answers for test-sece

8/3/2019 Answers for Test-secE

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Macroeconomics and Business Environment :Section-EEvaluation Component-1: QUIZ

Max. Marks: 20 Duration: 60 min.

Instructions: Tick mark the correct option(s) in the sheet itself. In the given space after each

question write your explanation. Talking, copying, or peeping into others sheet will lead u toward

zero marks. All the MCQs carry 0.5 marks and all the numerical are of 3 marks each.

1. Which of the following is a final good or service?a. Flowers bought at the market by a floristb. Meat bought by a restaurantc. Fertilizer purchased by a farm supplierd. Diesel fuel bought for a delivery truck

e. A haircut paid for by a student1. GDP per head may be an imperfect measure of economic welfare because it excludes

_________

a. the value of leisureb. externalitiesc. untraded goodsd. changes in the distribution of income

all are correct1. The equation C=20+0.9Yd predicts that consumption is

a) 90 when disposable income is 100b) 100 when disposable is 90c) 110 when disposable income is 100 ord) 180 when disposable income is 200

1. Which of the following statement is not truea. Household sector includes consumers and labour bothb. Consumption is also a part injection in the income streamc. Investment and Exports are injections in the income streamd. Financial sector reinvests the savings of households in firms either by advancin

loans or purchasing equitye. None of the above

2. From the following given table calculate the blank columns.

YearDisposableIncome (Yd)

HouseholdConsumption(C)

HouseholdSaving(S)

Marginalpropensityto consume(%)(MPC)

Marginalpropensityto save(%)(MPS)

1990 181 532 176 754 47781993 275 860 263 427 12433 0.918847 0.081153

1996 391 854 384 624 7230 1.044856 -0.044861999 521 149 514 271 6878 1.002722 -0.002722002 727 163 722 091 5072 1.008766 -0.008772005 969 402 967 940 1462 1.014903 -0.0149

Based on the information given in the Table below answer the questions 6-8

Items in Rs.Crores 2006-07(currentprices)

2007-08(currentprices)

2006-07(1999-2000prices)

2007-08(1999-2000prices)

Private final consumptionexpenditure

2312105 2607584 1826490 1977876

Government final consumption 427007 477697 306420 327747


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expenditureGross fixed capital formation 1346501 1598078 954350 1085618Change in stocks 96103 109321 64091 68541Valuables 49709 59211 38091 43404Exports 915674 1005065 641228 689636imports 1040797 1151739 770961 830006discrepancies 39508 7930 57663 35950Subsidies less indirect taxes 355747 409494 253062 275905depreciation 492313 434468 314661 341679

Gross National product at factorcost 3760285 4281795 2845156 3109361

3. Calculate the GDP at market price and at factor cost for the year 2006-07 and 2007-08 incurrent and base year prices from the expenditure method.

4. Calculate the difference between GDP and GNP. What is this difference known as?

5. Calculate the GDP Deflator for the two years and the inflation rate in 2007-08

Answer Table.

Items in Rs.Crores 2006-07

(currentprices)

2007-08

(currentprices)

2006-07

(1999-2000prices)

2007-08

(1999-2000prices)

I. GDP marketPrice=1+2+3+4+5+6-7+8

4145810 4713147 3117372 3398766

II. GDP factor cost= I-9 3790063 4303653 2864310 3122861

III. National Income= NNP atfactor cost= 11-10

3267972 3847327 2530495 2767682

IV. Net factor Income fromAbroad

-29778 -21858 -19154 -13500

V. GDP Deflator 132.23 137.81

VI. Inflation 4.22

VII.Gross National product atfactor cost

3760285 4281795 2845156 3109361

1. If the inflation rate, as measured by the CPI, over the past year was 5%, a basket of goods and

services that cost _____ a year ago would be equivalent to _______ at the current price level.

a. $200,000, $210,000b. $150,000, $155,000c. $50,000, $55,000d. $200,000, $201,000

1. Calculate the multipliers value if MPC= 0.92 and 0.75 and calculate the value of multiplierif MPS=0.78. How do you interpret the multiplier values?

Ans: higher the mpc higher the multiplier and higher the mps lower themultiplier. When mpc=0.92 multiplier=12.5, when mpc=0.75, multiplier=4 andwhen mps=0.78 multiplier =1.28

2. Value of the investment multiplier will depend on which of the following?

a. Higher the level of Autonomous Consumption higher the value of multiplierb. Higher the level of autonomous investment, higher the multiplierc. Higher the level of mpc and autonomous investment higher the value of

multiplierd. Higher the level of savings, higher the level of investment multiplier

1. Which of the following is / are true?


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a. Interest income on bonds, securities are not included in national income but inpersonal income

b. Indirect taxes are not included in national income but direct taxes are notdeducted

c. Household work, black market activities and and social work is not included innational income accounting because they are not transacted through markets

d. Expenditure on Intermediate goods and transfer payments are included in the nationalincome accounting

1. Find out the true statement from the following:

a. Micro economist focus on the economy as a whole whereas macroeconomist holdtotal income as constant.

b. Macroeconomist spend much time analyzing how total income changes, and how changes income cause changes in other modes of economic behavior, whereas microeconomisspend a great deal of time and energy investigating how people form their expectations anchange them over time.

c. Microeconomists consider the possibility that decision makers might change thquantities they produce before they change the prices they charge, whereamacroeconomists don't worry much about how decision makers form theexpectations.

d. Microeconomists as well as macroeconomists both assume that economiadjustment occurs first through prices that change to balance supply and demand

1. A backward shift in the aggregate demand curve of the world economy, according to RichMiller is taking place because of which of the following factors?

a. Declining consumer spending and wealth, rising unemployment andtightening credit

b. Despite interest rate cuts investments are not increasing due to the weakening ofthe financial systems

c. Ripple effect created through shaky stock markets and stricter borrowing normsimposed on household lending

d. Slowing down of US and European economies has affected the exports demand foremerging markets like China India and others.

1. Which of the following statements are true:

a. Classical economists relied more on demand side of the economy whereaKeynesians emphasize more on the supply side and monetarists believe monesupply can only bring equilibrium in the economy

b. Classical economist followed the says law of demand, while Keynesians stressemore on investment multiplier by government spending and monetarist stressemore on interest rate mechanisms.

c. Classical economist believed that supply creates its own demand, while

Keynesians believed that investment multiplier is more important tincrease aggregate demand while monetarist believed in the effectivenesof monetary policy

d. Classical economist and Keynesian both believed that expectation plays aimportant role for the macroeconomic equilibrium while monetarists believed in thstrong financial systems.

All the MCQs carry 0.5 marks and all the

numerical are of 3 marks each.


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