Choose the correct answer 1. The author of wealth definition is : (a) Alfred Marshall b) Lionel Robbins c) Adam Smith d) Samuelson 2.
Download ReportTranscript Choose the correct answer 1. The author of wealth definition is : (a) Alfred Marshall b) Lionel Robbins c) Adam Smith d) Samuelson 2.
Choose the correct answer 1. The author of wealth definition is : (a) Alfred Marshall b) Lionel Robbins c) Adam Smith d) Samuelson 2. The author of scarcity definition is (a) Adam Smith b) Samuelson c) Alfred Marshall d) Lionel Robbins Choose the correct answer 3. The concept of Net Economic Welfare has been given by (a) Samuelson b) Marshall c) Adam Smith d) Lionel Robbins 4. Economics is a a) positive science b) normative science c) Both d) none Choose the correct answer 5. In economics, we make use of a) deductive method b) inductive method c) Both d) none 6. The basic economic problems are common to a) Capitalism b) Socialism c) Mixed economy d) All the above Choose the correct answer 7. Traditional economy is a a) Subsistence economy b) Market economy c) Command economy d) Monetary economy 8. The basic force that drives the capitalist economy is a) Planning b) Technology c) Government d) Profit – motive Choose the correct answer 9. In a socialist economy, all decisions regarding production and distribution are taken by : a) Market forces b) Central planning authority c) Customs and traditions d) Private sector. Choose the correct answer 10. Red-tapism and corruption lead to a) Inefficiency of production b) Inequality of income and wealth c) Absence of technology d) Efficient use of resources Choose the correct answer 11. Necessaries, comforts and luxuries are a) Classification of goods and services b) Classification of wants c) Classification of utility d) None of the above Choose the correct answer 12. The Indifference curve approach was introduced by a) Alfred Marshall b) Lionel Robbins c) J.R. Hicks and R.G.D. Allen d) Adam Smith Choose the correct answer 13. Utility is a a) Social concept b) Subjective / psychological concept c) Political concept d) Scientific concept 14. Single commodity consumption mode is a) Production possibility curve b) Law of Equi-marginal utility c) Law of supply d) Law of Diminishing Marginal Utility Choose the correct answer 15. Consumer surplus is a) Potential Price – Actual Price b) MUn = TUn –TUn-1 c) Demand = supply d) None 16. Demand for a commodity depends on a) Price of that commodity b) Price of related goods c) Income d) All the above Choose the correct answer 17. Law of Demand establishes a) inverse relationship between price and quantity b) Positive relationship between price and quantity c) Both d) None 18. Increase in demand is shown by a) Movement along the same demand curve b) Shifts of the demand curve c) The highest point on the demand curve d) Lowest point on the demand curve Choose the correct answer 19. The degree of response of demand to change in price is a) Price elasticity of demand b) Income elasticity of demand c) Cross – elasticity of demand d) All the above. 20. Factors determining supply are : a) Production technology b) Prices of factors of production c) Taxes and subsidies d) All the above Choose the correct answer 21. At the point of equilibrium a) Only one price prevails b) Quantity demanded = quantity supplied c) The demand curve intersects the supply curve d) All the above 22. Above the equilibrium price a) S < D b) S > D c) S = D d) none Choose the correct answer 23. Changes in quantity demanded occur Only when price changes a) Only when price changes b) Due to change of taste c) both d) None 24. The time element in price analysis was introduced by Alfred Marshall a) J.R. Hicks b) J.M. Keynes c) Alfred Marshall d) J.S. Mill Choose the correct answer 25. In the long period a) All factors change b) Only variable factor changes c) Only fixed factor changes d) Variable and fixed factors remain constant. 26. Production refers to a) destruction of utility b) creation of utilities c) exchange value d) None Choose the correct answer 27. The initial supply price of land is a) Zero b) Greater than one c) Less than one d) Equal to one 28. Labour cannot be separated from a) Capital b) labourer c) profit d) organization Choose the correct answer 29. Reward paid to capital is a) interest b) profit c) wages d) rent 30. A successful entrepreneur is one who is ready to accept a) Innovations b) Risks c) deciding the location of the production unit d) none. Choose the correct answer 31. Real cost is ____________ a) pain and sacrifice b) subjective concept c) efforts and foregoing leisure d) All the above 32. Economic cost includes explicit cost and ______ a) implicit cost b) social cost c) fixed cost d) money cost Choose the correct answer 33. social costs are those costs all of these a) not borne by the firms b) incurred by the society c) health hazards d) all of these 34. Average fixed cost is obtained by dividing a) TC/Q b) TFC/Q c) TVC/Q d) None Choose the correct answer 35. Marginal revenue is the least addition made to the a) average revenue b) Total production c) Total revenue d) none 36. Perfect competition is a market situation where we have a single seller a) a single seller b) two sellers c) large number of sellers d) few sellers Choose the correct answer 37. A firm can achieve equilibrium when its a) MC = MR b) MC = AC c) MR = AR d) MR = AC 38. The firm and industry are one and the same under a) perfect competition b) duopoly c) oligopoly d) monopoly Choose the correct answer 39. Under perfect competition, the demand curve is a) Upward sloping b) horizontal c) downward sloping d) vertical 40. Most important form of selling cost is a) Advertisement b) Sales c) Homogeneous product d) None Choose the correct answer 41. Rent is the price paid for the use of a) Capital b) Organisation c) Labour d) Land 42. Profits are the reward for a) land b) capital c) labour d) organisation Choose the correct answer 43. The demand for labour is a) effective demand b) direct demand c) derived demand d) elastic demand. 44. The author of the concept of quasi – rent is a) Adam Smith b) Marshall c) Ricardo d) Samuelson Choose the correct answer 45. The author of liquidity preference theory is a) J.M. Keynes b) Marshall c) Samuelson d) Knight 46. The macro economic thinking was revolutionized by a) David Ricardo b) J.M. Keynes c) Adam Smith d) Malthus Choose the correct answer 47. The Classical Theory assumed the existence of a) Unemployment b) Disguised unemployment c) Full employment d) Under-employment 48. The central problem in Macro Economics is a) Income and employment b) Price and Output c) Interest and Money d) None Choose the correct answer 49. To explain the simple theory of income determination, Keynes used a) Consumption and Investment b) Aggregate demand and aggregate supply c) Production and Expenditure d) All the above 50. The marginal propensity to consume a) ΔS/ΔY b) C/y c) ΔP/ΔQ d) ΔC/ΔY Choose the correct answer 51. Monetary policy is controlled by a) central government b) state government c) central bank d) private sector. 52. Currency with the public is known as a) M1 b) M2 c) M3 d) M4 Choose the correct answer 53. Bank rate is raised during a) deflation b) inflation c) stable prices d) unemployment 54. During inflation a) Businessmen gain b) wage earners gain c) salaried people gain d) Rentiers gain Choose the correct answer 55. A situation marked by rising prices and stagnation in demand is known as a) Cost-push inflation b) demand – pull inflation c) stagflation d) wage – push inflation. 56. Public finance is concerned with the income and expenditure of a) Private sector b) Agricultural sector c) Public authorities d) Industrial sector Choose the correct answer 57. Tax revenue deals with the a) Fees b) Kinds of taxes c) Revenue d) Non tax revenue 58. The federal form of government consists of a) Central, state and local government b) central and state government c) State and local government d) above all Choose the correct answer 59. The compulsory charge levied by the government is a) License b) Gifts and grants c) Loan d) Tax 60. In ZBB every year is considered as a a) base year b) financial year c) new year d) academic year Fill in the blanks small 1. The term “micro” means_________ 2. Strictly speaking production refers to the creation of utilities _____________________ 3. Exchange of goods for goods is known as barter _________ Social science 4. Economics is a _________________ 5. An example of cosmopolitan wealth is ocean __________ Fill in the blanks 6. In a traditional economy, basic problems are solved Customs and Traditions by________________________ 7. Most of the economic activities of capitalism are Price Mechanism centered on__________ 8. Production possibility curve is also known as Transformation / producton possibility frontier ______________________________________ 9. The prime motive of socialist economy is Social /COLLECTIVE WELFARE ___________________________ 10. Under mixed economy, the economic control is Private and public sectors exercised by _________________________ Fill in the blanks Consumption 11. ____________ means using up of goods and services Competitive 12. wants may be both _____________ and complementary _________ 13. Marshallian utility approach is cardinal utility analysis _______________ 14. Marginal utility falls to zero, when the total utility maximum is __________ convex 15. An indifference curves is _________ to the origin. Ans :convex Fill in the blanks 16. The demand curve slopes downwards due to Law of diminishing marginal utility ______________________________ 17. Adding up of individual consumers schedule is Market demand schedule ___________________________________ 18. Goods that are demanded for their social prestige Veblen effect come under __________________ 19. The concept of elasticity of demand was Alfred Marshall introduced by ________________ 20. The rate of change of supply to a change is price is Price Elasticity of supply. ___________________ Fill in the blanks Price 21. ____________ is the major determinant of supply. 22. Agriculture, industry, growth and distribution are Subsystems the _______________ of the economy. Equilibrium price, there is no tendency to 23. At ___________ change the price or quantity. 24. Modern economists divide time periods into Short period long period _________________ and _____________ 25. The supply curve in the market period is a Vertical line. _________ Fill in the blanks primary 26. Land and labour are called ___________ factors 27. An enquiry into the nature and causes of wealth of Adam Smith nations was written by _____________ Division of labour is limited by the extent of 28. ________________ market. capital 29. ____________ is man-made physical goods used to produce other goods. 30. The functional relationship between inputs and Production function. output is known as _________________ Fill in the blanks Nominal cost 31. Money cost is also called ____________ 32. Economic profit is the difference between total Economic cost/ total cost revenue and___________________ 33. The distinction between the fixed and variable short run factors is possible only in _____________ 34. Total cost is the sum of total fixed cost and total variable cost __________________________ ‘U’ shaped. 35. The marginal cost curve is ____________ Fill in the blanks 36. Under perfect competition, the firms are homogeneous product. producing _____________ 37. When the Average revenue of the firm is greater than its average cost, the firm is earning Super normal profit ____________ price-takers 38. The perfect competitive firms are ____________ 39. Monopoly power achieved through patent right is legal monopoly called ______________ mutual 40. Firms realize the importance of _____________ co-operation under oligopoly. Fill in the blanks 41. Marginal productivity theory is the general _________theory of distribution. 42. Marginal productivity theory is based on the perfect assumption of ________ competition. opportunity cost. 43. Transfer earnings refer to ___________ nominal 44. Money wages are also known as __________ wages. entrepreneur 45. Organization is done by the ___________. Fill in the blanks 46. The term consumption function explains the consumption income and ________ relationship between________ Marginal Propensity to save 47. ________________________is the ratio of charge in saving to a change in income. 48. The worldwide depression of 1930s was also Fall in investment caused by a ___________________ Liquidity Preference refers to the cash holdings 49. ________________ of the people. 50. The magnified effect of initial investment on multiplier income is called______________ effect. Fill in the blanks 51. The direct exchange of goods for goods is known Barter system as _____________ falling 52. Deflation is a period marked by __________ prices 53. The equation of exchange (MV = PT) was given by Prof. Irving Fisher _______________ 54. Galloping inflation is also known as hyper-inflation or run-away inflation _____________________. 55. Monetary policy is usually effective in controlling inflation __________. Fill in the blanks Public revenue means different sources of 56. ____________ government income. 57. The absence of direct and proportional benefit is Quid pro – quo ______________ canons of taxation are considered as 58. _______________ fundamental principles of taxation. 59. The classification of direct and indirect taxes is shifting of the incidence based on criterion of ___________________ tax. Degressive tax is a blend of progressive tax and 60. _________ proportional tax. MATCH THE FOLLOWING 1. “Principles of Economics” - Time Element 2. First Nobel prize - Flow 3. Dynamic approach - Timbergen and Frisch 4. Wealth - Marshall 5. Income - Stock 1. “Principles of Economics” - Marshall 2. First Nobel prize - Timbergen and Frisch 3. Dynamic approach - Time Element 4. Wealth - Stock 5. Income - Flow Fill in the blanks 6. Minimum cost - supply, demand and price 7. Opportunity cost - Laissez faire economy 8. private property - next alternative foregone 9. Bureaucratic expansion - Maximum benefit 10. Market forces - socialism 6. Minimum cost - Maximum benefit 7. Opportunity cost - next alternative foregone 8. private property - Laissez faire economy 9. Bureaucratic expansion 10. Market forces - socialism - supply, demand and price Fill in the blanks 11. Wants 12. “Principles of economics” 13. Maximum social advantage 14. Indifference curve 15. Luxuries - Diamond, Jewels - Hicks and Dalton - Advertisements - Marshall - Ordinal Ranking 11. Wants - Advertisements 12. “Principles of economics” - Marshall 13. Maximum social advantage - Hicks and Dalton 14. Indifference curve - Ordinal Ranking 15. Luxuries - Diamond, Jewels Fill in the blanks 16. Positive relationship of - X and Y are not related price and demand 17. Tea and coffee -elastic demand 18. Segment between two points - Veblen effect 19. Ed > 1 - Arc 20. Cross-elasticity is zero - substitutes 16. Positive relationship of - Veblen effect price and demand 17. Tea and coffee - substitutes 18. Segment between two points - Arc 19. Ed > 1 - elastic demand 20. Cross-elasticity is zero - X and Y are not related Fill in the blanks 21. Equilibrium - Demand and supply. 22. Excess demand - Annual stock clearance 23. Price discount - Pair of price and quantity 24. Long period supply curve -D>S 25. Short period price - More elastic 21. Equilibrium - Pair of price and quantity 22. Excess demand -D>S 23. Price discount - Annual stock Clearance 24. Long period supply curve - More elastic 25. Short period price - Demand and supply. Fill in the blanks 26. Entrepreneur, an innovator 27. Division of labour 28. Production function 29. Bundle of risks 30. Exertion of body or mind - Adam Smith - Marshall - Schumpeter - Cobb Douglas - Hawley 26. Entrepreneur, an innovator - Schumpeter 27. Division of labour - Adam Smith 28. Production function - Cobb Douglas 29. Bundle of risks - Hawley 30. Exertion of body or mind - Marshall Fill in the blanks 31. Average cost - TFC + TVC 32. TC - TR – TC 33. The long run average cost curve - cost per unit 34. MCn - planning curve 35. Profit - TCn – TCn-1 31. Average cost - cost per unit 32. TC - TFC + TVC 33. The long run average cost curve - planning curve 34. MCn - TCn – TCn-1 35. Profit - TR – TC Fill in the blanks 36. Global market 37. Consumer sovereignty 38. South Africa 39. Technical monopoly 40. Monopolistic competition - E.H. Chamberlin - Diamond - Coco Cola - Gold and silver - Perfect competition 36. Global market - Gold and silver 37. Consumer sovereignty - Perfect competition 38. South Africa - Diamond 39. Technical monopoly - Coco Cola 40. Monopolistic competition - E.H. Chamberlin Fill in the blanks 41. Residual claimant theory 42. Waiting theory of Interest 43. Loanable Funds Theory 44. Dynamic Theory of profit 45. Risk-bearing theory of profit - Neo-classical theory - Walker - Hawley - Marshall - Clark 41. Residual claimant theory - Walker 42. Waiting theory of Interest - Marshall 43. Loanable Funds Theory - Neo-classical theory 44. Dynamic Theory of profit - Clark 45. Risk-bearing theory of profit - Hawley Fill in the blanks 46. Aggregate Demand -C+S 47. Slope - Liquidity Preference 48. K - 1/1-MPC 49. Y - Vertical Change/Horizontal Change 50. Keynes - C + I + G +(X-M) 46. Aggregate Demand - C + I + G +(X-M) 47. Slope - Vertical Change/Horizontal Change 48. K - 1/1-MPC 49. Y -C+S 50. Keynes - Liquidity Preference Fill in the blanks 51. Quantitative credit control - Purchasing power of money 52. Selective credit control - Creeping inflation. 53. Cheap money policy - Bank rate 54. Wages and prices push one another - Low rate of interest 55. Value of money - Moral Suasion 51. Quantitative credit control - Bank rate 52. Selective credit control - Moral Suasion 53. Cheap money policy - Low rate of interest 54. Wages and prices push one another - Creeping inflation. 55. Value of money - Purchasing power of money Fill in the blanks 56. Canons of taxation - Revenue and expenditure are equal 57. Progressive tax - Tax rate decreases 58. Fiscal policy - Adam Smith 59. Regressive tax - Best tax system 60. Balanced Budget - Rebate and subsidies 56. Canons of taxation - Adam Smith 57. Progressive tax - Best tax system 58. Fiscal policy - Rebate and subsidies 59. Regressive tax - Tax rate decreases 60. Balanced Budget - Revenue and expenditure are equal Answer in a word or two 1. What is the other name for Economics? Political economy 2. What are the subjects that econometrics make use of ? Statistics, mathematics, economics 3. What is the method that Ricardo made use of? Deductive method Answer in a word or two 4. Give one or two examples of free goods. Air, sunshine 5. What is the other name for money income? Nominal income 6. Is traditional economy a subsistence economy? Yes Answer in a word or two 7. What is the basic force that drives a capitalist economy? Profit Motive 8. What is the result of over-production? Depression 9. Name any two successful socialist economies. China and Cuba Answer in a word or two 10. Is there planning under mixed economies? Yes, Manufactures consumer and capital goods in the interest of public welfare. 11. Define Utility. Want satisfying power 12. What is the other name for the law of Equi- Marginal Utility? Gossen’s second law Answer in a word or two 13. What is Indifference curve? Locus of different combinations of two commodities 14. What is Indifference Map? It is a group of indifference curves for two commodities 15. What is the other name for budget line? Price – ratio line Answer in a word or two 16. What is the basic assumption of economic theory? Other things being equal / ceteris paribus condition 17. How does the demand change during boom and depression? During boom demand increases and during depression demand decreases 18. Give the formula for point method. ep = lower segment of the demand curve / upper segment of the demand curve Answer in a word or two 19. What is income elasticity of demand? The degree of responsiveness of demand to change in income. 20. When the demand for labour is inelastic, can a trade union raise wages? Yes 21. What is equilibrium in general? State of rest / balance Answer in a word or two 22. What are the determinants of shift in demand curve? Income, taste, price of substitutes 23. Who has introduced the time element? Alfred Marshall 24. Give an example for fixed input? Heavy machinery / building and capital equipments Answer in a word or two 25. Is supply fixed in the market period? Yes 26. Who is the changing agent of the society? Entrepreneur 27. How do internal economies arise? From within the firm Answer in a word or two 28. What is other name for isoquant? Iso-Product curve 29. Give the condition for producer’s equilibrium ? MRTS xy = Px / Py 30. State the Cobb-Douglas production function. Q = b L a Cb Answer in a word or two 31. When average revenue remains constant what will be M.R.? M.R. remains constant / coincide with A.R. 32. What is Marginal Revenue? Addition made to the total revenue. 33. What is break-even point? No - profit no-loss point Answer in a word or two 34. What is an envelope curve? It is a group of short run cost curves (planning curve) 35. How will you calculate AC? TC/q 36. What is an industry? Group of firms Answer in a word or two 37. Who undertakes the public utilities? State 38. How does the government control monopoly? Taxation / legislative method 39. What is the essential feature of monopolistic competition? Product differentiation Answer in a word or two 40. In which year the MRTP Act was passed? 1969 41. According to Ricardio, do all lands get rent? No 42. Even if all lands are equally fertile, can rent arise? Yes Answer in a word or two 43. Who is the author of Agio theory of interest? Bohm-Bawerk 44. Who is the author of the rent theory of profits? Prof. Walker 45. What is the name of Schumpeter’s theory of profits? Innovation theory Answer in a word or two 46. What crippled the free enterprise economies of US and UK? Great Depression 47. State J.B. Say’s Law of Market. Supply creates its own demand 48. Who is the author of the “General Theory of Employment, Interest and Money”? J.M. Keynes Answer in a word or two 49. Name the point of intersection of Aggregate Demand and Aggregate Supply. Keynesian cross 50. Give the formula for Multiplier. K = 1 / 1-MPC 51. Name the bank which controls money supply in a country. Central bank Answer in a word or two 52. When is dear money policy followed? During inflation 53. What is the name of inflation without a rise in price level? Suppressed inflation 54. Is wage cut a remedy for depression? No Answer in a word or two 55. Give the example of a country that experienced hyperinflation. Germany 56. What is a tax? Compulsory contribution by each person 57. Give the expansion for VAT. Value added tax Answer in a word or two 58. What is the meaning of proportional tax? Uniform tax rate 59. What are the kinds of budget? Balanced and unbalanced budget 60. What is public debt? Borrowing from the public THREE MARKS QUESTIONS & ANSWER 1. Write Alfred Marshall’s definition of economics. “Economics is a study of man’s action in the ordinary business of life.” Economics is on the one side a study of wealth and on the other and more important side, a part of the study of man. Man is the centre of his study. According to him, the study of man is more important than the study of wealth. THREE MARKS QUESTIONS & ANSWER 2. What are the main divisions of economics? Consumption Production Exchange Distribution Public Finance 3. Describe the relationship between economics, mathematics and statistics. Statistics is the science of averages. It is the science of counting. Many tables and diagrams used in economics are based on statistical analysis. Mathematical methods are largely used in modern economics. THREE MARKS QUESTIONS & ANSWER 4. Distinguish between free goods and economic goods. Free Goods i) They are not scarce Economic Goods i) They are scarce ii) Do not command a price in a market. iii) They have value in use ii) Command a price in the market. iii) They have value in exchange. THREE MARKS QUESTIONS & ANSWER 5. What are the basic issues of any society. What to produce and in what quantities food or weapons, if so in what quantities is it more food and less weapons (or) vice versa? How goods shall be produced Electricity from thermal power (or) from hydro power For whom shall the goods be produced? A few rich and many poor(or) most people in modest comfort. THREE MARKS QUESTIONS & ANSWER 6. Name the important general economic systems? T – Traditional economy (or) subsistence economy C – Capitalism (or) Market economy S – Socialism (or) Command economy M – Mixed economy THREE MARKS QUESTIONS & ANSWER 7. List the basic features of socialism SWM – Social Welfare Motive LRPP – Limited Right to private property CP – Central Planning NMF – No Market Forces THREE MARKS QUESTIONS & ANSWER 8. Is India a mixed economy? Yes, both public and private institutions exercise economic control. 9. What are the causes for wants? Elementary and Psychological causes Social causes Customs and habits Advertisements THREE MARKS QUESTIONS & ANSWER 10. What are the classifications of goods (or) wants? Necessaries - Food, clothing, shelter Comforts - T V, sofa cum bed Luxuries - Diamond studded jewels. 11. What are the properties of indifference curve Slope downwards to the right convex to the origin No two indifference curve can ever cut each other THREE MARKS QUESTIONS & ANSWER 12. Why does the demand curve slope downwards Mainly due to the law of diminishing marginal utility. 13. What are the types of elasticity of demand i.Price elasticity of demand ii. Income elasticity of demand iii. Cross elasticity of demand THREE MARKS QUESTIONS & ANSWER 14. What is equilibrium price? At that point the quantity demanded of a commodity by the buyer is equivalent to the Quantity the seller is willing to sell. This price is called as the equilibrium price. 15. Distinguish between change in demand and shift in demand. Shift in demand Change in demand Due to income, taste, Due to change in price price of substitution THREE MARKS QUESTIONS & ANSWER 16. Differentiate the short period from the long period. Short period Long period At least one factor will be Supply can be changed by changing a fixed input all the inputs 17. Write a short note on market period. Market period is the period during which the ability of the firms to affect any changes in supply in response to any change in demand is extremely limited (or) almost nil. THREE MARKS QUESTIONS & ANSWER 18. Name the types of utility Form F Place P Time T Possession 19. What are the forms of capital Capital Resources Physical i. Material Money ii. Monetary Human iii Human P THREE MARKS QUESTIONS & ANSWER 20. Define opportunity cost Any good is the next best alternative good that is sacrificed. Opportunity cost of a quintal of Wheat is the amount of output of potatoes given up. 21. What are economic costs? The economic cost includes not only the explicit cost but also the implicit cost. Economic cost = Explicit cost + Implicit cost THREE MARKS QUESTIONS & ANSWER 22. Define marginal cost? Marginal cost is defined as the addition made to the total cost by the production of one additional unit of output. Mc n = Tcn – Tcn-1 23. What is “Transfer earning”? Transfer earnings refer to the amount that a factor could earn in its best paid alternative employment. It represents the opportunity cost of its present employment. THREE MARKS QUESTIONS & ANSWER 24. Distinguish between real wages and money wages. Money wages are also known as nominal wages. Real wages refer to the commodities and services which the money wages command. They depend mainly on the purchasing power of money. 25. What are the 3 motives of Liquidity of preference? Transaction Precautionary Speculative THREE MARKS QUESTIONS & ANSWER 26. What is effective demand? Effective demand is the ability and willingness to spend by individuals, firms and government. Effective demand is that point where the ADF and ASF are equal. 27. Give the factors on which the aggregate demand depends. Functions i. Propensity to consume - Consumption ii. Inducement to invest – Investment THREE MARKS QUESTIONS & ANSWER 28. Write a note on Multiplier The ultimate determinant of income and employment is the multiplier. Any increase in investment increases income manifold due to multiplier effect. K 1 MPS 29. Define Money. K 1 1 MPS Crowther defined anything that is generally acceptable as a means of exchange. Walker has said money is that which money does. THREE MARKS QUESTIONS & ANSWER 30. What are the 4 components of money supply in India? M1 - Currency with the public narrow money M2 - M1 + post office saving deposits M3 - M2 + Time deposits of the public with the banks(broad money) M4 - M3 + total post office deposits 31. What are the instruments of quantitative credit control? 1. Bank rate 2. Variation of Cash Reserve Ratios 3. Open market operations THREE MARKS QUESTIONS & ANSWER 32. What is stagflation? The world has been facing the problem of stagflation marked by stagnation and lack of demand on the one hand and inflation on the other. 33. Define public finance Public finance is concerned with the income and expenditure of public authorities and with the adjustment of the one with the other. THREE MARKS QUESTIONS & ANSWER 34. What is subject matter of public finance? 1. Expenditure 2. Revenue 3. Debt 4. Financial administration 5. Federal finance 35. What are the canons of taxation? 1. Equity 2. Certainty 3. Convenience 4. Economy THREE MARKS QUESTIONS & ANSWER 36. What are the kinds of tax? Direct tax and Indirect tax Proportional , Progressive, Regressive and Digressive taxes Specific and Advalorem taxes Value Added tax Single and Multiple taxes 37. What is zero based budget? In zero based budgeting every year is considered as a new year. Thus providing a connecting link between the previous year and the current year. The past performance and programmes are not taken into account.