Economics (318) - April' 2019 | NIOS SENIOR SECONDARY Solved Papers

ECONOMICS (April’ 2019)
Time: 3 Hours
Maximum Marks: 100

1. “Increase in demand” of a normal good can be due to:
(a) Increase in income   (b) Increase in price of substitute good
(c) Fall in price of complementary good (d) All the above
2. Which of the following is subject matter of macroeconomics?
(a) A firm             (b) An industry                  (c) Market           (d) Money  supply
3. Payment of electricity bill by a production unit is:
(a) Implicit cost                 (b) Imputed cost              (c) opportunity cost        (d) Explicit cost
4. Index numbers measure:
(a) Absolute changes     (b) Relative changes      (c) Both ( a) and (b)         (d) Change in price
5. Dispersion of a series expressed in original units is:
(a) Relative dispersion   (b) Absolute dispersion (c) Both (a) and (b)          (d) None of the above
6. Average revenue of 2 units of output is Rs. 20 and that of 3 units of output is Rs. 18 Marginal revenue of 3 units of output is:
(a) 2       (b) 10    (c) 14     (d) 19
7. Which of the following is selective method of credit control?
(a) Margin requirements              (b) Bank Rate     (c) Open market operations        (d) Variable reserve ratio
8. Autonomous investment curve is:
(a) Parallel to the y-axis (b) Parallel to x-axis       (c) Upward sloping          (d) Downward sloping
9. Value added equals:
(a) Sales               (b) Sales + change is stocks          (c) Value of output – intermediate cost                (d) None of the above
10. National income equals:
(a) GDP MP          (b) GNP MP          (c) NNP FC            (d) NDP FC

11. Giving an example explain how economic problem arises in an economy due to ‘alternative uses of resources’                                   3
Ans: An economic problem is basically the problem of choice which arises because of scarcity of resources. Human wants are unlimited but means to satisfy them are limited. Therefore, all human wants cannot be satisfied with limited means. Wants differ in intensity and limited resources have alternative uses. In such a background, every consumer tries to satisfy his maximum wants. Therefore, one has to choose as to what goods one should consume and in what quantity. Economic problem arises the movement problem of choice arises. Actually speaking, economic problem is basically the problem of choice.

12. Explain ‘Choice of average’ as an issue in construction of index numbers.                  3
Ans.:- Difficulty is to select an appropriate method of calculating averages. There are a number of methods which can be used for this purpose. But all methods give different results from one another. It is, therefore, difficult to decide which method to choose.

13. Explain what is perfect correlation.                          3
Ans.:- Perfect correlation:- A relationship between two variables, X and Y, in which the change in value of none variable is exactly proportional to the change in value of the other. That is, knowing the value of one variable exactly predict the value of the other variable (i.e. rxy = 1.0). when graphed, a perfect correlation forms a perfectly straight line. If the variables change in the same direction (i.e., they both increase or decrease), the correlation is perfect correlation.

14. Distinguish between ‘ceiling price’ and ‘floor price’.         3
Ans.:- The difference between a Price Ceiling and a Price Floor:-
A price floor is the minimum  price at which a product can be sold. It’s there to stop a price from dropping below a certain level – the “floor”. Perhaps the best – known example is the minimum wage. This  prevents worker exploitation by mandating the lowest amount (the floor) that a worker can be paid for an hour of work to enable him to afford a  basic standard of living.
A price ceiling is another type of price control, only this time it keeps a price from climbing above a certain level – the “ceiling”. Government usually set price ceilings to protect consumers from rapid price increases that could make essential goods prohibitively expensive. For example, a state government could set a limit (ceiling) on how much a gallon of gas could set for in the helps of saving money for consumers and potentially stimulating growth in the economy.

15. What is meant by excess demand? Explain the restoration of equilibrium price in this case.    3
Ans.:- Excess Demand refers to the situation when aggregate demand (AD) is more than the aggregate supply (AS) corresponding to full employment level of output in the economy.
However, at a higher price , a small no. of people demanding the commodity will reduce / pull back their demand at a higher price.
This process continues for any arbitrary price till excess demand goes away and demand is equal to supply. Because at this point, there is equilibrium, and market has attained efficiency.

16. What are monotonic preferences? Explain                 3
Ans.:- Monotonic preference means that a rational consumer always prefers more of a commodity as it offers him a higher level of satisfaction.
Monotonic preferences essentially say that “more” is preferred to “less”. A modest version of preference monotonic is synonymous with free disposal in consumption “more” cannot “hurt” if any excess can be freely disposed of.

17. Explain the problem ‘for whom to produce’.      3
Ans.:- The problem for whom to produce refers to selection of the category of people who will ultimately consume the goods. Since resources are scarce in every economy, no society can satisfy all the wants of its people/ thus, a problem of choice arises. The economic problem of “ For whom to Produce” basically focuses on the distribution mix of the final goods and services produced. The distribution of the final goods and services is equivalent to the distribution of National Income (or National product ) among the factors of production such as land, labour, capital and entrepreneur.

18. Explain the ‘measure of value’ function of money.       3
Ans.:- Measure of value:- Money acts as a unit of account or money is the measure of exchange value. This means that money is a sort of common denominator, through which the exchange value of all goods and services can be expressed without any difficulty. Innumerable exchange rates under the barter system earlier caused enormous trouble in the transactions of all kinds.

19. Distinguish between real flow and money flow.                3
Ans.:- Differences between real flow and money flow:-
Real Flows include the factors of production, such as labour or land, the flow from individuals to companies, as well as the flow of goods and services from companies to individuals.
Meanwhile, money flows occur when companies pay wages in return for labour or services provided by individuals, as well as when individuals spend money to obtain goods or services produced by companies.

20. State any three components of aggregate demand.               3

Ans.:- Three components of aggregate demand are:-

  1. Consumption:-  This is made by households, and sometimes consumption accounts for the larger portion of aggregate demand. An increase in consumption shifts the AD curve to the right.

  2. Investment :- Investment, second of the components of aggregate demand, is spending by firms on capital, not households. However, investment is also the most volatile component of AD. An increase in investment shifts AD to the right in the short run and helps improve the quality and quantity of factor of production in the long run.

  3. Government Spending:- Government spending forms a large total o aggregate demand, and an increase in government spending shifts aggregate demand to the right. This spending is categorized into transfer payments and capital spending. Transfer payments include pensions and unemployment benefits  and capital spending is on things like roads, schools and hospitals. Governments spend to increase the consumption of health services, education and to re-distribute income.

21. Price elasticity of demand of a good is (-) 1. When price falls from Rs. 10 per unit to Rs. 9 per unit, the consumer buys one more unit of the good. Calculate the quantity purchased before change in price.               4


Let the quantity be X.

Given P = 10, P = Rs.1, Q = X units, Q = 1, ed = -1

Here P = Price, P = Change in price, Q = Quantity, Q = change in quantity

ed =  Q     P

                                      P          Q

-1  =  1 X       10

          1           X

- 1  = 10


-1x = 10

  X  = 10 – 1

  X = 9

Therefore quantity purchased before change in price was 9 units.


22. When price of a product changes of Rs. 100 per unit to Rs. 102 per unit, the producer’s sale increases from 1000 units to 1020 units. Calculate price elasticity of supply.               4


Given P = Rs.100, P = Rs.2, Q = 1000 units, Q = 20

Here P = Price, P = Change in price, Q = Quantity, Q = change in quantity


Price elasticity of supply , es = Q     P

          P          Q

      = 20     X    100

            2           1000

      = 2000


      = 1

Therefore price elasticity of supply = 1

23. Distinguish between ‘revenue deficit’ and fiscal deficit.               4

Ans.:- Difference between ‘revenue deficit’ and ‘fiscal deficit’:-

Revenue Deficit

Fiscal Deficit

It is the excess of revenue expenditure over revenue receipts.

It is the excess of total expenditure (revenue + capital) over total receipts excluding borrowings.

It signifies that government is living beyond its means even to conduct its day to day operations.

It implies total borrowing requirements of the government.

Revenue Deficit = Total Revenue Expenditure – Total revenue receipts.

Fiscal Deficit = Total expenditure – Total receipts excluding borrowings.

24.Calculate Net National Disposable Income. (Rs. Crore)                   4

i) Net indirect Tax         30

ii) NDP FC     370

III) Net current transfers to abroad       10

iv) Net factor income from abroad   (-) 5

v) Consumption of fixed capital     20.     

25. Distinguish between money cost and real cost. Also give an example of each.                   4

Ans: Money cost: When production cost is expressed in terms of monetary units, it is called money cost. It means the aggregate money expenditure incurred by a producer on the purchase, procurement and processing of inputs.

Real cost:- Alfred Marshall calls real cost of production as a ‘social cost’ Real cost refers to the payments made to the factors of production to compensate for disutility’s of rendering their services. It is computed in terms of the toil, trouble, pain and discomfort involved for labour, when it is engaged in production.

Example of money cost:- payment of wages,

Example of real cost:- pain of labour.

26. Explain ‘Margin requirements’ as an instrument of credit control.               4

Ans.:- Marginal Requirements:- Another important method of selected credit control in the hands of a central bank is variables in ‘margin requirements’ regulations. ‘Margin’ refers to the difference between market value of securities and the amount borrowed against these securities. This method of credit regulation was first of all tried in the USA in 1934. In recent years, it had been tried in India also to restrict speculation or hoarding in essential commodities. The essence of this method is that a bank while advancing credit against a security does not lend the full amount (full value of security) but less.

27. Calculate third quartile of wages (Rs) of 11 workers:

305,210,430,275,290,400,260,320,300,440,450               6


























Third Quartile , Q3 = 3 (N+1) 


      = 3 (11+1)


    = 36


    = 9th item which is 430

Therefore Q3 =  Rs.430/=

28. Given that MPC = 0.90 and investment increases by Rs. 300 crore, calculate (a) value of multiplies and (b) increase in income.           6

29. What does Law of supply show? Explain ‘Taxation policy of government’ as a determinant of supply.   6

Ans.:- The law of supply is the microeconomic law that states that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.

Taxation policy of government:- Government policy imposing taxes on firms, the government can affect the supply of a commodity. The government may ask business firms to pay taxes for polluting the atmosphere or for meeting government services on education, health, etc. As these taxes increase costs, firms reduce supplies. Similarly, subsidies may be given to firms so that they can produce goods needed by the society.

Often new firms are encouraged to produce some goods (e.g., software) by giving subsidies to these goods or by reducing taxes. Further, the government may use its regulatory device (e.g., industrial licensing ) to control the activities of business firms. This affects supply.


30. Explain how does a Consumer react if (a) MRS is greater than MRE and (b) MRS is less than MRE? 6

31. Calculate GNP MP (Rs. Crore)

i) Net factor income from abroad (-)5

ii) Net domestic fixed capital formation 70

iii) Net imports 10

iv) consumption of fixed capital 20

v) Change in stocks (-)30

vi) Private final consumption expenditure           500

vii) Net Indirect Tax 50

viii) Net current transfers from abroad 8

ix) Government final consumption expenditure 100 6

32. Explain two properties of standard deviation. 6



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