Economics Test 1

Q1. What is Public Expenditure? (3/3)Ans.. public expenditure is the money spent by the government on general public (on public and merit goods) for example the money spent on schools,hospitals etc.The money for this spendind usually comes from taxes collected by the general public and the reinvested into public goods.

Q2. What is Revenue and Consumer Expenditure? (3+3) Ans.revenue expenditure is the expense spent on goods and services used to earn revenue likie

the wages and salaries paid to employees and the cost of advertising.this is generally a smaller amount as compared to capital expenditure and helps to increase output,sales and hence revenue.

On the other hand consumer expenditure is the expense spent by consumers on buying goods and services.the more the taxes the lesser will be the consumer expenditure.

Q3. Effects of taxes on the following:-Taxes on consumer expenditure (2/2)

The more the taxes the lesser will be the purchasing power of consumers and the lesser will be the consumer expenditure.similarly with less taxes consumers can buy more goods and services and consumer expenditure will rise.

Taxes on investment expenditure (2/2)

The more the taxes the lesser will be the investment by businesses and individuals in firms and organizations.similarly with less investment expenditure more investment could be made.

Low exchange rate on exports (2)

With a low exchange rate our exports will increase and more amount of foreign currency will enter our country.

High exchange rate on imports (2)

× With a high exchange rate our imports will increase as our purchasing power will increase and we could buy more units of exporters currency.

Q4. What is the role of commercial bank? (5/6)

A commercial bank forwards loans and charges interest on that from the borrower.It provides an letter of credit(LC) to exporter through its bank that is a payment gurantee from importers bank.It receives depositors money for safe keeping.it honours withdraws.it facilitates international trade.

.Q5.What is Monetary Policy? (6)Ans.

Monetory policy are all those actions performed by the government to control the supply of money and price of money.the interest rate is the price of money charged on borrowing loan and received on lending for e.g.with an increased supply of money people will spend a lot,monetory supply is used to control this etc.

Q6.What is Fiscal Policy? (3/3)

Ans.It is a tool to alter taxes for the sake of public spending.The reduced taxes increases the purchasing power of people so they can buy more goods and services.

Q7.What is Expansionary & Contractionary fiscal policies? (0/3+3)Ans.

In the expantionary fiscal policy tax decreases and aggregate demand increases while in the contractionary fiscal policy tax increases and hence aggregate demand increases.

Q8.Explain interest rate and draw the graph? (0/3)Ans.

the interest rate is the price of money charged on borrowing loan and received on lending

Q9.What are the sources of Public Finance? (4/4)Ans.the sources of finance include taxes on the money spent by people on goods and services.they also include import and export duties.they also include income tax and borrowing loans from other countries.they also include share issuing.Q10.What is a good taxation system? (2/4)

Ans.A good taxation system is one which is fair i.e. a high interest must not be charged on a low income.IT must be cheap.It must be convenience as well.IT must not discourage goods people from buying goods and services. Q11.What is the purpose of taxation? (2/4)Ans. the purpose of taxation is to earn revenue.To buy imported goods and services.To get money for public spending.To spend on merit goods.To pay the loan borrowed from other countries.Q12.What is Disposable income? (3/3)Ans.It is the income that comes to us after cutting the taxes.

Q13.DescribeGDP_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

GNP_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

GIP_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q14.What are the 3 methods of measuring GDP? (2+2+2)Ans.__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q15.What is Aggregate Demand? (3)Ans.___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q16.What is Aggregate Supply? (3)Ans.___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q17.What is supply side Policy? (4)Ans.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q18.What are micro economics objectives? (3)Ans.__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q19.What are transfer of payment? (3)Ans.___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q20.Compare Market & Planned Economic system? (10)Ans.___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q21.What is the role Central Bank? (4)Ans.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q22.What is Perfect Competition? (4)Ans.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Q23.What are the advantages & disadvantages and characteristics of Monopoly? (10)Ans.___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Total Marks:104