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Karnataka 2nd PUC Macroeconomics Solutions

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17 views5 pages

Karnataka 2nd PUC Macroeconomics Solutions

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shekarvy
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© © All Rights Reserved
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Karnataka 2nd PUC Economics (Macroeconomics) Mock Test

Section-A: Objective Type Questions

1. Define GDP:

Gross Domestic Product (GDP) is the total monetary value of all final goods and services

produced within a country's borders in a given time period.

2. What is a fiscal deficit?

Fiscal deficit is the excess of total government expenditure over its total revenue, excluding

borrowings.

3. Mention one component of the current account in the balance of payments:

Exports of goods.

4. Formula for NNP (Net National Product):

NNP = GNP - Depreciation.

5. Primary function of the Reserve Bank of India (RBI):

Regulation and control of the monetary system in the country.

Section-B: Short Answer Questions

6. Distinguish between real GDP and nominal GDP:

- Real GDP: Adjusted for inflation, reflects the actual purchasing power.

- Nominal GDP: Measured at current market prices, not adjusted for inflation.

7. Investment multiplier:
The ratio of the change in income to the initial change in investment. Formula: K = 1 / (1 - MPC),

where MPC is the marginal propensity to consume.

8. Two differences between direct and indirect taxes:

- Direct taxes: Paid directly by individuals or entities (e.g., income tax).

- Indirect taxes: Levied on goods and services, collected by intermediaries (e.g., GST).

9. Role of government in correcting market failures:

- Imposing regulations to curb monopolies.

- Providing public goods and services.

10. Transfer payments:

Payments made by the government without receiving goods or services in return, e.g., pensions,

scholarships.

11. Depreciation vs. Devaluation:

- Depreciation: Decrease in currency value due to market forces.

- Devaluation: Deliberate reduction of a currency's value by the government.

Section-C: Descriptive Questions

12. Circular flow of income (two-sector economy):

- In a two-sector economy, households provide factors of production (land, labor, capital) to firms.

- Firms pay households factor payments (rent, wages, interest, profit).

- Households spend income on goods and services, creating a circular flow.

13. Significance and limitations of GDP as a welfare measure:

- Significance: Measures economic performance, indicates living standards.


- Limitations: Ignores income distribution, non-market transactions, and environmental

degradation.

14. Methods of measuring national income:

- Production Method: Sum of value-added in production.

- Income Method: Sum of all incomes earned.

- Expenditure Method: Sum of total spending on goods and services.

15. Fiscal policy and inflation control:

- Fiscal policy involves changes in government spending and taxation.

- To control inflation, the government reduces public spending or increases taxes to reduce

demand.

16. Functions of money:

- Medium of exchange.

- Measure of value.

- Store of value.

- Standard for deferred payments.

17. Balance of trade vs. Balance of payments:

- Balance of Trade: Difference between exports and imports of goods.

- Balance of Payments: Comprehensive record of all economic transactions between a country

and the rest of the world.

Section-D: Long Answer Questions

18. Keynesian Theory of Income and Employment:

- Keynes explained that employment depends on effective demand.


- The economy is in equilibrium when aggregate demand equals aggregate supply.

19. Causes of inflation and control measures:

- Causes: Demand-pull inflation, cost-push inflation, excessive money supply.

- Control measures: Monetary policy (e.g., raising interest rates) and fiscal policy (e.g., reducing

government expenditure).

20. Objectives of monetary policy in India:

- Control inflation.

- Encourage growth.

- Ensure currency stability.

- Regulate credit in the economy.

21. Components of the balance of payments:

- Current Account: Exports, imports, remittances.

- Capital Account: Foreign investment, loans.

- Significance: Reflects economic health and foreign exchange stability.

Numerical Problem Solution

From the given data:

Compensation of employees: Rs 500 crore

Rent: Rs 50 crore

Profits: Rs 150 crore

Interest: Rs 100 crore

Mixed-income: Rs 200 crore

Net factor income from abroad: Rs (-20 crore)


Formula: NI = Compensation of employees + Rent + Profits + Interest + Mixed-income + Net Factor

Income from Abroad

Calculation:

NI = 500 + 50 + 150 + 100 + 200 - 20

NI = Rs 980 crore

Final Answer: National Income = Rs 980 crore

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