CUET Economics Previous Year Solved Paper 5 (19 July 2022 Slot-2) - Humanities/Arts MCQ

For an Economy, following is the decreasing order of priority – A Hospital > A School > A Factory > A Residential Complex. Therefore, The Economy will choose to make Hospital on a piece of land and the opportunity cost (Cost of next best alternative forgone) will be a School.

When the change in quantity of a good is due to its price, it is known as change in quantity demanded. Here, because of reduction in price from 10 to 6, the quantity increased from 50 to 65. Therefore, it is increase in quantity demanded

Pri ce Elasticity of demand = % change in quantity demanded/% change in price

A resident is said to be a person (or an institution) who ordinarily resides in a country and whose centre of economic interest lies in that country.
He is called a normal resident since he normally lives in the country of his economic interest. The centre of economic interest of medical patients going from India to U.S.A. for treatment lies in India.

GNP Deflator = (Nominal GNP/Real GNP) × 100

Stock refers to any quantity that is measured at a particular point in time. Money Supply and Capital Stock in a country are measured at a particular point in time

• Intermediate goods are products that are used in the production process to make other goods.
• The intermediate goods are sold industry-toindustry for resale or to produce other products.
• Sugar purchased by a restaurant and chalk; duster purchased by school are intermediate goods.

National Income = Domestic Income + Net Factor Income from Abroad (NFIA). When NFIA = 0, National Income = Domestic Income

GDP(MP) = PFCE + GFCE + GDFCF + Change in stock + Net Exports (Expenditure Method to calculate National Income) > 2995 = 1100 + 900 + Change in stock – 75 > 2995 – 2925 = 70 = Change in stock

MPS can never be negative because change in consumption (C) can never be more than change in Y while APC is 1 when C = Y at break-even point.

Reverse repo rate is the rate of interest at which the Reserve Bank of India or RBI borrows money from commercial banks for a short period. This helps the RBI have a ready source of liquidity in case of any situation. The Reserve Bank of India offers the commercial banks great interest rates in return for the amount borrowed by it. In case of deficient demand, RBI will increase money supply by reducing the rates Less funds are kept with the RBI to generate interest income.

C = 100 + 0.2Y and S = Y – C = Y – 100 – 0.2Y i.e. S = –100 + 0.8Y

In two sector economy, AD=C+I and since the diagram shows parallel shift in AD from AD  to AD‚  so it is due to increase in autonomous Investment

If 20% of the income is sav ed, then MPS = 0.2 and investment multiplier k = 1/MPS i.e. k = 1/0.2 = 5 Change in Y/Change in I i.e. Change in Y = 5 × 100 = Rs. 500 crores

Effective demand is much below level of full employment equilibrium which means demand is not enough to employ all factors of production.

Note – You have to identify incorrect statement and if you cannot come to exact answer so use elimination technique where you eliminate options that consists of correct statement. Also, in (E) “only” is a strong word that makes the statement wrong

Buying and selling of gov ernm ent securities by the RBI to the public is called Open Market Operations.

Commercial Bank- Credit CreationReserve Bank of India – Lender of last resort Bank Rate- Long Term lending rate by RBI Repo Rate – Short term lending rate by RBI.

Total Deposits = Initial Deposits × 1/LRR
= 1000/0.20
= 5000

The total liability of the monetary authority of the country, RBI, is called high powered money.
It consists of currency in circulation with public, vault cash of commercial banks and deposits held by the government and commercial banks with RBI

The two main criteria that distinguish a public good are that it must be non-rivalrous and nonexcludable. Non-rivalrous means that the goods do not dwindle in supply as more people consume them; non-excludability means that the good is available to all citizens. 

The Union Cabinet approved the setting up of seven Mega Integrated Textile Region and Apparel (PM MITRA) Parks at an outlay of Rs. 4,445 crore.The MITRA park aims to integrate the entire textile value chain from spinning, weaving, processing/dyeing, printing to garment manufacturing at one location. Reallocation of resources helps to distribute resources, keeping in view the social and economic advantages of the country.

An indirect tax is collected by one entity in the supply chain, such as a manufacturer or retailer, and paid to the government, GST is an indirect tax levied on the supply of goods and services.

Primary Deficit = Fiscal Deficit – Interest Payment

Capital expenditures are one- time large purchases of fixed assets that will be used for revenue generation over a longer period. Revenue expenditures are the ongoing operating expenses, which are short-term expenses used to run the daily business operations.Capital Receipts are the income generated from
investment and financing activities of the business. Revenue Receipts are the income generated from the operating activities of the business.

Devaluation happens when a government makes monetary policy to reduce a currency’s value. A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies because of which Exports will become cheaper and imports become expensive

The Current account refers to the account which records the transactions of the domestic country with the rest of the world. The rent received by the company will increase the revenue of the company that is why it is recorded on the credit side of the current account.

B. India was self-sufficient in food grains, during Pre-British India.

• Before the British rule, India had a well-established agricultural system and was self-sufficient in food grains.
• The farmers cultivated a variety of crops, and the agricultural output was adequate to meet the demands of the population.

However, during the British rule, the focus shifted towards cash crops like cotton and indigo, which led to a decline in food grain production and self-sufficiency.

E. TISCO was established in the year 1907.

• Tata Iron and Steel Company (TISCO) was established by Jamsetji Tata in the year 1907.
• It was the first integrated private sector steel plant in India and played a significant role in the country's industrial development.
• The establishment of TISCO marked the beginning of the modern iron and steel industry in India.

The other statements are incorrect:
A. Almost 60% of the population lived in villages on the eve of Independence.
This statement is incorrect because the percentage of the population living in villages was much higher than 60%. In fact, around 85% to 90% of the population lived in rural areas during that time.
C. Britishers encouraged capital goods industry in India.
This statement is incorrect because the British rule largely focused on the extraction of raw materials from India and exporting them to Britain.
The British administration did not encourage the development of capital goods industries in India, and their policies led to the deindustrialization of the Indian economy.
D. India was a major exporter of finished goods on the eve of Independence.
This statement is incorrect because, during the British rule, India became a net importer of finished goods rather than an exporter.
The British policies favored the import of British manufactured goods into India, which led to the decline of traditional Indian industries and handicrafts.

Subsidies are a type of benefit that is offered by the government to the people, it results in reduction in the value of the subsidised product. It can be offered to individuals or public and private institutions. Subsidies are a part of nonplan expenditure.

The IPR 1956, st ressed t he im port ance of cottage and small-scale industries for expand-ing employment opportunities and for wider decentralization of economic power and activity.
The 1956 Policy emphasized the need to expand the public sector, to build up a large and growing coop-erative sector and to encourage the separation of ownership and management in private in-dustries and, above all, prevent the rise of pri-vate monopolies.