General instructions:
Q.1. Distinguish between Net Factor Income from Abroad and Net Exports.
OR
What is the difference between Intermediate Goods and Final Goods?
The difference between Net Factor Income from Abroad and Net Exports are:
OR
The difference between Intermediate Goods and Final Goods are:
Q.2. In an economy the consumption function is C = 200 + 0.25Y, where C is consumption expenditure and Y is income. Calculate the equilibrium level of income and consumption expenditure when investment expenditure is ₹ 4000.
OR
If Disposable income is ₹ 1540 and saving is ₹ 540, find APC.
Given:
C = 200 + 0.25Y
I = 4000
Equilibrium takes place where:
C = I
Thus,
200 + 0.25Y = 4000
0.25Y = 4000–200
0.25Y = 3800
Y = 3800/0.25
= 15,200
Equilibrium level of Income = ₹ 15,200
Consumption Expenditure = 200 + 0.25Y
= 200 + 0.25 × 15,200
= 200 + 3800
= ₹ 4000
OR
Given that,
Disposable income = ₹ 1540
Saving = ₹ 540
Then Consumption Expenditure = Disposable Income – Saving
C = 1540 – 540 = 1000
Thus, APC = C/Y
APC = 1000/1540 = 0.64
Q.3. “Men are Disposed, as a rule and on an average, to increase their consumption as their income increase” - Keynes. Justify the given statement.
According to Keynes, as income rises, propensity to consume also increases but by less than an increase in income. It means that there is a tendency among people not to spend on consumption the whole of additional income, i.e., they save a portion of income. This is called Keynes’ Psychological Law of Consumption.
Q.4. What do you mean by formal and informal sector of employment?
OR
Comment on the modest change in occupational Structure on following information:
Source – Report of employment and unemployment survey (2017-18), Ministry of Labour and Employment
(i) Formal sector: All public sector and private sector establishments which employ 10 or more hired workers are called formal sector establishments. Those who work in such establishments are called formal sector workers.
(ii) Informal sector: In this sector there is no hired worker. Thus, informal sector includes millions of farmers, agricultural labourers, owners of small enterprises and people working in those enterprises are self-employed.
OR
As per the above information, between the period of 1950 – 51 to 2017 – 18, percentage of workforce engaged in primary sector has declined from 72.72 percent to 43.8 percent. The percentage of workforce engaged in secondary sector has risen from 10.02 percent to 24.7 percent. The percentage of workforce engaged in tertiary sector has risen from 17.26 percent to 31.5 percent. Through the shift from primary to secondary sectors is noticeable.
Q.5. Why are less women found in regular salaried employment?
In both the sectors urban and Rural women are found less in a regular salaried employment because in rural areas women are generally illiterate, so they get the irregular employment. In the urban areas women depends upon the husband’s income and hence they are not interested to do the regular salaried job.
Q.6. How will you treat the following in the calculation of Gross Domestic Product of India? Give reasons for your answer.
(i) Profits earned by a branch of foreign bank in India.
(ii) Salaries of Indian employee working in embassy of Japan in India.
(iii) Salary of residents of Japan working in Indian embassy in Japan.
OR
If nominal income is ₹ 600 and Price Index is 150 (with base 100), Calculate real income.
(a) Yes, it will be included in the Gross Domestic Product of India as profits are earned within the domestic territory of India.
(b) No, it will not be included in the Gross Domestic Product of India as the embassy of Japan is not a part of the domestic territory of India.
(c) Yes, it will be included in the Gross Domestic Product of India as the Indian embassy is a part of the domestic territory of India.
OR
Real Income = (Normal Income/Price Index) x 100
= (600/150) x 100
= ₹ 400
Q.7. Study the following information and compare the Public Health Infrastructure in India.
Read the following case study and answer the questions 8 and 9 that follows on the basis of the same:
One of the much-talked issues around the world about China is its growth of Gross Domestic Product. China has the second largest GDP (PPP) of $22.5 trillion in the world, whereas, India’s GDP (PPP) is $9.03 trillion and Pakistan’s GDP is $ 0.94 trillion, roughly about 11 per cent of India’s GDP. India’s GDP is about 41 per cent of China’s GDP. When many developed countries were finding it difficult to maintain a growth rate of even 5 per cent, China was able to maintain near double-digit growth during 1980s.
In the 1980s, Pakistan was ahead of India; China was having double-digit growth and India was at the bottom. In 2015–17, there has been a decline in Pakistan and China’s growth rates, whereas, India met with moderate increase in growth rates. Some scholars hold the reform processes introduced in Pakistan and political instability over a long period as reasons behind the declining growth rate in Pakistan.
China and Pakistan have more proportion of urban population than India. In China, due to topographic and climatic conditions, the area suitable for cultivation is relatively small — only about 10 per cent of its total land area. The total cultivable area in China accounts for 40 per cent of the cultivable area in India. Until the 1980s, more than 80 per cent of the people in China were dependent on farming as their sole source of livelihood. Since then, the government encouraged people to leave their fields and pursue other activities such as handicrafts, commerce and transport. In 2018– 19, with 26 per cent of its workforce engaged in agriculture, its contribution to the GVA in China is 7 per cent.
In both India and Pakistan, the contribution of agriculture to GVA were 16 and 24 per cent, respectively, but the proportion of workforce that works in this sector is more in India. In Pakistan, about 41 per cent of people work in agriculture, whereas, in India, it is 43 per cent. Twenty - four per cent of Pakistan workforce is engaged in industry but it produces 19 per cent of GVA. In India, industry workforce account for 25 per cent but produces goods worth 30 per cent of GVA. In China, industries contribute to GVA at 41, and employ 28 per cent of workforce. In all the three countries, service sector contributes highest share of GVA.
(i) Since independence, there has been a significant expansion in the physical provision of health services.
(ii) During 1951-2013, the number of government hospitals and dispensaries increased from 9,300 to 44,000 and hospital beds from 1.2 to 6.3 lakh.
(iii) Nursing personnel increased from 0.18 to 23.44 lakh and allopathic doctors from 0.62 to 9.2 lakh.
Q.8. Write three observations highlighting global exposure of the economy of China.
Following observations highlight the global exposure of the economy of China.
(i) Inward looking policy of self-sufficiency and protection of domestic industry from foreign competition has gradually been replaced by the policy of growth through competition.
(ii) It allowed the foreign investors the freedom to ‘hire and fire’ the workers. It also offered them a lucrative infrastructure.
(iii) China allowed foreign investors 100 percent equity investment across most sectors of the economy.
(iv) China has emerged as the global manufacturing hub and one of the leading export – economy in the world.
Q.9. What is the difference between the economic growth of India and China?
There is a huge difference in the economic development of India and China. In nominal terms, Chinese GDP is at $ 14.9 trillion while India is at $ 2.6 trillion. Expressed in comparable PPP terms, China is at $ 24.2 trillion while India is at $ 8.7 trillion. India’s economy is expected to grow the fastest, at maximum 8%, followed by China even though its maximum growth rate up to 5%. Where China is developing itself by imposing restrictions on state – funded sectors in its economy, While India strengthening its economy by developing necessary infrastructure.
Q.10. What precautions should be taken while estimating national income by income method? Explain.
The following precautions should be taken while estimating national income by income method
(i) Transfer Payment like old age pension, scholarship, unemployment allowance are unliteral payments and they are not included in national income.
(ii) Value of production for self - Consumption should be included as it is also a part of production.
(iii) Sale/Purchase of second -Hand goods should not be included as their value had been included when these were produced.
Q.11. “The inflationary gap can be rectified by resorting to Fiscal Policy ”. Justify the given statement.
Inflationary gap refers to a situation of excess demand, when aggregate demand is greater than aggregate supply corresponding to full employment level in the economy. During this situation, general price level tends to rise, causing a rise in the rate of interest and consequently, a fall in investment and a fall in the growth rate of GDP. Correction of inflationary gap calls for a cut in expenditure. But owing to rising prices, wage rate tends to rise (along with other factor costs) which stokes the rate of inflation. In such a situation, a cut in government expenditure (particularly) non – development expenditure like on defence, law & order and subsidies will cause an overcall cut in aggregate demand. So that excess aggregate demand is corrected and inflationary gap is eliminated.
Government through its budget aims to prevent large scale fluctuations in prices. Such a situation, leads to anxiety and fear in minds of consumers and investors. Prices tend to rise when aggregate demand in the economy is higher than aggregate supply i.e., inflationary tendency.
Q.12. (a) Given the following data, find the missing value of ‘Wages and Salaries’ and ‘Gross Domestic Capital Formation.
(b) Government incurs expenditure to popularize yoga among the masses. Analyse its impact on Gross Domestic Product and welfare of the people.
OR
(a) Calculate (a) Operating Surplus and (b) Domestic Income.
(b) Explain ‘mixed income of self-employed’ and give an example.
(a) Wages and Salaries = ix – [(i) + (viii) + (vii)]
= 30,000 – (3,500 + 12,000 + 700) = 13,800 crores
Gross Domestic Capital Formation
Gross Domestic Capital Formation = (ix) – [(iv) + (v) + (vii) + (xii)] + (ii)+(vi)
= 30,000 – (14,000 + 3,000 + 700 + 11,000) + 300 + 300 = 1,900 crores
(b) Government expenditure on popularizing yoga raises Gross Domestic Product because it is government’s final consumption expenditure. It also raises welfare of the people because yoga exercises improve health and thus, raises efficiency of the people.
OR
(a) (i) Operating Surplus = (ii) + (iv) + (vii) + (viii)
= 800 + 460 + 940 + 300
Operating Surplus = ₹ 2,500 crore
(ii) Domestic Income = (i)+ Operating Surplus + (X)
= 2,000 + 2,500 + 200
NDPFC = ₹ 4,700 crore
(b) There are some incomes which cannot be conveniently divided into distinctive factor incomes. Such income arises to the self-employed like practicing lawyers, doctors, etc. For example, a practicing lawyer. The fees charged by the lawyer practicing lawyer. The fees charged by the lawyer is not only his wages but also interest of capital employed by him, rent of his office and profit of his entrepreneurship. Since no data is available to sub-divide the lawyer’s fees into wages, rent, interest and profit, it is called mixed income.
Q.13. (a) Women in India have fewer regular paid job; this is probably a result of the low literacy rate among women. In the light of the above statement, give your opinions.
(b) In the present context, during the corona virus pandemic, India has kept the level of employment in the economy as before by adopting the techniques of employment.
Justify the above statement.
(a) In both the sectors urban and Rural women are found less in a regular salaried employment because in rural areas women are generally illiterate, so they get the irregular employment. In the urban areas women depends upon the husband’s income and hence they are not interested to do the regular salaried job.
(b) During the corona virus pandemic & due to change in work method, it has now become a common practice for many people to work from their home. Internet has become an amazing mean for work at home. As COVID-19 started spreading, the entire nation virtually, put in place containment and mitigation strategies involving restrictions to movement and travel of individuals. In such a situation, to overcome the possibility of employment crises in the economy, the government promoted work from home. However, in spite of this, the unorganized sector in the economy faced the pain of unemployment.
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