PRACTICE TEST SERIES (2023-2024)
Test 10 | Macro | Full Course
Time allowed: 1.5 hours Maximum Marks: 40
General instructions:
This paper contains 10 Multiple Choice Questions type questions of 1 mark each.
This paper contains 2 Short Answer Questions type questions of 3 marks each to be
answered in 60 to 80 words.
This paper contains 3 Short Answer Questions type questions of 4 marks each to be
answered in 80 to 100 words.
This paper contains 2 Long Answer Questions type question of 6 marks to be
answered in 100 to 150 words.
Q. Questions Marks
No.
1 Deficient Demand indicates 1
(a) Under employment equilibrium (b) Over full employment equilibrium
(c) Full employment equilibrium (d) None of these
2 Choose the correct sequence to arrive at NNP at FC using value added method. 1
A) GDP at MP – Depreciation.
(B) NDP at MP – Net indirect taxes.
(C) Value of output – intermediate cost.
(D) Domestic income + Net factor income from abroad
Choose the correct answer from the following options:
(a) A, B, D, C (b) C, B, A, D
(c) A, B, C, D (d) C, A, B, D
3. If in an economy, the Investment Multiplier is 4 and Autonomous Consumption is 1
₹ 30 crore, the relevant consumption function would be .
(Fill up the blank with correct alternative)
(a) C = 30 + 0.75 Y (b) C = (–) 30 + 0.25 Y
(c) C = 30 + 0.25 Y (d) C = (–) 30 – 0.25 Y
4. Assuming that, the following data is given for an imaginary economy: 1
Year 2020 (₹ in Cr.) 2021 (₹ in Cr.)
Items
Exports of visibles 1,000 1,100
Imports of visibles 800 850
The balance of trade from 2020 to 2021 by ₹ crore. (Choose the
correct alternative)
(a) increased, 200 (b) decreased, 200
(c) increased, 50 (d) decreased, 50
5. Assertion (A) : Margin requirement is a qualitative tool for controlling credit 1
creation process.
Reason (R) : Margin requirement changes the availability of supply of
money in economy.
(a) (A) & (R) both are true and (R) is correct explanation of (A)
(b) (A) & (R) both are true and (R) is not correct explanation of (A)
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true
OR
In the present COVID-19 times, many economists have raised their concerns that
Indian economy may have to face a deflationary situation, due to reduced
economic activities in the country. Suppose you are a member of the high-
powered committee constituted by the Reserve Bank of India (RBI). You have
suggested that as the supervisor of commercial banks . . . . . . . of the money
supply be ensured, by the Reserve Bank of India (RBI).
(a) Restriction (b) Release
(c) Either (a) or (b) (d) None of the above
6. MPC = 0.75 and as a result of Multiplier Effect, National Income Increased by 1
₹ 300 crores by an additional investment of .
(a) 400 Crores (b) 225 Crores
(c) 1200 Crores (d) 75 Crores
7 On the basis of given diagram, what does the rightward shift of supply curve 1
indicates?
(a) Appreciation of domestic currency (b) Depreciation of domestic currency
(c) Appreciation of foreign currency (d) Both (b) and (c)
8 Choose the correctly matched pair from the following 1
Column I Column II
A Fall in Aggregate demand 1 Causes inflation
B Deflationary gap 2 Over employment equilibrium
C Increase in aggregate demand 3 Causes deflation
D Inflationary gap 4 Under full employment equilibrium
Alternatives:
(a) A – 4 (b) B – 1 (c) C – 3 (d) D – 2
9 Column I Column II 1
A Contracts involving future 1 Lack of common measure of value
payments were not possible
under barter system
B Under barter system, it was 2 Double coincidence of wants
difficult for people to maintain
wealth
C Barter system was possible 3 Lack of standard of deferred
only when both buyer and payments
seller were ready to exchange
each other’s goods
D Under barter system, it was 4 Lack of stored value
difficult to know about how
much of one commodity
should be given to exchange
other commodity
Alternatives:
(a) A – 3, B – 4, C – 2, D – 1 (b) A - 1, B - 2, C - 4, D – 3
(c) A – 4, B – 2, C – 1, D – 3 (d) A – 2, B – 3, C – 1, D – 4
10 Read the following statement given below and choose the correct alternative. 1
Assertion (A) : The Aggregate Demand curve is positively sloped.
Reason (R) : Aggregate Demand is sum of Investment and Consumption.
(a) Both assertion and reason are true. Reason is the correct explanation of
assertion.
(b) Both assertion and reason are true. Reason is not the correct explanation of
assertion.
(c) Assertion is true but reason is not
(d) Reason is true but Assertion is not.
11 “In an economy ex-ante Aggregate Demand is more than ex-ante Aggregate 3
Supply.” Explain its impact on the level of output, income and employment.
OR
In an economy, S = –100 +0.6 Y is the saving function, where S is Saving and Y
is National Income. If investment expenditure is 1,100. Calculate:
(1) Equilibrium level of National Income
(2) Consumption Expenditure at Equilibrium level of National Income.
12 Giving reasons, state whether the following are included/excluded while 3
estimating National Income.
(i) Expenditure by a firm on a payment of fees to a Charted Accountant.
(ii) Increase in the prices of stocks lying with a trader.
(iii) Free medical facilities to employees.
13 (i) State the impact of Excess Demand on output and employment during. 2
(a) Involuntary Employment in the economy.
(b) Full Employment level in the economy.
(ii) For a hypothetical economy, assuming there is an increase in the Marginal
Propensity to Consume (MPC) from 80% to 90% and change in investment to be 2
₹1,000 crore. Using the concept of investment multiplier, calculate the increase in
income due to change in Marginal Propensity to Consume (MPC).
14 (i) “Indian Rupee plunged to all times low of ₹ 74.48 against the US dollar 2
($)’’. What will be the impact on Balance of trade?
(ii) ‘Google will invest $10bn (£7.93bn) in India in the next five to seven years,
the chief executive of its parent company Alphabet Inc. has announced’.
From BBC News .
What will be the effect of this investment on the foreign exchange rate?
OR
(i) A British Company has ordered readymade garments from company. What
will be the impact on their total import expenditure if foreign exchange rate 2
increases?
(ii) ‘Make in India Programme has significant impact on Balance of Payment.’
Justify the given statement.
15 (i) Using a hypothetical numerical example, explain the effect of rise in Reserve 2
Ratio on credit creation by the commercial banks.
(ii) Currency is issued by central bank, yet we say that commercial banks create 2
money, elucidate. How is the money creation by commercial banks likely to
affect the national income? Explain
16 From the following information, determine: (a) Capital Expenditure (b) Total 3
Expenditure (c) Interest Payments
S. No. Particulars Amount (in ₹ crore)
1 Fiscal Deficit 12,000
2 Revenue Deficit 9,000
3 Primary Deficit 5,000
4 Revenue Receipts 6,000
5 Non-debt Capital Receipts 10,000
(i) Identify the following as revenue receipt or as a capital receipt in the context 3
of government budget and give valid reasons.
(a) Disinvestment
(b) Dividend received by Government from a company
(ii) Deficit or disequilibrium in BOP may occur due to autonomous transactions
or due to accommodating transactions. Defend or refute the given statement
with valid rationale.
17 (i) From the following data find the missing values: 6
S. No. Items Amount ( ₹ in lakhs)
(i) National Income 50,000
(ii) Net Indirect Taxes 1,000
(iii) Private Final Consumption Expenditure ?
(iv) Gross Domestic Capital Formation 17,000
(v) Profit 1,000
Government Final Consumption
(vi) 12,500
Expenditure
(vii) Wages & Salaries 20,000
(viii) Consumption of Fixed Capital 700
(ix) Mixed Income of Self Employed 13,000
(x) Operating Surplus ?
(xi) Net Factor Income from Abroad 500
(xii) Net Exports 2,000
OR
(i) (a) Explain why subsidies are added to and indirect taxes are deducted
3
from domestic product at market price to arrive at domestic product at
factor cost.
(b) Why are net exports added while computing national income by
expenditure method?
(ii) Defend or refute the given statements. Give valid reasons for your answer. 3
(a) Subsidies to the producers should be treated as transfer payments.
(b) Increase in national income always implies increase in domestic
income
