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Important Questions Bank, Macro Economics, class 12 Notes | Study Economics for CBSE Class 12 Board Examinations - Commerce

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Chapter 1/2/3/4        { NY and its aggregates }

 (Q1) What is meant by circular flow of income ? Distinguish between real flow and money flow?

 (Q2) Distinguish b/w Stock and flow variable ? Classify the following as Stock and Flow variable

(a) Losses / Profits                  

(b) Savings              

(c) Balance in a bank account

(d) Wealth.

(e) Export

 (f) Production // GDP

(g) Capital formation / Investment         


(Q3) Differenciate between Intermediate goods and Final goods ? Give two example of each

            Can purchase of Car be treated as IG ?                                                ,or

            ‘Machine’ purchased is always a final good ? Give reason            , or

            Butter is only a final product                                                                   , or


Categorised as Intermediate Products and Final Products ::

(a) Paper purchased by publisher     

(b) Coal used by manufacturing firms

(c) Computer installed in an office.

(d) Mobile sets purchased by a mobile dealer

(e) Milk purchased by restaurant

(f) Chalks, dusters, etc. purchased by a school

(g) Colddrink purchased by canteen


(Q4) Discuss the differences between GDP at constant prices and GDP at current Prices. ,or Give the meaning of Nominal GDP and Real GDP . Which of these is better indicator of economic welfare ?          


Can Nominal GDP be less than Real GDP.       


During a given year nominal national income increased by 14 per cent while the real national income increased by only 6 per cent. Population increased by 2 per cent. What has caused the difference between nominal income and real income ? What is real per capita income?


If the Real GDP is Rs. 400 and Nominal GDP is Rs. 450, calculate Price Index (base = 100).           

 If the Nominal GDP is Rs. 600 and Price Index (base = 100) is 120, calculate the Real GDP.

 The value of the nominal GNP of an economy was Rs.2,500 crores in a particular year.  The value of GNP of that  country during the same year, evaluated at he prices of same base year, was Rs.3,000 crores.  Calculate the value of the GNP deflator of the year in percentage terms.  Has the price level risen between the base year and the year under  consideration ?

                                                                                             ( Ans :: no  price has fallen by 16.67 % )


(Q5) GDP or National income is not a measure of Economic welfare ? HOW             


Explain limitation of GDP / national income as a a measure/index of Economic welfare


What are externalities ? Give an example of a positive externality and its impact on welfare of the people.


What are non monetary exchanges ? Give an example . Explain their impact on use of GDP as an index of welfare ?

 Increase in per capita real income means increase in per capita availability of goods and services. Does it necessarily mean rise in the welfare of the people of the country ? Give any one argument in support of your answer and explain the same.


Do you think higher level of real GDP always leads to higher availability of goods per person in the domestic economy ? If not, what lesson do you draw from such a situation ?

 (Q6) Differentiate Net National Disposable Income with National Income and Personal  Disposable Income?


 (Q7) Differentiate Net National Disposable Income with Personal Disposable Income ?  ,or                       

(Q8)Explain the problem of double counting ? How can it be avoided ?                     


(Q9)Explain value added method of estimating NY with the help of suitable example ?


State the various components of the Expenditure Method that are used to calculate                    national income.


Gross domestic capital formation is always greater than gross fixed capital formation.      

(Q10) Distinguish between Domestic factor income (Domestic product) and National income (National product) on the basis of concepts of resident and domestic territory?


Mention components of domestic factor income.


Are the following included in Domestic factor income                      

            (i) Scholarship given by GOI

            (ii) Profit earned by Indian bank from its branch abroad

            (iii) Profit earned by American bank from its branch in India

            (iv)Salary given to Indian working in American Embassy in India

            (v) Salary given to non-resident working in Indian Embassy in America


(Q11) Giving reasons explain how are following treated while estimating national income


(a) Payment of fees to a lawyer engaged by a firm or Exp. by a firm on payment of fees to CA

(b) Payment of wealth tax or death duty or entertainment tax or excise duty

(c) Payment of income tax by a production unit

(d) Payment of corporate tax

(e) Purchase of a truck  or machinery by a production unit / firm

(f) purchase of taxi by taxi driver // Purchase of tractor by farmer

(g) Purchase of furniture by a firm.

(h) Value of wood purchased for making table

(i) Expenditure on maintenance by a firm.

(j) Payment of electricity bill by a school.       

(k) Expenditure on fertilizer by farmer

(l) purchase of uniforms by hospital

(m) Expenditure on education of children by a family. 

(n) Addition to the stock during the year

(o) Expenditure on maintenance of a building.

(p) Expenditure on adding a floor to the building or Expenditure on construction  or                Expenditure on improvement of fixed assests

 (q) Rent free house to an employee by an employer or free medical facilities by employer

(r) Gift given by employer to employee

(s) Bonus given by employer to employee

(t) Contribution paid SSS paid by employee

 (u) Imputed rent of self occupied houses.         

(v) Expenditure by government in providing free education or free treatment of poor in hospitals

(w) Expenditure by government on providing policce services

 (x) Wheat grown by farmer but used entirely for family’s consumption.

(y) Services rendered by family member to each other

(z) Taking care of aged parents


(a) Payment of interest by a government firm.

(b) Interest on national debt or Interest on public debt or Payment of interest on                  borrowings by general government.   

(c) Interest received on debentures.

(d) Payment of interest by a firm to a bank                                                     

(e) Payment of interest by a bank to an individual

(f)  Payment of interest by an individual to a bank 


(g) Purchases by foreign tourist

(h) Dividend received by a foreigner from investment in share of an Indian company.


(i) brokage payment on sale of shares                        

(j) Earning of shareholders from the sale of shares

(k) Capital gain on sale of a house

(l)) Prize won in a lottery                            

(m)Financial help received by flood victims.


Explain any three precaution or items not be included in GNP of a country ?


Chapter 5 / 6   { MONEY & BANKING }  

(Q12) Explain the process of money or credit creation by commercial banks with numerical example ?                                                                                                  


Currency is issued by the central bank, yet we say that commercial banks create Money.Explain . How is this money creation by commercial bank likely to affect the national income ? Explain.


 Govt of India has recently launched ‘Jan -dhan yojna ‘ aimed at every household in the country to have at least one bank account . Explain how deposit made under the plan are going to affect national income ?


(Q13) Explain two drawback of Barter system of exchange ? How does money remove this system ?                                                                                 

(Q14) Explain function of money as

            (a) Medium of exchange or  function that has separated the acts of sale and                      purchase or  function that has removed the difficulty of lack of double coincidence of wants or function that helps to make payments for all transactions of goods and services.               

             (b) Unit of Value or function that helps to find out exchange ratios between various goods and services or functions that works as a common denomination, in which values of all goods and services are expressed.


(Q15) Explain function of money as

             (a) Standard of Deferred Payment  or function that has led to capital formation and economic development of the economy or function that has simplified the borrowing and lending operations           

             (b) Store of Value or function of money that facilitates transfer of purchasing power from present to future or function of money that is also termed as ‘Asset Function’ of money.


(Q16) What are various components of supply of money ?                      

 (Q17) How does Central bank acts as “Note issuing authority” // “Bank of Issue function”

 (Q18) How does Central bank acts as “Bankers Bank” “Govt.’s Bank” “Lender of last  resort”          


Chapter 7/8/9/10/11  { AD & AS }


(Q19) Explain ‘consumption function’ with the help of a schedule and diagram.        ,or

Explain ‘saving function’ with the help of a schedule and diagram.          


 What is Consumption Function ? How can it be derived from the Saving Function ?       Explain.


(Q20) Given below is the consumption function in an economy :   C= 100 + 0.5Y

With the help of a numerical example show that in this economy as income  increases APC will decrease.


(Q21) Give the meaning of APS, APC, MPC and MPS ? When can value of APS be negative ? What will value of APC in such situation ? 


 State true or false

            (a) APS is always greater than zero // APS can never be negative                                  

            (b) value of APS can never be greater than one

            (c) If APS is negative then MPS is also negative

            (d)  value of MPS can never negative 

            (e) When marginal propensity to consume is zero, the value of investment multiplier will also be zero

            (f) If the ratio of marginal propensity to consume and marginal propensity to save is 4:1, the value of investment multiplier will be 4.                                                           ,or

Important Question,Macro Economics,CBSE Class 12,Board Examination,Exam Preparation


(Q22) Draw on a diagram a straight line saving curve for an economy. From it derive the consumption curve, explaning the method of  derivation. Show  points on the consumption curve at which APC is equal to one  and APC is less than one ( APS is negative )


(Q23) Explain the difference between ‘autonomous investment’ and ‘induced investment’.


(Q24) Distinguish between voluntary and involuntary unemployment. What is the                 significance of this distinction ?


(Q25)  How national income or employment or output is determined in an economy through S and I approach ?


If panned saving ( total output ) exceed planned investment  (expenditure) what changes will bring about equality between them


If planned expenditure is less than planned output , what changes will take place in an economy ?    


Why should PS be equal to PI at this level ?


Why should be aggregate demand is equal to aggregate supply ?


When is an economy in equilibrium ? Explain with the help of Saving and Investment              functions. Also explain the changes that take place in an economy when the economy is not in equilibrium. Use diagram.  


(Q26)  Explain the concept of “Under-employment Equilibrium “                                    ,or 

Can there be unemployment at equilibrium  level of income ?                                          ,or

“ Eq. level of Income is not necessary at Full employment equilibrium”  ? Explain   


(Q27) C = 200 + .9 Y and I = 1000. Find (a) equilibrium level of income (b) level of consumption and saving at equilibrium level                                  


The savings function of an economy is S = - 200 + 0.25Y. The economy is in equilibrium when income is equal to 2,000. Calculate :

            (a) Investment expenditure at equilibrium level of income.

            (b) Autonomous consumption.

            (c) Investment multiplier              

 If in an economy Saving function is given by S = (-) 50 + 0.2 Y and Y = 2000 crores ;                   consumption expenditure for the economy would be 1,650 crores and the autonomous investment is 50 crores and the marginal propensity to consume is 0.8. True or False? Justify your answer with proper calculations.

 In an economy the autonomous investment is 60 and MPC = 0.8 . If the equilibrium level of income is 400 , then the consumption is 30 . Justify your calculation

 An economy is in equilibrium. Calculate the Marginal Propensity to Save from the                       following: 

National Income = 1000

Autonomous Consumption = 100

Investment = 120

 (Q28) Explain the working of multiplier assuming initial investment to be 100 cr and  MPC = .8 ?            (Q29) Explain the relationship between Investment multiplier and MPC ? What is the max. value of Investment multiplier and Why ?


 “Economists are generally concerned about the rising Marginal Propensity to Save (MPS) in an economy”. Explain why ?

 (Q30) Explain the concept of Inflation and Deflation gap with diagram ? How  budgetary policy or “Taxation policy” of govt. useful in these context ?                                   


(Q31) What is meant by Repo Rate? How does the Central Bank use this measure to control inflationary conditions in an economy?                                                       


What is ‘deficient demand’ ? Explain the role of ‘Bank Rate’ in removing it.    

 (Q32) What is meant by Reverse Repo Rate? How does the Central Bank use this measure to control inflationary conditions in an economy?

 (Q33)Explain   “Reserve Ratio // legal reserve ratio ” as quantitative instrument in controlling the availability of credit in an economy ? 

(Q34) What is meant by Margin Requirement? How does the Central Bank use this                      measure to control deflationary conditions in an economy?


What is ‘excess demand’ ? Explain the role of “Open market operation” in removing it.


Chapter 12 { BUDGET }  

(Q35) What is Govt. Budget? Explain its three objective?   


 Explain the role of government budget in bringing “economic stability” & “reducing              inequalities of income”?


Explain how the government can use the budgetary policy in reducing inequalities in               incomes.


Tax rates on higher income group have been increased. Which economic value does it reflect? Explain.


The govt. decides to give budgetary incentives to investors for making investments in backward regions . Explain these possible incentives and the reasons for the same ?


In the Government of India’s budget for the year 2013-14, the Finance Minister proposed to raise the excise duty on cigarettes. He also proposed to increase income tax on individuals earning more than Rs. one crore per annum. Is the objective only to earn revenue for the government ? What possible welfare objective can you think of from these proposals ? Explain


(Q36) Define Tax ? When is a tax called Direct Tax and when is a Tax called Indirect tax ? Give examples?


Classify into direct and indirect tax

       (a) Wealth tax                       (b) Corporation tax

       (c) Sales Tax                        (d) Service  Tax                              

       (e) VAT


(Q37) Distinguish between Revenue Receipts and Capital Receipts ? Give two example of each                                                                         OR     


Important Questions Bank, Macro Economics, class 12 Notes | Study Economics for CBSE Class 12 Board Examinations - Commerce

 (Q38)Distinguish between Revenue Expenditure and Capital Expenditure ? Give two example of each                                           



Important Questions Bank, Macro Economics, class 12 Notes | Study Economics for CBSE Class 12 Board Examinations - Commerce

(Q39) What is meant by Fiscal deficit and Revenue Deficit ? What is the effect of large FD or what problem can large FD  create or indicates ?  


“Governments across nations are too much worried about the term fiscal deficit”. Do you think that fiscal deficit is necessarily inflationary in nature? Support your answer with valid reasons.


What are the implications of a large revenue deficit? Give two measures to reduce this                      deficit                          

(Q40) Distinguish between revenue deficit and fiscal deficit.   


Can there be Fiscal deficit without a revenue deficit ?


Higher revenue deficit necessarily leads to higher fiscal deficit. Comment


Chapter 13 / 14 { FER and BOP }


(Q41) List four item each of Current and Capital account of BOP?    


Distinguish between current and capital account of BOP. Classify the following transactions           

            Important Questions Bank, Macro Economics, class 12 Notes | Study Economics for CBSE Class 12 Board Examinations - Commerce                                                         or

Name the main components of current account of BOP account. What does a deficit in current account indicates ?

 (Q42) What is meant by ‘official reserve transactions’? Discuss their importance in Balance of Payments.

 (Q43) Distinguish between ‘autonomous’ and ‘accommodating’ Balance of Payments transactions.

 (Q44) What does the Balance of Payments Account record ? Distinguish between the “balance on current account” and the “balance of trade” in this account.

 (Q45)How is Foreign exchange rate ( FER ) determined in foreign exchange market ?

 (Q46) Explain the meaning of Managed Floating Exchange Rate.

 (Q47) List four sources each of demand and supply of Foreign exchange ? Use diagram                    

(Q48) Explain relationship between rise in price of foreign exchange rate and its supply by giving two examples ?


Explain the effect of depreciation of domestic currency on exports.     


Foreign exchange rate in India is on the rise recently. What impact is it likely to have on exports and how ?  


In India, exchange rate of Rs. in terms of US doller has fallen considerably. What is the likely impact on Indian export and why ?       

(Q49) Explain the effect of appreciation of domestic currency on imports.


 Give two reason for a rise in demand for a foreign currency when its price falls ? 


 Explain the impact or economic value of

            (a) GOI has doubled import duty on gold

            (b) lot of indians going abroad

            (c) GOI giving incentives for export

            (d) GOI restricts autonomous import of gold


(Q50)  Devaluation and Depreciation of currency are one and the same thing’. Do you agree?

How do they affect the exports of a country? (3)


( 1 Mark ) Ques.


(i)  Define micro economics and give two example or study of micro economics

 (ii) Define macro economics and give two example or study of aggregates economics

 (iii) Define Balanced govt. budget , Foreign exchange rate (if Rs 450 exchanges for $ 10 , find exchange rate)

 (iv) Name two invisible item of current account of BOP

 (v) When is there a deficit / surplus in balance of trade (if BOT - 100 and export is 500 ,what is import value

 (vi) Define full employment and involuntary unemployment?

 (vii) When can be GNP be less than GDP? Or Domestic income greater than national income

 (viii) Define appreciation of currency Or The price of 1 US Dollar has fallen from Rs.50 to Rs.45. Has the Indian currency appreciated or depreciated?

 (ix) Give two example of non-tax revenue receipt?

 (x) What will be the effect of rise in bank rate on Money supply?

 (xi) Why is an entertainment tax an indirect tax?

 (xii) If APC = 1.5 , find APS ?

 (xiii ) What is the relationship between MPS and MPC ? or IF MPS and MPC are equal , what is the value of a multipler ?

 (xiv) What will be the effect of a rise in bank rate on money supply ?

 (xv) Why are taxes received by governments not a capital receipts ?

 (xvi) Define consumption goods.         

 (xvii) What are time deposits ?

 (Xviii) How can RBI helps in bringing down FER when it is very high ?

 (xix)Which agency is responsible for issuing Rs 1 currency note in India?

 (xx) Define foreign exchange rate , floating exchange rate           

 (xxi) What is the value of multiplier ? When Marginal Propensity to Save is zero ?

 (xxii) Name of the market exchange rate system in which the Central Bank can actively             intervene.                                                                                                                            

 (xxiii) What is Central Bank ?                                                                                         

 (xxiv) Define resident ?

 (xxv) Define deprciation / consumption of fixed capital

 (xxvi) Govt. has started more on providing education and health for the poor ? What                economic value does it reflects ?

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