I.

Choose the correct answer:- a) Price makers b) Price takers

1. The scare resources of an economy have c) Price analyst d) none of the above
a) Competing usages b) Single usage 23. A situation where the plans of all consumers and firms in market
c) Unlimited usages d) None of the above match,
2. Which of the following is an example of micro economic study? a) In equilibrium situation b) equilibrium situation
a. National income b. Consumer behavior c) Maximization situation d) Partial equilibrium
c. Unemployment d. foreign trade situation
3. Central problems of an economy includes 24. As results in increase in the number of firms there is an increase in
a. what to produce b. How to produce supply, than,
c. For whom to produce d. All of the above a) Shift towards left b) Shift towards
4. Traditionally, the subject matter of economics has been studied Right
under the following broad branches. c) Shift towards both Right and left d) none of the above
a. micro &Macro economics b. Positive & Normative 25. The firms earn super normal profit as long as the price is greater
c. Deductive & Inductive d. None of the above than the minimum of,
5. Utility is, a) Marginal cost b) Total cost
a) Objective b) subjective c) Average cost d) fixed cost
c) Both a and b d) None of the above 26. The Government imposing upper limit on the price of goods and
6. The shape of an indifference curve is normally, service is called,
a) Convex to origin b)concave to origin a) Price ceiling b) Selling price
c) Horizontal d) vertical c) Price floor d) none of the above
7. The consumption bundles that are available to the consumer 27. The government imposed lower limit on the price of goods and
depend on, service called,
a) Color& shape b) price & income a) Goods floor b) Service floor
c) Income& quality d) none of the above c) Price floor d) none of the above
8. The equation of budget line is, 28. A market which produces heterogeneous products is called,
a) Px + Py = M b)M= P0X0 + Px a) Monopoly b) Monopolistic
c) P1X1 + P2X2 = M d) Y= Mx + C competition
9. The demand for these goods is increase as income increases, c) Perfect competition d) none of the above.
a) Inferior goods b) Normal goods 29. The change in TR due to the sale of an additional unit is called
c) Giffen goods d) none of the above a) Total revenue b) Average Revenue
10. A vertical demand curve is, c) Marginal Revenue d) Revenue
a) Perfectly elastic b) Perfectly inelastic 30. When the price elasticity of demand is more than one, MR has a
c) Unitary elastic d) none of the above a) Negative value b) Decreasing value
11. Ordinal utility analysis expresses utility in, c) Constant Value d) Positive Value
a) Numbers b) Returns 31. Profit
c) Ranks d) None of the above a) P x Q b) TR – TC c) TFC + TVC d) TR/ Q
12. The formula of production function is,
a) Q=f(l,k) b)q=d(p) PART - B
c) Y=f(x) d) None of the above 32. The individual or institutions which take economic decisions are,
13. in the short run, a firm a) Economic variable b) Economists
a) Can change all inputs b) cannot vary all inputs c) Economic agents d) none of the above
c) Can keep the inputs fixed d) none of the above 33. In 1936 British economist J.M. Keynes published his celebrated
14. The change in output per unit of change in the input is called, book,
a) Marginal Product b) Average input a) Wealth of Nations b) Theory of Employment
c) Total input d) Product c) Theory of interest
15. Cobb-Douglass production function is, d) General theory of employment, interest & money
a) q = (x, x) b) q= (x1,x2)
c) q= (x1á , x2â ) d) q= (0) 34. All the laborers who are ready to work will find employment and all
16. TC= the factories will be working at their full capacity, this school of
a) TVC b) TFC thought is known as,
c) TFC + TVC d) AC + MC a) Modern thought b) Contemporary thought
17. In a perfect competition each firm produces and sells, c) Classical thought d) none of the above
a) Heterogeneous products b) Homogeneous products
c) Luxury goods d) Necessary goods 35. The year of great depression is,
18. The increase in total revenue for a unit increase in the output is, a) 1920 b) 1889 c) 1929 d) 2018
a) Marginal Revenue b) Average Revenue 36. In capitalist country production activities are mainly carried out by,
c) Total Revenue d) Fixed Revenue a) Private enterprises b) Government authority
19. The firm’s profit denoted by, c) Planning authority d) none of the above
a) .. b) Ä c) π d)ð 37. The Study of national income is related to,
20. When the supply curve is vertical the elasticity of supply is, a) Micro economics b) Macro economics
a) es = 1 b) es> 1 c)es = 0 d) es = •‡ c) Both Micro & macro d) none of the above
21. The revenue per unit of output of a firm is called, 38. NNP = GNP –
a) TR b) MR c) AR d) none of the above a) Deduction b) Depreciation
22. In perfect competition, buyers and sellers are c) Investment d) none of the above
39. The value of GDP at the current prevailing price is, 58. The exchange rate is determined by the market forces of demand
a) Real GDP b) Personal income and supply is called as,
c) NOMINAL GDP d) NDP a) Fixed exchange rate b) Dirty floating exchange rate
40. By deducing undistributed profit from national income, we get, c) Flexible exchange rate d) none of the above
a) Personal disposable income b) Personal income 59. The balance of payments (BOP) recorded these transactions
c) Private income d) Subsidies between residents and with the rest of the world.
41. Measuring the sum total of all factor payments will be called, a) Goods b) Services
a) Product method b) Expenditure method c) Assets d) All of the above
c) Income Method d) none of the above 60. The rate at which the price of one currency in terms of foreign
42. The main function of money is, currency is called,
a) Saving b) Expenditure a) Exchange control b) Interest rate
c) Medium of exchange d) Investment c) Foreign exchange rate d) None of the above
43. The bank which acts as monetary authority of India. 61. In this standard all currencies were defined in terms of gold
a) RBI b) NABARD c) RRB d) IDBI a) Metal standard b) Silver standard
44. The banks which are part of the money creating system of the c) Gold standard d) None of the above.
economy are,
a) Bankers b) Commercial Bank
c) RBI d) none of the above II Fill in the blanks (each question carries 1 mark)
45. The rate at which the RBI lends money to commercial banks against 1. Scarcity of resources gives raise to Problem of Choice
securities 2. In a centrally planned economy all important decisions are made
a) Bank rate b) Repo rate by government
c) Reserve Repo Rate d) none of the above 3. In reality, all economies are Mixed economy
4. Want satisfying capacity of a commodity is Utility
5. Market Economy is a set of arrangements where economic agents
46. The important tool by which RBI influences money supply is, can freely exchange their endowments or products with each other.
a) Open market operation b) Closed market operation 6. Two indifference curves never intersect each other.
c) Money operation d) none of the above 7. As income increases, the demand for normal goods shifts
47. Consumption which is independent of income is called, towards Right
a) Induced consumption b) Autonomous consumption 8. The demand for good moves in the opposite direction of its price.
c) Wasteful consumption d) past consumption 9. Method of adding two individual demand curve is called
48. Value of MCP Lies between horizontal summation
a) 1 And 2 b) 0 and 1 c) 2and 4 d) 0 and 0.5 10. In the long run, all inputs are changing
49. The pint where ex-ante aggregate demand is equal to ax-ante 11. Average product is defined as the output per unit of variable
aggregate supply will be input.
a) Equilibrium b) Disequilibrium 12. Marginal product and average product curves are U in shape.
b) Excess Demand c) excess Supply 13. SMC curve cuts the AVC curve at the minimum point of AVC
50. Easy Availability of credit encourages curve from below.
a) Saving b) Investment 14. Isoquant product curve is the set of all possible combinations of
c) Rate of Interest d) None of the above the two inputs that yield same maximum possible level of output.
51. In the situation of excess demand 15. Price taking behavior is the single most distinguish characteristic
a) Demand is less than the level of output of perfect competitive Market.
b) Demand is more than the level of output 16. Unit tax is a tax that the government imposes per unit sale of
c) Supply is less than the level of out put output.
d) Supply is more than the level of output 17. For a price taking firm marginal revenue is equal to Market price.
52. The taxes on individual and firms are 18. The point of minimum AVC where the SMC curve cuts the AVC
a) Direct Taxes b) Indirect Taxes curves is called Shut down point
c) Fixed Taxes d) Non Tax revenues 19. Opportunity cost of some activity is the gain forgone from the
53. Duties levied on goods produced with in the country. second best.
a) Service Taxes b) Estate duties 20. In perfectly competitive market, equilibrium occurs when marker
c) Excise duties d) Custom duties demand Is Equal in market supply.
54. The Tax which acts as an automatic stabilizer 21. If the supply curves shifts right ward and demand curve shift left
a) Qualitative income tax b) Income Tax ward equilibrium price will be decreasing
c) Quantitative Tax d) proportional Income Tax 22. Wage rate is determined at the point where the demand for labour
55. Which of the following is an example for paper taxes? and supply of labour curves intersect.
a) Income Tax b) Excise Taxes 23. in labour market House hold are the suppliers of labour.
c) Wealth Tax d) Customs Taxes 24. Due to right ward shift in both demand and supply curves the
56. When the demand exceeds the available output under conditions of equilibrium price remains Same / Unchanged
high level of employment, this may give rise to, 25. It is assumed that, in perfectly competitive market an Equilibrium
a) Inflation b) Deflation price is at play.
c) Stabilization d) none of the above 26. The monopoly firm’s decision to sell a larger quantity is possible
57. The consumers and producers can choose between domestic and only at Lower Prices
foreign goods, this market linkages is called, 27. Competitive behavior and competitive market structure are in
a) Financial market linkages b) Output market linkages general Inversely / Opposite related.
c) Labour market linkages d) none of the above
 28. In the monopoly market, the goods which are sold have no 3. Unitary elasticity demand c. Ed=1
Substitutes 4. Complementary goods d. Pen & ink
29. TR = P X Q 5. Indifference map e. A family of indifference curve
30. The revenue received by firm per unit of commodity sold is called
Average Revenue 1. CRS a. Constant returns to scale
31. with the zero production cost, when the total revenue of monopoly 2. SAC b. Short run average cost
firm is maximization, the profit is Maximum 3. LRAC c. Long run average cost
32. Macro economics tries to address situation facing the economy as 4. TFC + TVC d. TC
a whole 5. SMC e. ÄTC/ÄQ
33. A part of the revenue is paid out as Rent for service rendered by
land. 1. MR a. TR / Q
34. The domestic country may sell goods to the rest of the world these 2. ð = b. TR - TC
are called Exports 3. AR = c. TR/Q
35. The production unit will called as firms. 4. Normal profit d. Zero profit
36. Macro Economic policies are pursued by the state itself or 5. Perfect competition e. Perfect information
statutory bodies like the RBI, SEBI etc.,
37. Stocks are defined at a particular point of time. 1. Adam smith a. Operation of invisible hand
38. Final Goods will not pass through any more stages of production. 2. Price ceiling b. Upper limit of price
39. Depreciation is an annual allowance for wear and tear of capital 3. Market equilibrium c. QD=QS
goods. 4. Possibility of super normal profit d. Attraction of new firms
40. Inventory is a stock of variable. 5. Price floor e. Lower limit of price
41. Pollution is an example for Negative externalities.
42. The net contribution made by a firm is called is Value added. 1. Labour a. Wages
43. Economic exchanges without the use of money are referred to as 2. GDP b. Gross domestic product
Barter system 3. Inventory c. Stock variable
44. RBI is the only institution which can issue currency in India. 4. PDI d. Personal disposable income
45. Government of India is issues coins in India. 5. Domestic service e. Non monetary exchange
46. The principal motive for holding money is to carry out
Transaction 1. SLR a. Statutory liquidity ratio
47. M1 and M2 are known as Narrow money 2. Circulation of Coins b. Government of India
48. cY shows the dependence of consumption on Income 3. Money c. Medium of exchange
49. Savings is that part of income that is Not consumed 4. M3 and M4 d. Broad money
50. Average propensity to consume (APC) is the consumption per 5. Repurchase agreement e. Repo
unit of Income
51. Investment Is defined as addition to the stock of physical capital. 1. Savings a. Y – C
52. Size of the multiplier depends on the value of Marginal 2. Raw material b. Intermediate good
propensity to consume 3. Consumption per unit of income c. Average propensity
53. I is a positive contact which represent the Autonomous consumption
Investment in the economy. 4. Aggregate demand for final goods d. C + I + cY
54. Non paying users of public goods are known as Free Riders 5. Excess demand e. Leads to rise in the
55. Financial year runs from1st April to 31st March in India. prices in the long run
56. Taxes imposed on goods imported into and exported out of India
are called Custom duties 1. SDR a. Paper Gold
57. The government may spend an amount equal to the revenue it 2. Balance of Payment b. Trade in goods and
collects this is known as Balanced Budget services
58. Revenue deficit = Revenue Expenditure = Revenue Receipts 3. Balance of trade c. Trade in goods
59. Current account is the record of trade in goods and services and 4. Floating exchange Rate d. Flexible exchange rate
transfer payments. 5. Managed Floating e. Dirty Floating
60. Capital account records all international transactions of assets.
61. The price of foreign currency in terms of domestic currency has IV. ONE Marks question
increased and this is called Depreciation of domestic currency.
62. Managed floating exchange rate is a mixture of a flexible and 1. Why does the problem of choice arise?
Because of limited resources and unlimited wants.
fixed exchange rate system.
63. The Britton conferences held in the year 1944 2. What is market economy?
Economic activities under the controlled and operated by
III. Match the following (each question carries 1 mark) private sector.
1. Market economy a. Private
2. Service of a Teacher b. Skill 3. What do you mean by centrally planned economy?
3. Centrally planned economy c. Government Economic activities under the controlled and operated by
government sector.
4. Positive economics d. functioning of Mechanism
4. Give the meaning of micro economics.
5. Normative economics e. Evaluate the Mechanism The study of economic behavior of individual agents such as,
particular price, a commodity, a market, individual income,
1. Demand curve a. Downward sloping etc.
2. Linear demand curve b. D(p)= a- b(p)
5. What do you mean by positive economics?
Positive economics explains the study of ‘what is?’ & what
was?’ under the given set of circumstances.
6. What is normative economics?
Normative economics Explains ‘what ought to be’ or what
should be done or not done, which is right or wrongness in
economic activities.
7. What is budget line?
A graphical representation of all possible combinations of two
goods which can be purchased with given income and prices
called budget line.
8. What do you mean by cardinal utility Analysis?
If utility can be measured by numbers like, 1,2,3,4 are known
as cardinal utility Analysis.
9. Give the meaning of marginal utility?
The utility derived from consumption of an additional units of
a commodity is called marginal utility.
10. What is utility?
Want satisfying power of goods and services is called utility.
11. Expand MRS.
Marginal Rate of Substitution.
12. What do you mean by Indifference curve?
An indifference curve that represents all those combinations of
two goods which give equal satisfaction to the consumer.
13. What is Demand?
The quantity of goods that can be purchases in a market at a
particular price, at a particular time is called demand.
14. What do you mean by total product?
Total product is a total volume of goods and services produced
with using all inputs in process of production. TP= ......
15. What is average product?
Average product is per unit of production by variable factor.
AP= TP/L
16. Give the meaning of marginal product?
Marginal production is an additional goods production by
employment of additional unit of factors in process of
production. MP= TPn – TPn-1
17. Write the meaning of cost of function of firm?
It is a expenses incurred by a firm to produce goods and
service. Ex: payment for factor of production: rent, wages,
interest, capital.
18. What is total fixed cost?
Fixed cost is a payment made for fixed factor in process of
production.
19. What is average fixed cost?
It is a per unit fixed cost of production.
20. Define marginal revenue.
The increase in total revenue for a units increase in the output
21. To which side does supply curve shift due to the
technological progress?
‘Right Side’
22. Write a formula to calculate average revenue?
AR = TR / Q
23. What is Normal profit?
The minimum level of profit that is needed to keep a firm in
the existing business is defined as normal profit.
24. Give the meaning of super normal profit.
Profit that a firm earns over and above the normal profit is
called super normal profit.
25. Define market equilibrium.
Market equilibrium is a situation where market demand is
equal to market supply. Here the plans of all consumers and
producers in the market match and market clears.
26. What is equilibrium price?
The price at which equilibrium is reached is called equilibrium
price.
27. What is Price ceiling?
The government imposed upper limit on the price of goods or
services is called a price ceiling.
28. What is price floor?
The government imposed lower limit on the price of goods or
services is called a price ceiling.
29. 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 the wage rate of the laborers does not fall below a
particular level.
30. What is monopoly?
A single seller or a firm is selling goods in market are known
as monopoly.
31. Give the meaning monopolistic competition.
A large number of sellers selling heterogeneous goods with
various prices are known as monopolistic market.
32. Give the meaning of oligopoly market.
There is a Few Firms or sellers producing and sell a products
in a market are called a oligopoly market.
33. What is Duopoly?
Duopoly is a market situation where there is only two sellers
or firms exist in the market.
34. Who are economic agents?
The individual or institutions which take economic decisions
are called a economic agents.
35. What does classical school of thought say?
The classical economic thought is, all the laborers who are
ready to work will find employment and all the factories will
be working at their full capacity.
36. Give the meaning of imports.
Economies which buy the goods from rest of the world are
called as imports.
37. Name the well-known work of adman smith.
‘An enquiry into the nature and causes of the wealth of
nations’ – 1776
38. What do you mean by wage rate?
Wage rate refers to the price at which the sale and purchase of
labour services in the process of production.
39. What do you mean by final goods?
The goods that will not pass any more stages to pass or
transformations is called a final goods.
40. Expand CPI.
Consumer price index
41. Expand GNP.
Gross National product
42. How do you get value added?
Deduction the value of depreciation from gross value of goods
we get value added.
43. Give the meaning of GDP.
Gross domestic product
44. Give the meaning of Intermediate goods?
Those goods used as raw materials or inputs for production of
other commodities are known as intermediate goods.
45. What is depreciation?
It is a deduction made from the value of gross investment in
order to accommodate regular wear and tear of capital goods.
46. How do you get personal disposable income?
The personal Disposable Income is obtained by deducting
personal tax payments and non tax payments from Personal
Income.
47. Write the question of GVA at market prices.
GVA at Market prices = GVA at basic prices + Net product
taxes.
48. What is GDP deflator?
GDP deflator is the ratio of nominal GDP to real GDP. Its
formula , GDP deflator = NOMINAL GDP
REAL GDP
49. What do you mean by Barter system?
The economic exchanges without the mediation of money, is
called Barter system.
50. Give the meaning of money.
Money is the commonly accepted medium of exchange.
According to F.A.walker ‘Money is what money does’.
51. What is time deposit?
These are the deposits in which money deposited is fixed for a
period of time and cannot be withdrawn before stipulated time.
High rate of interest is paid. Interest rate depends on the
duration of money.
52. What is fiat money?
Fiat Money is the money which does not have any intrinsic
value. Intrinsic value is the value of metal or paper which is
equal to face value of coin or currency note.
53. Write the meaning of high powered money?
The total liability of the monetary authority of the country –
RBI, is called high powered money. It consists of currency
(coins and notes in circulation with the Public and vault cash of
commercial banks) and deposits held by the Government of
India and commercial banks with RBI.
54. Expand CRR.
Cash Reserve Ratio.
55. What is bank rate?
Bank Rate is the rate at which the RBI gives loans to the
commercial banks.
56. Write the meaning of autonomous consumption.
The consumption which is independent of income is called as
autonomous consumption.
57. 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 + C = I.
58. Define average propensity to save (APS).
It is the consumption per unit of income. It is obtained by
dividing consumption by income i.e., APS = C / Y
where c is consumption and y is income.
59. 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
\
60. Mention two fiscal variables which influence aggregate
demand.
The two fiscal variables which influence aggregate demand are
as follows: a) Tax. b) Government Expenditure.
61. Write the formula for MPC.
MPC is change in consumption by changing in each units of
level of income.MPC = C / Y
62. What are the public goods?
Public goods are the goods and services provided by the
Government and which cannot be provided by the market
mechanism. Ex: Roads, defense, etc.
63. Who are free riders?
If some users do not pay and it is difficult and impossible to
collect fees for the public good, such non paying users are
known as free riders.
64. 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.
65. Give the meaning of progressive Tax?
If the rate of tax is changes as per level of income changes are
known as progressive tax.
66. What are the revenue receipts?
Revenue receipts are those receipts that do not lead to a claim
on the government. They consist of Tax and non-tax revenues.
67. Write the meaning of capital receipts?
All those receipts of the Government which create liability or
reduce financial assets are termed as capital receipts.
68. Give the meaning of Revenue Expenditure?
Revenue Expenditure is expenditure incurred by government
out of its current revenue receipts. This expenditure is related
to maintain government departments and various services,
interest payments, grants given to state governments etc.
69. Give the meaning of Capital Expenditure?
The capital expenditures are the expenses of government
which result in creation of physical or financial assets or
reduction in financial liabilities. It includes expenditure on the
acquisition of land, building, machinery, equipment,
investment in shares, etc.
70. Expand FRBMA.
Fiscal Responsibility and Budget Management Act.
71. What is primary deficit?
Primary deficit is the fiscal deficit minus the interest payments.
Or Gross Primary deficit = Gross Fiscal deficit – Net interest
liabilities.
72. What do you mean by open economy?
An open economy is an economy which has economic
relationship with other countries in the world with regards
financial asset, goods and services, etc.
73. What is balance of payment?
Balance of payment is a systematic record of all economic
transactions between one country and rest of the world during
a year.
 74. What is balance of trade? 9. Mention the types of returns to scale?
Balance of trade is the difference between the value of visible Constant return to scale Increasing returns to scale
items of export and import of a country during a year. Decreasing Returns to scale

75. What do you mean by flexible exchange rate?

10. Name the short run costs?
Flexible exchange rate is a system in which exchange rate
keeps on changing or floating. In this system exchange rate is Fixed cost Total variable cost Total cost
determined by market force. Average fixed cost Average variable cost
Average cost Marginal cost
76. Give the meaning of official reserve sale.
when there is deficit balance of payments, Reserve Bank of 11. What are long run costs?
India sells foreign exchange it is called official reserve sale. Long run Marginal cost Long run Average cost
77. Give the meaning of managed floating.
The managed floating exchange rate system is the mixture of a 12. Mention the conditions needed for profit by a firm under
flexible exchange rate system and a fixed exchange rate perfect competition
system. Here, Reserve bank of India fixed lower and upper 1. The price, p, must equal to MC.
limit of exchange rate. When exchange rate fluctuates outside 2. The marginal cost is non-decreasing at q0.
this two limits monetary authority intervenes to control. 3. In the short run, the price, p, must be greater than or equal to
the average variable cost (p>AVC);
MICRO ECONOMICS TWO MARKS 4. In the long run, the price, p, must be greater than the
average cost (p>AC).
1. What are the difference between budget line and budget set? 13. Give the meaning of shut down point?
A graphical representation of all possible combinations of two It refers to the point where Short run marginal cost curve cuts the
goods which can be purchased with a given income and price is average variable cost curve at its minimum is called the short run
called budget line. shut down point of the firm.
A budget set is a collection of all bundles available to consumer
at the prevailing market price at a given level of income. 14. Write the meaning of opportunity cost with an example?
Opportunity cost of some activity is the gain foregone from the
2. What do you mean by inferior goods give example? second best activity. OR
There are some goods which when the consumers income Opportunity cost is the cost of next best alternative sacrifices in
increase, demand decreases. When income decreases demand order to produce that good.
increases, these goods are called inferior goods. There is a inverse
relationship between price and demand for inferior goods Ex. Suppose, if we save Rs.1000 in a bank it get the gain of interest
Pearl millet (Sajje), Finger millet (Ragi), Fox tail millet (navane), or if we invest the same in business it gain a profit. The same
Kodo millet (Aarka) etc. amount can’t be used with both activities.

3. What is monotonic preference? 15. Mention the two determinants of a firm’s supply curve?
Being a rational consumer always chooses a higher indifference Technological progres Input prices
curve to get maximum level of satisfaction this is called as Tax policy of the government Goal of the firm
monotonic preference. Nature of the market Climatic conditions

4. State the law of demand? 16. Give the meaning of price elasticity of supply and write its
Law of demand explains the inverse or negative relationship formula?
between price and demand. If a change in the price leads to change in the Supply is
When other things remaining constant when the price decreases, called price elasticity of supply.
the demand increases and when price increases, the demand for 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝑐ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑑
es== 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝑐ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑝𝑟𝑖𝑐𝑒
the good decreases. Other things are: Prices of related goods,
Consumers Income, taste, preference
17. Define equilibrium price and quantity.
The equilibrium price is the market price where the quantity of
5. Mention two different approaches which explain consumer
goods supplied is equal to the quantity of goods demanded.
behaviour?
Cardinal approach Ordinal approach.
18. How price is determined, when fixed number of firms exist in
6. What do you mean by price elasticity of demand? perfect competition.
If change in the price is leads to change in the demand is called Equilibrium price is determined by the market forces of demand
as price elasticity of demand and supply in a perfectly competitive market. Where market
𝑃𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝐶ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑑𝑒𝑚𝑎𝑛𝑑𝑓𝑜𝑟𝑡ℎ𝑒𝑔𝑜𝑜𝑑 equilibrium is determined when market demand is equal to
Ped= 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝑐ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑡ℎ𝑒𝑝𝑟𝑖𝑐𝑒𝑜𝑓𝑡ℎ𝑒𝑔𝑜𝑜𝑑
market supply.

7. What is iso-quant?
An Iso-quant is the set of all possible combinations of two inputs
(labour and capital) which yield same maximum possible level of
output. Each Iso-quant represents a particular level of output.
8. Give the meaning of the concepts of short run and long run?
In the short run a firm cannot vary all the inputs.
In the Long run all factors of production can be varied.
19. Write any two possible ways in which simultaneous shift of
both demand and supply curves.
A. Both supply and demand curves shift rightwards.
B. Both supply and demand curves shift leftwards.
C. Supply curve shifts leftward and demand curve shifts
rightward.
D. Supply curve shifts rightward and demand curve shifts
leftward.
20. What is marginal Revenue product of labour (MRPL).
Marginal Revenue Product of Labor refers to the increment to
revenues caused by the increment to output produced by the last.
21. Distinguish between excess demand and excess supply.
At any price greater than equilibrium price, there will be excess
supply, and at any price lower than equilibrium price, there will
be excess demand.
22. How wage is determined, in the labour market?
Wage is determined at the point where the labour demand and
supply curves intersect.
4. Mention three methods of measuring GDP (national
income).
Product or Value Added Method
Expenditure Method
Income 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. They do not have any market in which they can be
bought and sold. The two types of externalities are Positive
Externalities and Negative Externalities.

6. What is equation of GDPmp and GDPfc.

23. State the meaning of average revenue and marginal revenue.
GDPmp =C + I + G + X – M
Average revenue is amount of revenue per unit sold.
C- Consumption expenditure I – Investment expenditure
Marginal revenue is the additional revenue generated from the
G –Government consumption and expenditure
sales of an additional unit of the product.
X – Export M – Import
GDPfc = GDPmp – NIT ( net direct tax)
24. State the relationship between marginal revenue and price
7. Mention two functions of money.
elasticity of demand. The two functions of Money are
The value of marginal revenue has a relation with price elasticity Medium of exchange Measure of value
of demand. Price elasticity of demand is more than one when the
marginal revenue has a positive value and becomes less than the 8. Mention the two motives of demand for money.
unity when marginal revenue has a negative value. The two motives of demand for money are as follows:
The transaction Motive
25. Write the meaning of monopolistic competition and give an The Speculative Motive
example. Precautionary Motive
Monopolist is a type of imperfect competition in which there are
many sellers selling differentiated products but not perfect
substitutes. Examples: - soaps, shampoos, detergents, biscuits 9. Write the difference between nominal and real GDP.
etc.
Sl.No. Nominal GDP Real GDP
26. Write the feature of monopoly.
If the GDP is measured based If the GDP is measured based
Single seller No close substitutes
1 on current year price are on base year price is known
High barriers to entry Price maker known as nominal GDP as Real GDP.
Price discrimination or uniform prices
2 It is not reliable It is reliable

MACRO ECONOMICS It does not give clear picture It give clear picture of
3 of economic development of economic development of a
1. What are the four factor of production? Mention their a country country.
rewards.
Land gets Rent Labour gets wages
Capital gets Interest. Organization gets profit. 10. Give the meaning of CRR and SLR.
Sl.no Cash reserve ratio Statutory liquidity ratio
2. Distinguish between stock and flow. Give example.
S.No Stock Flow 1. Each commercial bank is As per the Direction of RBI
need to save a portion of its each commercial bank save a
It is that quantity of economic It refers to that quantity of
deposits in RBI it’s called a portion of its deposit in itself
1. variable which is measured at economic variable measured
Cash Reserve ratio. in bank it’s known as
a particular point of time. over a period of time.
Statuary liquidity ratio.
Example capital, inventory, Example net investment,
2. wealth, foreign exchange salary, National Income etc.
11. State the credit control instruments of RBI.
reserves etc.
There are two instruments of RBI to control credit
Quantitative techniques Qualitative techniques
3. What is difference between consumer goods and capital
goods? Bank rate Margin requirements
Open market operations Direct action
Sl.No Consumer Goods Capital Goods Cash reserve ratio Credit rationing
Statutory liquidity ratio Moral suasion, etc
1. The Goods which are These are the durable
purchase for consumption goods which are used in 12. How does bank rate influences money supply.
are known as consumer the production process. The RBI can influence money supply by changing the rate at
good. which it gives loans to the commercial banks. This rate is called
2. Example food, clothes, Examples are machinery, as Bank Rate.
services like recreation. tools, implements etc. i) By increasing the bank rate, loans taken by commercial
banks become more expensive which reduces the
 reserves held by the commercial bank and hence 21. Why public goods must be provided by the central
decreases money supply. government.
ii) A fall in the bank rate can increase the money supply. These goods must be provided by the government because of
the following reasons:
13. What role RBI is known as Lender of last resort. i. The benefit of public goods can be easily enjoyed by
When commercial banks need more funds in order to be able to anyone without affecting the consumption of other
create more credit, they may go to market for raising such funds individuals.
or go to the RBI. The RBI provides them funds through various ii. No individual can be excluded from using public
instruments. goods as it available to all.
This role of RBI, that of being ready to lend to banks at all times
is said to be the lender of last resort. 22. Mention the non-tax revenues of the central government.
Interest receipts on account of loans by the central government.
14. Write the meaning of excess demand and deficit demand. i. Dividends and profits on investments made by the
If the equilibrium level of output is more than the full employment government.
level, it is due to the fact that the demand is more than the level of ii. Fees and other receipts for services rendered by the
output produced at full employment level. This situation is called government.
excess demand. iii. Grants-in-aid from foreign countries and
If the equilibrium level of output is less than the full employment
international organizations.
of output, it is due to fact that demand is not enough to employ all
factors of production. This situation is called deficient demand.
23. Why the proportional income tax acts as automatic
15. Give the meaning of investment multiplier. Write its formula. stabilizer?
Investment multiplier is the ratio of the total increment in The proportional income tax, acts as an automatic stabilizer
equilibrium value of final goods output to the initial increment in because, it makes disposable income and consumer spending
autonomous expenditure. Its formula is, less sensitive to fluctuations in GDP.
Investment Multiplier = ∆Y / ∆A
24. Mention the three linkages of open economy.
16. Give the meaning of paradox of thrifts. Output market linkage,
If all the people of the economy increase the proportion of income Financial Market linkage
Labour market linkage.
they save, total value of savings in the economy will not increase –
it will either decrease or remain unchanged. This result is known as
25. What is difference between current account and capital
the Paradox of Thrift. account?
SL Current account Capital account
17. What are the factors which cause change in aggregate
demand? It is the record of trade in It is the record of all
Change in consumption Change in investment 1. goods and services and international
transfer payments. transactions of
18. Write a difference between public provision and public assets.
production. It consists of factor and It includes money,
Sl.No Public Provision Public production 2. non-factor incomes apart stocks, bonds,
from gifts, remittances government debt etc.
A set of facilities financed When the goods produced and grants.
by the government through directly by the
1. its budget are known as Government, are called a 26. When do surplus and deficit arise capital account?
public provision. public production Surplus in capital account arises when the capital inflows are
These are used without any These are used with direct greater than capital outflows.
2. direct payment. Example payment. Example Deficit in capital account arises when capital inflows are
Free education, mid-day Electricity, water supply
lesser than capital outflows.
meals etc. etc.
27. Write the meaning of balanced, surplus and Deficit BOT.
19. Who are free riders? Why are they called so? a. Balance of trade is said to be in balance when exports of
If some users do not pay and it is difficult and sometimes goods are equal to the imports of goods i.e., balanced
impossible to collect fees for the public good, such non-paying balance of trade.
users are known as free riders. They are called so because, b. Surplus balance of trade arises if country’s exports of
consumers will not voluntarily pay for what they can get for free goods are more than its imports.
and for which there is no exclusive title (ownership) to the property c. Deficit balance of trade arises if a country’s imports of
being enjoyed. goods are more than its exports.
20. Distinguish between surplus budget and deficit budget.
Sl.No Surplus Budget Deficit Budget 28. Why do people demand foreign exchange?
People demand foreign exchange rate because of the
If anticipated revenue of the If anticipated expenditure of following reasons:
1. government exceed its the government exceed its 1. To purchase goods and services from other countries.
anticipated expenditure in a anticipated Revenue in a year 2. To send gifts abroad
year is called surplus budget. is called Deficit budget. 3. To purchase financial assets abroad.
2. It usually planned by It usually planned by
developed countries. developing countries.
 29. What is foreign exchange rate? 4. Prepare a budget on monthly income and expenditure of
The term foreign exchange means conversion of one currency your family.
into other. It links the currencies of different countries and The budget is a financial statement which includes
enables comparison of international costs and prices. anticipated income and anticipated expenditure. An
Ex: if we need to pay Rs.68 for 1 dollar, then the exchange
imaginary monthly income and expenditure of a family is
rate is Rs.68 per dollar.
given below:
30. Differentiate between depreciation and devaluation.
SL Depreciation Devaluation Sl. Income Expenditure
No.
Here the price of foreign The deliberate reduction of
1. currency in terms of Indian currency against to 1 Salary Income Childrens Education expenditure
domestic currency foreign currency is called Rs. 20,000 Rs. 20,000
increases. Devaluation. 2 Agricuture Income Food
It happens because of It is a deliberate action of Rs. 5,000 Rs. 10,000
2. market forces i.e., demand government. 3 Revenue earned from Electricity, Milk, Paper,
for foreign exchange and Trade Rs. 10,000 Rs. 5,000
supply of foreign exchange. 4 Rent from house Petrol
Rs. 10,000 Rs. 5,000
Savings
Assignment and project oriented question.(each question carries 5 Rs. 5,000
marks) Total : Rs.45,000 Total : Rs.45,000
1. A Consumer wants to consume two goods. The price of Budget for the month of January-2019
Bananas is Rs.5 and the price of Mangoes is Rs.10. The
consumer income is Rs.40. This family has surplus budget as its income is more than
A. How much Bananas can she consumes if she spends her entire
expenditure.
income on that good?
8 Banana’s
B. How much Mangoes can she consumes if she spends her entire 5. Name the currencies of any five countries of the following.
income on that good?
4 Mangoes
SL.NO Countries Currencies
C. Is the slope of budget line downward or upward?
Downward 1 U.S.A Dollar
D. Are the bundles on the budget line equal to the consumer’s 2 UK Pound sterling
income or not? 3 GERMANY euro
It’s equal to Consumers Income
E. If you want to have more of bananas you have to give up 4 JAPAN Yen
Mangoes. Is it true? 5 CHINA Ren Min Bi
Yes it is true 6 ARGENTINA Argentaino peso

2. Find the missing products in the following table 7 UAE Dhirham

8 BANGLADESH Taka
Factor 1 TP MP1 AP1
9 RUSSIA Rubel
0 0 0 0
1 10 10 10
2 24 14 12
3 40 16 13.33
4 50 10 12.5
5 56 6 11.2
6 57 1 9.5

3. Compute the total revenue, marginal revenue and average revenue

schedules in the following table when market price of each unit of
goods is Rs.10.
Quantity sold TR MR AR
0 0 0 0
1 10 10 10
2 20 10 10
3 30 10 10
4 40 10 10
5 50 10 10 NARAYANASWAMY. N
6 60 10 10 LECTURER,
DEPT.OF ECONOMICS,
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