SMT.

KAMLA MEHTA COLLEGE OF COMMERCE

Business Economics external External examination subject code253154
Time : 2 ½ Hrs. – 75 marks
N.B 1. All questions are compulsory.
2. Figures to the right indicate full marks.
3. Draw diagrams wherever necessary.

Q.1 (A) Choose the best answer: (Any eight)

(8)
1. The MPS is the counterpart of
(a) APC (b) MPC
(c) APS (d) None of the above
2. MEC curve
(a) slopes upwards (b) slopes downwards
(c) remain constant (d) does not change
3. In what the multiplier is related to MPS ?
(a) directly related to (b) reciprocal of
(c) not related to (d) equal to
4. Demand of speculative motive is referred to as demand for
(a) active cash balance (b) idle cash balance
(c) both active and idle cash balance
5. Inflation is beneficial to
(a) Fixed income group (b) Business people
(c) Creditors
6. When CRR is increased, banks reserves are
(a) increased (b) decreased
(c) remains the same
7. External debt implies borrowing from
(a) individual (b) firm
(c) foreign countries (d) none of the above
8. FRBM Act has _______ major objectives.
(a) 7 (b) 5
(c) 4 (d) 3
9. Ricardian theory ignores
(a) Supply (b) Demand
(c) Full employment
10. Gross barter terms of trade takes into account
(a) all the items (b) only services
(c) trade items and unilateral payments
Q.1 (B) State whether the statements are True or False: (Any 7)
(7)
1. Equilibrium level of employment can be attained at less than full
employment.
2. All bank deposits are included in narrow money.
3. In Fisher’s equation V is changing.
4. Functional finance rules were given by Keynes.
5. Fiscal tools can be used to redistribute income in favour of poor.
6. Taxes can reduce consumption of tax payers.
7. Keynes did not recommend public expenditure.
8. Free trade leads to creative destruction.
9. Green field investment refers to the new investment to acquire assets.
10. Overall balance is obtained by adding up current account and capital
account balances.
Q2 Answer (1 and 2) or (3 and 4)-15 marks
1. Explain the effects of inflation.(7)
2. What are Qualitative Techniques of Credit Control(8)
 OR
3. Explain the limitations of Fiscal responsibility and Budget Management
Act.(7)
4. Explain the assumptions of Ricardian theory of comparative cost.(8)
Q3 Answer (1 and 2) or (3 and 4)-15 marks
1. Explain the arguments for protection of free trade(7)
2. Explain the benefits of foreign direct investment to the host country. (8)
OR
3. Explain the Advantages of Multinational Corporations.(7)
4. Explain the Causes of disequilibrium.(8)
Q4 Answer (1 and 2) or (3 and 4)-15 marks
1. Explain Anti-Inflation Effects on Taxation(7)
2. What are the features of FRBM Act 2003(8)
OR
3. Factors determining the gains from trade(7)
4. Benefits of portfolio equity flows and Risks of portfolio investments.(8)
Q5 Attempt (1 & 2) or ( 3 ) -15 marks
1. Explain the Burden of internal debt.(7)
2. Explain the important reasons put forward for government or Central
Bank’s intervention to manage the exchange rate.(8)
OR
3. Short notes {any 3} – 5 marks each -15 marks
 A) High Powered Money
 B) Effects on employment
 C) Budgetary deficit
 D) Limitations of terms of trade
 E) Hedging