Subject

Economics

Class

CBSE Class 12

Pre Boards

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Sample Papers

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 Multiple Choice QuestionsShort Answer Type

21.

Define marginal propensity to consume.

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22.

Define government budget.

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23.

Give meaning of balance of trade.

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24.

Define externalities. Give an example of negative externality. What is its impact on welfare?


An externality is said to occur when the actions of one entity bears an impact on other entities. These externalities can be positive as well as negative. Negative externalities occur when the consumption or production of a good causes a harmful effect to a third party. It is an action of one person adversely affecting the others.

Examples of negative externalities:
1) If you play loud music at night your neighbour may not be able to sleep.
2) If you produce chemicals and cause pollution, then as a side effect, local fishermen will not be able to catch fish. This loss of income will be the negative externality. The hazardous chemicals in water bodies and the surroundings adversely affect the health of the people. Also, it contributes to the environmental degradation along with increasing the pollution levels in the country.

Thus, by endangering and affecting the life of the people living in the surrounding areas, it reduces the overall welfare of the society and creates negative externality.

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25.

Explain the significance of 'store of value' function of money.

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26.

Explain the significance of 'medium of exchange' function of money.

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27.

Is the following, revenue expenditure or capital expenditure in the context of government budget? Give reason.
(i) Expenditure on collection of taxes.
(ii) Expenditure on purchasing computers.

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28.

Explain the meaning of balance of payments deficit.

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29.

Recently Government of India has doubled the import duty on gold. What impact is it likely to have on foreign exchange rate and how?

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30.

Define money supply and explain its components.

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