Short Answer TypeExplain the store of value function of money.
Or
State the meaning and components of money supply.
Explain ‘banker to the government’ function of the central bank.
Or
Explain the role of reverse repo rate in controlling money supply.
Explain how government budget can be used to influence distribution of income ?
The government's budget and budgetary policy can influence distribution of income in the following ways:
i. The government uses the taxation and expenditure policy, through the taxation policy the government imposes the higher taxes on higher income group and through expenditure policy it transfers purchasing power in the hands of the poor section of societies in terms of subsidies etc.
ii. The government regularises the activities of the private sector to provide social benefit to the poor.
iii. A tax is a legally compulsory payment imposed by the government on households and producers. The government imposes taxes on socially unsafe goods such as alcohol and tobacco. Thereby resources will be shifted to the production of socially essential goods.
iv. The government also provides subsidies for necessary goods such as wheat, rice and sugar. Thereby the resources are shifted from the
production of goods for the rich to the production of goods for the poor.
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.
Long Answer TypeExplain ‘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.
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