Short Answer TypePrimary deficit equals: (Choose the correct alternative)
(1) (a) Borrowings (b) Interest payments (c) Borrowings less interest payments (d) Borrowings and interest payments both
Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called:(Choose the correct alternative)
(a) Current transactions
(b) Capital transactions
(c) Autonomous transactions
(d) Accommodating transactions
An economy is in equilibrium. Calculate Marginal Propensity to Consume:
National income = 1000
Autonomous consumption expenditure = 200
Investment expenditure = 100
Sale of petrol and diesel cars is rising particularly in big cities. Analyse its impact on gross domestic product and welfare.
Explain the 'medium of exchange' function of money. How has it solved the related problem created by barter?
Explain how 'Repo Rate' can be helpful in controlling credit creation.
Repo rate is the rate at which commercial banks can borrow money from RBI to overcome the shortage of money. By varying the repo rates, the RBI can increase or decrease the supply of money. This rate relates to the loan offered by RBI with securities and only short term borrowings by the commercial banks.
Repo rate is used as the main instrument of credit control. When the Central Bank raises the repo rate, there will be an increase in the cost of borrowing which reduces commercial banks borrowing from the Central Bank. Consequently, the flow of money from the commercial banks to the public reduces. Therefore, the supply of money reduces and bank credit creation is controlled.
Long Answer TypeWhat is the difference between revenue expenditure and capital expenditure? Explain how taxes and government expenditure can be used to influence.
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