Short Answer TypeWhere will sale of machinery to abroad be recorded in the Balance of Payments Accounts? Give reasons.
Explain the 'bank of issue' function of the central bank.
Or
Explain 'Government's Bank' function of central bank.
Government of India has recently launched 'Jan-Dhan Yojna' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.
An economy is in equilibrium. Calculate national income from the following:
Autonomous consumption (C) = 100
Marginal propensity to save (S) = 0.2
Investment expenditure (I) = 200
Long Answer TypeA consumer consumes only two goods X and Y both priced at Rs. 3 per unit. If the consumer chooses a combination of these two goods with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Explain.
Or
A consumer consumes only two goods X and Y whose prices are Rs. 4 and Rs. 5 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibrium? Give reason. What will a rational consumer do in this situation? Use utility analysis.
Giving reason, explain how the following should be treated in estimation of national income:
(i) Expenditure by a firm on payment of fees to a chartered accountant
(ii) Payment of corporate tax by a firm
(iii) Purchase of refrigerator by a firm for own use
(i) The services of chartered accountant hired by the firm should not be included in the estimation of national income. This is because it forms a part of the firm’s intermediate consumption.
(ii) Corporate profits already form part of national income. Hence Payment of corporate tax is not included in the national income as it is a mere transfer payment from the firm to the government.
(iii) Purchase of refrigerator by a firm for own use will be included in the national income as it is regarded as final consumption expenditure.
Explain the concept of Inflationary Gap. Explain the role of Repo Rate in reducing this gap.
OR
Explain the concept of Deflationary Gap and the role of 'Open Market Operations' in reducing this gap.
Explain the role the government can play through the budget in influencing allocation of resources.
Calculate National Income and Personal Disposable Income:
| (Rs.crores) | ||
| (i) | Personal tax | 80 |
| (ii) | Private final consumption expenditure | 600 |
| (iii) | Undistributed profits | 30 |
| (iv) | Private income | 650 |
| (v) | Government final consumption expenditure | 100 |
| (vi) | Corporate tax | 50 |
| (vii) | Net domestic fixed capital formation | 70 |
| (viii) | Net indirect tax | 60 |
| (ix) | Depreciation | 14 |
| (x) | Change in stocks | (-) 10 |
| (xi) | Net imports | 20 |
| (xii) | Net factor income to abroad | 10 |
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