Explain the store of value function of money.
Or
State the meaning and components of money supply.
Explain the basis of classifying taxes into direct and indirect tax. Give examples
Direct tax refers to those taxes which are directly imposed individuals and companies and are paid directly by them to the government. For example, income tax- the tax burden cannot be shifted to any other person, wealth tax, corporate tax etc.
Indirect tax refers to those taxes which are imposed on an individual but are paid by another person either partly or wholly. Hence, the impact and incidence of taxes are on different persons. Examples of indirect taxes are custom duties, excise dutiesetc. Indirect taxes are those taxes in which the tax burden can be shifted to another person. For example, the sales tax where the tax burden is shifted by the seller of the commodity to the buyer. Example: Direct tax- income tax and indirect tax- sales tax
Explain ‘banker to the government’ function of the central bank.
Or
Explain the role of reverse repo rate in controlling money supply.
An economy is in equilibrium. From the following data about an economy calculate autonomous consumption.
(i) Income = 5000
(ii) Marginal propensity to save = 0.2
(iii) Investment expenditure = 800
Why does the demand for foreign currency fall and supply rises when its price rises ? Explain.
Explain ‘non-monetary exchanges’ as a limitation of using gross domestic product as an index of welfare of a country.
Or
How will you treat the following while estimating domestic product of a country ? Give reasons for your answer :
(a) Profits earned by branches of country’s bank in other countries
(b) Gifts given by an employer to his employees on independence day
(c) Purchase of goods by foreign tourists
Calculate (a) net domestic product at factor cost and (b) gross national disposable income :
s. no. | in RS | |
1 | Private final consumption expenditure | 8000 |
2 | Government final consumption expenditure | 1000 |
3 | exports | 70 |
4 | imports | 120 |
5 | Consumption of fixed capital | 60 |
6 | Gross domestic fixed capital formation | 500 |
7 | change in stock | 100 |
8 | Factor income to abroad | 40 |
9 | Factor income from abroad | 90 |
10 | indirect taxes | 700 |
11 | subsidies | 50 |
12 | Net current transfers to abroad | (-)30 |
Assuming that increase in investment is Rs. 1000 crore and marginal propensity to consume is 0.9, explain the working of multiplier.