CUET Economics Previous Year Solved Paper 3 (16 July 2022, Slot-2) - Humanities/Arts MCQ

The following is the motive

• Making India a supplier of raw materials - The main motive of the British Government was to make India a mere supplier of cheap raw materials to feed its own rapidly expanding industries.

It was established in the year 1907 in Jamshedpur,British rulers introduced railways in India in 1850,The details of the Demographic condition regarding the population of British India, were primarily obtained through a census in 1881,The Planning Commission is a government agency in India that was established in 1950 to oversee the country's economic and social development, primarily through the development of five-year plans,Small scale industrial committee was set up in the year 1955. It was also called a Karve committee.

The correct statements are:

• Currency Issuance: Currency is issued by the nation's Central Bank. This is one of the primary functions of a central bank, as it is responsible for managing the nation's money supply.
• Foreign Exchange Reserves: The economy's foreign exchange reserves are preserved by the Central Bank. This helps ensure that the country has enough foreign currency to support its international trade and financial transactions.
• Monetary Policy: Central Bank does control money supply and credit through monetary policy. By adjusting interest rates, reserve requirements, or other financial tools, the central bank can influence the overall money supply and credit conditions in the economy.
• Short-Term Loans to Commercial Banks: Central Bank gives loans to commercial banks for short term. This is done through a process called "discounting" or "lending," where the central bank provides funds to commercial banks at a predetermined interest rate. This helps maintain liquidity in the banking system and ensures that banks have access to funds when needed.

Total Money Creation = Initial Deposit x 1/LPR
12000 = Initial Deposit × 1/0.25
Initial Deposit = 0.25 × 12000 = 3000

• Pradhan Mantri Jan Dhan Yojana was announced by the Hon'ble Prime Minister Shri Narendra Modi on 15th August 2014 from the ramparts of the Red Fort and launched by him on 28th August 2014 across the country.
• MGNREGA was enacted in September 2005.
• In post-independent India, there have been several attempts. The Planning Commission formed a Study Group in 1962.
• The 'Task force on projections of minimum needs and effective consumption demand' was formed in 1979. Food For Work Programme was launched in 1977-78

• Revenue expenditure are the expenditure incurred for the basis other than the creation of physical or financial assets of the central government.
• Capital Expenditure are the expenditure of the government that result in the creation of physical or financial assets, or depletion in financial liabilities.
• Revenue Receipt are those receipt of the government which neither creates any liability nor it creates any reduction in the assets of the government.
• Receipts that either create liabilities or reduce assets of the government are called capital receipts.

NNPfc = NNPmp – NIT
NNPfc = 5330 – (1770 – 0)
NNPfc = 3560
GNPfc = NNPfc + Depreciation
GNPfc = 3560 + 1550 = 5110

The owner of capital gets interest . T h e entrepreneur gets profit. Factor income is the income accruing to the owner of the factor of production in return for the services rendered to the production units. There are four types of factor incomes in the form of wages, interest, rent and profits.

Wealth is a stock as it is measured at a particular point of time.

Net Indirect Tax (NIT) refers to the difference between indirect taxes and subsidies.Net indirect taxes are equal to zero in case indirect taxes are equal to subsidies.

The correct answer is B: A, B, C, D only.

• A. Fees to a mechanic paid by a firm is not included in the estimation of national income
  Correct. The fees paid to a mechanic is considered an intermediate expense, and intermediate expenses are not included in national income calculation.
• B. Income tax paid by an individual is not included in national income
  Correct. Income tax is a transfer payment from individuals to the government and is not a part of national income calculation.
• C. Interest paid by a garment manufacturer on a loan taken from a bank is included in national income
  Correct. Interest paid by a firm is considered a part of the factor income as it is a payment to the owners of financial capital. Therefore, it is included in the national income.
• D. Payment of old age pension will not be included in national income as it is a transfer paymen
  Correct. Old age pension is a transfer payment from the government to individuals and is not included in national income calculation.
• E. Insurance premium paid by a household to an insurance company is not included in the estimation of national income
  Incorrect. Insurance premium is considered a part of the factor income as it is a payment for insurance services. It is included in the national income estimation.

B: Net factor revenue from overseas includes money from Exports. This statement is correct because net factor revenue from overseas includes income earned by residents from foreign countries, which comprises money from exports.
E: Profit earned by non-resident company in India is a part of domestic income of India. This statement is correct because domestic income includes all incomes earned within the geographical boundaries of a country, including the income earned by non-resident companies.
The other statements (A, C, and D) are incorrect for the following reasons:

• A: The Household's investing is considered to be the cost of building a residence, as it adds to the capital formation in the economy.
• C: The sum of factor incomes does not equal the net value added. The sum of factor incomes equals the gross value added.
• D: The assessment of national income takes into account the market value of only final items, not intermediate items. Intermediate items are excluded to avoid double counting.

Factor cost is the 'Price' of the commodity from the producer's side. Market price is derived after adding the indirect taxes to the factor cost of the product.
The formula to calculate is Market Price = Factor Cost – Subsidies – Indirect Taxes.

Sales rev enue is calculated by multiplying the number of products or services sold by the price per unit.
Value of Output = Sales + Change in Stock + Production for Self Consumption

Farmer to Miller – 500
Miller to Baker – 700
Baker to Consumer – 1000
(Value Added is 200 + 300 = 500)

The correct answer is C: B, D, E only. Here's an explanation for each statement:
B. The sum of APC (Average Propensity to Consume) and APS (Average Propensity to Save) is equal to 1:

• This is true because the total income is either consumed or saved. So, APC + APS = 1.

D. The value of MPC (Marginal Propensity to Consume) and MPS (Marginal Propensity to Save) varies between 0 and 1:

• This is true because MPC represents the proportion of an additional unit of income that is spent on consumption, and MPS represents the proportion that is saved. Since the entire additional income is either consumed or saved, the sum of MPC and MPS must be 1, and their individual values must lie between 0 and 1.

E. At the breakeven point, saving is zero:

• This is true because, at the breakeven point, total expenditure equals total income, leaving no income for saving. Thus, saving is zero at this point.

The other statements (A and C) are incorrect:
A. Consumption curve starts from the origin:

• This is false because even at zero income, there might be some consumption due to autonomous consumption, which is independent of income level.

C. Aggregate demand and market demand mean the same:

• This is false because aggregate demand refers to the total demand for all goods and services in an economy, while market demand refers to the demand for a specific good or service in the market.

Deflation is termed as the decrease in price levels of goods and services in an economy. Impact on demand. Demand for products and services increase in inflation. Demand for products and services decrease in deflation.

Monetary policy concerns the decisions taken by central banks to influence the cost and availability of money in an economy.

Deflationary Gap is the amount by which the aggregate demand falls short of aggregate supply at the full employment level. It is called deflationary because it leads to a fall in the price level.

In the saving and investment approach, the equilibrium is attained at the point where saving and investment will intersect each other, i.e. leakages are equal to injections.

As MPC = 4/5 = 0.8 and MPS = 1/5 = 0.2, then
Multiplier (K) = 1/MPS = 1/0.2 = 5

Consumption Function is C = 400+ b Y where Y in the income in the economy and b= marginal propensity to consume.

At equilibrium level of output,

AS=AD

Y= C+I

=> 2,000 = 400 + b (2,000) + 200

=> 2,000 = 600+ 2,000 b

=> 2,000 b = 2,000 - 600

=> b = 1,400/ 2,000 = 0.7.

K =  1/MPS
K = 1/0.20
K = 5 Then, K = Change in Income/Change in Investment
5 = Change in Income/400
Change in Income = 2000 Crores

Borrowings from the International Monetary Fund (IMF) is a capital receipt. This is because borrowings creates liability for the government.

• In 2016, the Indian Parliament passed a law, Goods and Services Tax Act 2016, to simplify and introduce a unified indirect tax system in India. This law came into effect from July 2017.
• WTO- World Trade Organisation, was established in 1995 as the heir organisation to the GATT (General Agreement on Trade and Tariff). GATT was founded in 1948 with 23 nations as the global (international) trade organisation to serve all multilateral trade agreements by giving fair chances to all nations in the international exchange for trading prospects.
• On 8 November 2016, the Government of India announced the demonetisation of all Rs.500 and Rs.1,000 banknotes of the Mahatma Gandhi Series. It also announced the issuance of new Rs.500 and Rs.2,000 banknotes in exchange for the demonetised banknotes.
• Tata Group formally took over Air India in January 2022 after the government's long-awaited privatisation of the debt-laden and loss-making airline in a 180 billion rupee deal ($2.2bn) for 100 per cent ownership.

Keeping all other factors the same, when there is a change in demand of a commodity due to change in price, it is referred to as the change in quantity demanded. It is shown as a movement along the demand curve when expressed graphically.