General instructions:
Q.1. Distinguish between Final Goods and Intermediate Goods.
OR
Distinguish between positive externalities and negative externalities.
Final goods refer to those goods which are used either for final consumption or for investment purposes. Whereas Intermediate goods refer to those goods which are used either for resale or for further production purposes.
OR
Positive externalities refer to benefits caused by one entity to another, without being paid for it. Whereas Negative externalities refer to the harms caused by one entity to another without being penalized for it.
Q.2. Calculate equilibrium level of income for a hypothetical economy, for which it is given that:
(a) Autonomous Investments = ₹ 500 crores, and
(b) Consumption function, C = 100 + 0.80 Y
OR
Calculate Change in Income (ΔY) for a hypothetical economy. Given that:
(a) Marginal Propensity to Consume (MPC) = 0.8, and
(b) Change in Investment (ΔI) = ₹ 1,000 crores
Given Consumption function is, C = 100 + 0.8 Y
Autonomous investments = 500 crores
We know, at equilibrium levelY = C + I
Y = 100 + 0.8 Y + 500
Y-0.8Y = 600
0.2 Y = 600
Y = ₹ 3,000 crores
OR
Given, ΔI = ₹ 1,000 crores
MPC = 0.8
As we know,
Multiplier (K) = (1/(1-MPC)) = 1/(1-0.8) = 1/0.2 = = 5 times
We know K = ΔY/ΔI
5 = ΔY/1000
ΔY = ₹ 5,000 crores
Q.3. ‘As the income increases, people tend to save more’. Justify the given statement.
At a lower level of income, a consumer spends a larger proportion of his/her income on consumption expenditure (basic survival requirements). As the income increases, owing to the psychological behaviour of a consumer (rational), people tend to consume less and save more for future uncertainty.
Q.4. State and discuss any two indicators that help in measuring the health status of a country.
OR
Compare and analyze the ‘Women Worker Population Ratio’ in Rural and Urban areas based on following information:
Two indicators that help to measure the health status of a country are:
(a) Infant Mortality Rate: Infant Mortality Rate (or IMR) indicates the number of children that survive first year of their life.
(b) Literacy Rate: Literacy rate measures the proportion of literate population in the age group of seven years or above.
OR
The data in the given table reveals that:
(a) Women constitute 16.5% of the total worker population in the economy.
(b) The number of women workers in rural areas (17.5%) are relatively higher than the women workers in urban areas (14.2%). Due to the abject poverty in rural areas, rural women are compelled to work more than their urban counterparts.
Q.5. What should be the main elements of employment policy in India in the present context?
Following should be the main elements of employment policy in India in the present context:
(i) The employment policy should emphasis on both fuller and more productive employment.
(ii) Employment policy must have the objective of higher rate of capital formation.
(iii) Employment should be generated in the normal process of development.
Q.6. How should the following be treated while calculating national income? Give reasons for your answer.
(i) Interest received by households from banks.
(ii) Dividend received by shareholders.
(iii) Profits earned by the branch of an Indian bank in France.
OR
In a hypothetical economy during a particular year let the Nominal GDP rate be 7.4% and GDP Deflator be 150. Calculate the Real GDP of this specific year.
(i) Bank is a production unit so this is a factor income and hence should be included.
(ii) It is a part of the profits of production units which is distributed to the owners so it is included.
(iii) It is included as factor income from abroad.
OR
Let the GDP of the base year = 10,000
Nominal GDP Rate = (Change in Nominal GDP/Base Year GDP) x 100
Given, Nominal GDP Rate = 7.4
7.4 = (Change in Nominal GDP/10,00) x 100
Change in Nominal GDP = (7.4 x 10 000)/100 = 740
Thus, Nominal GDP = 10,000 + 740 = 10,740
As we know, Real GDP = (Nominal GDP/GDP Deflator) x 100
= (10,740/150) x 100 = 7,160.
Q.7. Over the year, India has built up a vast health infrastructure. Explain this fact with the help of the table given below.
Read the following hypothetical case study and answer the questions 8 and 9 that follows on the basis of the same:
New Delhi: Despite China’s runaway economic growth, there are possibilities for India to achieve extremely rapid growth over the next 20 years or so that will allow it to compete directly with its giant northern neighbour, says a summary of a paper brought out by a Pune based think tank.
The factors in India’s favour include demography with “the outlook for the working age population is superior to that of China, where the one-child policy of 1979-2015 coerced households into a premature `baby bust’” says the Pune International Centre in its paper.
A second factor in India’s favour is that the “Indian financial system allocates capital better than the Chinese financial system. This gives India an edge in translating the flow of investment into increased GDP and thus reduces the consequences of the gap between investment in India vs. investment in China,” the paper says.
The third factor in India’s favour is that the “Chinese exports are fragile to the extent to which they have been led by state interventions, the extent to which they are shaped by distortions in finance, exchange rates and subsidies. This raises questions about sustainability of the level and the growth,” the paper says. Currently, the difference in China’s growth and India’s is large, the paper says. “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. Looking forward, reasonable scenarios for Chinese growth involve growth rates like 3, 4 or 5 %. Reasonable scenarios for India’s growth involve growth rates like 4, 6 or 8 %,” it says. There are three areas where “there is a case for a retreat from engagement with China,” the paper argues making a case for “introducing restrictions against companies controlled by the Chinese state from having a controlling stake in a hotlist of sensitive infrastructure assets” like ports and airports though not highways.
India capable of achieving growth and compete with China in 20 years: Report – Livemint – 23rd March 2021
Since independence, there has been a significant expansion in the physical provision of health care services during 1951 to 2015.
- Number of hospital and dispensaries increased from 9,294 to 45,978.
- Beds for the patients in government hospitals increased from 1,17,000 to 7,54,724
- By 2014-15, the Number of Community Health Centres and Primary Health Centre increased up to 5,396 and 25,308 similarly.
- Over the last five decades, India has built up health infrastructure and made considerable progress in improving the health of its population.
Q.8. What is the difference between the economy of India and Pakistan?
The population of Pakistan is very less as compared to India and it is about one tenth of India. In the 1950s to 1960s, Pakistan started import substitution-based industrialization. If we compare the people living below the poverty line in India and Pakistan, then we find that the condition of India is better than Pakistan but in the context of maternal mortality, both India and Pakistan have not been able to save women from maternal mortality.
Q.9. Mention any three important features of the economy of Pakistan.
- Pakistan mechanized the agricultural sector by adopting the Green Revolution, due to which on the one hand the public investment increased, there was an increase in the production of food grains in the country.
- In the 1970s to 1980s, Pakistan, realizing the importance of capitalism, strengthened the private sector of its country with the help of western countries, so that the country’s economic condition was strengthened.
- In Pakistan all the indicators of economic development like per capita income, standard of living, IMR, maternal mortality etc. are improving but its rate is very low. For example, In China, for one lakh births, only 29 women die whereas in India and Pakistan, about 133 and 140 women die respectively, which is certainly not favourable.
Q.10. A person can be a citizen of one country and at the same time a resident of another country, how?
Citizen and resident are two different terms. This does not mean that a citizen is not resident, and a resident is not a citizen. A person can be a citizen as well as resident but it is not necessary that a citizen of a country is necessarily the resident of that country. A person can be a citizen of one country and at the same time a resident of another country.
Citizenship is basically a legal concept based on the place of birth of the person or some legal provision allowing a person to become a citizen. On the other hand, resident ship is basically an economic concept based on the basis economic activities performed by a person. A resident, whether a person or an institution, is one whose centre of economic interest lies in the economic territory of the country in which he lives.
Q.11. “Deficient demand pushes the economy towards under employment equilibrium” Do you agree with the above statement? Give reason in support of your answer.
Yes, I agree with the statement that Deficient demand pushes the economy towards under employment equilibrium.
The deficient demand caused deflationary gap. The deflationary gap is the difference between the level of aggregate demand required to establish the full employment equilibrium and the actual level of aggregate demand. The deflationary gap is a measure of the amount of deficiency of aggregate demand.
The deflationary gap will set in motion forces that will cause a decline in economy’s output, income and employment. Thus, the deficient demand caused deflationary gap and has pushed the economy into an under-employment equilibrium. Deficient demand will lead to recession and depression in the trade cycle of an economy.
Q.12. (a) Calculate GDPMP, GDPFC and GNPFC by Expenditure Method.
(b) Why is GDPMP called Gross?
OR
(a) Calculate (i) Gross National product at Market Price by Expenditure Method (ii) Gross Domestic Product at Market Price by Income Method
(b) Discuss the value-added method and the steps involved while estimating national income by value added method.
(a) GDPMP = (iii) + (ii) + (vi) + (vii) + (iv) – (v)
= 51,177 + 7,351 + 13,248 + 3,170 + 4,812 – 5,664 = ₹ 74,094 crores
GDPFC = GDPMP – (x) + (xi)
= 74,094 – 8,834 + 1,120 = ₹ 66,380 crores
GNPFC = GDPFC + (viii)
= 66,380 + (–) 255 = ₹ 66,125 crores.
(b) GDPMP is final product valued at market price. This is what buyers pay. But this is not what production units actually receive. Out of what buyers pay, the production units have to make provision for depreciation and payment of indirect taxes like excise, sales tax, etc. This explains why GDPMP is called gross. It is called gross because no provision has been made for depreciation. However, if depreciation is deducted from GDP, it becomes Net Domestic Product (NDP).
OR
(a) (i) Gross National product at Market Price by Expenditure Method
GNPMP = Private final consumption expenditure + Government final consumption expenditure+ Gross Domestic Capital Formation + Net Exports + Consumption of fixed capital
= (i) + (ii) + (iii) + (iv) + (xii)
GNPMP = 200 + 20 + 40 + (– 5) + 5
GNPMP = ₹ 260 crore
(ii) Gross Domestic Product at Market Price by Income Method
GDPMP = Wages and Salary + Employer ’s contribution to social security schemes + Profits+ Interest + Rent + Consumption of fixed capital + Indirect Taxes - Subsidies
GDPMP = (v) + (vi) + (vii) + (viii) + (xi) + (xiii) + (ix) – (x)
= 165 + 10 + 15 + 20 + 5 + 30 – 5 + 15 = ₹ 255 crore
(b) With the help of this method national income is estimated at production level. At production level national income is the value of final goods and services produced in a country within the domestic territory plus net factor income from rest of the world. In this method following steps are involved:
Firstly, all the producing enterprises in an economy are broadly classified into three industrial sectors according to their activities.
Secondly: Net value added of each producing unit of the economy is estimated from their gross value of output which is calculated by multiplying total volume of goods produced with their prices. After deducting the sum of value of intermediate goods (IG), depreciation and net indirect taxes (NIT) from value of output we get net value added at FC of the producing units.
Thirdly: Net National Product at factor cost is obtained by adding net factor income from rest of the world to net domestic product at factor cost.
Q.13. (a) Environmental protection and industrial development are opposite concepts. Justify this statement.
(b) “Market economy and informalisation of workers are strongly correlate to each other ”.Give your opinion in support of this statement.
(a) It is essential for environmental protection that air and water pollution caused by industrial development are managed and controlled. With optimum utilization of resources, while we can fulfil our needs, we can also protect environment for our coming generation. Industrial development is necessary to meet the needs of growing population, but the pollution arising from industries is for our environment. Therefore, industrial development is an obstacle in the way of environmental protection.
(b) A series of economic reforms were launched in 1991 with the goal of transformation from a controlled economy to market economy. And, in this process of transformation there has been a significant draft towards informalisation of workers. Market economy and informalisation of workers, perhaps, are strongly correlated to each other. Informalisation is driven by the force of supply and demand in the labour market. Presently, formal sector employment comes to merely 10 percent of the total, 90 percent of the workforce continues to be informal.
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