value
2. Give the meaning of CRR and SLR.
Cash Reserve Ratio is the percentage of deposits which commercial banks are required to keep with the RBI
in the form of reserve or balance.
Statutory Liquidity Ratio is the percentage of total demand and time deposits that the commercial banks
have to keep with themselves in the form of liquid assets.
3. State the credit control instruments of RBI.
The credit control instruments of RBI are,
Quantitative methods
a) Bank Rate
b) Open Market Operation
c) Cash Reserve Ratio
d) Statutory Liquidity Ratio
Qualitative methods
a) Margin requirements
b) Discourage or encourage lending which is done through moral suasion.
4. Mention two motives of demand for money.
The two motives of demand for money are,
a) The Transaction Motive
b) The Speculative Motive
5. How does bank rate influence money supply?
Bank rate influences the supply of money by increasing the bank rate, loans taken by the commercial banks
become more expensive; this reduces the reserves held by the commercial bank and hence decrease money
supply. A fall in the bank rate increases the money supply.
6. What role of RBI is known as ‘Lender of Last Resort’?
The role of RBI, that of being ready to lend to banks at all times is an important function of central bank,
and due to this central bank is said to be the lender of last resort.

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VIII. Assignment and project oriented questions (carries 5 marks)
1. Write a note on Demonetization
The withdrawal of a coins and notes from the use as legal tender is called demonetization. Demonetization
was a new step taken by the government of India on 8th November, 2016. It was introduced to tackle the
problem of corruption, black money, terrorism and circulation of fake currency in the economy. Old currency
notes of Rs.500 and Rs. 1000 were no longer legal tender. New currency notes in denomination of Rs. 500 and
Rs. 2000 were introduced. The public were advised to deposit old currency notes in their bank account till 31st
of March 2017 without any declaration and after 31st March 2017 with the RBI with declaration. In order to
avoid a complete breakdown and scarcity of cash, government allowed exchange of Rs. 4000 old currency
notes with new currency restricting to a person per day. Further till 12th December 2016, old currency notes
were acceptable as legal tender at petrol pumps, government hospitals and for payment of government dues
like taxes, power bills, etc.
This initiative had both appreciation and criticism.
Criticism of Demonetization:
The following the important Criticisms of demonetization.
1) There were long queues outside banks and ATM booths.
2)The shortage of currency in circulation had an adverse impact on the economic activities. However, things
improved with time and normalcy returned.
Appreciation of Demonetization:
The following are the important appreciations of demonetization.
1. It improved tax compliance as a large number of people were bought in tax thx ambit.
2. The savings of an individual were channelized into the formal financial system As a result; banks have
more resources at their disposal which can be used to provide more loans at lower interest rates.
3.It is a demonstration of State’s decision to put a curb on black money Showing that tax evasion will no
longer be tolerated.
4. Tax evasion will result in financial penalty and social condemnation.
5. Tax compliance will improve and corruption will decrease.
6. Demonetization could also help tax administration in another way, by shifting transactions out of the cash
economy into the formal payment system.
7. Households and firms have begun to shift from cash to electronic payment technologies.
*****

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 II PUC - ECONOMICS

Chapter-IV: INCOME DETERMINATION

I. Choose correct Answer. (Each question carries 1 mark)

1. Consumption which is independent of income is called
a) Induced consumption c) Wasteful consumption
b) Autonomous consumption d) Past consumption
2. Value of MPC lies between
a) 1 and 2 b) 0 and 1
c) 2 and 4 d) 0 and 0.5
3. The point where ex-ante aggregate demand is equal to ex-ante aggregate supply will be
a) equilibrium c) excess demand
b) disequilibrium d) excess supply
4. Easy availability of credit encourages
a) saving b) investment
c) rate of interest d) none of these
5. In the situation of excess demand
a)demand is less than the level of output b)demand is more than the level of output
c)supply is less than the level of output d)supply is more than the level of output

Answers: 1(b), 2(b), 3(a), 4(b), 5(b)

II. Fill in the Blanks (Each question carries 1 mark)

1. cY shows the dependence of consumption on _______
2. Savings is that part of income that is _________
3. Average propensity to consume (APC) is the consumption per unit of _____
4. __________ is defined as addition to the stock of physical capital
5. Size of the multiplier depends on the value of ______.
6. I- is a position constant which represents the __________ investment in the economy.

Answers: 1. Income 2. Not consumed 3. Income 4. Investment

5. Marginal Propensity to Consume (MPC) 6. Autonomous

III. Match the following (carries 5 Marks)

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

Answers: 1(e), 2(c), 3(a), 4(b), 5(d)

IV. Answer the following questions in a sentence/word. (Each question carries 1 mark)
1. Write the meaning of autonomous consumption.
When the level of consumption is independent of income, it is called as autonomous consumption.
2. Give the meaning of Marginal propensity to save (MPS).
It is the change in savings per unit change in income. It is denoted by s and is equal to 1-c.
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3. Define Average Propensity to save (APS).
It is the savings per unit of income i.e…s/y.
4. Write the meaning of full employment level of income.
Full employment level of income is that level of income where all the factors of production are fully
employed in the production process.
5. Mention two fiscal variables which influence aggregate demand.
Tax and government expenditure are two fiscal variables which influence aggregate demand.
6. Write the formula of MPC.
MPC = C/ y = c

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

1. Write the meaning of excess demand and deficient demand.
If the equilibrium level of output is more than the full employment level then it is called as excess demand.
If the equilibrium level of output is less than the full employment of output, then it is called as deficient
demand.
2. Give the meaning of investment multiplier. Write its formula.
The ratio of the total increment in equilibrium value of final goods output to the initial increment in
autonomous expenditure is called the investment multiplier.
The investment multiplier =
3. Give the meaning of Paradox of thrift.
If all the people of the economy increase the proportion of income they save (i.e., if the mps of the economy
increases) the total values of savings in the economy will not increase. It will either decline or remain
unchanged. This result is known as the Paradox of Thrift.

*****

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 II PUC - ECONOMICS

Chapter-V: GOVERNMENT BUDGET AND THE ECONOMY

I. Choose The correct Answer (Each Question carries Mark)

1. The Taxes on Individual and firm are
a) Direct Taxes b) Indirect Taxes
c) Fixed taxes d) Non tax Revenues
2. Duties Levied on goods produced with in the country.
a) Service Tax b) Estate Duties
c) Excise Duties(Taxes) d) Customs duties
3. The tax which acts as an automatic stabilizer
a) Qualitative income Tax. c) Quantitative Tax
b) Income Tax. d) Proportional income Tax.
4. Which of the following is an example for ‘Paper taxes’
a) Income Tax b)Excise Taxes c)Wealth Tax d) Customs Taxes
5. When Demand exceeds the available output under conditions of high level of employment, this may
give rise to
a) Inflation b) Deflation c) Stabilization d) None of the above.

Answers: 1(a), 2(c), 3(d), 4(c), 5(a)

II. Fill in the Blanks (Each Question Carries 1 mark)

1. Non paying users of public goods are known as ___________________
2. Financial year runs from_________ to _____________ in India.
3. Taxes imposed on goods imported into and exported out of India are called__________________
4.The Government may spend an amount equal to the revenue it collects. This is known as ___________
5. Revenue deficit = Revenue expenditure -_______________

Answer: 1) Free-Riders 2) April 1st to 31st March 3) Customs Duties 4) Balanced Budget
5) Revenue Receipts

III. Answer the Following Question In a Sentence/word (Each question Carries 1mark)
1. What are public goods?
The goods which have two important feature namely, non – rivalry and non-excludable in nature For
example, public parks, Roads Street lights exc.
2. Who are ‘free-rider’?
Non paying users of public goods are known as ‘free-rider’.
3. What do you meant by public provision?
Public provision means that they are financed through the budget and can be used without any direct
payment.
4. Give the meaning of Progressive Tax.
A progressive tax is a tax system in which the rate of tax increases as income increases.
5. What are Revenue receipts?
Revenue receipts are receipts of the government which are non-redeemable, that is, they cannot be reclaimed
from the government. Example, Tax and-tax revenues.
6. Write the meaning of capital receipts.
All those receipts of the government which create liability or reduce financial assets are termed as capital
receipts Example, borrowing(internal and external)borrowing from RBI exc.
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7. Give the meaning of Revenue expenditure.
It is the expenditure incurred for purpose other than the creation of physical or financial assets of the
government Example, Interest payments, defense services, etc.
8. Give the meaning of Capital expenditure.
It is the expenditure of the government which results in creation of physical or financial assets or reduction
in financial liabilities. Example, buildings, machinery, etc.
9. Expand FRBMA.
Fiscal Responsibility and Budget Management Act.
10. What is primary deficit?
It refers to the excess of fiscal deficit over interest payments.
Primary Deficit =Fiscal Deficit-Net interest liabilities (Net liabilities consist of interest payments minus
interest receipts by the government on net domestic lending)

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

1. Write the difference between public provision and public production.
public provision means that are financed through the budget and can be used without any direct payment.
Public provision Public production
1. Those provisions which are financed through 1. When goods are produced directly by the
the budget and can be used without any direct government is called public production.
payment is called public provision.
2. Public provision can be obtain without any 2. Public goods produced by the government
direct payment can be obtained with payment.
2. Who are ‘Free-riders? Why are they called so?
Some users do not pay for the public goods and it is difficult and sometimes impossible to collect fees for
the public good. These non paying users are known as ‘free-rider’.
1. Consumers will not voluntarily pay for what they can get for free
2. For which there is no exclusive title to the property being enjoyed.
3. Distinguish between surplus budget and deficit budget.
Surplus Deficit Budget
1. If the anticipated revenue of the 1. If the anticipated expenditure of the government
government exceeds its anticipated expenditure exceeds its anticipated revenue in a year, then it is
in a year, then it is knows as surplus budget. known as deficit budget.
2. Usually government of developed 2. Usually government of developing countries
countries plan for a surplus budget. plan for a deficit budget.
3. Surplus budget indicates financial 3. Deficit budget indicates deliberate excessive
soundness of the government. expenditure by the government
4. Why public goods must be provided by Government?
These goods must be provided by the government because of the following reasons:
a. The benefits of public goods can be easily enjoyed anyone without affecting the consumption of other
individuals.
b. No individual can be excluded from using public goods as it available to all
c. Even if some users do not pay, it is difficult and sometimes impossible to collect fees for the public good.
d. Productions of some goods are profitable. In this situation private people are not come forward to produce
this type of product. In this situation govt. must produce this type of goods.
5. Mention the non-tax revenues of the central Government.
Non-tax revenues of the central government are Interest on account of loans by the central government,
dividends and profits on investment by the government, fees and other receipts for services rendered by the
government.

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6. Why the proportional income tax acts as automatic stabilizer?
The proportional tax acts as an automatic stabilizer because it makes disposable income and thus consumer
spending less sensitive to fluctuations in GDP.

VII. assignment and project oriented questions (each question carries 5 marks)
1. Prepare a budget on monthly Income and expenditure of your family.
The budget is a financial statement which includes anticipated income anticipated expenditure. An
imaginary monthly income and expenditure of a family is given below.
Budget for the month January 2020
Income In rs Expenditure In rs
1. Agriculture 5000-00 1. Ration 4500-00
2. House rent 2000-00 2. Education 2000-00
3. Part time work 1500-00 3. Health expenditure 1000-00
4. misc 1500-00 4. fuel and other 2500-00
Total 10,000-00 Total 10,000-00
This family has balanced budget as its income is equal to expenditure.

******

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 II PUC - ECONOMICS

Chapter-VI: OPEN ECONOMY.

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

1. The consumers and producers can choose between domestic and foreign goods. This market linkage
is called.
a) Financial market linkage b) output market linkage
c) labor market linkage d) none of the above
2. The exchange rate is determined by the market forces of demand and supply is called as
a) Fixed exchange rate b) dirty floating exchange rate
c) flexible exchange rate d) none of the above
3. The balance of payments ( BOP) record these transaction between residents and with the rest of the
world.
a) Goods b) services c) assets d) all of the above
4. The rate at which the price of the one currency in terms of foreign currency is called.
a) Exchange control b) interest rate c) foreign exchange rate d) none of the above
Answers: 1(b), 2(c), 3(d), 4(c), 5(c)

II. Fill in the blanks ( each questions carries 1 marks)

1. _________ is the record of trade in goods and services and transfer payments.
2. _________ account records all international transaction of assets.
3. The price of foreign currency in terms of domestic currency has increased and this is called _____ of
domestic currency.
4. _____ is a mixture of a flexible and fixed exchange rate system.
Answers: 1. Current account 2. depreciation 3. Capital account 4. Managed floating 5. 1944

III. Match the following ( carries 5 marks)

A B
1. balance of payment - a. Dirty floating
2. balance of trade - b. Flexible exchange rate
3. Floating exchange rate - c. Trade in goods
4. Managed floating - d. Trade in goods and service
Answers: 1(d), 2(c), 3(b), 4(a)

IV. Answer the following questions in a sentence or word ( each question carries 1 mark)
1. What do you mean by open economy?
An open economy is one which interacts with other countries through various channels.
2. What is balance of payment?
Balance of payment records the transaction of goods, services and transfer payments.
3. What is balance of trade?
Balance of trade is the difference between the value of export and value of imports of goods of a country in
a given period of time.
4. What do you mean by fixed exchange rate?
The government fixes the exchange rate at a particular level is called fixed exchange rate.
5. Give the meaning of official reserves sale.
The reserve bank sells foreign exchange when there is a deficit. This is called official reserve sale.
6. Give the meaning of managed floating.
Managed floating system is a mixture of flexible and fixed exchange rate system.

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 II PUC - ECONOMICS
V. Answer The Following Question in 4 Sentences. (Each Question Carries 2 Marks)
1. Mention the Three Linkages of open economy.
The three linkages of open economy are,
a) Output market b) Financial market c) labor market
2. What is the difference between current account and capital account?
Basic Current Account Capital Account
Influence 1. Current account transactions affect the 1.Capital account transaction affects the
current income level of the economy. capital stock of the company
Components 2. It records export/import of goods and 2. It records transaction relating to
services, unilateral transfers and sale/purchase of assets and
investment income received or paid. borrowings/lending.
Concept 3. It is a flow concept 3.It is a stock concept
3. When do surplus and deficit arise in Capital Account?
Surplus in capital account arises when capital inflows are greater than capital outflows whereas,
deficit capital account arises when capital inflows are lesser than capital outflows.
4. Write the meaning of balanced, surplus and deficit BOT.
Balance of trade is said to be in balance when export of goods are equal to the imports of goods.
Surplus BOT will arise if country exports more goods than what it imports.
Deficit BOT will arise if a country imports more goods than what it exports.
5. Why do people demand foreign exchange?
People demand for foreign exchange because: they want to purchase goods and services from other
countries: they want to send gifts abroad: and want to purchase financial assets of a certain country.
6. What is foreign exchange rate?
Foreign exchange Rate is the price of the currency in term of another. It links the currencies of different
countries and enables comparison of international costs and prices.eg: 1 us dollar equals to 70 rs.
7. Differentiate between depreciation and devaluation.
Devaluation Depreciation
1. It refers to a deliberate reduction of value of 1. It occurs when the value of domestic currency
one country’s currency with other country’s decreases in relation to the value of other currencies in
currency. foreign exchange market.
2. It takes place due to the action taken by the 2. It take-place due to changes in the market forces.
government.
3. It takes place under Fixed exchange rate 3. It takes place under flexible exchange rate system
system

VIII. Assignment and project oriented questions. (Each question carries 5 marks)
1. Name the currencies of any five countries of the following.
USA, UK, Germany, Japan, China, Argentina, UAE, Bangladesh, Russia.
Countries Currency
1. USA Dollar
2. UK Pounds Sterling
3. Germany Euro
4. Japan Yen
5. China Renminbi
6. Argentina Peso
7. UAE Diran
8. Bangladesh Thaka
9. Russia Rubel
****

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